Adverse selection in the labour market

1. Job Interviews a. Problem
Adverse selection exists in the labour market when an interview takes places because there is an asymmetry of information between the interviewer (buyer) and the interviewee (seller). Indeed, the interviewer knows his skills better than the interviewer, which can lead an employer to hire an unskilled employee. b. Solution
The common solution to deal with this kind of situation is to hire people who studied in top schools. It does not mean they necessarily have the skills required for the job they apply to. But, on average, they will perform better than other candidates. 2. Productivity of employees a. Problem
Adverse selection can also be seen in wages. Wages are supposed to reflect employees’ productivity. However, a manager does not necessarily know precisely how productive his employees are. Therefore, in an attempt to be fair and to deal with this problem as fast and simply as possible, he just considers a mean productivity for all his employees. Therefore, highly-productive employees think their wages are lower than they should be and they leave their jobs. Consequently, the productivity mean decreases, and the employees who have a higher productivity than the mean start looking for another job. This process repeats itself and the average production keeps lowering.
There is one phenomenon that even worsens this tendency called presenteeism. Presenteeism is the act of staying at work more than necessary without a significant increase in production. The reason why employees do this is because managers precisely do not have access to this productivity information and would assume that if an employee stays longer, his output increases. Therefore, the employer would be more willing to promote employees who stay longer at work. But what if the reason why these employees are