Searching for a new job is a challenging endeavor, and job seekers often lack information that is crucial for the search process. In order to address these challenges, it is a key objective and a mandate for most employment agencies to assist job seekers who are searching for employment. While this has traditionally been a core task of caseworkers, coaches, and counselors, recent years have seen immense interest by public employment agencies and private providers in using digital tools for job search assistance. This bears two distinct promises. First, it enables policymakers to disseminate information at low marginal cost. Second, it allows providing advice tailored to different groups of workers, which may substantially increase the value of the information provided. At the same time, the competitive nature of the labor market raises concerns that offering search advice may provoke so-called displacement or spillover effects, that is, job seekers who receive support may benefit at the expense of others with whom they compete for jobs.
To investigate the effects of online job search advice, we conducted a large-scale countrywide field experiment among unemployed workers in Denmark. In the experiment, we varied the content of a new digital dashboard that provides personalized information—about available vacancies and alternative occupations that might be a “good match”—to job seekers on the central online platform of the Danish public employment agency. Moreover, our experiment was explicitly designed to study how the effects of providing this personalized information depend on the scale of the intervention, that is, how many job seekers were exposed to search advice.
It turns out that both forms of online job search advice effectively improve the labor market integration of unemployed workers as long as the share of those treated is relatively low: when fewer than 50% of job seekers in a local labor market are exposed to online job search advice, both vacancy information and occupational recommendations increase workers’ earnings and raise total working hours by more than 5%. At the same time, however, the scale of the intervention plays a crucial role for its effectiveness. In local labor markets where more than 75% of job seekers receive search advice, working hours and earnings of treated individuals are about equal to those of the control group and lie significantly below the labor market outcomes of treated individuals in low-intensity regions. Further empirical evidence from job application data suggests that the labor market effects of the intervention are generated by changes in how job seekers compete for vacancies across occupations.
In light of the rising interest in online job search advice and algorithmic recommendations, our findings provide a cautionary tale that the scaling of personalized assistance may crucially affect its effectiveness. It appears important that researchers and policymakers account for possible spillover effects when designing tailored instruments to support unemployed workers during the job search process.
© Steffen Altmann, Anita Glenny, Robert Mahlstedt, and Alexander Sebald
Steffen Altmann is Professor of Economics at the University of Hohenheim, Affiliate Professor at the University of Copenhagen, and a Research Fellow at IZA.
Anita Glenny is a Postdoctoral Researcher at Aarhus University.
Robert Mahlstedt is Assistant Professor of Economics at the University of Copenhagen and a Visiting Research Fellow at IZA.
Alexander Sebald is Head of Department at the Department of Economics at the Copenhagen Business School.
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