Labor Shortages & Matching Markets
What is the ideal employee like? It’s a question that employers ask themselves when they first set out to recruit their future employees. Obviously, employers will have a list of skills and qualifications in mind that describe their ideal candidate, but what happens when not enough candidates meet those requirements? According to a recent article by Business Insider, this mismatch between employer demands and employee supply is part of the reason why the labor shortage is still occurring in America. Specifically, workers are lacking the skills that they need to transition to jobs with a higher demand for workers. For instance, although there’s been an increase in demand for workers in the construction industry throughout the pandemic, not many people have the skills that they need to work in the industry.
This situation reminds me of the matching markets we discussed in class. According to the textbook, a perfect matching will occur when each node on one side of a bipartite graph is connected by an edge to exactly one node on the other side of the graph. In other words, assuming that the number of positions available is equal to the number of job applicants, each job applicant would hypothetically get an offer from one potential employer. Similar to the hospital residency problem on last week’s problem set, job applicants will only be able to receive an offer if they qualify for the position based on the employer’s criteria. If perfect matching does not occur then there has to be a constricted set where the number of applicants (S) is greater than the number of positions that they qualify for (N(S)). As a result, not all applicants will be matched with a job offer resulting in both an unemployed worker and an empty position that needs to be filled. Even if most applicants were able to get a new job, using maximum matching where the largest possible number of nodes were matched it would be impossible to find everyone a new employee or employer given that perfect matching does not exist. In order to reach a perfect match, participants would need to change their preferences. For the labor market, this could mean potential employees acquiring the skills that they need to be viewed as “qualified” in the eyes of employers. As more people in this market become “qualified”, more employers would be open to hiring them, as N(S) or the number of positions a given set of applicants, (S), is qualified for would increase. This would put the market on the right track towards eliminating the constricted set and experiencing perfect matching. Furthermore, another solution would be to have employers lower their expectations of potential workers. This would help achieve the same effect as before as more employees would be “qualified” for positions.
Given these suggestions, it would appear that at least part of the solution to the current labor shortage is compromise on both the part of the workers and their bosses. Without at least one of these groups changing their perspectives on the job search it would be difficult for both sides to have their needs successfully fulfilled.
Sources: