1993 Reports

Employer Size and Labor Turnover

Idson, Todd

This paper investigates the causes of higher tenure, and lower turnover, for workers at large plants or firms. The primary hypothesis investigated is that long-term employment relationships in large plants and firms stem from (1) the greater capacity of large employers to provide job opportunities within the enterprise and (2) the lower probability of business failure facing large producers. In addition to directly lowering turnover, these effects on average employment duration act to raise the expected returns from on-the-job training, resulting in higher levels of on-the-job training that in turn inhibit turnover. Furthermore, in order to protect these training investments, remuneration is characterized by mobility inhibiting wage premia and fringe benefits, and firms attempt to hire employees with lower mobility tendencies - both practices act to further reduce mobility. In addition to empirically evaluating the above view of the manner in which size of employer influences mobility outcomes, three additional factors are investigated that may account for the link between size and mobility, (1) working conditions, (2) monitoring difficulties, and (3) union organization threats.