Last year, a national survey of 3,000 businesses reported that companies hiring young graduates pay very little attention to their high school achievement. This was not exactly news. It simply made explicit the weak link in the U.S. between school and work that some people have been worried about for a long time. But when researchers did further analyses of the survey data, they found something else. Whether or not businesses ignore it, there is a solid connection between a company's productivity and the education of its workers.
The National Employer Survey, as it is called, was carried out by the U.S. Census Bureau for the U.S. Department of Education in 1994. The survey found that businesses rank measures of formal education--years of schooling, test scores, the reputation of the school an applicant attended, and the applicant's grades--below nonschool measures. And though they consider recommendations from current and past employers important, teacher recommendations are at the bottom of the list.
If asked to explain why they have little interest in school performance, the businesses would undoubtedly have said that high school graduates are often so poorly prepared that it is not worth the time and expense to see whether John got better grades or took tougher courses than Bill. The trouble is, as I wrote in an earlier column about this survey ("Linking School and Work," April 23, 1995), this is a "self-fulfilling prophecy." If a lot of people start withdrawing money from a bank because they are afraid it will fail, the bank will certainly fail. When businesses regularly disregard what students have accomplished in school, most students will see no reason to take tough courses instead of easy ones. In fact, they'll feel stupid if they do. As a result, educational achievement will continue to slide.
However, a second round of findings based on data from the National Employer Survey links hiring more-educated workers with increased productivity. In "The Other Shoe: Education's Contribution to the Productivity of Establishments," researchers from the National Center on the Educational Quality of the Workforce looked first at the effect on productivity associated with an increase in the book value of a company's capital stock. They found that a 10 percent increase in capital stock was associated with a 3.4 percent increase in productivity. If hours worked were increased by 10 percent, there was a 5.6 percent increase in productivity. But a 10 percent increase in employees' average education (which is equal to a little more than one additional year of schooling) was associated with an 8.6 percent increase in productivity. This was true for all the businesses surveyed. When researchers looked at productivity increases in the nonmanufacturing sector, they found an even greater effect: A 10 percent increase in education was associated with a hefty 11 percent increase in productivity. The same survey that established the unimportance of education in hiring decisions also makes clear that businesses that ignore education are missing the boat.
Additional analyses of data from the National Employer Survey also indicate that considering applicants' education makes a difference in employee turnover and thus in recruitment costs. According to "Weighing the Benefits: Incentives for Connecting Schools and Employers" (Change magazine, March/April 1996), many employers say they don't bother screening applicants. Instead they "try them out," a technique that results in "a series of hires and fires until both employer and employee [find] a suitable match." In contrast, companies that use school measures as "important criteria" in screening candidates have a much lower turnover rate: During the first year, there is a 10 percent difference between employers who consider education important and those who do not. Undoubtedly this means that companies that pay attention to school measures save money on recruitment and on training new employees.
Should we be surprised that hiring workers who are more educated leads to greater productivity or job stability? I don't think so. Still, it is difficult to turn around a settled practice, like ignoring school achievement, and if it takes quantitative research to establish the obvious, so be it. (We are certainly used to that in education.) Furthermore, the results of this survey will make it easier for business leaders to carry out the pledge they made at the Education Summit in March-- that is, to pressure companies to begin calling for school transcripts when they are hiring recent graduates. And when that happens, we'll know we are on our way to establishing a connection between school and work.