How Amenities Affect Job and Wage Choices over the Life Cycle

30 Pages Posted: 31 Oct 2007

See all articles by Ed Nosal

Ed Nosal

Federal Reserve Banks - Federal Reserve Bank of Atlanta

Peter Rupert

University of California, Santa Barbara (UCSB) - Department of Economics

Date Written: May 2003

Abstract

Observing the current wage at a job may not fully reflect the value of that job. For example, a job with a low starting wage may be preferred to a high starting wage job if the growth rate of wages in the former exceeds the latter. In fact, differences in wage growth can potentially explain why a worker might want to quit a high paying job for a job with a lower initial wage. Job amenities are shown to be another important factor that not only influence the value of a job but also provide an independent rationale for why workers change jobs. The inclusion of a job amenity as part of the "value" can also generate a move from either high-paying to low-paying or low-paying to high-paying jobs as part of an optimal consumption plan over the life cycle. Both the direction of movement and the timing of a job change are shown to depend critically on the relationship between the worker's rate of time preference and the market interest rate.

Keywords: job changes, amenities, lifetime wage profile

JEL Classification: J2, J3, J6

Suggested Citation

Nosal, Ed and Rupert, Peter, How Amenities Affect Job and Wage Choices over the Life Cycle (May 2003). FRB of Cleveland Working Paper No. 03-02. Available at SSRN: https://ssrn.com/abstract=1026315 or http://dx.doi.org/10.2139/ssrn.1026315

Ed Nosal (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

Peter Rupert

University of California, Santa Barbara (UCSB) - Department of Economics ( email )

2127 North Hall
Santa Barbara, CA 93106
United States

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