The determination of wages of newly hired employees: survey evidence on internal versus external factors

Kamil Galuščắk, Mary Keeney, Daphne Nicolitsas, Frank Rafael Smets, Paweł Strzelecki () and Matija Vodopivec
Additional contact information
Kamil Galuščắk: Czech National Bank
Mary Keeney: Central Bank and Financial Services Authority of Ireland
Daphne Nicolitsas: Bank of Greece
Matija Vodopivec: Bank of Slovenia
Authors registered in the RePEc Author Service: Kamil Galuscak

No 129, Working Papers from Bank of Greece

Abstract: This paper uses information from a rich firm-level survey on wage and price-setting procedures, in around 15,000 firms in 15 European Union countries, to investigate the relative importance of internal versus external factors in the setting of wages of newly hired workers. The evidence suggests that external labour market conditions are less important than internal pay structures in determining hiring pay, with internal pay structures binding even more often when there is labour market slack. When explaining their choice firms allude to fairness considerations and the need to prevent a potential negative impact on effort. Cross-country differences, that do exist, are found to depend on institutional factors (bargaining structures); countries in which collective agreements are more prevalent and collective agreement coverage is higher report to a greater extent internal pay structures as the main determinant of hiring pay. Within-country differences are found to depend on firm and workforce characteristics; strong association between the use of external factors in hiring pay, on the one hand, and skills (positive) and tenure (negative) on the other.

Keywords: wage rigidity; newly hired workers; internal pay structure; employee turnover; business cycle; survey data (search for similar items in EconPapers)
JEL-codes: J31 J41 J51 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-lab and nep-lma
Date: 2011-04
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Related works:
Journal Article: The determination of wages of newly hired employees: Survey evidence on internal versus external factors (2012)
Working Paper: The Determination of Wages of Newly Hired Employees: Survey Evidence on Internal versus External Factors (2010)
Working Paper: The determination of wages of newly hired employees - survey evidence on internal versus external factors (2010)
Working Paper: The Determination of Wages of Newly Hired Employees: Survey Evidence on Internal versus External Factors (2009)
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