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Working Paper

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.

Working Papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications. The views expressed in this paper are those of the authors and do not represent the views of the Federal Reserve Bank of Cleveland or the Federal Reserve System.

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.