Network Hiring and Intergenerational Persistence

• In Event: Inequality, Poverty, and Mobility Section Roundtables
  In Refereed Roundtable (60 minute): 3. Inequality and the Labor Market

Abstract

Intergenerational persistence in labor market outcomes is a defining feature of stratified societies. While much research focuses on how family resources shape education, occupational choice, and earnings, less attention has been paid to the organizational processes that translate social origin into durable career advantages. Hiring is one such process. When recruitment occurs through social ties, access to employment is mediated by relationships that are themselves structured by class and family background. Network hiring may therefore play a central role in the intergenerational transmission of advantage. While previous studies have examined the relationship between workers’ own social connections and earnings, we shift our focus on the role of social connections that workers inherit from their parents. This project examines how referrals from parents’ social connections contribute to intergenerational persistence of earnings by shaping careers within firms. Using longitudinal register data, we compare career trajectories of workers hired through referrals from their parents’ social connections with those hired through formal channels to assess whether network hiring increases similarity in economic outcomes between parents and children. We find that while hiring via parents’ social connections is associated with a small increase in earnings on average, such referrals have meaningfully different effects by social background. For workers from high-SES families, referrals from parents’ social connections result in large relative earnings gains, while referrals for workers from low-SES families are associated with earnings losses. Analyses of pre-referral earnings trajectories suggest that individuals from different social backgrounds use referrals to recover from economic hardship, but to varying levels of success. Altogether, job referrals via parents’ social connections play an important role in the intergenerational transmission of economic status both by preserving labor market advantages within high-SES families and suppressing upward mobility among those from low-SES backgrounds.

Authors

• Joshua Benjamin Choper, University College London

• Per Engzell, University College London

• Nathan Wilmers, Massachusetts Institute of Technology