An Employer's Eye View

Regional ReviewQuarter 4, 1999
by Philip Moss and Chris Tilly

There are many popular conceptions of the labor market for entry-level work in the big cities, and of the labor market problems of inner-city workers, whose unemployment rates remain stubbornly high. One frequent refrain is that employers require “new” skills, driven in large part by computers and computer-related technology, and that urban minority workers, whose education is lacking, are being left out of the “new economy.” A contrasting and often voiced theme is that anyone who really wants to work can find a job.

Are inner-city workers being left behind, without work, because they lack the skills for the jobs available in the information age? Or are they left behind because jobs have left the cities? Are employers stuck with a labor pool that is unequipped to do today’s jobs? Or are there jobs out there for anyone who truly wants to work?

In this article, we look specifically at the labor market for entry-level jobs in metropolitan areas. Our study is based on extensive information gathered from employers. The Multi-City Study of Urban Inequality, funded by the Russell Sage Foundation and the Rockefeller Foundation and conducted from 1992 to 1996, included telephone surveys of several thousand managers in the Atlanta, Boston, Detroit, and Los Angeles urban areas, followed by several hundred face-to-face interviews. Researchers asked employers questions about the skills they require, the tasks they need done, and how and where they recruit workers for entry-level positions. Employers were also asked what they think of the city as a place to do business, and how they view the labor pool for these jobs. Their responses allow us to look at the operation of the urban labor market and assess the validity of popular images.

We find that skill and geographic barriers put even entry-level jobs out of reach of many inner-city workers — though the skills involved are typically far from high tech. But there’s more to the story. Employers’ assessments of the skills of potential workers are often influenced by stereotype and bias. If employer perceptions result in missed hiring opportunities among workers who would otherwise make good employees, then both workers and firms are losing out.


SKILLS AND CREDENTIALS

The past 20 years have been difficult for lower-skilled and less-educated workers, as opportunities and incomes have shrunk during much of that time. The role of computers in driving up skill requirements has particularly captured the public imagination, as personal computers have invaded many areas of work. But how significant are the skill requirements for entry-level jobs? To find out, we and our colleagues asked employers about the tasks they want entry-level workers to perform.

Their responses tell a sobering story. Half of all entry-level jobs in our survey required workers to talk to customers, read instructions of at least a paragraph, do arithmetic, or work with computers every day. With the exception of computer use, this is true for all occupational groups, even the lowest-paid category of job — service workers. Harry Holzer, who directed the study’s telephone survey and is now Chief Economist for the U.S. Department of Labor, has found that the frequency with which these tasks are used is even higher in the central city, as compared to the suburbs and other smaller cities within the metro area.

Employers are also looking for fairly significant credentials for entry-level workers. A high school diploma is required for approximately two-thirds to three-quarters of the available jobs; general or specific experience is sought for about the same fraction. In the city of Boston, for example, 80 percent of entry-level jobs require a high school diploma, 78 percent require general experience, and 81 percent call for references.

This new emphasis on credentials and “hard skills,” such as reading and math, seems to have arisen for several reasons. Some employers mentioned new equipment and safety standards in the use of hazardous materials, and new programs that require worker involvement in quality control, all of which can require reading written instructions or keeping written records. Employers also spoke of the need for workers to handle a broader range of tasks, and to possess a more analytical view of how their job fits into the big picture. Secretaries, for instance, are no longer typists but “information managers.” And a variety of industry-specific changes call for added skills: for example, according to the director of a Boston agency, home care aides need added technical knowledge because managed care is inducing hospitals to discharge sicker patients.

At the same time, computer use in entry-level jobs rarely involves rocket science. “It takes about ten minutes” to train file clerks to use the computers, one manager reported. A human resources director at a bank commented that she doesn’t look for computer familiarity in new hires because “all systems are different.” In some cases, computers have actually reduced skill requirements. Most retailers commented that “smart” cash registers have made the cashier’s job easier. A data entry supervisor at a consulting firm noted that computers have become easier to use.

Less expected was employers’ emphasis on “soft skills,” such as the ability to communicate and work with others. In face-to-face interviews, increased demand for soft skills was mentioned more frequently than any of the hard skills, except computer use. Many employers related this to a competitive strategy to win over customers — to make their businesses “a fun place to shop and to work,” in the words of one retailer. Managers of retail, service, and clerical workers spoke of the increased need for the skills involved in customer service. “It’s becoming more and more important that people have good communication skills and (that) they’re people-oriented.” Even in a consumer goods factory, the human resources director said that he needs someone who is “more customer-oriented” — meaning someone who is motivated to think about the quality the customer seeks. The increased use of teams and broader interaction across the organization also appears to be a factor.

Thus, the hurdle for entry-level jobs, especially in central cities, appears to be high. Fewer than 6 percent of jobs required no reading, writing, arithmetic, talking to customers, or use of a computer. Fewer than 5 percent of employers were willing to hire workers with no high school diploma, other training or experience, or references. Whereas the average hourly wage for all entry-level jobs was $8.72, those that required none of the above-mentioned tasks or credentials paid $6.88 and $5.87 per hour, respectively.

And this situation is likely to worsen. About 40 percent of all employers reported an increase in the level of skills required on an entry-level job (with very few expecting any decrease). Basic reading, writing, and math skills were cited most frequently; close behind were social and verbal skills, or a combination of both. Clearly, employers want workers with cognitive and personal skills to handle daily tasks, even for entry-level jobs. And this need is even more pronounced in the central city, where a great many minority and less-educated workers reside.


LOCATION OF THE FIRM

Most urban labor markets, including Boston, face the problem of having more potential workers than jobs. Although the number of job vacancies is typically higher in central cities than in other parts of the metro area, the number of unemployed workers and their unemployment rate are higher as well. Furthermore, suburban commuters take a significant number of available jobs. Thus, the effective level of unemployment (accounting for the size of the labor force and commuting patterns) tends to be highest in central cities.

This problem has been exacerbated by the relocation patterns of firms. In all parts of the metro area, firms we surveyed have an average tenure that is fairly high. Still, about 44 percent have moved in the past ten years. Moves out of the primary central city — to either suburbs or smaller cities in the metro area — totaled 22 percent of firms that were located there ten years ago. This is far more common than the reverse move; only 1 percent of businesses outside the central city moved in. Even though central cities represent only a minority of metro area businesses (ranging from 20 percent of businesses in Boston to 45 percent in Atlanta), the result is a strong net flow of relocating businesses away from these main cities.

Employers’ most commonly expressed concern about urban locations was that the fear of crime and violence in their area would deter customers and employees. A Boston public-sector manager from an inner-city neighborhood noted that he had a hard time getting people to work if they were not from the minority community. “You read the newspaper, and you hear this one gets shot, and that one gets shot through the window, and the bus, and the car, and whatever. . . .” However, some urban employers protested that their neighborhoods’ reputation for crime “far exceeds the reality.” Interestingly, suburban employers were more concerned about inner-city crime than their central city counterparts, suggesting that such fears may be prone to media-fueled exaggeration.

Employers also expressed concern about the quality of the inner-city workforce, with 60 percent voicing negative views in the face-to-face interviews. Many spoke of the lack of hard skills such as reading and writing; also of concern (but mentioned less frequently) were negative evaluations of soft skills or character. In all four cities, employers linked the problems to race, but more often to class and culture. Yet, evaluations of the skills of urban and suburban workers were far from monolithic. Many asserted that there was no difference between urban and suburban workers; 21 percent painted inner-city workers as a better workforce in some ways — more likely, perhaps, to be available for work, and more content and committed workers in menial or low-paid jobs.

Most firms that had moved out of the city gave reasons that have little to do with perceptions of neighborhoods. They cited the need for more space, lower rent, or lower taxes; the desire to consolidate scattered operations after downsizing; or the need for better access to transportation. But about one in seven of those moving or planning a move did raise “inner-city” issues in explaining the firm’s decision to move; all of those mentioned crime or related issues such as vandalism and a few also cited the quality of the workforce.

Finally, what of inner-city-based businesses that choose not to move? First, smaller businesses and those tied to local clienteles (such as local merchants or community banks) do not have relocation as an option. Second, employers such as universities, government agencies, and nonprofits have a strong commitment to their locations. Third, some low-wage or environmentally harmful industries found inner-cities’ workforces and sites advantageous; for example, a penal institution was one of the few firms moving to an inner-city location. This reminds us that such moves can sometimes be a mixed blessing.


RECRUITING AND SCREENING

One potential source of dysfunction in urban labor markets is firms’ recruiting and screening practices. If practices rely too heavily on word-of-mouth among closed social networks or are geographically limited in scope, firms may miss finding and hiring qualified workers, especially blacks and other minorities. We asked firms how they recruited the last entry-level person hired, and about screening methods used in the hiring process.

Recruiting practices for entry-level jobs are pretty basic. Employers reported that newspaper ads and referrals from current employees each generated about 25 percent of new hires; referrals from acquaintances produced 14 percent; another 14 percent were filled after an applicant walked in off the street. Most of the rest were referred by an employment service, school, or union, or applied after seeing a help wanted sign. For screening, most firms use a written application and an interview. About half use some form of testing. City employers used methods roughly similar to those in other parts of the metro area.

The prevalence of informal recruiting, particularly referrals from friends and current employees (almost 40 percent of hires in our sample), tends to favor those who are connected to the incumbent workforce and work to the disadvantage of those who are geographically or socially isolated. Even firms that officially rely on formal methods often end up hiring via informal networks because managers find this easier and more reliable. One manager for a public agency that advertises job openings widely and uses employment agencies noted that dispatcher jobs are, nonetheless, typically filled by informal means. “Somebody who is a [current employee will] say, ‘Gee, I worked with, I know this kid’. . . . We find that the informal . . . network is quite often the best, the best way to go.”

Thus, generating a more open hiring process and a more representative workforce may require supplementing informal channels with formal ones. A human resources specialist from a national retail chain indicated that informal methods make up the bulk of their recruiting but do not generate sufficient black applicants for company goals. So they advertise to increase the flow of black applicants. “It’s not cost-efficient, actually, to advertise in the newspaper,” she notes. “The reason we advertise in the black newspaper is because I have a hard time drawing in people who are qualified from that area. That’s actually the only reason. . . .”

Whether consciously or not, employers may also be limiting their scope by focusing their efforts at particular neighborhoods. Few described active measures to avoid hiring workers from particular geographic areas, since doing so may risk violating antidiscrimination laws. However, when asked if they target particular neighborhoods for hiring workers, only 55 percent said “never.” But when asked if they avoid particular neighborhoods, 90 percent replied “never,” even though targeting some neighborhoods may imply avoiding others.

The use of preemployment interviews may increase the subjectivity involved in hiring decisions, especially when screening for soft skills, as some employers noted. One director of human resources characterized interviews as “a personal evaluation . . . a gut feeling.” This may result in missed opportunities to hire otherwise qualified applicants, particularly minority candidates. An Atlanta greeting card store manager offered an interesting account of his own experience. He began by stating that black applicants do not know how to apply for a job. “They don’t know how to dress,” he said. “They don’t ask about the job. They don’t seem interested. They don’t show up on a timely basis.” But, moments later, he noted that many of these “poor” applicants were in fact qualified for the jobs. “They’re fine once they get the training. I maybe sound like I’m putting the young black kids down, but the group we have right here — they were all greenhorns then, and they’re very good right now.”


EMPLOYER ATTITUDES

Employer attitudes about racial and ethnic groups ineluctably infiltrate hiring decisions. Some negative perceptions surely stem from actual average skill differences, but bias clearly plays a part as well. Audit studies that sent out job applicants with identical qualifications have found that employers chose white and Anglo applicants more often than black and Latino ones.

Our survey asked employers about whether customers, employees, or other employers in the industry prefer to deal with people of their own race or ethnicity. Overall, almost one-quarter of employers think that customers, employees, or other employers would prefer to deal with people of the same race or ethnicity. These results are fairly similar across cities.

Another less direct indicator of employer attitudes is the ratio of new hires to applicants by racial, ethnic, and gender group. Firms in our survey hired a greater proportion of white applicants than of black male, black female, and Latino applicants. In almost every instance, the ratios of hires to applicants are smallest for black males, and in several instances the difference between the ratio for black males and other groups is startling. Some of these differences no doubt result from differing qualifications in the applicant pools. But the divergence between central city and suburban employers in our sample raises some questions. For compared to their urban counterparts, suburban firms hire a smaller proportion of black male and female applicants. This contrast is striking because urban jobs require (on average) higher levels of skill and qualifications than jobs in the suburbs. As blacks have lower levels of credentials, education, and test scores than whites (on average), we would expect the hiring ratios of blacks to be higher in the suburbs.

When asked about racial or ethnic differences in skill or worker quality, the largest group of respondents consisted of those who answered “I don’t know” (sometimes citing the fact that their workforce is too segregated to assess different groups) or “I don’t see any differences.” Some of these attitudes appear to be sincere; others may have been offered as the socially acceptable answer. When employers did note black/white or Latino/Anglo differences, they touched on many of the same issues that arose about inner-city workers. One common view was that blacks and Latinos have less command of hard skills, such as reading, writing, and math. Many attributed these skill differences to educational attainment or school quality.

Employers’ criticisms of blacks’ hard skills often shaded over into discussions of soft skills — for example, the claim that many African-Americans don’t know how to apply for a job or present a professional image. And here some of the views expressed clearly fall into the category of stereotypes. Standard stereotypes about black hostility and oversensitivity abounded. Many employers opined that black workers have “a chip on their shoulder” or “feel like they’re owed;” these phrases came up recurrently. Another recurrent stereotype depicted blacks as lazy or unmotivated. But other employers see black workers (and even more commonly Latino and Asian immigrants) as needing the job, and therefore more willing to work hard, do menial tasks, and stay at a job longer. A few viewed black workers’ assertiveness as understandable or even positive.

The persistence of stereotypes is distressing, particularly given rising skill requirements for entry-level jobs. Though skills shortfalls in African-American and Latino populations represent a real and serious problem, their labor market outcomes may suffer, in part, because of employer perceptions (and misperceptions) of the hard and soft skills of different racial and ethnic groups. It is particularly difficult to distinguish between legitimate, skill-based screening and discrimination, when soft or social skills are involved. Moreover, the combination of informal recruiting and screening methods, which are prone to subjectivity, and the rising demand for soft skills, where assessment is hard to free entirely from cultural differences, stereotypes, and prejudice, presents something of a double whammy for inner-city workers, particularly workers of color.


CLOSING THE GAP

Our findings do not paint a rosy picture of the market for entry-level jobs in urban labor markets. Returning to the questions we posed at the beginning of the article, it is clear that there are not jobs for all who want to work, in large part because of jobs’ rising skill demands.

On the other hand, skill barriers facing inner-city workers pertain more to basic skills than to information-age expertise. Moreover, the skills mismatch is only one hurdle among several. Lower-skill jobs continue to filter to the suburbs, driven primarily by available space or low rents, but at least in some small part by fears and concerns about crime and the inner-city workforce. Informal recruiting methods, stereotyping, and bias may also contribute to a failure to hire potentially successful candidates, especially minorities.

Such multiple hurdles call for multiple responses. Upgrading the basic education that inner-city youth receive is a top priority. Strengthening and supplementing public transit systems can help workers reach the suburbs where lower-skill jobs are growing. Diversity training for managers can help them to see beyond stereotypes, recruit more widely, and successfully manage a diverse workforce.

The current, low-unemployment labor market presents an important opportunity to help employers who are now scrambling to find workers, including inner-city residents of color who previously have been relatively low on the hiring queue. Indeed, businesses are dramatically expanding their hiring and in-house training of less-educated inner-city workers, even prison parolees. Education and training policy can capitalize on our current tight labor markets by boosting our efforts to improve the basic and the soft skills that employers indicate they need. Rather than becoming complacent about the temporary upsurge in jobs or bemoaning the labor shortage, now is a critical time to invest in training, nurture new recruiting networks, and challenge old stereotypes. Although our interviews date back to a time when unemployment rates were higher, they make a compelling case that the gaps in the structure of job opportunities for inner-city workers are profound. Today’s strong labor market will not completely erase such barriers, but it offers a real chance to begin breaking them down.


THE TASKS REQUIRED AND...
% of entry-level jobs that require worker to: Daily Weekly Monthly Almost Never
Talk face to face with customers 58 7 2 32
Talk on phone with customers 53 7 2 37
Read instructions 54 21 7 18
Write paragraphs 31 17 10 43
Do arithmetic 65 12 4 19
Use computers 51 5 3 41
Rows may not add up to 100 because of rounding


...THE CREDENTIALS EMPLOYERS WANT IN ENTRY-LEVEL JOBS
% of entry-level jobs that require: Central City Suburbs
   A l l  F o u r  M e t r o  A r e a s    
High school diploma 75 70
General experience 73 68
Specific experience 67 59
References 73 72
Vocational or other training 42 39
   B o s t o n    
High school diploma 80 75
General experience 78 71
Specific experience 69 58
References 81 81
Vocational or other training 43 44


HOW EMPLOYERS RECRUIT AND SCREEN NEW WORKERS
The last entry-level worker hired (in percent) through: Central City Suburbs
Newpaper ad 24 29
Help wanted sign 4 5
Walk-in 14 14
Referral from    
    Current employees 26 25
    Acquaintances and others 14 14
    Employment services, community agencies 14 9
    School 3 5
    Union 1 1
Rows may not add up to 100 because of rounding
 
Entry-level jobs (in percent) that screen applicants by: Central City Suburbs
Written application 79 82
Interview 88 88
Skills test 50 40
Verify education 35 25
Check criminal record 32 29
Source: Multi-City Study of Urban Inequality


EMPLOYERS' BELIEFS ABOUT RACIAL AND ETHNIC PREFERENCES
% of employers who say that: Central City Suburbs
   A l l  F o u r  M e t r o  A r e a s    
Their customers prefer to deal with employees of their own race or ethnic group 23 19
Their employees prefer to deal with employees of their own race or ethnic group 28 22
Other employers in the industry prefer employees of their own race or ethnic group 25 21
Any one of the three above 37 30
   B o s t o n    
Their customers prefer to deal with employees of their own race or ethnic group 21 18
Their employees prefer to deal with employees of their own race or ethnic group 27 18
Other employers in the industry prefer employees of their own race or ethnic group 24 20
Any one of the three above 38 28
Source: Multi-City Study of Urban Inequality


HOW HIRING MATCHES UP WITH JOB APPLICANTS
Ratio of firms' last hires to applicants for: Central City Suburbs
   A l l  F o u r  M e t r o  A r e a s    
Black males .62 .51
Black females .89 .68
Hispanic 1.01 1.12
White and other 1.18 1.09
   B o s t o n    
Black males .55 .58
Black females .59 .41
Hispanic 1.12 1.09
Asians .62 .60
White and other 1.15 1.00
Note: Ratio is percentage of hires by race or ethnicity and gender divided by the percentage of applicants by race or ethnicity and gender. Asians are omitted from the upper panel because the small population in Detroit and Atlanta makes the data unreliable. The ratios for Los Angeles are 1.12 (central city) and 0.79 (suburbs).
Source: Multi-City Study of Urban Inequality

Philip Moss and Chris Tilly are Professors in the Department of Regional Economic and Social Development at the University of Massachusetts, Lowell. Their book, Stories Employers Tell: Race, Skill, and Hiring in America, will be published by the Russell Sage Foundation in the fall of 2000.

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