Recruitment of Seemingly Overeducated Personnel: Insider-Outsider Effects on Fair Employee Selection Practices

Fair employment policies constrain employee selection: specifically, applicants' professional experience can be a substitute for formal education. However, reflecting firm-specific job requirements, this substitution rule applies less strictly to applicants from outside the firm. Further, setting low educational job requirements decreases the risk of disparate impact charges. Using data from a large US public employer, we show that successful outsider candidates exhibit higher levels of formal education than insiders. Also, this gap in educational attainments between outsiders and insiders widens with lower advertised degree requirements. More generally, we find strong insider-outsider effects on hiring decisions.