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If You Pay, Will They Stay? Using J2J to Investigate Earnings and Separations Rates

A previous blog used Job-to-Job Flows (J2J) Explorer data from the U.S. Census Bureau to understand job mobility in North Carolina. Continuing to use the J2J data, this blog confirms that for the most part, earnings and separations in North Carolina were inversely related. This has implications for training and hiring practices, especially in lower-wage industries.

Author: Chi Wong

Recent national surveys and reports regarding the Great Resignation and the motivations for job changers have listed low pay as one of the top reasons for changing jobs, even during an uncertain time where job security could be preferable. We can use J2J Explorer data to examine this relationship empirically in NC. More specifically, the data includes industry-level counts for workers that leave a job anywhere in the US and immediately transfer to another job based in North Carolina, as well as their earnings level at the job they separated from. Based on the survey findings, we expect to see the higher-paying industries with a lower separation rate than lower-paying industries, and vice-versa.

The tables below show the initial results of our analysis, which was performed on 2020 earnings and separations data:

Industry Sectors: Separation Rate vs Average Quarterly Earnerings, 2020
Industry Sector 2020 Separation Rate 2020 Average Quarterly Earnings
Admin and Waste Management Services 9.5% $9,507
Accommodation and Food Services 7.1% $4,270
Retail Trade 4.6% $6,880
Arts, Entertainment, and Recreation 4.3% $7,073
Transportation and Warehousing 4.2% $10,634
Construction 3.6% $13,366
Real Estate and Rental and Leasing 3.5% $12,142
Other Services (except Public Administration) 3.5% $8,976
Professional, Scientific, and Technical Services 3.4% $19,437
Agriculture, Forestry, Fishing and Hunting 3.0% $8,524
Health Care and Social Assistance 3.0% $10,722
Information 2.7% $21,104
Wholesale Trade 2.5% $17,644
Manufacturing 2.4% $13,563
Management of Companies and Enterprises 2.4% $20,160
Mining, Quarrying, and Oil and Gas Extraction 1.9% $13,506
Finance and Insurance 1.8% $22,476
Educational Services 1.3% $10,955
Public Administration 1.2% $10,563
Utilities 1.1% $19,874

Taken together, this data shows a weak relationship between separations and quarterly earnings (correlation coefficient of -.058).  However, if you remove Educational Services, Public Administration, and Administrative and Support and Waste Management and Remediation Services (the gray dots below) the relationship becomes much stronger (-.75):

2020 Average Quarterly Earnings & Separation Rate

Source: Job-to-Job (J2J Flows Data, U.S. Census Bureau 

Why are these three industries so disruptive to the trend? In the case of Educational Services and Public Administration, a potential explanation is that many of those employees work in the public sector, which attracts workers that may be motivated by factors other than earning potential.  These other factors can include things like a desire for greater job stability, the opportunity for pension benefits tied to longevity, and the desire to serve one’s community. As for Administrative and Support and Waste Management and Remediation Services, this sector includes Temporary Help Services, who are likely to change jobs frequently regardless of the wages offered. Having said that, the data in this analysis cannot support these hypotheses.

The findings in this blog are enriched when considered in tandem with the previous J2J analysis regarding destination industries for low-wage job changers. After excluding the three aforementioned sectors, Accommodation and Food Services and Retail Trade have the highest separations rates and lowest average quarterly earnings.1 It is also known, however, that job changers from both sectors either stay in the same sector or move to the other (i.e. Accommodation and Food Services job changers move to Retail Trade, and vice versa). In other words, many low wage workers move between one low wage sector to another. Perhaps marginal wage increases enough for these individuals to change industry. Maybe workers in these sectors lack the skills and/or resources to move to higher paying industries. Or are there other reasons outside of pay that keep workers in these positions?

Unfortunately, the J2J data cannot this. Nevertheless, our findings may still have further implications for the workforce. For one, the labor market is still tight; there are still more job openings than jobseekers. Given that there are more workers who transfer between jobs than workers who are hired from unemployment, medium wage industries may find workers more easily by directing recruitment workers from lower-wage industries and providing appropriate training. Additionally, the cycle of workers separating and rejoining lower-wage industries highlights the continued need to outreach to this group. Is the promise of better career path through higher education well known and believable? Are the education offerings available to them appealing, affordable, and accessible – fitting their schedule, transportation options, and family obligations (e.g. childcare/elder care)? Apprenticeships and education/training programs available through NC’s Community Colleges may be a solution help those workers transition towards better opportunities – provided the offerings match workers’ ability to access them. 

1A potential concern of this analysis is that the high separations rates in those industries was an artifact of COVID-19. Thus, we also looked at data from before 2020, and found that Accommodation and Food Services and Retail Trade consistently have the highest separations and the lowest average quarterly earnings.

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