The Signaling Value of Labor Market Programs

Abstract

This paper investigates how employers interpret participation in active labor market programs for hiring decisions. Drawing on signaling theory, we assume that employers use program participation as a signal for a candidate’s qualities. On the basis of a factorial survey experiment, we simulated a hiring process for two job positions, a low and mid-skilled one, in the hotel sector. Recruiters were asked to evaluate fictional candidates that differ, among other characteristics, in their participation in active labor market programs. Our results show that employers do use participation in labor market programs as a signal. Its impact can be positive as well as negative, depending on the type of job that is applied for. For low-skill positions, the impact is more positive than for mid-skilled ones. We also show that the signal “participation in a labor market program” interacts with education and, to a lesser extent, nationality. By studying interactions among signals and with job type, this article contributes both, to a better understanding of how job market signaling works as well as to the literature on labor market programs.

Keywords: Active labor market policies, labor market programs, job market signaling, recruitment

JEL Classification: J68, J64, J65