Anyone who has ever tried in vain to find a job knows it: Job searching is not always as easy and fast as it should be.
This has not been helped by the financial crisis.
It is precisely this topic that Nobel prize winner Professor Dale T. Mortensen and his colleagues have dealt with. And in times of unemployment in Europe and the United states, their research is more relevant than ever. The University Post met up with him to talk about his research, while he visited Copenhagen.
Thought to be perfect market
Mortensen is professor at Northwestern University in the United States and has for the last few decades looked into the mechanics of the labour market.
Before his research, this labour market was seen as a perfect market: Employers and employees found each other and transacted in a simple and clear way. Nevertheless, we know that this is not the case, and Dale T. Mortensen’s theories help to explain why.
So why is it so hard to find a job?
New search engines should help
According to Mortensen, it is »the information gathering requirements that turn out to be important« as he puts it. It takes time and effort to find what you are looking for. In other words, there is what economists call ‘search friction’.
Nowadays, in the eyes of employers, expected future economic demand looks unpromising and there will only be a recovery when employers decide that demand is looking up. In other words, it would be more profitable to hire in the future.
A question that comes to mind is whether new technology has reduced search friction by making it cheaper and faster to collect information. For instance in Denmark the search site jobbank.dk makes it easier for employers and employees to find each other. It would be intuitive that this would help employers and employees find each other during unemployment periods, making the periods last less.
People are more selective
But this does not seem to be the case, according to Mortensen
»New communication technology is effective, otherwise people would not use it, but it is more complicated than that.«
»What happens when you improve technology is that there is a response to that. Employers and job seekers become more selective. They decide to wait the same amount of time but find a better match, which even though it turns out good in the end, does not imply that the searching periods are reduced.«
Unemployment might not return to ‘normal’
Perhaps one of the most relevant topics in today’s economy is whether or not unemployment rates will go back to pre-crisis levels, or whether the number of people unemployed will remain high for an unknown period of time.
»Typically, after a recession, there is a fairly quick recovery, but that has certainly not happened. I think there will be a return to ‘normal’, but the issue is how long it will take. We have seen in both the United States context and in Denmark that two years have passed and we have not moved. So there is actually no evidence that we are going back to normal, even at a very slow rate. «
»The natural prescription for this would be for the government to make up the difference by spending. But the problem with that right now is political. Everyone is worried about the debt.«
So, even if we wait for the crisis to end, there is no evidence that unemployment will get better. New technologies may ultimately help us be more productive and happier with better jobs, but do not seem to be helping us reducing spells of unemployment.
Maybe neither jobseekers nor employers will be having it easier any time soon.
Stay in the know about news and events happening in Copenhagen by signing up for the University Post’s weekly newsletter here.