The Low-Wage Labor Market: Challenges and Opportunities for Economic Self-Sufficiency. The Role of Job Turnover in the Low-Wage Labor Market . Extent of Turnover


What is the level of turnover in the economy? Just as there is both a worker and a firm side to the source of turnover, there are two ways of determining the extent of turnover.  The first is to ask, through worker-based surveys, how many jobs a worker has had within a given time period.  The second is to use employer-based surveys or administrative records to determine how many workers have left or been hired, again, within a given time period.  Researchers using the former approach, with Survey of Income and Program Participation (SIPP) data, estimate that the average monthly turnover rate in the U.S. economy in 1991 was 7.1 percent.(13)  Using the latter, other analysts estimate that quarterly turnover in the early 1980s was 23 percent.(14), (15)  Turnover thus depends on the time period within which it is measured, as well as the unit of analysis.  It is worth noting that the source of turnover also depends on the business cycle — downturns in the economy, while not affecting overall turnover, will increase the involuntary component of turnover by increasing layoffs and reducing quits.(16)

Turnover also varies by industry, skill, sex, and age —the average number reported in the previous paragraph hides a great deal of variation.  For low-wage workers, the news is almost all bad.  Low-skilled and young workers experience more turnover than older, more highly educated workers.  Workers in complex jobs, such as in manufacturing, are likely to experience lower turnover and higher wages than workers in retail sales, who tend to be low-wage workers.  New and small firms, which are also more likely to pay lower wages, should have higher turnover; new job matches, paying entry-level wages, should dissolve faster than long ones.  The consequences of this are well illustrated by Burtless (elsewhere in this volume) who notes that although over 1.2 million cashier jobs will be available every year until 2006, fewer than 1 out of 6 of these represent new job openings — the rest is turnover. Alternatively, of 11 low-skill occupations with 6.5 million job openings per year, only 1 million are new jobs.

Turnover by Industry

Table 1 demonstrates that turnover, however measured, varies dramatically by industry.  It is highest in the construction and retail trade industries; lowest in manufacturing, finance insurance and real estate, and in public administration.  Two high-turnover sectors, retail trade and professional services, while accounting for 1 in 5 jobs, account for almost half of all worker-based turnover.  It is also worth noting that turnover rates are more than twice as high for small and new employers as for large, older employers.(17)

These employer differences have important implications for the employment of low-wage workers.  Clearly, high-turnover firms are more likely to have job openings than low-turnover firms, but, just as clearly, employment with these firms is less likely to last and less likely to be one in which wages grow.  For example, the new and small firms with high turnover are also likely to have less capital and train their workers less, since this reduces hiring and firing costs and makes turnover less costly.  It is also possible that small firms have less efficient personnel screening mechanisms — which is what leads to a greater number of bad hires, and, consequently, greater turnover — but this also may mean that there are fewer or poorer skills acquired on the job.  The high-turnover industries are also those where the production tasks are less complex, so on average the skills acquired in retail trade, for example, are less valuable than those acquired in manufacturing or finance, insurance and real estate.

In sum, the high-turnover industries are also those most likely to hire low-wage workers.  Some researchers point out that forced exiters from welfare are twice as likely to get jobs in the retail trade sector than are other workers;(18) similarly 28 percent of jobs offered to welfare recipients were in the highest-turnover industry (business services).(19)

Table 1.  Monthly Turnover Rates by Industry

  Average Employment
Turnover Actions Proportion of Turnover
Turnover Rate
Quarterly Turnover Rate from UI data*
Agriculture, Forestry, and Fishing 1,698 245 3.26 14.43 47.96
Mining 623 38 0.51 6.10 26.00
Construction 4,973 529 7.05 10.64 38.14
Manufacturing 20,863 975 12.99 4.67 20.27
Transportation, Communication, and Utilities 7,463 350 4.66 4.69 17.43
Wholesale trade 4,421 283 3.77 6.40 19.05
Retail trade 17,641 1,737 23.14 9.85 26.75
Finance, Insurance, Real Estate 6,621 387 5.16 5.85 14.88
Business and Related Services 5,589 712 9.49 12.74 21.83
Personal services 2,825 330 4.40 11.68  
Entertainment and Recreation 1,241 218 2.90 17.57  
Professional and Related Services 25,441 1,431 19.07 5.62  
Public administration 5,639 270 3.60 4.79 14.19
Total 105,038 7,505 100.00 7.15 23.04
Source:  Ryscavage (1997), table E, p. 5 and author's calculations
*  Anderson and Meyer (1994).


Turnover by Worker Characteristics

Turning to the worker side of the story, table 2 demonstrates that turnover is much higher for young than for old workers.  It should be noted that this is not necessarily a negative for this group: many writers have documented that mobility among younger workers leads to higher earnings and greater earnings growth.  In fact, the average length of time spent looking for work after a job change is only 1.7 months for young women; 2.1 months for young men.(20)  However, adult men with a high school education change jobs almost 40 percent more often than do college-educated males.  This is of particular concern, both because this group takes almost twice as long to find a new job as does youth and because Farber (1997a) shows that prior mobility is a good predictor of the probability of leaving a new job.(21)

Thus, those workers who have moved a lot continue to move a lot, and if there are intervening spells of joblessness, those workers have fewer weeks worked in the year.  There are consequences other than lost earnings capacity.  In 1996 almost one in four workers with less than high school education was in a job lasting less than a year, compared with only one in six college-educated workers.(22)  This is important, because predicted job tenure is an important determinant of the training decision and training is very closely related to wage growth.  Workers who are likely to leave the job for nonemployment are 17 percent less likely to receive training.(23)

Table 2.  Turnover by Worker Characteristics

  Average Employment
Turnover Rate
Both sexes ages 16-24 19,366 15.8
Men ages 25-54 39,892 4.9
Women ages 25-54 37,172 5.8
College-educated 11,837 4.0
High school 1,080 5.5
Source:  Ryscavage, table F, p. 5