Do startup employees earn more in the long run?
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Published version
Date
2021-05
Authors
Sorenson, Olav
Dahl, Michael S.
Canales, Rodrigo
Burton, M. Diane
Version
Published version
OA Version
Citation
O. Sorenson, M.S. Dahl, R. Canales, M.D. Burton. 2021. "Do Startup Employees Earn More in the Long Run?" Organization Science, Volume 32, Issue 3, pp.587-604. https://doi.org/10.1287/orsc.2020.1371
Abstract
Evaluating the attractiveness of startup employment requires an understanding of both what startups pay and the implications of these jobs for earnings trajectories. Analyzing Danish registry data, we find that employees hired by startups earn roughly 17% less over the next 10 years than those hired by large, established firms. About half of this earnings differential stems from sorting—from the fact that startup employees have less human capital. Long-term earnings also vary depending on when individuals are hired. Although the earliest employees of startups suffer an earnings penalty, those hired by already-successful startups earn a small premium. Two factors appear to account for the earnings penalties for the early employees: Startups fail at high rates, creating costly spells of unemployment for their (former) employees. Job-mobility patterns also diverge: After being employed by a small startup, individuals rarely return to the large employers that pay more.
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This work is licensed under a Creative Commons Attribution 4.0 International License. You are free to copy, distribute, transmit and adapt this work, but you must attribute this work as “Organization Science. Copyright © 2021 The Author(s). https://doi.org/10.1287/orsc.2020.1371, used under a Creative Commons Attribution License: https://creativecommons.org/licenses/by/4.0/.”