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

  • Uschi Backes-Gellner

    ()

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

  • Simone Tuor

    ()

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

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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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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  15. John S. Heywood & Uwe Jirjahn, 2002. "Payment Schemes and Gender in Germany," ILR Review, Cornell University, ILR School, vol. 56(1), pages 44-64, October.
  16. Mari Sako & Gregory Jackson, 2006. "Strategy Meets Institutions: The Transformation of Management-Labor Relations at Deutsche Telekom and Ntt," ILR Review, Cornell University, ILR School, vol. 59(3), pages 347-366, April.
  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. 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.
  19. Alberto Bayo-Moriones & Pedro Ortín-Ãngel, 2006. "Internal Promotion versus External Recruitment in Industrial Plants in Spain," ILR Review, Cornell University, ILR School, vol. 59(3), pages 451-470, April.
  20. 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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