Wages in the Beginning of a Career

When entering the labor market, young workers tend to receive different wages which subsequently change also at different rates. What are the reasons underlying the wage differentiation in the beginning of a career? To address this question, we investigate and quantify the effects of the number of factors that determine the differences between young workers’ starting salaries and wage growth rates in the early years after labour market entry. The theoretical part of the work reviews the scientific literature dealing with this problem and allows us to focus on the higher education, student status, gender and work experience as the key factors for the research. Using the data from RLMS-HSE over the period from 2004 to 2014, in the empirical part of the work we conduct the econometric analysis which is based on the separate estimation of two Mincer-type wage equations: for initial wages and wage growth. In the first case, the OLS method is applied with the further application of the Heckman procedure to correct for selectivity bias; in the second - the random effects model is evaluated. The results obtained in this study indicate the importance of having higher education degree for increasing young women’s starting salaries and young workers’ wage growth rates in the first years of work, regardless of gender. In addition, the findings show the positive impact of working while studying at the university on the initial wages of young men. Also, the existence of the gender gap in early career wage growth in favour of men is confirmed.