#157 2017 · Abel, Burger & Piraino (World Bank / University of Cape Town / Stellenbosch University) · Labor economicslegibility
Researchers cut South Africa's hiring gap with a one-page letter instead of training or subsidies
the problem
Employers couldn't tell skilled job-seekers from unskilled ones
background
South Africa's unemployment rate has stayed among the world's highest for decades, and the usual policy toolkit — skills training, wage subsidies, job-search assistance — treats the job-seeker as the thing to fix: not skilled enough, not searching hard enough, not subsidized enough to be worth the risk of hiring.
Economists Martin Abel, Rulof Burger and Patrizio Piraino targeted a different half of the transaction: employers screening large numbers of applicants from a labor market where almost no one has a verifiable work history couldn't tell a reliable worker from an unreliable one, and defaulted to rejecting the whole pool rather than gambling on any one candidate.
the move
The researchers ran two linked experiments: a resume audit sending otherwise-identical applications with and without a one-page reference letter from a previous employer, and a field experiment encouraging real job-seekers to obtain and attach one. The letter contained no new skill, credential, or subsidy — just a former employer's plain assessment of the person's reliability, made visible to a screener who previously had nothing to go on.
the payoff
Reference letters raised callback rates by more than 60%. Among job-seekers encouraged to obtain and use one, employment rates rose 49% — driven overwhelmingly by women, for whom the information gap had been widest — closing a meaningful share of the sample's gender employment gap with no training, subsidy, or change to the applicants themselves.
what came after
Published as Abel, Burger & Piraino, 'The Value of Reference Letters,' American Economic Journal: Applied Economics 12(3), 2020 (World Bank Policy Research Working Paper 8266, 2017), the study is cited in labor economics as evidence that hiring discrimination against the unverified can be an information problem solvable for the cost of one letter, not a skills or motivation problem requiring years of intervention.
filed under
references
- [1]Abel, Burger & Piraino — The Value of Reference Letters, World Bank Policy Research Working Paper 8266World Bank / IDEAS-RePEc, 2017ideas.repec.org
- [2]Abel, Burger & Piraino — The Value of Reference Letters, American Economic Journal: Applied Economics 12(3)American Economic Association, 2020aeaweb.org