The impact of skills and performance on earnings: evidence from retail bankers in Portugal

This article contributes to the debate on wage flexibility by estimating the return to skills and performance for a sample of Portuguese retail bankers. If the relevance of skills in the contemporary workplace is unquestionable, their role as the main determinant of earnings is doubtful. The argument of this article is that firms are not adjusting individual wages according to information obtained from on-the-job appraisals subsequent to employment. The banks show a selective approach to rewarding skills and performance, and they still manage as an internal labour market. The idiosyncratic nature of skills may offer a partial explanation for the persistence of this model. However, the evidence points to the presence of hybrid models. While the return to organisational skills reinforces the role of specific skills, the return to cognitive skills suggests that there is competition around general skills in the banking industry.