Meaningful jobs and compensating differentials

In The Conversation last week, Andrew Bryce (University of Sheffield) wrote about the meaningfulness of jobs. These bits in particular caught my eye:

Work provides many things over and above the monthly pay cheque: status and identity, community and social connection, doing tasks that we find stimulating, and the opportunity to make a positive contribution to society. All of these things make work feel meaningful.

My research explores how paid work is experienced as meaningful compared to the other activities people do in their everyday lives. I also identify the types of job in which people experience the most meaningfulness and explore how these results can be explained by the particular qualities of different occupations...

People in community and social service occupations (which includes social workers, counsellors and clergy) experience the most meaningfulness in their work.

The other top-ranking occupations are: healthcare practitioner and technical occupations; education, training and library occupations; and, perhaps surprisingly to some, legal occupations. More broadly, people working in the non-profit sector and self-employed people report significantly more meaningfulness in their work than those employed in private sector for-profit firms...

When work is meaningful, then that becomes a reward in itself and generous pay offers are not prioritised to motivate people and retain staff. In contrast, less meaningful work has no such intrinsic value, so a monetary reward is needed to get people to do these jobs.

This of course leads to the perverse situation where the most socially useful jobs are those that are paid the least. It may seem unfair but it’s the reality of how the labour market works.

It's the reality of how the labour market works because of compensating differentials. Jobs have both monetary and non-monetary characteristics. Monetary characteristics include the pay and other monetary benefits. Non-monetary characteristics include the whole range of other things associated with the job. Perhaps it is dirty, dangerous, or boring. Or perhaps it is clean, safe, or fun. When a job has attractive non-monetary characteristics, then more people will be willing to do that job. This leads to a higher supply of labour for that job, which leads to lower equilibrium wages. In contrast, when a job has negative non-monetary characteristics, then fewer people will be willing to do that job. This leads to a lower supply of labour for that job, which leads to higher equilibrium wages. It is the difference in wages between jobs with attractive non-monetary characteristics and jobs with negative non-monetary characteristics that we refer to as a compensating differential (essentially, workers are being compensated for taking on jobs with negative non-monetary characteristics, through higher wages).

The meaningfulness of a job is a non-monetary characteristic. If a job is meaningful, then more people will want to do the job (holding other job characteristics constant), and wages will consequently be lower. Another way of thinking about it is that employers of workers who offer meaningful jobs don't have to compete hard to attract workers, and so they don't have to offer as high a wage to fill the job. Either way, meaningful jobs pay less because of compensating differentials.