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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.

Suggested Citation

  • Williams, Nicolas, 2009. "Seniority, experience, and wages in the UK," Labour Economics, Elsevier, vol. 16(3), pages 272-283, June.
  • Handle: RePEc:eee:labeco:v:16:y:2009:i:3:p:272-283
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Veliziotis, Michail, 2010. "Trade unions and unpaid overtime in Britain," ISER Working Paper Series 2010-43, Institute for Social and Economic Research.
    2. Carrillo-Tudela, Carlos & Kaas, Leo, 2011. "Wage Dispersion and Labor Turnover with Adverse Selection," IZA Discussion Papers 5936, Institute for the Study of Labor (IZA).
    3. Ken Burdett & Carlos Carrillo-Tudela & Melvyn Coles, 2016. "Wage Inequality: A Structural Decomposition," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 19, pages 20-37, January.
    4. Anja Deelen, 2011. "Wage-Tenure Profiles and Mobility," CPB Discussion Paper 198, CPB Netherlands Bureau for Economic Policy Analysis.
    5. Giovanni Sulis, 2014. "Wage Returns to Experience and Tenure for Young Men in Italy," Scottish Journal of Political Economy, Scottish Economic Society, vol. 61(5), pages 559-588, November.
    6. 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.
    7. Ludo Visschers & Carlos Carrillo-Tudela, 2011. "Unemployment and Endogenous Reallocation over the Business Cycle," 2011 Meeting Papers 1101, Society for Economic Dynamics.
    8. Anja Deelen, 2012. "Wage-Tenure Profiles and Mobility," De Economist, Springer, vol. 160(2), pages 141-155, June.
    9. 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.
    10. Paul Hek & Daniel Vuuren, 2011. "Are older workers overpaid? A literature review," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 18(4), pages 436-460, August.
    11. Hayek, Mario & Thomas, Christopher H. & Novicevic, Milorad M. & Montalvo, Daniel, 2016. "Contextualizing human capital theory in a non-Western setting: Testing the pay-for-performance assumption," Journal of Business Research, Elsevier, vol. 69(2), pages 928-935.
    12. Chih Cheng CHEN, 2013. "Industry Agglomeration and Wage Differentiation: An Empirical Study on Taiwan’s Manufacturing Industry," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 13(2), pages 147-160.
    13. Pouliakas, Konstantinos & Panos, Georgios & Zangelidis, Alexandros, 2009. "The Inter-Related Dynamics of Dual Job Holding, Human Capital and Occupational Choice," MPRA Paper 16859, University Library of Munich, Germany.

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