Does Culture Pay? Compensating Differentials, Job Satisfaction, and Organizational Practices

Organizational practices are an increasingly important mechanism for retaining and motivating employees. Using a new survey tool in partnership with PayScale.com between 2014 and 2016, I first document the cross-section of job satisfaction and organizational practices in the labor market, and, secondly, recover a willingness to pay for these amenities. I show that these amenities create a time-varying, firm-specific rent that amplifies traditional selection problems. My identification strategy exploits employees’ outside option, which is uncorrelated with contemporaneous organizational factors, but still capitalizes work-place amenities. Employees are willing to pay 2-3% of their earnings for a standard deviation rise in organizational practices.