Three Essays in Employee Mobility
Chang, Jin Woo
2018
Abstract
This dissertation studies employer and employee outcomes that are related to employee mobility. In particular, it explores the consequences of employee mobility on employer performance, and how constraints on employee mobility can affect employee welfare. The first two chapters investigate how quitting, and firing, of employees are associated with the employer’s future growth. The third chapter examines how mobility constraints in the form of the enforceability of covenants-not-to-compete (CNCs) affect employee mobility and wages. In the first chapter, I examine how the effect of worker quits on future establishment growth varies by the quitting worker’s productivity level. I argue that when there are labor market frictions related to search and training, the difficulty of replacing a worker with another of equivalent productivity increases with the productivity level of the quitting worker, and this in turn leads to greater detrimental effect of quits by higher productivity workers. I provide novel empirical evidence that quits of high productivity workers lower future growth, whereas quits of low productivity workers do not. In particular, a one standard deviation increase in quit rate of high productivity workers is associated with a 1.2 percentage point decline in future establishment employment growth rate. The detrimental effect of high productivity worker quits is stronger for establishments with higher replacement costs: establishments that are more likely to have unfilled vacancies, that are more likely to cover the training costs of their employees, that have a more knowledge-intensive workforce, that have more complex operations, and that have worker representatives participating in hiring decisions. I exploit the richness of the German employer-employee linked data to distinguish quitting workers from fired workers, and construct instrumental variables to alleviate potential endogeneity concerns. This study contributes to the literature by exploring the role of replacement-related frictions in mediating the relation between worker quits and establishment performance. The second chapter examines how firing as a management practice can enhance worker-firm idiosyncratic match quality, and thereby foster growth of small firms. I view match quality as a component of a worker’s productivity contribution to the firm, determined by the fit between the worker and the firm. Utilizing German employer-employee linked data, I propose a measure of match quality and examine how firing, match quality, and growth are related at the firm-level. I hypothesize that firms can enhance its match quality with its workforce by trying out different workers, and find that firing is positively associated with enhanced match quality and stronger future growth. This relation is stronger for firing workers with fewer number of past jobs. In the third chapter, we examine the relationship between the enforceability of covenants-not-to-compete (CNCs), and employee mobility and wages. Using matched employer-employee data, we find that workers starting a job in an average-enforceability state experience longer job spells and lower wages such that after 8 years they have about 8% fewer jobs and 5% lower cumulative earnings relative to equivalent workers in a non-enforcing state. We then examine the 2015 CNC ban for tech workers in Hawaii and find that this ban increased mobility by 11% and new-hire wages by 4%. These results are consistent with CNC enforceability increasing monopsony power.Subjects
Employee Mobility
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Thesis
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