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Seniority, experience, and wages in the UK

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  • Williams, Nicolas

Abstract

This paper uses BHPS data to investigate the relative importance of seniority and experience in determining male wages in the UK labor market. Using both the Altonji and Shakotko instrumental variable and the Topel two-step estimation approaches, I find that for all male workers, tenure plays a modest role, increasing wages by about 1% each year over the first 10Â years on the job. General labor market experience has a larger role, so that after 30Â years wages have increased by about 60%. Individual and job match heterogeneity are important, and should be carefully modeled when estimating wage equations for the British labor market. These results are remarkably similar to the most recent evidence about these relationships in the US labor market. After extending the standard model to include industry and occupation experience, the estimated impact of job seniority becomes negligible for nonunion workers. Instead, the wages of nonunion workers rise because of the accumulation of general and sector-specific experience. The wages of union workers are still found to increase with job seniority over the first ten years with their employer, suggesting that if seniority matters for wages it is only for union workers.

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Bibliographic Info

Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 16 (2009)
Issue (Month): 3 (June)
Pages: 272-283

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Handle: RePEc:eee:labeco:v:16:y:2009:i:3:p:272-283

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Web page: http://www.elsevier.com/locate/labeco

Related research

Keywords: Wages Seniority Tenure Experience Industry Occupation Union;

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  1. Joseph G. Altonji & Nicolas Williams, 2005. "Do wages rise with job seniority? A reassessment," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 58(3), pages 370-397, April.
  2. Light, Audrey, 1998. "Estimating Returns to Schooling: When Does the Career Begin?," Economics of Education Review, Elsevier, vol. 17(1), pages 31-45, February.
  3. James Coleman, 1998. "The effect of tenure on earnings for males: a public/private analysis," Applied Economics Letters, Taylor & Francis Journals, vol. 5(11), pages 707-710.
  4. Alexandros Zangelidis, 2004. "Seniority Profiles In Unionised Workplaces: Do Unions Still Have The Edge?," Royal Economic Society Annual Conference 2004 48, Royal Economic Society.
  5. Hildreth, Andrew, 1999. " What Has Happened to the Union Wage Differential in Britain in the 1990s?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(1), pages 5-31, February.
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  7. Dustmann, Christian & Meghir, Costas, 1999. "Wages, Experience and Seniority," CEPR Discussion Papers 2077, C.E.P.R. Discussion Papers.
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Citations

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Cited by:
  1. Anja Deelen, 2012. "Wage-Tenure Profiles and Mobility," De Economist, Springer, vol. 160(2), pages 141-155, June.
  2. Leo Kaas & Carlos Carrillo-Tudela, 2011. "Wage Dispersion and Labor Turnover with Adverse Selection," 2011 Meeting Papers 1075, Society for Economic Dynamics.
  3. Michail Veliziotis, 2013. "Trade Unions and Unpaid Overtime in Britain," Working Papers 20131304, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
  4. Daniel van Vuuren & Paul de Hek, 2010. "Are older workers overpaid? A literature review," CPB Discussion Paper 165, CPB Netherlands Bureau for Economic Policy Analysis.
  5. Devereux, Paul J & Hart, Robert A & Roberts, J Elizabeth, 2013. "Job spells, employer spells, and wage returns to tenure," Stirling Economics Discussion Papers 2013-01, University of Stirling, Division of Economics.
  6. Akyol, Ali C. & Verwijmeren, Patrick, 2013. "Human capital costs, firm leverage, and unemployment rates," Journal of Financial Intermediation, Elsevier, vol. 22(3), pages 464-481.
  7. Anja Deelen, 2011. "Wage-Tenure Profiles and Mobility," CPB Discussion Paper 198, CPB Netherlands Bureau for Economic Policy Analysis.
  8. G. Sulis, 2009. "Wage Returns to Experience and Tenure for Young Men in Italy," Working Paper CRENoS 200903, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.

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