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Worker churning and firms' wage policies

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Author Info

  • Pedro S. Martins

Abstract

Purpose – The purpose of this paper is to provide empirical evidence of a causal nature about the relationship between wages and churning (“excessive” worker turnover). Design/methodology/approach – Matched employer-employee panel data from Portugal, covering the period 1986-2000 are used in the study. Econometric methods are also used, including random effects tobit models, fixed effects and instrumental variables. Findings – Unlike in previous research (which typically does not consider causal relationships), the paper presents evidence that wages do not necessarily decrease the amount of churning. If employers are forced to increase pay, they may respond by hiring different workers. Detailed evidence about the nature of job and worker flows and churning levels across industries is presented. Research limitations/implications – Future research should examine the paths of workers whose wages are affected by collective bargaining. Practical implications – The paper provides additional evidence that effort may not be particularly sensitive to wages in some industries/occupations. The should be a better understanding of role of wages in personnel policies. Originality/value – This paper is probably the first that seeks to examine the causal relationship between wages and churning. The results will be of interest to labour economists and human resource management experts.

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Bibliographic Info

Article provided by Emerald Group Publishing in its journal International Journal of Manpower.

Volume (Year): 29 (2008)
Issue (Month): 1 (May)
Pages: 48-63

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Handle: RePEc:eme:ijmpps:v:29:y:2008:i:1:p:48-63

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Related research

Keywords: Employee turnover; Pay policies; Portugal;

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References

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  1. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, January.
  2. Burgess, Simon & Lane, Julia & Stevens, David, 2001. "Churning dynamics: an analysis of hires and separations at the employer level," Labour Economics, Elsevier, vol. 8(1), pages 1-14, January.
  3. Pekka Ilmakunnas & Mika Maliranta, 2005. "Worker inflow, outflow, and churning," Applied Economics, Taylor & Francis Journals, vol. 37(10), pages 1115-1133.
  4. Ana Rute Cardoso & Pedro Portugal, 2005. "Contractual Wages and the Wage Cushion under Different Bargaining Settings," Journal of Labor Economics, University of Chicago Press, vol. 23(4), pages 875-902, October.
  5. Burgess, Simon & Lane, Julia & Stevens, David, 1995. "Job Flows, Worker Flows and Churning," CEPR Discussion Papers 1125, C.E.P.R. Discussion Papers.
  6. Oriana Bandiera & Iwan Barankay & Imran Rasul, 2005. "Social Preferences and the Response to Incentives: Evidence from Personnel Data," The Quarterly Journal of Economics, MIT Press, vol. 120(3), pages 917-962, August.
  7. John M. Abowd & Patrick Corbel & Francis Kramarz, 1999. "The Entry And Exit Of Workers And The Growth Of Employment: An Analysis Of French Establishments," The Review of Economics and Statistics, MIT Press, vol. 81(2), pages 170-187, May.
  8. Pedro Portugal & Olivier Blanchard, 2001. "What Hides Behind an Unemployment Rate: Comparing Portuguese and U.S. Labor Markets," American Economic Review, American Economic Association, vol. 91(1), pages 187-207, March.
  9. Hamermesh, D.S. & Hassink, W.H.J. & Ours, J.C. van, 1996. "Job turnover and labor turnover: A taxonomy of employment dynamics," Open Access publications from Tilburg University urn:nbn:nl:ui:12-86873, Tilburg University.
  10. Lane, Julia & Stevens, David & Burgess, Simon, 1996. "Worker and job flows," Economics Letters, Elsevier, vol. 51(1), pages 109-113, April.
  11. David E. Guest & Jonathan Michie & Neil Conway & Maura Sheehan, 2003. "Human Resource Management and Corporate Performance in the UK," British Journal of Industrial Relations, London School of Economics, vol. 41(2), pages 291-314, 06.
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Cited by:
  1. repec:hal:journl:halshs-00593952 is not listed on IDEAS
  2. Richard Duhautois & Fabrice Gilles & Héloïse Petit, 2012. "Worker flows and establishment wage differentials : a breakdown of the relationship," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00833872, HAL.

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