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It is only a floor to the extent that employers pay attention and/or care about this link. For every farsighted employer who does this calculation, there are pl

by a_c_s 11y ago

It is only a floor to the extent that employers pay attention and/or care about this link. For every farsighted employer who does this calculation, there are plenty of others who: * don't track turnover * are too small for turnover statistics to be valid * don't bother to do the math * know the link but are culturally and/or structurally disinclined to change their pay structure Edit: formatting

trjordan 11y ago
They don't have to know about this link for it to be valid. They only have to be susceptible to its effects by, say, having a competitor who is aware.
- a_c_s 11y ago
  I once worked somewhere that took it as a given that developers left after 18 months. They were susceptible to the effects (developers leaving for higher salaries) but their response was to accept the turnover rather than to change. Their primary offering was not software and their profits grew almost every year, so they had little incentive to make changes: especially ones whose pain is immediate and payoff is harder to quantify.
ChuckMcM 11y ago
The fun thing about the "invisible hand of the market" is that it smacks you upside the face even if you don't believe in it :-). In this specific case turnover costs are operational costs that reduce profitability, so companies that minimize those costs will be more profitable and be able to either compete more effectively (better product at the same price) or more money to re-invest given the same product and the same price.
- jbooth 11y ago
  Except, due to internal organization of those companies, it's entirely possible that one person is getting a bonus for cutting the costs of 'resources' while another is berated for a variety of seemingly unrelated quality issues.
bcoates 11y ago
Economically, that doesn't matter at all. Wages are set "at the margin" by the most competitive players[1] and everyone is just living in their world. Ignorance on the part of employers (and employees) might cause them to be surprised by outcomes instead of creating them but doesn't change the situation. [1] in the efficient frontier sense, not necessarily the most skilled workers or the best jobs.

by a_c_s 11y ago

trjordan 11y ago

They don't have to know about this link for it to be valid. They only have to be susceptible to its effects by, say, having a competitor who is aware.

a_c_s 11y ago
I once worked somewhere that took it as a given that developers left after 18 months. They were susceptible to the effects (developers leaving for higher salaries) but their response was to accept the turnover rather than to change. Their primary offering was not software and their profits grew almost every year, so they had little incentive to make changes: especially ones whose pain is immediate and payoff is harder to quantify.

ChuckMcM 11y ago

The fun thing about the "invisible hand of the market" is that it smacks you upside the face even if you don't believe in it :-). In this specific case turnover costs are operational costs that reduce profitability, so companies that minimize those costs will be more profitable and be able to either compete more effectively (better product at the same price) or more money to re-invest given the same product and the same price.

jbooth 11y ago
Except, due to internal organization of those companies, it's entirely possible that one person is getting a bonus for cutting the costs of 'resources' while another is berated for a variety of seemingly unrelated quality issues.

bcoates 11y ago

Economically, that doesn't matter at all. Wages are set "at the margin" by the most competitive players[1] and everyone is just living in their world. Ignorance on the part of employers (and employees) might cause them to be surprised by outcomes instead of creating them but doesn't change the situation. [1] in the efficient frontier sense, not necessarily the most skilled workers or the best jobs.