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A Hicksian Model of Labour Turnover and Local Wage Determination

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  • G L Clark

    (John F Kennedy School of Government, Gund Hall, Harvard University, Cambridge, Mass 02138, USA)

Abstract

Employers have a variety of reasons for attempting to stabilize turnover in their labour force. For example, specific skill requirements, the added costs of training inherent in hiring new workers, and the absolute demand for labour may stimulate firms to minimize labour turnover. One way of reducing turnover is for the individual firm to raise its wage rates. However, depending upon the relative tightness of the local labour market (reflected in the rates of hiring and unemployment), this could result in widespread wage competition amongst employers and general increases in the aggregate local wage rate. The significance of quits, hires, and unemployment are explored, in an attempt to explain differential urban wage inflation in the United States. Emphasis is placed on Hicks's model of labour turnover which emphasizes the firm's management of its labour needs. This model is analysed in a time-series framework over the period 1970–1979; a decade of rapid inflation and general stagnation in the United States.

Suggested Citation

  • G L Clark, 1981. "A Hicksian Model of Labour Turnover and Local Wage Determination," Environment and Planning A, , vol. 13(5), pages 563-574, May.
    • Handle: RePEc:sae:envira:v:13:y:1981:i:5:p:563-574
    DOI: 10.1068/a130563
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    References listed on IDEAS

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    1. Thomas, R Leighton & Stoney, P J M, 1971. "Unemployment Dispersion as a Determinant of Wage Inflation in the U.K., 1925-66," The Manchester School of Economic & Social Studies, University of Manchester, vol. 39(2), pages 83-116, June.
    2. Vasilev, Aleksandar & Maksumov, Rashid, 2010. "Critical analysis of Chapter 23 of Keynes’s Notes on Mercantilism in The General Theory of Employment, Interest and Money (1936)," EconStor Research Reports 155318, ZBW - Leibniz Information Centre for Economics.
    3. A. W. Phillips, 1958. "The Relation Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861–1957," Economica, London School of Economics and Political Science, vol. 25(100), pages 283-299, November.
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