Labour Turnover and Labour Productivity in a Retail Organization
AbstractWe study the impact of labour turnover on labour productivity using a panel dataset of 347 shops belonging to a large UK clothing retailer over1995-1999. For the within-shop link – holding constant the shop’s permanent characteristics – we observe an inverted U-shape effect of labour turnover on productivity. The productivity-maximizing rates of FTE-adjusted quits and hires are each about 20% per year, improving productivity by 2.5% compared to the zero turnover level. We explain the difference between this optimal level of labour turnover and its observed average (quits and hires each around 10%) through the costs of hiring estimated at about £600 per hire. By contrast, between shops, there is a positive link between average rates of turnover and average productivity, suggesting that an unobservable management quality factor generates both high turnover and productivity, which we discuss.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2322.
Length: 29 pages
Date of creation: Sep 2006
Date of revision:
Publication status: published in: Academy of Management Journal, 2009, 52 (2), 294-313
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Find related papers by JEL classification:
- J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
- L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-09-30 (All new papers)
- NEP-BEC-2006-09-30 (Business Economics)
- NEP-EFF-2006-09-30 (Efficiency & Productivity)
- NEP-HRM-2006-09-30 (Human Capital & Human Resource Management)
- NEP-LAB-2006-09-30 (Labour Economics)
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