Employer Evaluation and Transition from School to Work: Reexamining the Impact of Institutional Linkages on the Japanese Labor Market

The purpose of this study is to investigate how employers evaluate high school graduates’ ability when they make hiring decisions. The process of job-attainment includes two components: one is the entry of job seeker into the labor queue and the other is the assessment made by employers. However, past studies that used a simple regression model typically assumed supply and demand sides were in equilibrium. Such a model may not be appropriate for the analysis of a highly-structured labor market like Japan. This study makes a distinction between job seekers’ preference and employers hiring decisions by using partial observability probit model(Sakamoto and Powers 1995). This model assumes two underlying equations for one observable outcome and can make a behavioral process more explicitly. Using a nationally representative data, we analyze how high school graduates’ attain their first jobs. Previous studies have shown the importance of long-term networks among schools and employers(Rosenbaum and Kariya 1989). We examine whether employers in fact highly appreciate such institutional linkages.  Dependent variables are the attainment of regular employment, white-collar jobs, and large-firm jobs. The result observes institutional networks are important for employers’ hiring decisions, rather than students’ vocational skills or academic achievement. Moreover, the result doesn’t confirm the impact has weakened after the economic crisis since 1990s. This suggests in Japan, where vocational signals are weak, employers exclusively rely on social relations that are embedded(Granovetter 1985) in the labor market.