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.
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 action8. 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.