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VoxEU Column Labour Markets

Mandatory broader job searches for unemployed workers

Research shows that long-term unemployment is caused, in part, by misplaced optimism among job seekers and a tendency to search exclusively for work resembling their previous jobs. This column analyses data from a large-scale Dutch programme in which unemployed workers were required to search for and accept jobs unrelated to their former occupations. Mandating broader search requirements worsened labour market outcomes. Though there is ample evidence that caseworker meetings help the unemployed find work, forcing job seekers to conduct sub-optimal searches appears to decrease the likelihood of securing successful employment.

In a recent column on Vox, Spinnewijn et al. (2021) argue that biased beliefs among unemployed job seekers is a cause of long-term unemployment. Krueger and Mueller (2016) and Mueller et al. (2021) show that unemployed workers are overly optimistic and search too often for work that resembles their previous job. Therefore, an increasing number of OECD countries are requiring unemployed workers who are at risk of long-term unemployment to search for and accept jobs beyond the occupation of their previous employment. This low-cost intervention may be very effective if it reduces the biased beliefs of unemployed workers.

A recent literature argues that unemployed workers benefit from broadening their job search. The empirical evidence for this argument is largely based on encouragements to apply for a broader set of vacancies (Altmann et al. 2018, Belot et al. 2019). However, developing a formal and mandatory policy using the results from such ‘encouragements’ is not straightforward. The mandatory policy will be universal, while the encouragement only affects individuals who are responsive. Furthermore, people may react differently to an obligation than to an encouragement.

The Dutch unemployment insurance (UI) administration has developed a programme to stimulate broader job searches for unemployed workers who have been collecting UI benefits for at least six months. The programme starts with an additional caseworker meeting, during which past job search behaviour is evaluated. When the caseworker considers the past job search too narrow, the caseworker can give the unemployed worker the task of broadening their search. To illustrate a broader job search, the caseworker gives the unemployed worker two vacancies that are considered broader. The unemployed worker should first apply to these vacancies, and next search more broadly for other vacancies. In the next caseworker meeting, the fulfilment of this task is evaluated.

Our paper (Van der Klaauw and Vethaak 2022) discusses the evaluation of this broader search programme. The results from a randomised control trial containing more than 130,000 unemployed workers show, on average, that participation in the programme reduces the number weeks of collecting unemployment insurance benefits by 1.8 weeks and the amount of benefits payments by €1200. Both effects are significant, and the programme is cost effective for the unemployment insurance administration. The average increase in the workers’ earnings is substantially smaller than the reduction in benefits payments.

The programme consists of a meeting with a caseworker and possibly a broader search task. An extensive literature confirms the positive effects of caseworker meetings on job finding (e.g. Maibom et al. 2017, Schiprowski 2020). To evaluate the broader search task, we exploit the fact that within local offices, unemployed workers are randomly assigned to caseworkers, and that caseworkers have very different rates of assigning the broader search task. This approach allows us to estimate the additional effect of imposing the broader search task for unemployed workers that attend the caseworker meeting.

The empirical results show that imposing the broader search task does not improve labour market outcomes. On the contrary, the task reduces job finding and extends the period of collecting unemployment insurance benefits. The job characteristics are also less favourable; after the task, individuals are less likely to have a permanent contract and they work fewer hours per week. The implication is that the caseworker meeting determines the positive effect of the broader search programme.

The adverse effects of imposing the broader search task seem to contradict results from earlier studies that show positive effects of stimulating a broader job search. An important difference is that the broader search task is part of a formal and mandatory programme, while other studies considered ‘information treatments’. For example, Belot et al. (2019) feed job seekers on an online search platform with vacancies that are considered broader. Individuals can easily ignore these vacancies. Altmann et al. (2018) focus on a brochure about successful broader job searches that is distributed at the benefit administration. The effects are most pronounced among unemployed workers with a relatively high risk of long-term unemployment. Skandalis (2019) shows that when the media announces that a plant intends hiring, the composition of job applicants changes to individuals living further away.

Information treatment might affect mainly the beliefs about returning to the job search among unemployed workers who were too optimistic. The unemployed workers who receive a mandatory task from caseworkers might be a different population. We show that the adverse effects of the task are largest for unemployed workers who are most likely to receive it. Recall that caseworkers assign the task mainly to unemployed workers who were searching narrowly before the meeting. These may be specialised workers who benefit most from a narrow job search and who were optimising their job search before receiving the mandatory task.

In an earlier column, Zimmermann et al. (2015) argued that targeted information provision can be an effective tool to reduce the risk of long-term unemployment. However, the findings discussed above show that evaluations from an encouragement or information treatment are not easily translated into (low-cost) active labour-market programmes, which are often mandatory, meaning that the treated population is likely larger than that of an encouragement or information treatment. Caseworkers will target the active labour-market programme at a different group than, say, the respondents to a brochure on the advantages of conducting a broader search (as in Altmann et al. 2018). To some extent, caseworker meetings without the mandatory task are more similar to the information treatments. If no task is given the unemployed worker, the meeting will still focus on a broader search, but in an advisory and informative capacity. There is ample empirical evidence that caseworker meetings help unemployed workers find work (Card et al. 2010).

References

Altmann, S, A Falk, S Jäger and F Zimmermann (2018), “Learning about job search: A field experiment with job seekers in Germany”, Journal of Public Economics 164: 33–49.

Belot, M, P Kircher and P Muller (2019), “Providing advice to jobseekers at low cost: An experimental study on online advice”, Review of Economic Studies 86(4): 1411–1447.

Card, D, J Kluve and A Weber (2010), “Active labour market policy evaluations: A meta‐analysis”, Economic Journal 120(548): F452–F477.

Krueger, A B and A I Mueller (2011), “Job search, emotional sell-being, and job finding in a period of mass unemployment: Evidence from high-frequency longitudinal data”, Brookings Papers on Economic Activity 1(1): 1–70.

Maibom, J, M Rosholm and M Svarer (2017), “Experimental evidence on the effects of early meetings and activation”, Scandinavian Journal of Economics 119(3): 541–570.

Mueller, A I, J Spinnewijn and G Topa (2021), "Job seekers' perceptions and employment prospects: heterogeneity, duration dependence, and bias", American Economic Review 111(1): 324–63.

Schiprowski, A (2020), “The role of caseworkers in unemployment insurance: Evidence from unplanned absences”, Journal of Labor Economics 38(4): 1189–1225.

Skandalis, D (2019), “Breaking news: The role of information in job search and matching”, mimeo.

Spinnewijn, J, G Topa and A I Mueller (2021), “Job seekers’ beliefs and the causes of long-term unemployment”, VoxEU.org, 29 January.

Van der Klaauw, B and H Vethaak (2022), “Empirical evaluation of broader job search requirements for unemployed workers”, CEPR Discussion Paper 17734.

Zimmermann, F, A Falk, S Jäger and S Altmann (2015), “Learning about job search: A ‘nudge’ to tackle long-term unemployment”, VoxEU.org, 3 August.

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