Worker turnover: quits and separations

1. Worker turnover: quits and separations • Is worker turnover desirable? • Why do workers quit? Why do they separate? • Empirical evidence • Public sector ILM

2. 1. Is worker turnover desirable • Specific skills & job matching • Recession – downsizing • LIFO policy – young workers • Early retirements – older workers • See diagram • Churning (quits + separations + new entrants) • Better job matches • Higher output & profit

3. 2. Why do workers turnover • Quits (Voluntary) versus separations (involuntary) • A) Better outside opportunities • Relative W • Wage compression • B) Shocks • Recession or reduction in demand for Q • C) Household production • Move with husband • Childrearing • D) Worker dissatisfaction • Training & promotion

4. 2. Why do workers turnover? • E) Worker preferences • Proxied by personal characteristics • D) Tenure • Negative relationship

5. 3. Empirical evidence • ‘THE EFFECT OF RELATIVE WAGES AND EXTERNAL SHOCKS ON QUITS AND SEPARATIONS FROM THE PUBLIC SECTOR’ • Data • Minimum Obligatory Human Resources Information (MOHRI) database • 200,000 workers (2001) – all Depts • Permanent workers & temporary workers

6. Table 2 Quits and separations by workforce characteristics, 2001

9. 3. Empirical evidence • Methodology • hQ = f(t, q, p(t), ut, wr) (1b) • hS = f(t, q, p(t), ut, wr) (2b) • Hazard models • Observed heterogeneity – see Eqn 1b and 2b • Unobserved heterogeneity • Selection problem – good workers leave ‘first’

10. 3. Results • A) Learning workers productivity • Non-monotonic hazards – spike at 12 months & 24 months • Unobserved heterogeneity • Males & females on temporary contracts separate rather than quit • B) The effect of shocks • Separations: Pro-cyclical or counter-cyclical?

11. Results • Are quits counter-cyclical? • Findings • A higher unemployment rate increases separations (counter-cyclical) and reduces quits (pro-cyclical) • Higher relative wages increases quits • Occupational differences