2.8. Open and Closed Positions and Health
2.8.1. Open and Closed Positions: Incumbents vs. Applicants
I have treated the relationship between health and labor market rewards as if labor market rewards can be awarded in a continuous way like wages. However for high status jobs this assumption does not hold. It might be true that the probability of attaining such a position can be altered continuously with regard to health status. The question whether one does or does not get a reward cannot be defined in such a way. One cannot get a promotion just a bit or a little bit more. It’s all or nothing.
2.8.1.1. How the Choice of Labor Market Outcome Affects the Role of Health A distinction can be made between the classical measure of labor market generated income which is continuous and a dichotomous reward like a high status job17. Such a distinction only makes sense if we expect a non-perfect market. If all jobs were completely open than the distinction between high and low status jobs would be irrelevant as all relevant information about the importance or value of a job would be included in the wages. However, if we accept
17Which is of course often associated with an increase in wages, but not necessarily and the degree to which it is varies a lot.
that some jobs (especially high status jobs) cannot just be created and eliminated at will, then a decision to give such a position to a person implies uncertainty and risk for the employer. In open positions hiring someone is not a risk for the employer, because he can fire the person at any time.
High status jobs can be seen as closed positions, because they provide important functions, supervision, and expert knowledge. All of these cannot simply be created and abolished anytime the employer wants. Other jobs in companies depend on these jobs. Incumbents have strong bargaining position, because of the importance of the position. Hiring someone in a closed position involves the risk of hiring someone who is not up to the task which is contrary to employers’ preference for maximizing profit. This is especially problematic as the candidates for a job will highlight their strengths and try to hide their weaknesses (Williamson 1973, 319). Such a strategy improves their bargaining position as applicants. Of special relevance is this behavior in fields and for positions where productivity cannot directly be measured and employers need to look for indirect signs of quality in the applicant. Not all candidates might overstate their potential usefulness to the employer. Nevertheless, it is sufficient to assume that some persons will act opportunistic in such a situation to warrant uncertainty for the employer (Williamson 1981, 553). The employer can never be sure, that the person under review is actually capable of doing what he claims. Therefore special attention will be paid to supposed signals of performance. That encourages statistical discrimination, which in turn facilitates gender differences in health effects (Sørensen 1983, 210).
Analyzing job status also allows to distinguish between the position of the applicant and the incumbent and how this modifies the role of health (section 2.8.1.2). As I will argue below it makes a systematical difference whether one applies for a high status job, or whether one already occupies such a position. The latter is much more to the benefit of the employee.
2.8.1.2. Incumbents vs. Applicants
If we accept the argument that incumbents and applicants have a structurally different bargain-ing position, we can raise another question. Does it make a difference for the role of health if I want to attain a position or if I want to keep it? At first thought one might think that the mechanisms should be the same. Highly productive workers get the job, workers with low productivity lose it. End of story. However, the preceding sections about different mechanisms of allocation and rewards in open and closed positions warrant a further investigation into the matter.
Regarding health effects, I argue that it is necessary to make a distinction between the role of an incumbent and an applicant. In the following, I will explain why and how this allows me to formulate more precise hypotheses.
I assume that employers have a preference to reduce risk of productivity loss. This preference
is higher than the preference for maximizing profit in the long run, as most employers18 cannot or are not willing to risk short-term productivity losses which might arise from incompetent employees in important positions. Most employers cannot try out 5, 10, or even more employees for a job until they find the perfect match. The backside of the coin is that they might hire on average lower performing employees, but with less variance in performance. Assessment centers are a way of circumventing this problem to some degree. But an assessment center also presents a large investment on the side of the employer and requires a lot of know-how to be effective. A lot of employers might not be able to handle this. Given employers’ preference to reduce risks it seems plausible that selection criteria for open positions are less strict than for closed positions. In open positions hiring an unproductive employee can be corrected after a short period of time, in closed positions this is by definition very hard as the match is indefinite (Sørensen 1983, 209).
Therefore health should play a minor role in getting into jobs in open positions. Employers do not need strong signals of high performance, because they can easily get rid of employees who are ill and show low performance. The other side of the argument is that if you are occupying an open position, health is of major importance. Employers can replace you at any time, so reduced performance will be penalized immediately.
For closed positions the argument goes the other way around. The criteria for entry into a position are also an indicator of the openness of a position. So, if demands in form of e.g.
diplomas, tests, work experience, and most important for my example physical fitness are high then the position has a high degree of closure (Doeringer & Piore 1985, 47). This suggests that health is very important when applying for a job in a closed position. The importance of health in the application process can further be supported by job search models. In this view workers have to make an investment in their search (usually in form of reduced income). If they are ill their search will be less effective, raising opportunity costs and reducing the chance of finding a good job. This includes the application for promotion. It will also reduce their performance in interviews or other forms of assessment (Paul & Moser 2009, 268). They will have less energy for preparation or to look for alternatives. They might be in a worse position for negotiations as well.
We can therefore view applying workers as being in a situation ofcareer tournament (Rosenbaum 1979) or job competition(Thurow 1975). They need to show the absolute highest performance to get the job. They will have to take the performance of others into account, because it will influence their own ranking in the view of the possible employer. This makes it very important that they are in good health. However, once occupying a closed position performance and rewards of the incumbent are detached. Job loss, pay cuts, and demotions are a minor risk.
Therefore the performance they show does not need to be high. They have no further need to be ranked as number one. This makes it less important that they are completely fit. Illnesses can be easier compensated, and consequently health is of little importance to the question of
18Who lead medium and small businesses.
whether they keep their position or not.
The last point has to be differentiated. If the person occupying a closed position has aspirations to move further up the job ladder, things look different. Even if further aspirations exist, job loss and pay should still be detached from health. But if another promotion or a better job is desired, then incumbents of closed positions find themselves again in a job competition or career tournament and the process starts again only this time with different contestants.
This potential for climbing the ladder within a firm or bureaucracy has been argued to be one of the strongest incentives for high performance that employers can use for employees in closed positions (Sørensen 1983, 211). In addition, such incentives based on seniority promotions can be efficient for employers if they fear costs of labor turnover (Carmichael 1983). One might even expect that the higher on the career ladder a person enters such a tournament the more important personal health is, because the fiercer the competition for the ever reduced number of closed positions will be. Such a mechanism can be superimposed if social contacts, not performance is the main criterion for ranking. The literature reports that social contacts are an important factor for the highest of managerial positions. Then a strategic position in the old boy networks (Oakley 2000) is more important than physical or mental health.
In conclusion, we can say that health is important if you want to get intoa closed position (applicant) - regardless of whether you are in an open or closed position at the moment. The important part is that you enter the competition for a position. Health is also important if you want to keep a job in an open position (incumbent). On the other hand health is of no consequence if you want to attain an open position or want to keep a job in a closed position (see table 2.1 for a schematic overview).
2.8.1.3. Open and Closed Positions and Discriminated Groups
The theory of open and closed positions can be further modified allowing for disadvantaged groups. For this purpose, I make a distinction between the degree of closure of a position towards different groups. The distinction between applicant and incumbent will also be upheld.
Discrimination increases the degree of closure of a position for a certain group if they try to get into such a position (applicant). This corresponds to an argument made already by scholars from segmented labor market theory. One way of discrimination in closed positions is entry discrimination. Hiring standards, screening criteria, and recruitment practices can be used to directly or most often indirectly select the discriminated from the main group (Doeringer &
Piore 1985, 137-140).
However, once in the position, it will be less closed, because the employer has reduced opportunity costs of firing the incumbent as long as he or she has a taste for discrimination against the incumbent. The argument holds for employers with a taste for discrimination, because this taste should persist after employing a disadvantaged person. If discrimination
Table 2.1.: Expected Effect of Health Depending on the Type of Labor Market Position Status of individual Applicant Incumbent
Type of labor market position
Open no yes
Closed yes no
Table 2.2.: Change of the Degree of Closure of a Labor Market Position Depending on Discrimination
Discrimination no Discrimination
Incumbent more open/none none
Applicant more closed none
does not persist the position of the incumbent is not influenced. This shows that it makes a difference whether statistical discrimination is the relevant mechanism. If it is, discrimination is expected to vanish after hiring, because then the employer can assess the individual and does not have to draw on averaged information from the individual’s group. In the case of taste for discrimination the taste should persist and so should the discriminatory practice (see table 2.2 for a schematic overview).
We can conceptualize this as the overlaying of two processes of social closure. Discrimination is one. The other is a not nearer defined process of job closure. This can be an occupational closure mechanism as described in section 2.7.3 or a high status job, which is closed due to its high degree of specialization and responsibility involved. The two processes of social closure reinforce each other.
On the other hand, membership in a discriminated group means that certain positions are closed against the discriminated individual. When occupying such a position (e.g. a high status job) it is less closed for all other non-discriminated persons, because, as mentioned above, employers have reduced opportunity costs of firing such a person.
Here we can refer back to the argument that women have a harder time getting into a high status job than men. They have to compensate the fact that they are discriminated against by showing more effort to get into a closed position. In addition, when occupying a high status job, health is more important for women, because they are more likely to lose their position again.