Screening

Lets assume that there are two groups of laid off station agents of equal size in the MTA applicant pool, low ability group X of laid off station agents and high ability group Y of laid off station agents. Because individuals in group X have a lower innate ability their marginal revenue product for the MTA will be $10 per hour, while the marginal revenue product of the higher ability group Y is $20 per hour.

If the MTA possessed no data on the personal characteristics of each laid off station agent, it would randomly select a worker from the laid off station agents from the pool with a probability of .5 of getting a laid off station agent from group X and group Y. The expected value or average level of each laid off station agent would be .5($10)+.5($20)=$15 per hour. Given that the MTA will pay laid off station agents a wage commensurate with their marginal revenue product, the wage paid would also be $15 per hour.

The reason the MTA will engage in screening is obvious from the above example. At the going rate the wage will be $15 and the MTA would find some characteristic that identified a high productivity laid off station agent group Y from a low productivity laid off station agent group X. It would reject all group X workers and hire only group Y workers, paying a wage of only $15. Thus of course the MTA has the incentive to engage in screening.

Accepting that will only validate Walder’s theory of the ‘net-zero’ approach to employee wages and benefits. Is that the right move forward in dealing with the blue collar workers? We understand the point of view of the station department of getting the laid off station agents to work but we do not like it. Samuelsen has rejected Walder’s ‘net zero’ theory and has drawn the line on the sand. However when we begin to make compromises in skirmishes before the 2012 fight begins it will lead to no good, because by compromising we may undermine our cause.