The Wages of Paycuts: Evidence from a Field Experiment (joint with Daniel Chen)

• Paper Abstract: To understand why firms rarely cut nominal wages, we hired workers for a data entry task, paid them a high wage and then offered some of the workers the opportunity to keep working, albeit for a lower wage. Offers were framed differently across groups. Workers were more likely to reject lower offers, but ``reasonable'' justifications eliminated this effect. Yet not all justifications were effective---suggesting the cut would improve our profits increased quits. We also measured whether the treatments affected quality, trust and cooperation. The ``profits'' treatment reduced cooperation and possibly reduced quality; the other treatments had generally weak effects.
• PDF. Current version as June 5th, 2009.
• Data (zipped)
• Write-up and Code: This is the raw Sweave document - it contains a mixture of both the LaTeX writeup of the paper and the underlying R code that produces the analysis found in the paper.
• Key Result: Altering the framing of a wage cut can dramatically affect uptake of the new offer:

• Status: Under review.