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Employer Learning and the "Importance" of Skills

Author

Listed:
  • Light, Audrey

    (Ohio State University)

  • McGee, Andrew

    (University of Alberta)

Abstract
We ask whether the role of employer learning in the wage-setting process depends on skill type and skill importance to productivity. Combining data from the NLSY79 with O*NET data, we use Armed Services Vocational Aptitude Battery scores to measure seven distinct types of pre-market skills that employers cannot readily observe, and O*NET importance scores to measure the importance of each skill for the worker's current three-digit occupation. Before bringing importance measures into the analysis, we find evidence of employer learning for each skill type, for college and high school graduates, and for blue and white collar workers. Moreover, we find that the extent of employer learning – which we demonstrate to be directly identified by magnitudes of parameter estimates after simple manipulation of the data – does not vary significantly across skill type or worker type. Once we allow parameters identifying employer learning and screening to vary by skill importance, we find evidence of distinct tradeoffs between learning and screening, and considerable heterogeneity across skill type and skill importance. For some skills, increased importance leads to more screening and less learning; for others, the opposite is true. Our evidence points to heterogeneity in the degree of employer learning that is masked by disaggregation based on schooling attainment or broad occupational categories.

Suggested Citation

  • Light, Audrey & McGee, Andrew, 2012. "Employer Learning and the "Importance" of Skills," IZA Discussion Papers 6623, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp6623
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    References listed on IDEAS

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    1. Joseph G. Altonji & Charles R. Pierret, 2001. "Employer Learning and Statistical Discrimination," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(1), pages 313-350.
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    Cited by:

    1. Martin Lundin & Oskar Nordström Skans & Pär Zetterberg, 2021. "Leadership Experiences, Labor Market Entry, and Early Career Trajectories," Journal of Human Resources, University of Wisconsin Press, vol. 56(2), pages 480-511.
    2. Urgiles Bravo, Maria Gabriela, 2014. "Employer learning and statistical discrimination: a comparison of hispanic and white males," Master's Theses and Plan B Papers 180417, University of Minnesota, Department of Applied Economics.
    3. Light, Audrey & McGee, Andrew, 2015. "Does employer learning vary by schooling attainment? The answer depends on how career start dates are defined," Labour Economics, Elsevier, vol. 32(C), pages 57-66.
    4. Araki, Shota & Kawaguchi, Daiji & Onozuka, Yuki, 2016. "University prestige, performance evaluation, and promotion: Estimating the employer learning model using personnel datasets," Labour Economics, Elsevier, vol. 41(C), pages 135-148.
    5. Emiko Usui & Seik Kim, 2013. "Employer Learning, Job Mobility, and Wage Dynamics," 2013 Meeting Papers 912, Society for Economic Dynamics.
    6. Melinda Petre, 2018. "Are Employers Omniscient? Employer Learning About Cognitive and Noncognitive Skills," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 57(3), pages 323-360, July.

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    More about this item

    Keywords

    employer learning;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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