The Earnings Function: A Glimpse Inside the Black Box
Working Paper 0224
DOI 10.3386/w0224
Issue Date
This paper studies the wage determination process for a group of managerial employees in a major U.S. airline. As would be expected, those with greater-than-average schooling, pre-company labor market experience, and company service receive greater-than-average earnings. The analysis also addresses the question of whether or not the managers within a grade level who are paid more receive higher performance ratings by their supervisors. The answer is "no" in the case of those with more pre-company labor market experience (i.e., those who are older) and with more company service. This suggests that the salaries received by managers within a grade reflect their age and tenure with the company more than their present performance.