Dual-Market Screening Frictions
RCTReview
Standard labor economic models assume recruitment assistance only matters during tight labor markets when candidate scarcity is high, ignoring the heavy screening costs employers incur when overloaded with applicants during economic downturns.
Picture this
Imagine a store owner during a gold rush trying to find one good employee among a crowd of zero applicants (a tight market) versus during a severe depression where thousands of applicants line up outside the door (a slack market). In both cases, the store owner wastes huge time and resources—either hunting for missing candidates or reading mountain loads of resumes—making recruitment assistance equally valuable in good times and bad times.
What the evidence says
Treatment effects on permanent contract vacancies (+0.031 in below-median vs +0.038 in above-median, p = 0.550) and permanent contract jobseeker hires (+0.056 in below-median vs +0.038 in above-median, p = 0.711) showed no statistically significant difference between slack and tight markets.
- Who was studied
- N = 7,438 small and medium-sized firms across 129 local employment agencies in France split across commute-zone sector tightness.
- How
- Heterogeneity analysis within an RCT comparing treatment effects across local labor markets above and below median tightness (median tightness = 0.35).
What to do
Provide external candidate filtering support to employers during both economic recessions and economic expansions, adapting services from candidate generation in tight markets to resume pre-selection in slack markets.
From the source
"Firms have trouble generating candidates for their vacancies 'when times are good' as benchmark theory would predict, but also when times are bad due to the number of applications they receive when opening a position."
Are_Active_Labor_Market_Policies_Directed_at_Firms_Effective_Evidence.pdf