Rehiring, Seniority, and Labor Force Adjustment

Carlos E Santiago

Journal of Labor Economics, 1987, vol. 5, issue 4, S18-35

Abstract: This paper examines the role of seniority in two interrelated phenomena-rising age-earnings profiles and the use of layoffs rather than wage adjustments during economic decline. The results sug gest that rehiring based on a seniority-first criterion is not incons istent with an approach that maximizes worker productivity within a h eterogeneous labor force. Moreover, assessment of worker reliability based on the upward portion of the wage-productivity cum seniority lo cus is appropriate since it reduces subsequent turnover. Thus, an app roach that combines human capital accumulation with Lazear-type defer red payments schemes explains much of long-term worker-firm attachmen t. Copyright 1987 by University of Chicago Press.

Date: 1987
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