Management Accounting Section Midyear Meeting

Managing Employee Retention Concerns: Evidence from US Census Data

• In Event: Incentives and Retention

Abstract

Using Census microdata on 14,000 manufacturing plants, we examine how firms manage employee retention concerns in response to local wage pressure. We observe wage increases in response, but the effect is weaker when key knowledge is not locked up in individual employees and when local plant management has more delegated decision-making authority. We also find substantial use of non-wage levers. Plants shift incentives to increase the likelihood that bonuses can be paid: performance target transparency declines, as does the use of localized performance metrics for bonuses. Furthermore, promotions become more meritocratic, ensuring key employees can be promoted and retained. Lastly, decision-making authority at the plant-level increases, offering more agency to local employees. We find evidence consistent with inequity aversion constraining the response to local wage pressure, and document spillovers in both wage and non-wage reactions across same-firm plants.

Authors

• Eva Labro, University of North Carolina-Chapel Hill

• James Omartian, University of Michigan