1. Incidence of turnover summary of 300 institutions Saratoga Institute 2004 Workforce Executive Summary

2. Turnover Stylized facts Employment lags the business cycle In downturn, output falls faster than employment, so productivity (Q/N) falls In expansion, employment does not rise immediately, but output and productivity increase

3. N W P*MP N N0N0 N1N1 Puzzle: As employment falls, productivity should rise P*AP N = Q/N

4. Do hiring costs and firm-specific human capital explain the productivity puzzle?

5. Total Cost per Hire Breakdown Advertising 18.4% Agency 19.9% Referral Bonuses 1.8% Travel 2.7% Relocation 32.9% Recruiter 24.3% Source: Saratoga InstituteSaratoga Institute

6. Total Cost per Hire Total $4,588 Exempt $12,032 Nonexempt $989 Note training costs not included Source: Saratoga InstituteSaratoga Institute

7. Cost per Hire Varies by employee type Factors Affecting Employer Search and Vacancy Duration InterviewsHours per Time to fill per offerinterviewvacancy Total Training +* +* +* Education + +* +* No prior experience -* - -* Barron Berger and Black. 1997 On-The-Job Training

8. N W P*MP N N0N0 N1N1 P*AP N =Q/N LABOR HOARDING SOLVES PUZZLE N’ 1

9. Labor Hoarding Who’s jobs are safest? Those most costly to replace More training More experienced More education Exempt (higher job level)

10. Turnover Facts 19% of jobs end in less than 1 year 35% of jobs last more than 10 years 21% of jobs last more than 20 years Averages Male tenure > Female tenure Not much difference by education level

11. Internal Labor Market Promotion, labor allocation and compensation decisions made within a firm that are insulated from the external labor market

12. Internal Labor Market Source of insulation from the external labor market Specific training => Firm wage greater than opportunity wage Hiring costs Firing costs Costs highest as job level rises

13. Internal Labor Market How to minimize expensive hiring mistakes? Job levels Entry Supervisor Mid Management Manager

14. Internal Labor Market How to minimize expensive hiring mistakes? Job levels Entry Supervisor Mid Management Manager Promote from within

15. Internal Labor Market STRUCTURE

16. Internal Labor Market Determinants Technology Firm Size Scarce Skills Stable Product Market