Do Wages Rise with Job Seniority? A Reassessment

Abstract

The authors provide new estimates of the return to job seniority using a dataset similar to that employed in Joseph Altonji and Robert Shakotko, “Do Wages Rise with Job Seniority?” Review of Economic Studies (1987) and Robert Topel, “Specific Capital, Mobility, and Wages,” Journal of Political Economy (1991). They consider the strengths and weaknesses of these studies' treatment of economy-wide trends, their dating conventions for tenure and wages, their handling of wage observations that might span multiple jobs, and their estimation approaches. Re-estimation points to an effect often years of tenure on the log wage equal to .11, which is above the preferred estimate of Altonji and Shakotko but far below that of Topel. Changes in earnings distributions and in the employment relationship motivate the examination of more recent data. Perhaps surprisingly, the return to tenure has probably increased over time.