Arindrajit Dube, University of Massachusetts Amherst

"Power and Dignity In the Low-Wage Labor Market: Theory and Evidence from Wal-Mart Workers” coauthored with Suresh Naidu and Adam Reich"

Abstract

What is the value of workplace dignity to low-wage workers, and is it supplied efficiently? We present evidence on the value of workplace dignity workers, guided by a model of job design under imperfect competition. We implement a survey experiment based on extensive ethnographic work, with over 10,000 Wal-Mart workers. We first validate our experimental design by showing that our hypothetical quit elasticities are close to other estimates in the literature, and that subjects’ behavior (their likelihood of clicking on an outside job link) is consistent with their stated preferences and together imply a non-trivial degree of monopsony power. Next, we estimate workers’ valuations of different workplace amenities, from commuting and scheduling to more subjective measures of workplace dignity. We find that workers value workplace dignity at approximately six percent of their current wage, making it comparable to amenities like commute time and more valuable than widely discussed amenities like control over one’s schedule. Third, we use geographic variation in the bite of Walmart’s 2014 voluntary minimum wage policy to estimate the causal impact of higher wages on changes in dignity. Contrary to the theory of compensating differentials, we find that workplace dignity is complementary to wages, as reported dignity values do not decrease among those workers likely to have experienced a raise as a result of the voluntary minimum wage. Finally, in light of these findings, we explore why dignity might be under-provided by the labor market, motivated by a model of job design in imperfectly competitive markets in which (1) workers’ quit and bargaining elasticities are each relevant to firm profits and (2) workers’ quit and bargaining elasticities with respect to an amenity may vary. While the experience of dignity at work decreases the quit elasticity slightly, seemingly incentivizing employers to oversupply dignity, it increases the bargaining elasticity to a much greater extent, suggesting a reason why it might be under-supplied in equilibrium

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