1
THE CHANGING SIGNIFICANCE OF TIES.
AN EXPLORATION OF THE HIRING CHANNELS
IN THE RUSSIAN TRANSITIONAL LABOR MARKET
Valery B. Yakubovich
Department of Sociology
Stanford University and University of Warwick
E-mail:
Irina Kozina
Samara Branch of the Moscow Institute
for Comparative Labour Relations Research (ISITO), Russia
E-mail:
1
Abstract
This paper explores the relative change in significance among various means of getting a job in Russia in the period of transition from state socialism. We argue that the transition neither makes personal connections obsolete or transform them in a market-like fashion, nor does it keep them intact. Instead, we witness their overall strengthening with a disproportionate gain in the significance of purely social ties versus work-related ones. We attribute this change to the institutional vacuum in hiring processes created by the mismatch between the job requirements of the transitional labor market and educational credentials obtained under state socialism. This vacuum is filled by ad hoc hiring decisions which create extra room for patronage, and, consequently, for the growing importance of purely social ties. Our theoretical propositions are supported by the empirical analysis based on the data from a large-scale survey in four Russian cities. We treat three hiring channels - purely social ties, work-related ties, and formal means - as alternative means of a getting a job described by a competing risk event history model with repeated events. The model is estimated using the fixed-effects partial likelihood method.
1
The initial public support and enthusiasm surrounding the socio-economic reforms in Russia were largely based on the expectation that such reforms would rapidly lead to the extinction of the pervasive patronage which accompanied the distribution of jobs, goods, and services in the former Soviet Union. In practice, while basic goods did become widely available after the liberalization of prices, the role of personal contacts in getting a job appears to be as crucial as never before according to popular wisdom and anecdotal evidence.
This paper explores in a systematic fashion whether the described phenomenon is indeed present and, if so, where it originates. Our approach to this problem is based on the mainstream tradition in economic sociology of labor markets which pays primary attention to the hiring channels through which people get their jobs (Granovetter 1973). However, to achieve our purpose, this approach needs to be developed further to grasp the changing relative utility of personal ties versus formal means in hiring over time. The specific challenge of our case emerges from the fact that the accumulation and dispersion of social capital as well as the development of the formal segment of the labor market takes place in three temporal dimensions; in addition to age and tenure at the previous job, which are traditionally important for getting a new job, we must deal with a drastic transformation of the social structure in both positional and relational terms within a very short historical period.
To address emerging theoretical and methodological questions, we proceed in the following manner. First, we review existing theoretical treatments of getting a job processes and derive from them specific predictions about the changes in the ways and means in which people obtain their jobs during the transition from state socialism. In section 2, we describe the data collected from a large-scale survey of the local labor markets in four Russian cities: Moscow, Kemerovo, Samara, and Syktivkar. The analytical methods and statistical models which we employ to test the theoretical hypotheses and overcome some methodological difficulties are discussed in detail in section 3. Finally, we present empirical findings from our analysis and discuss their implications.
1. Theoretical Background and Hypotheses
After approximately thirty-five years of quite intensive debates within a sociology of labor markets (for a review, see Granovetter 1995), one can distinguish three theoretical perspectives from which the role of hiring channels can be explored.
The first one follows from the conventional economic paradigm which considers a market of anonymous buyers and sellers as the best remedy for inefficiencies caused by the penetration of non-economic relationships into economic transactions. From this perspective, the market-oriented reforms undertaken around the world over the last decade should, at least, limit the damaging effect of corrupted personal ties on the economic behavior of firms and individuals and, eventually, lead such practices into extinction. Thus, one could expect that the introduction of basic free-market mechanisms into the Russian labor market in the beginning of the 1990s would lead to a diminishing role of personal connections in hiring process. More precisely,
Hypothesis 1. After the start of the market-oriented reforms, the chances of being hired through personal contacts diminish relatively to the chances of being hired through formal labor market mechanisms.
A more complex picture of the process at hand emerges from the economic and sociological perspectives which account for the fact that buyers and sellers have incomplete information in the market. From this standpoint, personal connections serve as channels for specific and often sensitive information about the transaction partners which cannot be passed through formal channels. As a result, better matches between potential employers and employees are achieved and the hiring process as a whole becomes more efficient. The proponents of this position would still argue that the market undermines the role of personal ties in hiring, however, it acts selectively, neutralizing pressures from those ties which carry social influence and preserving those which provide the transaction partners with better information about each other.
For a number of reasons, including sensitivity of the subject matter and deeply contextual manifestations of social influence, it is extremely difficult to accurately operationalize and measure this theoretical construct in a large scale survey (Bian 1997, Kozina 1996). To partially overcome this difficulty, we make a distinction between purely social ties and work-related ties. We assume that the juxtaposition of these categories of social ties is closely associated with the influence/information distinction. Indeed, co-workers are more likely to be concerned about the fit between the job and the potential candidate; on the contrary, involvement of the candidate’s family members and friends in the hiring process is more likely to be motivated by unconditional emotional affection and thus be independent of the candidate’s qualifications. Thus, the incomplete information argument can be turned into an empirically verifiable hypothesis:
Hypothesis 2. During the transition from state socialism, the relative significance of the hiring channels provided by relatives and social friends diminishes vis-à-vis the formal means while the relative significance of work-related hiring channels gain according to the same criterion.
Up until now, we have presented the “free market” and “incomplete information” approaches to the analysis of the relative significance of personal ties for hiring in the Russian transitional labor market. The logic of our discussion led us from a purely economic to socio-economic view of the hiring processes. The “social embeddedness” perspective, which we will invoke at this point, develops this logic further. Unlike the “incomplete information” thesis, this approach explicitly recognizes non-economic motives of economic actions in general and the role of pre-existing social ties in such actions in particular (Granovetter 1985). Moreover, a number of researchers expect the logic of “social embeddedness” to become even more salient in the period of transition from state socialism, although the debate regarding the driving forces behind this trend is far from being resolved.
On the one hand, the path dependency argument suggests that the social networks which are the most effective in the period of transition were shaped by the former institutions of state socialism. Even if the institutions themselves vanished, the social networks shaped by them continue to exist. Furthermore, because the origins of institutions are rooted in social networks (Berger and Luckman 1967), the post-socialist networks are likely to serve as a nucleus for the emerging market institutions and thereby can transfer the old practices under the new umbrella (Grabher and Stark 1997, Stark 1996). From this standpoint, one can envision social networks as Plato’s substances which convert from one form to another keeping intact their very nature.
An alternative explanation for the increasing role of social networks in the transition period can be derived from the logic of reciprocity (Polanyi 1957) or generalized exchange (Blau 1964, Ekeh 1974) which is often considered as a distinctive institutional arrangement vis-à-vis market exchange and redistribution. Applying the same idea to a modern economic system in a state of transition from state socialism, one can argue that because the redistributional mechanisms were almost completely dismantled while the market-like arrangements remain in their embryonic stage of development, reciprocity emerges for economic actors as the only plausible alternative (Yakubovich and Granovetter 1997).
The two outlined perspectives imply different answers to our question of interest. The path dependency argument favors the idea of the status quo in the Russian labor market, i.e., regardless of the change in the formal rules of the game, the informal arrangements will retain their value. In other words, the following alternative reformulation of Hypothesis 2 should hold:
Hypothesis 2a. The introduction of the market mechanisms in hiring has no effect on the chances to be hired through either type of personal contacts relatively to the chances to be hired through formal means.
On the contrary, the reciprocity argument predicts the increasing role of non-economic relationships and the status quo in the relationship between work-related contacts and formal means of getting a job.
Hypothesis 2b. Comparing with the pre-reform period, the chances of getting a job through purely social contacts increase relatively to the chances of hiring in the open market while the relative value of work-related contacts remains the same.
The outlined hypotheses make clear the punchline of our overall argument: The process of transition from state socialism neither makes personal connections obsolete or transform them in a market-like fashion, nor does it keep them intact. Instead, we witness their overall strengthening with a disproportionally significant influence of purely social ties versus work-related ones. We attribute this change to the institutional vacuum emerging when the old institutions of state socialism collapse and the new market ones are weak and immature. If left here, the changing significance of ties argument would fall into a broad category of institutional ideas which are too general to be useful for explaining transitional phenomena (Walder 1996). One wants to know more precisely what is missing in the transitional institutional order (or disorder) that makes the role of social ties so crucial in the hiring process. In other words, which of the collapsing old institutions and new immature institutions lead to the increasing significance of social ties?
Looking for an answer to this question, we turn our attention to the fact that a transitional labor market is characterized by yawning discrepancies between the old skills of job seekers and the new requirements of the available positions. In this regard, economists primarily emphasize that the whole system of education and training in the former Soviet Union focused on the “mastery of fixed, specialized body of knowledge to be applied in narrowly defined jobs” and neglected subjects which are crucial for modern market economies such as economics, management, law, psychology, and foreign languages (The World Bank 1996:124). From the institutional perspective, we should also keep in mind that, being a primary ideological institution of the socialist system, the Soviet education suffered additional losses in its symbolic appeal independently of its actual content. Under these conditions, formal labor market mechanisms cannot properly function simply because formal job requirements generated under the new circumstances do not match the formal credentials obtained under the socialist system. Very often, the new requirements themselves are too vague to be useful for the candidates’ evaluation. Acting together, the outlined trends depreciate educational credentials and make them irrelevant in the transitional labor market. The emerging institutional vacuum is filled by ad hoc hiring decisions which create extra room for patronage and, consequently, for the growing importance of purely social ties.
The same trends undermine informal channels of information. The knowledge that a group of current or former co-workers has about each other’s skills is irrelevant if the skills themselves are obsolete. Moreover, when whole economic sectors experience severe hardships, co-workers tend to have a common fate. If a person finds him(her)self in a disadvantaged position, his(her) co-workers are likely to be less helpful. All this being said, we nevertheless do not expect work-related ties to exactly follow suit of the formal means. The reasons for our weak optimism are twofold. On the one hand, these channels can carry other information besides that about the skills signaled by formal credentials. In particular, co-workers know if the ego has any skills particularly relevant in the transition period, for example, if she is trustworthy. On the other hand, one should not completely reduce the work-related ties to information channels; they certainly carry social influence albeit to a smaller degree than purely social contacts.
Consequences of the skill mismatch factor, if it is indeed present, should disproportionally affect workers with specialized training or education. Therefore, the following hypothesis is expected to hold:
Hypothesis 3. The socio-economic reforms significantly decrease the chances of workers with specialized skills vis-à-vis those with only a general education to be hired in the open market.
In fact, because our discussion brings up skill mismatch as the primary reason for the increasing significance of social ties, we want to prove a stronger statement:
Hypothesis 4. Controlling for the decrease in the chances of skilled workers to be hired in the open market (Hypothesis 3), there is no effect of the market reforms on the relative significance among the three major types of hiring channels: the open market, work-related ties, and social ties.
2. Data
To test our hypotheses, we use the data from a survey of workers from sixteen large industrial enterprises situated in four Russian cities: Moscow, Kemerovo, Samara, and Syktivkar. The survey was carried out by the Moscow Institute for Comparative Labour Relations Research and the Centre for Comparative Labour Studies in the University of Warwick, United Kingdom in the Spring 1997.
The selected firms are the research sites where the authors of the survey spent the five previous years collecting detail ethnographic information about economic restructuring and employment policies. The results of the ethnographic studies (Kozina 1996) serve as a source of the theoretical insights and formal hypotheses developed in this paper. 50 workers were randomly selected from the employee list in each enterprise to form the sample of 800 individuals.
The research team carried out face-to-face structured interviews with all the respondents. Among other items, the questionnaire solicited information about the individuals’ work histories between 1985-1997 including how the jobs where obtained. This information allowed us to develop an event history model of getting a new job through three alternative channels: purely social ties (relatives, friends, and neighbors), work-related ties (co-workers), and open market (employment agencies, ads, direct contacts with enterprises).
3. Event History Model of Getting a Job
Temporal dimensions are largely ignored in the vast literature on hiring which is based exclusively on the results of cross-sectional surveys consistently replicated among different populations within one country and across countries (Granovetter 1995). The major general conclusion that informal means of getting a job do matter is drawn from the comparisons of the marginal distributions of hiring methods for the subpopulation of those who got jobs which might be either their current jobs, the most recent ones obtained within some fixed time period, or first jobs. These research designs disregard the fact that hiring takes place in a number of temporal dimensions such as the historical time, individual life course, time since the previous hiring, to name the most important ones. Taking into account only those who got the jobs, we tacitly assume that the timing of the hiring is exogeneous to the way in which it occurs or, to put it differently, one causal mechanism determines the time when the hire takes place while another determines the hiring method conditional on the fact that the hire happens at the specific time point. Such models would be satisfactory if the process of getting a job had been reducible to choosing among alternative job search methods. Sociological research convincingly shows that this is not the case; actors use any means available at a given point in time and, on the other hand, very often do not search for a job at all at the time when the offer suddenly arrives (Granovetter 1974).