Labor Market Displacement Effect
RCTReview
Intensive job search counseling increases placement speed for participating job seekers, but in competitive labor markets with limited open vacancies, these individual gains occur by displacing non-participating job seekers who compete for the same positions [8-10]. Without measuring general equilibrium displacement, policymakers risk misinterpreting zero-sum job reallocation as net job creation [2, 8, 10].
Picture this
Think of line-skipping at a grocery store checkout line with a fixed number of open registers. Giving a VIP line-skipping pass to one shopper lets them check out faster, but pushes every non-VIP shopper back by one position in line. The entire line does not move any faster, and the total quantity of groceries purchased at the store remains completely unchanged.
What the evidence says
At eight months, untreated job seekers in treated communities were 2.1 percentage points less likely to obtain long-term employment than job seekers in communities where no counseling was offered, and in highly competitive job markets, untreated peers experienced a 7.7 percentage point drop in employment relative to pure comparison areas [6, 7, 12].
- Who was studied
- Nearly 30,000 young, college-educated job seekers in France (two-thirds female, 67% receiving no unemployment benefits) across 235 local job market communities [5].
- How
- Clustered randomized controlled trial comparing treated job seekers, untreated job seekers in treated communities, and job seekers in pure comparison communities with 0% treatment saturation over a two-year follow-up period [3, 5, 7, 11].
What to do
Evaluate local labor market vacancy constraints and competition density prior to expanding intensive counseling programs to prevent negative employment spillovers on non-participants [9, 12].
From the source
"Although job seekers who were offered intensive counseling were 2.5 percentage points more likely to be employed in the short run than their peers who lived in the same communities but were not offered counseling, these peers were 2.1 percentage points less likely to have long-term employment than job seekers in areas where intensive counseling was not offered at all." [6, 7]
briefcase_job-placement-and-displacement.pdf