Wage Framing Invariance (Average vs. Marginal)
RCTClinical Trial
When job choices present compensation as differing overall hourly averages across two schedules rather than explicit incremental pay for extra hours, workers might fail to calculate true marginal incentives, distorting revealed reservation wages.
Picture this
Imagine buying coffee where one sign says "12 oz for $3 and 16 oz for $4" and another sign says "12 oz for $3 plus $1 for 4 extra ounces"; if buyers choose the larger cup at identical rates under both signs, it proves they clearly understand the true cost per additional ounce regardless of sign design.
What the evidence says
Estimated marginal values of time are statistically indistinguishable between average wage framing ($12.00, s.e. = 1.50) and explicit marginal wage framing, confirming that structural framing does not bias applicant labor supply evaluations.
- Who was studied
- N = 272 applicants presented with a 35 vs 40 hours/week job comparison across 80 U.S. metro areas.
- How
- Randomized validation study comparing choices between (1) traditional framing with two distinct average hourly rates versus (2) overtime framing with a single base hourly wage up to 35 hours plus an explicit marginal wage for hours 36–40.
What to do
Validate complex pricing or wage experimental designs by testing whether presenting options as total average rates versus incremental marginal rates yields identical structural parameter choices.
From the source
"The estimates are close and we conclude that the framing of the choice is not influencing the estimated MVT."
Labor_Supply_and_the_Value_of_Non_Work_Time_Experimental_Estimates.pdf