Labor Market Tightness and Spillover Concentration
RCTReview
The magnitude of negative displacement spillovers caused by targeted job search assistance varies depending on local labor market conditions. In slacker labor markets with abundant job openings, assisted job seekers can find work without harming others, but in tight, highly competitive markets, search assistance intensifies zero-sum competition for scarce vacancies.
Picture this
Imagine two games of musical chairs: one where there are 99 chairs for 100 people, and another where there are only 10 chairs for 100 people. Giving speed boosts to a few players in the 99-chair game barely changes anyone else's chances of sitting down, but in the 10-chair game, speeding up a few players guarantees that non-boosted players are violently crowded out from getting any seat at all.
What the evidence says
In communities with extremely competitive job markets, untreated job seekers in treated areas experienced a 7.7 percentage point reduction in long-term employment compared to pure comparison areas where no counseling was offered.
- Who was studied
- Subgroups of young, college-educated French job seekers evaluated across 235 local communities with varying levels of job market competitiveness.
- How
- Cluster-randomized experiment comparing employment rates of untreated comparison workers in treated areas against pure comparison areas across varying levels of local market competitiveness.
What to do
Target intensive job search assistance interventions strictly toward slack labor markets while prioritizing macroeconomic vacancy creation in tight, highly competitive markets.
From the source
"Displacement effects were strongest in places where job seekers eligible for the program were competing for a smaller pool of jobs. In treatment areas with extremely competitive job markets, the employment rate among the comparison group individuals was lower by 7.7 points..."
briefcase_job-placement-and-displacement.pdf