Heterogeneity of job seekers in labour market matching

Abstract

This study examines the matching of heterogeneous job seekers and vacant jobs. Job seekers are divided into four employability groups according to their labour market status. The dataset consists of highly disaggregated monthly data from 146 Local Labour Offices in Finland over 14 years. The results indicate that the employability of job seekers differs. Therefore, the composition of the pool of job seekers in a local labour market affects the ability of that market to form successful matches. The long-term unemployed have a negative effect on matches while job seekers out of the labour force notably improve the production of matches.

Acknowledgements

This study was funded by the Academy of Finland (project number 53374). I am grateful to Jaakko Pehkonen, Hannu Tervo and Jukka Lahtonen for their helpful comments and suggestions.

Notes

¹ The dataset consists of job seekers and vacant jobs registered at the public employment agency, which plays an important role in the Finnish labour market. The proportion of jobs mediated by LLOs varied between a low of 49 in 1993 and a high of 71% in 1996 over the period 1993 to 2002 (Hämäläinen, 2003). The mean was around 60%.

² Lindeboom et al. (1994) found employment offices in the Netherlands to be the least efficient recruitment channel for employed workers compared to other channels, since they are not designed for mediating jobs for already employed persons. They also argue that the sample of employed job seekers using employment offices may be a negative selection of the total sample of employed job seekers. These findings may hold in Finland as well under normal economic conditions.