The true returns to the choice of occupation and education

Which occupations are best for wellbeing? There is a large literature on earnings differentials, but less attention has been paid to occupational differences in non-pecuniary rewards. However, information on both types of rewards is needed to understand the dispersion of wellbeing across occupations. We analyse subjective wellbeing in a large representative sample of UK workers to construct a measure of “full earnings”, the sum of earnings and the value of non-pecuniary rewards, in 90 different occupations. We first find that the dispersion of earnings underestimates the extent of inequality in the labour market: the dispersion of full earnings is one-third larger than the dispersion of earnings. Equally, the gender and ethnic gaps in the labour market are larger than data on earnings alone would suggest, and the true returns to completed secondary education (though not to a degree) are underestimated by earnings differences on their own. Finally, we show that our main results are similar, and stronger, for a representative sample of US workers.