Risky business? Earnings prospects of employees at young firms

Working paper

Young ?rms are an engine of job creation, but little is known about the quality of the jobs that they o?er. I use a matched employer-employee dataset to study how starting wages and lifecycle earnings of employees di?er between young and mature ?rms. I ?nd that young ?rms pay a small premium to new hires, but subsequent wage growth is better at mature ?rms, both within continuing job matches and when individuals change jobs. These results are con?rmed by several approaches to addressing sorting and selection of employees into ?rms of di?erent ages. There is substantial heterogeneity of outcomes: the few young ?rms that survive and become highly productive pay higher wages to employees from the outset than less successful young ?rms. Overall, highly-paid and stable jobs at young ?rms are rare. Policies that aim to stimulate job growth by encouraging the formation of new ?rms should therefore pay close attention to the types of ?rms that form as a result.

Authors: Adrjan, P

• Publication status: Published
• Publisher: University of Oxford
• Series: Department of Economics Discussion Paper Series
• Publication date: 2018-06-01
• Paper number: 852