’Contagious unemployment’ is one theory why companies have difficulty hiring workers

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Companies are struggling to find recruits, and economists, lawmakers and businesses big and small are wondering why. The latest hypothesis, proposed in a new working paper, is “contagious unemployment.”

Some states, including Arizona, Montana and Ohio, are offering return-to-work bonuses of up to $2,000 to incentivize workers to get reemployed. Arizona is providing funds to cover three months’ worth of child-care costs for those who return to work and earn less than $25 an hour.

There is also a host of other theories on why people are not taking jobs, among them lack of transportation, low wages, the cost of child care, caring for an elderly relative, recovering from COVID-19 or caring for a relative who has the coronavirus, and inability to work due to a disability. The ways in which workers search for jobs have been shown to have critical implications for the macroeconomic propagation of labor-market shocks, Niklas Engbom, an assistant professor at New York University Stern School of Business, wrote in his paper distributed Monday by the National Bureau of Economic Research.

Workers also pivot to other industries, which also may contribute to scattershot applications and “greater idiosyncratic volatility,” he argued. “For instance, the construction sector contracted in the Great Recession, necessitating the reallocation of workers to other sectors,” Engbom added. He says companies should take more responsibility for the hiring process from start to finish, including designing jobs with realistic requirements, reconsidering their focus on “passive” candidates and understanding the limits of internal referrals.

 

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WTF is a recruit?

Recruitment is broken. It has been for years. Recruiters are mostly terrible. ATS systems are a poor excuse for automation. Talent is constantly overlooked. Companies still have many outdated practices and prejudices. I’m surprised recruitment has largely remained undisrupted.

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