THE EFFECT OF CHANGES IN QUITS AND HIRES ON THE LENGTH‐OF‐SERVICE COMPOSITION OF EMPLOYED WORKERS*

AuthorVladimir Stoikov
Date01 July 1971
DOIhttp://doi.org/10.1111/j.1467-8543.1971.tb00857.x
Published date01 July 1971
THE EFFECT
OF
CHANGES
IN
QUITS AND
COMPOSITION
OF
EMPLOYED WORKERS*
HIRES
ON
THE
LENGTH-OF-SERVICE
VLADIMIR
STOIKOV~
THE
length-of-service composition of a firm’s labour force is of considerable
interest to the employer, not only as an index of labour force specific
experience, but also as a good description of its age composition. The first
part of the paper analyses the effect of independent changes in the hire
rate, and in the quit rate, on the distribution
of
length-of-service. In
particular, it is shown that a realistic reduction in the quit rate rotates
the length-of-service distribution in favour of those with short seniority in
the company. This effect, and the effect of changes in hire rates, are
illustrated with particular length-of-service specific quit schedules and
hire rates. Two examples of the recent literature on a firm’s ability to
retain its labour force are examined and found defective in their inter-
pretation of the length-of-service distribution. The paper closes with
some implications of the obtained results for the ageing of the employed
labour force and a speculative proposition on the economic consequences
for firms of a declining rate of expansion, summarized as the Necessity-to-
Grow principle.
I.
A STABLE LENGTH-OF-SERVICE DISTRIBUTION
Let the length-of-service composition of employed workers in a firm in
year
t
be Llt, L,,,
. .
.
,
L,,,
these being the number of workers in the
length-of-service groups
0
to
1,
1
to
2,
. . .
,
(n
-
1)
to
n.
The total number
of workers,
L,,
is defined as
L,
=
L,,
+
L,,
+
*
* *
+
L,,,
(1)
which, divided by
L,,
leads to the following identity:
Note that each term of the right-hand side describes the proportion of the
employed labour force in a given length-of-service category. Let the work
force grow or decline by a given rate
I,
so
that
L,
=
L(l
+
I)t,
(3)
*
The author acknowledges helpful suggestions received from
Ivor
Francis, Lewis Per1 and
t
Professor of
Labor
Economics, Cornell University, Ithaca, New
York
Judith
Stoikov.
225

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