The Low-Wage Labor Market: Challenges and Opportunities for Economic Self-Sufficiency. Mismatch in the Low-Wage Labor Market: Job Search Perspective . Conclusion

02/16/2000

This paper has been concerned with the extent to which there are problems of informational access that complicate the matching of workers with jobs. Whereas it is certainly important to assess the extent to which there is an informational mismatch between individuals seeking jobs and employers seeking workers, it is also important to recognize that successful job matches are only a first step toward strong labor market attachment. The role of changing skill requirements, barriers imposed by race, sex, and other group statuses, and broader labor market conditions are crucial determinants of labor market opportunities that cannot be properly understood (or overcome) through a narrow look at job search strategies. Moreover, although policies that ultimately result in an improvement in job matching through closer attention to search strategies may benefit individual workers, these policies may not have corresponding effects on the aggregate labor market.(66)

Beyond these more long-term considerations, however, the findings reported in this chapter do suggest that problems of informational mismatch are important and may affect the employment prospects of some workers. Employers exploit search strategies that they believe will target qualified candidates inexpensively and efficiently. For many employers in the low-wage labor market, informal referrals represent such a low-cost and efficient strategy. Especially when job qualifications are difficult to ascertain through objective means, employers may find that the informal referral process includes an invaluable and trustworthy screening function not available with other methods.

Job seekers also disproportionately rely on the informal referral process in their search efforts. However, whereas many job seekers successfully find employment from informal referrals, those who are socially isolated from job networks or whose network members do not provide effective referrals are disadvantaged. Employers may selectively act on referrals from those employees they deem most qualified or productive, while ignoring the referrals of less-desirable employees. Thus, the informal referral process often produces referrals from a homogenous, closely knit network of individuals, and it can result in quite segregated workforces that are difficult to penetrate from the outside.

Moreover, the workers who are likely to benefit least from the informal referral process are also likely to be disadvantaged by many of the other search methods. This is because in their efforts to recruit efficiently and inexpensively for positions that increasingly demand difficult to measure "soft skills," employers may infer information about a worker's qualifications from categorical information such as race, sex, welfare status, or other group memberships. Thus, an employer may believe that African Americans, central city residents, or welfare recipients are less likely to be good workers, and then use those individual characteristics as a negative flag when reviewing direct applications or responses to advertisements. These same employers may avoid relying on formal search methods altogether because formal agencies are less likely to rely on such proxy information or subjective screening criteria. Thus, efforts to improve the information that employers and job seekers have about each other through the better matching of search strategies would also need to address the underlying motivations guiding employer preferences that may ultimately result in discriminatory hiring practices.