New Horizons in Management series
Edited by George Saridakis and Cary L. Cooper
Chapter 15: Employee turnover and the expansion and contraction of employers
In this chapter we consider the relationship between employee turnover and job turnover, both at the level of the firm1 and at the aggregate level. By ‘employee turnover’ we mean the entry and exit of individuals into and out of the firm, or hires and separations. By ‘job turnover’ we mean the creation and destruction of jobs by the firm. In practice, it is not possible to precisely identify and follow a job over time (whereas employees can be identified and followed), and so job turnover is typically measured by firm-level employment growth. The relationship between employee and job turnover sheds light on the cyclical behaviour of the labour market, in particular the extent to which recessions should be characterized as periods of increased separations (inflows into unemployment) or reduced hiring (outflows from unemployment). The relationship also tells us about the causes of employee turnover: to what extent is employee turnover caused by the creation and destruction of jobs, and to what extent is it caused by the reallocation of labour between existing jobs? Patterns of employee and job turnover therefore also tells us about the speed with which employees and jobs can be reallocated to more efficient matches. Finally, the behaviour of employee turnover as firms grow and shrink is informative as to the role of employment protection legislation and other labour market institutions.
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