Skill Development, Bargaining Power, and a Theory of Job Design

Abstract

We examine the job design decision in the context of skill development and bargaining power. The choice between specialization and multitasking requires employees to develop either specialized or varied task-specifc skills. Employees (i.e., the owners of the acquired skills) bargaining power depends on their skill sets which differentiate their ability to hold up production and threaten to leave a firm. When a firm cannot meaningfully elicit skill investments through job design, it will pursue inefficient multitasking to reduce production holdups or inefficient specialization to prevent skilled employees from leaving. We obtain inefficient job design results only for mediocre ability workers.

Keywords: Specialization Versus Multitasking; Skill Development; Bargaining Power; Inefficient Job Design

JEL Classification: D23; J24; M54