IDEAS home Printed from https://ideas.repec.org/p/mit/worpap/407.html
   My bibliography  Save this paper

Job Duration, Seniority and Earnings

Author

Listed:
  • Katharine G. Abraham
  • Henry S. Farber

Abstract

The stylized fact that seniority and earnings in a cross-section are positively related, even after controlling for total labor market experience, has served as the basis for theoretical analyses of implicit labor contracts suggesting that workers post bonds in the form of deferred compensation in order to ensure their continued performance at an adequate level. An alternative interpretation is that good workers or workers in good jobs or good matches both earn more throughout the job and have longer job durations. Another stylized fact, that labor market experience and earnings in a cross section are positively related, has been taken as evidence of the importance of general human capital accumulation. An alternative interpretation of this evidence is that workers with more experience have had more time to find good jobs and/or good matches, resulting in higher earnings. Earnings functions are estimated including a measure of the completed duration of jobs in order to distinguish between the competing hypotheses regarding both seniority and experience. These yield three main results. First, workers in longer jobs earn significantly more in every year of the job than do workers in shorter jobs. Second, controlling for completed job duration eliminates most of the apparent return to seniority found in standard cross-section models. Thus, it appears that implicit contracts that provide for workers posting bonds through deferred wage payments are less important than has been believed. Third, for blue collar workers there is evidence thata part of the small observed (cross-sectional) return to labor market experience is due to sorting of workers into better jobs over time. There is no evidence of sorting for white collar workers.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Katharine G. Abraham & Henry S. Farber, 1986. "Job Duration, Seniority and Earnings," Working papers 407, Massachusetts Institute of Technology (MIT), Department of Economics.
  • Handle: RePEc:mit:worpap:407
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Gary S. Becker & George J. Stigler, 1974. "Law Enforcement, Malfeasance, and Compensation of Enforcers," The Journal of Legal Studies, University of Chicago Press, vol. 3(1), pages 1-18, January.
    2. Bulow, Jeremy I & Summers, Lawrence H, 1986. "A Theory of Dual Labor Markets with Application to Industrial Policy,Discrimination, and Keynesian Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 4(3), pages 376-414, July.
    3. Joseph G. Altonji & Robert A. Shakotko, 1987. "Do Wages Rise with Job Seniority?," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 54(3), pages 437-459.
    4. Katharine G. Abraham & James L. Medoff, 1983. "Length of Service and the Operation of Internal Labor Markets," NBER Working Papers 1085, National Bureau of Economic Research, Inc.
    5. Ernst R. Berndt & Bronwyn H. Hall & Robert E. Hall & Jerry A. Hausman, 1974. "Estimation and Inference in Nonlinear Structural Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 3, number 4, pages 653-665, National Bureau of Economic Research, Inc.
    6. Hall, Robert E, 1982. "The Importance of Lifetime Jobs in the U.S. Economy," American Economic Review, American Economic Association, vol. 72(4), pages 716-724, September.
    7. Joseph Altonji & R. Shakotko, 1985. "Do Wages Rise with Job Seniority?," Working Papers 567, Princeton University, Department of Economics, Industrial Relations Section..
    8. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-990, October.
    9. repec:fth:prinin:187 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:eee:labchp:v:3:y:1999:i:pb:p:2373-2437 is not listed on IDEAS
    2. 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 145-176, February.
    3. Paul Sullivan, 2010. "A Dynamic Analysis Of Educational Attainment, Occupational Choices, And Job Search," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(1), pages 289-317, February.
    4. Philip Jung & Moritz Kuhn, 2019. "Earnings Losses and Labor Mobility Over the Life Cycle," Journal of the European Economic Association, European Economic Association, vol. 17(3), pages 678-724.
    5. Dohmen, Thomas J., 2004. "Performance, seniority, and wages: formal salary systems and individual earnings profiles," Labour Economics, Elsevier, vol. 11(6), pages 741-763, December.
    6. Lehmann, Hartmut & Wadsworth, Jonathan, 2000. "Tenures That Shook the World: Worker Turnover in Russia, Poland, and Britain," Journal of Comparative Economics, Elsevier, vol. 28(4), pages 639-664, December.
    7. Peter F. Orazem & Marvin L. Bouillon & Benjamin M. Doran, 2004. "Long‐Term Attachments and Long‐Run Firm Rates of Return," Southern Economic Journal, John Wiley & Sons, vol. 71(2), pages 314-333, October.
    8. 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.
    9. repec:eee:labchp:v:2:y:1986:i:c:p:789-848 is not listed on IDEAS
    10. Cahill, Miles B., 2000. "Exploring the interaction between efficiency wages and labor market frictions," The Quarterly Review of Economics and Finance, Elsevier, vol. 40(1), pages 121-137.
    11. Derek Neal & Sherwin Rosen, 1998. "Theories of the Distribution of Labor Earnings," NBER Working Papers 6378, National Bureau of Economic Research, Inc.
    12. repec:eee:labchp:v:1:y:1986:i:c:p:525-602 is not listed on IDEAS
    13. Alan B. Krueger, 1987. "Ownership, Agency and Wages: An Examination of the Fast Food Industry," Working Papers 606, Princeton University, Department of Economics, Industrial Relations Section..
    14. Roland A. Amann & Tobias J. Klein, 2012. "Returns to type or tenure?," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 175(1), pages 153-166, January.
    15. 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.
    16. Jacob Mincer, 1988. "Job Training, Wage Growth, and Labor Turnover," NBER Working Papers 2690, National Bureau of Economic Research, Inc.
    17. Parrado, Eric & Caner, Asena & Wolff, Edward N., 2007. "Occupational and industrial mobility in the United States," Labour Economics, Elsevier, vol. 14(3), pages 435-455, June.
    18. Kevin Lang & William T. Dickens, 1987. "Neoclassical and Sociological Perspectives on Segmented Labor Markets," NBER Working Papers 2127, National Bureau of Economic Research, Inc.
    19. repec:eee:labchp:v:3:y:1999:i:pb:p:2439-2483 is not listed on IDEAS
    20. Steven G. Allen & Robert L. Clark & Ann A. McDermed, 1991. "Pensions, Bonding, and Lifetime Jobs," NBER Working Papers 3688, National Bureau of Economic Research, Inc.
    21. Ghosh, Suman, 2007. "Job mobility and careers in firms," Labour Economics, Elsevier, vol. 14(3), pages 603-621, June.
    22. Laurence J. Kotlikoff & Jagadeesh Gokhale, 1992. "Estimating a Firm's Age-Productivity Profile Using the Present Value of Workers' Earnings," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(4), pages 1215-1242.
    23. Edward P. Lazear, 1995. "Personnel Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121883, December.
    24. Christopher Taber & Rune Vejlin, 2020. "Estimation of a Roy/Search/Compensating Differential Model of the Labor Market," Econometrica, Econometric Society, vol. 88(3), pages 1031-1069, May.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mit:worpap:407. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Linda Woodbury (email available below). General contact details of provider: https://edirc.repec.org/data/edmitus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.