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Job Tenure versus Age: Effects on Wages and the Implication of Consumption for Wages

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Internal Labour Markets, Incentives and Employment

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Abstract

In this chapter we are interested in explaining the upward-sloping wage profiles in Japanese firms. There are in fact many hypotheses explaining upward-sloping wage profiles. For example, the theory of human capital states that earnings growth represents the return to human capital embedded in workers. Alternatively, one may stress the upward-sloping wage profile as playing the role of an incentive device. However, few studies have attempted to incorporate the effect of consumption profile on wage growth over the life cycle. The hypothesis presented in this chapter is that some part of earnings growth can be explained by the fact that firms determine wage profiles taking account of the consumption pattern of workers. Some possible theoretical explanations are examined. We look for models in which wage and consumption profiles are jointly determined, and both of them are closely and positively related.

This chapter is based on the paper presented at the 33rd Biwako Conference (Shiga, Japan, July 1995). The authors are indebted to J. Theeuwes for his detailed comments and to other participants for their comments. Any errors in this chapter, however, are the authors’ responsibility alone.

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Authors
  1. Souichi Ohta
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  2. Toshiaki Tachibanaki
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Editor information

Editors and Affiliations

  1. Nagoya University, Japan

    Isao Ohashi (Professor of Economics) (Professor of Economics)

  2. Institute of Economic Research, Kyoto University, Japan

    Toshiaki Tachibanaki (Professor of Economics) (Professor of Economics)

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© 1998 Souichi Ohta and Toshiaki Tachibanaki

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Ohta, S., Tachibanaki, T. (1998). Job Tenure versus Age: Effects on Wages and the Implication of Consumption for Wages. In: Ohashi, I., Tachibanaki, T. (eds) Internal Labour Markets, Incentives and Employment. Palgrave Macmillan, London. https://doi.org/10.1057/9780230377974_3

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