Why Workers Stay: Pay, Beliefs, and Attachment

Sydnee Caldwell, Ingrid Haegele and Jörg Heining

No 33445, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Workers often remain with their employer even when outside firms offer higher pay. This may reflect information frictions or preferences. We use a large-scale survey of full-time German workers, linked to Social Security records, to elicit pay expectations and preferences over specific outside firms. Workers believe outside pay varies across firms and direct their search toward higher-paying employers. Expected pay premia are highly correlated with administrative pay measures observed and with workers’ amenity valuations. Yet most workers would not switch firms—even for substantial raises at named destination firms. Implied switching costs range from 7 to 18% of annual pay. Attachment varies across firms and is not explained by amenities or switching costs, suggesting residual firm-specific factors shape mobility.

JEL-codes: J0 J3 J30 J31 J32 (search for similar items in EconPapers)
Date: 2025-02
New Economics Papers: this item is included in nep-hrm, nep-inv and nep-lma
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