Declining Worker Turnover: the Role of Short Duration Employment Spells
Using the Quarterly Workforce Indicators, we document that a significant amount of the decline in labor market turnover during the last two decades is accounted for by the decline in employment spells that last less than a quarter. Using a search and matching model that incorporates noisy signals about the quality of a worker-firm match, we show that improved candidate screening by firms can account for the decline in short-lived employment spells. Quantitative exercises show that this explanation can account for the observed changes in various labor market outcomes, whereas alternative potential explanations, such as increased hiring costs, cannot.
We are thankful for helpful comments and suggestions from seminar participants at the Federal Reserve Bank of Cleveland and the 2019 MidWest Macro Conference at the University of Georgia. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
I have received financial support in excess of $10,000 over the last three years from the Federal Reserve Bank of Minneapolis, the Federal Reserve Bank of Atlanta, Yonsei University (South Korea) and the World Bank.