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How Costly is Turnover? Evidence from Retail

Peter J. Kuhn, Lizi Yu

NBER Working Paper No. 26179
Issued in August 2019, Revised in May 2020
NBER Program(s):Labor Studies

We estimate turnover costs in small retail sales teams using daily sales data and an advance notice requirement to address endogeneity concerns. In addition to short-staffing and onboarding costs, we identify two less familiar sources of turnover costs: incumbent workers’ recruitment activities, and reductions in team morale after a departure is announced. Our estimates of total turnover costs are relatively modest, however: Ten percent higher turnover is about as costly as a 0.6% wage increase. We attribute these low costs to a set of complementary personnel policies which ensure that only 25 percent of departures result in a short-staffing spell.

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Document Object Identifier (DOI): 10.3386/w26179

 
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