Low-Productivity Cost Offsets

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In Simple Words

If it costs $1,000 in advertising and interviewing to hire a worker for a job that only generates $1,200 in value, a business owner will not take the risk. If an outside agency handles all the hiring effort for free, the upfront cost drops to zero, making it profitable to create the low-margin job.

Observed permanent vacancies with the agency

No proactive agency outreach
Reference skill requirements
Proactive agency outreach
12.1 points more low-skill vacancies

Observed posted-vacancy comparison; percentage points. New vacancy selection may explain differences. Lower productivity and recruitment-cost offsets were not directly measured.

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Research question

Firms in rigid wage environments hesitate to open low-productivity or entry-level positions because fixed upfront recruitment costs exceed the anticipated post-hire profitability of marginal workers.

Participants

N = 1,825 permanent contract vacancies posted with the French Public Employment Service during the RCT sanctuary period.

Study Design

OLS regression of job characteristics and predicted wages (trained on N = 1,921,148 outside vacancies) on firm treatment status.

Results

Vacancies created by treated firms showed no difference in offered wages (log wage diff = -0.017, p > 0.10) or required experience, but were 12.1 percentage points more likely to be low-skilled/unqualified positions (p < 0.01), confirming that vacancy cost reductions selectively unlock lower-productivity job creation.

Takeaway

Offer public vacancy cost subsidies specifically tailored to low-qualification entry-level roles where upfront hiring expenses block marginal employment creation.

Source and citation

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Plain-English glossary

Original explanations, informed by the references below. Examples are illustrations, not data from the studies above. The research text stays unchanged.

Percentage points

The difference between two percentages.

ExampleA rise from 40% to 50% is 10 percentage points. Relative to the starting value, that is a 25% increase.

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Randomized controlled trial

A study that uses chance, like drawing lots, to decide who receives each option being compared. Researchers compare the groups’ outcomes to estimate the effect of those options.

ExampleA lottery assigns volunteers to a training programme or a comparison group. Researchers then compare their outcomes.

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