Good Jobs, Screening, and Labour Productivity

Abstract

Accumulating evidence shows that firm success is closely related to choosing the right mix of human resource management practises. This paper uses survey data from a representative sample of the British economy (WERS 2004) to identify clusters of policies which predict labour productivity. First, firms which leave their employees substantial discretion in working processes report (weakly) higher labour productivity despite increased shirking opportunities. Second, firms which pay high income to employees in addition to allowing discretion (good jobs) are highly successful if they screen job candidates for personality. This result is consistent with gift-exchange behaviour between employers who pay high wages and employees who voluntarily exert high effort, as screening for personality predicts reciprocal behaviour. Third firms offering but abstain from screening (efficiency wage hypothesis) or rely on agent's work ethic without providing high wages (Huang and Cappelli, 2010) report significantly lower labour productivity than firms offering good jobs and screen for personality. Forth, tests aiming to uncover job candidate's ability in combination with good jobs predict beneficial firm outcomes substantially worse, implying that not screening itself but screening for personality is decisive for offering good jobs to predict high labour productivity.