An Adaptation of "A Look at Worker Exits by Region of Minnesota and Type of Firm"

An Adaptation of "A Look at Worker Exits by Region of Minnesota and Type of Firm"*
by: Mustapha Hammida, Research Analysis Specialist, Minnesota Employment Review, Minnesota Department of Labor Security, Research and Statistics Office

adaptation by: Julie Barnish, Statistician, Research & Planning

introduction by: Krista R. Shinkle, Economist, Research & Planning

This article is an adaptation of “A Look at Worker Exits by Region of Minnesota and Type of Firm.” This adaptation offers an example of another state’s use of administrative databases for labor market research. Administrative databases contain information collected for the purpose of conducting business, but they are also used for statistical analysis. Research & Planning uses several administrative databases to study the Wyoming labor market. The previous article, “Comparing Unemployment Insurance Statistics of Wyoming and Neighboring States,” uses data from the Unemployment Insurance (UI) database. Another example of how Wyoming uses administrative databases is found in the July 2001 issue of Wyoming Labor Force Trends. The article, “The Effect of a College Degree on Wages: The Different Experiences of Men and Women,” contains information gathered from Wyoming’s Wage Records database. The use of administrative databases in compiling data for analysis allows for more timely information with a greater degree of accuracy.

The movement of workers into and out of employment, or new hires and worker exits,1 is a natural outcome of the dynamic processes inherent in the labor market. These processes have at least two dimensions, which can be defined as temporal and spatial. In a temporal sense, jobs taken by new hires may not keep pace with the decline of jobs. Such a situation may occur when displacement is sudden and large, as in a mass layoff event. In a spatial sense, new hires and worker exits may not happen in the same location, and this can cause imbalances across counties and regions of the state.

When regional and local imbalances in new hires and worker exits occur, they may impact earnings or the job structure of an area. For example, it has been observed that the displacement component of industrial development is biased towards unskilled occupations and declining industries and is usually geographically concentrated. Similarly, job creation has been biased towards skilled employment and to areas different from the ones with a heavy concentration of declining industries.

How businesses differ in their contribution to job creation and job loss across industry classifications and geography is an important question for regional economic development and for effective public policy. Having measures of job creation and job loss and knowing the behavior of job creation and job loss in the different sections of the state is key to keeping each region economically healthy and attractive for new businesses.

Distribution of Firms and Jobs by Region

The 1997 distribution of firms and quarterly jobs by region in Minnesota reveal two striking points. First, the Twin Cities' share of the total number of firms and the total quarterly jobs are much larger than those of the other five regions. The Twin Cities account for over half of firms and quarterly jobs.

Second, the shares of the total number of firms and the total quarterly jobs of the five regions located in Greater Minnesota were fairly similar.

Distribution of Worker Exits by Region

The distribution of worker exits between the Twin Cities and Greater Minnesota seems to be proportional to their shares in the total number of firms and quarterly jobs. Thus, in absolute terms, firms in the twin cities had the largest role in worker exits in Minnesota.

The ratio of worker exits to total jobs showed small differences among the six regions of the state. In other words, the range of variation of the ratio of worker exits to total jobs across regions was small, between 21 percent and 18 percent. This result indicates that no significant regional differences seem to exist in the extent of worker exits in total jobs.

Like the ratio of worker exits to total jobs, the average number of worker exits by firm shows little variation across the six regions.

Thus, the pattern of worker exits seems to show no major differences across the six regions of the state. As expected, firms in the Twin Cities Region were found to be slightly more active in worker exits than firms in greater Minnesota.

Distribution of Firms and Jobs by Firm Type

So far, the analysis of worker exits across geographical regions has used all firms, regardless of type. In other words, the patterns of worker exits from seasonal firms and from non-seasonal firms are mixed together. The extent of worker exits from these firms is certainly not of the same magnitude. Also, the distribution of these firms may be different across regions, and this may mask regional differences in worker exits. To account for the effect of differing employment patterns over time on the relationship between geographical regions and worker exits, firms were further segregated into three types;2

1. Long-lived firms are firms who were in business (here measured by no zero employment) in 1997 and were still in business in 1998.
2. Short-lived firms are firms who have ceased employment activity in 1998.
3. Returning firms are firms with zero employment in two or more consecutive quarters during the twelve quarters spanning 1996 to 1998.

The distributions of firm type in each region and in the state as a whole show that long-lived firms accounted for the majority of firms and jobs in 1997. As can be inferred from their definition, long-lived firms are characterized by a regular and continuous employment activity in the labor market. This means that worker exits at long-lived firms should provide an excellent indicator of the fundamental linkages between worker exits and geographical regions.

In addition to the distributions of firms and quarterly jobs, the state and regional distributions of worker exits by firm type were developed. Thus, the share of worker exits by firm type does not seem to vary across the six regions of the state.

Conclusion

Firms in the Twin Cities dominated the 1997 Minnesota labor market. These firms accounted for over half of the firms and over three-fifths of the quarterly jobs. Moreover, these firms seemed to play an important role in worker exits in Minnesota. About two-thirds of worker exits were from firms in the Twin Cities. However, in spite of this dominance, firms in the Twin Cities seemed to exhibit a pattern of worker exits similar to that of firms in all other regions of the state. In fact, no significant differences were present in the pattern of worker exits across regions in Minnesota.

¹The methodology followed to obtain new hires and worker exits in this study has been discussed in earlier issues of Minnesota Employment Review. For new hires, see the February 2000 issue; for worker exits, see the June 2001 issue. Current and back issues of this publication can be accessed online at <http://www.MnWorkForceCenter.org/lmi/review/archive.htm>.

²For a detailed definition of the three types of firms used in this study, see the Supplement to the June 2001 issue of Minnesota Employment Review, “A Look at Worker Exits by Firm Type.” Available at <http://www.MnWorkForceCenter.org/>.

*Used with permission. Originally published in the July 2001 issue of Minnesota Employment Review, a monthly publication produced by the Minnesota Department of Economic Security, Research and Statistics Office. The entire article can be viewed at <http://www.MnWorkForceCenter.org/lmi/review/0701supp.htm>.

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