Abstract
In this study, I use personnel data from a large German company in order to analyze handicaps in job assignment. First, I compare the productivity-relevant characteristics (university degree and work experience) and wages between insiders and outsiders as well as between men and women, who have been assigned to jobs at the same hierarchical level. Second, I estimate promotion probabilities and duration models for the time until the next promotion. The overall findings indicate a significant handicap in job assignment for outsiders with respect to schooling and little evidence that women are handicapped. While gender differences in wages within job levels and promotion probabilities are small, women have, on average, significantly less work experience than men at the same job level.
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Notes
Another recent study that examines the handicapping hypothesis is Agrawal et al. (2006), who analyzed Chief Executive Officer (CEO) succession in different firms. CEOs are, however, a subject group with special characteristics and the focus of the study was on the determinants of firms hiring outsiders.
The preference of firms with internal labor market structures for the recruitment of younger workers, who certainly cannot have much work experience, stems from their longer potential tenure until retirement. First, internal labor markets are often associated with quasi-fixed employment costs (e.g. screening, training) that make the recruitment of younger workers with longer amortization periods more attractive (Oi 1962). Second, many human resource practices in internal labor markets are based on long-term employment relationships (e.g. deferred compensation, promotions as efficient allocation) (e.g. Hutchens 1986).
Since the underlying rationale is of an economic nature, I will use the term handicap instead of discrimination. Discriminatory explanations for the disadvantages experienced by women in job assignment and wages are, of course, not ruled out.
This assumption seems reasonable because a firm whose workforce is strongly engaged in sabotage and collusion is unlikely to continue to use—or even to implement—a tournament incentive scheme.
A promotion is observed in the data if a worker is employed at a higher hierarchical level than in the month before. Monthly observations of insiders are dropped from the sample before their first observed promotion because they could not be classified in these months.
Potential experience is computed: age-18-6 in case of university degree; age-13-6 in case of high school degree; age-10-6 in case of lower school degree. The subsequent results do not change qualitatively if age instead of potential experience is used.
Gibbs (2006) also compared several indicators of worker quality (e.g. education and experience) between newly hired workers and those promoted into similar jobs. His focus was, however, on changes over time and not on handicaps.
This rationale follows that of Chan (2006), who identified handicaps through the higher probability that outsiders would be promoted.
In the context of duration models, it should be noted that my sample of insiders and outsiders is of flow sampling type with right-censoring but without left-censoring. The average observed panel length in the sample is about 37 months for insiders and about 33 months for outsiders.
Note that a linear probability model (OLS) is applied because of problems associated with interaction terms in nonlinear models (Ai and Norton 2003).
I also performed separate estimates for insiders and outsiders in order to gain additional insights into the female handicap. These estimates show qualitatively the same results as in the descriptive statistics (see Table 5 in Descriptive Statistics and Main Results). The results for the interaction effects of females and levels were not statistically significant. Due to the low numbers of females, especially at higher levels and for outsiders, these estimates are not very meaningful and, thus, the results are not presented in the paper but can be requested from the author.
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Acknowledgements
Part of this research was done during my visit at University of California Berkeley. This work was supported by a fellowship within the Postdoc-Programme of the German Academic Exchange Service (DAAD), by the Fritz Thyssen Foundation, and by the VolkswagenStiftung. I thank Knut Gerlach, Simon Janssen, an anonymous referee and the editor of this journal for their comments.
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Pfeifer, C. Handicaps in Job Assignment: Insiders, Outsiders and Gender. J Labor Res 32, 1–20 (2011). https://doi.org/10.1007/s12122-010-9099-9
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DOI: https://doi.org/10.1007/s12122-010-9099-9