Firm Pay and Worker Search

Sydnee Caldwell, Ingrid Haegele and Jörg Heining

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

Abstract: Whether and how workers search on the job depends on their beliefs about pay and working conditions in other firms. Yet little is known about workers' knowledge of outside pay. We use a large-scale survey of full-time German workers, linked to their Social Security records, to elicit pay expectations and preferences over specific outside firms. Workers believe that they face considerable heterogeneity in their outside pay options, and direct their search toward firms they believe would pay them more. Workers' expected firm-specific pay premia are highly correlated with pay policies observed in administrative records and with workers' valuations of firm-specific amenities. Most workers are unwilling to search for a new job—or leave their current firm—even for substantial pay increases. Switching costs are equivalent to 7 to 18% of a worker’s annual pay. Attachment varies across firms, and cannot be explained by either differences in firm-specific amenities or switching costs.

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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