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Why Workers Stay: Pay, Beliefs, and Attachment

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Listed:
  • Sydnee Caldwell
  • Ingrid Haegele
  • Jörg Heining

Abstract

Workers often remain with their employer even when outside firms offer higher pay. This may reflect information frictions or preferences. We use a large-scale survey of full-time German workers, linked to Social Security records, to elicit pay expectations and preferences over specific outside firms. Workers believe outside pay varies across firms and direct their search toward higher-paying employers. Expected pay premia are highly correlated with administrative pay measures observed and with workers’ amenity valuations. Yet most workers would not switch firms—even for substantial raises at named destination firms. Implied switching costs range from 7 to 18% of annual pay. Attachment varies across firms and is not explained by amenities or switching costs, suggesting residual firm-specific factors shape mobility.

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  • Sydnee Caldwell & Ingrid Haegele & Jörg Heining, 2025. "Why Workers Stay: Pay, Beliefs, and Attachment," NBER Working Papers 33445, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:33445
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    More about this item

    JEL classification:

    • J0 - Labor and Demographic Economics - - General
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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