We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
Wage Cuts as Investment in Future Wage Growth.
- Authors
Connolly, Helen; Gottschalk, Peter
- Abstract
Wage cuts are often presumed to reflect an adverse change in economic constraints. However, several theoretical models have shown they can be a form of investment in future wage growth. This paper provides empirical evidence of the latter by explicitly modeling the worker's job choice when the job offer consists of both a starting wage and expected future wage growth. We use our analytical model to estimate the distribution of job offers faced by workers who are searching across jobs differing in both initial wage and expected wage growth. For females, roughly one-third of job changes that result in immediate wage cuts are transitions to jobs that have a higher value function than the existing job. For males, the corresponding value is one-fifth.
- Subjects
JOB offers; EMPLOYEE selection; LABOR costs; CAREER development; LABOR incentives; SALARY reduction plans
- Publication
LABOUR: Review of Labour Economics & Industrial Relations, 2008, Vol 22, Issue 1, p1
- ISSN
1121-7081
- Publication type
Article
- DOI
10.1111/j.1467-9914.2007.00404.x