Employer Recruitment Strategies and the Labor Market Outcomes of New Hires

I. INTRODUCTION Employers and job seekers are brought together for potential matches through their recruitment and job search activities. Employers may post help-wanted signs, run newspaper advertisements, or seek referrals from private employment agencies. Job seekers may speak with friends and relatives, solicit the aid of the state employment agency, or simply walk in and apply. These recruitment and search activities help both parties acquire information about each other, and the more information they obtain prior to entering an employment agreement, the higher the likelihood of a good employment match. The crucial role of information in the labor market has been recognized since Stigler (1962), but despite a voluminous literature on job matching and organizational behavior in labor markets, we know far less about employers' recruitment strategies than about job seekers' search strategies. As Granovetter (1995) notes, "While people are finding jobs, employers are finding people to fill them, and their behaviors, strategies, and purposes play a central but often neglected role in the process of matching people to jobs." This imbalance in research effort is explained more by a dearth of adequate data describing employer recruitment behavior than by lack of scholarly interest. Indeed, labor economists, sociologists, psychologists, and human resource management specialists have spent the last half-century exploiting the meager existing data sets in efforts to learn about employer recruitment behavior. In this article I address several empirical questions concerning employer recruitment using the Multi-City Study of Urban Inequality (MCSUI), a large cross-sectional survey of employers in four metropolitan areas of the United States that has not been exploited for a detailed analysis of the relationships among recruitment strategies, starting wages, and vacancy duration, despite the richness of the data set for this purpose. The MCSUI data contain detailed information on firm and job characteristics and, most important for the purpose of this article, indicators of the recruitment methods these employers used when hiring the most recently hired worker. The data allow a number of interesting questions to be addressed concerning the link between employer recruitment choices and starting wages, vacancy duration, and the skill levels of new hires. Because there has been relatively little empirical research done by labor economists on employer recruitment, this work with a relatively large representative sample of employers should enhance our understanding of a number of basic questions. I consider three of these. First, I present evidence describing which recruitment methods employers use and how these vary by firm characteristics, vacancy characteristics, and the skill requirements of jobs. I estimate a multivariate probit model with a separate equation for each of 10 recruitment choices. In addition to providing information about the relationship of each recruitment method with each of the covariates, this method has the attractive feature of allowing for an analysis of the relationships among the unobserved determinants of recruitment choice. To my knowledge, this methodology is new to the recruitment literature. Second, I present regression evidence showing how vacancy duration varies by recruitment choices. Some recruitment methods can be expected to be faster than others in generating job applicants. However, an employer must invest time in screening the applicant pool, so the recruitment methods that generate applicants quickly do not necessarily fill vacancies quickly. Therefore the link between recruitment methods and vacancy durations is an empirical question. Third, I present evidence concerning the relationship between starting wages and recruitment methods. In particular, I augment standard log-wage specifications based on the human capital model with recruitment choices and find that the recruitment variables have explanatory power, even in the presence of all of the usual controls. …