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Labor Markets Aren't Perfect
Neither workers nor employers have sufficient information about labor markets. However, both groups must seek enough information to make educated decisions about pay and employment.
Unemployment and job vacancies exist simultaneously. Of course, there are usually more job vacancies than unemployment at any given time, except in a recession.
There are several reasons for this, including:
- workers are reluctant to quit their jobs
- AND
- employers are aware of their investment in current employees
Here's how it works…
Think of a labor market as a flow of people from unemployment to job vacancies, where both pools are constantly renewed. The two pools of people are related since a change in either pool creates forces that change the other. The flow during the year is much larger than the net change over a year.
Cutting recruitment costs
Let's assume that employers pay the market rate for labor. There are several ways those employers can cut recruitment costs:
- Pay above-average rates in hopes of attracting a larger number of more qualified candidates. Attempt to retain current employees and recruit from employee referrals.
- Expand the reach and type of advertising in the marketplace to increase the applicant pool. This might be simply by advertising through a professional association or including a secondary advertising source.
- Expand the recruitment strategy to target the appropriate actions needed to increase the applicant pool.
- Reduce voluntary turnover within the company by understanding the reasons employees are leaving and then implement the required change to eliminate unwanted turnover.
- Use internal labor markets as a source of employees so that only a few jobs are filled from external labor markets. This may be through an Employee Referral Program.
Different labor markets
Each labor market has a different:
- supply of workers
- AND
- demand from employers for workers
What does that mean? It means it’s likely that facilities or remote employees located in different geographic regions will be in different labor markets with different supply and demand conditions compared to the headquarters office.
This creates different market rates for employees working in different geographic labor markets.
Memory Jogger
Employers can reduce their recruitment costs by: