Job Turnover and Hire Rates
in Wyoming
Which is Greater: Job
Creation or Destruction?
by: Mike Evans, Senior
Economist
Tables by: Mike Evans and G. Lee Saathoff
" ... the number of labor market transactions (individuals hired and exiting jobs) occurring in the Wyoming economy is extremely high (473,316 in 1997)."
T
he last three feature articles
in Wyoming Labor Force Trends have examined specific types of labor turnover,
migration and job flow data in Wyoming from the perspective of the individual labor market
participant (see "Industry Variations in Wyoming's Steady
Workers," "Wyoming-Attached Workers: Living and Working
in Wyoming" and "Separation from the Wyoming Labor
Market"). This month we will look at the overall job flow and turnover data for
the state from the individual and employer perspective using Unemployment
Insurance (UI) Wage Records for individuals and UI Employment Specific (ES-202) data
for employers.
A constant churning occurs in the labor market. Individuals are hired and exit jobs,
businesses expand and contract or start and end, and the difference of all these
transactions determines whether or not jobs are created or destroyed. Even if
exits equal hires (see "
Definitions,"), a stable establishment exists with the same
employment level as the previous year. For example, in a forthcoming article, we
will show that over one-third of all businesses have the same employment level from
one year to the next. However, a firm may turn over its entire workforce in the
course of two years and still be classified as stable growth compared to high turnover.
The total number of accumulated exits by individuals from employers in all industries in
Wyoming amounted to 231,198 in 1997 (see Table 1). This level of
exits is greater than Wyoming’s total 1997 annual average non-agricultural jobs
(1) (224,500)! A large number of these exits come from
the same individuals jumping from job to job during the year and seasonal workers hired
temporarily. The number of hires by employers in 1997 amounted to 242,118, showing a
positive net job flow of 10,920 more hires than exits (242,118 hires minus 231,198 exits).
This job growth is up from 1995 when an employment contraction of 480 more exits than
hires coincided with other data showing a slowdown in the Wyoming economy
(2). This also gives us new insight into understanding
the dynamics of changes in the overall employment levels for industries (see
Wyoming Nonagricultural Wage and Salary Employment).
Data
In this research, we link quarterly Wyoming Unemployment Insurance ES-202 (employer)
files to the wage record (employee) database to develop time series data on the aggregated
characteristics of firms and employee turnover. The data sets were matched from quarter
to quarter to track the changes from year to year and seasonal patterns.
The data sets used are a census of UI covered employers and employees with no sampling.
Other studies merely examine large businesses at one point in time.
We will look at continuous data to analyze the condition of all businesses over time
(3). In Wyoming, most businesses are required to submit
joint quarterly UI/Worker’s Compensation (WC) forms on the number of employees working
on the 12th of the month, along with their employee’s wage records, a list of each
individual employed and wages paid by the business for the previous quarter.
Turnover rates to determine job expansion and contraction
Net change in employment is the traditional way of studying economic growth (see
Wyoming Nonagricultural Wage and Salary Employment). Turnover
rates describe the processes of net job flow growth. Job flow
rates are calculated by subtracting hires from exits and then dividing this
by total employment for the time period (0.4% in 1997, Total for All Industries; see
Table 1). Net job flows determine
whether or not employment is stable in comparison to turnover levels and also determine
if a business is expanding or contracting.
If net job flows and job flow rates are positive, then job
creation is occurring (employment in the present time period is greater than
employment in previous periods). Similarly, if employment in the present time period
is less than employment in previous time periods, then job
destruction is occurring. The turnover rate
(i.e., total number of exits from employers divided by the total number of jobs) has
leveled off at 9.0 percent (Total for All Industries, see
Table 1) after increasing from 1993. The hire and job flow rates followed the same
pattern of declining from 1993 to 1995 and thereafter showed signs of growth. Nebraska’s
turnover rate is half of Wyoming’s (4.5%) which could be due either to higher wages, the
nature of the calculation, the time period covered or that Nebraska uses a survey instead
of administrative data(4) to derive their turnover rate.
On the other hand, Alaska, Illinois and Oregon have higher turnover rates(5) (24.9, 17.6 and 20.7% for 1995, respectively(6)). The gross job flow for Wyoming shows the sheer quantity of total
exits and hires of 473,316 during 1997. This is a tremendous number of labor market
transactions. In future research, we will examine turnover by county and industry.
Industry Turnover Rates
Construction, Agriculture and Retail Trade have the largest industrial turnover rates
in Wyoming, ranging from 12.1 to 15.6 percent in 1997. This is primarily due to the
seasonal nature of the industries. For example, Agriculture’s crop production industry
(see Table 2) has a turnover rate of 26.0 to 31.0 percent in
third quarter (July, August and September) when harvesting is nearing completion. Hire
rates range from 28.0 to 37.0 percent in second quarter (April, May and June) when the
planting season is starting. Table 2 also shows that job flow rates and net job flows
follow this same pattern. Total turnover and hire rates in Wyoming also follow this
seasonal pattern where hiring rates are around 10.0 to 11.0 percent in the second and
third quarters, while the fourth (October, November and December) and first (January,
February and March) quarter rates are around 7.0 to 8.0 percent and the majority of the
exits occur in the fourth quarter of the year.
Industries with low turnover rates of 3.4 and 6.0 percent, such as Public Administration
and Finance, Insurance, & Real Estate (FIRE), typically do not have the seasonal patterns
associated with Construction or Agriculture. As can be seen from
Table 1, Public Administration has zero job flow rates since 1994, indicating neither
job expansions nor contraction (job replacements are equal to openings). Typically,
elected officials serve two- to four-year terms and many workers in Public Administration
work on one-year contracts thereby reducing the turnover rates
(7). Education shows 3.0 to 4.0 percent turnover in the fourth and first
quarters and 6.0 to 7.0 percent in the second and third quarters (see Table 2). This
is expected, due to summer break and teachers taking positions in other industries
when contracts expire. The Services industry as a whole has a turnover rate of 8.9 to
9.2 percent for the time period from 1993 to 1997.
Public Administration and education also have low turnover because people who go into
those types of professions (i.e., teachers, nurses, police officers, firemen, etc)
typically make a career decision. If they leave their jobs, these people usually move
to a similar job somewhere else, either to another county or out of state. Also, when
teachers move from one school to another in the same county, they usually stay with the
same employer. Turnover within the same employer or internal promotional moves cannot
be followed using wage records, resulting in an underestimation of overall turnover
rates(8).
High paying industries, such as Mining and Transportation, Communications, & Public
Utilities (TCPU), also have low turnover rates. Rates for these industries range from
5.3 to 7.0 percent, compared to the Total for All Industries norm of 9.0 percent. The
hypothesis is that higher wages induce fewer exits. Consequently, high-wage industries
require fewer replacement hires and turnover rates are thereby reduced. For example, in
an industry with an average turnover of 10.0 percent, a specific employer may have a
35.0 percent turnover rate because it is paying wages that are much lower than the
industrial demand.
One interesting note: the pipeline industry in TCPU (see Table 2)
shows fairly consistent hire and turnover rates until the third quarter of 1997 when hire
rates increase dramatically from 2.0 to 26.0 percent. This is due to a special pipeline
construction project that started in that quarter. An examination of forthcoming 1998
data should show a dramatic increase in exits and turnover when the project was completed.
Special one-time projects can increase both hire and turnover rates, while dramatic
increases in exits and turnover alone would suggest a massive layoff by employers.
Conclusion
Using individual and employer information, we determined that the number of labor market
transactions (individuals hired and exiting jobs) occurring in the Wyoming economy is
extremely high (473,316 in 1997). Turnover appears to increase among lower wage
industries when wages are low and the industry requires few job skills, although for
certain industries this is not true because of seasonality. In the future, we will
continue studying job expansion and contraction by examining the growth and decline
of businesses over time by industry, occupation and size class.
1 Current Employment Statistics, "
Wyoming Annual Average
Nonagricultural Employment by Industry 1990-1998."
2 Gregg Detweiler, "Industry Variations in
Wyoming’s Steady Workers," Wyoming Labor Force Trends,
May 1999, pp. 1-6.
3 Businesses covered under Unemployment Insurance (UI) have a
payroll of $500 or more in a calendar year or acquire all or part of an organization,
business, or trade, subject to the UI law at the time of acquisition. UI typically
does not cover self-employed, agricultural workers, unpaid family workers, domestic
help, military personnel, railroad workers, and non-profit workers.
4 Nebraska Department of Labor, Nebraska Economic Trends, January 1999.
5 Wyoming also had artificially high turnover rates in 1992. Since 1992 was the first year hires and exits were available, all employees picked up in the first quarter of 1992 were considered hires because there was no prior work history in the database. Thus, the number of hires was artificially increased; that is why we are not reporting 1992 hire and turnover rates.
6 C. Caldwell, "Cyclical Patterns of Occupational Hiring," Short-Term Employment Forecasts Consortium, Caldwell Economic Information Services, 1999.
7 Ownership type in Public Administration (i.e., Local, State and Federal Government) is not broken out of these calculations, although other studies show State Government employee turnover around 14.0 percent in 1998.
8 Krista Shinkle, "Wyoming-Attached Workers: Living and Working in Wyoming," Wyoming Labor Force Trends, April 1999, pp. 1-6.
Watch for the final installment of this five-part article series analyzing labor force attachment coming in the July issue of Wyoming Labor Force Trends!
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