Entry Wages Research Articles

Adjustments of wage-tenure profiles with respect to entry age

This paper adds a new empirical finding of the impact of workers’ entry age on wage-tenure profiles to the literature, which might be explained by human capital and deferred compensation models. I analyze two different data sets stemming from personnel records of a large German company and from German linked employer-employee data. The analyzed company employs a quite large share of older workers but does not hire many older workers. Estimated earnings functions indicate that wage-tenure profiles are adjusted with respect to entry age: workers with older entry age earn higher entry wages and have lower wage growths than younger workers. The linked employer-employee data confirm the findings from personnel records as most firms pay higher entry wages and flatter wage-tenure profiles to older new entrants. The personnel data set and the linked employer-employee data set have their advantages and disadvantages so that an analysis of both enhances the credibility of the main results.

The Cyclical Behaviour of Employers' Monopsony Power and Workers' Wages

This paper investigates the behaviour of employers' monopsony power and workers' wages over the business cycle. Using German administrative linked employer employee data for the years 1985-2010 and an estimation framework based on duration models, we construct a time series of the firm-level labour supply elasticity and estimate its relationship to the aggregate unemployment rate. In line with theory, we find that firms possess more monopsony power during economic downturns, which shows to be robust to controlling for time-invariant unobserved worker heterogeneity. We also document that cyclical changes in workers' entry wages are of similar magnitude as those predicted under monopsonistic wage setting, suggesting that monopsony power should not be neglected when analysing wage cyclicality.

Measuring What Employers Do about Entry Wages over the Business Cycle: A New Approach

Rigidity in real hiring wages plays a crucial role in some recent macroeconomic models. But are hiring wages really so noncyclical? We propose using employer/employee longitudinal data to track the cyclical variation in the wages paid to workers newly hired into specific entry jobs. Illustrating the methodology with 1982–2008 data from the Portuguese census of employers, we find real entry wages were about 1.8 percent higher when the unemployment rate was 1 percentage point lower. Like most recent evidence on other aspects of wage cyclicality, our results suggest that the cyclical elasticity of wages is similar to that of employment. (JEL E24, E32, J31, J64)

Explaining age and gender differences in employment rates: a labor supply-side perspective

This paper takes a labor supply perspective (neoclassical labor supply, job search) to explain the lower employment rates of older workers and women. The basic rationale is that workers choose non-employment if their reservation wages are larger than the offered wages. Whereas the latter depend on workers’ productivity and firms’ decisions, reservation wages are largely determined by workers’ endowments and preferences for leisure. To shed some empirical light on this issue, we use German survey data to analyze age and gender differences in reservation and entry wages, preferred and actual working hours, and satisfaction with leisure and work.

Real Wages and the Business Cycle: Accounting for Worker, Firm, and Job Title Heterogeneity

Using a longitudinal matched employer-employee dataset for Portugal over the 1986–2007 period, this study analyzes the wage responses to aggregate labor market conditions for newly hired workers and existing workers within the same firm. Accounting for worker, firm, and job title heterogeneity, the data support the hypothesis that entry wages are more procyclical than wages of stayers. A one point increase in the unemployment rate decreases wages of newly hired workers within a given firm-job title by around 2.7 percent and by 2.2 percent for stayers within the same firm-job title. Finally, the results reveal a one-for-one wage response to changes in labor productivity. (JEL: E24, E32, J64)

How Acid are Lemons? Adverse Selection and Signalling for Skilled Labour Market Entrants

This paper jointly analyses the consequences of adverse selection and signalling on entry wages of skilled employees. It uses German linked employer employee panel data (LIAB) and introduces a measure for relative productivity of skilled job applicants based on apprenticeship wages. It shows that post-apprenticeship employer changers are a negative selection from the training firms’ point of view. Negative selection leads to lower average wages of employer changersin the first skilled job in comparison to stayers. Entry wages of employer changers are specifically reduced by high occupation and training firm retention rates. Additional training firm signals are high apprenticeship wages that signal a positive selection of apprenticeship applicants, works councils and establishment size. Finally, positive individual signals such as schooling background affect the skilled entry wages of employer changers positively.

Explaining Age and Gender Differences in Employment Rates: A Labor Supply Side Perspective

This paper takes a labor supply perspective (neoclassical labor supply, job search) to explain the lower employment rates of older workers and women. The basic rationale is that workers choose non-employed if their reservation wages are larger than the offered wages. Whereas the offered wages depend on workers' productivity and firms' decisions, reservation wages are largely determined by workers' endowments and preferences for leisure. To shed some empirical light on this issue, we use German survey data to analyze age and gender differences in reservation and entry wages, preferred and actual working hours, and satisfaction with leisure and work.

Sexual Orientation Discrimination in the Cypriot Labour Market: Distastes or Uncertainty?

Sexual orientation and employment bias is examined in Cyprus (Republic of Cyprus: Nicosia, Limassol, Larnaca, Paphos) by implementing an experiment for the period 2010-2011. The design is aimed at answering three main questions: Do gay and lesbian people face occupational access constraints and entry wage bias than comparable heterosexuals? Do gay and lesbian people benefit from providing more job-related information? Does the differential treatment between gay/lesbian and heterosexual applicants disappear as the information of the applicants increases? Methodologically, we sent applications to advertised vacancies and we experimented with two information sets the 'sexual orientation' and 'information' of the potential applicants. The estimations suggest that gay and lesbian applicants face significant bias than heterosexual applicants. Moreover, both heterosexual and gay/lesbian applicants gain by providing more job-related information. However, the estimations suggest that the informational premium for sexual orientation minorities could not reduce the discriminatory patterns. The current results indicate that discrimination against sexual orientation minorities in the Cypriot labour market is a matter of preference, not the result of limited information. One strategy the Cypriot government may employ is to try to affect public opinion and people's attitudes towards sexual orientation minorities. This is the first nationwide field experiment in the Cypriot labour market and contributes to the literature as it is the first field study on sexual orientation which tries to disentangle statistical from taste-based discrimination in the labour market.

Discretionary Acquisition of Firm-Specific Human Capital Under Non-Verifiable Performance

The paper considers a model, in which a worker makes discretionary investment in the acquisition of firm-specific human capital (HC). When this investment is non-contractible, and the firm has the full bargaining power, the worker's incentives to invest are completely undermined. However, we show the inability of the incumbent firm to observe wage offers arriving from competitors at the interim stage prevents it from complete expropriation of the surplus; the worker is then induced to make positive investment in equilibrium. We then explore the value of commitment opportunities for the firm. We show that a commitment to the wage floor for the second period destroys the worker's incentives to acquire HC, but makes turnover efficient. This opportunity is practiced only if the return to worker's investment in HC acquisition is sufficiently unproductive. We also consider an extension of the basic model, in which firms differ in the productivity of their HC acquisition technology. To separate themselves and thus induce the employee to exert higher effort, more productive firms offer higher entry wages than the less productive ones, whereas under symmetric information the pattern of wages is the opposite. Furthermore, we show that in stark contrast to the case of symmetric information, the commitment opportunity has value for the more productive firms: commitment to a wage floor acts as a substitute to the higher entry wage.

Women's Sexual Orientation and Labor Market Outcomes in Greece

This study is the first to use a field experiment to provide information on the relationship between women being lesbian and their hiring prospects in Greece. Data for 2007–8 support previous findings (in Canada and Austria) indicating that lesbians face hiring discrimination. The study finds that the estimated probability of lesbian applicants receiving an invitation for an interview is 27.7 percent lower than that for heterosexual women applicants. More importantly, the study shows that entry wage differentials assigned are inconsistent with the ascendant empirical claims (from the United States, the Netherlands, and the United Kingdom) that lesbians have higher market earnings. The study concludes that the negative effect of lesbian sexual orientation on wage outcomes in Greece is 6.1 percent. Given that legal actions in Greece have the potential to affect sexual-orientation minorities, it is important to understand the relationships between sexual orientation and the labor market.

Getting What (Employers Think) You’re Worth – Evidence on the Gender Gap in Entry Wages among University Graduates

Since the early 1970s, wage differentials between men and women have attracted the research interest of labor economists. However, up to now empirical evidence on gender differentials of labor market entrants and the determinants of their starting wages is scarce. To fill this gap, we make use of a unique dataset on graduates in economics from a large representative German university, to investigate whether – even for such a homogeneous group of labor market entrants – a gender gap in earnings exists. Concentrating on a highly homogeneous sample limits the problem of unobserved heterogeneity, which results in an overestimation of the unexplained component of standard decompositions analyses. The results reveal that women’s entry wages are significant lower than those of their male counterparts. Blinder-Oaxaca decompositions suggest that the major part of this gap remains unexplained by gender differences in observable characteristics.

Religious Affiliation and Employment Bias in the Labor Market

Religious affiliation and employment bias is examined in Athens, Greece by implementing an experimental field study. Labor market outcomes (occupation access, entry wage, and wait time for call back) are assessed for three religious minorities (Pentecostal, evangelical, and Jehovah's Witnesses) compared to the religious majority (Greek Orthodox). Results indicate that religious minorities experience employment bias as measured by access to job interviews, entry wages, and wait time for call backs. Moreover, religious minorities face greater constraints on occupational access in more prestigious jobs compared to less prestigious jobs. Occupational access and entry wage bias is highest for religious minority women. In all cases, Jehovah's Witnesses face the greatest bias; female employers offered significantly lower entry wages to Jehovah's Witnesses than male employers.

Labour Market Entry Conditions, Wages and Job Mobility

Economic conditions at the time of labour market entry can induce wage differentials between workers entering the labour market at different points in time. While the existence and persistence of these entry wage differentials are well documented, little is known about their interaction with employees’ mobility behaviour. This paper contributes to this research area by analyzing the interaction between job mobility and entry wage differentials using German administrative data. The results suggest that labour market entrants earning less than the average starting wage are more likely to change jobs, directly from employer to employer as well as indirectly via an unemployment spell. In addition they are more likely to change occupation. Moreover, job mobility tends to reduce the effects of labour market entry conditions, implying that job mobility operates as an adjustment mechanism that mitigates entry wage differentials. These results hold not only for high-skilled, but also for medium-skilled and unskilled workers.

Identification of Social Interactions through Partially Overlapping Peer Groups

In this paper, we demonstrate that, in a context where peer groups do not overlap fully, it is possible to identify all the relevant parameters of the standard linear-in-means model of social interactions. We apply this novel identification structure to study peer effects in the choice of college major. Results show that one is more likely to choose a major when many of her peers make the same choice. We also show that peers can divert students from majors in which they have a relative ability advantage, with adverse consequences on academic performance, entry wages, and job satisfaction. (JEL I23, J24, J31, Z13)

Fields of Training, Plant Characteristics and the Gender Wage Gap in Entry Wages Among Skilled Workers – Evidence from German Administrative Data

Summary This paper investigates the gender wage gap among skilled German workers after the end of vocational training using data from social security records. Using information on worker and plant characteristics for the training plant, results from standard decomposition techniques show that up to 92% of an initial 14% earnings disadvantage for women in the first job can be attributed to differences in endowments. Of these, occupational segregation explains up to two thirds of the earnings gap, with plant characteristics accounting for about 25%.

Understanding the wage patterns of Canadian less skilled workers: the role of implicit contracts

Abstract We examine the wage patterns of Canadian less skilled male workers over the last quarter‐century by organizing workers into job entry cohorts. We find entry wages for successive cohorts declined until 1997 and then began to recover. Wage profiles steepened for cohorts entering after 1997, but not for cohorts entering in the 1980s – a period when start wages were relatively high. We argue that these patterns are consistent with a model of implicit contracts with recontracting in which a worker's current wage is determined by the best labour market conditions experienced during the current job spell.

Measuring What Employers Really Do About Entry Wages Over the Business Cycle

In models recently published by several influential macroeconomic theorists, rigidity in the real wages that firms pay newly hired workers plays a crucial role in generating realistically large cyclical fluctuations in unemployment. There is remarkably little evidence, however, on whether employers' hiring wages really are invariant to business cycle conditions. We review the small empirical literature and show that the methods used thus far are poorly suited for identifying employers’ wage practices. We propose a simpler and more relevant approach – use matched employer/employee longitudinal data to identify entry jobs and then directly track the cyclical variation in the real wages paid to workers newly hired into those jobs. We illustrate the methodology by applying it to data from an annual census of employers in Portugal over the period 1982-2007. We find that real entry wages in Portugal over this period tend to be about 1.8 percent higher when the unemployment rate is one percentage point lower. Like most recent evidence on other aspects of wage cyclicality, our results suggest that the cyclical elasticity of wages is similar to that of employment.

Real Wages and the Business Cycle: Accounting for Worker and Firm Heterogeneity

Using a longitudinal matched employer-employee data set for Portugal over the 1986-2005 period, this study analyzes the heterogeneity in wages responses to aggregate labor market conditions for newly hired workers and existing workers. Controlling simultaneously for worker and firm specifi ce ffects, the results show that entry wages are much more procyclical than current wages. A one-point increase in the unemployment rate decreases wages of newly hired male workers by around 2.5% and by just 1.5% for workers in continuing jobs. For female workers these same effects are 2.3% and 1.1%, respectively. Thus, our empirical evidence does not seem to lend support to the hypothesis of wage stickiness as an explanation for the unemployment volatility puzzle. JEL classification: J31; E24; E32;

Seeking Similarity: How Immigrants and Natives Manage at the Labor Market

We show that immigrant managers are substantially more likely to hire immigrants than are native managers. The finding holds when comparing establishments in the same 5-digit industry and location, when comparing different establishments within the same firm, when analyzing establishments that change management over time, and when accounting for within-establishment trends in recruitment patterns. The effects are largest for small and owner-managed establishments in the for-profit sector. Separations are more frequent when workers and managers have dissimilar origin, but only before workers become protected by EPL. We also find that native managers are unbiased in their recruitments of former co-workers, suggesting that information deficiencies are important. We find no effects on entry wages. Our findings suggest that a low frequency of immigrant managers may contribute to the observed disadvantages of immigrant workers.

Attractive Physical Appearance vs. Good Academic Characteristics: Which Generates More Earnings?

SUMMARYThis study uses the entry‐level wage of Taiwanese female college graduates to ensure a clear causality between the wage and physical appearance. It is found that height raises the entry wage, and that there exists an optimal BMI. Graduates who are satisfied with their looks earn 3.4% more than the average. The wage premiums for a good college grade and for all advantageous physical characteristics are significantly lower than that for admission to a selective college. Graduates who are satisfied with their looks are more likely to become full‐time workers and are less likely to be unemployed shortly after graduation.