Events

Prof. Eva Labro
Professor of Management Accounting and Michael W. Haley Distinguished Scholar
University of North Carolina at Chapel Hill
Senior Editor, Journal of Management Accounting Research

Using Census microdata on 14,000 manufacturing plants, we examine how firms man- age employee retention concerns in response to local wage pressure. We validate our measure of employee retention concerns by documenting that plants respond with wage increases, and do so more when the employees’ human capital is higher. Then, we document substantial use of non-wage levers in response to retention concerns. Plants shift incentives to increase the likelihood that bonuses can be paid: performance target transparency declines, as does the use of localized performance metrics for bonuses. Furthermore, promotions become more meritocratic, ensuring key employees can be promoted and retained. Lastly, decision-making authority at the plant-level increases, offering more agency to local employees. Lastly, we find evidence consistent with inequity aversion constraining the response to local wage pressure, and document spillovers in both wage and non-wage reactions across same-firm plants.