Reservation wages

What affects job retention and job creation: reservation wages or reservation what?

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Christine Jeske on 2 July 2018

Unemployment research typically inquires how to generate more jobs and how to keep workers working. Researchers often probe the reservation wage level (which appears to balance the interests of employees and employers). Qualitative research findings suggest that wages may be less significant factors in work-related decisions than the nature of interpersonal relationships in the workplace. Both employees and employers emphasise the importance of the quality of relationships, though employers and employees highlight different factors.

Reservation wages found in surveys can be very misleading

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Rulof Burger, Patrizio Piraino, Asmus Zoch on 12 September 2017

The responses of unemployed workers to the typical survey question about their ‘lowest acceptable wages’ are susceptible to error and overestimation – particularly for people in persistent joblessness. Studies using only the responses to the standard question may incorrectly conclude that vulnerable workers are unemployed because they tend to price themselves out of employment – while in fact their responses are just unreliable and distorted indications of their true reservation wages. Alternative questions would give more reliable results.