Worker turnover: quits and Worker turnover: quits and separationsseparations

• Is worker turnover desirable?Is worker turnover desirable?

• Why do workers quit? Why do they Why do workers quit? Why do they separate?separate?

• Empirical evidenceEmpirical evidence– Public sector ILMPublic sector ILM

1. Is worker turnover desirable1. Is worker turnover desirable

• Specific skills & job matching Specific skills & job matching – Recession – downsizingRecession – downsizing

•LIFO policy – young workersLIFO policy – young workers

•Early retirements – older workersEarly retirements – older workers

– See diagramSee diagram

• Churning Churning (quits + separations + new (quits + separations + new entrants)entrants)– Better job matchesBetter job matches– Higher output & profitHigher output & profit

2. Why do workers turnover2. Why do workers turnover

• Quits Quits (Voluntary)(Voluntary) versus separations versus separations (involuntary)(involuntary)– A) Better outside opportunities A) Better outside opportunities

• Relative Relative WW• Wage compressionWage compression

– B) ShocksB) Shocks• Recession or reduction in demand for QRecession or reduction in demand for Q

– C) Household productionC) Household production• Move with husbandMove with husband• ChildrearingChildrearing

– D) Worker dissatisfactionD) Worker dissatisfaction• Training & promotionTraining & promotion

2. Why do workers turnover?2. Why do workers turnover?

• E) Worker preferencesE) Worker preferences– Proxied by personal characteristicsProxied by personal characteristics

• D) TenureD) Tenure– Negative relationshipNegative relationship

3. Empirical evidence3. 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

Table 2 Quits and separations by workforce characteristics, 2001

Quits Separations Other

Male Female Male Female Male Female

Personal Characteristics

ATSI 0.13 0.09 0.05 0.04 0.06 0.04

NESB 0.06 0.05 0.04 0.04 0.06 0.05

Disabled 0.12 0.15 0.07 0.07 0.13 0.12

Age (years) 38.70 36.24 39.09 36.70 47.25 47.34

Wages and Tenure

Wage Rate ($ / hour) 23.53 21.07 24.70 23.44 25.72 22.78

Tenure (years) 6.93 5.38 5.77 3.33 15.52 11.97

Managers 0.07 0.05 0.06 0.02 0.11 0.03

Professionals:

(a) Nurses 0.04 0.14 0.00 0.01 0.00 0.05

(b) Teachers 0.06 0.09 0.23 0.30 0.11 0.19

(c) Other Professionals

0.28 0.20 0.22 0.14 0.18 0.11

Associate Professionals

0.17 0.11 0.13 0.10 0.22 0.10

Intermediate Craft 0.13 0.01 0.05 0.00 0.03 0.00

Advanced / Intermediate Clerical

0.13 0.32 0.15 0.32 0.15 0.32

Intermediate Production

0.02 0.00 0.03 0.00 0.05 0.01

Elementary Clerical

0.03 0.04 0.07 0.08 0.02 0.06

Labourer 0.07 0.05 0.07 0.02 0.12 0.13

Working Conditions

Agency Size 23,581 34,299 26,488 34,851 22,609 36,821

Establishment Size 783 919 592 589 647 593

Establishment sick rate

1.78 1.90 1.75 1.77 1.97 2.01

Observations 3,024 5,291 2,305 4,096 1,018 1,147

3. Empirical evidence3. Empirical evidence

• MethodologyMethodology– hhQQ = f( = f(tt, q, p(t), u, q, p(t), utt, w, wrr)) (1b)(1b)

– hhSS = f( = f(tt, q, p(t), u, q, p(t), utt, w, wrr)) (2b)(2b)

– Hazard modelsHazard models•Observed heterogeneity – see Eqn 1b and 2bObserved heterogeneity – see Eqn 1b and 2b

•Unobserved heterogeneityUnobserved heterogeneity– Selection problem – good workers leave ‘first’ Selection problem – good workers leave ‘first’

3. Results3. Results

• A) Learning workers productivityA) Learning workers productivity– Non-monotonic hazards – spike at 12 Non-monotonic hazards – spike at 12

months & 24 monthsmonths & 24 months– Unobserved heterogeneityUnobserved heterogeneity– Males & females on temporary contracts Males & females on temporary contracts

separate rather than quitseparate rather than quit

• B) The effect of shocksB) The effect of shocks– Separations: Pro-cyclical or counter-Separations: Pro-cyclical or counter-

cyclical?cyclical?

ResultsResults

• Are quits counter-cyclical?Are quits counter-cyclical?

• FindingsFindings– A higher unemployment rate increases A higher unemployment rate increases

separations (counter-cyclical) and separations (counter-cyclical) and reduces quits (pro-cyclical)reduces quits (pro-cyclical)

– Higher relative wages increases quitsHigher relative wages increases quits– Occupational differencesOccupational differences