Understanding the Job Market

In recent times of economic turmoil, “jobs” is one of the most talked about topic in every gathering. Unemployment figures in many countries seem to be hitting record highs. So why is it so difficult to get a job when there are so many job sites, openings, start-ups, expansions etc. True, there are economic problems everywhere. But then, could there be another cause ? Let’s find out.

First, lets define a market.

Market: A market is a system (physical or virtual) which facilitates the exchange of goods and/or services. 

and now a job

Job: A regular activity, sometimes skilful, performed in exchange for payment (mostly monetary). 

So a job market would then be defined as : A system which facilitates the exchange of a regular activity (sometimes skilful) and payment. Correct ?

So, when it is difficult to get a job in the market, that points to either the regular activity or payment. I don’t believe payment to be a major consideration as people are ready to work for anything that is better than nothing, so let’s leave it here for a while.

The Regular Activity: The Job

Any goods or service is subject to the market forces of demand and supply. So is the Job. There is demand of job i.e. job openings/vacancies or there is supply of jobs i.e. the number of people providing their skills to do a job. In a good system, the supply tends to follow the demand very closely or in statistical words, a strong positive co-relation between the two exists. Now what if Supply is high, Demand is also high, but demand is not being met. That indicates a mismatch. An inefficiency in the market. So how do we find that out whether it exists in the Job Market.

I tried to find out and reached the Beveridge Curve. This curve is a graphical representation of the relationship between the job openings and unemployment rate. It helps to understand the efficiency of the job market. When the curve moves outwards towards the right-top corner, it shows an inefficient job market and the presence of a mismatch between the job openings and the unemployed maybe in terms of skill, location or perhaps the employers delaying hiring due to economic uncertainty. Another reason could be hiring more from the employed lot itself and very less from the unemployed.  Heres a look at the US Beveridge curve from February 2001 to April 2013.

As you can see, during the economy boom, job openings were high and unemployment was very low. However, as the economy went into recession mode, from Dec’07 through 2009, the curve sloped downward every month and moved towards the right as job openings reduced and unemployment rose. This is still normal and the reason cited as “recession”. As the economy started recovering, though we see more job openings and reduced unemployment rate, the curve has moved outwards and towards the right, indicating a mismatch between the vacancies available and the unemployed. This means that we have openings but cannot find the right person due to various reasons like no sufficient awareness about the opening, right person doesn’t know about the opening, leaving out a candidate based on checklist system of hiring (leaving it all to the recruitment agency), people having the wrong skill-set etc. . Or it could also mean that employers are looking to hire more of the “already-employed” people rather than from the unemployed lot (The Monster Jobs controversial ads which stated ” Jobless need not apply”). If this is the case, it implies a serious social issue which needs to be addressed. It’s like feeding a pizza to someone who’s just finished his Big Mac while the person next to him is suffering from malnutrition.

The story is the same across Europe as well, with Germany as the only exception where the curve has moved inward. Can’t seem to find any such curve for most of the Asian countries. If you do please post below.

Coming back to the problem, there seems to be some issue with the hiring process or skill set. There hasn’t been much innovation in the hiring process, atleast I haven’t come across any, apart from the online job postings becoming more prevalent. We still go through the age-old CV formats, checklists and interview techniques to select a candidate. Yes, and the process is expensive too. Can we look to better the hiring process, to remove the inefficiencies ? Have we forgotten to innovate in this field because it’s not revenue generating as such ? And if there is a problem with the skills, can there be more communication between the business and education world ? Does everyone graduating come out with straight-on-the-job skils ? Isn’t on-the-job training a concept ?

With such high unemployment rates, I think people have to offer a “free trial plan” with their CV soon – “30 days free service , if you like my work, hire me “. I sincerely hope the people in positions of power realise these issues and look into finding good solutions for them.