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Length of Service, Terminations and the Nature of the Employment Relationship

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  • Katharine G. Abraham
  • James L. Medoff

Abstract

This paper presents new survey evidence that relative protection against job loss grows with length of service, independent of their net value to the firm. This protection makes good sense given that at most companies employees appear to earn less than their value marginal product in the early part of their tenure and more than their value marginal product in the latter part; without job protection policies for senior employees, the firm would have an incentive to terminate them when their "spot" earnings went above their "spot" value marginal product. In particular, we find that a very large percentage (over 95 percent) of hourly union members outside of agriculture and construction are covered by protective policies for senior workers and, that a somewhat smaller, but still substantial, percentage (about 85 percent) of comparable nonunion hourlies also have some protection against jobloss in their senior years. The potential reasons for these findings are briefly discussed.

Suggested Citation

  • Katharine G. Abraham & James L. Medoff, 1983. "Length of Service, Terminations and the Nature of the Employment Relationship," NBER Working Papers 1086, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:1086
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    References listed on IDEAS

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    1. Daniel J. B. Mitchell, 1982. "Recent Union Contract Concessions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 13(1), pages 165-204.
    2. Viscusi, W Kip, 1980. "Self-Selection, Learning-Induced Quits, and the Optimal Wage Structure," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(3), pages 529-546, October.
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    Cited by:

    1. 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.
    2. repec:eee:labchp:v:2:y:1986:i:c:p:789-848 is not listed on IDEAS
    3. Katharine G. Abraham & James L. Medoff, 1983. "Years of Service and Probability of Promotion," NBER Working Papers 1191, National Bureau of Economic Research, Inc.

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