In response to trends that favor less “traditional” work arrangements, more and more companies are giving employees the flexibility they prefer. But do employees really want that increased flexibility—especially if it comes at the expense of their wages? Two National Bureau of Economic Research scholars, Alexandre Mas (professor of economics and public affairs at Princeton University) and Amanda Pallais (associate professor of political economy and social studies at Harvard University), answer that question in a paper titled “Valuing Alternative Work Arrangements.”*
To gather their data, Mas and Pallais conducted an actual recruitment drive for a national call center, advertising in 68 high-population areas through a national job-search site. The 7,000 applicants were ethnically diverse and predominantly female, with an average age of 33. Half of them had attended college but had no degree; the other half was evenly divided between those who had only high school degrees and those who had college degrees.
The ads included “no information about the job’s schedule, location, or duration.” But when applicants clicked on the link to more detailed information, they were offered a choice between a standard Monday-through-Friday, 9-to-5 schedule and one of the following alternatives (chosen at random for each person):
- Full-time (40-hour) flexible schedule set by employee; employee reports to company worksite in applicant’s city.
- Full-time or part-time flexible schedule (up to 40 hours per week) set by employee; employee gets to determine number of hours worked as well as the schedule and reports to company worksite in applicant’s city.
- Full-time, Monday–Friday, 9-to-5 schedule; employees can telecommute.
- Full-time or part-time flexible schedule set by employee; employee gets to determine number of hours worked and schedule and can choose whether to telecommute or to report to company worksite in applicant’s city.
- Full-time, variable hours (which could include weekend and night work) set by employer at least one week in advance; employee reports to company worksite in applicant’s city.
But there was a catch: the two options didn’t pay the same hourly rate. One paid a certain wage, and the other paid an amount (randomly determined) ranging from $0 to $5 less than that wage. There was no fixed correlation between a particular pay rate and a particular job. Sometimes the standard job had the higher wage, and sometimes it had the lower wage.
As one might expect, option 5—with no flexibility afforded to employees—was not very popular among the job seekers. Mas and Pallais found that “the average applicant [was] willing to take a 20% wage cut to avoid these jobs, and almost 40% of applicants would not take this [type of] job even if it paid 25% more than a M–F, 9 a.m.– 5 p.m. position.” But when faced with a choice between having alternative work arrangements or increased pay, what would applicants prefer?
Surprisingly, the study found that most people were not willing to take a cut in pay in order to have flexible schedules, even if they were able to set those schedules themselves. Mas and Pallais found that “the great majority of workers are not willing to pay for flexible scheduling relative to a traditional schedule: either the ability to choose the days and times of work or the number of hours they work.”
At the same time, though, a significant minority of applicants (mostly women with young children) was willing to take a pay cut to be able to work from home. Mas and Pallais found that, “on average, job applicants [were] willing to take 8% lower wages for the option of working from home.” This study offers some valuable insight into employee relations and workplace management:
- Money is clearly a big deal. Money was never a small deal, of course, but in the past (when employment and the economy were more stable than they are now) employees often placed a high value on non-monetary rewards and sometimes regarded good communication, perceptions of fairness, and lack of favoritism as more important than the pay. (Today’s concept of “workplace flexibility” wasn’t part of the vocabulary then.) This study indicates that money may be the biggest priority now, and perhaps even more so for young people entering the workforce.
- Work-life balance still ranks high in importance. But the traditional Monday-through-Friday, 9-to-5, onsite work schedule may be a pretty good way to create and maintain it—without taking a hit to the wallet because of reduced wages associated with other options.
- Nobody likes variable schedules set by employers (with the possible exception of the employers, of course).
- Telecommuting continues to be popular with everybody, and especially with women who have young children.
The study by Mas and Pallais appears to turn many received notions on their heads. In particular, conventional wisdom has long held that employees value flexibility in their work arrangements more than anything else. Yet this study indicates that (under the conditions presented here, at least) this preference may be overstated. Employers would do well to investigate this subject further, in part to find ways to increase employee engagement by providing employees with the perks and benefits they truly value most.
*Alexandre Mas and Amanda Pallais. 2016. “Valuing Alternative Work Arrangements.” NBER Working Paper No. 22708, scholar.harvard.edu/wp-content/uploads/pallais/wp-content/uploads/valuing_alternative_work_arrangements.pdf.
Robin E. Shea has more than 20 years’ experience in employment litigation, class and collective actions under the Fair Labor Standards Act and state wagehour laws, defense of audits by the Office of Federal Contract Compliance Programs, and labor relations. She conducts training for human resources professionals, management, and employees on a wide variety of topics. Shea is editor in chief of the client publications for Constangy, Brooke, Smith, and Prophete LLP. She can be reached on Twitter at @RobinEShea.