Length of Service, Terminations and the Nature of the Employment Relationship

32 Pages Posted: 9 Jun 2004 Last revised: 21 Jun 2021

See all articles by Katharine G. Abraham

Katharine G. Abraham

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

James L. Medoff

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

Date Written: March 1983

Abstract

This paper presents new survey evidence that relative protection against job loss grows with length of service, independent of their net value to the firm. This protection makes good sense given that at most companies employees appear to earn less than their value marginal product in the early part of their tenure and more than their value marginal product in the latter part; without job protection policies for senior employees, the firm would have an incentive to terminate them when their "spot" earnings went above their "spot" value marginal product. In particular, we find that a very large percentage (over 95 percent) of hourly union members outside of agriculture and construction are covered by protective policies for senior workers and, that a somewhat smaller, but still substantial, percentage (about 85 percent) of comparable nonunion hourlies also have some protection against jobloss in their senior years. The potential reasons for these findings are briefly discussed.

Suggested Citation

Abraham, Katharine G. and Medoff, James L., Length of Service, Terminations and the Nature of the Employment Relationship (March 1983). Available at SSRN: https://ssrn.com/abstract=304814

Katharine G. Abraham (Contact Author)

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

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James L. Medoff

Harvard University - Department of Economics ( email )

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