Firms' office locations affect recent graduates' access to high-wage job opportunities

Date

02/27/20
A firm’s decision on where to locate its branch offices has reverberations in higher education and students’ post-graduation upward income mobility, according to new research from U. of I. labor economist Russell Weinstein.

 

CHAMPAIGN, Ill. — A firm’s decision on where to locate its branch offices has reverberations in higher education and students’ post-graduation upward income mobility, according to new research from a University of Illinois at Urbana-Champaign expert who studies labor markets and employer recruiting strategies.

Russell Weinstein, a professor of labor and employment relations and of economics at Illinois, studied access to high-paying job opportunities in finance and consulting and found that firms are nearly four times as likely to recruit at a university five or more years after they open a satellite office nearby, relative to the year before the move. And after closing the nearby office, firms are 45% less likely to recruit at the university.

“Where a firm locates itself and its offices creates barriers to access for students who study farther away from the firm’s locations,” Weinstein said. “So it really comes down to the old saying about real estate: location, location, location. Where a firm locates a satellite office affects which students have access to its job opportunities.”

To analyze how firm locations affect variation across universities in labor market opportunities, Weinstein collected data from 2000-13 on office locations and campus recruiting strategies for more than 70 banking and consulting firms.

With two case studies and data culled from university annual reports and a website devoted to employment and professional networking, Weinstein also shows that when a top financial firm increases its presence in a new city, graduates from the local university are more likely to have the firm be their first employer, relative to those who graduated from the same university a few years before the firm increased its local presence.

“These were really striking results for a couple of reasons,” Weinstein said. “One is that it points to an important role for distance for these firms. I show that in choosing where to recruit workers, the costs of distance relative to other university attributes appear large, even for high-wage firms recruiting young, college-educated workers. And even for this very high wage set of firms, a lot of people have in their minds that they only recruit at the top three or five universities in the country. In reality, they do recruit at a pretty wide range of universities in terms of selectivity, and that likelihood increases when they move closer to these universities.”

That suggests that, for many students choosing where to go to college, location might be an important consideration if they care about getting a finance or consulting job after graduation, Weinstein said. In particular, students may want to think about which firms are in their university’s local market and recruit at the university.

“Firms appear willing to recruit at nearby universities, even if they are less selective than other alternatives,” he said. “This suggests choosing the most selective university may not always be the optimal decision for high school students, depending on their objectives. They may be able to attend a less selective university with more access to high-wage firms.”

Additional results of the research also suggest that increased local presence of high-wage firms affects graduates’ longer-run earnings outcomes.

“Access to newly recruiting firms on campus has a larger effect on income success rates for students from lower-income families, which means that the findings have important implications for improving upward income mobility,” Weinstein said. “A lot of this depends on what the student’s objective is when they’re applying to college, and if they care about where they’re going to be employed after they graduate. Making information about employment outcomes and employers recruiting on campus readily available from the university is an important thing to do.”

The results also indicate that local economic development policies, which attract firms to municipalities or states, may improve access to high-quality jobs for students in those markets, Weinstein said.

“If firms are closing offices in your area, that leads to the danger that they stop recruiting at your university – which suggests that universities should be mindful of what’s going on in the local economy and try to maintain connections with firms.”

Editor’s notes: To contact Russell Weinstein, call 217-300-6410; email weinst@illinois.edu.

The paper “Firm decisions and variation in the return to college: Evidence from employer recruiting” is available online.