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Market-Based Solutions to Vital Economic Issues

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Market-Based Solutions to Vital Economic Issues
Research
May 1, 2017

Demand Fluctuations, Precarious Incomes, and Employee Turnover

Abstract

Millions of employees face work schedules and wages that change frequently as firms try to match labor to demand. Here, we use personnel records from the retail industry to examine whether workers’ income precariousness impacts firm performance. We find that lower income levels and higher income volatility increase employee turnover, without improving revenues. These effects are not driven by employee ability. Using exogenous changes in customer traffic as instruments for employees’ income level and volatility, we show that these results have a causal nature. Hence, firm efforts to optimally deploy labor need to account for employees’ response to precarious wages.

Note: Research papers posted on SSRN, including any findings, may differ from the final version chosen for publication in academic journals. 


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