How Worker Productivity and Wages Grow with Tenure and Experience: The Firm Perspective

Andrew Caplin, Minjoon Lee, Søren Leth-Petersen, Johan Saeverud and Matthew Shapiro

No 30342, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: How worker productivity evolves with tenure and experience is central to economics, shaping, for example, life-cycle earnings and the losses from involuntary job separation. Yet, worker-level productivity is hard to identify from observational data. This paper introduces direct measurement of worker productivity in a firm survey designed to separate the role of on-the-job tenure from total experience in determining productivity growth. A key innovation is to elicit what managers know about the productivity of their workers. Several findings emerge concerning the initial period on the job. (1) On-the-job productivity growth exceeds wage growth, consistent with wages not being allocative period-by-period. (2) Previous experience is a substitute, but a far less than perfect one, for on-the-job tenure. (3) There is substantial heterogeneity across jobs in the extent to which previous experience substitutes for tenure. The survey makes use of administrative data to construct a representative sample of firms, check for selective non-response, validate survey measures with administrative measures, and calibrate parameters not measured in the survey.

JEL-codes: J24 J30 (search for similar items in EconPapers)
Date: 2022-08
New Economics Papers: this item is included in nep-bec, nep-eff, nep-hrm, nep-lma, nep-ltv and nep-sbm
Note: EFG LS ME PR
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Citations: View citations in EconPapers (7)

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Working Paper: How Worker Productivity and Wages Grow with Tenure and Experience: The Firm Perspective (2022)
Working Paper: How Worker Productivity and Wages Grow with Tenure and Experience: The Firm Perspective (2022)
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