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Since the internet’s earliest days, firms and workers have used various online methods to advertise and find jobs. Until recently there has been little evidence that any internet-based tool has had a measurable effect on job search or recruitment outcomes. However, recent studies, and the growing use of social networking as a business tool, suggest workers and firms are at last developing ways to use the internet as an effective matchmaking tool. In addition, job boards are also emerging as important for the statistical study of labor markets, yielding useful data for firms, workers, and policymakers.
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Electronic job boards—i.e. websites where job ads and résumés are posted—are emerging as an important source of data on labor market trends.
Internet job search remains disproportionately anonymous and formal, i.e. it does not take advantage of preexisting networks of friends, relatives, or colleagues. Historically these have been the most effective search and recruitment tools.
Online tools, including job boards and social networking, could significantly reduce frictions in labor markets. Much of this potential is only now being realized, as early evidence showed no friction-reducing effect. Job boards are also emerging as important for the statistical study of labor markets, yielding useful data for firms, workers, and policymakers. After a slow start, the internet-based job market is beginning to be used effectively.
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Since the early 1990s, a large share of commerce in developed countries has moved from bricks-and-mortar settings to the web. In the process, a number of markets—notably, books and recorded music—have been fundamentally transformed. Entirely new market mechanisms, such as eBay, have been created. And in a number of cases there is solid evidence that moving transactions online has had beneficial effects on market functioning.
Given all these developments, plus the fact that a large share of workers’ job search efforts and firms’ recruitment activities has shifted online, it seems possible that online matching has improved the functioning of labor markets as well. This paper reviews the evidence on whether this has actually happened.
Figure 1 shows the percentage of job seekers looking for work online in the United States in two periods: 1998–2000 and 2008–2009; the numbers are taken from a recent study that focused on persons aged 23–29 in both periods [1]. Not surprisingly, there was a massive increase in online job searching over this ten-year period: The share of unemployed persons who said they used the internet to look for jobs more than tripled, from 24% to 74%.
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Much of this increase was related to the growth of internet access—the share of unemployed persons who had internet access at home more than doubled—but was also driven by growing use of the internet for job searching among those who did have home access. This suggests that the online tools available for job searching may have become more attractive to people seeking work.
Another contributing factor, of course, is the fact that the vast majority of job advertisements have migrated to the internet: Job seekers have moved to where the jobs are advertised, while firms have moved to where the job seekers are, in a self-reinforcing cycle.
While unemployed persons, by definition, are looking for work, it is important to remember that they are not the only ones doing so in any labor market. In fact, in most labor markets a substantial share of job seekers already have a job. Although historical data are not available for this group, Figure 1 shows that by 2008–2009, 85.3% of employed job seekers used the internet as part of their job search. In short, over the past decade, job seekers have dramatically expanded their use of the internet as a means of finding new jobs, to the point where internet job search is almost universal, at least among job seekers who already have jobs.
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Not surprisingly, both in 1998–2000 and 2008–2009 job searchers who looked online were, on average, younger and much better educated than job seekers who did not [1], [2]. It is perhaps noteworthy, though, that by the second period, when internet access was much more universal, this large education gap was evident even among job seekers with home internet access. Thus, even though they had the option to look for work online from a home computer, many unemployed, less-educated job seekers did not use the internet when looking for work. In neither period was there a gender difference in the use of online search. Internet job search activity is also more likely to be used by people seeking work in certain industries, such as information technology (IT), finance/insurance, and real estate [3].
Somewhat more surprising are the ethnic and racial gaps in online search—at least in the US, where these data are available. For example, while black and Hispanic workers were less likely to look for work online than whites in 1998–2000, this gap was absent in the subsample of job seekers who had home internet access. By 2008–2009, black and Hispanic job seekers were just as likely to look for work online as white job seekers, even though they were less likely to have home internet access.
One possible explanation is that black workers have less access to informal referral networks for jobs than white workers; this could compel them to use more formal, impersonal methods, like responding to job ads and posting résumés [4], which until very recently were the main ways in which the internet was used to look for work.
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While it is clear that internet job searching has increased dramatically over the past decade, what do people actually do when they look for work online? Importantly, the rates of internet job search displayed in Figure 1 include
Kind of online activity to look for work, including e-mail. What do we know about the ways in which workers use the new electronic tools that have emerged in the past decade in their job search strategies?
The first study of this question used data from 1998–2000 [5]. Although the survey used by the authors did not ask respondents whether they used the internet to conduct any given type of search activity (such as contacting public employment agencies or filling in résumés), it does allow us to tabulate the mix of search activities separately for persons who did any online search versus persons who searched only offline. Figure 2 shows the results.
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Interestingly, while most activities were used in similar amounts by these two groups, internet searchers were much more likely to look for work by sending out résumés and by placing or answering job ads. At the same time, they were less likely to contact employers directly about jobs and less likely to contact friends or relatives about job possibilities. These differences confirm the notion that, at least in its early days, internet job search was primarily an anonymous, formal process of looking at (and responding to) ads and posting résumés.
A follow-up survey using data from 2008–2009 directly measured which types of job search activities were done mostly online and which mostly off-line [1]. As in 1998–2000, the use of the internet was quite similar for most job search activities, but two stark differences were apparent: Sending out résumés and filling in applications were much more likely to be done online, and the reverse was true for contacting friends and relatives about jobs. This reinforces the idea that as recently as 2008–2009 the internet was primarily a tool for formal, anonymous job search, not for informal networking activities.
Finally, it is worth mentioning a distinct and small but growing way in which internet job search is happening: sites like oDesk, Amazon Mechanical Turk (MTurk), Elance, and Freelancer, which mediate the actual provision of labor online. To the extent that less and less work in an information economy needs to be done by someone who is physically present on an employer’s premises, this form of labor market intermediation, which transcends national boundaries, may soon become the norm for many firms and workers.
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As mentioned, the internet has become a widely used intermediary in many markets, and studies of its effects have, in many cases, shown significant improvements in market functioning. For example, one feature of a well-functioning market is that identical products should be priced identically. A well-crafted early study found that the advent of internet exchanges reduced the dispersion of prices for a standardized product: life insurance [6]. Since the internet made it easy to compare prices, firms charging
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