Pay Beliefs and the Amenity-Pay Tradeoff

Abstract

This paper studies how workers' beliefs about pay shape the tradeoffs between pay and workplace amenities. We design a multi-stage incentivized survey experiment that combines hypothetical choice experiments with elicited beliefs about starting salaries in real jobs and randomly varies the provision of explicit pay information. Although stated preferences imply sizable willingness to pay for amenities consistent with prior literature, baseline beliefs about salaries in real jobs are systematically biased along two margins: respondents under-predict starting salaries by 18% and expect higher-amenity jobs to pay more, substantially over-predicting the amenity-pay gradient. Exposure to pay information raises mean pay beliefs for similar jobs by 4% and reduces belief dispersion by 15%, but does not alter the strong positive association between perceived pay and advertised amenities, leaving the amenity-pay tradeoffs in stated choices essentially unchanged. While workers have strong preferences for workplace amenities, the tradeoffs they perceive deviate sharply from those present under full information.