Voluntary turnover — that is, quitting — can hit businesses hard. Not only is there the potential for the loss of valuable institutional knowledge but also the cost of a replacement. According to data released by the Society for Human Resource Management in 2022, the estimated average cost per new hire was nearly $4,700, but some companies can spend as much as three to four times the position’s posted salary in recruitment costs.
As such, retaining employees is important, but so is understanding why they decide to leave in the first place. A new study by Adina Sterling, the Katherine W. Phillips Associate Professor of Business at Columbia Business School, found that an employee’s decision to leave can be tied to their race — and their access to resources. While previous studies suggest that racial minorities in the United States are more likely to quit due to workplace discrimination, Sterling takes a unique approach, opting to analyze how the availability of resources may lead to differences in voluntary departure.
Using 22 years of data from the National Longitudinal Survey of Youth’s 1997 cohort, Sterling discovered that while White workers quit jobs slightly more often than Black workers, the latter were more likely to voluntarily leave due to resource constraints, such as lack of reliable transportation or access to healthcare. On the other hand, White workers were more likely to leave a job for resource-enabled reasons, such as to return to school, start their own business, or take a different job.
The study’s cohort was made up of approximately 9,000 individuals living in the United States who were age 16 or 17 by the end of 1996, when the survey began. In addition to gathering detailed demographic data, the researchers asked study participants which jobs they held and, if not employed, the reason for their unemployment. While some of those surveyed were involuntarily terminated, Sterling focused on those who left a job voluntarily — and the reasons why.
She also found that White workers were more likely to leave a job to take a new one or already had a new job lined up, whereas Black workers were more likely to leave a job to search for another. One reason for this discrepancy might be that there are differences in social ties across racial groups, with some studies finding that White workers have an easier time finding jobs through their social ties than Black workers.
In some of Sterling’s statistical models, she found that Hispanic workers were less likely to voluntarily leave a job than their White counterparts, as were Asian workers. Hispanic workers were also less likely than White workers to voluntarily leave for resource-advantaged reasons.
Sterling’s findings suggest that to address racial disparities in voluntary turnover, organizational leaders need to look beyond just internal policies and culture and to consider how external societal forces and resource constraints can impact employee retention.
“You could work a lot on the company’s culture; you could have done a lot to make people feel psychologically safe,” Sterling says. “But if there are broader external forces in society affecting the way that people can be engaged at work, then we're only addressing part of the problem.”
Racial differences in voluntary turnover reasons persist even after accounting for socioeconomic status, suggesting societal factors beyond just organizational culture play a role, according to Sterling.
She notes that a lot of conversations around employee well-being, especially for minority employees, have revolved around improving internal workplace culture through diversity, equity, and inclusion efforts. That’s a great way to create anti-racist organizations, but there’s more to creating a company culture that retains minority employees.
“More attention to these broader, external constraints could help leaders understand turnover more generally and also maybe be more empathetic,” Sterling says. “If it's health disparities that are a reason my employees are turning over, what can we do about that? Maybe we need to expand our healthcare options. It’s about moving away from those intraorganizational points of focus and saying, ‘Can we figure out ways to look beyond that?’”
Policymakers can also do some of the heavy lifting when it comes to supporting workers. Sterling points to policies that expand healthcare access, like the Affordable Care Act, as an example. However, she says organizations can play a role in policy by looking at government investment in social services as a boon to corporate profitability rather than a drag.
That’s because conversations around employee productivity often ignore the fact that companies need a healthy and engaged workforce to successfully and skillfully accomplish tasks, according to Sterling.
“Some organizational leaders can look at investments in social services as a drag on corporate profitability because it might cost companies more in taxes,” she says. “But investing in good healthcare organizations like hospitals and public transportation, in public safety initiatives, etc., those things go hand in hand to have a fully productive workforce. Those are not anti-business initiatives.”
