Labor market implications of weak ties.

• Author: Tassier, Troy

1. Introduction

   Many of us have heard the phrase "it's not what you know but who you know." While this may not be strictly true, approximately one half of workers in the United States do find employment through friends, relatives, and other social contacts (Granovetter 1995). Further, in a seminal paper, Granovetter (1973) argues that, for the purpose of finding jobs, it is acquaintances, not close friends, who are most important in helping individuals find employment. He claims that friends whom one knows well are likely to be close in social space. Close friends know one's other close friends and tend to have social networks similar to each other. Thus, any information held by a given close friend may be obtained from other close friends as well; the job information of close friends is often redundant. In contrast, acquaintances tend to have less similar social networks and know different people from one's close friends. Granovetter argued that acquaintances also are more likely to have different information about available jobs, which makes them valuable job contacts. Granovetter labeled acquaintances as weak ties as opposed to close friends, who are known as strong ties.

   In this article, I am defining weak and strong ties as Granovetter (1983) did. Weak ties are acquaintances and strong ties are close friends. The important point of these definitions is the idea that, on average, acquaintances are less likely to know one's other friends than strong ties. On average, the social network of strong ties has more overlap than the social network of weak ties. As I will explain in more detail below, the lack of overlap of acquaintances implies that a social network with more weak ties will be larger (will have more range) than a social network with fewer weak ties.

   Since Granovetter's article, much work has been done by other scholars to validate the importance of weak ties in labor markets by answering two questions: First, researchers asked whether weak ties are a common source of finding employment. These studies have been successful in demonstrating that weak ties are indeed an important source of finding employment. For instance, in Granovetter (1973), of the people finding jobs through referral sources (such as friends, family, and other personal contacts), 27.8% use weak ties, 16.7% use strong ties, and the majority, 55.6%, use ties of moderate strength in between weak and strong. Others have replicated the finding that weak ties are a common means of finding employment. (1) In summary, this line of research has demonstrated that, as Granovetter claimed, weak ties do play an important role in matching workers and jobs. Second, because weak ties appear to be important in locating jobs, researchers have asked if the use of weak ties as a job-finding method increases income (Bridges and Villemez 1986; Marsden and Hurlbert 1988; Wegener 1991). The findings of these studies suggest that there is little evidence of a relationship between weak ties and income. (Note that the hypothesized link between weak ties and income was not a part of Granovetter's hypothesis, as he makes clear in Granovetter [1983].)

   The present article can be seen as an extension to this second line of questioning. In this article, I use an example to show that previous methods used to measure the effect of weak ties on income will underestimate the effect, if it exists. I then provide a new method of estimating the effect of weak ties on income that directly considers the social network of individuals. Granovetter's idea that weak ties are more likely to provide novel information rests on the idea that weak ties are less likely to overlap than strong ties, on average. In other words, weak ties know a smaller fraction of one's other friends compared with strong ties, on average. I use this idea to show that less overlap in friendships increases the range of an individual's social network. Individuals with less overlap have more individuals in their social network. Thus, they have more opportunities to acquire job information. I find that the range of an individual's social network has a positive and meaningful effect on income. Because weak ties increase the range of an individual's nework (Granovetter 1973), I find strong empirical support for the notion that having weak ties in one's social network increases income.

   In the next section, I provide a short overview of the previous findings with regard to weak ties and income. I then provide an example in Section 3 that demonstrates why previous studies underestimate the effect of weak ties on income. Section 3 also describes the important features of the potential relationship between weak ties and income that will be used in Section 4. In Section 4, I describe an explicit model of social networks that can be used to estimate the size of an agent's social network relative to other members in the population. I then use this estimation to measure the effect of weak ties on income using data from the General Social Survey (Davis and Smith 1985). In Section 5, I briefly review the main findings of the article and discuss implications for future research.

2. An Overview of Weak Ties and Labor Markets

   Establishing and measuring the effect of weak ties on income is the focus of this article. Because weak ties appear to be especially helpful in finding jobs, it has been argued that individuals with many weak ties in their social network may have higher income than those with few weak ties. In order to test this claim, researchers (Bridges and Villemez 1986; Marsden and Hurlbert 1988; Wegener 1991; Smith 2000; Mouw 2002, 2003) performed studies that compare the income of workers who found jobs using various search methods. These studies used survey information from respondents who were questioned about their current (and sometimes past) jobs, how each job was found, and income or wages in addition to other relevant variables, such as education, work experience, etc. The studies statistically analyzed how income is affected by the methods used to find jobs.

   The workers in Granovetter's original study (Granovetter 1973) who found their job using weak ties earned higher income, on average, than those who found their job by other means. However, the purpose of Granovetter's study was to show that weak ties were a common means of finding employment. Again, as he makes clear in Granovetter (1983), he was not testing the hypothesis that weak ties increase income. Thus, he did not attempt to control for items such as level of education, age, etc. Although the later findings of Bridges and Villemez (1986) and Marsden and Hurlbert (1988) substantiate that individuals who find their jobs through weak ties earn higher income on average, they also find that the effect is statistically insignificant when control variables, such as level of education, are introduced. Wegener (1991) provides an exception. He finds a positive effect on income of having found one's job using weak ties but only for high-status individuals. He argues that low-status individuals with weak ties still only connect to other low-status individuals. Thus, Wegener's findings suggest that the job information available through weak ties is not better than the job information they receive from strong ties for low-status individuals. In contrast, Wegener argues that high-status individuals using weak ties more easily bridge their social networks to other high-status individuals with useful job information.

   More recently, Smith (2000) studied the wage effects of using personal contacts to find a job conditional on race and gender. She finds that the effect varies. For instance, white men and Latinos earn 9% and 10% less than workers finding jobs through formal channels. But white women earn an average of 14% more if using personal contacts. Further, the white male to female wage gap shrinks for personal-contact job finders versus formal method job finders. Additionally, she finds that the wage differential between white males and Latinos using personal contacts is greater than the difference when more formal job-finding methods are used. In summary, her results suggest that the effect of job-finding method on wages is race and gender dependent. Mouw also has recently studied the effect of personal-contact use in job finding for black workers (Mouw 2002) and a broad sample of workers from the National Longitudinal Study of Youth (NLSY) and the Multi City Study of Urban Inequality (MCSUI) (Mouw 2003). He does not find a strong effect of personal-contact use increasing income in either case. In summary, despite the intuitive appeal of the notion that using weak ties to find a job may increase income, for the most part, past efforts to show a clear empirical link between weak ties and income have failed (Mouw 2003).

   All of the previously mentioned studies measure individual income as a function of how the individual found a particular job. More specifically, they estimate the effect of job-finding method (found job by direct application, found by newspaper advertisement, found by weak tie, found by strong tie, etc.) on income while controlling for other relevant labor-market variables, such as education, experience, gender, etc. Essentially, these articles test the hypothesis that weak ties provide superior job information that leads to better jobs or higher paying jobs. As Granovetter (1995) has argued, however, there is no empirical evidence that weak ties do provide superior information. Recall that Granovetter's weak ties hypothesis claims that having many weak ties allows one to find more information both about jobs and other socially transmitted information because weak ties increase the range of one's social network. In effect, weak ties increase the amount of nonredundant information a job seeker receives but may not increase the quality of information.

   For there to be an effect of weak ties on income, it is not necessary that...