How to Sell Jobs
35 Pages Posted: 26 Dec 2017 Last revised: 2 Sep 2018
Date Written: August 31, 2018
Abstract We develop a theory of competition in labor markets where firms compete to sell desirable job attributes to employees. We show that when employees perceive desirable job attributes and monetary compensation as complements, the optimal mechanism for selling desirable jobs is to assign young employees to low-quality jobs and then promote only some of them to the desirable jobs. In contrast with the traditional compensating differentials framework, job desirability and wages are positively related in equilibrium. Our analysis provides a framework for thinking about the effect of competition on employment and wages, span of control, and inequality within and between generations.
Keywords: Competition, Compensating Differentials, Employment Contracts
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