The effects of a back-loaded compensation policy on the recruiting of older workers

Abstract

The goal of this article is to investigate the impact of back loading on the hiring of older workers. We argue that the impact of back loading on the motivation of a worker to put effort into work depends, among other variables, on the probability of being able to find another job. The less likely it is that one can find another job the more likely one is to exert a greater effort at work. Given that older workers are less likely to be able to find another job if they are dismissed from their current position, they are also less likely to shirk their obligations at work. Therefore, firms have to expend fewer resources monitoring their work. In addition, we demonstrate that the probability of employee misconduct declines with the number of years on the job even when the probability of detection remains constant.

Keywords:

• older workers
• age discrimination
• delayed compensation
• effort at work

JEL Classification:

• J14
• J22

Notes

¹ This rate of increase in wages is close to that of Pfeifer (2009).