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Wages in and voluntary quits from an establishment internal labour market

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  • John Sutherland

Abstract

This paper analyses wage rates in and quit rates from two production departments in an establishment based structured internal labour market in which labour allocation between grades and the wage rate of these grades are managerially determined. First, it is assumed that management makes effective use of the 'private' information about individual employees collected through time, proxied by tenure, to allocate them to the most appropriate tasks. However, in an OLS regression the elasticity of the wage rate with respect to tenure, although statistically significant, is not economically important. Further, it is assumed that this labour allocation process together with the wage structure will facilitate labour retention. However, in a probit model analysing the quit probability, the probability of quitting increases with the wage rate. Both results are compatible with an internal labour market labour allocation process and wage structure that is not competitive with wage rates prevailing in the external labour market.

Suggested Citation

  • John Sutherland, 2002. "Wages in and voluntary quits from an establishment internal labour market," Applied Economics, Taylor & Francis Journals, vol. 34(3), pages 395-400.
  • Handle: RePEc:taf:applec:v:34:y:2002:i:3:p:395-400
    DOI: 10.1080/00036840110053234
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    Cited by:

    1. Kankaanranta, Terhi & Nummi, Tapio & Vainiomaki, Jari & Halila, Hannu & Hyppola, Harri & Isokoski, Mauri & Kujala, Santero & Kumpusalo, Esko & Mattila, Kari & Virjo, Irma & Vanska, Jukka & Rissanen, P, 2007. "The role of job satisfaction, job dissatisfaction and demographic factors on physicians' intentions to switch work sector from public to private," Health Policy, Elsevier, vol. 83(1), pages 50-64, September.
    2. D Cassidy & J Sutherland, 2008. "Going Absent, Then Just Going? A Case Study Examination of Absence and Quitting," Economic Issues Journal Articles, Economic Issues, vol. 13(2), pages 1-20, September.

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