Job market signalling: What it is, how to apply it to stand out in the job market
education’. The real question is why an employer hires an economics graduate in product design, or a civil engineer in marketing. Michael Spence received the Nobel prize for his Harvard thesis, where he proposed the idea of job market signalling, a foundational concept in labour economics. Here’s how to understand the way employers read signals, and apply this to stand out.
Education
Individuals acquire credentials or education not necessarily because it will help them contribute directly to work productivity, but because these signal a higher ability to potential employers and help land better jobs. Most valuable education courses have either entry or exit barriers. So, tough entrance exams like JEE, NEET and CAT are a high entry barrier to top institutes, and clearing chartered accountancy exams is a high exit barrier. The tougher the course, the stronger the signal for the job market, and better returns in compensation. A clear hierarchy plays out in course and college selection. It’s no surprise that, on an average, STEM (science, technology, engineering, math) degrees from institutes that are tough to get into, signal higher capability and result in above-average salaries. Use this idea to conduct a cost-benefit analysis of academic qualifications that you choose to pursue.
Brand
Let’s examine the value of signalling beyond academic qualifications. Where you choose to work impacts the probability of getting a lucrative next offer. The bigger the employer’s brand, the stronger the signals for the market.
