OECD JOB TURNOVER

Job turnover measures the creation or disappearance of positions while labour turnover measures the movement of workers into (hires) and out of (separations) jobs. In practice, this distinction is not always clear-cut. "Jobs" in this chapter are defined as filled employment positions. Job turnover is based on comparisons of stocks of employment in each establishment or enterprise at two points in time, usually one year apart. This comparison eliminates labour turnover within the establishment during the intervening period and so distinguishes job turnover. However, only net changes in jobs within each establishment are counted, so that true job turnover is under-estimated. In addition, changes in unfilled vacancies are not included.
Comparison of each establishment at two points in time allows it to be classified (in Chart 1) into one of four categories: opening (block A), expanding (block C), declining (block D) and closing (block B).Continuing establishments are classified based on net employment change. The sum of these four components (without regard to sign) represents gross change or job turnover (block I) or gross job reallocation. The net effect of these four categories of change, aggregated across all establishments in the economy, is equivalent to the net change in employment (block J).
Turnover is high relative to net employment growth because establishments or firms behave differently. Excess job turnover (reallocation) is the difference between total turnover and the absolute value of net employment growth (in Chart 4.1 block I - block J)2. This turbulence in the labour market represents the dispersion of establishment or firm growth rates around the mean rate of employment growth.This reflects differing circumstances facing establishments and implies that establishments within industries, regions and size classes are not homogeneous as is traditionally assumed in economics. As Hamermesh (1993) has pointed out, this means that there is no" representative establishment in an industry". If one assumes that decisions to hire are dependent on the marginal product, turnover data suggest that it is constantly shifting across establishments. If this is true, then, labour demand is a considerably more complex issue than is allowed for in the neoclassical theory of production, useful as that theory has been [Hamermesh (1993)].
Among the many ways to analyze job turnover, gains from opening and expansion of establishments (firms) (Chart 1 block E) can be compared with losses arising from closures and contractions (block F). Employment changes due to openings and closures, or net entry (Chart 1 block G) can be seenas distinct from expansion and contraction within a pool of existing establishments (net expansion) (Chart 1 block H). Employment growth stemming from the opening of new establishments can be viewed separately from the performance of existing establishments which consists of expansion, contraction and closure.