How workers search for jobs and find employment and how employers post and fill job openings have important implications for workers’ long-term economic security and mobility. Indeed, jobseekers and employers engage in a “search and matching” process to find one another, and that process is influenced by many factors: the search behavior of individual jobseekers, systemic and social forces, macroeconomic conditions, employer decisions about recruitment and hiring, and public policies. Researchers use the term “frictions” to refer to barriers that prevent jobseekers from instantly matching with employers, and both parties encounter a variety of frictions in the labor market. In this landscape report commissioned by WorkRise, Alexander Bartik, assistant professor of economics at the University of Illinois, Urbana-Champaign, and Bryan Stuart, economist at the Federal Reserve Bank of Philadelphia, survey the landscape of search and matching literature. This report analyzes and summarizes evidence from more than 100 empirical studies on the search and matching process that brings workers and employers together to create jobs.
The report's key findings can be organized by a few major themes.
Individual Job Search
- The amount of time that people are willing to spend searching for a job varies considerably. Studies note that employed job seekers spend less time searching and send out fewer job applications than unemployed job seekers. Yet even among people who are unemployed and actively seeking work, many do not job search on a daily basis. Despite spending less time and sending out fewer applications, employed job seekers receive more job offers and offers with higher wages.
- Measuring the conversion of job applications to job offers is challenging. Available evidence suggests that the majority of job applications do not lead to a job offer. One study notes that only 8 percent of business and health care job applicants received a call back.
- Job seekers evaluate a job’s many characteristics before accepting an offer. Studies show that some jobseekers are willing to accept lower pay in exchange for qualities they value, such as flexible hours, job security, and workplace safety. How workers evaluate nonwage characteristics varies considerably by race, gender, age, education, and socioeconomic status. Evidence shows that jobseekers with higher education and wages are more likely to work in jobs with better nonwage characteristics.
- Job seekers experience many frictions during the job search, including imperfect information about job postings and wages and behavioral biases about the job search process, which may affect how much time they spend searching for jobs and their optimism about finding a job. Job seeker decisionmaking is also influenced by individual preferences, relationships or networks, and the monetary and nonmonetary costs of switching jobs.
- Publicly funded job-search assistance is a major policy lever. Evidence suggests that job search assistance generally leads to higher employment and earnings and that such services lead to positive effects for recipients of unemployment insurance. Evidence from work search requirements in the unemployment insurance program is mixed. Some studies show that these requirements did not change employment or earnings; others show they improved the labor market outcomes of people who were permanently laid off.
- Other policies that affect job search and matching outcomes include reemployment bonuses, direct job placement, noncompete agreements, and occupational licensing. The authors find that transportation infrastructure could also increase job seekers’ options by lowering commuting costs.
Employer Recruitment and Hiring Practices
- Employers spend considerable resources on recruitment and hiring and face major decision points through the process. Employers fill job openings by either reassigning incumbent workers or searching for new workers. More research is needed to understand what recruitment strategies yield higher “vacancy yield,” or the number of hires an employer makes per posted vacancy. There are substantial differences in hiring approaches and intensity among employers.
- Employers use a variety of methods to screen job candidates, including resumes, tests or assessments, sample work assignments, work samples, interviews, and background and reference checks. The information from these screening methods signal a candidate’s productivity, probability of acceptance, expected job tenure, and any outside options that candidate may have. For positions requiring specialized skills, employers can train incumbent workers or hire new workers and must weigh the costs of training versus recruiting.
- Employers face a unique challenge when assessing job applicants with limited work experience. Studies have shown that entry-level workers benefit from providing employers with evaluations or letters of recommendation from previous work assignments even if their work histories are limited.
- Labor supply and macroeconomic conditions affect firms’ hiring practices. One recent study shows that during the Great Recession, employers in labor markets with larger supplies of available workers raised their hiring standards and demanded greater education and experience from applicants.
- Public policies affect how employers post and fill job openings. Several studies suggest that hiring subsidies in the form of tax credits have had moderately positive effects on employment, particularly for people from disadvantaged backgrounds and during recessions. A study of a British hiring subsidy program found it increased employment of eligible youth by 20 percent. Evidence is mixed on the impact of policies that prohibit employers from asking for certain types of information from job candidates, such as salary histories and credit scores.
The Role of Intermediaries and Online Search Tools
- Intermediaries are third parties that connect job seekers with employers and can be formal (such as colleges or public employment services) or informal (like social networks and institutions). Studies show that referrals from employees who are already working for an employer increases the chances a job seeker will be hired and earn higher starting wages. Employee referrals may be particularly beneficial to job seekers with less experience or who are young, relocating, or changing industries. Employers also benefit from employee referrals because they are associated with shorter vacancies and longer-lasting employment relationships.
- The internet has transformed the search and matching process and given rise to platforms and tools for job seekers and employers to find one another for formal, long-term employment and short-term tasks or gigs. A recent study finds that in Norway, the expansion of broadband intent and online job search tools led to faster rates of job seekers finding work and employers filling vacancies. These expansions also led to higher wages and longer-lasting employment relationships. Other studies show that online gig platforms can help inexperienced workers gain new opportunities and help workers more flexibly smooth negative income shocks.
Racial and Gender Disparities
- People of color continue to face discrimination in the labor market, and much existing research has documented how this discrimination plays out in the job search and matching process. Several studies show that when applicants of different races with similar characteristics apply for jobs, people of color in the sample are less likely to receive job interviews and offers. One notable exception is a study that examined online job applications and did not find racial differences in callback rates, indicating that online applicant tracking software and algorithms may have mitigated bias in this case.
- Many studies compare outcomes of Black and white job seekers. Studies show Black people spend more time looking for jobs, apply to more jobs, are more likely to accept a job offers, are less likely to bargain over wages, and have lower “reservation wages,” meaning the minimum wage they are willing to accept as part of a job offer.
- Residential segregation limits labor opportunities for people of color by limiting access to jobs and by activating employer bias about candidates based on where they live. Residential segregation may also lead to segregated social networks through which many people find jobs. Some evidence suggests that Black people may be less willing to refer others in their social networks to job openings out of fear of backlash from their employers.
- Although limiting the types of information employers can obtain about job seekers might seem to benefit job seekers, studies have shown that a reduction in information disadvantages people of color, because employers discriminate against nonwhite workers when less information is available. For example, laws that prevent employers from asking about criminal history and credit history harmed the employment prospects of nonwhite job seekers, while laws permitting drug testing increased employment and wages among Black workers.
- Evidence indicates that antidiscrimination laws have improved economic outcomes for Black workers but evaluating these policies has proven challenging.
- Women continue to earn far less than men, and this stems in part from differences in how men and women search for and accept jobs. Research shows women have lower reservation wages and less willingness to commute to jobs. Additional evidence shows women earn lower salaries in contexts where salary negotiations are more important. Women tend to receive information about work-life balance from employers even when they don’t ask for this information.
- Certain studies show that banning employers from asking about salary histories increased the earnings of some groups of women compared with men.
Future Directions for Research
The authors identify several areas where additional research would advance knowledge and improve economic mobility for workers, including:
- Improve data collection, particularly on how employers post and fill job openings. A new “Survey of Employer Expectations” could match the existing Survey of Consumer Expectations (which surveys people about their job search) to yield insights on employer recruitment and hiring.
- Prioritize evaluations that identify the equilibrium effects—or different impacts on different populations—of specific policies. Understanding both who benefits from and who may be harmed by policies that support job search and matching is essential.
- Focus on current trends in the labor market, particularly on policies and practices that govern the types of information job seekers and employers can share with each other. Given the rise of online labor markets and the rapid pace of technological innovation, the process of job search and matching and the effects of different policies and practices are quickly evolving. Researchers, policymakers, employers, and nonprofits can create innovative partnerships to study the effects of new tools, technologies, and policies on how workers search for and match to jobs. Such partnerships are essential to building knowledge on how these decisions affect workers’ well-being and their long-term earnings and economic outcomes.