Later City news
  • Mary Che

Do Startup Employees Earn More in the Long Run?

Since the average startup founder who makes it to Series A earns more than a large company employee, many believe that early-stage startup employees also earn more. Evaluating the attractiveness of startup employment requires an understanding of both what startups pay and the implications of these jobs for earnings trajectories.

Later City News: A research done by Olav Sorenson and his team members from University of California, Aarhus University of Denmark, Yale University and Cornell University shows 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.

This research also added: 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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