Can inclusive programs reduce labor market discrimination?

Jorge Agüero, PhD

Contribution by Jorge M. Agüero

In Latin America, the poor are heavily underrepresented in their access to higher education. Less than ten percent of adolescents from low-income families are enrolled in college, while for their most affluent counterparts, the enrollment rate is close to 70%. To address these disparities, many countries in the region have implemented inclusive policies providing financial aid to talented but disadvantaged high school students. Yet, in a region where low socioeconomic status is often intertwined with ethnicity, it is unclear how the labor market would react to such policies. In an ongoing study, with Peruvian colleagues at the Universidad del Pacífico, and sponsored in part by a faculty seed grant from El Instituto. El Instituto/Economics core faculty member Jorge Agüero explores what sort of signal a merit-based scholarship conveys to the labor market for recent college graduates. They focus on Beca 18, the largest Peruvian scholarship targeting poor adolescents who excelled in public high schools. Beca 18 is sponsored by the central government and covers all college related expenses, including tuition, room and board, laptop, and tutoring.

Beca 18 could provide an advantage in the labor market if it sends a “productivity signal.” Employers could recognize that applicants with Beca 18 have better skills than similar applicants without the scholarship. These skills could reflect cognitive gains (e.g., good grades in high school and while in college) as well as soft skills (e.g., perseverance, grit, and the ability to overcome poverty). But this is not the only signal employers can infer from Beca 18. The inclusive nature of the scholarship could reinforce negative stereotypes. Beneficiaries are poor and tend to be indigenous. The scholarship could hurt job applicants if the labor market discriminates against indigenous candidates, as has been documented by previous studies in Peru. Indeed, when they reviewed more than 130 resumes from actual Beca 18 beneficiaries, only a handful of them mentioned the scholarship. Those who did, included it at the bottom of their resume and without making it salient. Such behavior would be consistent with a fear that the market would not respond positively to the scholarship. Do such trepidations reflect the true behavior of the market? To understand the labor market reaction, we conducted a field experiment.

Agüero and his Universidad del Pacífico collaborators managed a correspondence audit study, where they sent fictitious resumes in response to more than 800 job ads in Lima, Peru’s capital. They focused on jobs targeting recent graduates from 3- and 5-year colleges. Resumes were identical to each other except that, in some, a sentence was randomly added stating that the job applicant was a recipient of Beca 18. Our preliminary results are encouraging. Resumes including the Beca 18 statement are 17 percent more likely than those that do not to receive a callback. This premium seems large. It represents up to 50% of the callback that graduates from prestigious colleges receive. There are many more issues to unpack in our study. However, this preliminary finding suggest that, contrary to the fears of some Beca 18 recipients, the productivity signal of inclusive education programs could reduce socioeconomic disparities.