Labor market dynamics in a highly competitive industry

We study labor market dynamics of workers in a highly competitive industry with a highly competitive labor market. We focus on the relationship between workers’ age, wages, and productivity. Our analysis uncovers an inverse U-shaped relationship. While some wage adjustments occur within the current firm, job mobility plays a crucial role in shaping wage trajectories. There is assortative matching with highly productive workers moving to highly productive firms, while less productive workers gravitate towards less productive firms. Our findings suggest that both in-firm wage progression and wage growth via job mobility contribute to a close alignment between wages and productivity throughout workers’ careers. • We study age–wage–productivity dynamics in a highly competitive labor market. • We find an inverse U-shaped relationship between age and both wages and productivity. • Job mobility drives wage progression alongside within-firm adjustments. • Wage trajectories closely track productivity over the career cycle.