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Wages, employer costs, and employee performance in the firm

  • Harry J. Holzer

Analyzing data from a 1982 survey of firms, the author finds evidence that firms' wage levels are positively associated with the previous experience of new hires, the tenure of employees with the firm, managers' perceptions of employee productivity, and managers' perceptions of the ease of hiring qualified workers; they are negatively associated with job vacancy rates and training time. Although the magnitudes of some of these relationships are not large, in combination they suggest that high-wage firms can sometimes offset more than half of their higher wage costs through improved productivity and lower hiring and turnover costs. The effects are generally stronger for firms that have chosen high wage levels than for firms in which unions have imposed high wage levels. (Abstract courtesy JSTOR.)

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Article provided by ILR Review, Cornell University, ILR School in its journal ILR Review.

Volume (Year): 43 (1990)
Issue (Month): 3 (February)
Pages: 147-164

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Handle: RePEc:ilr:articl:v:43:y:1990:i:3:p:147-164
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  1. Jonathan S. Leonard, 1987. "Carrots and Sticks: Pay, Supervision and Turnover," NBER Working Papers 2176, National Bureau of Economic Research, Inc.
  2. Brown, Charles & Medoff, James, 1989. "The Employer Size-Wage Effect," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1027-59, October.
  3. Weiss, Andrew, 1988. "High School Graduation, Performance, and Wages," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 785-820, August.
  4. Albrecht, James & Axell, Bo, 1983. "An Equilibrium Model of Search Unemployment," Working Papers 83-10, C.V. Starr Center for Applied Economics, New York University.
  5. Harry J. Holzer, 1988. "The Determinants of Employee Productivity and Earnings: Some New Evidence," NBER Working Papers 2782, National Bureau of Economic Research, Inc.
  6. Harry J. Holzer & Lawrence F. Katz & Alan B. Krueger, 1988. "Job Queues and Wages: New Evidence on the Minimum Wage and Inter-Industry Wage Structure," NBER Working Papers 2561, National Bureau of Economic Research, Inc.
  7. James L. Medoff & Katharine G. Abraham, 1981. "Are Those Paid More Really More Productive? The Case of Experience," Journal of Human Resources, University of Wisconsin Press, vol. 16(2), pages 186-216.
  8. Raff, Daniel M G & Summers, Lawrence H, 1987. "Did Henry Ford Pay Efficiency Wages?," Journal of Labor Economics, University of Chicago Press, vol. 5(4), pages S57-86, October.
  9. Viscusi, W Kip, 1980. "Sex Differences in Worker Quitting," The Review of Economics and Statistics, MIT Press, vol. 62(3), pages 388-98, August.
  10. Ronald G. Ehrenberg & George T. Milkovich, 1987. "Compensation and Firm Performance," NBER Working Papers 2145, National Bureau of Economic Research, Inc.
  11. Lawrence F. Katz, 1986. "Efficiency Wage Theories: A Partial Evaluation," NBER Chapters, in: NBER Macroeconomics Annual 1986, Volume 1, pages 235-290 National Bureau of Economic Research, Inc.
  12. Johnson, George E, 1975. "Economic Analysis of Trade Unionism," American Economic Review, American Economic Association, vol. 65(2), pages 23-28, May.
  13. Pissarides, Christopher A, 1985. "Short-run Equilibrium Dynamics of Unemployment Vacancies, and Real Wages," American Economic Review, American Economic Association, vol. 75(4), pages 676-90, September.
  14. Charles Brown, 1990. "Firms' choice of method of pay," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 43(3), pages 165-182, February.
  15. Bishop, John, 1987. "The Recognition and Reward of Employee Performance," Journal of Labor Economics, University of Chicago Press, vol. 5(4), pages S36-56, October.
  16. Holzer, Harry J & Katz, Lawrence F & Krueger, Alan B, 1991. "Job Queues and Wages," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 739-68, August.
  17. Lindbeck, Assar & Snower, Dennis J, 1986. "Wage Setting, Unemployment, and Insider-Outsider Relations," American Economic Review, American Economic Association, vol. 76(2), pages 235-39, May.
  18. Jacob Mincer, 1981. "Union Effects: Wages, Turnover, and Job Training," NBER Working Papers 0808, National Bureau of Economic Research, Inc.
  19. William T. Dickens, 1986. "Wages, Employment and the Threat of Collective Action by Workers," NBER Working Papers 1856, National Bureau of Economic Research, Inc.
  20. Barron, John M & Bishop, John & Dunkelberg, William C, 1985. "Employer Search: The Interviewing and Hiring of New Employees," The Review of Economics and Statistics, MIT Press, vol. 67(1), pages 43-52, February.
  21. Barron, John M & Black, Dan A & Loewenstein, Mark A, 1989. "Job Matching and On-the-Job Training," Journal of Labor Economics, University of Chicago Press, vol. 7(1), pages 1-19, January.
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