Strategy for securing employment that considers job filling, separation, and productivity shocks

Securing employment is one of the most important issues for a firm’s production. This study investigates labor demand dynamics in a situation where the firm faces job filling and turnover using numerical analysis. This study derives the relationship between labor input and strategic labor input target and introduces the relationship into a labor demand model. This relationship can be concave, convex, or linear, depending on the ratio of the job-filling rate to job-separation rate. The firm adjusts the labor input by choosing a strategic labor input target that incurs adjustment costs. The response of labor input to a shock in productivity increases with an increase in the ratio in the model with adjustment costs but does not change in the model without adjustment costs. The response of the strategic labor input target to the shock is increased or decreased by increasing the ratio in the model with or without adjustment costs. From the viewpoint of securing employment, a ratio that most easily secures employment exists when a shock occurs. Therefore, policies that increase this ratio may not necessarily facilitate securing employment if the ratio is high.