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Risky Business? Earnings Prospects of Employees at Young Firms

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  • Pawel Adrjan

Abstract

Young ï¬ rms are an engine of job creation, but little is known about the quality of the jobs that they offer. I use a matched employer-employee dataset to study how starting wages and lifecycle earnings of employees differ between young and mature ï¬ rms. I ï¬ nd that young ï¬ rms pay a small premium to new hires, but subsequent wage growth is better at mature ï¬ rms, both within continuing job matches and when individuals change jobs. These results are conï¬ rmed by several approaches to addressing sorting and selection of employees into ï¬ rms of different ages. There is substantial heterogeneity of outcomes: the few young ï¬ rms that survive and become highly productive pay higher wages to employees from the outset than less successful young ï¬ rms. Overall, highly-paid and stable jobs at young ï¬ rms are rare. Policies that aim to stimulate job growth by encouraging the formation of new ï¬ rms should therefore pay close attention to the types of ï¬ rms that form as a result.

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  • Pawel Adrjan, 2018. "Risky Business? Earnings Prospects of Employees at Young Firms," Economics Series Working Papers 852, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:wpaper:852
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    Cited by:

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    3. Daniel Fackler & Lisa Hölscher & Claus Schnabel & Antje Weyh, 2022. "Does working at a start-up pay off?," Small Business Economics, Springer, vol. 58(4), pages 2211-2233, April.
    4. Schmieder, Johannes F., 2023. "Establishment age and wages," Journal of Econometrics, Elsevier, vol. 233(2), pages 424-442.
    5. Tania Babina & Wenting Ma & Christian Moser & Paige Ouimet & Rebecca Zarutskie, 2019. "Pay, Employment, and Dynamics of Young Firms," Working Papers 19-23, Center for Economic Studies, U.S. Census Bureau.
    6. Kristina Nyström, 2021. "Working for an entrepreneur: heaven or hell?," Small Business Economics, Springer, vol. 56(2), pages 919-931, February.

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    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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