Academic journal article Monthly Labor Review

Earning Less, Rationally

Academic journal article Monthly Labor Review

Earning Less, Rationally

Article excerpt

Workers sometimes change employers to get higher wages. True enough, but there are also cases where workers earn less in new jobs. Some of these cases involve workers who involuntarily left their old job and only take a lower-paying job after being unable to find anything at their old wage level. But what about those cases involving workers who voluntarily leave higher-paying jobs for lower-paying ones?

One idea is that workers accept lower wages in a new job if it is an entry-level position in a career that will eventually allow them to earn more than they would ever earn in their previous occupation. For example, a teacher might leave teaching and work as an accountant, even if that meant earning less in the new occupation for the first few years.

In Economic Commentary (published by the Federal Reserve Bank of Cleveland), Peter Rupert puts forth another hypothesis to explain why workers trade higher-paying jobs for lower-paying ones. "It's not always about the money," is his conclusion.

Wages are only part of a job's "value" for a worker. Besides wages, a worker also obtains "amenities" from a job: intangible benefits such as the enjoyment of a good workplace environment, pleasant working conditions, a certain cachet, or some other je ne sais quoi. …

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