How Employers Use Signals of Cognitive and Noncognitive Skills at Labour Market Entry: Insights from Field Experiments

Abstract

This article aims to improve our understanding about why and how individuals’ signals of cognitive and noncognitive skills influence labour market outcomes. We study how employers use skills signals when hiring labour market entrants. These demand-side microprocesses are investigated at the apprenticeship market in Germany, which functions as the main entry labour market below tertiary-level education. Qualitative studies and personnel psychology research suggest multistage hiring processes. We concentrate on the first stage at which employers narrow the applicant pools based on written application documents. Their information is limited to applicants’ school reports—including their grades (as signals of cognitive skills) and teachers’ evaluations of their behaviours (as signals of noncognitive skills). We conducted two linked field experiments, applying the correspondence test method. Analysing the unbiased employers’ responses to randomly varied fictitious applicant profiles enables us to discover whether, and if so how, applicants’ skills signals are used as ‘screens’ at the first selection stage. The experiments reveal that both skills signals are important selection criteria, but employers prefer noncognitive skills signals. Moreover, the findings confirm that firms use thresholds (cut-off values) for selection criteria instead of linear rankings.

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