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How Amenities Affect Job and Wage Choices over the Life Cycle

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.

JEL Classification: J2, J3, J6
Key Words: job changes, amenities, lifetime wage profile

Suggested citation: Nosal, Ed, and Peter Rupert, 2003. “How Amenities Affect Job and Wage Choices over the Life Cycle,” Federal Reserve Bank of Cleveland, Working Paper, no. 03-02.

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