Labor markets in advanced economies have undergone substantial change in recent decades due to globalization, technological improvements, and organizational changes. Due to these developments, oral and written language skills have become increasingly important even in less skilled jobs....

This paper considers the optimal hiring strategy of a firm that is unable to observe the productive abilities of all its applicants. Whom the firm considers as hireable, will depend crucially on the extent to which the firm can use its wage setting to mirror productivity differences. However,...