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Abstract
This study examines job mobility and wage growth in a sample drawn from the National Longitudinal Survey of Young Men. The early career is highlighted because most young workers undergo rapid turnover and enjoy substantial wage growth as they shop for a good match. The objectives are (1) to describe the labor force activities of young men, (2) to determine whether job-specific investments are undertaken during the early career and, if so, whether they increase in match quality, and (3) to compare within-job and between-job wage growth.
Recognition that match quality depends on both wage levels and wage growth distinguishes this study from previous work. A job shopping model incorporates this broad view of match quality and yields the implication that within-job wage growth--to the extent that it reflects investment in job-specific human capital--is an outcome of job shopping. The model justifies the fact that job changers may accept a wage cut in exchange for increased wage growth.
The analysis has three parts. First, wage regressions are estimated with completed job duration serving as a proxy for unobserved match quality. These regressions suggest that young workers do undertake job-specific investments, and that laborers and high school educated workers invest more intensively in high quality (longer) matches. In addition, workers receive a boost in starting wages upon moving to more durable matches. Next, regressions of first differences (both within and between jobs) are estimated. These regressions fail to show increased within-job wage growth on longer jobs, but they show substantial wage growth in general. The average worker receives 5.7 percent wage growth by remaining on the job for an additional year and 7.9 percent wage boost by changing jobs. Clearly, young men change jobs because they are offered a higher current wage.
The final analytic section presents linear estimate of the probability that a job ends. These regressions reveal that the exit hazard declines in experience and tenure. Apparently, jobs become more valuable as tenure increases because specific investments are undertaken. The hazard also decreases in the current wage, but increases in wage growth. This suggests that workers with high wage growth receive extremely attractive job offers.
