Looks & earnings

Here’s yet more evidence that appearances matter in the labour market. Christian Pfeifer estimates that, among Germans, a one point higher rating for physical attractiveness on a 1-11 scale is associated with 3% higher wages, controlling for other obvious influences. The effect is slightly larger for men than for women.
This implies that, among men the earnings difference between being very ugly and very attractive is greater than the return to a university degree.
What’s more, in contrast to some research, this is not due merely to there being a penalty for being ugly. Although the ugliest men do suffer low wages, very handsome ones do better than middlingly attractive ones. Among women the looks premium is more linear.
Why should this be? There are many possibilities, but several of them are flawed, for example:
 - Customers prefer to deal with attractive people. This runs into the problem that, even in occupations where you’d think there would be a big customer premium on attractiveness, such as prostitution, the returns to looks aren’t much different from those in the labour market generally.
- Looks are correlated with other productive traits, such as intelligence (pdf) - the Vorderman effect. However, this might not be the case, and anyway most studies on the beauty  premium control for the big and obvious measures of ability, such as academic qualifications.
- Looks are associated with self-confidence, which enables its owners to push for better jobs. However, Pfeifer shows that there is no correlation between men’s assessment of their looks and earnings; it is only the interviewers’ opinion of their looks that are correlated with earnings*.
With these theories flawed, here’s another theory. The beauty premium exists because the labour contract is typically incomplete and workers’ performance cannot always be easily monitored. In such cases, employers will want people they can trust - and, for reasons which might not be rationally grounded, good-looking people are considered to be more trustworthy (pdf).
Perhaps, therefore, the beauty premium isn’t just a funny quirk, but is instead an artefact which arises from the very structure of the labour market - the same structure which gives us both efficiency wages (and thus persistent unemployment) and rising inequality generally.
* This raises the possibility of reverse causality; maybe interviewers get the impression that a man is well-off and subconsciously rate him as more attractive because of this.

Comments

[Luis Enrique]

your theory potentially related to the confidence idea - people that are more used to being trusted may be more confident as a consequence. I wonder how much noisier self-assessment of looks are, relatve to stranger assemessments? Could it be that people who might give their own looks a low rating nonetheless have higher self-confidence attained by experience of how others treat them? I'm not sure the self-assessment thing, interesting thought it is, quite rules out higher self confidence as being a big part of the story.

[CS Clark]

In these experiments how do they manage to control natural beauty from looks resulting from haircut, skin routine, use of product, shininess of shoes, trendiness of style, thread count and other things related to wealth unless they throw each participant into the same shower then examine them clothed in the same backless surgical gown? One at a time, I mean.

By the way, the Daily Mail really missed a trick when they didn't hire our gracious host to be their official Getting Totty Pics In the Paper Through Whatever Means Necessary Even Though We're Higher Class Editor.

[Tom]

Aren't good looking people supposed to be more competitive and therefore more likely to "STEAL" if were playing golden balls, i.e. less trustworthy and geared to playing the "hawk" option. Their symmetric features a sign of (I use the term very loosely here) "genetic fitness"

...That show makes me so angry.

[Keith]

If this is correct then is the premium a result of evolutionary Psychology? Rather than the imperfection of Contracts? so it would exist under any economic system. I take it then we should have a surcharge on the income tax for very good looking tax payers. Now what will the libertarians say about that idea!

[Rony]

Its right looks matters. The place you working , the place you going for outing, a restaurant, Hotel, Garden or any where etc. Peoples likes your look at you they don't like your looks they don't.

[gordy]

Normal human behaviour unfortunately. We should judge people by what they achieve not their looks.