Another characteristic of the sub-baccalaureate labor market, described by both educational providers and most employers, is that initial employment is dominated by smaller firms. Individuals leaving community colleges and those trying to find new positions generally find employment in smaller firms at first. Then--because there can be relatively little mobility within small firms--the path of upward mobility requires them to move to larger firms with greater opportunities for on-the-job training, specialization, supervisory positions, higher earnings and benefits, and more stable employment.[33] In part, this pattern emerges because larger firms, with their better earnings and working conditions, are able to attract the most applicants and then--as the description of hiring procedures in the "Employers in the Sub-Baccalaureate Labor Market" section will clarify--are able to demand substantial experience from the individuals they hire. Small firms cannot be so selective, so they must hire individuals with less experience. As the director of placement for a well-regarded community college in the Palmdale area admitted,
I hate to say this but a lot of the smaller employers like to find students with us and can find students through us because their salaries are not as competitive as, say, IBM. And they know that we would have students who would be willing to get a job to get the experience at a lower salary.
In part, the apparent dominance of small firms in initial hiring comes from an imbalance between large and small firms. Large firms working under time constraints need to have workers who are immediately productive--"they want somebody who can come in and hit the bricks running"--while small firms under cost constraints are forced to hire inexperienced individuals and give them training: "Their problem is cash flow, so there, they may be more willing to take inexperienced people just to get somebody cheap."[34]
We did uncover other mobility patterns. In one, relatively small, high-tech firms "where scientific knowledge is part of the training base" hire individuals from larger firms. In part, this allows the smaller firms to use the training that larger firms can better afford. In addition, "Employment in larger firms is a sign of employability. It is a sign of competency. . . . Small firms look to larger firms to screen people for them."[35] In addition, some individuals get initial experience in the completely unskilled, routinized work of large firms. These examples suggest a revised conception of mobility in the sub-baccalaureate labor market: A hierarchy of more desirable and less desirable firms exists in which large firms are normally more desirable than small firms because they have better wages and benefits and more opportunities for advancement; but some smaller, advanced firms are still better places to work. Individual mobility, then, occurs both within firms (as we will see in the "Employers in the Sub-Baccalaureate Labor Market" section) but also via mobility up the hierarchy of firms. Individuals accumulate experience and perhaps some training in lower-level firms, and their employment in lower-level firms also signals "employability," "competency," and other personal traits so crucial in the sub-baccalaureate labor market.
There are several consequences to the dominance of smaller firms in entry into the sub-baccalaureate labor market. One is that hiring procedures are highly informal. Small firms lack personnel departments and formalized hiring criteria; they rarely articulate any specific requirement for hiring--a particular educational qualification, for example, other than the widespread requirement of a high school diploma--and instead use casual assessments of skill to make their choices. In addition, they hire too few individuals in any one occupation to develop well-established ties with particular providers of education such as local community colleges or to accumulate information about the strengths and weaknesses of various sources of potential workers.[36] On the demand side, then, there is relatively little information about the options available.
Another consequence of entering small firms is that individuals in the sub-baccalaureate labor market are more likely to be laid off over the business cycle, giving greater instability to employment than in larger firms. Those individuals who find themselves out of work during a downturn need retraining in order to enter other occupations, adding to the numbers in community colleges and other training programs and swelling the numbers needing retraining. In this way, the dominance of small firms contributes to the magnitude of retraining required in the sub-baccalaureate labor market.
The providers of education and training in the sub-baccalaureate market are also "small" in a somewhat different sense. Certainly some community colleges are quite large, as measured by their enrollments: A few enroll over 100,000 students per year, and several community colleges in our four areas enroll over 25,000. But these numbers are deceptive: Many students enroll for only a course or two, and many take remedial education, English as a Second Language (ESL), or avocational courses. Many students are using community colleges to transfer to four-year colleges, and others are "experimenters," unsure of their plans but using low-cost community colleges to explore various options. Even many occupationally oriented students take very few courses or drop out before completing a program (Grubb, 1989).
The numbers of completers in any one occupational area in any one year are therefore quite small--more likely in the range of ten to twenty, even for an institution with an enrollment of 25,000. Furthermore, there are typically many potential providers within any community: In most places, there are several community colleges within a reasonable distance, with area vocational schools, perhaps some remaining high school programs, a few proprietary schools, and shorter-term job training programs (including those run by the local community college, as in Frankton) adding to the supply. The sense of the job-related education and training system being chaotic and fragmented was widespread among employers. A typical comment came from the director of an economic development program in Frankton:
It sometimes feels like there are a million different training programs in the area. . . .I've been in this business for seven years, and I still can't tell you who they all are. Between the junior colleges, private nonprofits, CBOs, K through 12 school systems which also operate separate adult schools, and there seems to be two or three different tracks of vocational training, . . . it's hard to keep track of it. I think it would be difficult to plan what to train for when it's hard to develop a comprehensive view of what's out there. I can't keep track of them, and I have a vested interest in it.
With the exception of some firms that have established good working relations with specific educational programs, particularly those in Cotooli participating in co-op programs and employers in Rosefield relying on local electronics programs, many employers were unable to distinguish among providers; their responses to questions about the strengths and weaknesses of various educational institutions were vague and unreliable, and it became clear that these institutions do not have very clear reputations in the employer community.
The case of many small firms and many small providers of education and training may appear to match the textbook case of a market, in which there are many demanders and suppliers. However, in practice, small size thwarts the development of the information that is necessary for markets to operate efficiently. Each side is relatively uninformed about the other, and the small size of the institutions makes it difficult to accumulate information. In most cases there are no organizations whose business it is to provide information about this labor market--community college placement offices are weak, as we will examine in the next section, and local labor market information is quite imprecise.[37] The result, compared to the market for those with advanced degrees, appears to be a market where it is relatively difficult for individuals to find their way.
[33] This conclusion corroborates the statistical results in Grubb (1992b, forthcoming-b). In these results, higher earnings over time come from gaining access to occupations where individuals can accumulate more experience and on-the-job training, and the value of community college credentials is that they help individuals gain access to such positions. But experience and on-the-job training are absolutely crucial to earnings; once these are controlled, community college education provides no additional advantage.
[34] Perhaps inadvertently, this is the approach to providing general training envisioned by Gary Becker (1975) in which individuals pay for general training through reduced wages--in this case, the lower wages of smaller firms who are forced to provide on-the-job training and from which individuals move to better-paying larger firms.
[35] The individual who identified this pattern is a staff member of an industry association of high-tech manufacturers in the Palmdale area. After her initial interview, we expressed surprise about the pattern of smaller firms hiring from larger firms; she then checked with several small firms to confirm this pattern. In general, however, the quality of information about mobility patterns is poor since employers and educators have incomplete information; employees, whom we did not interview, have limited recall (see footnote 103). Our views about mobility should therefore be considered tentative.
[36] Indeed, our sample of firms interviewed is biased toward mid-sized and large firms precisely because interviewing very small employers about their hiring policies proved pointless.
[37] Every state has a state occupational information coordinating committee (SOICC) which publishes information about local employment, but this information generally describes the numbers hired in various occupations rather than providing the information about specific firms and particular hiring criteria that students entering the labor market require.