Altruism and Inequality: How Pro-social Pay Discounts Offset the College Pay Premium

Abstract

In an era of substantial labor market inequality, employers increasingly invoke pro-social mission, corporate responsibility and organizational purpose. Many commentators criticize these prosocial commitments as ineffectual and insincere. In this paper, we argue on the contrary that these employer commitments inadvertently reduce earnings inequality. Building on research on job values, we hypothesize that college graduates are more willing to sacrifice pay for pro-social impact. So employers’ increased emphasis on pro-social job amenity will lower pay disproportionately for higher skill workers. We test this theory with data on the near-universe of online US job postings. We find that pro-social jobs which require a college degree post 10 percent lower wages than standard postings with exactly the same job requirements. Wages at pro-social, but low-education jobs, are no different from comparable regular jobs. This gap reduces the aggregate college wage premium by around 5 percent. We present a variety of supplementary evidence using resumes, survey data and an online experiment with hiring managers. The findings show that employers' embrace of pro-social messages can offset macro-level inequality.