External Labor Market Research Articles

Hiring Discrimination Under Pressures to Diversify: Gender, Race, and Diversity Commodification across Job Transitions in Software Engineering

White, male-dominated professions in the United States are marked with substantial gender and racial inequality in career advancement, yet they often face pressures to increase diversity. In these contexts, are theories of employer biases based on gender and racial stereotypes sufficient to explain patterns of hiring discrimination during common career transitions in the external labor market? If not, how and why do discrimination patterns deviate from predictions? Through a case study of software engineering, we first draw from a large-scale audit study and demonstrate unexpected patterns of hiring screening discrimination: while employers discriminate in favor of White men among early-career job applicants seeking lateral positions, for both early-career and senior workers applying to senior jobs, Black men and Black women face no discrimination compared to White men, and White women are preferred. Drawing on in-depth interviews, we explain these patterns of discrimination by demonstrating how decision-makers incorporate diversity value—applicants’ perceived worth for their contribution to organizational diversity—into hiring screening decisions, alongside biases. We introduce diversity commodification as the market-based valuative process by which diversity value varies across job level and intersectional groups. This article offers important implications for our understanding of gender, race, and employer decision-making in modern U.S. organizations.

Industry tournament incentives and acquisition performance

This paper examines the effect of industry tournament incentives on acquisition performance. Using the pay gap between a firm's CEO and the highest-paid CEO in the same industry as the measure of industry tournament incentives, we find that deals led by CEOs with higher industry tournament incentives experience higher abnormal announcement returns. This positive relation between industry tournament incentives and acquisition returns is more pronounced when CEOs have greater mobility and probability of winning the tournament prize. Our findings highlight those tournament incentives induced by the external labor market play important roles in corporate acquisitions.

Heterogeneity and wage growth of full-time workers in Japan: An empirical analysis using micro data

In this paper we examine the driving forces of fluctuations in wage growth of full-time workers in Japan, taking into account the heterogeneity of wage structures among the workers and using micro data including those from the Basic Survey on Wage Structure. To this end, we first divide full-time workers into two classes with distinct wage structures, based on a finite mixture model estimated using various characteristics of the workers and the firms they work for. We find that the two classes correspond to what previous studies have called an "internal labor market," where labor is reallocated within firms and wages follow a seniority-based system under long-term employment practices, and an "external labor market," where labor moves across firms and wages are mainly determined by supply and demand factors in the market. We next analyze the effects of economic factors on individual full-time workers' wage growth rates. We show that in the internal labor market, neither labor market conditions at the industry and firm-size level nor the output gap at the macro level have influenced the wage growth rates in recent years at least until 2021, while higher potential growth has increased them. By contrast, in the external and the overall labor markets for full-time workers, improvements in labor market conditions and the output gap have accelerated the wage growth rates, even in recent years.

Managers' career preferences and corporate culture

AbstractBuilding effective corporate culture is challenging as it requires senior managers to embed shared values within the firm. Yet some firms can do so, and some cannot. This study examines whether managers' career preferences influence manager‐employee value misalignment and weaken corporate culture. Career preferences for job‐hopping provide incentives for managers to signal their leadership quality in the labor market. We capture managers' and employees' attention allocation across different cultural values using data from conference calls and Glassdoor. We predict and find that job‐hopping managers direct their attention away from soft cultural values (e.g., respect and integrity) that are less observable by the external labor market. Furthermore, job‐hopping managers who pay insufficient attention to soft cultural values fail to address the concerns that employees have in their everyday work, resulting in lower overall employee culture ratings. Our study highlights the significance of managers' career preferences in shaping different cultural values and offers implications for firms selecting senior managers.

КОРПОРАТИВНАЯ КУЛЬТУРА И БРЕНД РАБОТОДАТЕЛЯ В СОВРЕМЕННЫХ УСЛОВИЯХ

In the modern world, the successful development of any enterprise in any field depends on a number of factors, including the creation of a favorable corporate culture. Corporate culture is becoming an increasingly important aspect of doing business today. In this regard, the formation of a common vision of goals and objectives, a single strategy and sustainable values, which must be implemented at all levels and management structures, are of fundamental importance.
 The article focuses on the fact that in modern conditions, the process of forming an effective corporate culture is associated with three important elements: external and internal HR-brand and social policy. The internal HR brand is a certain set of tools with which the strategy of staff retention and development is implemented, thereby developing employee loyalty. An internal HR brand is a powerful tool for creating and strengthening ties between employees and the employer, as well as ensuring their commitment to the company. In turn, an external HR brand is a set of activities aimed at attracting new personnel and strengthening the company's image in the external labor market, since it affects the perception of the company by potential employees and partners. Also, an equally important element of corporate culture is the social policy of the enterprise, which is aimed at improving working conditions and improving the quality of life of employees. Social policy includes elements such as bonuses, benefits and other programs that are aimed at showing the company's concern for its employees and creating a positive image. All these factors together give uniqueness to the corporate culture of the enterprise and influence its success in the long term.

The returns to returning to school

PurposeThis work examines the returns to education for workers who pursue additional education after time out of the labor force. It compares those who remain in the labor force during additional education with those who drop out of the labor force during additional education. It compares two cohorts of the National Longitudinal Survey of Youth (NLSY).Design/methodology/approachThis work utilizes a difference equation to estimate the returns to education for workers who pursue additional education after time spent out of school and in the labor force.FindingsThe results indicate a sheepskin return of approximately 14% for those who remain in the labor force and a return of approximately 9% to years of additional education for those who drop out of the labor force. This contrasting pattern of returns is robust to sample selection correction and a variety of checks.Research limitations/implicationsThis work does not fully account for all threats to causation. Further research could pursue these and make use of data from more clearly defined periods of education.Practical implicationsThis work finds key differences between the internal labor market faced by those remaining in the labor force and the external labor market faced by those dropping out of the labor force. A policy focused on re-training workers should account for these differences.Originality/valueThis is the first work to compare workers who pursue additional education while remaining in the labor force to workers who pursue additional education and drop out of the labor force.

Internal university labor market: problem, inevitability or expediency?

There are 2 strategic vectors of human resource management: an open or closed model. The reasons for the development or rooting of a closed model (the internal labor market) we explain by two groups of basic conditions (factors): the specifics of the external environment and the business model of the organization. Each of the conditions determines the need to attract workers with specific characteristics.The article is devoted to the study of the influence of these factors on the creation of internal labor markets in universities. The methodological framework of the study is based on human resource management and labor economics. The specificity of the business model of the university is due to the multifunctionality of its target efficiency, the complexity of the hierarchy, and the special characteristics of the goods. Also, the reasons for the emergence of closed models of human resource management are associated with bilateral and quasi-market relations in the higher education. Together, these factors explain the emergence of a special type of internal labor market. Its key characteristics are an indirect system for assessing the level of professor’s qualifications; self-selection and inbreeding as the unique institutions; implicit individual contracts as a by-product of the hidden career and the working time elasticity. In Russian universities, internal labor markets are a non-alternative model of human resource management due to the underdevelopment of infrastructure, as well as an imbalance in supply and demand in the external labor market. It is shown that the functioning of such a model will be relatively expedient when building the effective work of a university in a loose coupling net of national and international academic community.

Canteen Workers’ Wages and Collective-Bargaining Arrangements in British Coal

This paper examines the rates of pay of female canteen workers employed by British Coal as compared to male employees, with a focus on the reasons for the existence and persistence of a wage differential of around 20%. Four sets of interrelated issues are addressed: first, the structure of collective pay bargaining in the coal industry and the formal and informal relationship between bargaining arrangements for female canteen workers and male mineworkers; second, the empirical evidence on relative pay levels and rates of change for female canteen workers and other British Coal employees; third, the structure and influence of the external labour market for canteen workers and its relation to the position of British Coal’s female canteen workers; and fourth, the role of gender in influencing the level of wage differential between female employees and male employees of British Coal. The conclusion is that gender difference seems to be the main explanatory factor for the remaining differences in pay and conditions that exist between female canteen workers and mineworkers.

How local tournament incentives influence ESG disclosure: CEO’s genuinely altruistic or self-serving?

PurposeThis study aims to examine the effects of local tournament incentives on environmental, social and governance (ESG) disclosure and the quality of such disclosures among Chinese A-share listed companies. Furthermore, it seeks to investigate the moderating roles of CEO duality, institutional investors’ shareholding and product market competition in this relationship.Design/methodology/approachThis study uses a quantitative approach, and data from A-share listed companies in China spanning from 2012 to 2021. To test the proposed hypotheses, the authors conduct hierarchical regression analysis along with a series of robustness tests to ensure the validity of our findings.FindingsThe findings of this study indicate that local tournament incentives have a positive impact on companies’ propensity to disclose ESG information, yet they negatively influence the quality of these disclosures. Additionally, the presence of CEO duality and product market competition attenuate this relationship, whereas the shareholding of institutional investors serves to strengthen it.Practical implicationsThis study’s findings can aid policymakers and regulators in China and other emerging economies in policies that promote high-quality ESG information disclosure, taking into account local tournament incentives. Furthermore, the study underscores the importance of maintaining robust corporate governance structures within firms to ensure that CEOs’ self-serving motivations do not undermine ESG disclosure.Originality/valueThis study adds to the ongoing discourse on the significance of ESG disclosure in emerging economies by analyzing the influence of executive promotion incentives on ESG disclosure from an external labor market standpoint. By exploring the potential self-serving motivations of CEOs in promoting ESG values and practices within organizations, this paper addresses a gap in the existing literature.

The effect of contractual and behavioral CEO attributes on aggressive tax avoidance: case of German-listed firms in HDAX

Purpose This paper aims to examine the effect of contractual factors and noncontractual factors on tax avoidance (TA). Design/methodology/approach The sample comprises 400 firm-year observations of 67 companies listed on the HDAX during the period 2008–2017. The generalized least square panel regression is applied. Findings The study results confirm a significant effect of long-term chief executive officer (CEO) compensation incentives and CEO attributes on TA. Findings exhibit a significant impact of foreign CEO on TA, whereas an insider CEO mitigates TA. The results hold for several robustness tests, with lag effective tax rate as dependent variable and with splitting foreign CEO into European and non-European origin. Research limitations/implications First, the sample is limited to 400 firm-year observations and to the German context. For shareholders, the study provides first evidence on relationships between the geographical and internal versus external labor market for CEOs and TA. For researchers, the findings underline the importance of integrating behavioral approaches like place attachment theory and the rooting theory in the theory of TA. Originality/value To the best of the authors’ knowledge, this is the first study to examine the impact of both contractual determinants and behavioral determinants on TA in the German context as an emerged economy with a dualistic corporate governance. This study contributes to the existing literature regarding the scientific debates about the impact of CEOs and CEO attributes on TA. It also analyses the balance between the place attachment theory and the rooting theory in the face of the compensation outcomes of agency theory.

Who wants to leave when facing mass lay-off: a regulatory focus perspective on turnover intentions and mobility-oriented behavior

PurposeMass lay-offs tremendously impact employees and companies. Helping people toward new employment could help organizations manage costs and reputation. The authors sought to test a model, based on regulatory focus theory, predicting which employees are more likely to consider leaving the company during this uncertain time (turnover intentions) and indirectly to engage in behavior to strengthen their external labor market position (mobility-oriented behavior).Design/methodology/approachWith a mass lay-off impending, the authors studied employees (N = 326) in a financial services organization. The authors reasoned that employees' perception that they have higher (vs lower) qualifications than their job requires, may be able to spur turnover intentions for some because it enhances perception that movement to another job is desirable and feasible. The authors proposed perceptions of being overqualified vs perceptions of being underqualified only affect the turnover intentions and mobility-oriented behavior of promotion-focused employees.FindingsSupporting the expectations, promotion-focused employees (but not prevention-focused employees) who perceived themselves to be overqualified, compared with promotion-focused employees who perceived themselves to be underqualified, showed higher turnover intentions and, indirectly, mobility-oriented behavior.Originality/valueThis research is one of few studies that have examined intentions and behavior of employees who are facing impending mass lay-off, as most lay-off research has studied survivors or victims post lay-off. To the best of the authors’ knowledge, this is the first study to apply a regulatory focus perspective on overqualification/underqualification, as well as to turnover intention and mobility behavior.

Proactive career behavior in management: A systematic literature review

The purpose of the conducted systematic review is to identify how organizations can promote proactive career behavior among employees. The review includes 91 articles published in highly ranked English language journals till 2022. The review covers three categories of job seekers — the employed (the domestic labor market), those in active search (the external labor market), students. The employed workers include both new recruits and those who are interested in further career advancement. The study interprets the key definitions related to proactive career behavior and clarifies the variants of operationalization. The authors suggest four measures how to promote employees’ proactive career behavior. Due to the novelty of the topic in the domestic academic context, the identified definitions, operationalization and methods of organizational support require empirical testing in Russian organizations. The paper introduces the publications in highly ranked journals; it increases the credibility of the obtained results and shows possible ways of empirical testing of the identified assumptions. The practical significance pertains to companies’ interest in well-being, diversity and inclusion programs. Supporting employees in their efforts related to career success has a positive impact on their well-being and expands a range of tools for managing diversity through a greater autonomy in building individual career trajectories. In Russia, most of the research on proactivity is conducted in the fields of psychology and sociology. The present review suggests a range of issues for management, shifting the focus to the role of organizations in the career success of their employees.

External Labor Market Punishment in Finance

External Labor Market Punishment in Finance

Barriers to Sustainable Digital Transformation in Micro-, Small-, and Medium-Sized Enterprises

Digital transformation empowers micro-, small-, and medium-sized enterprises (MSMEs) to rethink the way they make decisions and apply technology in meaningful and sustainable ways. The aim of this study is to investigate the main barriers to MSMEs’ sustainable digital transformation, given their global importance and function as the backbone of any economy. We apply the concept of sustainable digital transformation (SDT), which refers to the process of digitalizing the economy in a long-lasting, green, and organic way by building on its key strength: innovative companies and their business ecosystems. The study is based on a representative survey of 425 Latvian MSMEs, which was conducted in the spring of 2021. We combine a survey of MSMEs with a qualitative comparative analysis. Our study identified seven barriers to sustainable digital transformation for MSMEs, which can be classified into three levels of importance. We found that the most important barriers to MSMEs are IT security issues and the shortage of specialists in the external labor market. Furthermore, we discovered that some barriers differ depending on company attributes, such as the number of employees, revenue, and the ability to implement digital transformation independently. However, the barriers were evaluated similarly by company owners and managers. These findings can help MSMEs’ managers and owners, policymakers, and practitioners understand which barriers are impeding MSMEs’ sustainable digital transformation.

Germany and the United States in coronavirus distress: internal versus external labour market flexibility

Germany and the United States pursued different economic strategies to minimise the impact of the Coronavirus Crisis on the labour market. Germany focused on safeguarding existing jobs through the use of internal flexibility measures, especially short-time work (STW). The United States relied on a mix of external flexibility and income protection. On this basis, we use macroeconomic time series to examine the German strategy of securing employment through internal flexibility by contrasting it with the chosen strategy in the United States. In Germany, temporary cyclical reductions in working hours are mainly driven via STW. US unemployment rose at an unprecedented rate, but unlike in previous recessions, it was mostly driven by temporary layoffs. However, a closer look at the blind spots of the chosen strategies in both countries showed that despite the different approaches, people in weaker labour market positions were less well protected by the chosen strategies.

Reputation on Career: An Antecedent of Category Spanning in External Labor Market

This study examines the role of reputation in career progression decisions in external labor markets. While many prior studies have been devoted to investigating the consequences of generalist and specialist careers in labor markets, much less work has examined the antecedents to whether or not one chooses to work across disparate jobs. Drawing on social category, reputation, and self-efficacy theories, we investigate how reputation influences job seekers to have different interpretations and expectations for their own abilities, leading to varying decisions and behaviors. Better reputation triggers self-efficacy, or one’s belief on their own abilities, helping to believe that their abilities can be generalized from one to others. Our analyses of one of the largest online freelancing platforms, Elance.com, between 2008 and 2013 demonstrate that job seekers with better reputation will be more likely to span disparate job categories than those with worst reputation. Moreover, we suggest this relationship is attenuated for more competitive market conditions in the main job categories and strengthened for more failures in the periphery job categories that they have experienced. Since self-efficacy helps to perceive these threatening situations as things to be overcome rather than things to be avoided, job seekers facing stressful situations such as high competition in their own main job areas and failures in the periphery job areas are more likely to choose to persist in the face of threats. The results provide some evidence that whether generalist or specialist careers are chosen depends on the reputations of job seekers.

Director reputational penalties when shareholders disapprove of executive compensation

AbstractWe investigate the reputational consequences for directors of firms that receive a low‐support Say‐on‐Pay (SOP) vote. These affected directors face a significantly greater likelihood of losing board seats, both at the voting firm and in the external labor market. However, penalties are not equal for all directors. Directors who serve on compensation committees and at firms with high chief executive officer pay suffer internal penalties. Both internal and external penalties affect directors of low‐support firms with high executive entrenchment. Compensation committee members serving low‐support firms are more likely to receive a negative reelection recommendation from Institutional Shareholder Services and fewer votes for reelection, at both voting and external firms. We provide the first evidence of external labor market penalties when directors fail to align executive compensation contracting with shareholder preferences. Our findings suggest that nonbinding SOP votes provide shareholders with a mechanism to influence director incentives and, therefore, executive compensation.

Restructuring, Redeployment and Job Churning within Internal Labour Markets

This article explores the phenomenon of recurrent internal redeployment, through a case study of restructuring at a UK based steel firm. While redeployment reflected one of the key functions of the traditional internal labour market at SteelCo, frequent restructuring events meant some workers experienced redeployment on a recurrent basis. For these workers the experience of repeated redeployment was analogous to churning in and out of jobs on the external labour market. Adapting this term to internal organisational processes, the article presents a new way of analysing recurrent redeployment through the formulation of the concept of Internal Labour Market Churn. This new contribution to internal labour market theory highlights problems with human capital development, career progression and in-work insecurity associated with internal churning, which tarnishes the sense of mutual commitment traditionally associated with and engendered by internal labour markets.

Do external labor market incentives improve labor investment efficiency?

This paper examines the impact of CEO external labor market incentives, proxied by CEO industry tournament incentives (CITI), on a firm’s labor investment efficiency (LIE). We develop two competing hypotheses based on the bright side of CITI and the dark side of CITI. Consistent with the former, we find a positive association between CITI and LIE. In cross-sectional tests, we show that the relationship between CITI and LIE is more pronounced for firms with weaker monitoring. Furthermore, this relationship is amplified for firms with weaker financial standing. Our results survive an array of tests for robustness and endogeneity concerns.

How Substitutable are Workers? Evidence from Worker Deaths

To assess the substitutability between workers within a firm, and between incumbent workers and outsiders, we estimate how exogenous worker exits affect a firm’s demand for incumbent workers and new hires. Using matched employer-employee data from Germany, we analyze the effects of 34,000 unexpected worker deaths and show that these worker exits on average raise the remaining workers’ wages and retention probabilities for a period of several years. The average effect masks substantial heterogeneity: Coworkers in the same occupation as the deceased see positive wage effects; coworkers in other occupations instead experience wage decreases when a high-skilled worker or manager dies. Finally, when the external labor market in the deceased’s occupation is thin, incumbents’ wages respond more and external hiring responds less to a worker death. Taken together, our findings imply that incumbent workers are closer substitutes to one another compared to outsiders, that high-skilled workers and managers are complements to coworkers in other occupations, and that thin external markets for skills lead to higher firm-specificity of human capital and lower replaceability of incumbents.