Valuing Alternative Work Arrangements
Though most workers are not willing to accept lower wages for some types of flexible work arrangements (e.g., scheduling flexibility to set their own days and times of work at a fixed number of hours, or the ability to choose the number of hours they work), women are generally more willing than men to give up more of their pay in exchange for flexible work options such as working from home and avoiding irregular work hours, especially if they have young children.
Human resources professionals in the United States have long maintained that flexible work arrangements such as options to work from home or set your own hours can help employers to attract and retain employees. In particular, these arrangements are thought to be attractive to female workers. These arrangements can also have other positive benefits. For example, when organizations promote flexibility and supervisor support, job-related wellbeing increases among all employees and general wellbeing increases only for female employees. However, little is known about the monetary value workers actually place on these arrangements.
In this paper, the authors sought to determine how much workers would be willing to pay (WTP) for various types of flexible work arrangements. To do this, the authors advertised a telephone interviewer position and gave applicants the choice between a position with a standard 40-hours-per-week schedule or one with a randomly selected alternative work arrangement. The authors varied the pay for the two positions to determine the value that respondents gave to the alternative arrangements. They then compared the responses of female and male job applicants to determine if differences in valuation of these arrangements could help explain the gender wage gap. The authors compared their experimental data with a survey they conducted among participants in the nationally representative Understanding America Study (UAS) to test the validity of their field results.
Most workers were willing to accept lower pay to work from home and to avoid giving their employer discretion to set their schedule on short notice. However, the average worker did not value the ability to set their own schedule or total number of work hours. Female workers were more willing to give up more of their pay than men in exchange for some of these arrangements, but the difference was not sufficient to explain existing wage gaps.
- The average worker was willing to give up 8% of their wages in order to work from home, but was not willing to trade any wages for the option to set their own schedule or to choose the number of hours worked.
- When workers were offered a combined option that included work from home but also flexible scheduling and flexible number of hours, the results were similar to the solo option of work from home, suggesting it would be sufficient to only offer work from home to appeal to prospective workers.
- Women were more willing than men to give up more of their hourly wages for the ability to work from home ($1.59 versus $0.68, on average) or the combined option that included work from home, but neither difference was statistically significant.
- Women and men did not differ significantly in their willingness to give up pay in exchange for a flexible work schedule or flexible number of work hours. This might be due in part to the strong preference for 40-hour work weeks (i.e., full-time jobs). The average worker was willing to give up $6 per hour to have a 40-hours-per-week schedule instead of a 20-hours-per-week schedule. Similarly, the average worker was indifferent to working overtime (a 50-hours-per-week schedule) even with overtime premium pay of 1.5-2 times their hourly rate.
- The average worker was willing to give up 20% of their wages in order to avoid a work arrangement in which the employer would have discretion to set the worker’s schedule with only one week’s notice.
- Virtually all workers sought to avoid this type of arrangement (the bottom 25% of the sample was still willing to give up as much as 10% of earnings to avoid this arrangement). Workers’ dislike of the employer discretion arrangement was driven by their desire to avoid working at odd times (i.e., evenings and weekends) and not by the short notice for their schedules.
- Women were willing to give up more of their wages to avoid employer discretion over their hours than men ($4.27 versus $2.11), and this difference was statistically significant.
Nationally representative sample data from the Understanding America Study (UAS) shows that women are only very slightly more likely than men to work from home or to be in jobs with consistent schedules. In combination with this study’s results, this suggests that the differences in women and men’s willingness to accept less pay for employee-friendly work arrangements do not explain existing wage gaps. While employers widely believe that a flexible schedule is a desirable benefit, particularly for women, the authors conclude that the majority of workers do not actually value the ability to set their own schedule or choose the hours they work. Both female and male employees, however, highly value the ability to work from home and the ability to avoid giving their employers complete discretion over their schedules.
The authors posted an advertisement on a national U.S. job search platform for telephone interviewer positions, with customized ads in 68 large metro areas. The advertisements did not include details about the job’s schedule, location, or duration. Approximately 7,000 individuals who completed the application were asked to choose between two positions: an on-site job with a standard Monday-Friday 9 a.m. to 5 p.m. schedule (with the location adjusted to their metropolitan area) or a randomly assigned second job with an alternative work arrangement: (1) “flexible schedule”: a 40 hour-per-week position with the ability to make their own work schedule; (2) “flexible number of hours”: the ability to set their number of hours worked, up to 40 hours per week; (3) “work from home”: the ability to work from home with a standard schedule; (4) “combined flexible”: the ability to work from home, set their own schedule, and set the number of hours worked; and (5) “employer discretion”: a 40 hour-per-week option for the employer to set the employee’s schedule (including evenings and weekends) with one week’s notice. The hourly pay rates for these jobs were randomly assigned, and were between $0 and $5.00 in $0.25 increments. Applicants were asked to provide information related to their work history and education, as well as optional demographic information, similar to a regular job application. The authors then developed an econometric framework to estimate the distribution of job applicants’ “willingness to pay” (WTP) for each of the alternative work arrangements.
The authors included multiple checks to estimate the rate at which applicants were inattentive, which they included in these calculations since those who were inattentive should be equally likely to select either option. The authors also included multiple checks that their sample was similar to the general population by comparing findings with nationally representative data from the Understanding America Study (UAS) and by weighting their sample estimates to the demographics of the nationally representative sample. They included questions in the survey that mirrored key elements of the study (specific results not reported in this summary). Finally, the authors also took additional steps to better understand certain results, such as focus groups and supplemental studies (e.g., comparing 20-hour and 50-hour schedules; some but not all results reported in this summary).