Job search and job finding in a period of mass unemployment

 
(iStock)
(iStock)
Share
By

The Great Recession officially ended in June 2009, yet the U.S. unemployment rate has remained persistently high.  The long-term unemployed — individuals out of work for 27 weeks or more — risk losing professional skills and network connections, and may encounter discrimination from employers reluctant to hire applicants not currently working.

A 2011 paper for Princeton University’s Center for Economic Policy Studies, “Job Search and Job Finding in a Period of Mass Unemployment: Evidence from High-Frequency Longitudinal Data,” analyzed data from weekly online interviews with 6,025 unemployed workers in New Jersey between the fall of 2009 and the spring of 2010.  The study focused on two key variables: the amount of time each day an unemployed worker dedicated to the job search; and the lowest wage offer this worker would accept (“the reservation wage”).

Key study findings include:

  • Despite the fact that a decrease in the reservation wage leads to landing a job more quickly, the data show that the typical job seeker’s reservation wage remains relatively stable over time, and close to a job seeker’s previous earnings.  Two notable exceptions to this finding are job seekers over 50 and those with less than $10,000 in savings. (Workers over 50 who hold more than $10,000 savings typically reduce their reservation wage by 10% over the course of the job hunt.)
  • For the typical unemployed person, there are cycles — usually 15 to 20 weeks in duration — in which time spent on the job search increases early on and then wanes as time passes.  For instance, approximately 100 minutes a day is devoted to searching for a job in week 1 of unemployment, but only 70 minutes by week 12, a decline of 30%.  Overall, the amount of time spent job hunting declines sharply over the term of unemployment.
  • The amount of time a job seeker spends looking for work positively correlates with how quickly he or she is able to find a new position. Job seekers who spent 20 hours or more per week searching for a job, for instance, are 20% more likely to exit the unemployment insurance benefit system before benefits are exhausted. A lower reservation wage indicated a 6% greater likelihood of finding a new position.
  • 2,626 participants received job offers during the course of the study; 15.9% of those looking for a part-time job received offers, compared to 6.5% of those looking for full-time work, with compensation offers averaging $16.50/hour for part-time work and $19.50 for full-time work.  About 60% of extended job offers were accepted, including 50% of positions that offered a lower salary than the preferred reservation wage.  Less educated workers and African-Americans were less likely to accept a job with a wage lower than their reservation wage.

The authors propose three reasons for the decline in the average job search time over time: a lack of suitable positions; increased search efficiency; and discouragement at the lack of progress finding a new position. “Interventions that encourage more search effort and more moderate reservation wages could help to speed the return to work,” the authors state, but caution that their study only analyzed a relatively modest sampling of job offers.

Tags: economy, employment, campaign issue

Last updated: September 12, 2011

 

We welcome feedback. Please contact us here.