The Value of Stable Employment as Inferred from Market Wages

This paper estimates the value employees place on stable employment. Here the term 'stable employment' means a relatively low probability of temporary and/or permanent layoffs. This value is estimated by regressing individual wage rates on exogenous variables and proxy variables for unstable employment. The sign and size of the coefficients on these proxy variables in the wage equation measures the value of stable employment in terms of the hourly wage rate. The wage equation is estimated using the Michigan and Parnes survey data. The results indicate that the wage elasticity with respect to instability is .3. This means that if one industry is 50 percent more stable than another, then other things equal, the more stable industry would have a 15 percent lower wage rate. (Author)