Labor Market Chances of Whistleblowers - Potential Drivers of Discrimination

Abstract

Whistle-blowers frequently face retaliation after reporting law-breaking activities and end up leaving their employing organization. Our study uses a controlled lab experiment to examine how whistle-blowing affects the chances of future employment when respective employees re-enter the labor market. Our results reveal that their chances differ depending on the manager making the hiring decision: while honest managers do not discriminate, managers with a past fraud record discriminate against whistle-blowers. This discrimination pattern is robust across different treatments. Even when recruiting for an employee who attaches importance to moral integrity and whose behavior reduces the risk of financial losses for the managers, fraudulent managers still discriminate against whistle-blowers. Our study has important implications for whistle-blowing protection as employees not only face retaliation in the immediate aftermath of whistle-blowing but also encounter reduced long-term career prospects in the labor market.