Marginal Job Productivity-Recruitment Cost Trade-Off
RCTClinical Trial
Reducing initial recruitment costs lowers the economic threshold for firm job creation, leading employers to open marginal positions that exhibit lower post-hire productivity and skill requirements.
Picture this
Think of an orchard farmer picking apples. When harvesting requires climbing expensive scaffolding, the farmer only picks high-priced premium apples. If someone provides free ladders, the farmer begins harvesting smaller, cheaper apples because the labor cost to pick them is now low enough to yield a net profit.
What the evidence says
Vacancies created by treatment firms were significantly more likely to require low skill levels and low qualifications, while offered wages showed no statistically significant difference compared to control group vacancies.
- Who was studied
- N = 7,438 establishments in France; analysis on N = 1,825 permanent contract vacancies posted with the Public Employment Service.
- How
- Stratified Randomized Controlled Trial evaluating vacancy skill requirements and predicted wages using OLS regressions.
What to do
Evaluate the net economic benefit of lowering recruitment costs by factoring in the lower average productivity and skill requirements of newly incentivized marginal positions.
From the source
"This suggests that the marginal jobs created through the intervention are of lower productivity and profitability post-hiring, but this was offset by a reduction in the initial recruitment cost."
Are_Active_Labor_Market_Policies_Directed_at_Firms_Effective_Evidence.pdf