Working Paper: NBER ID: w8552
Authors: Charles Brown; James L. Medoff
Abstract: In this paper, we analyze the relationship between how long an employer has been in business (firm age) and wages. Using data from special supplements to the Survey Research Center's monthly Survey of Consumers, we find that firms that have been in business longer pay higher wages (as previous studies have found), but pay if anything lower wages after controlling for worker characteristics. There is some evidence that the relationship is not monotonic, with wages falling and then rising with years in business. Older firms provide better fringe benefits and more stable employment, but these differences do not appear very important in understanding the age-wage relationship. Established employers do appear to make greater use of back-loaded compensation, consistent with their higher probability of remaining in business.
Keywords: Firm Age; Wages; Labor Market; Employment Stability
JEL Codes: J3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| firm age (L10) | wages (J31) |
| worker characteristics (J29) | wages (J31) |
| job stability (J63) | wages (J31) |
| firm age (L10) | fringe benefits (J32) |
| firm age (L10) | backloaded compensation strategies (J33) |
| firm age (L10) | closure risks (G33) |