Why workplace dignity is valuable to U.S. workers, employers, and the broader economy
The role of employment in the lives of many U.S. workers and their families is more than just a way to provide for oneself and one’s loved ones. Jobs are shaped by both social networks and social norms that influence decision-making. Different occupations come with varying social status. And our daily work can deeply affect our well-being through shaping stress and associated health effects. These are just a few of many other characteristics that make labor so unique in the economy.
Across these different attributes of employment, it is clear that an understanding of the role of dignity and empowerment at work is a key economic question that has been underexplored in the field of economics. Yet research from other fields and interdisciplinary work can provide some critical insights to guide U.S. policymakers in promoting good jobs, in which workers have both power and dignity at work while contributing to broadly shared and robust economic growth.
In a new Equitable Growth working paper, titled “Power and Dignity in the Low-Wage Labor Market: Theory and Evidence from Wal-Mart Workers,” Arindrajit Dube of University of Massachusetts Amherst and Suresh Naidu and Adam Reich of Columbia University bring insights from sociological research applied to economics methods to dig into precisely what dignity at work means and how it shapes job quality for low-wage workers at the notoriously low-road employer Walmart Inc. The researchers are interested in how subjective perceptions of dignity at work are a workplace amenity, similar to other job characteristics, and how job characteristics—including dignity, as well as standard benefits such as paid time off—are valued as substitutes or complements to each other.
Underlying these questions are questions about how power imbalances within workplaces lead to inefficiencies where in-demand job characteristics are undersupplied in a noncompetitive labor market. And, as noted, the field of economics has a sparse literature on dignity at work.
One notable exception, cited by Dube, Naidu, and Reich, is work by Roland Benabou of Princeton University and Jean Tirole of the Toulouse School of Economics. In their 2009 paper, “Over My Dead Body: Bargaining and the Price of Dignity,” they define dignity as a motivated belief in one’s own productivity, which, in turn, shapes bargaining outcomes between workers and employers. In a bargaining model with dignity, outcomes are different than the equilibrium predicted in simplistic supply-and-demand model with workers maximizing income and employers minimizing costs to maximize profits.
Moving beyond the simplistic economic model where narrowly defined rationality reigns supreme, this subjective belief in one’s own productivity does not mean that workers and employers are, for one reason or another, irrational in their bargaining over wages because neither is solely motivated by maximizing income or minimizing costs. There may be fundamental flaws in either party’s decision-making, to be sure, and these internal belief distortions may lead to efficiency losses because it is difficult to correct for flaws in self-perception.
While it might help to “knock down a peg” the overhyped beliefs of the unproductive worker, for example, there is also a risk of reducing the confidence of productive workers, which would result in them potentially being paid less than the value they create and would reinforce deadweight loss through wage suppression. In an economy with imbalanced information between workers and employers and other power disparities in the bargaining process, the latter outcome may be more likely. In these circumstances, policymakers recognizing intrinsic imperfections in these economic dynamics gives them more space to correct them through policymaking, such as by raising the wage floor or enforcing workplace protections.
Outside of economics, there is a rich sociological literature on dignity at work. Randy Hodson’s 2001 book, Dignity at Work, reviews 200 workplace ethnographies that investigate job satisfaction, finding themes of autonomy, co-worker relationships, and supervision over one’s work—which Dube, Naidu, and Reich subsequently center as their definition of workplace dignity. In “Power and Dignity in the Low-Wage Labor Market,” the researchers follow Reich’s previous qualitative survey work in his 2018 book with Peter Bearman, Working for Respect: Community and Conflict at Walmart. They essentially scale-up the findings of Reich and Bearman’s ethnographic work on Walmart workers by using how they define dignity at work in qualitative interviews mapped on to a large-scale survey.
The co-authors use the Qualtrics survey methods developed by The Shift Project, which was spearheaded by demographers and sociology professors Danny Schneider of Harvard University and Kristen Harknett of University of California, San Francisco. And, with a novel dataset, Dube, Naidu, and Reich are able to begin to estimate the value of nonwage amenities to workers. In their framework, workers maximize the combination of wage and nonwage amenities, including dignity at work measured by perceptions of supervisor fairness or friends at work, alongside other workplace benefits, such as paid time off or sufficient work hours.
Yet when the population of workers have different preferences for the combinations of job characteristics, firms will tend to shape job offers to attract the last-hired worker, which may not be an efficient outcome for the average worker at that workplace. One hypothetical case-in-point made by the three co-authors is if an employer needs to recruit just one more worker and that worker has a higher-than-average rate of substitutability between wages and work amenities, whereas other workers may find them imperfect substitutes that can’t just be traded for one another, then amenities will end up being underprovided and wages overprovided for the average worker preferences at that establishment.
Additionally, the co-authors include in their model that workers can quit in response to better job offers, yet the arrival rate of better job offers may be imperfect due to search frictions, or the difficulty in finding an adequate offer. Each of these features of the model are consistent with the framework of monopsony, where imperfect labor markets leave room for policy intervention to raise wages and benefits for more efficient outcomes.
Dube, Naidu, and Reich are then able to estimate the value of nonwage amenities by pairing wage and amenity offers at other hypothetical jobs with wages and amenities at the Walmart workers’ current jobs and the likelihood of receiving such an offer and then quitting one’s current job. They are able to estimate what job attributes matter, just how much in dollar terms, and how they impact the likelihood of quitting in an imperfectly competitive labor market. Some of the nonwage amenities that impact the likelihood of quitting the most are sufficient work hours, how fair and respectful a supervisor is, paid time off, and commute time.
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They also examine whether wage and nonwage amenities are substitutes or complements for each other by comparing how valuable a nonwage amenity is at the average wage and then at a 10 percent higher wage, seeing if the wage increase does or does not affect how much a worker values a nonwage amenity. What they find is that, overall, nonwage amenities are complements to wages, meaning the value of nonwage amenities increases when wages go up. In particular, they demonstrate how much workers value sufficient work hours, paid time off, and increases in commute time when wages go up. Amenities related to time increase in value at higher wages.
What is clear is that dignity and power at work matter beyond simple dynamics of workers seeking higher wages and businesses trying to keep costs low to increase profits. These other attributes and dynamics paint a more complex picture, but one that may ring true to all workers who experience the social aspects of their jobs.
This exciting new paper demonstrates the strength of cross-disciplinary methods to bring more clarity to complex labor market dynamics than relying on traditional methods of any one field. What’s more is what this insight can tell policymakers. In an extension of this analysis in the paper, the co-authors’ findings about complementarities shed light on how minimum wage increases impact workers, finding that Walmart employers do not reduce other nonwage amenities when wages increase.
All of these findings are consistent with the underlying framework of monopsony. Understanding the complex ways that people interact with their jobs through research with cutting-edge techniques across social research fields can be helpful for policymakers and businesses alike to improve job quality, reduce turnover, and foster broadly shared economic growth and prosperity.
