THE ECONOMIC IMPACT OF JOB SELECTION METHODS ON SIZE, PRODUCTIVITY, AND PAYROLL COSTS OF THE FEDERAL WORK FORCE: AN EMPIRICALLY BASED DEMONSTRATION

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  • The opinions expressed in this article are those of the authors and do not necessarily reflect policies of the institutions with which they are affiliated. The authors would like to thank Darrell Hildreth and May Eng of the U.S. Office of Personnel Management for their assistance in obtaining the data on the federal work force used in this study, and Helen Christrup, Jay Gandy, Hannah Hirsh, and Martin Reck for helpful comments on an earlier version of this paper. We would also like to thank Cynthia Clark for her extensive editorial work. Requests for reprints should be sent to Frank Schmidt, Dept. of Industrial Relations and Human Resources, Phillips Hall, College of Business Administration, University of Iowa, Iowa City, IA 52242.

Abstract

In this study, job performance increases resulting from improved selection validity were measured empirically rather than estimated from the standard linear regression utility equations. Selection utility analyses based on these empirical measurements were carried out for most white-collar jobs in the federal government. Results indicate that selection of a one-year cohort based on valid measures of cognitive ability, rather than on non-test procedures (mostly evaluations of education and experience), produces increases in output worth up to $600 million for each year that the new employees remain employed by the government. Newly hired federal employees remain with the government an average of approximately 13 years, resulting in a total gain in output of almost $8 billion over this period. This gain represents a 9.7% increase in output among new hires. If total output is held constant rather than increased, new hiring can be reduced by up to 20,044 per year (a 9% decrease), resulting in payroll savings of $272 million for every year the new cohort of employees remains on the job. The percentage of new hires in the bottom decile of the non-test-selected job performance distribution

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