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The Determinants of Employee Productivity and Earnings: Some New Evidence

  • Harry J. Holzer

This paper uses data from a nationwide sample of firms on employee wages and characteristics to reexamine the determinants of employee productivity and earnings. The data include several measures of job experience, training, and both worker and firm characteristics as well as subjective employer productivity ratings and earnings of workers. Given observations on the same individual at different points in time, we can consider both levels and changes in earnings and productivity, with various firm- and job-specific effects eliminated from the latter. The results show that: 1) Both previous experience and tenure in the current job have significant, positive effects on wages and productivity. Previous experience effects are found primarily on levels of wages and productivity while tenure affects occur for both current levels and changes. 2) Hours of training are positively related to productivity and wage growth but generally not to levels of either. 3) Among demographic characteristics, we find productivity growth and current productivity levels to be slightly higher for females while their wages are significantly lower. Other determinants of earnings and productivity ratings (e.g., such as various types of incentive pay and the fraction unionized) are considered here as well.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2782.

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Date of creation: Dec 1988
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Publication status: Published as "The Determinants of Employee Productivity and Earnings", IR, Vol. 29, no. 3 (1990): 403-422.
Handle: RePEc:nbr:nberwo:2782
Note: LS
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  1. Meitzen, Mark E, 1986. "Differences in Male and Female Job-quitting Behavior," Journal of Labor Economics, University of Chicago Press, vol. 4(2), pages 151-67, April.
  2. 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.
  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. Katharine G. Abraham & Henry S. Farber, 1986. "Job Duration, Seniority and Earnings," Working papers 407, Massachusetts Institute of Technology (MIT), Department of Economics.
  5. Roger Klein & Richard H. Spady & Andrew Weiss, 1987. "Factors Affecting the Output and Quit Propensities of Production Workers," NBER Working Papers 2184, National Bureau of Economic Research, Inc.
  6. 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.
  7. Seiler, Eric, 1984. "Piece Rate vs. Time Rate: The Effect of Incentives on Earnings," The Review of Economics and Statistics, MIT Press, vol. 66(3), pages 363-76, August.
  8. James N. Brown, 1983. "Are Those Paid More Really No More Productive? Measuring the Relative Importance of Tenure Versus On-The-Job Training in Explaining Wage Growth," Working Papers 549, Princeton University, Department of Economics, Industrial Relations Section..
  9. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-84, December.
  10. Barron, John M & Loewenstein, Mark A, 1986. "On Imperfect Evaluation and Earning Differentials," Economic Inquiry, Western Economic Association International, vol. 24(4), pages 595-614, October.
  11. James L. Medoff & Katharine G. Abraham, 1980. "Experience, Performance, and Earnings," NBER Working Papers 0278, National Bureau of Economic Research, Inc.
  12. Jacob Mincer, 1988. "Job Training, Wage Growth, and Labor Turnover," NBER Working Papers 2690, National Bureau of Economic Research, Inc.
  13. Lazear, Edward P, 1986. "Salaries and Piece Rates," The Journal of Business, University of Chicago Press, vol. 59(3), pages 405-31, July.
  14. Frank, Robert H, 1984. "Are Workers Paid Their Marginal Products?," American Economic Review, American Economic Association, vol. 74(4), pages 549-71, September.
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