A Study on the Relationship Between Wage Rate and Quit Rate

The manner in which wages are determined and how people move from one employment setting to another has historically been a classic question in management. Employee turnover, through either quitting, layoffs or other reasons, is one of the biggest concerns for employers in the United States. The reason is that it is costly negatively impacts organization productivity. According to the Bureau of Labour Statistics (2018, p. 2), the number of employees who quit their jobs in the month February 2018 stood at 3.2 million. The figure translates to a rate of 2.2%.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Save 25%

Previously published studies state that wages have significant effects on employees. For instance, Breza, Kaur, and Shamdasani (2017, p. 1) share that wages have are a determinant of employee output. Breza, Kaur, and Shamdasani (2017, p. 1) also state that wage rates are a determinant of whether employees are willing to come to work. In essence, wage rates are a determinant of whether employees have the morale to come to work and conduct their duties effectively.

The aim of this study is to explore the relationship between wage rate and quit rate among employees in the United States. It will specifically focus on examining the effect of wage rate on the propensity of employees to quit their jobs. The findings of the study will be beneficial to employers who would like to address high turnover rates in their organizations, which are occasioned, by high quit rates.

The study will be guided by the following research questions:

Research Question: How does wage rate affect the propensity of an employee to quit his or her job?

The significance of the study is inherent in the fact that it will provide employers with insight into who wage rate impacts quit rates. It will thus provide them with an idea of how they can modify their wage rate to avert high employee turnover, which is costly to an organization.

Literature Summary

Historical Perspective

According to Bureau of Labour Statistics (2018, p. 2), quits are generally referred to as the voluntary decision of an employee to leave an organization. Therefore, quite rates are the measure of an employee's willingness to or ability to detach oneself from an organization by leaving employment. As indicated earlier, the rate of quits in the United States was at 2.2% reflecting a figure of 3.2 million persons who voluntarily left their jobs in the month of February 2018.

Since February 2017 to February 2018, the United States has experienced a consistent quite rate by employees in different organizations in different industries. The quite rates have averaged 2.2% with variation being either +0.1% or -0.1% (Bureau of Labour Statistics, 2018, p. 10). The rates indicate that an estimate of an average 3 million employees has quit their jobs on a monthly basis. The figures translate an estimate of 36 million employees who quit their jobs in the last one year. Undoubtedly, these astronomical figures are astonishing.

The Bureau of Labour Statistics (2018, p. 10) further reports that the private sector is hardest hit by these voluntary resignations. For instance, in February 2018, out of the 3.2 million quitters, 3.04 million were from the private sector while 0.16 million were from the public sector.

Relevant Theories

In their publication, Levy-Garboua, Montmarquette, and Simonnet (2001, p. 1) provide a theory of why employees quit. Levy-Garboua, Montmarquette, and Simonnet (2001, p. 3) state that the maximization of wealth model of separation is the simplest way of determining why employees quit. The models state that an individual considers leaving his or her job if he expected benefits that will be obtained while out of the firm are greater than those obtained while in a firm. The model states that an individual also considers the cost of moving from one organization to another. Hence, an individual chooses to resign from his or her job after based on the consideration that the value of a job in future has better productive value.

In another publication, Harris, Tang, and Tseng (2002, p. 3) provide the firm-specific human capital theory to explain the dynamics of an employee quitting. The theory states that if firms bear the cost of training as well as other incentives to staff members, the likelihood that they quit their jobs will be low. However, when firms do not provide firm-specific training, employees will have a low opportunity cost of quitting. It is therefore likely that employee quit work if they lack incentives.

Literature on the Subject

According to Scopelliti (2015, p.1), workers quit their jobs for a number of reasons. Some of the quit their jobs so as to seek quality work life, or to get a higher income. In essence, workers tend to switch jobs rather than choosing to become unemployed then search for a new job. Scopelliti (2015, p.1) further states that the number of employees who quit their jobs during economic expansions is lesser than those who quit during contraction. Another study by Burdett and Coles (2010, p. 1) studies how to identify econometrically between tenure effects and wages of workers. Burdett and Coles (2010, p. 1) state that employees often accumulate knowledge and experience during their tenure at an organization and that they often learn by doing. The more an employee's tenure at an organization increases, while he or she work experience and an opportunity for promotion, is not forthcoming, it will increase the likelihood that he or she will consider leaving the organization.

Al Mamun and Hasan (2017, p. 66) agrees with Scopelliti (2015, p.1) that employees consider many factors before quitting their jobs. These factors include their working environment, managerial factors, wage rate, fringe benefits and opportunities for advancement. They also consider their relationship with their colleagues and superiors, job fit, alternative employment opportunities and career promotion.

Based on the literature review, it can be noted that employees are quitting their jobs at an alarming rate. It can also be noted that employee turnover has been widely researched, however, quitting which is one of the subfactors in has not been extensively studied. Also literatures that link wage rate to quit rates are quite few. Hence this study will serve to add knowledge to a field of a subject that contains few studies. It will, therefore, seek to advance knowledge on the subject.

Methodology

This study is aimed to examine the relationship that exists between wage rate and quit rate. It will apply the qualitative and quantitative research designs. According to Ritchie et al., (2013, p. 31), a qualitative research design alludes to an examination that utilizes words to clarify information got from an investigation. It portrays the highlights, characteristics of results acquired from the study. It is frequently simpler to comprehend and less mind-boggling than quantitative information. Then again, a quantitative research approach alludes to a kind of study that shows its discoveries in measurable and numerical data. A factual portrayal of information frequently gives far-reaching answers and can be utilized to affirm and negate a hypothesis.

The survey will use a questionnaire as the only instrument for data collection. The questionnaire will be a close-ended questionnaire, which will incorporate questions that were developed as per the study's objectives. The study will use opportunity sampling to recruit participants which is a non-probability sampling process where participants take part in the study based on their availability. It will, therefore, recruit participants from Qualtrics which is an online platform that offers access to potential study participants (Qualtrics, 2018). The participants will then be sent questionnaires where they will be required to fill their responses to the questions electronically and submit them. The respondents will not be required to fill their personal details in the questionnaires.

Ethical Issues

The research will ensure full privacy and confidentiality to the respondents. Due to the fact that the subject being contemplated is sensitive, the study will stick to ethical requirements as required in research. The research will not force any participant to enroll in the study, hence, the decision to participate in the survey will be optional and voluntary. The research will likewise not utilize incentive to motivate the participants to partake in the exploration. Furthermore, the participant's private information will not be publicly available as it will keep private and later destroyed. The participant's names and names of the institutions he or she works or previously worked in will be coded such that they will be unrecognizable. The research will likewise guarantee that the technique used to choose the sample for the study is ethically acceptable. Additionally preceding the beginning of the exploration an assent letter will be sent to college to get an endorsement for undertaking the study. Henceforth, for this examination to be initiated, assent from the college organization will be sought.

Timeline

References

Al Mamun, C.A., and Hasan, M.N., 2017. Factors affecting employee turnover and sound retention strategies in the business organization: a conceptual view. Management (open-access), 15(1), pp.63-71.

Breza, E., Kaur, S. and Shamdasani, Y., 2017. The moral effects of pay inequality. The Quarterly Journal of Economics, 133(2), pp.1-34.

Burdett, K. and Coles, M.G., 2010. Tenure and experience effects on wages: A theory.

Bureau of Labour Statistics, 2018. Job Openings and Labor Turnover. Available at: https://www.bls.gov/news.release/pdf/jolts.pdf.

Harris, M., Tang, K.K., and Tseng, Y.P., 2002. Optimal employee turnover rate: Theory and evidence.

Levy-Garboua, L., Montmarquette, C. and Simonnet, V., 2001. Job satisfaction and quits: Theory and evidence from the German Socioeconomic Panel. CIRANO.

Qualtrics, 2018. Employee Experience Management Platform. Qualtrics. Available at: https://www.qualtrics.com/employee-experience/.

Ritchie, J., Lewis, J., Nicholls, C.M., and Ormston, R. eds., 2013. Qualitative research practice: A guide for social science students and researchers. Sage.

Scopelliti, D., 2015. Job switching: a prelude to wage growth? Monthly Labor Review, pp.1-1. Available at: https://www.bls.gov/opub/mlr/2015/beyond-bls/pdf/job-switching-a-prelude-to-wage-growth.pdf.