Involuntary Terminations Under Explicit and Implicit Employment Contracts

60 Pages Posted: 8 Jun 2004 Last revised: 28 Mar 2021

See all articles by James L. Medoff

James L. Medoff

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Katharine G. Abraham

University of Maryland - Joint Program in Survey Methodology and Department of Economics; National Bureau of Economic Research (NBER)

Date Written: February 1981

Abstract

This study investigates where and when last-in-first-out permanent layoff policies seem to go hand in hand with compensation policies under which the net value of senior workers appears to be less than that of their junior peers. The investigation relies upon both the approximately 260 usable responses to a survey we mailed out to a sample of U.S. firms and microdata from the computerized personnel files of a major U.S. corporation. Our findings for U.S. companies outside of agriculture and construction lead us to the following three conclusions: (1) For most employees, it appears that protection against job loss grows with seniority, although net value to the firm does not.(2) While a very sizeable percentage of nonunion workers may be covered by implicit employment contracts which give more protection against termination to those with more seniority, a much higher percentage of workers covered by collective bargaining agreements seem to enjoy such protection; and (3) The job protection afforded senior nonunion personnel, especially exempt employees, appears to be less strong than that provided to union members.

Suggested Citation

Medoff, James L. and Abraham, Katharine G., Involuntary Terminations Under Explicit and Implicit Employment Contracts (February 1981). NBER Working Paper No. w0634, Available at SSRN: https://ssrn.com/abstract=275388

James L. Medoff (Contact Author)

Harvard University - Department of Economics ( email )

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Katharine G. Abraham

University of Maryland - Joint Program in Survey Methodology and Department of Economics ( email )

College Park, MD 20742
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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