Relative Wage Positions and Quit Behavior: Evidence from Linked Employer-Employee Data

Abstract

The authors analyze the importance of relative wage positions within firms in western Germany in the context of individual quit decisions as an inverse measure of job satisfaction. Using a linked employer-employee data set (LIAB) for the years 1996-2005 whose sample consists of full-time male prime-age workers in western Germany without college degrees, they ascertain whether workers find status or signal effects stronger motivators for quit decisions. They find that workers with higher relative wage positions within their firms are, on average, more likely to quit their jobs than those with lower relative wage positions and that workers who experience a loss in their relative wage positions are also more likely to accept a wage cut associated with their job transition. Overall, results suggest that a signal effect is, on average, stronger than a status effect.

The Acceptance of Earnings Losses after Voluntary Mobility

“…Pfeifer and Schneck (2010) show that workers who change to higher relative wage positions compared to the previous establishment have, on average, a lower probability to change to lower wages. Workers who change to lower relative wage positions, in turn, likely suffer more wage cuts.…”

Determinants of fair own wage perceptions: the moderating effect of works councils and performance evaluations

“…Clark et al, 2009), quit behaviour (e.g. Pfeifer and Schneck, 2012) and other outcomes has been studied in laboratory experiments as well as with large survey and administrative data. In this empirical research note, I do not present further evidence for the effects of fair wages but I use German survey data to analyse the determinants of fair own wage perceptions.…”

My Wage is Unfair! Just a Feeling or Comparison with Peers?

“…For recent literature see, among others, Brown et al [2008], Clark et al [2008], Clark et al [2009], Clark and Senik [2010], Card et al [2012], or Pfeifer and Schneck [2012].…”

“…In order to answer the question whether workers who perceive their wages as unfair rest their evaluation of fair wages on economical factors, we follow Clark and Oswald [1996], Senik [2008], and Pfeifer and Schneck [2012] who predicted wages conditional on individual and job characteristics. This approach is expected to be especially feasible in an European country, where individuals attribute outcomes frequently to effort or skill [see Gerlach et al, 2008, p. 421].…”