The Flow of Labor: Workforce Interactions with the Labor Market
How Do Workers and Employers Interact?
Occupational vacancies occur for a variety of reasons. Job growth is one explanation. Besides growth, other market characteristics are associated with increasing demand for labor in certain industries and occupations, but not in others. This chapter discusses three market characteristics:
characteristics of the job--how human resources are used in terms of worker characteristics and industry characteristics,
worker characteristics likely to lead to vacancies, and
industry characteristics associated with the normal flow of workers into and out of jobs--market interaction.
Chapter 1 concluded with a discussion of workers' earnings. Earnings represent a measure of the extent to which a firm or an industry fully and efficiently utilizes the available supply of labor. The working proposition of this publication is that the utilization of labor is associated with its availability. Underutilized labor is less likely to be available than fully-utilized labor.
In this chapter, we examine how different industries utilize labor. While the manner in which industries utilize labor has quality of life and community effects, our focus is on identifying industry efficiency and supply requirements. Subsequent chapters examine how Wyoming's labor market utilizes educational and training resources, and describe the competitive position of the state's wage rates.
Earnings are associated with demographics, and both earnings and demographics are associated with the extent to which industries utilize labor. One measure of utilization is the mix of full- and part-time work. This measure is, however, unavailable to us. Instead, we can describe worker attachment and how extensively each industry utilizes the available human resources with factors constructed from available administrative databases. Overcoming a circumstance in which it may be difficult to obtain labor may in fact turn on the question of whether employers can more fully utilize locally available employed or underemployed workers.
The concept of labor utilization can be approached from the standpoint of worker behavior (supply), the standpoint of industry efficiency (demand), and from the standpoint of the interaction between the two. Traditionally, worker behavior has been described in terms of the extent of labor attachment to the market, or labor's sustained patterns of interaction with available demand.
The extent to which the workforce is attached to the labor market is illustrated in Figure 2-1. Figure 2-1 shows Wyoming's employment distributed among six categories of labor attachment. The categories were developed by Research & Planning (R&P) (see Glossary, Attachment to Labor Market). As can be seen in Table 2-1, less than half of Wyoming's total workforce worked steadily (those working at least three quarters) during 1998.9 In 1998, 43.7 percent of the workforce worked for the same employer and an additional 3.8 percent had consistent work opportunities (not necessarily in the same industry) but changed employers. Though there are individual exceptions in the other categories, the majority of workers had a more tenuous relationship with the market. Appendix F provides detailed tabular data on employee utilization and labor attachment.
The number of steady workers includes both those who worked for the same employer (SE) at least three quarters or for different employers (DE) at least three quarters. Large numbers of Wyoming workers held jobs during only one or two quarters of the year in Wyoming. This pattern is indicative of seasonal job holding such as summer jobs held by students or contracts for highway construction work. Also, in 1998, 43,829 workers were characterized as multiple-job holders, meaning they chose to adopt a strategy of working two or more jobs simultaneously, supplementing their earnings and supporting their attachment to Wyoming.
Labor market attachment varies significantly by demographic group. In general, from Appendix G, younger workers worked fewer quarters and experienced a lower level of attachment to the labor market. For example, 24.4 percent of all individuals aged 20-24 years worked as steady workers for a single employer. Of this same age group, 25.6 percent worked as multiple-job holders, significantly higher than the 14.8 percent from all age groups who fell into this category. In contrast, 67.2 percent of 45-54 year-old males and 63.0 percent of 45-54 year-old females held steady employment with a single employer.
The industrial efficiency of labor utilization may be defined in terms of the number of persons working the available number of jobs. Based on the data in Table 1-1, we can illustrate how human resources are utilized in Wyoming by computing the ratio of people working to jobs worked by industry. Table 1-2 shows that for all industries 295,610 persons worked at any time during the year, and 213,551 State Unemployment Insurance (UI) Covered jobs, a ratio of 1.38 persons per job. In Transportation, Communications, & Public Utilities (TCPU), 13,805 persons worked at 11,106 jobs, a ratio of 1.24 persons per job, demonstrating a more efficient use of available human resources. However, "employment [in TCPU] is forecast to dip . . . in 2001 and continue to decline . . . [through] 2008."10 In comparison, in the growth industry of Services, 70,375 persons worked at 48,106 jobs, a ratio of 1.46 persons per job. Based on these ratios, Services used 17.7 percent more persons per job than Transportation, Communications, & Public Utilities (TCPU) and 6.0 percent more persons than the labor market as a whole. The Services industry is more dependent upon a larger labor supply than the market as a whole and therefore, is defined as less efficient than the market as a whole. With the population, containing the supply of labor, estimated to have decreased between 1998 and 1999 (down from 480,045 to 479,602--see Appendix D), continued growth in Services is likely to be constrained unless it utilizes human capital more efficiently.
The efficiency with which an industry utilizes labor can also be measured in terms of the extent to which employment opportunities represent work over all four quarters of the year. Table 2-2 shows employee utilization by industry. By summing the number of quarters worked by all employees in a given industry, and computing the ratio of this sum to the total quarters of work possible (if each wage earner in the industry had worked all four quarters), we formulated a measure of industry utilization, or the Utilization Index. Quarterly employment reported by employers (under Unemployment Insurance) does not include the actual hours of work for each employee, or whether the employee had a full- or part-time status. The Utilization Index offers an alternative to knowledge of work hours in order to measure the degree to which employers use the human resources available to them.
Coal mining, for example, represents an industry with a high (90.2%) employee utilization rate. In comparison, within Services, hotels and other lodging places (60.9%) and educational services (82.4%) use lower proportions of their respective workforces. This lower utilization may be explained by a more seasonal pattern of labor demand within the lodging and educational services industries than in coal mining.
The interaction between supply and demand measures implies a correlation between measures of labor attachment and industry utilization. For example, Table 2-1 also shows that 63.6 percent of workers in coal mining fell into the Steady Worker Single Employer category. This helps account for the high utilization rate reported for coal mining. Within Services, hotels and other lodging places (25.0%) and educational services (42.1%) represent industries providing fewer opportunities for steady employment with a single employer. Appendix F provides an opportunity to view employment utilization and labor attachment data together by industry.
The Demographics of Attachment and Utilization
Industries have patterned ways of using labor. The uses of labor are associated with demographics where age serves as a proxy for experience. Also, the level of labor utilization implies a correlation between earnings and utilization rates. For example, Appendix E shows that in 1998 males aged 35-44 years who worked in TCPU earned on average $36,578. These earnings are more than twice (109.9%) Wyoming's average annual wage of $17,429 for all industries. Male earnings are used in this example because males comprised a majority (at least 65.3%) of TCPU's workforce (see Appendix B).11 The Utilization Index for TCPU also has a high 81.8 percent (see Table 2-2); meaning 81.8 percent of TCPU employees worked all four quarters. In comparison, male workers aged 35-44 years working in Services earned on average, $26,696; females aged 35-44 years working in Services earned $14,844 (see Appendix Table E). Correspondingly, the Utilization Index for Services (regardless of gender) was 70.5 percent (see Table 2-2), much lower than in TCPU. Within Services, only health services (82.0%) and legal services (82.5%) had utilization rates comparable to TCPU. Business services, which includes information technology-related companies, had a utilization rate of 63.9 percent.
Worker gender, worker attachment, and industry utilization are not the only factors associated with the continued availability of labor. Table 2-3 shows the relationship of age to working in all four quarters in 1998. The highest proportion (74.7%) of any age group working all four quarters in 1998 occurred among 45-54 year-olds. This is also the age group for which both men and women earned the highest average wages, $28,532 (see Table 1-3). By comparison, only 68.5 percent of 55-64 year-olds worked all four quarters.
The proportion of workers with high utilization (in Table 2-3) by age group are illustrated in Figure 2-2. Over the forecast horizon (1998 to 2008), 61,126 persons aged 35-44 (with a high utilization rate of 70.8%) will be maturing into the age group (45-54) of highest utilization (74.7%) and enhancing the supply of labor. At the same time, those presently aged 45 to 54 will be maturing into an age group with lower levels of high utilization (68.5%--see Figure 2-2). Given the higher population level of the 35-44 year old workforce, it appears that the net change results in an overall higher level of labor utilization.
Retirement: Permanent Employee Exits from the Labor Market
The concept of attachment refers to the dominant, patterned involvement of workers in the labor market. One standard pattern of market interaction is retirement. Table 2-3 indicates that 2.1 percent of the workforce is 65 years of age and over and that for 21.5 percent of the population age information is unavailable. By prorating the number of persons for whom age information is unavailable to the age categories for which age information is available (78.5% of the workforce), we can estimate the proportion of the workforce reaching the traditional retirement age of 65, over the forecast period of 1998 to 2008.
In Table 2-4 we present an estimate of the number of persons likely to create a permanent vacancy in the labor market due largely to retirement in Wyoming. An estimated 9.1 percent of the workforce will reach age 65 during the period 1998 to 2008 creating an annual replacement demand of 2,687 persons if all aspects of the labor market were to remain unchanged in the level of demand.
The male dominated, high wage, high utilization, steady work industry of Transportation, Communications, & Public Utilities (TCPU) is expected to experience a replacement need of 11.9 percent during the forecast period. However, some of the highest rates of replacement need are found in all levels of government (12.5%), in coal mining (12.2%), nonmetallic minerals mining (11.6%), real estate (12.4%), and in heavy construction (9.8%). While individual firms may be cognizant of their growing needs as a function of the share of employment reaching traditional retirement age, it is not clear that they understand that growing retirements are something common to firms of selected industries. To the extent that replacement need is industry wide, it is not clear to what extent firms losing employees to retirement will be able to recruit from a less mature workforce in the same industry.
Retirement, as used in Table 2-4, means a permanent withdrawal from the labor market. Persons retiring from the market would represent a small share of the persons exiting the labor market as discussed in relationship to the remaining three tables in this chapter.
Determining "the effectiveness of the labor market," and identifying the "percentage of job openings (that) are filled through the workforce activities/services such as the One-Stop Centers" implies a knowledge of how the market in its entirety functions. With some limitations, comprehensive market functioning can be specified and the level of filled vacancies computed.
As we indicated in Table 2-1, steady work with the same employer (only 43.7% of the workforce) does not characterize the experience of most workers in Wyoming. Most people who work in Wyoming, or most employers, attain a job, leave a job, hire someone, or let someone go during the course of a year. In 1998, 57.7 percent of the 294,166 persons who worked entered employment during the year (see Table 2-5). The vast majority (70.0%) of those who worked at any time during the year were hired, left employment with an employer, or engaged in both activities.
Most employers, 84.3 percent of the total, hired at least one person during 1998 (see Table 2-6). The data in Tables 2-5 and 2-6 describe the number of workers and employers in the market during each quarter of 1998. Table 2-7 describes the volume of market hire and exit transactions between most workers and employers in Wyoming.
In 1998, 206,040 persons and 16,213 employers, were responsible for 233,981 hiring transactions and 242,646 exit transactions. As we can see in Table 2-7, the peak period of hire (n=75,446) occurred during the second quarter. The peak periods of exit were in the third (n=70,952) and fourth quarters (n=70,777). Turnover rates were computed as a function of exit transactions divided into the number of jobs worked as of the 12th of the month for all employers reporting complete employment (jobs) and Wage Records (all persons who worked) information for Unemployment Insurance purposes. A conventional computation of the turnover rate for 1998 is to divide average employment (N=206,334) into the number of exit transactions (N=242,646) for a rate of 117.6 percent.
Exit (turnover) rates are at their lowest point in the first quarter at 20.4 percent, and rise to 34.7 percent in the fourth quarter (when non-market transactions in the Unemployment Insurance program begin to accelerate). In terms of volume, certain periods of the year are dominated by different industries. The majority (56.6%) of hiring during the peak period of the second quarter was divided between 22,675 hiring transactions in Services and 20,021 in Retail Trade.
Overall, exit rates are lower in high utilization industries and higher in low utilization industries. For example, the Utilization Index in Mining (see Table 2-2), at 84.1 percent, corresponds to a low turnover rate of 87.9 percent (see Table 2-7). However, the Index for Services stands at 70.5 percent, with a correspondingly high 151.8 percent turnover rate. As the Workforce Development Council's minutes, used to introduce this chapter, reflect, to the extent that "job openings are filled through ... workforce activities ... such as the One-Stop Centers . . . " there may be increased pressures for One-Stop services if the Services Producing sector continues to expand as anticipated.
Given the lower levels of utilization, worker attachment, worker earnings, and higher turnover rates for Services Producing industries, it is not clear that the workforce benefits as extensively from nonselective One-Stop services driven by the volume of transactions generated by Services. R&P has not received the files necessary to identify the market share of all transactions that have contact with the One-Stops, partner agencies, and intermediaries in the market.
As the available data indicate, the majority of employers and workers engage in hiring and exit activity over the course of a year. Labor interactions are of a very fluid nature, but barring geographic and seasonal differences between the demand and supply for labor, Wyoming has sufficient human resources. This untapped source of labor in Wyoming is what might be termed our "under-utilized work force." What is unclear, however, is whether the available labor is sufficient to meet the current occupational demands.
Clearly, the industries representing the bulk of under-utilized labor include Construction, Retail Trade, and Services. We know something of the demographic profile of under-utilized workers in these industries. In Retail Trade and Services, they are females, aged 20-44. Construction employs a high proportion of under-utilized male workers aged 20-34 years. Workers in these age groups offer a source of labor that could be more fully utilized.
A policy implication for workforce development is that by improving the utilization rate of human resources in Services, Retail Trade, Construction, or other growing industries to a level equivalent to TCPU (81.8%), Wyoming's current supply of labor may be able to meet the demand for labor and more fully tap the workers' potential. Innovations such as developing telework arrangements for Services employees or training opportunities for Construction or Retail Trade workers may help eliminate geographical or seasonal barriers to improving levels of employee utilization.
9 Wyoming Department of Employment, Research & Planning, Wyoming Wage Records 1992-1998: A Baseline Study, November 1999, p. Appendix C-2. The attachment measure is an attempt to characterize attachment of individuals using quantitative measures and measures of interactive processes, while the utilization index in Table 2-2 in the present publication represents an attempt to quantify the efficiency with which industries utilize labor.
10 Wyoming Department of Employment, Research & Planning, Outlook 2000: Joint Economic & Demographic Forecast to 2008, February 2000.
11 Male workers in Transportation, Communications & Public Utilities (TCPU) very likely comprise more than 65.3 percent of the industry's workforce, especially when factoring in those industry workers for whom demographic data are not available (14.1%).
Last modified on August 10, 2001 by Valerie A. Davis.