Linked Employer Employee Data Research Articles

Linked Employer–Employee Data from XING and the Mannheim Enterprise Panel

Abstract The availability of social media data is growing and represents a new data source for economic research. This paper presents a detailed study on the use of data from a career-oriented social networking platform. The employment data are exported from user profiles and linked to the Mannheim Enterprise Panel (MUP). The linked employer–employee (LEE) data consist of 14 million employments for 1.5 million employers and describes around 9 million employee flows. Plausibility checks confirm that career-oriented social networking data contain valuable information about employments and employee flows. Using such platform data provides opportunities for research on employee mobility, networks, and local ecosystems’ role in economic performance at the employer and the regional level.

Performance evaluations and employee turnover intentions: Empirical evidence from linked employer–employee data

Performance evaluations and employee turnover intentions: Empirical evidence from linked employer–employee data

Worker reallocation, firm innovation, and Chinese import competition

While recent work has documented a nexus between international trade and firm innovation, the underlying mechanisms explaining firms’ innovation in response to import competition are, thus far, poorly understood. To identify the mechanism of labor adjustments and its economic relevance, we use longitudinal linked employer–employee data from Denmark (1995–2012). We first show that import competition triggers a significant increase in the share of R&D workers at the firm level. The majority of the increase in the share of R&D workers is explained by between-firm, not within-firm, worker reallocation. The significance of this reallocation becomes evident when we show that innovation improvements are observed only among firms that experience a large increase in the share of R&D workers, especially if this increase is achieved through between-firm worker reallocation. We then extend our analysis to Portugal where the labor market is more rigid and find contrasting yet consistent results: labor reallocation occurs only within firms and it does not result in increased innovation.

The costs of job loss and task usage: Do social tasks soften the drop?

AbstractDo different tasks shield differently from the scarring effects of job loss? This study examines how the effects of job loss depend on task usage. We use Finnish linked employer–employee data from 2001 to 2016, representative survey data on task usage, and plant closures to identify individuals who involuntarily lose their jobs. We find that heterogeneity in the cost of job loss is linked to task usage. Workers in more social task-intensive origin jobs have smaller employment and earnings losses, whereas workers in routine jobs face larger wage losses. The probability of being employed is 8.3 pp higher (3.9 pp lower) per one standard deviation higher than mean social (routine) task usage 1 year after the job loss event. We also find that workers with longer tenure face larger losses and that task usage contributes more to their losses. The results show that the costs of job loss depend on task usage in the origin job. Public policy measures should be targeted at employees in routine-intensive jobs, since they face the largest losses.

Human resource management technology, workplace performance, and employee well‐being in the British public sector

AbstractUsing linked employer–employee data for workplaces in Britain, we find high‐performance workplace practices (HPWPs) are positively associated with public sector workplace performance. Contrastingly, HPWPs are not associated with measures of public sector employees' well‐being or motivation. The implication is that the performance effects of HPWP in the public sector constitute part of efficient management technology, without the need to invoke special employee responses as mediators. Public sector findings differ from those in the private sector: in the latter, HPWPs are positively associated with some performance outcomes but employee outcomes are a complex mix of non‐significant, positive, and negative associations.

Managing an ageing workforce: workplace retention practices and early labour market exit

This study addresses a critical gap in our understanding of how the employer and workplace context influences the working career of older employees. Leveraging linked employer–employee data, this study examines the impact of workplace retention practices on an early labour market exit for employees aged fifty-five to sixty-four in Denmark. The findings reveal that, for those eligible for early retirement, work environment adaptation, re-employment of retired employees, and positive views of older employees’ productivity significantly contribute to avoiding early retirement. However, these workplace retention practices do not influence unemployment, emphasizing their effectiveness in postponing early retirement rather than mitigating job loss. Moreover, the analysis shows that employees with managerial roles and high skill levels benefit more from workplace retention practices in terms of avoiding both early retirement and unemployment. This finding highlights the employer’s key role in shaping inequalities in an ageing workforce by selectively providing opportunities to extend working lives.

Technological change, training, and within-firm wage inequality in Germany

Abstract Technological change increases the demand for higher skills and fosters wage inequality. Studies on technological change often emphasize the importance of training to adapt workers’ skills to technology use and mitigate inequality. However, we know little about firms’ training activities and their consequences for inequality in the context of technological change. This article investigates, first, whether firms’ decisions to invest in information technology (IT) are associated with skill bias in firms’ training activities, whether this is conditional on the job tasks of workers, and, whether the relationship between IT investments and training activities affects the wage gap within firms. Using linked employer–employee data containing detailed information about investments and training, I show that firms’ IT investments have a large positive effect on the training participation of high-skilled workers. In contrast, the positive effect on low-skilled workers is smaller, short lasting and conditional on workers job tasks. Additional investigations show that the training of high-skilled workers mediates approximately 5 per cent of the effect of IT investments on wage inequality within firms. In the conclusions, I highlight the broader implications of these findings for the effects of technological change for inequality in training opportunities.

Failing Young and Temporary Workers? The Impact of a Disruptive Crisis on a Dual Labour Market

Abstract We study the impact of the pandemic crisis using monthly data covering the universe of individuals registered as unemployed in mainland Portuguese municipalities, complemented with electronic payments, linked employer–employee data, and furlough records. Event study designs identify a sharp increase in unemployment, driven mostly by termination of temporary contracts, and a decrease in new job placements. With triple difference-in-differences, we show that the effects are stronger in more dual municipal labour markets, i.e. with a higher share of temporary jobs, concentrated in young workers and middle educated individuals. The asymmetries are exacerbated by the duality of the municipal labour market.

Establishment age and wages

This paper investigates the relationship between establishment age and wages. A key challenge is that new establishments differ from mature establishments along many dimensions due to non-random survival of establishments. Furthermore, worker composition changes as establishments age. To get around this, the paper uses linked employer–employee data from Germany and estimates the establishment age–wage relationship controlling for establishment and worker fixed effects and focuses on starting wages of workers. I show a striking pattern: starting wages in new establishments are 9 percent higher than in mature establishments (older than 20 years). I also report evidence that this difference is not driven by differences in hours, compensation for unemployment risk or slower future wage growth. Instead, I show that the difference is driven by, on average, high growth rates in new establishments as would be predicted by monopsonistic search models.

Do Organizational Policies Narrow Gender Inequality? Novel Evidence from Longitudinal Employer–Employee Data

Scholars have long proposed that gender inequalities in wages are narrowed by organizational policies to advance gender equality. Using cross-sectional data, scarce previous research has found an association between gender wage inequalities and these organizational policies, but it remains unclear whether this correlation represents a causal effect. We provide first evidence on this topic by using longitudinal linked employer–employee data covering almost 1,500 firms and nearly one million employee observations in Germany. We investigate whether and how organizational policies affect gender gaps using firm fixed-effects regressions. Our results show that organizational policies reduce the gender wage gap by around nine percent overall. Investigating channels, we show that this effect is entirely driven by advancing women already employed at a given firm, whereas we find no effect on firms' composition and wages of new hires. Furthermore, we show that our findings are not driven by potential sources of bias, such as reverse causality.

Within-job gender pay inequality in 15 countries

Extant research on the gender pay gap suggests that men and women who do the same work for the same employer receive similar pay, so that processes sorting people into jobs are thought to account for the vast majority of the pay gap. Data that can identify women and men who do the same work for the same employer are rare, and research informing this crucial aspect of gender differences in pay is several decades old and from a limited number of countries. Here, using recent linked employer–employee data from 15 countries, we show that the processes sorting people into different jobs account for substantially less of the gender pay differences than was previously believed and that within-job pay differences remain consequential.

FDI and onshore job stability: Upgrades, downgrades, and separations in multinationals

We use linked employer–employee data to estimate the impact of firms’ foreign direct investment (FDI) into a low-wage country on workers’ job stability in a high-wage country. We are the first to consider internal (i.e., within-firm) job transitions. Specifically, we examine the impact of German firms’ FDI into the Czech Republic on the likelihood of onshore employees up- or downgrading to occupations that are more or less intensive in analytical and interactive tasks. To do so, we match firms with similar investing probabilities. We use this sample to estimate proportional hazards models to retrieve the dynamic effects on workers. We find that FDI increases the average likelihood of upgrades and downgrades by 17% and 19%, respectively. These effects are the strongest for jobs with low shares of nonroutine and interactive tasks, and they increase over time. They become substantial two years after the investment and reach 32%–46% and 35%–48%, respectively. FDI does not increase the hazard of worker–firm separations. Our results highlight the importance of internal firm restructuring, which enables firms to satisfy their altered domestic labor needs after FDI.

Regional static diversification and relatedness between industries

Abstract Relatedness has often been shown to have a central role in regional diversification. Knowledge flows between related industries are an important source of innovation, leading to industry growth and the establishment of new industries. Earlier studies have focused on dynamic diversification into new industries, but in this study, we emphasize static diversification, that is, changes in the balance between existing industries in a region. We use linked employer–employee data from Denmark and construct a range of measures at the level of regional industries. The role of relatedness in static diversification 2008–2013 is then analyzed based on industry characteristics in 2008. We find that relatedness plays a more important role in regions that are either spatially peripheral or economically non-peripheral, while relatedness has no relationship to static diversification on average. In addition to the empirical result, we contribute by comparing indices of relatedness, suggesting an alternative employment-weighted index, and conceptualizing relatedness as itself a disparity dimension of diversity. We finally ask how static and dynamic diversification affect disparity. We find that human capital intensity plays an important role in the link between diversification and the evolution of disparity.

We are Hiring: Growth Opportunities for New Firms and the Business Cycle

Whether firms founded in economic crises have sufficient growth potential is an important question for both aspiring entrepreneurs and policy makers. However, existing research in entrepreneurship and economics offers conflicting answers and most studies either focus on aggregate cohort-level effects or selectively exclude small new businesses from their analyses. We argue theoretically and explore empirically that young firms of different ages and sizes respond highly heterogeneously to cyclical conditions. Using extensive linked employer–employee data on young German firms, we reveal that the average new firm finds it easier to hire its first employees when it is founded in a crisis. These firms achieve countercyclical growth through hires of career entrants who face difficulties staring their careers during the crisis. More specifically, hiring in very young and small-to-medium-sized young firms is countercyclical, whereas the same does not hold true for older and larger young firms. Firm-specific effects for young entrepreneurial businesses can hence strongly differ from effects previously presented in the literature.

The role of the workplace in ethnic wage differentials

AbstractUsing linked employer–employee data for Britain, we examine ethnic wage differentials among full‐time employees. We find substantial ethnic segregation across workplaces. However, this inter‐workplace segregation does not contribute to the aggregate wage penalty in Britain. Instead, most of the ethnic wage gap exists within the workplace, between observationally‐equivalent co‐workers. Lower pay satisfaction and higher levels of skill mismatch among ethnic minority workers are consistent with discrimination in wage‐setting on the part of employers. The presence of recognized trade unions and the use of job evaluation schemes within the workplace are associated with a smaller ethnic wage gap. These findings indicate that more attention should be placed on ensuring fairness in wage determination.

Internal labor markets: A worker flow approach

This paper develops a new method to study how workers’ career and wage profiles are shaped by internal labor markets (ILM) and job hierarchies in firms. We tackle the conceptual challenge of organizing jobs within firms into hierarchy levels by proposing a data-driven ranking method based on observed worker flows between occupations within firms. We apply our method to linked employer–employee data from Norway that record fine-grained occupational codes and track contract changes within firms. Our findings confirm existing evidence that is primarily based on case studies for single firms. We expand on this by documenting substantial heterogeneity in the structure and hierarchy of ILMs across a broad range of large firms. Our findings on wage and promotion dynamics in ILMs are consistent with models of careers in organizations.

Cyclical labor market sorting

We consider sorting in the labor market, that is, whether high- or low-productivity workers and firms tend to match with each other, and how this varies over time using U.S. linked employer–employee data. Composition changes of workers and firms move in opposite directions over the business cycle. During and after recessions, low-rank workers are less likely to work, while the employment share of low-rank firms increases. The agreement between worker and firm ranks increases in the early stages of labor market downturns.

Firm pay dynamics

We study the nature of firm pay dynamics. To this end, we propose a statistical model that extends the seminal framework by Abowd et al. (1999) to allow for idiosyncratically time-varying firm pay policies. We estimate the model using linked employer–employee data for Sweden from 1985 to 2016. By drawing on detailed firm financials data, we show that firms that become more productive and accumulate capital raise pay, whereas firms lower pay as they add workers. A secular increase in firm-year pay dispersion in Sweden since 1985 is accounted for by greater persistence of firm pay among incumbent firms as well as greater dispersion in firm pay among entrant firms, as opposed to more volatile firm pay.

The persistence of wages

This paper documents the extent to which wage persistence can be explained by permanent worker, employer, and match heterogeneity. Standard methods used to perform such decompositions for industry or racial wage gaps are inappropriate for decomposing wage persistence in dynamic panel data models because of the incidental parameter problem. When we apply these methods without bias correction, we find that the majority, 59.3 percent, of wage persistence is explained by worker heterogeneity, with employer and match heterogeneity explaining 29.7 and 11.0 percent, respectively. We evaluate three methods for addressing incidental parameter bias using a Monte Carlo study. An empirical application to Portuguese linked employer–employee data shows that the uncorrected estimates tend to understate wage persistence by around 24 to 42 percent, depending on the choice of the bias correction estimator used, and overstate the extent to which wage persistence arises from permanent unobserved heterogeneity. Furthermore, results indicate that the uncorrected estimates overstate the role of permanent worker heterogeneity, and understate the role of firm heterogeneity.

Immigrant–Native Wage Gaps at Work: How the Public and Private Sectors Shape Relational Inequality Processes

We investigate how the institutional context of the public and private sectors regulates the association of workplace diversity policies and relational status positions with first- and second-generation immigrants’ wages. Using unique linked employer–employee data combining administrative and survey information of 6,139 employees in 120 German workplaces, we estimate workplace fixed-effects regressions. Workplace processes are institutionally contingent: diversity policies such as mixed teams reduce inequalities in the public sector, and diversity policies such as language courses reinforce existing inequalities in the private sector. In public sector workplaces where natives hold higher relational positions, immigrants’ wages are lower. This group-related dynamic is not detectable in the private sector.