The Labor Market Effects of Employer Recruitment Choice

[Excerpt] I analyze employer recruitment decisions using a dynamic, discrete-choice structural model that I estimate on a sample of clerical workers from the MCSUI, a large cross section of establishments in 4 metropolitan areas of the U.S. In the model, employers choose either informal recruitment methods (which generate a small but select applicant pool from which the employer can hire quickly) or formal methods (which create a large but less select applicant pool which the employer must screen intensively, delaying hiring times). I study the effects of 3 counterfactual simulations on recruitment strategies, starting wages, and vacancy durations: a wage subsidy, a policy designed to improve information about prospective matches, and an increase in the heterogeneity of prospective matches. I show that the effects of exogenous policy or environmental changes can be decomposed into “pure wage effects” that affect the wage offers employers post, holding constant their recruitment strategies, and “recruitment-wage effects” that involve changes in recruitment methods. The results show that changes in recruitment strategies represent an important channel through which changes in the economic environment affect the starting wages and vacancy duration for new hires

The Signaling Role of Promotions: Further Theory and Empirical Evidence

[Excerpt] An extensive theoretical literature has developed that investigates the role of promotions as a signal of worker ability. There have been no tests, however, of the empirical validity of this idea. In this paper we develop the theory in a manner that allows us to generate testable predictions, and then investigate the validity of these predictions using a longitudinal data set that contains detailed information concerning the internal-labor-market history of a medium-sized firm in the financial-services industry. Our results support the notion that signaling is both a statistically significant and economically significant factor in promotion decisions. The paper also contributes to the extensive literature on the role of education as a labor-market signal

Using "opposing responses" and relative performance to distinguish empirically among alternative models of promotions

Applying a simultaneous-equations estimation approach that accounts for both worker and firm behavior, I show that six alternative promotion models can be empirically distinguished to a greater extent than previously thought. I show that classic tournaments, market-based tournaments, and performance standards can be sharply distinguished when promotions induce worker effort. I also show that market-based tournaments with effort choices can be sharply distinguished from those with human capital investments. A key insight is that an empirical test can be based on the “opposing responses” property whereby workers and firms adjust their choice variables in opposite directions when the stochastic component of worker performance changes. Finally, I propose a new approach – also requiring simultaneous equations – for empirically distinguishing between classic tournaments and market-based tournaments with human capital investments, showing that the two models differ in their predictions regarding the average wage between job levels.tournaments; promotions; relative performance; internal promotion competitions; wage spreads; tests of tournament theory

Promotions and Incentives in Nonprofit and For-Profit Organizations

[Excerpt] Using data from the 1992–95 Multi-City Study of Urban Inequality, an employer survey, the authors document a new empirical finding that workers are less likely to receive promotions in nonprofit organizations than in for-profit firms. The study also uncovers evidence that wage increases associated with promotion were of comparable magnitudes in the two sectors, as was the potential for within-job wage growth; nonprofits were less likely than for-profits to base promotions on job performance or merit; nonprofits were less likely to use output-contingent incentive contracts to motivate workers; and the observed difference in promotion rates between the nonprofit and for-profit sectors was more pronounced for high-skilled than for low-skilled workers. The authors also propose a theory, based on the idea that nonprofit workers are intrinsically motivated to a greater extent than are for-profit workers, that potentially explains the broad pattern of evidence they uncover

The Signaling Role of Promotions: Further Theory and Empirical Evidence (CRI 2009-008)

An extensive theoretical literature investigates the role of promotions as a signal of worker ability. In this paper we extend the theory by focusing on how the signaling role of promotion varies with a worker’s education level, and then investigate the resulting predictions using a longitudinal data set that contains detailed information concerning the internal-labor-market history of a medium-sized firm in the financial-services industry. Our results support signaling being both a statistically significant and economically significant factor in promotion decisions. The paper also contributes to the extensive literature on the role of education as a labor-market signal

Waging the War for Talent: Do Recruitment and Screening Strategies Raise Employee Performance?

We use data from the Multi-City Study of Urban Inequality to provide an empirical answer to the question, “Do recruitment and screening strategies raise employee performance?” Our approach differs from previous empirical work in that we allow for changes in screening behavior to accompany changes in recruitment behavior. In the end, our results are consistent with those of the previous literature that ignores the auxiliary effect of recruitment through screening, in that we find no effect of recruitment methods on worker performance

Doing the Right Jobs Right: Managers’ Attributes and Activities at Borders

[Excerpt] This article starts with a simple value proposition: that companies can save large sums and gain competitive advantage by utilizing more fully their own data on the determinants of profit. In this article, we describe how we used a variety of statistical methods (correlations, simple regressions, multiple regressions, and decompositions) to help one company, Borders, gain competitive advantage by learning from itself

ILR Impact Brief – Gender, Promotion, and Raises: Sometimes the Advantage Goes to Men

Prior studies looking at gender discrimination in the workplace, in the form of promotions and/or raises, have yielded mixed results. Research focusing on promotions has found that women are promoted less often than men, more often than men, and at equal rates. Research assessing both promotions and wages, grounded in the notion that promotions signal a status change that warrants additional compensation, has also produced no consensus on outcomes. This particular study, however, used unique data on recently hired workers at a broad sample of companies that enabled the authors to control for workers’ job performance, educational attainment, and other characteristics, as well as company characteristics such as profit/not-for-profit status, industry, establishment size, and percent of the workforce covered by a union contract in order to analyze gender differences in actual and expected promotions and accompanying wage gains

The signaling role of promotions: Further theory and empirical evidence

An extensive theoretical literature has developed that investigates the role of promotions as a signal of worker ability. There have been no tests, however, of the empirical validity of this idea. In this paper we develop the theory in a manner that allows us to generate testable predictions, and then investigate the validity of these predictions using a longitudinal data set that contains detailed information concerning the internal-labor-market history of a medium sized firm in the financial services industry. Our results support the notion that signaling is both a statistically significant and economically significant factor in promotion decisions. The paper also contributes to the extensive literature on the role of education as a labor-market signal.signaling theory; promotions; asymmetric information