Implications for Practice

This study enhances the understanding of recruiting processes, especially with respect to the relation between search channels and personality. Individuals that are found through different search channels differ considerably regarding their personality. This finding is particularly relevant for companies or jobs with meaningful bonus systems (e.g. sales, production, see Heywood, Jirjahn, 2002), as formal channels are more likely to attract employees that score high on internal locus of control. Those individuals are easier to be motivated by monetary

incentives (Bowles et al., 2001), which is likely to be linked to performance.78 Bryson et al.

(2013) found that individual performance pay in Europe is most frequently paid to low-skilled employees in the construction and manufacturing sector. Hiring through formal channels might be particularly promising for employers in these sectors. Organisations who utilise incentive schemes should, furthermore, try to attract individuals who score low in neuroticism. Neurotic individuals with inadequate stress responses are more likely to “choke under pressure”, meaning that high incentives could be detrimental to performance (Ariely et al., 2009). With respect to post-hire outcomes, an internal orientation is related to both wage

78 _{See Cable and Judge (1994) for evidence on the relationship between personality and pay preferences of} college students who were searching for a job.

165 Determinants and Effectiveness of Recruitment Channels – The Role of Personality

and job satisfaction which supports the assumption that attracting such workers is beneficial for an organisation.

Previous research has linked risk preferences to incentive schemes. Bellemare and Shearer (2010) found that more risk tolerant employees sort into jobs with high incentives since incentive payments transfer the economic risk at least partially from the employer to the employee. Grund and Sliwka (2010) provided further evidence that more risk averse employees are less likely to work in jobs with incentive contracts. Risk, as an economic preference, has been identified as complementary to personality traits (Becker et al., 2012). However, individuals with a strong believe that their effort translates into a desired outcome could be willing to bear higher risks. Individuals scoring high in locus of control might perceive risks differently because they might believe that risks can be compensated by their own effort. Although this relationship has not been investigated empirically, firms could attract employees with higher risk tolerance through formal ties.

The empirical results indicate that openness to experience is positively related to both search via internet and job satisfaction. Therefore, firms that intend to find creative and open employees should utilise this channel to attract adequate applicants. No correlation was detected for neuroticism; hence, firms are not able to adjust their application process to be less visible for neurotic individuals.

5.5 Conclusion

The objective of the empirical analyses in this chapter was to gain a deeper knowledge of the determinants and outcomes of job search via social capital – and the role of personality traits in this context. In general, this study aimed at understanding if personality differences explain selection into source usage and/or determine post-hire outcomes. The analysis of the determinants of job search via certain channels revealed considerable personality differences between job searchers via formal and informal channels. The most important hypotheses regarding the selection process were supported by the findings. In the second step of the analysis, source and personality variables were included in regressions to analyse their relationship to wages and job satisfaction. No significant relation could be found between post-hire outcomes and recruitment sources. After including four correction terms as proposed by Bourguignon et al. (2007), the newspaper coefficient in the wage regression becomes significant. Hence, apart from this channel, self-selection might be a lesser concern with regard to post-hire outcomes of search channels. Personality variables could explain

166 Determinants and Effectiveness of Recruitment Channels – The Role of Personality

differences in wages (LOC, agreeableness) and job satisfaction (openness, agreeableness, LOC), even when it is controlled for search channels and selection into channel usage.

The results of this study indicate that selection into job search channels is not only a matter of demographic or job-related factors. Differences in personality traits are able to explain why some people search via personal contacts and others prefer to utilise formal channels. Moreover, personality traits are less able to explain differences in wages; however, a relation between personality and job satisfaction could be found. In all steps of the analysis, locus of control has proven to be the strongest correlate of channel selection and job success. Hence, further studies should implement at least a measure of locus of control in order to control for an important determinant of individual behaviour. Future research should investigate the relationship between personality traits and the referring person and the long-term effects of personality as well as job search channels. For practice, the findings of this study indicate that individuals who found their jobs through formal channels are more internally oriented. Those employees are more responding to incentive schemes (Bowles et al., 2001), which might be relevant for firms in industries or for positions in which incentive schemes are more common (e.g. firms with foreign ownership or works councils, see Kurdelbusch, 2002; Heywood, Jirjahn, 2014).

Future research could draw on the theoretical illustrated in Chart 10 in order to investigate this complex relationship. Structural equation modelling could serve useful to estimate whether the theoretical model accurately describes the selection process into search channels and the determination of post-hire outcomes. Furthermore, this approach could directly incorporate the personality items instead of using aggregated measures as described in chapter 5.3.1. Structural equation modelling could be, thus, a powerful approach in order to investigate the job finding process as a whole and multiple stages could be modelled which has not been possible in a simpler two-stage model. Nevertheless, the reader should keep in mind that “no measurement can claim to capture the entire job-search process” (Lin, 2008: 53). Yet, the chosen two-stage approach represents an attempt to cover the search process better than previous studies. Furthermore, this study has incorporated personality measures in order to gain more robust estimates and to elucidate a dimension of individual differences that has been widely ignored in the past. Although additional research in this field deems necessary, this study can be regarded as a further step bringing personality into economic research. To say it with the words of Goldberg (1993: 32): “Once upon a time, we had no personalities. Is it not exciting to see their return?”

167 Pre-hire and Post-hire Outcomes of Search Activities of Unemployed Job Seekers

6 Pre-hire and Post-hire Outcomes of Search Activities of Unemployed Job Seekers

6.1 Introduction

Unemployment exposes huge monetary and non-monetary costs on individuals, such as forgone earnings (Feldstein, 1978), reduction in subjective well-being (Kassenboehmer, Haisken-DeNew, 2009; Helliwell, Huang, 2014), and negative effects on psychological and physical health (see e.g. McKee-Ryan et al., 2005; Paul, Moser, 2009). Hence, unemployed job seekers spend a significant amount of their time on job search activities (Krueger, Mueller, 2012). Job search can be conducted via different search channels, which are commonly divided into formal and informal channels. Formal channels comprise job search via newspaper or internet adverts as well as public and private employment offices. On the contrary, individuals could utilise their social ties to friends, relatives, or acquaintances as a source of information to find a new job (Zottoli, Wanous, 2000).

Based on the “strength of weak ties”-hypothesis (Granovetter, 1973), early research for the U.S. labour market finds evidence that social ties lead to better jobs as regards to wages and job satisfaction (Granovetter, 1995). Wanous (1978) explained the positive effects of social ties on post-hire outcomes by more realistic job expectations of applicants as their sources can provide the applicants with better information about the respective job. Furthermore, the incumbent disposes of information advantages about the skill requirements of the vacancy compared to the job seeker. Therefore, pre-screening by the incumbent assures that only high- skilled and well-fitting applicants receive information about the vacancy because frequent recommendation of low-skilled workers could harm the reputation of the recommender (Zottoli, Wanous, 2000). In contrast to this, Schwab (1982) denied the existence of any source effects and claims that different sources attract a different part of the job seeker population. Hence, wage and job satisfaction differences are rather a result of preferences of job searchers than of information benefits or pre-screening.

While the first three chapters of this thesis have investigated relationship between the channel the new job has been found through and post-hire outcomes in general, this chapter limits the investigation to unemployed job seekers. As visualised in Chart 2, this chapter investigates actual job search activities – which might be used simultaneously – and not job finding. Therefore, the fourth research question raised in the introduction is addressed. In his theoretical model on job search, Burdett (1978) distinguished on and off-the-job search (searching while being unemployed) as a search strategy. Unemployment is likely to affect everyday life in various ways, e.g. by more time available for job search (especially via

168 Pre-hire and Post-hire Outcomes of Search Activities of Unemployed Job Seekers

formal channels) and a loss of social ties to other employed individuals (Bramoullé, Saint- Paul, 2010). Unemployment could, therefore, coincide with job search via formal means. Yet, analyses in chapter 3 have shown that disadvantaged job seekers can benefit from job search via social ties. Those unemployed job seekers who are able to maintain their social network might be able to escape more quickly from unemployment and might be better off in terms of post-hire outcomes. Thus, the analysis of job search of unemployed job seekers could extend our understanding of how social ties translate into monetary and non-monetary benefits. The contribution of this chapter is threefold. First, it is analysed whether job search via personal contacts serves as a promising means for escaping unemployment. In contrast to the two previous chapters, this analysis exploits rich data of the Socio-Economic Panel (SOEP) on unemployed job seekers. Hence, it is possible to observe search behaviour of unemployed job seekers (off-the-job search) and to match this information with job characteristics after finding a job. This approach should elucidate the dynamics and outcomes of job search via different channels. In a second step it is focussed on those individuals who found a job. For these successful job seekers, post-hire outcomes, i.e. wages, job satisfaction, and job security, can be estimated depending on the respective search activities during their unemployment spell. Third, this chapter explores whether search activities in unemployment are related to finding a job via one of the four channels (social ties, newspapers, employment agencies, and internet) which have been investigated throughout this dissertation.

This chapter is structured as follows: In the next chapter theoretical considerations on the particular relevance of social ties for unemployed job seekers are made and connected to the existing literature. At the end of this chapter, hypotheses are developed. Chapter 6.3 introduces the different datasets and methodologies used in order to address the three objectives of this chapter. The empirical evidence is presented in chapter 0 and these findings are discussed in 6.5. Chapter 6.6 concludes.