Strategy for securing employment that considers job filling, separation, and shocks

Securing employment is one of the most important issues for a firm’s production. This study investigates labor demand dynamics when a firm faces issues with job filling, job separation, and shocks. This study derives the relationship between labor input and vacancies and introduces this relationship into a labor demand model. This relationship can be concave, convex, or linear, depending on the ratio of job filling to separation. The firm adjusts the labor input by choosing vacancies. The response of labor input to a productivity shock increases with an increase in the ratio in the model with adjustment costs, but does not change in that without adjustment costs. The response of vacancies changes from reducing to amplifying as the ratio increases in both models. From the viewpoint of securing employment, the ratio that most easily secures employment exists when a shock occurs. Therefore, policies that increase this ratio may not necessarily facilitate securing employment if the ratio is high. Additionally, this study analyzes the responses to shocks in job-filling and separation rates. A positive job-filling rate shock increases labor input and decreases vacancies. In contrast, a positive job-separation rate shock decreases labor input and increases vacancies.