Currently, many workplaces across the world are at least partially closed due to the COVID-19 pandemic. According to figures from the International Labor Organization, a UN agency committed to advancing social and economic justice through international labor standards,5 These closures have caused an estimated 14% loss in working hours worldwide, something that is reflected in the forecasted 4.9% GDP reduction globally this year.14 As a consequence, millions of people are expected to move into extreme poverty.13
Employment affects the quality of life and development of the most vulnerable people, and consequently, all of society.12 Therefore, any country that wishes to promote prosperity and inclusion in a sustained manner over time must seek to offer jobs that meet the demand of the population, especially in the context of a fragile economy.12 Despite this, removing barriers to job opportunities, with an emphasis on disadvantaged sectors (women, young people, etc.), is no easy task.
In the face of this, behavioral economics has contributed to the identification of cognitive biases present during job searches. Perhaps the unemployed do not act rationally when trying to get work — despite the potential benefits they would have by doing so — due to systematic deviations that influence their decision-making.6
A team of researchers led by Linda Babcock, the head of the Department of Social and Decision Sciences at Carnegie Mellon University, pointed to the difficulty involved in this type of job search. This difficulty may be even greater than what is assumed by mainstream economics due to two problems: the need for relevant and easily understandable information, and the willpower of job seekers.2
To provide a solution, there exist low-cost interventions that could reduce the time a person is unemployed. These interventions could serve as study opportunities for policymakers during a time in which a simpler job search process is highly desirable for society as a whole.
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The intensity of the search
It stands to reason that every unemployed person should be actively seeking a new job. However, people often procrastinate and spend their time on other activities. And even if they have searched, have they done so effectively? As Babcock et al. pointed out, people tend to underestimate the benefits of conducting an adequate job search.
So, a question arises: What factors influence the intensity of a job search?
According to recent studies, some factors might be biases related to the level of impatience (aka present bias), overconfidence, and a lack of willpower in individuals (procrastination).3
To address these biases, Abel et al. (2019) carried out an action plan with 1,100 unemployed South African youths, which was expected to reduce the intent-action gap, and thus lead to an increased search intensity. An action plan, derived from contributions of behavioral economics, consists of the simplification of a complex task or process into small concrete actions to directly incentivize the action.8 In this study, the weekly goals to be met were explicitly related to the number of applications, identification of job opportunities, and the number of hours spent on job searches.
The results show that job applicants who use action plans receive 24% more responses in their applications, as well as a 30% increase in job offers, compared to their peers who were not offered a plan to follow.
Regarding the probability of getting a job, the beneficiaries achieved an increase from 11.5% to 16.4%. The reason for these results lies in the improvement — in terms of quality and frequency — of the job search via the act of creating and following through with an action plan.
However, despite these positive and significant results, it is important to remember that the experiment focused on short-term behavioral changes, so doubt remains as to whether similar results could be ensured in the medium and long term.
For example, a valid question yet to be answered is whether job seekers would have persisted in their quest if they had experienced further failures in their results.3 Apart from that, the use of this type of intervention in labor policies can be recommended as a possible solution, given their ease of implementation and their ability to obtain results in a short amount of time.
Concise and easy information
Other problems linked to job search are the need for information on labor market conditions, the process of applying for a job, and the skills required in the positions of interest. All of these considerations must be shown in an attractive and simple way to the reader beyond addressing just the content of the roles.2 In this context, behavioral economics suggests the use of nudges to achieve desired behavioral changes.
Alongside a team of researchers, Steffen Altmann, an Associate Professor of Economics at the University of Copenhagen, considered the importance of providing effective information, as well as the usefulness of nudges. To do so, they conducted an experiment that aimed to reduce the time a person is unemployed.1 The intervention consisted of providing a brochure, with easy and concise information of interest related to the position. The participants comprised 54,000 German job seekers, who were divided into two groups where one group received the leaflet and the other did not.
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The leaflet provided was made up of four parts. The first one showed statistics of the labor market along with positive messages, such as “it is the ideal moment,” or “you will be successful in finding employment.” Highlighting positive aspects of the information provided suggests that the authors were cognizant of the framing effect and its ability to drastically alter behavior. On the other hand, the second and third sections explained the relationship between carrying out a job search during unemployment and quality of life variables (health, family life, etc.).
Citing evidence of the benefits of job searching in the brochure is related to trying to reduce the availability heuristic, a behavioral concept that explains when we evaluate the probability of occurrence of an event based on familiar events we have in mind. For example, if we know that our neighbors have not found a job for more than a year, we might think that our luck will also be low. Finally, the fourth part mentions the options available when looking for a job, such as social networks and employment agencies.
The results were significant in groups of people at risk of long-term unemployment — those more limited by their education or work experience among other factors. Specifically, one year after the experiment, a 4% increase in employment and earnings was found in this group, compared to their peers. It is important to note the low cost involved in obtaining such an improvement, as less than € 1 was spent per brochure.
A final piece of evidence to support the use of concise and easy information comes from a study led by Monika Mühlböck of the University of Vienna, which used an informative intervention with the addition of a short survey to encourage reflection, known as a “nudge of reflection”.9 The authors reduced the time that participants spent employed through access to information and a reflection on the job search.
The study’s intervention aimed at 37,000 recently unemployed young people from Austria, who would be given a short video and a short email survey. Four groups received two nudges differently, finding positive and significant results in the group that received the survey first followed by the short video. The most positively affected group, who was characterized as having a low level of education, found an increased likelihood of gaining employment by 3.7%.
Job search is often a more complex issue than many assume. Despite how frequently such a search is performed there needs to be easy and concise information in the process. In this context, behavioral economics can offer analysis and behavioral change suggestions to help those who are looking for jobs.
Therefore, there is a lot of potential in the generalization of online job searches for the future, as many authors have noted.7 The ease of obtaining data in the way employers and applicants search allows the possibility of carrying out intervention designs that allow lessons from labor economics and behavioral economics to be incorporated into job searches. The way job offers are linked to an applicant’s skills could also be improved. Furthermore, measuring the amount of information that may cause cognitive overload in applicants could also enrich further studies.
In the post-pandemic world, the search for online employment — even in developing nations — can become more widespread and common than before. Allowing insights derived from studies regarding online job searches, as well as behavioral economics models, can promote a better understanding of the biases involved in the recruitment process. Doing so would certainly allow a greater range of action and could achieve greater effectiveness, something that will be vital for the coming years.
1. Altmann, S., Falk, A., Jager, S., & Zimmermann, F. (2018). Learning about job search: A field experiment with job seekers in Germany. Journal of Public Economics, 164,33-49. doi:10.1016/j.jpubeco.2018.05.003
2. Babcock, L., Congdon, W. J., Katz, L. F., & Mullainathan, S. (2012). Notes on behavioral economics and labor market policy. IZA Journal of Labor Policy, 1(1), 2. doi:10.1186/2193-9004-1-2
3. Abel, M., Burger, R., Carranza, E., & Piraino, P. (2019). “Bridging the Intention-Behavior Gap? The Effect of Plan-Making Prompts on Job Search and Employment.” American Economic Journal: Applied Economics, 11 (2): 284-301. doi:10.1257/app.20170566
4. International Labour Organization (2012). Jobs and livelihoods at the heart of the post-2015 development agenda. Recovered from https://www.ilo.org/global/about-the-ilo/newsroom/statements-and-speeches/WCMS_205641/lang–en/index.htm
5. International Labour Organization (2020). COVID-19 and the world of work. Updated estimates and analysis (5 ed.). Retrieved from https://www.ilo.org/wcmsp5/groups/public/@dgreports/@dcomm/documents/briefingnote/wcms_749399.pdf
6. Kahneman, D. (2011). Thinking, fast and slow. New York: Farrar, Straus and Giroux.
7. Kircher, P. (2020). Search Design and Online Job Search–New Avenues for Applied and Experimental Research. Labour Economics, 64, 101820. doi:10.1016/j.labeco.2020.101820
8. Martínez, D., Rojas, A. & Scartascini, C. (2020). Behavioral economics may help to combat the coronavirus. Inter-American Development Bank.
9. Mühlböck, M., Kalleitner, F., Steiber, N., & Kittel, B. (2020). Information, Reflection, and Successful Job Search: A Nudging Experiment. SSRN Electronic Journal. doi:10.2139/ssrn.3576740
10. Spinnewijn, J. (2010). Unemployed but Optimistic: Optimal Insurance Design with Biased Beliefs. LSE working paper, London
11. Thaler, R. H., & Sunstein, C. (2008). Nudge: Improving decisions about health, wealth, and happiness. New Haven, CT: Yale University Press.
12. World Bank (2018). Jobs at the Core of Development: Transforming Economies and Societies through Sustainable Employment. Recovered from https://www.worldbank.org/en/results/2018/02/13/jobs-at-the-core-of-development
13. World Bank (2020). COVID-19 to Plunge Global Economy into Worst Recession since World War II. Recovered from https://www.worldbank.org/en/news/press-release/2020/06/08/covid-19-to-plunge-global-economy-into-worst-recession-since-world-war-ii
14. International Monetary Fund (2020). Update on the world economic outlook. Recovered from https://www.imf.org/es/Publications/WEO/Issues/2020/06/24/WEOUpdateJune2020
About the Authors
Marco Carrasco Villanueva
Marco Carrasco holds an M.Sc. in Economics and Psychology from the University of Paris 1: Panthéon - Sorbonne, Summa Cum Laude. He has previously worked at the Organization of American States in Washington, DC, and the Ministry of Development and Social Inclusion of Peru. He has researched at the Shanghai Academy of Social Sciences in China and the National University of San Marcos in Peru. He is a Co-Founder of the Peruvian NGO Behavioral Economics & Data Science Team (BEST) and has been a lecturer and guest speaker in various international seminars and events related to his areas of specialization: behavioral economics, and Asia and Latin America economic development. He is a current MPA-ID candidate at Harvard Kennedy School, where he is also conducting research and has assumed the Professional Development Chair of Harvard Behavioral Insights Student Group.
Braulio is a Peruvian economics student at the National University of San Marcos. He currently works in the Impact Evaluation area of the Ministry of Housing, Construction and Sanitation of Peru. His interests include the application of behavioral economics and data science in public policy design and implementation. He is a co-founder and writer at “La Rotonda”, an organization that promotes participation and debate regarding current economic trends and topics. He is also affiliated with EvalYouth Perú, a network that promotes the culture and evaluation practice within the public and development spheres.