Do Startup Employees Earn More in the Long Run?

Olav Sorenson, Michael Dahl, Rodrigo Canales () and M. Diane Burton ()
Additional contact information
Rodrigo Canales: Yale School of Management, Yale University, New Haven, Connecticut 05611
M. Diane Burton: New York State School of Industrial and Labor Relations, Cornell University, Ithaca, New York 14853

Organization Science, 2021, vol. 32, issue 3, 587-604

Abstract: Evaluating the attractiveness of startup employment requires an understanding of both what startups pay and the implications of these jobs for earnings trajectories. Analyzing Danish registry data, we find that employees hired by startups earn roughly 17% less over the next 10 years than those hired by large, established firms. About half of this earnings differential stems from sorting—from the fact that startup employees have less human capital. Long-term earnings also vary depending on when individuals are hired. Although the earliest employees of startups suffer an earnings penalty, those hired by already-successful startups earn a small premium. Two factors appear to account for the earnings penalties for the early employees: Startups fail at high rates, creating costly spells of unemployment for their (former) employees. Job-mobility patterns also diverge: After being employed by a small startup, individuals rarely return to the large employers that pay more.

Keywords: careers; entrepreneurship; human capital; inequality; wages (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (12)

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