Does Coworker Complementarity Matter?

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According to a new Harvard working paper, the answer is “yes”. Not only that, it demonstrates the importance of specialization. The paper concludes,

Division of labor allows workers to specialize, but also makes them dependent on one another. That is, specialization often implies co-specialization: coworkers need to acquire different, yet complementary expertise. I have quantified these interdependencies in terms of the match and substitutability among coworkers, using Swedish administrative data that describe workers’ educational attainment in terms of 491 different educational tracks. Coworker match is measured by how often these tracks co-occur in establishments’ workforces, whereas substitutability is measured as the degree to which different educational tracks give access to the same occupations.

The effects of coworker match on wages are positive and substantial. Causal estimates imply that working with well-matching coworkers yields returns of a similar magnitude as having a college degree. Moreover, better coworker matches are associated with lower job-switching rates. In contrast, being easily substituted by coworkers diminishes wages and is associated with elevated job-switching rates. Given the positive wage effects, I have argued that the component of a worker’s coworker match that is orthogonal to coworker substitutability can be thought of as a measure of how complementary a worker is to her coworkers. This coworker complementarity rises over the course of a worker’s career in a way that closely tracks the Mincer curve. Furthermore, I have shown that well-established wage premiums are to some extent contingent on working with complementary coworkers. For instance, college-educated workers who have few complementary coworkers earn about the same as workers who only completed secondary school. Similarly, the urban wage premium is about nine times larger for workers in the top quintile of the complementarity distribution compared to those in the bottom quintile. Finally, for workers with post-secondary degrees or higher, the large-plant premium, i.e., the relatively high wages paid by large establishments, can be wholly attributed to the fact that these establishments employ larger numbers of complementary coworkers.

These findings highlight a salient fact of modern societies: high levels of specialization make skilled workers reliant on coworkers who specialize in areas that are complementary to their own field of expertise. This interdependence of coworkers has consequences for how we should think about returns to schooling at a societal level, for the implied coordination challenges in upgrading education systems, and for the role urban labor markets play as places where workers match to coworkers, not just to employers (pgs. 41-42).

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