Reservation Wage Rigidity Post-Employment Exposure

In Simple Words

When a worker gets a high-paying temp job, one might expect them to permanently raise the minimum salary they are willing to accept, like a seller raising prices after one big sale. However, if reservation wages remain flexible or unadjusted, the worker quickly accepts subsequent jobs across the market without extending their unemployment period.

Research question

Standard job search models predict that obtaining high-paying short-term work experience causes workers to upwardly adjust their reservation wages. This upward revision can prolong unemployment spells if workers refuse lower-paying subsequent job offers.

Participants

N = 221 urban Malawian male job seekers interviewed at the 8-month follow-up survey in Lilongwe, Malawi.

Study Design

Instrumental variables (IV) estimation evaluating the impact of short-term work experience on self-reported monthly reservation wages and active job search duration.

Results

Receiving short-term work experience resulted in a $124.40 increase in monthly reservation wages that was statistically insignificant (p > 0.10), and produced no statistically significant increase in the proportion of time spent actively searching for work (coefficient = 0.089, p > 0.10).

Takeaway

Measure actual job search duration alongside reservation wage surveys to verify whether wage expectations create search frictions following temporary employment interventions.

Read alongside the research

Plain-English glossary

Original explanations, informed by the references below. Examples are illustrations, not data from the studies above. The research text stays unchanged.

Follow-up

Collecting more information about participants later in a study to see what has happened to them. The term can also mean the length of time researchers keep track of them.

ExampleResearchers interview the same workers three months after a programme ends. That later interview is a follow-up.

GET-IT glossary · Follow-up ↗Read more about follow-up →

Statistically significant

A label used when a result passes a chosen statistical threshold, often p < 0.05. It does not show how large or useful an effect is. A result that is not statistically significant does not prove there is no effect.

ExampleA study reports p = 0.03 against a 0.05 threshold. It passes that test, but the effect could still be too small to matter.

American Statistical Association · Statement on p-values ↗Read more about statistically significant →

Related findings

• Broad-Based Wage Distribution CDF Shift →Labour & employment

  A short-term work experience intervention acts like raising the water level in an entire harbor rather than lifting a single boat. It shifts the entire cumulative distribution curve of daily wages to the right, increasing earnings opportunities across low-, medium-, and high-earning workers alike.

• Contract Permanence vs. Daily Wage Trade-Off →Labour & employment

  Earning higher daily wages in short-term project roles is like working as a high-paid freelance contractor rather than a lower-paid permanent office employee. The worker receives higher immediate daily compensation, but the work is organized around short contracts that require frequent re-entry into the job market.

• Social Job Network Expansion →Labour & employment

  Joining a short-term workplace is like gaining access to a private neighborhood bulletin board where members continuously share tips about upcoming job openings, allowing newly connected workers to hear about employment opportunities that are never publicly advertised.

• Causal Wage Returns to Short-Term Work Experience →Labour & employment

  Gaining a brief period of formal work experience functions like a temporary structural bridge over a river. Even if the job lasts only a few days, it gives a worker immediate hands-on practice with real-world tasks and transferable skills, providing subsequent private employers with verifiable proof of workforce productivity beyond mere academic credentials.