Bryan Caplan  

What You Say When You Throw an Application Away

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Physics Applied to Economics... What You Say When You Don't Ca...
Tyler has an odd interpretation of an interesting story.  The story:
[R]esearchers sent out 4,800 fake résumés at random for 600 job openings. What they found is that employers would rather call back someone with no relevant experience who's only been out of work for a few months than someone with lots of relevant experience who's been out of work for longer than six months.
Tyler's interpretation:
I think of this as further illustration of what I have called ZMP workers, a once maligned concept which now is rather obviously relevant and which has plenty of evidence on its side.  It's fine if you wish to label them "perceived by employers as ZMP workers but not really ZMP," or "unjustly oppressed and only thus ZMP workers."  The basic idea remains...
But is the Zero Marginal Productivity concept even relevant, much less "obviously relevant"?  Put yourself in the shoes of an employer reviewing applications.  What are you saying when you hastily toss an application in the trash?  Consider the following possibilities:

1. "I perceive this applicant to be a ZMP worker."

2. "I perceive this applicant to have a MVP below the wage we're offering."

3. "After a cursory glance at his application, I perceive this applicant to have a sufficiently high probability of having a MVP below the wage we're offering that collecting more information is imprudent."

My claim: #1 is a rare special case of #2, which is in turn a rare special case of #3.  #3 is the generally correct story. 

Why?  The mere fact that you throw an application in the trash doesn't mean you think the applicant has MVP=0.  After all, even if the applicant had a high MVP, you'd still want to throw his application in the trash if his MVP<wage.  Similarly, the mere fact that you throw an application in the trash doesn't mean that you think the applicant's MVP<wage.  After all, you'd do the same if you merely thought the probability that the applicant's MVP>wage wouldn't justify additional search effort on your part.

Not convinced?  Remember that employers often get hundreds of applications per position.  80%+ quickly end up in the trash can.  Does this mean that employers think that 80%+ of applicants are ZMP?  Of course not. 

I readily believe that most employers hastily throw away applications from the long-term unemployed.  The "obviously relevant concept," though, is not ZMP, but statistical discrimination.  Employers, like all humans, save time using true-on-average stereotypes.  In the process, they inevitably overlook many diamonds in the rough.  Spurning applications from the long-term unemployed is one example.  Spurning applications from the uncredentialed is another.  The article Tyler cites doesn't confirm his fears about low worker productivity.  It disconfirms his doubts about the signaling model of education.

P.S. If the true story is #2 or #3, why do employers treat wages as fixed?  If a worker's MVP is half the salary you're offering, why not offer him a job at half the usual wage instead of junking his application?  This is an excellent question with many well-known responses: morale, fairness, insider-outsider problems, and more.  None of these answers are totally satisfying, but all of them are more satisfying than ZMP.


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COMMENTS (19 to date)
Scott M writes:

In current HR practices, it is unlikely that anyone who considers MVP will see the resume.
The process is that these resumes are:
1. Filtered/screened through an automated program or a low level person based on keywords that must be found to go to the next level.
2. Filtered through a slightly higher low level Merson to see if they meet additional criteria. many employers are now using the "been unemployed too long" flag to weed these people out.
Nowhere in this process would statements about MVP be directly considered, thought, or said by these individuals.

Noah Yetter writes:

I often criticize you for not knowing what you're talking about when it comes to hiring, but you're mostly correct here. #3 is indeed the general case and most relevant characterization of employer behavior.

Your "P.S." is way off though. Wages are not fixed, not even close. Note that the vast, VAST majority of private sector job listings that are not either hourly or contract do not list a salary or even a salary range. Salary is often discussed at the first HR callback, but sometimes does not come up until later in the hiring process, and if the applicant and employer have widely divergent ideas of appropriate pay that process can come to an unexpected screeching halt.

If I'm looking to hire someone in the $80k-$100k range, and I get a resume from an individual that I estimate might be worth $50k-$60k (noting as an aside that in a Garrett Jones economy these numbers are all phantoms), it rarely makes sense for me to revise the *position* rather than discard the resume. Because typically when someone applies to a position way above their marginal productivity, it's a sign they either didn't read the posting or ignored what it was asking for, two acts that make a poor first impression.

Only after discarding dozens of resumes, conducting a handful of failed interviews, and generally tearing my hair out for a few months would I consider revising the position downward to fit the pool of applicants, rather than continuing to search for who I actually need.

Scott M writes:

Incidentally, I was unemployed for 3 months in the summer of 2011. I was directly challenged in an interview by an interviewer who asked why I was unemployed so long (this interview was 2 1/2 months into that timeframe). My response was "I applied for this position less than two weeks after being unemployed. It has taken this long for you to go through the interview process to select me for an interview. It will likely take at least a couple of additional weeks for you to finish the interview process and make a decision. That is easily at least 3 months of being unemployed, even though I was diligent in applying immediately".
I didn't wait that long and accepted another coincident position the next week.

Maximum Liberty writes:

Further to Noah's point -- Most open position are existing positions where the employer is filling attrition. The employer already has in place all of the complements to the labor performed by the position -- equipment, processes, management, etc. Does it make more sense to (a) hire a person with a marginal productivity that is within the range for which those complements are already optinized or (b) re-optimize all of those complements based on the marginal productivity of the person?

I think that the answer will vary from company to company based on a lot of factors, including the company's size and culture, the level of regulation involved, and the amount of physical capital that would need to be replaced.

If we assume that, for at least many positions, the employer must be satisfied that the employee will have a marginal productivity within a certain range, then the odds are that you have to pay a commensurate salary. There are always opportunities to do a long search to find the one diamond in the rough who actually have the desired level of productivity and is willing to take a lower wage, but the search cost imposed by waiting may easily outweigh the benefit of the lower wage.

Max

Mike writes:

Max, good point.

Your reasoning also explains the difficulty of career/industry changes.

bryan willman writes:

Scott M has it.

What's more, I think it's probably a bit off to suggest that most employers "think about" the resumes they screen-out/discard.

It is more accurate to say that they STOP thinking about them at all!

And as I've written here, on Arnold's blogs, on Tyler's blog - the goal is NOT to find diamonds in the rough or even to find the "BEST" candidate. The goal is to find a Fully Adequate (steady state job) or Very Execellent (upward moving job) candidate as cheaply as possible.

Will statistically on average true stereotypes bias this? Probably.

Peter St. Onge writes:

Why would non-hire imply MVP

Foobarista writes:

Having been in the resume-sorting game occasionally in my career, there is very little thought involved, particularly about a resume you've put in the discard pile. The first scan is to find a reason to make the pile smaller, and you can usually find one in about 10-15 seconds.

Anything material to the job is an easy set-aside: not enough experience, wrong sort of experience, etc. Other set-asides are not in the country (I've always worked at startups that wouldn't pay for relocation), not great school for jobs targeting younger people, etc, even stuff like misspellings and poor grammar in the resume is enough.

The last thing you're going to do is actually futz with the job requirements to hire one of the several hundred or thousand resumes you've got in a pile. The only time I've seen anything like this done is if we've get a "tweener": someone who's overqualified for a junior position but possibly a bit underqualified for a senior position but otherwise a good hire, we're hiring both, and we're having trouble hiring for one or the other. If you're doing the res sort, you usually do have several positions to fill, and you'll make a "tweener stack" for people like this.

After the res sort is done, you end up with a very small stack of "contact for each job", an even smaller stack of "tweeners", and a huge stack of discards.

Andrew writes:

Of course there is a $20 bill in the stack of resumes that landed in the trash. It would just cost me more than $20 to find it.

Glen S. McGhee writes:

Most job training occurs on the job (Ivar Berg, 1971), and younger workers are easiest to train, since they have nothing to unlearn.

Unfortunately, we are not told enough about this exercise to say much more than this -- what industry, how much were they asking, and can we assume that it was for an entry level job? What about education credentials? certifications?

And the most important question of all -- how the hell did the researchers manage to get any kind of a response from HR? A quick look at facebook would have told them that these kids "existed only on paper." Darn! Unemployed people spend years waiting by the phone, and these researchers are getting calls on fake resumes! How many resumes did they have to send out to get (how many?) responses (over how long a period of time)? Sounds real fishy to me -- this does not pass the baloney test.

aretae writes:

And #3 is a rare special case of #4:

Jobs are more scarce than applicants, so I need to screen most of them out in order to have a small pool to interview. Therefore, throw out any resume that doesn't have a,b,c, and d, JUST so that I can start with a small pool of resumes that I actually need to read.

John writes:

I think this story is more credible than the ZMP one I think it still misses the mark. I suspect most managers have some gestalt image of the desired candidate and "long terms unemployed" simply doesn't fit that image. I don't think most hiring managers think that deeply in terms of maximizing the MVP they are hiring but rather thinking about how the potential candidate will fit into the team.

In the latter case economist might try telling a story about the teams MVP given the marginal team member but I think that's really stretching the case.

Last, for any number of managers there's the concern that they may be hiring their own replacement if they bring in someone with a lot of experience. Or, at the very least, someone who might challenge their position of authority, directly or indirectly/unintentionally, which might be seen as undesirable by the manager regardless on the impact on team performance. If the team's performance increases this person may be a rival for some promotion.

michael pettengill writes:

This is a better explanation for screening in my experience than Tyler's from being one of the "helpers" in a much better job market ie 10-20 relevant resumes per opening.

Hiring a worker is like giving business to a small business in particular but sometimes even big businesses: if the business is so desperate they are pricing themselves below costs, the quality is going to suffer or the business will end up bankrupt. A very experienced and qualified worker is either going be living according to the old prevailing wage, or is a recent grad with debt to match, so hiring below cost is not the start of a long term relationship. Most businesses are focused on building their business, not in spending lots of resources searching for the lowest cost labor and suppliers.

As for the firm looking for employees and suppliers, the fate of those ignored for whatever reason is not their problem - and economists assume the unused labor and suppliers will vanish.

But this is all useless from a policy standpoint.

If your odds of getting an interview get worse and worse overtime, what do economists think should happen??

Bankruptcy and liquidation> Euthanize and sell off body parts? Homeless and hungry? Suicide? Nonexistence?

Jacob AG writes:

HR isn't thinking about the MP of the applicant relative to zero, nor even to the wage the position entails. HR is thinking about the MP of the applicant *relative to the other MP's in the stack of resumes.* And given the number of resumes, they need a heuristic. They use long-term unemployment as a heuristic for lower-MP-than-the-next-guy. That heuristic might have something to it, but when you factor in that it's an externality -- people are rejecting an applicant, because someone else rejected that applicant, because someone else rejected that applicant..... -- it becomes a major problem for the long-term unemployed. The LTU applicant might have high MP, but the HR dept has so many resumes that they won't (and don't need to) take on the search costs associated with separating the high-MP workers from the low-MP workers. The result is persistent LTU.

Jim Rose writes:

this proves too much.

How do labour markets ever get out of recessions? The unemployment rate would never bounce back to 5%. After a few recessions it would be 10%, made up mostly of long-termed unemployed?

Average unemployment durations at 1 year in Europe. How does any unemployed over there get a call-back in Europe?

The strongest empirical result in labour economics is the spike in job finding just before unemployment insurance exhaustion.

How do the unemployed near exhaustion suddenly get around their call-back problems?

Is the exhaustion spike in job finding lower in countries will longer benefit duration because fewer unemployed exhausting their insurance get a call-back?

Glen Smith writes:

Jim Rose,

One thing I know allows the overall labor market to bounce back is a disruptive technology. Thing about both MVP and ZMP stories is that both MVP and ZMP are based on perception. Further, when (and if) the demander (the hiring manager) lowers expectations to meet with reality, perceptions can change.

Hazel Meade writes:

It might be none of the above. You could be throwing it away because you've already identified multiple candidates who are more qualified. As you get towards the end of the pile, the liklihood of having done so rises.

David S writes:

I've done quite a bit of hiring in my career, and I think an under-appreciated aspect is the fear of a highly negative MP hire (NMP?). Most businesses aren't set up to handle this case well at all and this makes them extremely risk averse when hiring and unlikely to take any chance to find a "diamond in the rough". If a long break in employment is viewed as a signal of risk (and it is), it is going to be disqualifying (and it almost always is unless there is a strong countervailing factor such as a personal recommendation from a current employee or other trusted source).

Bryan, imagine that you hired an adjunct to teach one of GMU's economics classes (a bottom-level academic job), and the adjunct turned out to be unqualified and/or unmotivated and did unacceptably poor work. How much would it cost GMU to try to fix the mess that this would make in your department? There would be students who would be unprepared for their future economics classes and who would require some form of extra help or other remediation, probably performed by more valuable faculty members at substantial cost. Some potential future economists may be discouraged altogether, a real loss if an unquantifiable one. There would also be a difficult-to-quantify but real cost to the department's reputation among students. The total loss to GMU from this adjunct would far outweigh the actual wages paid for teaching the class. I'm sure GMU takes pains to make sure that this doesn't happen that are far out of proportion to the care that would be appropriate for a similar expense for office supplies.

I submit that this situation, where the employee represents the employer in some way and/or their work product (if below standard) will cost the employer dearly in customers and reputation, is increasingly representative of the typical employment opportunity. A barista at a Starbucks represents the company to the customer. An employee in a modern manufacturing facility may be responsible for the operation of millions of dollars of equipment with little direct supervision. In these cases, a ZMP employee is actually the least of the employer's concerns.

The hiring situation is quite similar to buying a used car in some ways, and the failure to quickly find a job once unemployed is viewed as a signal that the applicant may be a "lemon", so the employer looks elsewhere.

Maximum Liberty writes:

@ Jacob AG

I disagree in part. I think the first task is to eliminate the candidates who don't fall within the right range. That includes both those who have too little MP and those who have too much MP.

The latter point is the "overqualified candidate." The employer's concern is that they can't pay the kind of wage needed to retain someone with the indicated level of experience. That's because they already have a wage range budgeted for the position due to all of the things I discussed above.

Of course, to the extent that the same complements are used by a very high MP individual, then the employer would be happy to get someone with 20 years' experience. But that's not usually the case. And if you can't pay a wage to retain the person, you will lose them and you will be right back where you were, except you will have spent time in the low-productivity time period when a new employee is learning the company.

After you cut the ends off the distribution, I agree with you as to what happens next.

@ David S

Great point. Even normal office workers can have negative MP if they are constantly causing drama that diminishes the productivity of their co-workers and supervisors.

Max

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