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7 Segmentation of the Labor Market and Information on the Skill of Workers The FundamentalUncertainty of the Labor Contract No firm that hires a new person knows quite what it is getting, or in particular what it will get on the average over the eight or so years it can expect to employ the new person. Even while the person is employed the firm does not know exactlywhat it has got. Let us start with the measurement of performance after the worker gets the job, since if that is impossible to obtain, predictions of that performance at the time of hiring cannot help but be yet more inexact (March and March 1978). We will analyze first performances of athletes in professionalathletics, for statistical measurement of performance is surely better developed there than in practically any other area (Kahn and Sherer 1986). Measurement is done by outsiders rather than by management, so that managers need not decide on a cost basis how carefully to measure performance . Athletes on baseball, basketball, football, or. soccer teams work under standard conditions, conditions very nearly identical to those of people who play the same positions on other teams. The objectives on all teams are identical: to score in a well defined set of ways in a standard number of games against a set of teams that are nearly identical in composition . The performance appropriate for different positions is also measured in standard ways, so that in baseball,for example, batting averages , earned run averages, or fielding averages span performances appropriate (in different mixtures) to outfielders, pitchers, and infielders. The difficulties with even this highly developed measurement system for the work of athletes are well known. The first, most obvious difficulty is that the measurments are statistical, and (given that half of all the teams lose and the other half win, except in games like soccer where ties are common) they are statistical under conditions where certain kinds of uncertainty are maximized as far as the opposing teams and the overall 240 Segmentation of the Labor Market I 241 managers of the competitive system can manage (for a description of the informal management of such a system of competition, Balinese cockfighting , see Geertz 1973a). This means that every measurement is only as statistically reliable as the sample size permitted by a season of games (or the season so far) makes it. For example, scoring is a very unreliable measure in soccer, because the expected number of scores per person in a season is very low. Pitchers who pitch few games, or passing by backs other than the quarterback, present comparable problems. But these are only extreme forms of the common problem of random measurement error in all performance statistics. In addition, different sports depend to different degrees on teamwork, and different positions or roles in any one sport matter more or less to the performance of others. Thus, individual performance statistics cannot adequately summarize performance, because the qualities reflected in one person's scoring (or other performance) include qualities of teammates . This fact has shown up historically in American sports in the slower racial integration of the positions of pitcher and catcher in baseball or of quarterback in football, where the importance of the position's contribution to teamwork makes measurement of performance difficult. Some measures of performance (e.g. the number of double plays in baseball ) are strongly affected by inseparability of teamwork performances. Finally, some star performers are very popular with the fans, while some are a good deal less popular. Except for the factor of race (where it is fairly clear that in basketball a white star is more valuable to a team than a black star of equal performance, because there are more white fans than black fans, and whites prefer a star of their own race; see Kahn and Sherer 1986), the ability to get favorable notice in the news and bring fans to the stadium is not easilymeasurable. So even in athletics, under the best of conditions, employers do not know quite what value they are buying for what they pay a worker. Further, the very excellence of the measurement demonstrates a second point, that the performance of athletes over the course of their playing life and the length of that playing life are not well predicted by scouts or by recruitment contract rankings. Sports recruiters find out more surely than other personnel departments when they have made a mistake in judgment (in fact, the mistake rate of personnel departments...

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