Wage-tenure Profiles in Contractual Labor Markets

Download or read book Wage-tenure Profiles in Contractual Labor Markets written by Hong W. Tan and published by . This book was released on 1981 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: The impact of long-term labor contracting on lifetime wages is a topic of growing interest among labor economists. There is evidence that an important fraction of the U.S. labor force is employed in near-lifetime jobs. Hall (1980 p. 20) finds that in 1978 over 35 percent of males held jobs that would last twenty years or more. There are several competing explanations for the existence of long-term jobs: the specific human capital hypothesis and, more recently, the agency and self-selection models. To date, no attempt has been made to distinguish empirically between them. The problem is that these models make similar predictions about the pattern of wage growth and labor turnover over the worklife. In the human capital approach, workers forgo high initial wages to invest in specific training which increases their productivity and earnings in subsequent years. The specific skills are, however, not transferable to other firms. In the agency and self-selection (henceforth, 'incentive') approach, firms offer workers wage profiles which are steeper than their productivity growth in order to reduce incentives to shirk (Lazear 1981) or to attract workers with low quit propensities. In both approaches, labor turnover declines with experience because relative wages in the current firm and elsewhere grow over the worklife.