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Encouraging Long-Term Tenure: Wage Tilt or Pensions?

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  • Richard A. Ippolito

Abstract

The author analyzes data on 6,416 persons in 109 firms to determine whether the length of these workers' tenure was positively related either to wage tilt—the payment of below-market wages in the early years of the worker's employment with a firm and above-market wages in the later years—or to the presence of defined benefit pension plans. Contrary to the popular (but little-tested) hypothesis that wage tilt is important in inducing workers to make long-term commitments to the firm, the results show that wage tilt had no significant effect on tenure, except indirectly through its effect on pension quit costs. In contrast, pensions increased tenure in the firm, on average, by more than 20%.

Suggested Citation

  • Richard A. Ippolito, 1991. "Encouraging Long-Term Tenure: Wage Tilt or Pensions?," ILR Review, Cornell University, ILR School, vol. 44(3), pages 520-535, April.
    • Handle: RePEc:sae:ilrrev:v:44:y:1991:i:3:p:520-535
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    Cited by:

    1. Montgomery, Edward & Shaw, Kathryn, 1997. "Pensions and Wage Premia," Economic Inquiry, Western Economic Association International, vol. 35(3), pages 510-522, July.
    2. Michael, Steven C., 1996. "To franchise or not to franchise: An analysis of decision rights and organizational form shares," Journal of Business Venturing, Elsevier, vol. 11(1), pages 57-71, January.
    3. Harley Frazis & Mark A. Loewenstein, 2009. "How Responsive are Quits to Benefits?," Working Papers 426, U.S. Bureau of Labor Statistics.
    4. palacios, Robert & Whitehouse, Edward, 2006. "Civil-service pension schemes around the world," Social Protection Discussion Papers and Notes 90340, The World Bank.
    5. Robert L. Clark & Joseph F. Quinn, 1999. "Effects of Pensions on Labor Markets and Retirement," Boston College Working Papers in Economics 431, Boston College Department of Economics.
    6. Ashok Thomas & Luca Spataro, 2016. "The Effects Of Pension Funds On Markets Performance: A Review," Journal of Economic Surveys, Wiley Blackwell, vol. 30(1), pages 1-33, February.
    7. Patricia M. Anderson & Bruce D. Meyer, 1994. "The Extent and Consequences of Job Turnover," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(1994 Micr), pages 177-248.
    8. Leora Friedberg & Michael Owyang, 2004. "Explaining the Evolution of Pension Structure and Job Tenure," NBER Working Papers 10714, National Bureau of Economic Research, Inc.
    9. Fang, Tony & Messacar, Derek, 2019. "Voluntary Job Separations and Traditional versus Flexible Workplace Saving Plans: Evidence from Canada," IZA Discussion Papers 12262, Institute of Labor Economics (IZA).
    10. Sundaram, Rangarajan K. & Yermack, David, 2006. "Pay Me Later: Inside Debt and Its Role in Managerial Compensation," SIFR Research Report Series 43, Institute for Financial Research.

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