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 workplace amenities, 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. A short-term pay information intervention raises mean beliefs about pay in similar jobs by 4% and reduces belief dispersion by 15%, but does not alter the perceived amenity-pay slope or the implied tradeoffs in stated choices. Meanwhile, full disclosure of pay for jobs under consideration raises the pay of chosen jobs by about 4% and recovers willingness-to-pay estimates closely aligned with full-information hypothetical-choice benchmarks. Short-term disclosure thus moves beliefs but not perceived tradeoffs, while persistent disclosure erases biases in pay beliefs and nearly restores the full-information tradeoffs.