Job Quality and Retention Rates: Why are People Leaving Their Jobs?

How much does job quality impact an employee’s work experience? In order to help job seekers achieve upward economic mobility and financial stability, it is important to understand how job quality influences workers’ experiences. To continue to better understand what candidates consider a quality job, this research focuses on the impact of wage and hours on retaining a job, not only as a whole but also broken up by industry. According to research published by the University of Illinois Urbana-Champaign, “there is a relationship between monthly pay and self-reported employment quality. Less than half (47 percent) of workers earning under $2,000 monthly (or less than $12.50 an hour at 40 hours a week) rate their employment quality at 7 or above or above average. This compares to about three-quarters (76 percent) of workers earning above $4,000 monthly (or more than $25 an hour at 40 hours a week). Therefore, workers’ take-home pay is closely related to self-reported employment quality, and on average higher-paid workers report better employment quality.” (A Good Job Not Just Any Job, 17).

As Skills continues to research and develop a way to properly measure job quality among our candidates, we focused on this idea to further investigate the factor wage has on candidates’ job quality. Knowing that candidates are more likely to stay in a job longer when they would consider the job high quality, we are using retention (how long a candidate stays in a job) as a key measure. Additionally, we wanted to see if a similar correlation could be identified between Skills’ data and National data trends.

The National Perspective

Nationally, job quality is measured using the job quality index (JQI); this is a number released on a monthly basis utilizing information provided from the U.S Bureau of Labor Statistics Employment Situation Report. The key data used are the average weekly wages and average working hours, comparing the higher-wage/higher-hour jobs to the lower-wage/lower-hour jobs. A benchmark is then determined for the JQI by calculating the average weekly wage of 180 industries and that value is weighted for the total number of jobs in each industry. The JQI has been getting measured since November of 2019, and saw its lowest point of 79.11 in April of 2020. As of February 2023, the U.S private sector JQI is up by 1.25% from January 2023 which means the number of low-quality jobs have decreased over the month. The current JQI is 83.95 (U.S Private Sector Job Quality Index, 1).

While looking at national industry trends, we identified a correlation between the average weekly earnings of an individual and their level of retention. The BLS reported an average weekly income of $1,141.61 and a 2.7 benchmark for turnover rate. BLS uses turnover rate (individuals leaving their jobs) instead of retention rate.

How to measure Turnover Rate

Anything higher than these benchmarks is identified as “higher-than-average” and anything below was considered, “lower-than-average.” The BLS website displays that when there appears to be higher-than-average wages, the turnover rate is lower-than-average and vice versa in eight industries: Financial Services, Constructions, Food Services, Healthcare, Hospitality, Manufacturing, Retail, and TDL. The only industry that does not show correlation is Business Services. Therefore, the higher quality of jobs, such as better income than the benchmark, lead to less employees leaving their jobs.

Turnover Rates and Average Weekly Incomes for Industries Measured Across the US

Based on the turnover rate for each industry, the retention rate is marked as “high” or “low” to match the measurement used by Skills*

A Skills Perspective

While looking into our data at Skills we identified a correlation between a candidate’s starting income and their level of retention. At Skills, we use a 90-day mark of a candidate maintaining employment in order to measure retention. The average of a Skills candidate retaining their job for 90 days in 2022 was 56%, this is what we used for our benchmark for this study; additionally, the average wage for Skills was $17.85, anything higher than these benchmarks we identified as “higher-than-average” and anything below was considered, “lower-than-average”. The Business Services and Financial Services industries have a higher-than-average hourly wage and lead to high retention rates of 84% and 87%. However, the Food Services, Hospitality, Manufacturing, and Retail industries who were identified as lower-than-average hourly wages showed lower than average retention rates of 36%, 54%, 50%, and 53%. In summary, those industries that pay more retain a larger majority of their employees for longer periods of time, and vice versa.

Retention Rates and Average Wages for Industries Measured by Skills

While six industries show correlation in the Skills research, it is worth noting that industries like healthcare and TDL do not. In the healthcare industry, the retention rate is higher-than-average, yet the average wage is below the benchmark. On the other hand, the TDL industry shows a low retention rate with a higher-than-average income.

Conclusion

When isolating for wage and retention, the data is clear. A higher-than-average wage leads to a higher-than-average retention rate. Although it seems that financial satisfaction makes the biggest difference in why individuals stay at their jobs, wage is not the only factor in retention or a quality job. Qualitative data, along with other quantitative data, must also be utilized to see the full scope of measuring a quality job. For more on the results of Skills’ initial quality jobs survey in 2022, click here.