When creditors do not honor human capital as collateral, firms can mediate financially by offering workers long-term wage contracts. The optimal contract specifies a wage consisting of a spot general skill component plus a component equal to the expected time-averaged value of the worker's specific skills with a competitor. Variations in the smoothed specific component are due only to changes in expectations about the likelihood of quitting a competing firm. The theory also explains interindustry disparities in wage paths and statistical discrimination by firms.