a research paper (No 2013-02 (January 2013)) by Simonetta Longhi and Mark Taylor (Institute for Social and Economic Research, University of Essex, UK)
Non-Technical Summary
During periods of low labour demand, competition for jobs is fierce as an unemployed person has to compete not only with a larger pool of other unemployed people but also with the employed who are looking for a better job. Job search theory suggests that employed workers look for jobs that pay a higher wage than their current job, while the unemployed look for jobs that offer wages exceeding their reservation wage (the wage at which the unemployed are indifferent between accepting the job offer and rejecting the offer in favour of continued job search). Most models assume that employed and unemployed job seekers are the same, differing only in their labour force status and in the intensity and effectiveness of their search. Empirically however there is little evidence that employed and unemployed job seekers have similar characteristics. If this is not the case, then it prompts the question of whether they compete for the same jobs. Our focus in this paper is to compare the characteristics and behaviour of employed and unemployed job seekers, and hence the nature of the competition between them, and how these vary over the business cycle.
We combine data from the British Labour Force Survey from 1984 to 2009 and the British Household Panel Survey from 1993 to 2007 to identify: (1) differences in observable characteristics between employed people who search for another job and those who do not; (2) the extent to which employed and unemployed job seekers have similar individual characteristics, work histories, preferences over working hours and job search strategies; and (3) the extent to which this varies over the business cycle. If employed and unemployed job seekers are observationally different, or if they apply to different kinds of jobs, then in contrast to the assumptions made in the theoretical literature we cannot conclude that they are in direct competition for the same vacancies or that the experience and decisions of one group will influence the outcomes of the other.
Our results indicate that employed people who engage in on-the-job search tend to be in worse jobs than employed individuals who are not searching. We find some evidence that unemployed job seekers apply to – or accept – worse jobs than employed job seekers, but continue to search for better opportunities when employed. We also find significant differences in the characteristics of employed and unemployed job seekers, which persist when also taking into account differences in (un)employment histories and unobserved characteristics. Employed and unemployed job seekers differ in their preferences in terms of working hours and search methods used, although differences are larger among the more highly educated. Such differences persist over the business cycle.
Therefore in contrast to what is typically assumed in the literature, our evidence suggests that employed and unemployed job seekers are systematically different and are unlikely to directly compete for the same vacancies. Consequently the job search activities of employed people should not affect the outcomes of unemployed job seekers.
JEL Classification: J29, J60
Full text (PDF 42pp)
Showing posts with label on-the-job_search. Show all posts
Showing posts with label on-the-job_search. Show all posts
Friday, 1 March 2013
Tuesday, 31 January 2012
Occupational change and mobility among employed and unemployed job seekers
a report by Simonetta Longhi and Mark Taylor (Institute for Social and Economic Research, University of Essex) published in October 2011 under the auspices of the Economic & Social Research Council.
Abstract
We use data from the Labour Force Survey to show that employed and unemployed job seekers in Great Britain originate from different occupations and find jobs in different occupations. We find substantial differences in occupational mobility between job seekers: employed job seekers are most likely to move to occupations paying higher average wages relative to their previous occupation, while unemployed job seekers are most likely to move to lower paying occupations. Employed and unemployed job seekers exhibit different patterns of occupational mobility and, therefore, do not accept the same types of jobs.
I am sure that social economists will understand the methodology of this research as described in the report which you can find here (PDF 26pp) but I have to say that I found the following most helpful.
Non-technical summary
Economic theory suggests that workers will change their job – and occupation – to improve wages over their career. However, a number of studies find substantial returns to experience accumulated within an occupation and argue that any loss of occupational experience associated with a change in occupation may result in lower wages, at least initially. This suggests that high levels of occupational mobility can severely inhibit a person’s career wage growth.
Whether a change in occupation is a positive or negative event is likely to depend on the cause of the change. For example, employed people searching for a new job will only accept job offers that are better than in their current job, either in terms of current wages, or in terms of future wage growth (or other working conditions). In contrast, people who are unemployed might be forced to accept sub-optimal jobs in order to exit unemployment and occupational change in this case might be to lower paying occupations, or occupations offering lower future wage growth. Our focus in this paper is to identify and compare the occupational mobility of employed and unemployed job seekers, a topic that has received little attention in the literature despite its potential implications. The literature has instead focused on the impact of an occupational change on short-term wage changes at the individual level, and has typically ignored whether the change is to an occupation offering higher or faster future wage growth.
We find that for both employed and unemployed job seekers the probability of finding a new job in the same occupation as the previous job is relatively low (around 30%), while more than one half experience a major occupational change (i.e. across occupations that are very different). However employed job seekers are much more likely than unemployed job seekers to move into higher paying occupations and much less likely to move into lower paying occupations. This suggests that for unemployed people a change in occupation is likely to have a negative impact on future wage growth while for employed people an occupational change is more often associated with better prospects for wage growth. Therefore occupational change is more likely to be an opportunity for employed job seekers, but a constraint for unemployed job seekers.
Previous studies suggest that employed and unemployed job seekers have different individual characteristics and employment histories, have different probabilities of finding a job, and find jobs of different quality. Our results suggest that they also exhibit different patterns of occupational change and tend to move in different directions in the occupational hierarchy. Since employed and unemployed job seekers start from different occupations and move in different directions, we can conclude that they tend to accept different types of jobs. All this adds evidence suggesting that employed and unemployed job seekers operate in different labour markets.
Although it has been suggested that job seekers might be more likely to find a better job if they quit their current job (i.e. become unemployed) and focus their efforts on their search for new employment, our results suggest otherwise. Since on-the-job search yields better occupational outcomes than unemployed search, workers should try to avoid unemployment. The best strategy for unemployed job seekers therefore seems that of accepting the first job offer they receive and then engaging in on-the-job search, rather than waiting for a good job offer which, especially in periods of recession, might not materialise.
Seems to run counter to the job-seeking advice of former times.
Abstract
We use data from the Labour Force Survey to show that employed and unemployed job seekers in Great Britain originate from different occupations and find jobs in different occupations. We find substantial differences in occupational mobility between job seekers: employed job seekers are most likely to move to occupations paying higher average wages relative to their previous occupation, while unemployed job seekers are most likely to move to lower paying occupations. Employed and unemployed job seekers exhibit different patterns of occupational mobility and, therefore, do not accept the same types of jobs.
I am sure that social economists will understand the methodology of this research as described in the report which you can find here (PDF 26pp) but I have to say that I found the following most helpful.
Non-technical summary
Economic theory suggests that workers will change their job – and occupation – to improve wages over their career. However, a number of studies find substantial returns to experience accumulated within an occupation and argue that any loss of occupational experience associated with a change in occupation may result in lower wages, at least initially. This suggests that high levels of occupational mobility can severely inhibit a person’s career wage growth.
Whether a change in occupation is a positive or negative event is likely to depend on the cause of the change. For example, employed people searching for a new job will only accept job offers that are better than in their current job, either in terms of current wages, or in terms of future wage growth (or other working conditions). In contrast, people who are unemployed might be forced to accept sub-optimal jobs in order to exit unemployment and occupational change in this case might be to lower paying occupations, or occupations offering lower future wage growth. Our focus in this paper is to identify and compare the occupational mobility of employed and unemployed job seekers, a topic that has received little attention in the literature despite its potential implications. The literature has instead focused on the impact of an occupational change on short-term wage changes at the individual level, and has typically ignored whether the change is to an occupation offering higher or faster future wage growth.
We find that for both employed and unemployed job seekers the probability of finding a new job in the same occupation as the previous job is relatively low (around 30%), while more than one half experience a major occupational change (i.e. across occupations that are very different). However employed job seekers are much more likely than unemployed job seekers to move into higher paying occupations and much less likely to move into lower paying occupations. This suggests that for unemployed people a change in occupation is likely to have a negative impact on future wage growth while for employed people an occupational change is more often associated with better prospects for wage growth. Therefore occupational change is more likely to be an opportunity for employed job seekers, but a constraint for unemployed job seekers.
Previous studies suggest that employed and unemployed job seekers have different individual characteristics and employment histories, have different probabilities of finding a job, and find jobs of different quality. Our results suggest that they also exhibit different patterns of occupational change and tend to move in different directions in the occupational hierarchy. Since employed and unemployed job seekers start from different occupations and move in different directions, we can conclude that they tend to accept different types of jobs. All this adds evidence suggesting that employed and unemployed job seekers operate in different labour markets.
Although it has been suggested that job seekers might be more likely to find a better job if they quit their current job (i.e. become unemployed) and focus their efforts on their search for new employment, our results suggest otherwise. Since on-the-job search yields better occupational outcomes than unemployed search, workers should try to avoid unemployment. The best strategy for unemployed job seekers therefore seems that of accepting the first job offer they receive and then engaging in on-the-job search, rather than waiting for a good job offer which, especially in periods of recession, might not materialise.
Seems to run counter to the job-seeking advice of former times.
Tuesday, 2 August 2011
Explaining differences in job search outcomes between employed and unemployed job seekers
a research paper by Simonetta Longhi and Mark Taylor (Institute for Social and Economic Research, University of Essex)
Abstract
We use individual data for Great Britain over the period 1992-2009 to compare the probability that employed and unemployed job seekers find a job, and the quality of the job they find. The job finding rate of unemployed job seekers is 50 percent higher than that of employed job seekers, and this difference seems to be due to behavioural differences between employed and unemployed job seekers rather than differences in characteristics. Consistent with search theory, we find that employed job seekers are more selective in evaluating job offers; for example, they are less likely to accept low-wage and temporary jobs, or jobs that do not meet their working hour requirements.
Full document (PDF 33pp)
Hazel’s comment:
That final sentence of the abstract might seem to be stating the obvious. Of course, if you’ve currently got a job you can afford to pick and choose more than if you haven’t. What I found interesting was not that obvious conclusion but the steps that both employed and unemployed job-seekers take along the way to a new job. The research shows where those steps are similar and where they differ.
The findings bear out what those of us working in employment advice in the 70s and 80s “knew” but only anecdotally.
Abstract
We use individual data for Great Britain over the period 1992-2009 to compare the probability that employed and unemployed job seekers find a job, and the quality of the job they find. The job finding rate of unemployed job seekers is 50 percent higher than that of employed job seekers, and this difference seems to be due to behavioural differences between employed and unemployed job seekers rather than differences in characteristics. Consistent with search theory, we find that employed job seekers are more selective in evaluating job offers; for example, they are less likely to accept low-wage and temporary jobs, or jobs that do not meet their working hour requirements.
Full document (PDF 33pp)
Hazel’s comment:
That final sentence of the abstract might seem to be stating the obvious. Of course, if you’ve currently got a job you can afford to pick and choose more than if you haven’t. What I found interesting was not that obvious conclusion but the steps that both employed and unemployed job-seekers take along the way to a new job. The research shows where those steps are similar and where they differ.
The findings bear out what those of us working in employment advice in the 70s and 80s “knew” but only anecdotally.
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