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

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

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

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

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

Table 2 Quits and separations by workforce characteristics, 2001 QuitsSeparationsOther MaleFemaleMaleFemaleMaleFemale Personal Characteristics ATSI NESB Disabled Age (years) Wages and Tenure Wage Rate ($ / hour) Tenure (years)

Managers Professionals: (a) Nurses (b) Teachers (c) Other Professionals Associate Professionals Intermediate Craft Advanced / Intermediate Clerical Intermediate Production Elementary Clerical Labourer

Working Conditions Agency Size23,58134,29926,48834,85122,60936,821 Establishment Size Establishment sick rate Observations3,0245,2912,3054,0961,0181,147

3. Empirical evidence Methodology Methodology –h Q = f( t, q, p(t), u t, w r )(1b) –h S = f( t, q, p(t), u t, w r )(2b) –Hazard models Observed heterogeneity – see Eqn 1b and 2b Observed heterogeneity – see Eqn 1b and 2b Unobserved heterogeneity Unobserved heterogeneity –Selection problem – good workers leave first

3. Results A) Learning workers productivity 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 B) The effect of shocks –Separations: Pro-cyclical or counter-cyclical?

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