A non-perpetual shirking model

•We derive a finite-horizon version of the Shapiro-Stiglitz shirking model of unemployment.•Workers' behavior may change as they approach the end of an employment contract.•Our model predicts that wages should be rising in age for an unchanged rate of unemployment.

We provide a finite-horizon counterpart to the Shapiro and Stiglitz model of unemployment to show how workers' effort falls as they approach the end of an employment spell. The model provides a reason for wages rising more rapidly than productivity.