BLS WORKING PAPERS

U.S. DEPARTMENT OF LABOR

Bureau of Labor Statistics

 

OFFICE OF EMPLOYMENT RESEARCH

AND PROGRAM DEVELOPMENT

What is a Promotion?

Michael R. Pergamit and Jonathan R. Veum

Working Paper 264

February 1995

 

The views expressed are those of the authors and do not reflect the policies of the Bureau of Labor Statistics or the views of other

BLS staff members.
WHAT IS A PROMOTION?

MICHAEL R. PERGAMIT AND JONATHAN R. VEUM*

*Michael Pergamit is Research Vice President for Economic Studies at the

National Opinion Research Center and Jonathan Veum is an economist with the U.S.

Bureau of Labor Statistics. The authors thank Stephen Bronars, Mary Joyce, and

Caroline Ratcliffe for helpful comments and Alexander Eidelman for excellent research

assistance. The views expressed are those of the authors and do not reflect the policies or

views of the Bureau of Labor Statistics.

The data and programs used to generate the results reported in this paper are

available from Jonathan Veum, Bureau of Labor Statistics, 2 Massachusetts Ave., NE,

Washington, DC 20212.
Abstract

WHAT IS A PROMOTION?

In this paper, data from the National Longitudinal Survey of Youth are used to

analyze the determinants and the consequences of a promotion among young workers.

The majority of events that workers label as a “promotion” do not involve any change in

position or duties. Most promotions are simply an upgrade of the current position. The

worker is typically the only person considered for the promotion. Men are more likely to

be promoted than women and whites more so than blacks or Hispanics. The acquisition of

company training and the receipt of a prior promotion are two of the most important

determinants of promotion. Consequences of promotion include increased wages, training

receipt, supervisory responsibilities, and job satisfaction. There is little evidence that

promotion has a direct impact on job attachment.
Little is known about the process by which higher level jobs are filled from within

an organization. While there are a number of theories regarding the internal dynamics of

the firm, there is scant empirical evidence concerning the employment relationship once an

individual has a job. “Success” at a job is usually reduced to a single measure, such as the

wage rate or earnings. Employment activities within the firm, such as promotion activity

and the consequences of promotion are typically not measured, and hence ignored.

Past empirical studies into the internal workings of firms have primarily used data

from individual firms or occupations. The primary advantage of examining a single firm

or occupation is that the definition of a promotion tends to be well-defined. For example,

most people understand what it means to become partner at a law firm or to receive tenure

at a university. At other types of jobs, however, it is not so clear what it means to be

promoted. Also, results from analyzing a single firm or occupation typically are not

generalizable, as the findings are not representative of the labor market as a whole. One

exception is a recent study by McCue (1996) who used nationally representative

household data from the Panel Study of Income Dynamics (PSID) to examine the impact

of promotions on wage growth.

This study attempts to provide an examination of the nature, causes, and

consequences of mobility within the firm among a representative group of private sector

workers. Data from the National Longitudinal Survey of Youth (NLSY) are used to

analyze the promotion process and to estimate the impact of a promotion on wages, job

attachment, and other labor market outcomes. The primary data used here are generated

from responses to a set of questions asked to respondents in 1990 about promotion receipt

and the characteristics of the promotion. The data provide a variety of measures of

promotion, which give insight into the "meaning" of a promotion among individuals who

work in different firms and occupations.
2

Unlike studies of individual firms or of narrowly defined occupations, the NLSY

does not provide sufficient detail to identify the level of job within the company or the

nature of the job beyond a three-digit occupational classification. In this analysis, use is

made of the small amount of information that exists in the NLSY that presumably reflects

the degree of hierarchy within the firm, such as whether or not the person supervises other

employees and firm size. Such limitations will exist in any large, general purpose,

household data set. The findings from the use of a broader array of occupations, types of

workers, and types of firms should complement the results from prior studies of individual

firms and occupations.

In addition, this study provides different insights than the previous work of McCue

primarily for two reasons. First, in the PSID, only a single measure of upward mobility

within the firm, or promotion, is available. The NLSY data used here allow for an

examination of a variety of measures of promotion. Second, the sequence of questions in

the PSID only allows for those individuals who underwent a “position change” to be asked

whether or not they received a promotion. As will be seen in this analysis, the majority of

events that workers label as “promotions” do not involve any change in job or position,

but are simply an upgrade of their current position or do not involve any change in duties.

Hence, limiting promotions to be a subcategory of “position changes” severely

underestimates the extent to which workers report being promoted.

Background

For most workers, the conditions of employment such as wages, benefits, and

work environment are extremely important aspects of a job. Also of importance is an

individual's rank or position within an organization. For instance, in many firms there

exists a well-established hierarchy in which advancement takes the form of promotions to

higher level jobs, which is often considered part of the "structure" of the organization.
3

Promotions may be used by firms to motivate workers, particularly in companies where

direct supervision of workers is difficult. A promotion may also be a reward that results in

advancement within the firm, but also involves greater responsibility.

While for many years economists ignored mobility within firms, researchers in

other fields, such as sociology, psychology, and human resource management typically

paid greater attention to the structure of the employment relationship, and the notion of a

“career.” For example, vacancy-driven models (White 1970) provide theories of how

upward mobility occurs. In particular, these models generally assume that mobility

depends upon available positions at the firm. Movements to higher-level positions take

place when vacancies occur in those positions, and these positions are filled by lower-level

workers at the firm. New hires typically begin at lower-level positions.

Economists are generally more familiar with the concept of an internal labor

market, where mobility within the firm is put into the context of a set of rules and

guidelines that are part of the employment relationship (Doeringer and Piore 1971).

Hiring is assumed to occur primarily at certain entry-level jobs or "ports of entry." Higher

level jobs are filled from within the firm, which offers chances for promotion, or a "career

ladder" to those hired at lower levels. Promotion is based upon the firm's evaluation of

the worker's productivity. Consequently, while workers are hired based upon well-defined

personal characteristics, promotion may occur based upon qualities that are typically

unobserved, such as ability, dependability, and personality.

More recently, there is a growing theoretical literature within economics on the

internal organizations of firms (see Gibbons (1996), for a summary). For example, Lazear

and Rosen (1981) and Rosen (1986) model promotion activity within the firm in terms of

a tournament. Essentially, a promotion is considered the "prize" and the probability of

winning is a function of productivity. The winner of the prize receives the salary, benefits,

and prestige associated with the higher position. Since each group of new hires knows
4

that not all will be promoted, the probability of promotion serves as an incentive to work

hard.

Lazear and Rosen (1990) present another model of the promotion process in which

the receipt of promotions and training is based upon the individual’s revealed ability at the

job. While males and females are assumed to have similar labor market abilities, women

are assumed to have greater nonmarket abilities and opportunities, and subsequently they

are more likely to depart the firm than men. Since job leaving among those promoted

imposes a cost on the firm, the employer will have a higher promotion standard for women

and be less likely to promote women than men. Hence, women are less likely to be

promoted and stay with the firm because they are viewed by the firm as having less job

attachment.

Other models deal with the method by which workers are assigned to particular

jobs (Sattinger 1993). Recent related research emphasizes that task assignment may also

serve to make the firm's knowledge about the worker available to the public. A promotion

may reveal to competing firms, who have less information about that worker, that the

worker is of high ability and may be worth hiring (Waldman 1984; Bernhardt and Scoones

1993). Wage increases are often associated with promotions, and the magnitude of the

wage increase may preempt or encourage other firms to compete for that worker.

It may also be true that a promotion is a consequence of human capital investment

or reflects a good job match. The human capital model suggests that workers often

receive training that is specific to a particular job, which makes workers more valuable to

the employer providing the training (Becker 1964; Mincer 1974). Carmichael (1983)

shows that a promotion ladder, where jobs are assigned by seniority and wages are

attached to jobs, can lead to human capital investment and to efficient turnover behavior.

Job match theory indicates that information about the quality of a job match reveals itself
5

over time (Jovanovic 1979). A promotion may simply be the firm’s optimal response after

learning about a worker’s productivity.

These conceptual and theoretical models of the promotion process are not

mutually exclusive and it is difficult to test among these alternatives. Many of these

models were conceived with the goal of being consistent with the facts concerning

promotions, wages, and the internal workings of the firms. Yet the empirical evidence on

internal mobility is scarce, and to date few studies have examined representative groups of

private sector workers. Also for the most part, these models often label a generic

movement within the firm as a “promotion,” when in fact there is virtually no evidence as

to what a typical worker considers to be a “promotion.”

Still, these approaches generate questions that give hints as to which framework

may be the most plausible. For instance, is upward mobility more a function of readily

observable characteristics, such as education, or of characteristics that are more difficult to

observe, such as ability? Are there gender or race differences in promotion? Does

training lead to promotion? Do promotions lead to improvements in wages or other

conditions of employment? Do promotions have any impact on job attachment?

Past empirical studies primarily use data from individual firms or occupations and

provide very inconsistent results as to who is promoted (Baker, Gibbs, and Holmstrom

1994; Broder 1993; Hersch and Viscusi 1996; Laband and Lentz 1993; Spurr and

Sueyoshi 1994). The evidence is somewhat more consistent regarding the impact of

promotions on wages, as most studies find that promotions and wage growth are

positively correlated. Still, the magnitude of the impact on wages differs widely across

studies. For instance, Olsen and Becker (1983), using a small sample of private sector

workers at one firm from 1973 to 1977, find that those who were promoted experienced

about a 30 percent greater rate of wage growth than those who were not promoted.

McCue (1996), using data from the PSID from 1976 to 1988, estimates that promotions
6

account for between 9 to 19 percent of life cycle wage growth. Hence, there exists a great

deal of uncertainty about internal labor markets, promotion activity, and the consequences

of promotion among private sector workers.

Data and Variables

Data from the National Longitudinal Survey of Youth (NLSY) provide an

opportunity to analyze the determinants of job advancement and the effect of internal

mobility on labor market outcomes. The NLSY is a sample of approximately 10,000

young men and women who were between the ages of 14 and 22 in 1979 and who have

been interviewed annually since that year.1 In the 1988 and 1989 surveys, respondents

were asked a single question concerning whether or not they were promoted within the

past year. In 1990, individuals were asked a more detailed set of questions concerning the

type and consequences of any promotion received on the current job within the past year.

The responses to these questions are the key variables of interest in this study.

In particular, along with being asked if they were promoted, in 1990 individuals

were asked to classify the promotion into one of eight categories, such as took over an old

supervisor's job, chosen to fill a newly created position, or received a promotion due to a

reorganization. In addition, respondents were asked about some of the consequences of a

promotion, such as whether the promotion led to a wage increase, an increase in job

responsibilities, or whether another promotion is possible at the current job.

In order to limit differences in promotion activity or turnover which may be simply

due to differences in labor supply, the primary sample used here is restricted to those

individuals who were working 30 or more hours per week at the 1989 and 1990 interview

dates.2 Since government workers, particularly younger ones, may be more apt to have

"automatic" promotions, such as step or grade increases in the General Schedule, the

sample is limited to private-sector workers who are not self-employed.3 Excluding those
7

with missing information on most variables used in the analysis results in a sample of 3,355

young men and women who were age 25 to 33 in 1990. Although this group of workers

is relatively young, they are in a period in their working lives in which human capital

investments and promotion activity likely occur with greater frequency and play a more

important role in career advancement than at other periods over their life cycle.

To examine the determinants of promotion, a probit equation on whether a

promotion was received within the past year is estimated.4 To determine the impact of

promotions on wage growth, first-differenced fixed effect wage equations are estimated.

The impact of a promotion on other outcomes, such as earnings structure, training receipt,

and supervisory responsibilities is also estimated through a series of first-differenced

equations. In addition, the effect of a promotion on subsequent job tenure is estimated

through a Cox proportional hazard model.

 In the promotion receipt and hazard models, variables used in the estimations

include individual characteristics such as gender, race, education, tenure, experience, firm

size, region, the local unemployment rate, union status, occupation, and industry.5 In

order to capture the impact of nonmarket opportunities on the likelihood of promotion

and on turnover, variables representing marital status, the number of children, and the

presence of a child age 6 or less in the household are also included in the estimations. The

event history format of the NLSY, in which dates are collected for the beginning and

ending dates of important events, allows for precise measures of tenure on the current job

and total work experience.

Two additional variables which may be particularly important in determining

promotion receipt included in this analysis are measures of individual ability and company

training. It may be true that firms are more willing to promote workers of high ability. An

individual’s score on the Armed Forces Qualifying Test (AFQT), which is a primary

criterion for enlistment in the Armed Forces, is taken to be a measure of ability.6 Also,
8

data on job training received by respondents are available in the NLSY, and since

company training may lead to promotion, a measure of company training receipt is used.

In order to minimize the impact of the endogeneity of training (since training may be a

consequence of a promotion), the training variable reflects training received in the period

from 1988 to 1989, i.e., training received in the year prior to the promotion.

Promotion Type and Promotion Receipt

Table 1 presents information on the percent of individuals who received a

promotion between 1989 and 1990. A breakdown of promotion receipt by eight different

categories is also presented. These categories include: a position upgrade; took over old

supervisor’s job; promoted to a higher level job in a different section; chosen to fill a

newly created position with greater responsibilities; there was a reorganization and was

promoted; received promotion but continued to perform the same duties as before; lateral

move to a different section; and other.

The data indicate that between 1989 and 1990, about 24 percent of the sample

experienced a promotion at their current job. In order to provide some context to this

figure, about 23 percent of the sample changed jobs between 1989 and 1990. Hence, the

prevalence of mobility within a firm is very similar to that of mobility across firms among

these workers.

The breakdown of promotion receipt by the different categories indicates that for

most people a promotion essentially means staying in the same position, although the

nature of the position may change somewhat. In particular, approximately 30 percent of

those who received a promotion essentially performed the same duties as before the

promotion. Also, about 1 of 4 of those promoted remained in the same position but

experienced a “position upgrade.”
9

The other types of promotion, which involved actual changes in the current

position, were far less common. About 14 percent were promoted to a higher level job in

a different section, nearly 10 percent were chosen to fill a newly created position with

greater responsibilities, and about 8 percent took over their old supervisor’s job. Only

about 6 percent received a promotion due to a reorganization and about 2 percent labelled

a lateral move to a different section as a promotion.

It is difficult to compare these promotion percentages to prior research given that

so little information exists. The overall promotion percentage is substantially higher than

that of McCue (1996) who found that from three to five percent of workers (age 20 to 60)

are promoted annually. Two reasons may account for these differences. First, in the data

set used by McCue, only those who underwent a position change were asked if they were

promoted. The categories of promotion used here indicate that most promotions do not

involve a position change. If an actual position change is required for a promotion, only

about 10 percent of the sample would be considered “promoted.” Second, the sample

used here involves a much narrower and relatively young age range in which individuals

may be more likely to experience promotions than at other times in their working careers.

At the 1990 interview, respondents who were promoted at their current job were

asked a number of questions regarding the nature of the promotion. These questions

include whether the promotion led to a wage increase; if the promotion led to an increase

in job responsibilities; if other people were considered for the promotion; and if another

promotion is possible at the current job. Table 2 presents information regarding these

characteristics of a promotion for those who experienced a promotion.

About 89 percent of workers who were promoted within the past year reported

that the promotion led to a wage increase. Similarly, about 85 percent underwent an

increase in job responsibilities due to a promotion.7 Also, most of these workers are not at
10

the top of the job ladder, as over 86 percent reported that another promotion is possible at

their current job.

Only about a third of those promoted said that other people were considered for

the promotion. Hence, about two-thirds of those promoted apparently do not “compete”

with others for the promotion. This is probably related to the fact that respondents label

most promotions as simply “position upgrades” or as “performing the same duties as

before.” While most promotions are not necessarily automatic, the majority of internal

mobility events involve the worker remaining in the same position and being the only

candidate for this promotion.

The seemingly passive nature of most promotions may be related to the notion of

“plateauing” in the organizational behavior literature (Bardwick 1986). This concept

usually refers to the plight of workers who, while not at the top of the job ladder, find that

direct upward movements in the hierarchical ranks of the firm are not as frequent as

desired. Although the workers from the NLSY examined here do not appear to be in

“dead end” jobs and are not necessarily at “plateau” stages in their careers, they are likely

in early career jobs in which most promotions are associated with relatively small or

intermediate internal movements that do not involve large changes in tasks or job titles.

For example, Kilborn (1990) reports, “In Monsanto’s information services department,

made up mostly of computer experts, people can climb from being a technologist to a

senior technologist to a distinguished technologist” (p. D6).

Table 3 presents results from estimating a probit equation on the receipt of a

promotion between 1989 and 1990. The reported coefficients are the derivative of the

probability with respect to a one-unit change in the particular variable where the

derivatives are evaluated as the sample means of the independent variables. The estimates

from specification (1) indicate that women are about 4 percentage points less likely to

receive a promotion than men, while blacks and Hispanics are about 7 and 5 percentage
11

points less likely to be promoted than whites, respectively.8 It is unclear whether these

results indicate barriers to advancement for women and minorities since narrow definitions

of job type or job level are not directly controlled for here. Also, these differentials may

reflect the nature of jobs in which women and minorities are employed rather than the

behavior of employers. Yet since most individuals are not at the top of the job ladder, or

are not in “dead-end” jobs, these findings suggest that such barriers to advancement exist.

The results on the other variables indicate that job tenure, company training, firm

size, and union status are significantly related to promotion receipt.9 The effect of job

tenure and company training on promotion likelihood suggests that the acquisition of jobspecific skills result in promotion. Unionized workers are less likely to be promoted, and

firm size is positively related to internal mobility. The negative impact of unionism on

promotion may occur because unionized firms are more likely to base promotion upon

seniority than are nonunionized firms (Abraham and Medoff 1985). Given that the sample

is comprised of relatively young workers, seniority rules may hamper the promotion

prospects of those who are unionized. The positive impact of firm size on promotion

likely reflects the availability of greater opportunities for upward mobility at larger

workplaces (Idson 1989).

Since detailed information on promotion is not available prior to the 1990

interview, there is a potential initial conditions problem when examining promotion receipt

among workers in 1990. To address this problem, a variable which represents the receipt

of a promotion in the prior year is included in the analysis. As suggested by Heckman and

Robb (1985), the inclusion of a lagged dependent variable, such as the receipt of prior

promotion, is likely to account for unobservable characteristics that influence the

likelihood of promotion receipt. In specification (2), when the receipt of prior promotion

is included as an additional regressor, the results indicate that there is a high degree of

correlation between past and current promotion probabilities. Individuals who are
12

promoted are nearly 18 percentage points more likely to be promoted again. Two

interpretations are suggested by this result. First, the past promotion variable may capture

unobserved motivation or ambition and reflect the fact that certain people move upward

through the firm's internal hierarchy at a much faster rate than others. Second, this

variable may also reflect characteristics of the job, and some workers are employed at

firms with well-defined and numerous promotion steps, while others work for companies

where promotions are more ambiguously structured and occur less frequently.

It is also of interest to note that approximately twice as many workers were

promoted (20 percent) than trained (10 percent) in the prior year.10 It should be

mentioned that the company training measure captures participation in formal company

training programs and does not reflect the acquisition of informal training. Hence, it may

be true that the promotion measure reflects increases in skills or productivity that are not

captured by the company training variable.

Results from the promotion probits estimated separately by gender presented in

specifications (3) and (4) indicate that the black and Hispanic differentials in promotion

receipt occur only among men. The negative impact of union status on promotion also

appears to be strongest among men. This result may suggest that the seniority-based

promotion process plays a larger role for unionized men than for unionized women.

Conversely, training appears to be more important in enhancing the promotion likelihood

of women, implying that training may be a particularly effective mechanism by which labor

market differentials between men and women might be minimized.11

Table 4 presents results for the gender/race coefficients when estimating separate

probit equations for each of the promotion measures described in Table 1.12 The estimates

indicate no significant differences for females or Hispanics. Blacks, however, are less

likely to fill a newly created position, to experience a promotion due to a reorganization,

or to receive a promotion in the “other” category. Similar to the other gender/race
13

findings, these results may reflect differences in types of jobs held, differences in job levels,

or different treatment from employers. Regardless of the source, taken together the

findings on promotion receipt suggest that gender and race differences persist even after

controlling for a fairly rich set of explanatory variables.

The Consequences of Promotion

What are the consequences of a promotion? It may serve as a method to enhance

wages and simply be a mechanism by which workers move along their wage-tenure

profiles. Yet, not all wage increases are necessarily promotions, so there must be

something associated with a promotion that differentiates it from a wage gain.13 Also, a

promotion may have an impact on other aspects of the job, such as the structure of

earnings, training receipt, and supervisory responsibility. In addition, a promotion may be

a mechanism used by firms to increase job attachment.

Wage Returns

In order to examine the impact of a promotion on wage growth, a first-differenced

wage equation is estimated in which the dependent variable is the change in log wages

between 1989 and 1990, or essentially the difference in wages before and after a possible

promotion.14 The differencing procedure eliminates the effect of any heterogeneity bias

due to unobserved factors if it is assumed that the selection process varies only across

individuals and not over time for the individual. The effects of all time invariant factors

are not estimated using the first-differenced technique. In order to compare the returns to

promotion to that of changing jobs, a job change dummy variable is the other key

independent variable included as a regressor. It is important to mention that since the

promotion variable refers to that received at the current job at the 1990 interview date, the
14

job change variable reflects any change in employers from 1989 to 1990 prior to

promotion receipt.

Table 5 presents results from estimating first-differenced wage equations. In

specification (1), the estimate on the promotion variable indicates that a promotion

increases wages by about eight percent between years. Also, there appears to be no

immediate wage gain from changing jobs for these workers, which differs from previous

research (Topel and Ward 1992) which suggests that job change is positively related to

contemporaneous wage growth. The lack of a positive impact of job change on wage

growth may be partially due to business cycle factors, as the 1989 to 1990 time period was

the beginning of a recessionary period.15 Specification (2) includes variables reflecting

voluntary and involuntary transistions between jobs rather than a single job change

variable, and the estimates indicate that voluntary job changes, or quits, increase wage

growth by about three percent, whereas involuntary job changes, or layoffs, reduce wage

growth by about eight percent.16 Given that about 24 percent of the sample were

promoted from 1989 to 1990, while about 18 percent quit jobs and about 5 percent were

laid off, these estimates imply that mobility within the firm plays a larger role than mobility

between firms in the wage growth of these workers.

In order to control for possible heterogeneity in wage growth that may be due to

differences in initial endowments of ability, the education and AFQT percentile variables

are included as additional regressors in specification (3). Although education is a

significant determinant of wage growth, the promotion estimate is changed very little by

the inclusion of these additional regressors. Consequently, the promotion measure

appears to reflect changes in productivity that are above and beyond individual differences

in ability or education.

In order to provide some context to the promotion estimate relative to that of

McCue (1996), specification (4) uses a modified promotion variable that only includes
15

promotions that might be considered “position changes” (promotions in the “position

upgrade” and “same duties” categories are excluded). The return to “position change”

forms of promotions is just under 7 percent, or slightly smaller than the return for all forms

of promotions. This result implies that the more “passive” forms of promotion that do not

involve a position change may be a way in which employers provide incentives and

increase the salary of workers without changing the nature of the job. This result, along

with the findings on promotion receipt, suggest that requiring a “position change” for a

promotion may understate both the incidence and returns to promotion.

Specifications (5) and (6) present estimates of first-differenced wage regressions

stratified by gender. The estimates indicate that males experience wage gains of about 9

percent due to a promotion, while females gain about 7 percent. The gender differences in

the wage returns to the promotion, are not statistically significant, however.17 Voluntary

job change is positively related to wage growth for males, but not for females. This result

is similar to that of Loprest (1992), who found that job change is an important determinant

of wage growth for young men, but not for young women.

In order to examine the longer term wage gains to promotion, specification (7)

presents results from a first differenced wage equation where the dependent variable is the

difference between the 1996 and the 1989 log wage for those working at a full-time job in

1996.18 Along with the variables reflecting job change from 1989 to 1990, also included

in specification (7) are variables reflecting whether the worker changed jobs voluntarily or

involuntarily from 1990 to 1996, or after the possible receipt of a promotion from 1989 to

1990. The estimate for the promotion coefficient indicates that wage growth is

approximately 12 percent, suggesting that the gains to promotion increase in the years

following the promotion. Interestingly, a voluntary job change between 1989 and 1990

increased wage growth by about 7 percent by 1996, whereas the negative impact of a

layoff from 1989 to 1990 diminished by 1996. Conversely, subsequent quits from 1990 to
16

1996 are unrelated to 1996 wage growth, while layoffs over that time span are associated

with a large (about 14 percent) reduction in wage growth. These results may suggest that

as workers age, the returns to quits diminish and the wage costs to layoffs increase. These

findings may also be a consequence of business cycle factors in the early 1990’s that

reduced the wage returns to quits and exacerbated the negative wage impacts of layoffs.

Specification (8) of Table 5 is similar to specification (7) but also includes an

interaction term between promotion and whether the worker subsequently quit the 1990

job by 1996. This interaction term is included to test the hypothesis that a promotion

signals the value of the worker to other firms, which will lead firms to bid for the worker’s

services (Waldman 1984; Bernhardt and Scoones 1993). While the estimate on the

coefficient is positive, it is not significant, which does not provide strong evidence for the

signaling hypothesis.

Table 6 presents estimates of the impact of a promotion on wage growth when

various measures of promotion are used as independent variables as opposed to the single

promotion measure. In particular, the various types of promotion, as presented in Table 1,

are included as independent variables. In addition, since the findings in Table 2 indicate

that a minority of those promoted competed with others for a promotion, results from

specifications in which the promotion variable is divided into categories based upon the

competitive/noncompetitive nature of the promotion are also presented.

The results on promotion type in column (1) indicate that five of the eight forms of

promotion have a positive impact on wage growth, ranging from about 7 to 12 percent. A

promotion associated with a reorganization increases wages by about 12 percent, which is

more than any other form of promotion. A promotion that involves performing the same

duties as before raises wages by about 7 percent, which is the smallest effect among the

forms of promotions that are significantly related to wage growth. Lateral moves that

workers label as a promotion are unrelated to wage growth.
17

The results in column (2), in which the change in wages from 1989 to 1996 is used

as the dependent variable, indicate that some forms of promotion are associated with

greater long-run gains, while the impact of others decline over time. Specifically, while

accepting a newly created position is unrelated to immediate wage gains, it has a large

impact on long-term wage growth. In contrast, while taking over a supervisor’s job is

correlated with short-term wage improvements, in the long term this type of promotion is

unrelated to wage growth.

Columns (3)-(6) present estimates from specifications stratified by gender. The

results indicate that there are substantial gender differences in the returns to promotion by

promotion type. For instance, in both the short term and the long term, men experience

significant returns to taking a higher level job in a different section and to filling a newly

created position, while women do not.

When the promotion variable is divided into competitive/noncompetitive

categories, the estimates reveal that noncompetitive promotions result in greater wage

gains than do competitive promotions in the short run. In particular, the findings in

column (1) indicate that noncompetitive promotions have nearly twice the impact on wage

gains as do competitive promotions, as the noncompetitive return is nearly 10 percent,

whereas the competitive return is approximately 5 percent. The long-term wage growth

estimates in column (2) indicate, however, that the return to a competitive promotion

increases substantially over time, as the return is over 16 percent by 1996, whereas the

return to a noncompetitive promotion remains at around 10 percent.

These differences in the competitive/noncompetitive returns to promotion suggest

that a competitive promotion may move workers to a new career track that does not result

in a large immediate wage increase, but has longer-term wage returns. Although

respondents who received a “noncompetitive” promotion indicate that no one else was

considered for the promotion, this is a literal interpretation of the promotion. Certainly
18

there are many cases where a supervisor reviews all eligible workers and selects one for

advancement, but there is no explicit competition. Consequently, the designation of the

promotion as “noncompetitive” may be more likely to reflect increases in productivity,

particularly in the short term, than do “competitive” promotions. In contrast, competitive

promotions appear to offer greater long-term wage returns.

While men and women both gain more in the long run from competitive

promotions than from noncompetitive promotions, it is interesting to see that women

receive no significant short-term wage gains from a competitive promotion, but their longterm return to a competitive promotion is over 11 percent. If competitive promotions are

associated with movements to different career tracts, this result may suggest that women

are more likely than men to sacrifice short-term wage gains to undergo such career

changes.

Earnings Structure, Training, and Supervision

Along with enhancing wages, a promotion may have a number of other

consequences. For instance, a promotion may move an individual from working at an

hourly piece rate to working on a salary. It may also lead to earnings which are based on

bonuses or stock options. The results in Table 3 suggest that training leads to promotion,

but it may also be true that promotion leads to greater training receipt. Along with

training, a promotion may result in greater supervisory responsibilities and authority over

other workers. Since the NLSY contains direct measures of the structure of earnings,

training receipt, and supervisory responsibilities, it is possible to examine the relationship

between promotion receipt and each of these outcomes. In addition, a promotion may

enhance a worker’s view of the job, or increase “job satisfaction.” A job satisfaction

measure is generated from an annual question asking about how the worker liked the job,
19

with a four category response ranging from “like it very much” to “dislike it very much.”19

This measure ranges from zero (low satisfaction) to four (high satisfaction).

Table 7 presents results from estimating the impact of a promotion on the structure

of earnings, training receipt, supervision, and job satisfaction. The results reported in the

table are the coefficients from estimating regression equations similar to the firstdifferenced wage equations.20 In this case, the change in each of the outcome variables

between years is used as the dependent variable and the promotion receipt variables are

used as the key independent variables in each regression.21 Results are presented for the

single promotion measure, the disaggregated promotion type measures, as well as the

competitive/noncompetitive promotion distinction.

The results for the univariate promotion measure in Table 7 indicate that

promotions not only impact wages, as shown in Tables 5 and 6, but also have some impact

on the nature in which earnings are received. In particular, a promotion reduces the

likelihood of earnings being based on piece rate, commissions, or tips. A promotion has

no significant impact on the likelihood of earnings being based on bonuses or stock

options, however. A promotion is also associated with training receipt, to becoming a

supervisor, and to increases in job satisfaction. The result of “becoming a supervisor” is

only mildly meaningful, however, given that about 40 percent of the sample report being a

“supervisor.”22 A more significant definition of supervision may be being responsible for

the pay or promotion of others, which more likely characterizes the role of a “manager”

(about 16 percent report being in this category). Using this different definition, a

promotion is still associated with increased managerial responsibilities. A promotion also

appears to be positively related to increases in reported job satisfaction.23

The breakdown of promotion by type and competitive/noncompetitive categories

reveals some insights into the meaning of the different forms of promotion. For instance,

some of the more “passive” forms of promotion, such as promotions that involve
20

performing the same duties as before the promotion and position upgrades are associated

with training receipt, supervisory responsibilities, and changes in the structure of earnings.

In particular, promotions that involve performing the same duties as before are associated

with training receipt, becoming a supervisor, and to a movement to compensation being

based on bonuses or stock options. Similarly, a position upgrade is positively related to

each of the outcomes other than earnings including bonuses or stock options. Promotions

due to a reorganization appear to be largely related to increases in supervisory

responsibilities. In addition, noncompetitive promotions appear to be more strongly

correlated with moving workers off of piece rate pay than are competitive promotions.

Subsequent Job Attachment

As mentioned, past discussions of promotion have raised questions concerning the

meaning and consequences of job advancement on labor market turnover. Are those who

advance within the firm more likely to stay with the firm, or are those people going to

move on to better jobs regardless of a promotion? Does a promotion signal to other

employers that the worker is of high ability and actually lead to a greater probability of job

leaving?

In order to examine the impact of promotion on subsequent job attachment, post1990 job tenure with the 1990 employer is analyzed. The probability of leaving the job

held at the 1990 interview data by 1996 is estimated through a Cox proportional hazards

model (Cox and Oakes 1984). The model is based on the hazard rate at time t:

h(t,x) = ho(t) exβ

where ho(t) is the baseline hazard rate at time t and x is a vector of covariates including

promotion receipt. This model is used to estimate whether an individual leaves the job in

week t given that the person did not leave the job in week t-1. The Cox model is
21

nonparametric in the sense that it does not require distributional assumptions on the baseline hazard as required for most other hazard functions.

Since it might be thought that a promotion may affect whether the job separation

decision is initiated by the worker or the firm, along with estimating the Cox model for

any type of job separation, models are estimated for voluntary and involuntary job

separations as well. Quit and layoff hazard models are estimated using a competing risks

framework, which essentially treats all job exits other than the one of interest as rightcensored at the individual’s time of departure.24 It is important to mention that since

individuals are not randomly assigned promotions (as exhibited in Table 3), any effect of

promotion on subsequent job tenure must be interpreted with caution. In particular, if it is

thought that workers with a higher “match quality” are promoted, the impact of a

promotion on turnover may be confounded with this “match quality” effect. If so, it might

be expected that any negative effect of a promotion on turnover may be partially due to

the quality of the job match, and a promotion will appear to have a greater negative impact

on turnover that it actually does.25

Table 8 presents results from estimating the Cox models. The specifications and

control variables are similar to those used in the promotion receipt equations in Table 3.26

Specification (1) includes the results from estimating all forms of job separation, while

specifications (2) and (3) present results from quit and layoff separation hazard models,

respectively. Specifications (4) and (5) present estimates for all job separations stratified

by gender.

The estimates indicate that a promotion received from 1989 to 1990 is unrelated to

job attachment, as it has no impact on all forms of job separation, voluntary separations,

or involuntary separations. These results do not provide strong evidence for models that

suggest that a promotion should increase job attachment (Lazear and Rosen 1981, 1990;
22

Rosen 1986) nor do they provide evidence for models that imply that a promotion may

induce turnover (Waldman 1984; Bernhardt and Scoones 1993).

The estimates for the coefficients on some of the other variables are of interest.

The results indicate that blacks, particularly black males, are more likely to experience

involuntary turnover than are whites, which is similar to findings of Blau and Kahn

(1981a). There is no race differential in quit behavior, however, which differs from

findings of Blau and Kahn (1981b) and Viscusi (1980). This difference may occur because

the individuals used in this analysis are of a more recent cohort of young workers than the

workers examined in previous studies. It is also of note that the gender coefficient is not

significant. While there is certainly not a consensus regarding gender differences in job

turnover, this result is similar to a number of other studies (Blau and Kahn 1981b; Light

and Ureta 1992; and Viscusi 1980) who also found that men and women are largely

indistinguishable in their quit behavior.

Education and the receipt of company training are negatively associated with

layoffs, suggesting that both general and firm-specific skills are important determinants of

job retention. Training appears to be particularly important for job retention among males.

Also somewhat surprisingly, the number of children increases turnover for males, but not

for females, ceteris paribus.

Table 9 presents estimates when the promotion type variables and the

competitive/noncompetitive promotion variables are used in the Cox hazard models of job

separation instead of the single promotion variable. For the full sample, there is one type

of promotion, taking an old supervisor’s job, that is positively related to job leaving. This

positive effect on job separation occurs primarily among males. The hazard estimates for

quits and layoffs, however, suggest that taking a former supervisor’s job is more highly

correlated with involuntary turnover than with voluntary job separations.27 Consequently,
23

it may be more likely that those who took their supervisor’s job were “downsized” as

opposed to being recruited away by other employers.

Hence these estimates, along with promotion estimates in Table 8, do not provide

strong evidence directly linking promotion receipt and job turnover. The receipt of

company training, however, is associated with increased job attachment. The findings

from the previous sections indicate that training not only leads to promotion, but

promotion leads to further training. Hence, a promotion may indirectly increase job

attachment through its impact on training receipt. This may suggest that firms use training

as a mechanism to retain promoted workers who might otherwise leave the firm, which is

indicative of task assignment models. Alternatively, it may be the case that the the training

receipt measure is in itself a measure of “promotion” that captures match quality of a job

more so than the direct measures of promotion.

Conclusions

In this study, data from the National Longitudinal Survey of Youth are used to

examine the determinants of advancement within the firm and to estimate the impact of

upward mobility on a number of labor market outcomes. Past studies often only have data

on internal advancement for limited sets of workers, and generally use a single measure of

promotion. The data set used here allows for an examination of the promotion process

among a large representative sample of private sector workers.

The data indicate that about 24 percent of workers reported a promotion at their

firm in the past year. Most promotions do not involve any change in job or position. The

majority of events which workers label as "promotions" involve no change in duties or are

an upgrade of their current position. Most workers report that they were the only person

considered for the promotion. Men are more likely to be promoted than women and

whites are more likely to be promoted than blacks or Hispanics. The findings that women
24

and minorities are less likely to be promoted are suggestive of discrimination, although

these results cannot necessarily be interpreted as such since information on the specific

nature of the workers’ jobs and the structure of firms is not available.

There is a wage gain of about 8 percent between consecutive years due to a

promotion. This wage gain increases to about 12 percent six years after the promotion.

Non-competitive promotions, or promotions in which the worker is the only person

considered for the promotion, lead to larger short-term wage gains than do competitive

promotions, but competitive promotions have larger long-run wage returns. Promotion

receipt is also associated with changes in the structure of earnings, training receipt,

supervisory responsibilities, and job satisfaction. There is no strong evidence indicating

that promotion is directly associated with greater or lesser job attachment.

The results imply that in some sense promotions are “passive” since promotions

usually do not involve moving to another position, but are simply upgrades of a current

position or involve performing the same duties as before the promotion. Yet the

consequences of the promotion are more “active,” as promoted workers, along with

receiving increased wages, are more likely to be trained, to supervise other workers, and

to experience changes in the structure of their compensation than are non-promoted

workers. In addition, the positive impact of past promotions and prior company training

on promotion receipt indicates that firms select the workers who they expect to be the

most productive in the long run and promote them. Similarly, workers who compete with

other workers for promotions appear to receive greater wage returns in the long run than

in the short run, implying that workers also strategically plot their long-term course within

an organization.

These results suggest that the promotion process involves aspects of tournament,

job matching, human capital, and task assignment models. The long-term gains to

competitive promotions are consistent with the notion of a tournament model. The role of
25

training and the selection process involved in promotion receipt are indicative of human

capital and matching models. Yet since the majority of promotions do not involve moving

to other positions and are noncompetitive, promotions may be “passive” for strategic

reasons. That is, by not making the promotion obvious, the firm does not reveal to other

firms the productivity of the worker. This may be the case if position upgrades and other

passive forms of promotion do not come with noticeable changes in such things as job

titles and may explain why firms choose to produce job advancement in this way.
26

Notes

1. Included are oversamples of blacks and Hispanics.

2. This restriction minimizes any effects due to a promotion associated with moving from

part-time to full-time employment. If full-time jobs involve greater monetary

compensation than part-time jobs, the consequences of promotion may be understated

by imposing this restriction.

3. In the NLSY (and the Current Population Survey), all individuals are placed in a “class

of worker” category. Individuals included in the sample used here are in the category

“works for a private company or an individual for wages, salary, or commission.”

4. Since workers were asked about promotion in the 1988, 1989, and 1990 surveys,

promotion receipt could also be modeled by a discrete time hazard model over these

three years. The primary focus throughout the paper, however, is on the more detailed

promotion information that is available only in 1990. Consequently, promotion receipt

is estimated for 1989-90 by a probit model.

5. The occupational categories and the percent in each are: professional and technical

(15.0); managers (14.5); sales (5.0); clerical (18.1); craftsmen (17.4); operatives

(14.2); laborers and farmers (6.3) (omitted); and service workers including private

household (9.5). The industrial categories include: agriculture, forestry, fisheries, and

mining (3.1); construction (7.3); manufacturing (28.4) (omitted); transportation,

communication, and public utilities (7.3); wholesale and retail trade (19.4); finance,

insurance, and real estate (8.5); business an repair services (7.7); personal services and

entertainment (3.9); and professional and related services (14.4).

6. The AFQT was administered to all respondents in 1980. The score used in the

estimations is the percentile ranking of the score based upon the respondent’s age

when the test was taken.
27

7. Individuals who reported “received promotion but continued to perform basically the

same duties as before” were not asked if their job responsibilities increased due to the

promotion. These individuals were excluded from the denominator when calculating

this percentage. If these people are included in the base and if it is assumed that they

did not experience any increase in job responsibilities, the figure is 59 percent.

8. The Hispanic coefficient is marginally significant at the .11 significance level.

9. The tenure variables are jointly significant (χ

2

 = 21.83, Prob > χ

2

 = .00).

10. While training and promotion are interrelated, only 3.4 percent of the sample received

both company training and a promotion in 1989. 16.1 percent were promoted but not

trained; 6.7 percent were trained, but not promoted.

11. A likelihood ratio test cannot reject the null hypothesis that the coefficients are the

same for men and women (χ

2

 = 32.17, Prob > χ

2

 = .58). When a more restricted set

of independent variables are used in the promotion receipt equation (black, Hispanic,

tenure, tenure squared, company training, firm size, and union status), the null

hypothesis is nearly rejected at conventional levels (χ

2

 = 11.59, Prob > χ

2

 = .11).

12. Alternatively, a multinomial choice model such as a multinomial logit or probit could

be estimated for these promotion measures. Since the primary objective in this

instance is data description rather than estimating a structural model, the ease of

interpretation of the probit estimates make them preferable to these alternatives.

13. About 29 percent of those who experienced a real wage gain from 1989 to 1990

reported being promoted.

14. Respondents can report earnings over any time frame (hour, day, month, etc.). For

those who do not report an hourly wage, one is constructed using usual hours worked

over the time frame. The CPI-U is used to convert all wages to 1990 dollars. The

1990 mean wage is $10.51, and the mean wage difference between 1989 and 1990 is

$0.40.
28

15. The national unemployment rate increased from 5.3 percent in 1989 to 5.6 percent in

1990.

16. “Quits” include all voluntary separations such as those to look for another job,

pregnancy reasons, or other reasons. Involuntary separations contained in the “layoff”

category include plant closings, the end of temporary or seasonal jobs, and firings.

17. F = .11, Prob > F = .74. Using the estimates that are stratified by gender in Table 3

and in Table 5, if women were treated similarly to men in promotion receipt (had the

male promotion receipt coefficients), their wage growth would increase by about 10

percent (or by about 4 cents). If women were treated similarly to men in wage growth

(had the male wage growth coefficients), however, wage growth would be reduced by

about 10 percent (men experienced lower wage growth than women). Hence, if

women were treated similarly to men in both promotion receipt and wage growth,

there would be no net change in women’s wages on average.

18. The most recent NLSY data available at the time of this analysis was from the 1996

survey. Individuals were not necessarily employed at the same job in 1996 as in 1990.

19. Specifically, the question reads, “How (do/did) you feel about (the job you have

now/your most recent job)? (Do/did) you like it very much, like it fairly well, dislike it

somewhat, or dislike it very much?”

20. Only the one-year impact of promotion on these outcomes are presented because the

immediate impact of promotion for these outcomes seems to be the most relevant and

because some of the outcomes (such as the earnings structure variables) are

unavailable after 1990.

21. Similar to the wage equations, a job change dummy variable was also included in all

regressions. Since ordinary least squares with limited dependent variables (limited to

1, 0, or –1 for the structure of earnings, training, and supervision outcomes) will likely
29

be affected by heteroscedasticity, the standard errors are corrected using the procedure

developed by White (1980).

22. The seemingly high percentage of workers who report being a “supervisor” is not

unique to the NLSY. In the General Social Surveys and the Panel Study of Income

Dynamics, approximately 40 percent of workers report supervising other workers

(Rothstein 1998).

23. Promotion is also positively related to increases in the a number of non-wage benefits

that workers report are made available to them, although a large number of workers

report “don’t know” when asked about non-wage benefit availability. Given that nondiscrimination laws generally require that employers make available the same set of

benefits to all workers, it is likely that workers become more cognizant of the nonwage benefits available to them immediately following a promotion.

24. “Quits” and “layoffs” are defined similarly as described in footnote 16.

25. An obvious solution to this problem is to generate an instrument for the promotion

variable. Any instrument, however, would rely on fairly dubious identification

restrictions, as it is difficult to find variables that affect promotion, but not job

turnover. We experimented with several variables to identify the promotion

instrument, but in no case were the estimates much different than those reported here.

26. The sample size for the hazard estimations is slightly smaller due to missing data for

20 individuals after the 1990 interview.

27. The coefficient for taking over an old supervisor’s job is marginally significant at the

.11 significance level in the layoff hazard estimation.
30

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Table 1

Percent Promoted 1989-90

All Males Females

Percent promoted 24.23 24.69 23.56

Among those promoted, percent who experienced:

Position upgrade 26.45 27.48 24.84

Took over old supervisor's job 8.12 8.49 7.55

Promoted to a higher level job in a different section 14.27 13.74 15.09

Chosen to fill a newly created position with 9.59 8.49 11.32

greater responsibilities

There was a reorganization and was promoted 5.54 5.66 5.35

Received promotion but continued to perform 30.50 30.51 30.50

basically the same duties as before

Lateral move to a different section 2.33 2.22 2.52

Other 3.20 3.43 2.83

Sample Size 3355 2005 1350

Source: National Longitudinal Survey of Youth
Table 2

Characteristics of a Promotion Among those Promoted

(In Percent)

All Males Females

Promotion led to a wage increase 89.18 89.29 88.99

Promotion led to an increase in job responsibilitiesa85.49 83.43 88.69

Other people were considered for the promotion 32.96 34.75 30.19

Another promotion is possible at current job 86.84 87.07 86.48

Sample Size 813 495 318

a

 Those who reported “received promotion but continued to perform basically the same duties” were not

asked if their responsibilities increased as a result of the promotion. These individuals were excluded

from the base when computing the percent who experienced an increase in job responsibilities.
Table 3

Determinants of Promotion Receipt

(Absolute Value of T-Statistics)

(1) (2) (3) (4)

Variable Mean All All Males Females

Femalea.40 -4.20*-3.86*

(1.83) (1.66)

Blacka.26 -7.17** -7.35** -7.71** -5.30

(2.62) (2.66) (2.20) (1.17)

Hispanica.18 -4.57 -4.69 -10.12** 3.36

(1.60) (1.63) (2.74) (.73)

Education 12.99 -.01 -.04 .18 -.16

(.01) (.07) (.23) (.15)

Armed Forces Qualifying Test 43.02 -.07 -.07 -.07 -.07

percentile (1.35) (1.33) (1.11) (.80)

Tenure (in weeks) 201.87 .03 -.01 .03 .03

(1.61) (.13) (1.17) (1.07)

Tenure squared x 10-3 71.64 -.10** -.05 -.10** -.09*

(3.08) (.87) (2.55) (1.72)

Prior experience (in weeks) 310.57 -.01 .01 .01 -.01

(.04) (.21) (.20) (.25)

Experience squared x 10-3 124.37 -.01 .01 -.03 .02

(.18) (.01) (.75) (.44)

Received company training .10 10.88** 8.95** 6.36 17.64**

1988-89 at current job (3.53) (2.87) (1.56) (3.67)

Firm > 1000 employeesa.40 7.04** 6.71** 8.56** 5.31

(3.34) (3.16) (3.10) (1.59)

Union membera.16 -5.90** -5.30*-7.19** -4.30

(1.97) (1.75) (2.02) (.76)

Reside in SMSAa.80 -3.10 -2.42 -2.98 -3.21

(1.18) (.91) (.89) (.74)

Local unemployment rate 5.53 -.09 -.05 .09 -4.62

(.16) (.09) (.13) (.49)

Marrieda.53 -.03 -.36 2.97 -4.56

(.15) (.16) (.9) (1.37)
Table 3 (Cont.)

(1) (2) (3) (4)

Variable Mean All All Males Females

Number of children .87 -.95 -.95 -.52 -1.06

(.74) (.74) (.29) (.53)

Child less than age 6 in .34 2.59 2.80 .58 3.80

Householda(.94) (1.01) (.15) (.91)

Promoted 1988-89 at current joba.20 17.86**

(7.45)

Log-likelihood -1789.9 -1762.4 -1077.7 -699.0

Sample size 3355 3355 2005 1350

Notes: The coefficients are normalized to represent the derivative of the probability of the outcome with

respect to a change in the explanatory variable. This is computed as )

ˆ

(

ˆbf Xb where bˆ

is the vector of

estimated parameters of the probit model, X is the vector of means of the explanatory variables, andf

standard normal probability density function. The normalized coefficients are multiplied by 100. All

equations include industry and occupation dummy variables.

 Refers to dummy variable.

* **at the .05 level (two-tailed tests).
Table 4

Gender/Race Coefficients from Promotion Receipt Probits, by Type of Promotion

(Absolute Value of T-Statistics)

Position Supervisor’s Higher level New Same Lateral

Variable Upgrade Job Job Position Reorganization Duties Move Other

Female -4.24 -2.67 .52 3.42 2.86 -1.06 1.86 -6.00

(1.49) (.62) (.15) (.87) (.57) (.39) (.26) (.94)

Black -3.75 4.35 1.54 -10.98*-24.82** -4.96 -7.10 -15.95*

(1.00) (.74) (.33) (1.89) (2.73) (1.32) (.73) (1.72)

Hispanic -3.39 3.62 1.83 1.65 -5.39 -4.75 -11.20 -7.80

(.84) (.61) (.38) (.30) (.76) (1.19) (.99) (.87)

Log-likelihood -790.3 -314.4 -498.7 -360.5 -221.4 -855.0 -108.5 -142.1

 Notes: The coefficients are normalized to represent the derivative of the probability of the outcome with respect to a change in the explanatory variable. This

is computed as )

ˆ

(

ˆbf Xb where bˆ

is the vector of estimated parameters of the probit model, X is the vector of means of the explanatory variables, andf is the

standard normal probability density function. The normalized coefficients are multiplied by 100. The normalized coefficients are multiplied by 100. The

other independent variables included are the same as specification (1) in Table 3. The sample size for all equations is 3355.

*

 Statistically significant at the .10 level; **at the .05 level (two-tailed tests).
Table 5

Promotions and Wage Growth

(Absolute Value of T-Statistics)

 

(1) (2) (3) (4) (5) (6) (7) (8)

All - Position

Alla Alla Alla Changea,c Malesa

Femalesa Allb Allb

Promotion 1989-90 8.10** 8.07** 7.94** 6.61** 8.65** 7.15** 11.65** 10.28**

(7.02) (7.01) (6.89) (5.11) (5.69) (4.07) (6.62) (4.61)

Education .89**

(3.18)

AFQT -.03

(1.54)

Job change 1989-90 .62

(.52)

Quit 1989-90 2.80** 2.70** 2.59** 3.11*2.28 6.21** 6.27**

(2.18) (2.10) (2.01) (1.82) (1.19) (3.07) (3.09)

Layoff 1989-90 -8.01** -7.91** -8.38** -6.67** -10.78** -.23 -.15

(3.41) (3.57) (3.56) (2.27) (2.71) (.06) (.04)

Quit 1990-96 1.84 .92

(1.08) (.48)

Layoff 1990-96 -14.08** -14.07**

(6.61) (6.61)

Promotion * 3.63

Quit 1990-96 (1.00)

Constant 1.99** 2.00** -8.07** 2.83** 1.58*2.63** 12.04** 12.36**

(3.12) (3.14) (2.52) (4.61) (1.87) (2.74) (9.76) (9.70)

_

R

2

.01 .02 .02 .01 .02 .02 .04 .04

Sample Size 3355 3355 3355 3355 2005 1350 2829 2829

Notes: All coefficients are multiplied by 100.

a

 The dependent variable is the natural log of the 1990 hourly wage minus the natural log of the 1989

hourly wage.

b

 The dependent variable is the natural log of the 1996 hourly wage minus the natural log of the 1989

hourly wage.

c

 The promotion measure excludes the categories “position upgrade” and “received promotion but

continued to perform basically the same duties as before.”

*

Statistically significant at the .10 level; ** at the .05 level (two-tailed tests).
Table 6

Promotion Coefficients From First-Differenced Wage Regressions

(Absolute Value of T-Statistics)

(1) (2) (3) (4) (5) (6)

All a Allb Malesa Malesb

FemalesaFemalesb

Promotion Type

Position upgrade 10.10** 8.93** 10.09** 9.25** 10.21** 8.64*

(4.97) (2.84) (3.83) (2.35) (3.20) (1.65)

Supervisor's job 9.69** 6.44 9.70** 8.57 9.71*2.27

(2.72) (1.18) (2.11) (1.25) (1.72) (.25)

Higher level job 8.27** 11.85** 12.03** 15.36** 2.91 6.44

(3.05) (2.84) (3.30) (2.83) (.72) (.99)

New position 4.72 16.64** 8.38*32.58** .29 -5.36

(1.44) (3.32) (1.82) (4.80) (.06) (.74)

Reorganization 11.82** 20.92** 12.79**16.85*10.32 29.20**

(2.75) (3.02) (2.28) (1.92) (1.54) (2.61)

Same duties 7.09** 13.08** 6.33** 14.18** 8.29** 11.21**

(3.73) (4.52) (2.52) (3.79) (2.86) (2.46)

Lateral move -3.18 11.35 -9.78 8.43 5.78 15.95

(.48) (1.21) (1.10) (.67) (.60) (1.16)

Other 8.20 5.10 8.11 -2.94 8.25 16.80

(1.46) (.61) (1.13) (.27) (.90) (1.30)

Competitive/Noncompetitive

Competitive 5.20** 16.02** 6.74** 18.18** 2.49 11.30**

(2.83) (5.67) (2.85) (5.12) (.85) (2.40)

Noncompetitive 9.53** 9.61** 9.71** 11.07** 9.24** 6.65**

(7.05) (4.63) (5.37) (4.10) (4.50) (2.07)

Sample Size 3355 2829 2005 1764 1350 1065

Notes: The numbers reported in the table are the estimated promotion coefficients from regressions where

the dependent variable is the change in the natural log of hourly wages. All equations also include

variables representing job change over time. All coefficients are multiplied by 100.

a The dependent variable is the natural log of the 1990 hourly wage minus the natural log of the 1989

hourly wage.

b The dependent variable is the natural log of the 1996 hourly wage minus the natural log of the 1989

hourly wage.

*

Statistically significant at the .10 level; **at the .05 level (two-tailed tests).
Table 7

Promotion Coefficients From First-Differenced Regressions

(Absolute Value of T-Statistics)

(1) (2) (3) (4) (5) (6)

Earnings Earnings

Include Based on Received Responsible

Bonuses or Piece rate/ Company For pay or

Stock Commissions/ Training Became Promotion Job

Options Tips 1989-90 Supervisor Of others Satisfaction

Promotion 2.31 -9.06** 5.06** 15.86** 6.26** 15.18**

(1.19) (2.96) (3.04) (7.22) (3.87) (5.17)

Promotion Type

Position upgrade -2.99 -6.52** 5.72*17.59** 6.57** 15.81**

(.92) (3.50) (1.92) (4.46) (2.38) (2.99)

Supervisor’s job 11.20*2.48 12.12** 49.14** 30.79** 12.83

(1.71) (.57) (2.46) (7.44) (4.96) (1.49)

Higher level job -.07 -1.31 6.87 11.22** 2.67 24.77**

(.01) (.49) (1.49) (2.01) (.61) (3.18)

New position .49 -7.20** .61 12.32*2.35 26.99**

(.09) (2.09) (.13) (1.91) (.57) (4.20)

Reorganization 9.68 -.44 -5.85 17.67** 16.37** 11.56

(1.27) (.07) (.90) (2.56) (2.25) (1.21)

Same duties 5.15*.32 5.14*9.71** 2.34 7.69

(1.65) (.20) (1.89) (2.70) (.97) (1.60)

Lateral move -4.76 -5.87 7.12 -1.89 -5.60 12.94

(.92) (1.14) (.61) (.12) (.54) (1.02)

Other 4.97 7.44 3.47 16.98*-2.06 17.11

(.43) (1.40) (.42) (1.72) (.22) (1.38)

Competitve/Noncompetitive

Competitive 3.34 -1.96 5.89** 16.81** 5.18*15.57**

(1.12) (1.05) (1.98) (4.57) (1.87) (3.56)

Noncompetitive 1.80 -2.32*4.64** 15.39** 6.79** 14.98**

(.77) (1.74) (2.45) (5.99) (3.62) (4.27)

Sample Size 3355 3355 3355 3355 3355 3355
Table 7 (cont.)

Notes: The numbers reported in the table are the estimated promotion coefficients from regressions where the

dependent variable is the change in the job characteristic between 1989 and 1990. All equations also include job

change as an independent variable. All coefficients are multiplied by 100.

*

Statistically significant at the .10 level; **at the .05 level (two-tailed tests).
Table 8

Job Separation Hazard Estimates

(Absolute Value of T-Statistics)

(1) (2) (3) (4) (5)

All

Variable Separations Quits Layoffs Males Females

Promotion 2.01 3.17 2.04 -.98 4.69

(.38) (.49) (.21) (.14) (.54)

Female -5.99 -5.52 -3.62

(1.09) (.83) (.35)

Black 12.07*3.24 25.98** 23.16** -6.67

(1.90) (.41) (2.33) (2.89) (.62)

Hispanic 1.95 -12.08 16.56 -5.77 2.58

(.28) (1.41) (1.43) (.67) (.24)

Education 9.07 .88 -5.94** -1.18 -.61

(.62) (.49) (2.26) (.64) (.25)

Armed Forces Qualifying Test -.04 .02 -.07 -.02 -.05

percentile (.32) (.13) (.35) (.16) (.24)

Tenure (in weeks) -.47** -.51** -.40** -.46** -.51**

(10.52) (9.09) (4.97) (8.08) (6.84)

Tenure squared x 10-3 .42** .45** .33** .42** .45**

(5.50) (4.66) (2.46) (4.30) (3.56)

Prior experience (in weeks) -.01 -.03 .07 .05 -.13

(.18) (.52) (.76) (.73) (1.62)

Experience squared x 10-3 -.04 -.01 -.17 -.12 .12

(.55) (.06) (1.25) (1.36) (.96)

Received company training -18.20** -13.66 -35.43** -26.98** -11.72

1988-89 at current job (2.15) (1.37) (2.06) (2.37) (.91)

Firm > 1000 employees -23.36** -17.98** -32.81** -20.96** -21.82**

(4.55) (2.88) (3.48) (3.10) (2.71)

Union member -28.13** -55.08** 2.78 -28.11** -30.18**

(3.88) (5.37) (.25) (3.27) (2.12)

Reside in SMSA -.33 -3.70 4.57 3.12 -5.37

(.05) (.48) (.42) (.40) (.52)

Local unemployment rate -.40 .56 -1.40 .35 -1.10

(.29) (.33) (.57) (.20) (.47)
Table 8 (Cont.)

(1) (2) (3) (4) (5)

All

Variable Separations Quits Layoffs Males Females

Married -19.46** -11.94*-35.52** -22.80** -18.74**

(3.61) (1.80) (3.64) (3.02) (2.34)

Number of children 2.37 2.73 -.12 6.42*-1.64

(.80) (.74) (.02) (1.74) (.35)

Child less than age 6 in household -8.98 -13.17 1.96 -11.47 -6.99

(1.37) (1.62) (.17) (1.29) (.70)

Log-likelihood -14874.1 -9690.6 -4610.0 -8439.7 -5104.8

Sample Size 3335 3335 3335 1990 1345

Notes: The reported coefficients are multiplied by 100. Industry and occupation industry dummy

variables are also included.

*

Statistically significant at the .10 level; **at the .05 level (two-tailed tests).
Table 9

Promotion Coefficients From Job Separation Hazards

(Absolute Value of T-Statistics)

(1) (2) (3) (4) (5)

All

Separations Quits Layoffs Males Females

Promotion Type

Position upgrade -.14 3.29 -8.70 -6.25 5.94

(.02) (.30) (.50) (.53) (.39)

Supervisor's job 28.51*19.36 44.24 33.77*23.56

(1.81) (.98) (1.59) (1.72) (.88)

Higher level job -8.57 -17.88 10.57 -23.47 13.42

(.66) (1.08) (.49) (1.34) (.69)

New position -1.78 2.98 -3.52 4.88 -17.60

(.12) (.16) (.12) (.24) (.74)

Reorganization 16.07 24.81 -11.34 30.42 3.35

(.82) (1.11) (.25) (1.21) (.16)

Same duties 2.10 6.48 -2.92 -.98 3.26

(.24) (.62) (.18) (.09) (.23)

Lateral move 17.73 2.92 48.82 -28.15 59.46

(.61) (.08) (1.07) (.62) (1.52)

Other -16.51 -17.30 -7.72 2.90 -56.18

(.67) (.57) (.19) (.10) (1.10)

Competitive/Noncompetitive

Competitive 9.21 11.71 9.03 9.90 3.16

(1.08) (1.12) (.59) (.95) (.21)

Noncompetitive -1.27 -.61 -1.37 -6.64 5.25

(.21) (.08) (.12) (.82) (.54)

Sample Size 3335 3335 3335 1990 1345

Notes: The numbers reported in the table are the estimated promotion coefficient from hazard models of

job leaving. The other independent variables are the same as those used in Table 8. All coefficients are

multiplied by 100.

*

Statistically significant at the .10 level; **at the .05 level (two-tailed tests).