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Seniority, experience, and wages in the UK

  • Williams, Nicolas

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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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
Contact details of provider: Web page: http://www.elsevier.com/locate/labeco

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  1. Christian Dustmann & Costas Meghir, 2005. "Wages, Experience and Seniority," Review of Economic Studies, Oxford University Press, vol. 72(1), pages 77-108.
  2. Arthur H. Goldsmith & Jonathan R. Veum, 2002. "Wages and the Composition of Experience," Southern Economic Journal, Southern Economic Association, vol. 69(2), pages 429-443, October.
  3. Light, Audrey, 1998. "Estimating Returns to Schooling: When Does the Career Begin?," Economics of Education Review, Elsevier, vol. 17(1), pages 31-45, February.
  4. MARGOLIS, David N., 1995. "Cohort Effects and Returns to Seniority in France," Cahiers de recherche 9559, Universite de Montreal, Departement de sciences economiques.
  5. repec:adr:anecst:y:1996:i:41-42 is not listed on IDEAS
  6. Katharine G. Abraham & Henry S. Farber, 1986. "Job Duration, Seniority and Earnings," Working papers 407, Massachusetts Institute of Technology (MIT), Department of Economics.
  7. Topel, Robert H, 1991. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 145-76, February.
  8. Addison, John T. & Belfield, Clive R., 2003. "Union Voice," IZA Discussion Papers 862, Institute for the Study of Labor (IZA).
  9. Theodossiou, I & Williams, H, 1998. "Employer-Provided Training and Tenure-Earnings," Scottish Journal of Political Economy, Scottish Economic Society, vol. 45(3), pages 258-72, August.
  10. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-90, October.
  11. Hirsch, Barry, 2003. "What Do Unions Do for Economic Performance?," IZA Discussion Papers 892, Institute for the Study of Labor (IZA).
  12. Brown, James N & Light, Audrey, 1992. "Interpreting Panel Data on Job Tenure," Journal of Labor Economics, University of Chicago Press, vol. 10(3), pages 219-57, July.
  13. Alexandros Zangelidis, 2008. "Occupational And Industry Specificity Of Human Capital In The British Labour Market," Scottish Journal of Political Economy, Scottish Economic Society, vol. 55(4), pages 420-443, 09.
  14. Williams, Nicolas, 1991. "Reexamining the Wage, Tenure and Experience Relationship," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 512-17, August.
  15. Katharine G. Abraham & Henry S. Farber, 1988. "Returns to Seniority in Union and Nonunion Jobs: A New Look at the Evidence," ILR Review, Cornell University, ILR School, vol. 42(1), pages 3-19, October.
  16. Alexandros Zangelidis, 2004. "Seniority Profiles In Unionised Workplaces: Do Unions Still Have The Edge?," Royal Economic Society Annual Conference 2004 48, Royal Economic Society.
  17. Alison L. Booth & Marco Francesconi & Carlos Garcia-Serrano, 1999. "Job Tenure and Job Mobility in Britain," ILR Review, Cornell University, ILR School, vol. 53(1), pages 43-70, October.
  18. Jovanovic, Boyan, 1984. "Matching, Turnover, and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 92(1), pages 108-22, February.
  19. Joseph G. Altonji & Nicolas Williams, 2005. "Do Wages Rise with Job Seniority? A Reassessment," ILR Review, Cornell University, ILR School, vol. 58(3), pages 370-397, April.
  20. 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.
  21. Hutchens, Robert M, 1989. "Seniority, Wages and Productivity: A Turbulent Decade," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 49-64, Fall.
  22. Booth, Alison L & Frank, Jeff, 1994. "Seniority, Earnings and Unions," CEPR Discussion Papers 1007, C.E.P.R. Discussion Papers.
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  24. Bruce E. Kaufman, 2005. "What Do Unions Do?--Evaluation and Commentary," Journal of Labor Research, Transaction Publishers, vol. 26(4), pages 555-596, November.
  25. 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.
  26. Farber, Henry S., 1999. "Mobility and stability: The dynamics of job change in labor markets," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 37, pages 2439-2483 Elsevier.
  27. repec:adr:anecst:y:1996:i:41-42:p:18 is not listed on IDEAS
  28. Jovanovic, Boyan, 1979. "Firm-specific Capital and Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1246-60, December.
  29. Light, Audrey, 2001. "In-School Work Experience and the Returns to Schooling," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 65-93, January.
  30. John M. Barron & Mark C. Berger & Dan A. Black, 1997. "On-the-Job Training," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number ojt, November.
  31. Joseph G. Altonji & Robert A. Shakotko, 1987. "Do Wages Rise with Job Seniority?," Review of Economic Studies, Oxford University Press, vol. 54(3), pages 437-459.
  32. Cingano, Federico, 2003. "Returns to specific skills in industrial districts," Labour Economics, Elsevier, vol. 10(2), pages 149-164, April.
  33. Joseph G. Altonji & Nicolas Williams, 1992. "The Effects of Labor Market Experience, Job Seniority, and Job Mobility on Wage Growth," NBER Working Papers 4133, National Bureau of Economic Research, Inc.
  34. Marshall, Robert C & Zarkin, Gary A, 1987. "The Effect of Job Tenure on Wage Offers," Journal of Labor Economics, University of Chicago Press, vol. 5(3), pages 301-24, July.
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