Labor Market Entry Conditions, Wages and Job Mobility

Thomas K. Bauer, Ronald Bachmann, Peggy David
RWI, Germany

Economic conditions at the time of labour market entry can induce wage differentials between workers entering the labour market at different points in time. While there exists much empirical evidence on the existence and persistence of the effects of labour market entry conditions, little is known about their interaction with employees’ mobility behaviour. Using German administrative data, this paper analyzes the determinants of job mobility, emphasizing the role of initial wage gaps. The analysis suggests that the effects of entry conditions play an important role in explaining job transitions. Labour market entrants earning less than the average starting wage are more likely to change jobs, directly as well as indirectly. Moreover, labour market transitions tend to reduce the effects of entry conditions, implying that job mobility operates as an adjustment mechanism that reduces the initial wage differences between workers.

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