Work Hours and Amenity Trade-offs

When you accept a job, you’re not just agreeing to a salary. You are agreeing to a bundle of perks: a schedule, a commute, a set of expectations about your time, and a package of benefits. How do workers choose between jobs when jobs have multiple perks? Which perks do they sacrifice in exchange for others?

The standard story

The classic economic answer is clean: workers who value a perk, say flexible hours, are willing to accept lower pay to get it. Firms respond by offering lower wages in exchange for offering the perk. Workers sort into jobs that match their preferences, and the wage gap between inflexible and flexible jobs reveals how much people value those perks. This is the theory of compensating differentials (Rosen, 1986)—and it has shaped how economists and policymakers think about salaries and job characteristics for decades.

But jobs don’t offer only one perk; they often package several of them together. Moreover, some perks are not offered when others are. For example, jobs with flexible hours often do not offer health insurance, or the ability to work from home. This bundling changes the basic trade-off workers face. When firms package multiple perks together, workers often trade lower hours for other benefits—not just for wages—and this reshapes how we should understand salary differences in the labour market.

The bundling problem

Think of a job as a package deal. A job with flexible hours might also come with the option to work from home but a smaller health insurance contribution. A high-paying job might come with long hours but generous paid leave. Workers don’t pick individual features; they choose from a menu of bundles.

The key insight of our paper is this: how workers choose between these jobs—and these perks—depends not only on their preferences, but also on the kind of bundles employers offer. A worker might want both low hours and a flexible schedule, but employers may not offer that particular bundle because it is too costly to provide. This can force a trade-off between the two: a worker might get low hours, or a flexible schedule, but not necessarily both.

In the paper, we develop a model where workers choose between amenity (perk) bundles and employers decide which bundles to offer. Amenities can interact with one another on both the demand and supply side, so ``the whole may be worth more than the sum of its parts.’’ Workers might value a bundle more—or less—than the combined value of getting each perk separately.

For example, being able to work remotely may make choosing one’s own schedule more attractive. On the employer side, bundling perks together might be cheaper—or more expensive—than offering each one separately: adding dental insurance may cost less if health insurance is already offered.

Flexible work hours don’t just cost you wages—they also cost you other benefits

We then move to the data to understand how workers trade-off between perks in the US labor market. We use panel data from the National Longitudinal Survey of Youth (Bureau of Labor Statistics, 2024), which has followed a cohort of young Americans into adulthood, tracking their jobs, wages, and benefits over time.

We find that there is a fundamental trade-off between hour flexibility and other perks:

• American workers who value lower hours often must give up other amenities.
• Workers who gain shorter work hours likely lose health insurance, maternity benefits, remote work, and schedule flexibility.

This matters for gender inequality

This trade-off between hour flexibility and other perks is not gender-neutral.

• Women, likely due to greater childcare responsibilities, are more likely to end up in jobs with flexible hours—jobs that pay less and come with fewer other benefits.
• The result is a gender gap in total compensation—wages plus the full value of benefits—that is wider than the gender wage gap alone suggests.

Bundling benefits into packages doesn’t just complicate the textbook story of compensating differentials. It hides part of the true cost women pay for flexibility—one that a wage comparison does not fully capture.

References

• Bureau of Labor Statistics, U.S. Department of Labor (2024), “National Longitudinal Survey of Youth 1997 cohort, 1997–2021 (rounds 1–20)”, produced and distributed by the Center for Human Resource Research (CHRR), The Ohio State University.
• Goldin, C (2014), “A grand gender convergence: Its last chapter”, American Economic Review 104(4): 1091–1119.
• Rosen, S (1986), “The theory of equalizing differences”, Handbook of Labor Economics 1: 641–692.