According to Caplan, employers are looking for conformity, conscientiousness, and intelligence. They use completion of high school, or completion of college as a sign of conformity and conscientiousness. College certainly looks as if it’s mostly signaling, and it’s hugely expensive signaling, in terms of college costs and foregone earnings.
But inserting conformity into the merit function is tricky: things become important signals… because they’re important signals. Otherwise useful actions are contraindicated because they’re “not done”. For example, test scores convey useful information. They could help show that an applicant is smart even though he attended a mediocre school – the same role they play in college admissions. But employers seldom request test scores, and although applicants may provide them, few do. Caplan says ” The word on the street: putting high scores on your resume suggests you’re smart but socially inept. ” Who would understand that better than Bryan? So valuing conformity leads to totally arbitrary standards – they exist because they exist. Let me suggest another possibility: flaunting high scores risks irritating the drones in HR. HR tends be packed with underperformers and people that the corporation felt compelled to hire (AA). Few people in HR have high scores on standardized tests. Other employees routinely express contempt for HR/Personnel. In the immortal words of Lieutenant Callahan: ” Personnel? That’s for assholes. ”
In the long run, who you hire is truly important, so it seems odd that companies would routinely allot this task to feebs. Yet it happens. The same thing is true for college admissions – the people doing it are not that special.
I think Bryan Caplan is more or less correct in his description of how companies hire, particularly for fresh college graduates and non-STEM majors. But he thinks that companies know what they’re doing (more or less), when it comes to hiring. ” Employers are greedy but not stupid.” I don’t see much evidence of that. Evidence would consist of careful statistical studies showing what worked best. Most companies have never done that, nor do they make use of similar studies from other companies. There are exceptions: Procter and Gamble puts a lot of thought into hiring, but they’re probably obeying a direct command from their Dark Lord. Google is apparently nutty enough to fire employees for endorsing their hiring system – along with pushing for a form of ideological conformity that is guaranteed to royally piss off at least half the population and all three branches of the Federal Government.
Let me give an example. Once upon a time, there was a Federal civil service exam, the General Aptitude Test Battery (GATB), a measure of general cognitive ability. That test was developed by the Feds. with considerable effort. The test had decent predictive value. It makes more sense for a huge organization to make that kind of investment – the development costs can be spread out over zillions of hires. Many state civil service exams also used the GATB, along with a number of private employers.
There was a catch: the results from the GATB were cooked. Race-normed. They gave your percentile rank for your ethnic group. “For example, three applicants might each earn a raw score of 300. But their converted scores would look quite different: the black test-taker would score in the 83 percentile of his group, the Hispanic would rank in the 67th percentile and the white or Asian in the 45th percentile.” It’s as if someone told you that you were a great jumper, for a funky white boy. The test-makers didn’t mention this little fact: most users weren’t aware of it.
My point is that it took almost ten years for this fact to come out. If HR was on the ball, you’d think they would have noticed.
Another point, which Caplan mentions in a review of Garrett Jones’s book Hive Mind: “At the individual level, IQ is much more highly correlated with job performance than income.” Which suggests that employers systematically undervalue intelligence. Why? Come to think of it, if Jones is correct, the effects are not limited to productivity at the individual level. Companies with a higher average IQ should be capable of performing more complex tasks – that is, companies in the O-ring sector of the economy – those where a single mistake can destroy much of the value. Useful tip for Paine-Webber, UBS, and Barings Bank, if a bit late.
You’d think that companies – almost all of them – would have realized this and avidly seek out unusually smart (and honest) workers ( depending on task complexity) . Along the same line of thought, baseball owners must have carefully analyzed the game and discovered all the important lessons of sabermetrics many years ago. Except that they didn’t. Bill James outdid them all while on the night shift as a security guard at the Stokely-Van Camp’s pork and beans cannery.
If the way most corporations hire new grads were close to optimal, it might be difficult to find a way of cutting through the useless and expensive signaling. We might be trapped in a local optimum. But since they apparently hire by intuition, or possibly sense of smell, improvements may not be impossibly difficult.