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Tenure, Wage Profiles and Monitoring

In: New Analyses of Worker Well-Being

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  • John G. Sessions
  • Nikolaos Theodoropoulos

Abstract

Efficiency wage theory predicts that firms can induce worker effort by the carrot of high wages and/or the stick of monitoring worker performance. Another option available to firms is totiltthe remuneration package over time such that the lure of high future earnings acts as a deterrent to current shirking. On the assumption that firms strive for the optimal trade-off between these various instruments, we develop a two-period model of efficiency wages in which increased monitoring attenuates the gradient of the wage-tenure profile. Our empirical analysis, using two cross sections of matched employer-employee British data, provides robust support for this prediction.

Suggested Citation

  • John G. Sessions & Nikolaos Theodoropoulos, 2014. "Tenure, Wage Profiles and Monitoring," Research in Labor Economics, in: New Analyses of Worker Well-Being, volume 38, pages 105-162, Emerald Group Publishing Limited.
  • Handle: RePEc:eme:rleczz:s0147-9121(2013)0000038004
    DOI: 10.1108/S0147-9121(2013)0000038004
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    More about this item

    Keywords

    Monitoring; tenure; efficiency wages; J33; J41; J54;
    All these keywords.

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J54 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Producer Cooperatives; Labor Managed Firms

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