Hiring on the Basis of Expected Productivity in a South African Clothing Firm

Using information from the personnel files of a South African clothing firm, the author explores the in- and outflow of weekly-paid workers. These employees form a separate labor market within the company. Data was available concerning both the productivity of current workers, and the characteristics of rejected applicants and fired workers. This makes it possible to identify the characteristics which are screened out at entry and the characteristics that influence productivity. This allows for an empirical analysis of discrimination at job-entry. Hiring decisions were found to be consistent with expected productivity. The observed screening out of African workers at job entry could be explained by statistical discrimination, i.e., the actual productivity of African workers in this firm was found to be significantly lower than the productivity of workers of other ethnic backgrounds. The effect of education on productivity was found to be very small. Copyright 1999 by Royal Economic Society.