Lifetime tenure and pay dynamics of white collar men and women

IZA Logo

IZA Seminar

Place: Schaumburg-Lippe-Str. 9, 53113 Bonn

Date: 02.12.2003, 12:15 - 13:30


Presentation by 

Niels C. Westergård-Nielsen (Copenhagen Business School)


We describe and model full careers for Denmark's population of white collar men and women who are continuously full-time employed.

Individual pay and mobility between firms is assumed to be a function of firm and industry pay and retention policies. These policies are characterised by firm and industry specific returns to education, experience and tenure. Workers solve the dynamic programming problem of mobility between firms by accounting for the expected future consequences of current decisions until retirement assumed to be at age 60. This dynamic selection is accounted for in the estimation of pay policies.

We sample all white collar private and public sector full-time employed men aged 20-54 in 1990. They are followed until 1995, and matched throughout to their employers and industries. We implement a conditional choice simulation estimator in the spirit of Hotz, Miller, Sanders and Smith (REStuds 1993).

Substantive findings are:

1. The average person has 12 different employers between ages 20 and 60, experiences a doubling of real earnings, three quarters of which is achieved before age 40 in the first 8 jobs. Two thirds of wage growth is between jobs.

2. In estimations of a model for moving or staying we find that a high expected wage level in the current firm means lower probability of moving.

3. If the person gets a higher wage than expected according to his/her characteristics (his/her error term is positive) moving is less likely.

4. The higher the expected wage growth in the current firm, the less likely is a move.

5. The higher expected wage or wage growth in competing firm, the more likely is a move. Furthermore, correlations between idiosyncratic wage elements in one job are correlated with the same in the next job. So is the wage growth and this gives insight in the existence of fast track careers.

For more information, please contact