The literature on gross flows in the labour market has developed considerably in recent years with interest generated by both labour economists and macroeconomists. This literature lacks information on the magnitude and characteristics of worker flows at the level of the firm, however. In Discussion Paper No. 1125, Research Fellow Simon Burgess, Julia Lane and David Stevens investigate the relationship between firm gross job flows and firm gross worker flows. Gross worker flows have two components: those which are an immediate consequence of job creation and destruction, and those which occur independently of job flows. This second component, labelled `churning', comprises simultaneous hiring and firing by firms (firms churning workers) and workers quitting and being replaced (workers churning firms).

The paper uses a large firm-level panel dataset to explore the links between gross job flows and gross worker flows. Its findings have relevance for models of job creation and destruction, of labour reallocation and of employment adjustment costs. Churning flows, the differences between worker and job flows at firms, are high, pervasive, and highly persistent over time within firms. Furthermore, the dynamic relationship between job and worker flows is quite complex: lagged job flows raise churning flows, but the effect of churning flows on job flows is asymmetric.

Job Flows, Worker Flows and Churning
Simon Burgess, Julia Lane and David Stevens

Discussion Paper No. 1125, February 1995 (HR)