Informal employment must be reduced and corporate policies must be promoted that make employees feel that changing jobs is not essential to progress.
We already knew that high labour turnover increases labour costs for companies, due to the costs involved in selection, training and adaptation.
We also knew that high informality has a major impact on high labour turnover.
But now we also know, according to the results of a recent study, that Latin American countries –Argentina, Brazil, Chile, Ecuador and Mexico and which also applies to the Dominican Republicthat in the long term high labour turnover can increase wage inequalities.
This is because while it is true that job changes can provide short-term benefits, particularly to younger workers, workers who change roles frequently tend to experience slower average wage growth over time, and since unskilled workers change jobs more often, high turnover increases inequality in the long term.
The study, authored by Renata Narita and Naercio Menezes-Filho, found that between 24% and 44% of workers in Argentina, Brazil, Ecuador, Mexico, Paraguay and Peru change jobs every year and between 30% and 50% of them remain outside the labor force.
These high turnover rates can largely be attributed to the informal or unregulated sector, which represents more than 40% of the workforce in many Latin American and Caribbean countries (in the Dominican Republic it exceeds 55%).
And it turns out that the duration of informal jobs tends to be significantly shorter than that of formal jobs, due to a lack of adequate regulations and benefits.
The data in this report are in line with the Dominican reality, since according to a study carried out by the Barna Business School, with the support of INICIA, Research and Sustainability, 47% of workers in the Dominican Republic consider that the work environment is unfavorable and many agree that companies have little regard for the personal and professional growth of employees.
This leads to 80% of Dominican employees intending to leave the company they work for because they consider the work environment to be polluting or unfavorable.
Obviously, not all job changes are bad: moving from low- to high-productivity jobs, for example, can boost wages, especially in the early years of workers’ careers, and can also help them secure better, more stable jobs with opportunities for advancement.
But that is not the case when younger, less educated workers change jobs more frequently, so they receive less training, learning and on-the-job experience, and end up suffering from slower wage growth, and are more likely to move from formal to informal jobs or, worse, to fall out of the labor force.
This type of rotation, which can prevent the accumulation of human capital, must be addressed in order to avoid it.
There are two paths to take to reduce job turnover: on the one hand, reducing informal employment and, on the other, promoting corporate policies that make employees feel that changing jobs is not essential to progress.
