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http://www.hreonline.com/HRE/images/PeterCappelli106x106.jpgIs There Really Discrimination Against the Unemployed?

Much like the joke that banks only want to give loans to people who don't need them, it sometimes seems as though the only people who can get jobs these days are those who already have them. But is that really true?

Monday, March 25, 2013
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The unemployment rate is coming down, and that's good news.  What hasn't changed much is the experience of the long-term unemployed.  Remembering that only those actively searching for a new job could be considered unemployed, the percentage of the workforce that is long-term unemployed -- more than 26 weeks -- has barely changed even as the overall unemployment rate has dropped.

Earlier this year, the revelation that many employers screened out applicants who did not currently have a job struck a nerve as it seemed to compound the misery of unemployment.  Much like the joke that banks only want to give loans to people who don't need them, it seems as though the only people who can get jobs these days are those who already have them. That would explain why the ranks of the long-term unemployed have changed so little.

Is this really true, though? An interesting field experiment by researchers Kory Kroft, Fabian Lange and Matthew J. Notowidigdo examined that question recently. The authors created 3,000 pretend candidates, each with a resume based on the attributes of real candidates, which was tailored to fit different occupations. They looked at openings posted on a major job board and applied to a random sample of those jobs using the pretend candidates and their information. They varied one item among applications from otherwise similar pretend candidates: whether the individual was currently unemployed and, if so, how long they had been unemployed. 

You may wonder who actually reports that they are unemployed on their resume. Few people do, but it is obvious when one looks at the dates of their last job whether that job ended, and if so, how long ago that likely occurred. Surprisingly, when they looked at actual resumes to create their pretend candidates, the authors found that relatively few real job seekers tried to disguise their joblessness. They rarely say, e.g., "Self-study, May 2011 to present," or "CEO, Me Inc."  So, the pretend unemployed candidates were not unusual. 

In the experiment, 12,000 "candidates" applied to roughly 3,000 positions. What percentage got call-backs, defined as follow-up from an employer indicating that the applicant was being considered for a job? About 4.5 percent. That in itself is a really interesting statistic, given that these pretend applications had the attributes of real applicants, although these pretend applications were probably filled out more carefully than those from real people. This tells us that an average unemployed applicant has to apply to a little more than 20 jobs to get a positive response from an employer. That's not a job offer; that's just an indication that they are still being considered.

As for the question of how an unemployed status affected the likelihood of getting that positive response. Surprisingly, the call-back rate was slightly higher for those who had just been laid off than for those who currently had a job. What should we make of this? It counters a different story that we frequently hear, one suggesting that employers really want passive applicants, those with jobs who are not looking for a new one. You might consider their issue one of adverse selection: Maybe the employed candidate wants a new job because he or she is failing in the current role and needs to get out before getting fired. Those who have just been laid-off, in contrast, have no choice but to be looking. 

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Other evidence is consistent with this sort of signaling interpretation. We know, for example, that individuals who lost their jobs because of a plant closing do better finding new ones than those who were just laid off. The thinking here is that plant closings are no signal about your ability because everyone lost their job, but layoffs could be -- and indeed, often are -- targeted at poor performers. In this recession, employers may be thinking that layoffs were so widespread and so deep that they had to hit good employees as well as poor ones.

And what happens after you are unemployed for more than a month? At that point, the probability of getting any positive response from employers falls sharply and declines further with each month, hitting a plateau after about eight months. A person with an otherwise identical set of skills and experiences is about half as likely to get a positive response from employers after eight months of unemployment, as compared to a person just being laid off. The likely explanation is that hiring managers think that, if no one else has offered to hire you after months of looking, there must be something wrong with you. Again, they see a signal about your ability from your current circumstances.

What does this tell us about discrimination against the unemployed? At least at present -- and perhaps because of the depth of the recession -- there doesn't seem to be a stigma about being unemployed per se. But there is a stigma attached to being unemployed for a long period of time. Once you fall into the long-term-unemployed pool, it is really hard to get out. What's the lesson for job seekers? Taking whatever job you can get in order to avoid that long-term stigma may not be such a bad idea.

Peter Cappelli is the George W. Taylor Professor of Management and director of the Center for Human Resources at The Wharton School. His new book is Why Good People Can't Get Jobs: The Skills Gap and What Companies Can Do About It.

 

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