Personalforschung an Hochschulen - Rainer Hampp Verlag

Zeitschrift für Personalforschung, 17. Jg., Heft 4, 2003 447
This finding is rather unspectacular, because intuitively it seems to be reasonable
that workers’ wages are a function of the time spend in the labor market and in
particular of the length devoted with one and the same employer. While this positive
correlation is a commonly accepted result, a lot of controversial talk over the interpretation
of the noticed association between earnings and tenure has grown up over the
past two decades, as the authors derived their findings from very different assumptions.
Even years before the emergence of the two rival theories, Mincer (1974) questioned
the human capital model, if an empirical test would fail to show that wage
growth correlates with productivity progress. The first of the countless studies which
were to follow on that attempted to answer the question whether wages actually increase
with productivity via tenure was Medoff/Abraham (1980,1981) who concluded
that the human capital theory might not be adequate in explaining the upward-sloping
age-earnings profile but instead the Lazear style model is more appropriate.
Over time, progress has been made concerning the debate which researcher’s
theory (or combination of theories) provides the best explanation for the positive
wage-tenure relationship. In the mid 80’s Jovanovic’s matching model was favored
while the other two alternatives were discredited. Two very influential papers, Abraham/Farber
(1987) and Altonji/Shakotko (1987) concluded that wages slope upwards
due to unobserved individual and match heterogeneity and not due to job seniority. In
a subsequent work, Topel (1991) disproved these results and argued that when the
formers’ econometric problems were solved for, findings were supportive of the human
capital pattern. Altonji/Williams (1997) stroke back, reexamining and defending
the Altonji/Shakotko findings from 1987.
To date, there is still an ongoing empirical dispute, seeking to clarify the relationship
between wages and tenure. Indeed, as noted by Felli/Harris (1996), this debate
remains an open question in the empirical analysis of labor markets. While even
the latest bulk of empirical work has tested whether or not one particular theory can
indeed explain the upward-sloping age-earnings profile (see Neumark/Taubman
(1995) and Azfar/Danninger (2001)) studies that aimed to discriminate between all
three competing hypotheses has not been conducted yet. In this respect, previous empirical
evidence is suggestive but inconclusive, because of the difficulties in measuring
precisely and objectively individual worker productivity.
The principal objective of this paper is to pave the road in order to gain a full
understanding of the question which one theory provides the best explanation why
wages increase with seniority. The fact, that empirical studies have not yet tackled the
obvious question of checking all three major theories versus each other using data
from one single industry with homogenous job characteristics is somewhat surprising.
Due to this deficit, I believe that there is considerable room for improvement. Consequently,
it’s time to breath new life into the puzzle that emerged more than 20 years
ago.