Academic journal article Atlantic Economic Journal

Job Duration and Earnings

Academic journal article Atlantic Economic Journal

Job Duration and Earnings

Article excerpt

The relationship between firm tenure and wages has been examined in a large number of studies. A portion of this research has looked at the relationship between earnings and the duration of the job |Bartel and Borjas, Studies in Labor Markets, 1981; Abraham and Farber, AER, June 1987; Topel, JPE, February 1991~. The longer the expected job duration, the more incentive for both firms and workers to invest in firm specific training. This investment should lead to steeper tenure profiles in longer-term jobs. However, past studies have assumed workers know exactly how many years they will stay with a firm. Since neither workers nor firms have this level of information, the issue merits further attention. This paper provides an alternative test of this hypothesis, which is based on the literature examining overeducation.

In their work on overeducation, Clogg |Demography, May 1984~ and Verdugo and Verdugo |JHR, Fall 1989~ classify individuals as overeducated if their completed schooling is more than one standard deviation above the mean level of schooling in an occupation. Earnings are then compared for workers with an adequate level of schooling and those who are overeducated.

This type of analysis can be extended to look at how earnings vary with job duration. Workers who are more than one standard deviation above the mean level of tenure in an occupation can be considered "overtenured." Short-term occupations are expected to have lower levels of completed tenure than longer-term occupations. …

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