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Editor's Blog

A Crucial Fact about Labor Markets

A central fact about labor markets–translated into real-world terms that means jobs for job-seekers and suitable employees for companies with positions to fill–is that they’re hideously inefficient. That means it’s hard to match up buyers and sellers.

In stark contrast to a commodity market, the parts of a labor market are not interchangeable. And the higher up the employment hierarchy you go, the more specialized you get, and the less interchangeable the parts become. You, as an expert in (fill in your biological science specialty here) are not, in most ways, interchangeable with that person you used to say hello to on the quad when you were in graduate school, who eventually emerged from his dark laboratory in the building across the way with a Ph.D. in physics. Your training is specialized. To get hired, you need to find a job that matches your credentials.


The same is true from an employer’s perspective, of course. An employer
need someone with particular skills to fill a particular need.

The result of this–and it’s absolutely critical for understanding how job markets work–is that the market is flooded with both
job-seekers and jobs, at precisely the same time. So what looks like a
terrible job market for a job seeker, also looks like a terrible hiring
market for  employers. For the job-seeker, there are plenty of jobs
listed on the jobs boards, but very few
of them fit my credentials, and the few that do provoke hundreds of
applications. At the same time, employers may get hundreds of
applicants for a single job, but none of them have quite the right
credentials.

I
first learned this when I became an editor. I had spent a few years as
a struggling freelancer. I thought I was a good writer, but I found it
very hard to get assignments. Most freelancers do when they’re starting
out.

When I became an editor–positioned on the other side of
the desk–I found it equally hard to find good writers. And apart from
the basic skills–the ability to do research, understand basic
scientific concepts, and write–science writers (and venues) are more
or less interchangeable. They’re not commodities, but they’re usually
not as specialized as scientists. Yet making a good match between
writer and editor was still very difficult. Neither can easily find the
other.

Solving the job market means solving an information
problem. The person you want to hire–or the job you want to fill–is
out there. You just have to find  that person, or that job. And that’s a very difficult thing to do.

This
simple fact has profound implications, for science and labor market
policy, and for job seekers. Consider the policy implications.

Anytime
you ask a buyer about the state of an inefficient market, he or she
will tell you that there’s nothing to buy. Ask a seller and he or she
will tell you that there are far too few buyers. What looks like a
labor glut to a job seeker looks like a shortage to an employer. Often
it’s neither–the job market may be in very good balance–but a
balanced job market does nothing to solve the search problem, the
information problem I mentioned.

This is at least part of the reason why policy makers and government agencies so often predict labor shortages. These
panels are staffed with experienced, well-employed people, who are the
hiring managers of the world, not the young job-seekers. Their
perspective is colored by contact with employers struggling to fill
jobs. There are other explanations for reports like “The Gathering
Storm”  from a couple years back. But this is, nonetheless, an
important fact about the intersection of the job market and science
policy.

Until progress is made on the search problem–the
information problem–employers will always perceive a shortage of
employee candidates, and job seekers will always perceive a shortage of
jobs. The only exception is when the job market is badly out of balance
one way or the other: When there are 6 highly qualified specialists
applying for every specialized opening, you’ve got a serious scientist
glut. And when, as happened in the post-Sputnik years, every new
physics Ph.D. graduate gets several job offers, you’ve got a serious
labor shortage.

So the next time someone tells you that their
experience has convinced them that there’s a shortage of one or the
other, point out this simple fact. There may or may not be a shortage
of jobs, or of talent, but first-hand experience is not a satisfactory
guide. Look instead to employment rates and salaries; are they rising,
or falling?