Labour Turnover, Wage Structure, and Natural Unemployment

Published: Jan. 1, 1978, 11 a.m.

b'A firm may reduce its turnover and the entailed turnover costs by raising wages. A rise in unemployment reduces turnover and turnover costs in a similar way. The interaction of these effects leads \\u2013 in presence of perfectly flexible wages \\u2013 to a stable equilibrium in the labor market which clears the market but accidentally. Unemployment increases with increases in labor mobility. Wage differentials arise between perfectly identical workers working in different firms that face different turnover costs.'