Study Measures Employee Turnover in Large and Small Firms

Establishment size matters in determining employee compensation and job tenure, concludes a study released recently by the Office of Advocacy of the U.S. Small Business Administration. The study found that all other things being equal, employees of larger establishments have longer job tenures than those working in smaller establishments. Moreover, the study found that service and manufacturing occupations pay more in larger establishments as well.

Written with funding from the Office of Advocacy by John Hope and Patrick Mackin of SAG Corporation, the study determined that each additional year of tenure on a job reduces the probability of turnover by 81%. It also established that the offering of benefits reduces the probability of an employee leaving in a given year by slightly more than 26%.

"The reasons for shorter job tenure and lower compensation in smaller establishments are not yet well understood," said Dr. Chad Moutray, Chief Economist for the Office of Advocacy. "Smaller establishments tend to be younger, and younger firms are more volatile. Their higher closure rate could be a major factor in determining job tenure rates. More study is needed to fully understand this phenomenon," he said.

The report, The Relationship Between Employee Turnover and Employee Compensation in Small Business, analyzes a unique set of data drawn from the National Longitudinal Survey of Youth gathered by the Bureau of Labor Statistics.

The Office of Advocacy, the "small business watchdog" of the federal government, examines the role and status of small business in the economy and independently represents the views of small business to federal agencies, Congress, and the President. It is the source for small business statistics presented in user-friendly formats, and it funds research into small business issues.

Source: The Office of Advocacy of the U.S. Small Business Administration (SBA)

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