Jobs with higher physical risk offer compensating wage differentials
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Economic theory and multiple empirical studies indicate that jobs with higher physical risks or hazards often offer compensating wage differentials, while some research notes limits to these premiums for specific populations.
Previous studies have found that self-employed workers with long business tenure earn less than other workers with similar characteristics. This difference in earnings can be explained by the compensating wage differential theory when self-employed jobs have attractive, non-pecuniary aspects. Using the National Longitudinal Survey of Youth 79 (NLSY79), I test whether moves in and out of self-employment are associated with changes in global job satisfaction. By looking at changes in job satisfaction for individuals over time, I overcome the difficulty of interpreting differences in subjective job satisfaction scores across individuals that cross-sectional analysis would require. Using my estimates, I calculate the monetary value of the non-pecuniary aspects of self-employment and find that the value of self-employment in terms of job satisfaction is sufficiently high enough to support the compensating differential hypothesis as an explanation for lower earnings among self-employed workers.
Considerable research and pervasive cultural narratives suggest that undocumented immigrant workers are concentrated in the most dangerous, hazardous, and otherwise unappealing jobs in U.S. labor markets. Yet, owing largely to data limitations, little empirical work has addressed this topic. Using data from the 2004 and 2008 panels of the Survey of Income and Program Participation, we impute legal status for Mexican and Central American immigrants and link their occupations to Bureau of Labor and Statistics (BLS) data on occupational fatalities and occupational hazard data from the U.S. Department of Labor to explore racial and legal status differentials on several specific measures of occupational risk. Results indicate that undocumented workers face heightened exposure to numerous dimensions of occupational hazard – including higher levels of physical strain, exposure to heights, and repetitive motions – but are less exposed than native workers to some of the potentially most dangerous environments. We also show that undocumented workers are rewarded less for employment in hazardous settings, receiving low or no compensating differential for working in jobs with high fatality, toxic materials, or exposure to heights. Overall, this study suggests that legal status plays an important role in determining exposure to job hazard and in structuring the wage returns to risky work.
An important but overlooked cost of payments in retailing is the cost on checkout cashiers. This paper examines the compensating wage differential that cashiers require to handle payments in cash. First, a multicountry panel data study shows that cashier wages increase with retail cash usage, which is consistent with cashiers requiring compensation to handle cash. Second, in a discrete choice experiment where supermarket cashiers chose between collecting card and cash payments, eight of 10 cashiers preferred card to cash. Among those who preferred card, the median cashier required a wage premium of S$37.50 (US$27) a month to handle cash. The premium was lower among cashiers who are local, less risk averse, and younger. Third, in a laboratory study, subjects traded off earnings against stress. With higher frequency of cash payments, high earners experienced greater physiological stress than low earners. Earnings also increased with abilities in arithmetic and coping with stress. Collectively, these studies show that cashiers require higher wages to handle cash payments, in part due to higher stress. We offer policy, managerial, and research implications for job design, payment systems, and workplace stress.
Our research examines the effect of combat deployments to Iraq and Afghanistan on casualties. We use restricted data from the Defense Manpower Data Center (DMDC) and Social Security Administration (SSA) to construct a panel of all U.S. Active Duty service members having served at some point during the years 2001-2012. Casualties disproportionately occur at higher rates among (i) young, white, males (ii) enlisted personnel (iii) less educated personnel (iv) and those in combat job types. Our estimates indicate that overall U.S. military personnel who deployed in an individual year to Iraq or Afghanistan had a 48 per 100,000 higher probability of death than non-deployed military personnel who remained stateside. The increased fatal injury risk of deployed U.S. military personnel is 15 times higher than the national average civilian workplace fatality rate, but roughly equal to the fatal injury risk faced in some of the most dangerous civilian occupations. Our estimates suggest a compensating wage differential equal to $808 per month would be appropriate, in comparison to the current status quo of $225 per month in danger pay (and additional tax benefits) provided to U.S. military personnel deployed into combat zones. The additional compensation should also be adjusted by service or job type.
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