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Avoiding Labor Shortages by Employer Signaling - On the Importance of Good Work Climate and Labor Relations

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  • Uschi Backes-Gellner

    ()
    (Institute for Strategy and Business Economics, University of Zurich)

  • Simone Tuor

    ()
    (Institute for Strategy and Business Economics, University of Zurich)

Abstract

Avoiding labor shortages for skilled employees is one of the major challenges for highly competitive firms acting in tight labor markets. The ability to avoid labor shortages on the company level, for example measured by the share of vacant jobs, is distributed very unevenly and cannot in general be explained by differences in wages and compensation packages as standard economic theory would suggest. In our paper we present a theoretical explanation for large and persisting inter-firm differences in job vacancy rates. Many psychological studies show that unobservable job and company characteristics such as work atmosphere or individual self determination are crucial for employees’ job choices. However, since these characteristics are not reliably observable to an outsider, we argue that potential employees use other, on the surface nonessential company characteristics as signals for their preferred characteristics in their job decision. To derive empirically testable hypotheses we reverse Spence’s labor market signaling model and study how employers can reliably signal the quality of their work climate and labor relations to potential employees. We use a rich data set from approximately 700 firms to test our hypotheses and do find in fact that formal features of labor relations which on the surface may not seem relevant for recruitment success of skilled workers nevertheless exert significant effects on recruitment success and job vacancies.

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File URL: http://repec.business.uzh.ch/RePEc/iso/ISU_WPS/67_ISU_full.pdf
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Bibliographic Info

Paper provided by University of Zurich, Institute for Strategy and Business Economics (ISU) in its series Working Papers with number 0067.

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Length: 29 pages
Date of creation: Jan 2007
Date of revision:
Publication status: published
Handle: RePEc:iso:wpaper:0067

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Keywords: Further Training; Investing in Human Capital; Costs-Benefit Ratio;

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References

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  1. Vrooman, John, 2000. "The Economics of American Sports Leagues," Scottish Journal of Political Economy, Scottish Economic Society, vol. 47(4), pages 364-98, September.
  2. Wagner, Joachim & Schnabel, Claus & Schank, Thorsten & Addison, John T., 2005. "Do Works Councils Inhibit Investment?," Discussion Papers 32, Friedrich-Alexander-University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
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  4. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
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  8. Lutz Bellmann & Uwe Blien, 2001. "Wage curve analyses of establishment data from western Germany," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 54(4), pages 851-863, July.
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  13. John S. Heywood & Uwe Jirjahn, 2002. "Payment schemes and gender in Germany," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 56(1), pages 44-64, October.
  14. Alberto Bayo-Moriones & Pedro Ortín-Ángel, 2006. "Internal promotion versus external recruitment in industrial plants in Spain," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 59(3), pages 451-470, April.
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  16. Rodney Fort & James Quirk, 1995. "Cross-subsidization, Incentives, and Outcomes in Professional Team Sports Leagues," Journal of Economic Literature, American Economic Association, vol. 33(3), pages 1265-1299, September.
  17. Stefan Szymanski, 2003. "The Economic Design of Sporting Contests," Journal of Economic Literature, American Economic Association, vol. 41(4), pages 1137-1187, December.
  18. Sonia Falconieri & Frédéric Palomino & József Sákovics, 2004. "Collective Versus Individual Sale of Television Rights in League Sports," Journal of the European Economic Association, MIT Press, vol. 2(5), pages 833-862, 09.
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Cited by:
  1. Verena Dill & Uwe Jirjahn, 2013. "Foreign Owners and the Quality of Industrial Relations in Germany," Research Papers in Economics 2013-07, University of Trier, Department of Economics.
  2. Uschi Backes-Gellner, 2014. "Benefits of Apprenticeship Training and Recent Challenges Ð Empirical Results and Lessons from Switzerland and Germany," Economics of Education Working Paper Series 0097, University of Zurich, Institute for Strategy and Business Economics (ISU).
  3. Jens Mohrenweiser & Thomas Zwick & Uschi Backes-Gellner, 2010. "Poaching And Firm Sponsored Training: First Clean Evidence," Economics of Education Working Paper Series 0051, University of Zurich, Institute for Strategy and Business Economics (ISU), revised May 2013.
  4. Simone Tuor & Uschi Backes-Gellner, 2009. "Time - Even More Costly Than Money: Training Costs of Workers and Firms," Economics of Education Working Paper Series 0046, University of Zurich, Institute for Strategy and Business Economics (ISU).
  5. Samuel Muehlemann, 2013. "Der Einfluss der Internationalisierung auf die arbeitsmarktorientierte Bildung," Economics of Education Working Paper Series 0092, University of Zurich, Institute for Strategy and Business Economics (ISU).
  6. Uwe Jirjahn & Jens Mohrenweiser, 2013. "Active Owners and the Failure of Newly Adopted Works Councils," Research Papers in Economics 2013-04, University of Trier, Department of Economics.
  7. Jens Mohrenweiser, 2013. "Which firms train disadvantaged youth?," Economics of Education Working Paper Series 0087, University of Zurich, Institute for Strategy and Business Economics (ISU).
  8. Samuel Muehlemann & Harald Pfeifer & Felix Wenzelmann, 2013. "The Costs of Recruiting Apprentices: Evidence from German Firm-Level Data," Economics of Education Working Paper Series 0095, University of Zurich, Institute for Strategy and Business Economics (ISU).
  9. Hammermann, Andrea & Mohnen, Alwine, 2012. "Who Benefits from Benefits? Empirical Research on Tangible Incentives," IZA Discussion Papers 6284, Institute for the Study of Labor (IZA).
  10. Kriechel, Ben & Mühlemann, Samuel & Pfeifer, Harald & Schuette, Miriam, 2012. "Works Councils, Collective Bargaining and Apprenticeship Training," IZA Discussion Papers 6497, Institute for the Study of Labor (IZA).
  11. Uschi Backes-Gellner & Stephan Veen, 2013. "Positive Effects of Ageing and Age-Diversity in Innovative Companies Ð Large Scale Evidence on Company Productivity," Economics of Education Working Paper Series 0093, University of Zurich, Institute for Strategy and Business Economics (ISU).
  12. Healy, Joshua & Mavromaras, Kostas G. & Sloane, Peter J., 2011. "Adjusting to Skill Shortages: Complexity and Consequences," IZA Discussion Papers 6097, Institute for the Study of Labor (IZA).
  13. Jens Mohrenweiser, 2012. "Recruitment and Apprenticeship Training," Economics of Education Working Paper Series 0073, University of Zurich, Institute for Strategy and Business Economics (ISU), revised Aug 2013.
  14. Bellmann, Lutz & Hübler, Olaf, 2014. "Skill Shortages in German Establishments," IZA Discussion Papers 8290, Institute for the Study of Labor (IZA).

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