Why are Labor Quit Rates Lower among Defense Contractors?

Tom Hyclak and Todd Watkins

No 121, Working Papers from National University of Ireland Galway, Department of Economics

Abstract: This paper explores whether empirical evidence we find of defense contractors' lower labor-force quit rates, compared to purely commercial firms, might be associated with differences in their human resource policies and organizational practices and strategies. We take advantage of a unique original (U.S.) data set to compare labor quits, workforce skills and occupational structure between defense contracting and non-contracting small manufacturers. Findings are that, compared with otherwise similar small manufacturing establishments, defense contractors: 1) report substantially lower labor force quit rates; 2) are less likely to hire the least educated, and have more formal workforce training regimes focused more on specialized rather than generic skills; 3) are more likely practitioners across a diverse spectrum of advanced workforce and organizational practices. Then, 4) econometrically, the defense contractors' lower reported quit rates are associated with those organizational and workforce practice differences, consistent with a hypothesis of a mediated relationship.

Date: 2007, Revised 2007
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