Nobel-Prize Labor Economist Has Predictions for Temporary Labor Markets
On June 21st at the Contingent Workforce Strategies Summit Europe in Amsterdam, IQNavigator sponsored the keynote presentation by Nobel Prize-winning labor economist Dr. Christopher Pissarides. Dr. Pissarides was awarded the 2010 Nobel Prize in Economic Sciences jointly for his work in the economics of unemployment, and is the author of “Equilibrium Unemployment Theory”.
Dr. Pissarides’ Equilibrium Unemployment Theory recognizes the frictions in the hiring miring that arise from the job-search costs by both the firm and the individual. While classic economics assumes that all information is known by all participants in a transaction, there are asymmetries of information in the job-search process because of the diversity and continually-changing aspects of both the available jobs and the available candidate pools.
These asymmetries lead to search costs and time to find information on jobs and candidates, which generates ongoing unemployment even if there are enough qualified candidates to fill a job. This insight led to the Nobel Prize last year along with Peter Diamond from MIT and Dale Mortenson from Northwestern University; when announcing the joint laureates, the Nobel Committee said the award was for analysis of markets with search frictions.
In his talk and over lunch afterwards, Dr. Pissarides discussed the unique characteristics of temporary jobs, which are used primarily to handle temporary requirements for additional work, to gain access to skills not available in the employee base, and to reduce risk of employee hiring via “try before buy”.
He also showed an analysis of the impact of country regulations on temporary labor hiring – some countries have more restrictive regulations than others – and their corresponding levels of temporary worker usage. Interestingly, his conclusion was that firms in the United States, with fewer regulations than almost all countries on temporary labor, should utilize temporary labor much more than it does currently.
Also, he predicted that search costs and frictions will continue to rise overall up as jobs continue to get more specialized, which would obviously fuel growth for staffing and search firms worldwide.
