Does working at a start-up pay off? (original) (raw)
Related papers
2018
Startups and other small firms have been found to pay less. But how do these differences influence long-term earnings as firms age and grow and as individuals move across employers? We explore how joining a startup as an employee affects the long-term earnings of an individual. Analyzing Danish registry data, we find that individuals who join startups earn roughly 25% less than the employees of large, established firms over the subsequent ten years. Although about half of this gap stems from sorting ? from the fact that individuals who can command higher wages disproportionately work in large, established firms ? a large share of who ends up employed at small and young firms appears to depend on chance and, even after accounting for the observed and unobserved characteristics of individuals, those employed at startups still earn less than their peers at large, established firms. If anything, moreover, these earnings disparities grow over time. These differences in earnings trajector...
Do Startup Employees Earn More in the Long Run?
Organization Science, 2021
Evaluating the attractiveness of startup employment requires an understanding of both what startups pay and the implications of these jobs for earnings trajectories. Analyzing Danish registry data, we find that employees hired by startups earn roughly 17% less over the next 10 years than those hired by large, established firms. About half of this earnings differential stems from sorting—from the fact that startup employees have less human capital. Long-term earnings also vary depending on when individuals are hired. Although the earliest employees of startups suffer an earnings penalty, those hired by already-successful startups earn a small premium. Two factors appear to account for the earnings penalties for the early employees: Startups fail at high rates, creating costly spells of unemployment for their (former) employees. Job-mobility patterns also diverge: After being employed by a small startup, individuals rarely return to the large employers that pay more.
Start-ups, long- and short-term survivors, and their contribution to employment growth
2013
We investigate the effects that regional start-up activity has on employment in new and in incumbent businesses. The analysis is performed for West German regions over the 1987-2002 period. It shows that the effects of new businesses on employment in the incumbents are significantly positive and that this indirect effect on incumbent employment leads to more jobs than what is created by the newcomers. We find that the effect of new business formation on incumbents is exclusively driven by start-ups that survive a certain period of time. We draw conclusions for policy and for further research.
Start-ups, New Business Employment, and the Effects on Incumbents: Who Contributes the Larger Share?
2008
We investigate the effects that new business formation has on employment in incumbent firms and compare it to the development in the start-ups. The analysis is performed for West German regions over the 1984-2002 period. It shows that the employment effects of new businesses on the incumbents are significantly positive. Moreover, we find indication that these effects on incumbents are considerably larger than the employment that is directly generated in the start-ups. We draw conclusions for policy and for further research.
Entrepreneurship, start-up costs and employment
European Economic Review, 2001
We study the effects of business start-up costs on employment, in a model with managers, workers and matching. We show that higher start-up costs discourage entrepreneurs and increase the fraction of the population who become workers. Job creation suffers and employment settles at a lower level. We illustrate with evidence from major OECD economies, where large variations in start-up costs are correlated with large variations in employment levels.
Do Newly Founded Firms Pay Lower Wages? First Evidence from Germany
Small Business Economics, 2007
Using a linked employer-employee data set for Germany, this paper analyses wage setting in a cohort of newly founded and other establishments from 1997 to 2001. While theory provides alternative explanations for higher or lower wages in newly founded firms, we show empirically that start-ups tend to pay lower wages, ceteris paribus. On average, wages in newly founded establishments are 8 percent lower than in similar incumbent firms. This negative wage differential is substantially smaller in eastern than in western Germany. The wage differential is shown to decline over time as the newly founded firms become more mature. Zusammenfassung Unter Verwendung eines kombinierten Firmen-Beschäftigten-Datensatzes für Deutschland analysiert dieser Beitrag die Lohnsetzung in einer Kohorte von neu gegründeten und anderen Betrieben im Zeitraum von 1997 bis 2001. Während theoretische Erklärungsansätze verschiedene Begründungen für höhere oder niedrigere Löhne in neu gegründeten Betrieben liefern, zeigen wir empirisch, dass Neugründungen ceteris paribus tendenziell niedrigere Löhne zahlen. Im Durchschnitt liegen die Löhne in Neugründungen 8 Prozent unter denen in vergleichbaren bestehenden Betrie-* The authors would like to thank the Deutsche Forschungsgemeinschaft for financial support under project SCHN-730/2-1 and Joachim Wagner and Markus Heckmann for helpful comments and suggestions.
How fast do newly founded firms mature?: Empirical analyses on job quality in start-ups
Using a linked employer-employee data set for Germany, this paper analyzes labour fluctuation and wage setting in a cohort of newly founded and other establishments from 1997 to 2001. We show empirically that startups tend to have higher labour turnover rates, ceteris paribus. Moreover, bargaining coverage rates and wages in new firms are lower than in similar incumbent firms. Both the excess labour fluctuation and the wage differential are shown to decline and become insignificant over time as the newly founded firms mature. Our results imply that it takes a new firm only a few years to become an incumbent firm. Zusammenfassung Unter Verwendung eines kombinierten Firmen-Beschäftigten-Datensatzes für Deutschland analysiert dieser Beitrag die Arbeitskräftefluktuation und die Lohnsetzung in einer Kohorte von neu gegründeten und anderen Betrieben im Zeitraum von 1997 bis 2001. Wir zeigen empirisch, dass Neugründungen ceteris paribus tendenziell höhere Arbeitskräftefluktuationsraten aufweisen. Überdies liegen die Tarifbindungsquoten und die Löhne in Neugründungen unter denen in vergleichbaren bestehenden Betrieben. Es * The authors would like to thank the Deutsche Forschungsgemeinschaft for financial support under project SCHN-730/2-1 and Joachim Wagner and the participants in the DFG program workshop in Mannheim (28/29 October, 2004) for helpful comments on previous versions of this paper. The usual disclaimer applies.
Company start-up costs and employment
DISCUSSION PAPER-CENTRE FOR ECONOMIC …, 2001
I study the role of company start-up costs for employment performance. The model is search equilibrium with a new concept for firms. Agents have an innate managerial ability and make a career choice to become either managers or workers. Manage rs set up firms, post jobs and match with workers. I show that in equilibrium career choice and job creation are jointly determined. Higher start-up costs reduce overall employment but increase the size of incumbent firms. I discuss some crosscountry OECD evidence which supports the model's main proposition.
The role of start-ups for aggregate employment
2019
We analyze wage dispersion within and across establishments in Korea between 2007 and 2013. We find that foreign owned establishments and those operating in global markets have higher withinestablishment wage dispersion. The effect is over and above the establishment size effect. Furthermore, wages are higher in larger establishments and internationally oriented ones. Our findings are consistent with theories explaining management pay and the scope of control. Our results also provide evidence that can explain the rise in wage inequality due to the emergence of 'super star' firms and global supply chains.