LABOR MARKET INFORMATION: The Data 2

Respondents are asked about the last worker hired, whether or not that worker is still with the employer. The recorded characteristics of the last worker hired include race/ethnicity, sex, age, educational attainment, starting and current wages, and job requirements. In addition, a supervisor’s performance rating of the worker is also provided, measured on a scale of one to 100. These ratings are used to measure productivity (P).

There are both conceptual and measurement issues that arise with respect to the performance ratings. First, the performance ratings do not provide an explicit productivity measure. In contrast, FR used time-rate pay as their measure of the wage, and piece-rate pay for the same worker to measure productivity. Nonetheless, it seems reasonable to assume that rated performance is monotonically positively related to productivity. We therefore use alternative positive monotonic transformations of the performance rating, specifically linear and log forms. so

Second, if the performance ratings were the product of a formal evaluation procedure used to set wages and determine promotions, the ratings might be influenced by discrimination in the same way as are data on wages (as employers might feel constrained to manipulate performance ratings to back up their wage decisions). In this case, performance ratings might “explain” wage differentials by race or sex, but not because they reflect true differences in productivity. However, these ratings are informal and not explicitly related to actual pay and promotion decisions. In addition, survey respondents were promised full confidentiality. Therefore, the ratings seem likely to provide an unbiased measure of a worker’s true job performance.