- New Horizons in Management series
Edited by George Saridakis and Cary L. Cooper
Chapter 2: Employee turnover
The labour market provides a dynamic environment for firms and workers. At any given moment in time, firms are established while others close, jobs are created while others are destroyed, thus contributing to involuntary movements of workers between firms, into unemployment or out of the labour force. In addition to these flows workers move freely between jobs and firms while ever searching for better jobs. This reallocation of resources, in this case labour, is of course necessary, since institutional aspects and legislations might change, through business cycle variation and due to technological progress. Employee turnover is thus a consequence of the reallocation of labour. The research on job and worker flows focuses on this reallocation and how this is related to institutional, firm and worker characteristics. The concept of flows also constitutes a core issue in many central labour market theories. For example, job creation and destruction are essential in the Mortensen–Pissarides matching model, and workers moving between jobs are a necessity in the equilibrium search framework. Thus the literature on job and worker flows also focuses on the testing of labour market theories and provides an empirical underpinning of important labour market theories. The reallocation of labour, as expressed by labour turnover, is costly for the firms, but also entails profit opportunities.
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