Abstract
Wages are an important factor that affects firm performance by influencing both the composition of the workforce and the behaviors of the employees. This study investigates how seniority-based pay affects firm performance. Using the Human Capital Corporate Panel (HCCP), we found that sales per employee, but not return on assets, was positively associated with the extent to which wages were increased by tenure. Limited support was found for the moderating effect of technological changes. These results demonstrate the importance of pay structures with regard to firm performance.
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