A Plague of Job Hoppers

Jumping from one job to another has become endemic in the American economy. In 1980 the average U.S. manufacturing firm lost 4% of its workforce every month. What this means is analyzed by Lester C. Thurow, professor of economics and management at M.I. T. and a member of TIME'S Board of Economists:

How could anyone expect good teamwork, group loyalty or a common interest in raising firm productivity when almost half of the work force will either quit or be laid off within twelve months? Neither worker nor company has any interest in the economic success of the other. Workers, including managers, are not willing to sacrifice to help build the future prosperity of the company since they know that they will not be around to share in that future prosperity. Conversely the company is not willing to invest in the future success of the individual since that person is apt to be somewhere else when the investment that goes into training him pays off.

The result is gross underinvestment in creating the on-the-job skills necessary for industrial success. Blue-collar workers are traditionally trained on the job, but with today's high turnover rates no firm wants to invest in training its work force since there is a very high probability that the workers will soon leave for another job. For each firm it is cheaper to bid, with higher wages, a skilled worker away from other firms, but this obviously does not work for the economy as a whole. The result is a perpetual shortage of skilled blue-collar workers whenever the economy begins to approach anything remotely resembling full employment.

The problem is visible in foreign trade. To be a successful exporter it is necessary to speak the languages of the countries to which you wish to sell your products. Foreign firms are willing to pay to teach their employees the languages that they need to be salesmen abroad. American firms generally are not. The differences show how long they expect their employees to remain on the payroll.

The American corporation is accused of having a short-run time horizon.

But if everyone, workers and managers, is basically on his own when it comes to economic success, how could anyone expect the American corporation to have a long time horizon? If each individual foresees that he will be with the firm for only a brief period, then it should come as no surprise that the corporation has an equally short time horizon in its planning.

Job hopping is only part of the problem of excessive employee turnover. U.S. firms are also quicker to fire workers in cyclical economic downturns than are their foreign counterparts. Compare the behavior of Chrysler and Mazda when they both faced economic extinction. Chrysler fired thousands of workers; Mazda went to great lengths to keep employees with the company. If firms fire workers when it is economically convenient, no one should be surprised when American workers abandon their firms when it is economically convenient.

To increase training, strengthen teamwork and lengthen time horizons, American corporations are going to have to adopt management practices that dramatically cut turnover rates. If America wants a loyal labor force interested in raising productivity, layoffs have to become the last, rather than the first, resort when a firm is facing difficult economic times. Incentives will have to be structured to give the biggest economic prizes to those who do not job hop.

"Every man for himself" is not the route to economic success.

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