The national internal labor market encounters the local labor market: Effects on employee retention |
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Institution: | 1. UNIDEMI & DEMI, Faculdade de Ciências e Tecnologia, Universidade Nova de Lisboa, Campus de Caparica, 2829-516Caparica, Portugal;2. UNIDEMI & DEM, Escola Superior de Tecnologiade Setúbal, Instituto Politécnico de Setúbal, Campus do IPS, Estefanilha, 2914-508 Setúbal, Portugal |
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Abstract: | Formal salary systems are commonplace among medium to large-sized firms and within the United States government. However, there is little evidence regarding the costs, if any, of such systems. This study analyzes the effects on retention within the United States Air Force from an inflexible wage system failing to adequately compensate personnel for local compensating wage differentials. Using location-specific Air Force personnel records, I compare the differences between military and civilian wages, by occupation, across locations to determine if local labor markets play a significant role in the stay or leave decisions for personnel. Results show that rigid wage constraints do in fact impose costs on the firm through increased turnover in locations that fail to adequately adjust wages for the cost of living and amenities. |
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