How employee churn drives the labor market dynamics: an initial descriptive investigation using firm-level evidence from Costa Rica

Abstract

Two models were reviewed that allowed us to calculate the churn rate per company per year - 2020 (pandemic), 2021 (pandemic), and 2022 (post-pandemic), by sector, by the process that those companies carry out in the country, and per year of operation in the country. The findings show there seems to be a pandemic-induced decrease in churn rates for corporate services. Churn reallocates workers from less productive uses to more productive ones. Using model 1 of Burgess et al. (2000) we find that for every new reallocated job there were on average 4 rellocated workers in services and 4.5 in manufacturing during the study period. This result is a measure of how dynamic these sectors are for Costa Rica. In addition, using the definition of churn of Lazear & McCue (2018) we find that the churn rate is higher for jobs with less labor specialization, but the churn rate for women is lower than that of men in these less specialized jobs. For more specialized jobs, however, the churn rate seems similar between genders, although it tends to be lower for women. Workers over the age of 40 have a lower job reallocation rate. Finally, churn rates in manufacturing companies behave differently from those of information technology-related services due primarily to the heterogeneity of the worker composition in the different job specialization categories.

Keywords: Churn rate, pandemic, foreign companies, gender, job specialization, job position, Costa Rica