Social Network Structure, Equality and Segregation in a Labor Market with Referral Hiring

We construct an agent-based model to examine the effects of referral based hiring and of the structure of social networks on three labor market phenomena: the steady state level of equality between groups, measures of segregation at steady state, and the rate of convergence to steady state. When firms hire by referral the relative structure of social networks in majority and minority groups determines the level of equality; groups prefer to have more regular (less random) social networks relative to other groups in the population. While regular networks are beneficial in regard to the steady state level of equality, they slow the rate of convergence to steady state. Thus there is a tension in that the preferred social network structure for the minority (disadvantaged) group depends on whether the labor market has converged to steady state. ∗Current address: Center for the Study of Complex Systems, University of Michigan