Labour Turnover and Labour Productivity in a Retail Organization

29 Pages Posted: 12 Oct 2006

See all articles by Stanley Siebert

Stanley Siebert

Business School, University of Birmingham; IZA Institute of Labor Economics; Institute of Economic Affairs (IEA)

Nick Zubanov

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Arnaud Chevalier

University College Dublin (UCD) - Institute for the Study of Social Change; IZA Institute of Labor Economics

Tarja K. Viitanen

IZA Institute of Labor Economics

Date Written: September 2006

Abstract

We study the impact of labour turnover on labour productivity using a panel dataset of 347 shops belonging to a large UK clothing retailer over 1995-1999. For the within-shop link - holding constant the shop's permanent characteristics - we observe an inverted U-shape effect of labour turnover on productivity. The productivity-maximizing rates of FTE-adjusted quits and hires are each about 20% per year, improving productivity by 2.5% compared to the zero turnover level. We explain the difference between this optimal level of labour turnover and its observed average (quits and hires each around 10%) through the costs of hiring estimated at about £600 per hire. By contrast, between shops, there is a positive link between average rates of turnover and average productivity, suggesting that an unobservable management quality factor generates both high turnover and productivity, which we discuss.

Keywords: labour productivity, labour turnover, matched employee-firm panel data, retailing

JEL Classification: J63, J24, L81

Suggested Citation

Siebert, Stanley and Zubanov, Nick and Chevalier, Arnaud and Viitanen, Tarja K., Labour Turnover and Labour Productivity in a Retail Organization (September 2006). IZA Discussion Paper No. 2322. Available at SSRN: https://ssrn.com/abstract=936908

Stanley Siebert (Contact Author)

Business School, University of Birmingham ( email )

Edgbaston
Birmingham, B15 2TT
United Kingdom
(44) 1214146698 (Phone)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Institute of Economic Affairs (IEA) ( email )

2 Lord North Street, Westminster
London, SW1P 3LB
United Kingdom

Nick Zubanov

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

HOME PAGE: http://www.eur.nl/ese/english/about_ese/staff/profiel_mis/10636/

Arnaud Chevalier

University College Dublin (UCD) - Institute for the Study of Social Change ( email )

Belfield
Dublin 4
Ireland
+353 1 716 4616 (Phone)
+353 1 716 1108 (Fax)

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

Tarja K. Viitanen

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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