Do Labor Market Networks Have an Important Spatial Dimension?
School and family networks have long been understood as important drivers of job outcomes. Concerns over old boys' clubs are also fundamentally about networks. Hellerstein et al study the effect of residence-based labor market networks—networks among people living in the same neighborhoods—on job outcomes. Understanding these networks is increasingly relevant for public policy, as policy makers have sought to leverage them to improve employment outcomes. An example is the U.S. Department of Housing and Urban Development's Jobs Plus Pilot Program, which aims to improve job market outcomes for public housing residents.
Hellerstein et al study residence-based labor market networks using an extensive data set from the U.S. Census Bureau, featuring detailed information from 2004 to 2007 on individuals' jobs, places of work, home addresses, and demographic information. They use these data to observe the extent to which people live in the same neighborhood as their coworkers. This information is used to build measures of the strength of residence-based labor market networks. They find that people working with more co-workers who live in the same neighborhood have less job turnover and higher earnings, suggesting that residence-based networks facilitate better job matches for their participants. Hellerstein et al then examine whether labor market networks among just neighbors of the same racial or ethnic group convey an added boost to turnover and earnings. They find that stronger participation in these racial-residential networks does further reduce turnover, though in this case they do not find that it yields an additional positive effect on earnings.
These findings are generally encouraging about the prospects for policies that leverage residence-based labor market networks to improve labor market outcomes. While residential segregation can reinforce poorer labor market outcomes for minorities, labor market networks that are formed in these neighborhoods may prove to be an important tool in addressing those problems.
Hellerstein, J. K., Kutzbach, M. J., & Neumark, D. (2014). Do labor market networks have an important spatial dimension?. Journal of Urban Economics, 79, 39-58.