COMPENSATION STRUCTURE AND ESTABLISHMENT QUIT AND FIRE RATES

Despite the claims of efficiency wage theory, there is surprisingly li ttle direct evidence that firms that pay higher wages have lower turno ver rates than otherwise similar firms. This study uses data on 205 ch ild care establishments to examine the influence of wages, fringe bene fits, and the dispersion of wages within a skill class on establishmen t quit and fire rates. We separately examine one high-skill group (tea chers) and one low-skill group (teacher aides). While we find that wag es (alone) significantly reduce establishment quit and fire rates, the effect seems too small to be consistent with the efficiency wage hypo thesis.