Keeping jobs in the family?
Exploring social norms and productivity challenges facing small agricultural businesses in Zambia
Nicholas Swanson (PhD student in Economics, UC Berkeley) shares results from a project testing what motivates employers to hire employees from their kinship network supported by CEGA’s Psychology and Economics of Poverty Initiative and Development Economics Challenge, the Weiss Family Program for Research in Development Economics, and Private Enterprise Development in Low Income Countries (PEDL).
Firms and employers in sub-Saharan Africa often rely on a pool of social contacts and family members when they choose who to hire. For the few businesses that hire employees, “the vast majority of microenterprises have no employees outside the owner’s family’’ (Jayachandran 2021). Economists have suggested that these hiring decisions may be due to a lack of information about or trust in non-relatives. Further, employers may face uncertainties around their ability to settle work-related disputes that may arise with non-relative employees (e.g. lack of legal recourse).
Despite these norms, keeping business within the family could be detrimental to firm owners. Business owners might be asked to “help out” other family members with jobs, even if they aren’t particularly suited to the work. Employers who hire family may not be able to use the same strategies as others to motivate high productivity and performance. For example, the possibility of dismissal due to poor performance may not be as realistic for relatives versus non-relatives. So why then would employers hire members of their family? In this project, I test whether some of this hiring is due to familial social pressure. This research may shed light on how to alleviate constraints to hiring the most productive employees and widen the pool of talent that employers can access.
Exploring why employers hire their relatives
Collaborating with ~250 agricultural employers in rural Zambia, I explored why they hire their family to work for them, and the benefits or drawbacks of hiring relatives as opposed to non-relatives. To do this, I offered these employers a subsidy for two days’ worth of work (morning until early afternoon) to hire an employee to shell their maize for them at the end of the harvest. Shelling maize is a common task for processing maize picked in the field into a saleable and consumable product. This task provides two metrics that can be used to measure employee productivity: the quantity of maize shelled and the quality of the shelling.
I randomized employers into one of three groups in which: 1) employers received a subsidy to hire a relative, 2) employers received a subsidy to hire a non-relative or, 3) employers received a subsidy to hire either a relative or non-relative of their choice (Figure 1). I then carried out the employer’s choice under two conditions. In the first condition, employers had to make their choice of whether they preferred to hire their relative or non-relative publicly. In the second condition, I offered employers the opportunity to make this choice privately and not reveal it to the employees. I compared how the choice of who to hire differed under these two conditions to see if employers would change their preference of who to hire when they had to make this choice publicly in front of family members.
The obligation to hire family members and what that means for production
When employers had to state publicly who they wanted to hire for the job, they became far more likely to say they preferred their relative. One employer noted, “Many people will look at me as a heartless person if I don’t [hire] my relative,” while another explained, “I need to help my relative to avoid confusion with my family.” However, when asked privately, employers were more likely to choose to hire non-relatives than family members. This is consistent with the idea that there might be a social norm or informal obligation to choose relatives over others, suggesting employers privately see benefits to not hiring within the family.
To test whether this was indeed the case, I randomized some employers to either receive a subsidy for their relatives or for their non-relatives to obtain an estimate of the returns to hiring. During a half day of work, I then measured 1) how many kilos of maize the employee shelled and 2) the quality of this maize (as observed by our enumerators and judged by buyers of maize in town). Comparing the productivity of non-relatives and relatives who were randomly assigned to shell maize for the employer, relatives of the employer performed worse on almost all dimensions. Relatives shelled less maize and the shelling work was of a lower quality than non relatives. Despite this, employers had to pay the same amount for their work. Employers suggested this was because of specific frictions that they faced when managing their relatives. One business owner shared, “My relative is never serious with any job that I have given him,” and another noted, “They [relatives] shell slow because they know that I cannot direct them much. They shell at their own pace and relatives do not like being instructed.”
These initial findings suggest that small agricultural businesses face particular challenges when they engage in the common practice of hiring of family members. My future research will further explore the challenges around how small business owners balance social norms and expectations with seeking the best employees.
References:
Jayachandran S. (2021) Microentrepreneurship in Developing Countries. In: Zimmermann K.F. (eds) Handbook of Labor, Human Resources and Population Economics. Springer, Cham. https://doi.org/10.1007/978-3-319-57365-6_174-1
