FELIX  KOENIG     

We develop a revealed preference approach to measure the value of workplace amenities by analyzing how variation in non-wage job attributes affects excess mass in the earnings distribution at budget discontinuities. The approach formalizes the idea that workers respond less to monetary incentives when amenities constitute a larger share of total compensation. Applying this method to workplace safety  during COVID-19 waves, we find that workers are willing to sacrifice 9% of their earnings to reduce weekly fatality risks by one in 100,000. The findings suggest that conventional hedonic regressions substantially underestimate the value of workplace safety.

Almost all OECD countries mandate paid vacation days, yet whether such work-time regulation corrects a market failure has been difficult to answer without exogenous variation in leave across employers. We exploit a 2012 German court ruling that outlawed age-based vacation entitlements, mandating firms that tied leave to age to grant additional paid vacation days to workers under 30. Combining matched employer-employee data with cross-industry variation in the pre-reform discontinuity at age 30, we examine how expanding leave affects worker selection, retention, and pay. Several pre-determined measures of productivity indicate that more generous leave attracts less productive applicants, with an adverse-selection cost that far exceeds the direct cost of the leave, highlighting why markets may under-provide vacation. At the same time we find that the cost incidence of the regulation is mostly on firms, whereas workers benefit, as turnover falls and young mothers return to full-time work sooner. We find no offsetting wage or employment response, ruling out the pass-through predicted by compensating-differentials models.

Employers report hiring difficulties for a wide range of positions. Why don't wages adjust dynamically to clear market demand? We use novel data on posted wages from a near spot market for labor and document that a small minority of firms raise wages when they struggle to fill positions. An RCT with hiring managers investigates potential constraints on wage adjustments by offering hiring managers automated wage-setting systems that are designed to relax alternative wage setting frictions. We find that a majority of firms would use wage-setting systems that automatically raise wages in response to tightening labor markets, with highest demand among those made experimentally aware of Platform’s A/B testing and labor supply tracking. Our results indicate that adjustment costs and information frictions explain why firms increase wages more aggressively with automated wage setting tools than they do manually. We estimate that the availability of automated wage-surge systems would increase wages on hard to fill positions by 4% and raise job fill rates by roughly 10%. A substantial proportion of these gains can be achieved by providing managers with current information on applicants available in their specific hiring market.