Are Workers Willing to Pay to Join a Better Team?

How are the wages negotiated by a worker and a firm impacted by the anticipated productivity of future colleagues? In a recent study published in Economic Inquiry – titled “Are Workers Willing to Pay to Join a Better Team?” – Analysis Group Manager Thomas Zimmerfaust shows that some workers, particularly skilled workers who are further from retirement, may be willing to forgo wages for the opportunity to work with higher skilled colleagues. Using data from the Major League Baseball free-agent market, Dr. Zimmerfaust finds that younger players are willing to trade wages for the opportunity to play with better colleagues, at a rate of 25 percent of their wages for an increase in expected team winning percentage of five percentage points (approximately one standard deviation). These results are robust to controlling for a variety of individual attributes, such as skill, experience, age, and position, various firm and market controls, and contract length. The study's findings suggest that some skilled workers may be willing to accept lower wages for the opportunity to work with more productive colleagues in an effort to improve their own skill sets and, hence, future wages.