Polarization, Purpose and Profit

We present a model in which firms compete for workers who value nonpecuniary job attributes, such as purpose, sustainability, political stances, or working conditions. Firms adopt flexible production technologies, enabling them to offer jobs with varying levels of these desirable attributes. In a competitive assignment equilibrium, more flexible firms become polarized, catering to workers with extreme preferences. Firms not only reflect but also amplify the polarized preferences of the general population. Firm polarization increases with the cost of developing flexible technologies and is positively related to industry concentration. More polarized sectors exhibit higher profits, lower average wages, and a reduced labor share of value added. Investors with social preferences enhance workers' welfare by increasing labor demand.