WHAT DO WAGES BUY

This study examines data on more than 8,000 employees of nearly 100 manufacturing plants in the United States and Japan to measure the effects of differences in wages on workplace attitudes and behaviors. In both the U.S. and Japan, workers receiving high wages are less likely to quit, are more satisfied with their pay, and report that they work harder than they have to. These results support theories of segmented labor markets and of social comparison, but not theories of human capital or compensating differences. In the U.S. data there is no evidence that the effects of high wages are less powerful than the effects of low wages. This result contradicts some variants of status-inconsistency and distributive justice theories. In Japan, workers who are highly paid compared with others in their plant appear to experience discomfort. This result indicates the important role social comparison plays in Japan.