Title: Job Amenities, Compensating Differentials, and Wage Rigidity: Evidence from Brazil

Abstract: I examine how the provision of a job amenity at the firm level can affect the attraction and retention of workers, generate compensating differentials in wages, and influence wage trajectories and promotions over time. I analyse the impacts of a program that allowed Brazilian firms to extend the length of paid maternity leave offered to their workers from 4 to 6 months. Using a linked employer-employee dataset covering the universe of formal employment in Brazil, I estimate the effects of introducing this amenity by analysing 50,000 firms that adopted the program at different points in time. I find significant impacts on earnings, with an average reduction of female wages of around 3% at the firm level. I also document that the effects of the policy do not manifest immediately and are mainly driven by new hires, indicating some degree of wage rigidity in the market. The proportion of women in high-skill positions shows a significant and persistent decline of almost 10%. This group of workers is 43% more likely to use extended maternity leave in comparison to low-skill workers. My estimates suggest that a worker using extended leave is 12% more likely to be dismissed within two years after birth when compared to co-workers not using the benefit. Finally, I provide causal evidence of within-firm competition effects over earnings and promotions: a female worker who faces a high share of co-workers using extended ML observes an increase in annual earnings of 2.1%. Their probability of promotions is increased by 4.4%. I show that the effects on earnings are mainly driven by lower promotion prospects arising from higher competition and that the promotion effects are driven by male workers being more likely to be promoted.

Title to be advised.