Recruitment of Seemingly Overeducated Personnel: Insider-Outsider Effects on Fair Employee Selection Practices

Fabel, Oliver and Pascalau, Razvan (2007): Recruitment of Seemingly Overeducated Personnel: Insider-Outsider Effects on Fair Employee Selection Practices.

Abstract

We analyze a standard employee selection model given two institutional constraints: First, professional experience perfectly substitutes insufficient formal education for insiders while this substitution is imperfect for outsiders. Second, in the latter case the respective substitution rate increases with the advertised minimum educational requirement. Optimal selection implies that the expected level of formal education is higher for outsider than for insider recruits. Moreover, this difference in educational attainments increases with lower optimal minimum educational job requirements. Investigating data of a large US public employer confirms both of the above theoretical implications. Generally, the econometric model exhibits a �good fit�.

• Item Type: MPRA Paper
• Language: English
• Keywords: employee selection, overeducation, adverse impact, insiders vs outsiders
• Subjects: I - Health, Education, and Welfare > I2 - Education and Research Institutions > I21 - Analysis of Education; J - Labor and Demographic Economics > J7 - Labor Discrimination > J78 - Public Policy; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M5 - Personnel Economics > M51 - Firm Employment Decisions ; Promotions; J - Labor and Demographic Economics > J5 - Labor-Management Relations, Trade Unions, and Collective Bargaining > J53 - Labor-Management Relations ; Industrial Jurisprudence

References

Abram, T.G. (1993). The Law, Its Interpretation, Levels of Enforcement, and Effect on Employer Behavior. American Economic Review, vol. 83, p. 62-66. Ai, C. and E.C. Norton. (2003). Interaction Terms in Logit and Probit Models. Economics Letters, vol. 80, p. 123-129. Anderson, N., F. Lievens, K. van Dam and A.M. Ryan. (2004) Future Perspectives on Employee Selection: Key Directions for Future Research and Practise. Applied Psychology: An International Review, vol. 53, p. 487-501. Ashenfelter, O. and R. Oaxaca. (1987). The Economics of Discrimination. American Economic Review, vol. 77, p. 321-325. Baker, R.M., J. Bound and D.A. Jaeger. (1995). Problems with Instrumental Variables Estimation When the Correlation between the Instruments and the Endogenous Variable is Weak. Journal of the American Statistical Association, vol. 90, p. 443-450. Bauer, T. (2002) Educational Mismatch and Wages: A Panel Approach. Economics of Education Review, vol. 21, p. 221-229. Betsey, C.L. (1994). Litigation of Employment Discrimination under Title VII: the Case of African-American Women. American Economic Review, vol. 84, p. 98-102. Carlson, R. (2005). Employment Law, New York, N.Y.: Aspen Publishers. Chevalier, A. (2003). Measuring Over-Education. Economica, vol. 70, p. 509-531. Chor, D. and R.B. Freeman. (2005). The 2004 Global Labor Survey: Workplace Institutions and Practices Around the World. Cambridge, Ma: National Bureau for Economic Research - NBER, Working Paper 11598. Clardy, A. (2003). The Legal Framework of Human Resources Development, Part II: Fair Employment, Negligence, and Implications for Scholars and Practitioners. Human Resources Development Review, vol. 2, p. 130-154. Coate, S. and G. Loury. (1993). Antidiscrimination Enforcement and the Problem of Patronization. American Economic Review, vol. 83, p. 92-98. Commission of the European Communities. (2000). A Memorandum on Lifelong Learning. Luxembourg: OOPEC, Sta¤Working Paper, SEC 1832. Council of Europe. (2001). Lifelong Learning and Social Cohesion: A New Challenge to Higher Education. Strasbourg: Council of Europe, Final Conference Report. Dakin, S. and J. S. Armstrong. (1989). Predicting Job Performance: Comparison of Expert Opinions and Research Findings. International Journal of Forecasting, vol. 5, p. 187-194. Davies, P. (2003). Widening Participation and the European Union: Direct Action - Indirect Policy? European Journal of Education, vol. 38, p. 99-116. DeLong, E.R., D.M. DeLong and D.L. Clarke-Pearson. (1988). Comparing the Areas under Two or More Correlated Receiver Operating Characteristic Curves: A Non-Parametric Approach. Biometrics, vol. 44, p. 837-845. Duncan, G.J. and S.D. Ho¤man. (1981). The Incidence and Wage Effects of Overeducation. Economics of Education Review, vol. 1, p. 75-86. Freeman, R.B. (1976). The Overeducated American, New York: Academic Press. Gallagher, J. and M. Feutrie. (2003). Recognizing and Accrediting Informal and Non-Formal Learning in Higher Education: An Analysis of the Issues Emerging from a Study of France and Scotland. European Journal of Education, vol. 38, p. 71-83. Godard, J. (2002). Institutional Environments, Employer Practices, and States in Liberal Market Economies. Industrial Relations, vol. 41, p. 249-286. Groeneveld, S. and J. Hartog. (2003). Overeducation, Wages and Promotions Within the Firm. Labour Economics, vol. 11, p. 701-714. Groot, W. and H. Maasen van den Brink. (2000). Overeducation in the Labor Market: A Meta Analysis. Economics of Education Review, vol. 19, p. 149-158. Gutman, A. (2003). On the Legal Front: Adverse Impact - Why Is It So Di¢ cult to Understand. The Industrial-Psychologist, vol. 40, p. 42-50. Gutman, A. (2004). On the Legal Front: Ground Rules for Adverse Impact. The Industrial-Psychologist, vol. 41, p. 109-119. Han, C. and P.C.B. Phillips (2006). GMM with Many Moment Conditions. Econometrica, vol. 74, p. 147-192. Hartog, J. (2000). Over-Education and Earnings: Where Are We and Where Should We Go? Economics of Education Review, vol. 19, p. 131-147. Holling, H. (1998). Utility Analysis of Personnel Selection: An Overview and Empirical Study Based on Objective Performance Methods. Methods of Psychological Research Online, vol. 3, p. 5-24. Lemeshow, S. and Hosmer, D. W. (1982). A Review of Goodness of Fit Statistics for Use in the Development of Logistic Regression Models. American Journal of Epidemiology, vol. 115, p. 92-106. Martin, W. (2005). KSA-Based Minimum Quali�cation Standards. Paper presented at the Mid-Atlantic Personnel Assessment Consortium - MAPAC, May 13, 2005. Murphy, K. M. and Topel, R. H. (2002). Estimation and Inference in Two-Step Econometric Models. Journal of Business and Economic Statistics, vol. 20, 88-97. Oyer, P. and S. Schafer. (2002). Litigation Costs and Returns to Experience. American Economic Review, vol. 92, p. 683-705. Phillips, P.C.B. (2006). A Remark on Bimodality and Weak Instrumentation in Structural Equation Estimation. Econometric Theory, vol. 22, p. 947-960. Robertson, I.T. and M. Smith. (2001). Personnel Selection. Journal of Occupational and Organizational Psychology, vol. 74, p. 441-472. Sattinger, M. (1993). Assignment Models of Distribution of Earnings. Journal of Economic Literature, vol. 31, p. 851-880. Schmidt, F.L. and J.E. Hunter. (1998). The Validity and Utility of Selection Methods in Personnel Psychology: Practical and Theoretical Implications of 85 Years of Research Findings. Psychological Bulletin, vol. 124, p. 262-274. Sicherman, N. and O. Galor. (1990). A Theory of Career Mobility. Journal of Political Economy, vol. 98, p. 169-192. Spence, M. (1973). Job Market Signaling. Quarterly Journal of Economics, vol. 87, p. 355-374. Staiger, D. and Stock, J. H. (1997). Instrumental Variables Regression with Weak Instruments. Econometrica, vol. 65, p. 557-586. Thurow, L. C. (1975). Generating Inequality: Mechanisms of Distribution in the US Economy. New York, N.Y.: Basic Books. US Equal Employment Opportunity Commission - EEOC, Civil Service Commission, (1978). Uniform Guidelines on Employee Selection Procedures. Washington, D.C.: Federal Register, Vol. 43. US Equal Employment Opportunity Commission - EEOC. (2006). EEOC Compliance Manual, Section 15: Race & Color Discrimination, Washington, D.C.: EEOC 4/9/2006, Directives Transmittal No. 915.003. Welch, F. (1981). Affirmative Action and Its Enforcement. American Economic Review, vol. 71, p. 127-133. Wooldridge, J. M. (2002). Econometric Analysis of Cross Section and Panel Data. Cambridge, Ma.: MIT Press.