Did the AIG Fuss Hurt Taxpayers?

A piece in this morning's Wall Street Journal, containing an interview with the head of AIG's financial products division, raises the possibility that the fuss over AIG's bonuses has hurt taxpayers by increasing turnover at the company:

American International Group Inc.'s financial-products unit is on track to wind down by year end, but the controversy over bonuses that led to the loss of some key people may have made the process more costly for taxpayers, the unit's head said.

AIG Financial Products head Gerry Pasciucco, in his first extensive public interview since the bonus dustup last month, said 20 of the unit's 370 employees quit amid the controversy, in which taxpayers and members of Congress decried retention payments to employees at the unit that helped topple the big insurer.

I am willing to believe that the controversy over AIG bonuses damaged morale and made it harder for the company to do its work. But the fact that 20 of the unit's 370 employees left the company isn't anything to write home about. It looks just about average to me.

Twenty employees is 5.4% of the 370-person financial products division. So the turnover rate for the period of controversy is 5.4%. For the sake of this blog post let's say the period of controversy is about a month. (News of the AIG bonuses broke the weekend of March 14, and today is April 13.)

The Bureau of Labor Statistics, God bless 'em, calculates monthly turnover rates (or "separation rates") by industry. In 2008, the average monthly turnover rate for professional and business services was a little over 5%. In January of this year it was 5.8%.

It's impossible to know what the employment situation at AIG would have looked like had no one raised an eyebrow over the company's bonuses. And it's possible that the 20 employees in question are, as the company's white paper on compensation practices suggested, uniquely essential to winding down the company's complex financial obligations. But the mere fact that 5.4% of the employees left last month doesn't betray anything out of the ordinary.

Here's the graph of average monthly turnover in the business and professional services industry over the last eight years:

professional and business services.jpg