Hiring Without Signals
Readers of Econlog who read co-blogger Bryan Caplan’s posts know that Bryan has posted a lot on a college degree as an expensive signal to potential employers. Here are 88 posts Bryan has written on signaling.
I find Bryan’s argument and evidence persuasive. Like some of his critics, though, I have often wondered why employers don’t figure out cheaper ways of getting information about potential employees. You might argue that the expense is not on the employer but on the employee. But if an employer can find a good employee who lacks a college degree, the employer can, all other things equal, pay less.
In Wednesday’s Wall Street Journal is an interesting news story by Rachel Feintzeg titled “Why Bosses Are Turning to ‘Blind Hiring’.” (WSJ, January 6, 2015, p. B4)
Here are the first 5 paragraphs:
Compose Inc. asks a lot of job applicants. Anyone who wants to be hired at the San Mateo, Calif., cloud-storage firm must write a short story about data, spend a day working on a mock project and complete an assignment.
There is one thing the company doesn’t ask for: a résumé.
Compose is among a handful of companies trying to judge potential hires by their abilities, not their résumés. So-called “blind hiring” redacts information like a person’s name or alma mater, so that hiring managers form opinions based only on that person’s work. In other cases, companies invite job candidates to perform a challenge–writing a software program, say–and bring the top performers in for interviews or, eventually, job offers.
Bosses say blind hiring reveals true talents and results in more diverse hires. And the notion that career success could stem from what you know, and not who you know, is a tantalizing one. But it can be tough to conceal a person’s identity for long.
Kurt Mackey, Compose’s chief executive, realized his managers tended to pick hires based on whom they connected with personally, or those with name-brand employers like Google Inc. on their résumés–factors that had little bearing on job performance, he says.
Time will tell how well this works. If it does work well, expect to see more of it. And if that happens, the repercussions for colleges will be large. And, as anyone who knows Bryan’s work also knows, the repercussions will be welcomed by Bryan.