Tenure, Wage Profiles and Monitoring
New Analyses of Worker Well-Being
ISBN: 978-1-78350-056-7, eISBN: 978-1-78350-057-4
Publication date: 11 August 2014
Abstract
Efficiency wage theory predicts that firms can induce worker effort by the carrot of high wages and/or the stick of monitoring worker performance. Another option available to firms is to tilt the remuneration package over time such that the lure of high future earnings acts as a deterrent to current shirking. On the assumption that firms strive for the optimal trade-off between these various instruments, we develop a two-period model of efficiency wages in which increased monitoring attenuates the gradient of the wage-tenure profile. Our empirical analysis, using two cross sections of matched employer-employee British data, provides robust support for this prediction.
Keywords
Acknowledgements
Acknowledgements
We thank the sponsors of the Workplace Employment Relations Survey (WERS) – Department for Business Enterprise and Regulatory Reform, ACAS, ESRC, and PSI – and the UK Data Archive for access to the WERS data. Helpful comments were received from seminar participants at the Universities of Bath, Lancaster, and Sheffield and from participants at the Western Economic Association Annual Conference, the Royal Economic Society Annual Conference, the European Association of Labor Economists Annual Conference and the Work Pensions and Labor Economics Study Group. The normal disclaimer applies. We would like to thank the editors of this book, Solomon Polachek and Konstantinos Tatsiramos, and an anonymous referee for comments that substantially improved this chapter.
Citation
Sessions, J.G. and Theodoropoulos, N. (2014), "Tenure, Wage Profiles and Monitoring", New Analyses of Worker Well-Being (Research in Labor Economics, Vol. 38), Emerald Group Publishing Limited, Leeds, pp. 105-162. https://doi.org/10.1108/S0147-9121(2013)0000038004
Publisher
:Emerald Group Publishing Limited
Copyright © 2013 by Emerald Group Publishing Limited