Cognitive and non-cognitive skills predict individuals’ labor-market performance, but employers cannot directly observe the skills of job applicants. While individuals make costly investments to signal skills to potential employers, it is not well understood which and to what extent signals of different skills affect hiring decisions. A more nuanced empirical investigation of the relative importance of different skill signals – characteristics in which workers have invested – for employability is challenging, because many different and potentially highly correlated signals are considered simultaneously by employers when making hiring decisions, and not all of these signals are typically observed by researchers.
In this paper, we investigate how several different skill signals affect labor-market entry in an experimental setting. Having access to the database of the ifo Personnel Manager Survey, a regular online survey of human-resource (HR) managers representative of German firms, we are able to conduct a survey experiment with 579 HR managers. The experimental design gives us full control over the information set available to firms. We simultaneously randomize several skill signals contained in applicants’ CVs, allowing us to exploit independent and exogenous variation in different signals for three broad skill domains: cognitive skills, social skills, and maturity – a trait of potentially particular relevance at labor-market entry.
We find that signals in all three studied domains – cognitive skills, social skills, and maturity – have a significant effect on being invited for a job interview. Consistent with the relevance, expectedness, and credibility of different signals, the specific signal that is effective in each domain differs between apprenticeship applicants and college graduates. While GPAs and social skills are significant for both genders, males are particularly rewarded for maturity and females for IT and language skills. Older HR managers value school grades less and other signals more, whereas HR managers in larger firms value college grades more.
Chosen excerpts by Job Market Monitor. Read the whole story at Skills, signals, and employability: an experimental investigation