Employer Learning and Schooling-Related Statistical Discrimination in Britain

(2003) - Fernando Galindo-Rueda

Journal: SSRN Electronic Journal
Link:: https://www.ssrn.com/abstract=412483
DOI:: 10.2139/ssrn.412483
Links::
Tags:: #paper #NCDS #LabourMarket
Cite Key:: [@Galindo-Rueda2003]

Abstract

The basic point made by this paper is simple: Employers pay for employees’ ability as they get to know them better but don’t pay for it as much as they would in a fully transparent labour market. This study of wage inequality demonstrates that qualifications are noisy signals of individual skills and British employers rely less on them as indicators of productivity as they get to know their workers better. However, relatively able but less educated workers appear to find it very difficult to advertise their skills to other potential employers, giving a strong bargaining power to their incumbent employers. Qualification credentials are intended to certify that an individual has acquired a determined level of skills but they are also bound to reveal to employers a more general type of ability that has enabled individuals to learn and acquire a determined qualification. Therefore, qualifications may also possess a strong informational value independently of their educational content. Statistical discrimination in favour of more educated individuals may occur when in the absence of better information, more educated individuals are known to be on average more productive than less educated ones.

Notes

“Employers pay for employees’ ability as they get to know them better but don’t pay for it as much as they would in a fully transparent labour market” (Galindo-Rueda, 2003, p. 3)

“Individuals with higher ability experience faster wage growth as they accumulate experience” (Galindo-Rueda, 2003, p. 3)

“As workers stay longer in the same firm, higher ability becomes a stronger indicator of the probability of receiving training.” (Galindo-Rueda, 2003, p. 4)