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Firms, Their Workers, and Their Survival

Firms, Their Workers, and Their Survival

(p.39) Chapter Four Firms, Their Workers, and Their Survival
Economic Turbulence
Clair Brown
University of Chicago Press

This chapter explores the link between worker turnover, workforce quality, and worker pay, as well as success as measured by firm performance. More productive firms pay above-average wages to their workers, have a higher-quality workforce and lower turnover, and have more skilled workers, although these relationships vary substantially across industries. Average productivity in the software industry rises substantially as low-productivity exiting firms are replaced by higher-productivity entering firms. Industry productivity dynamics are closely associated to firm entry and exit and restructuring. Establishments that exit are less productive and have higher turnover and lower workforce quality than firms that enter. Businesses with higher-quality workforces and lower churning are more likely survive. Firm performance is tightly linked with workforce quality and churning. Firm survival is a function of businesses with high productivity, low churning, and high human capital.

Keywords:   worker turnover, workforce quality, worker pay, firm performance, software industry, productivity dynamics, churning, human capital

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