Current state of affairs
From an economic point of view, the job market has always been characterized by two peculiarly pronounced features:
- Search Costs
- Job seekers have to find information about available job offerings, apply to them and keep track of the applications.
- Companies have to post job offerings, receive career information from job seekers and evaluate the candidates.
- Information Asymmetry
- Job seekers usually have access to limited information about the financial health of companies and the job offerings themselves offer only a partial insight on the actually required tasks.
- Companies normally have to verify the education background and the work experience reported by job candidates, often with a combination of face-to-face interviews and on-field test periods.
Therefore, both job seekers and companies have to invest time and money in order to overcome the issues created by search costs and information asymmetry.
Another important characteristic of the job market has always been its geographic segmentation: once justified by linguistic differences and by risky and expensive emigrations, nowadays this segmentation is mainly due to selective immigration policies and other national laws opposing the technological and economic trends of low-cost travels and distributed work.
Other current historical trends in the job market are the following:
- The substitution of human work, not only blue-collar but also white-collar, with “clever” machinery, based on the achievements of electronic science and software engineering.
- The decline of the bargaining power of labor unions and the emergence of the freelance economy. Both phenomena could be explained by:
- A more heterogeneous and differentiated job market than in the past, since professions are more and more specialized in terms of education, competency and experience. In such a scenario, it is difficult to organize a homogeneous labor union and some may find convenient to switch from being a worker on wage to becoming a service provider.
- The international competition dictated by economic globalization, that reduces the bargaining power of national labor unions. Plus, geographic barriers are lowered by telecommunication networks and some may find convenient to offer their remote services internationally rather than maintaining a national job position.
Most of the contemporary political discussion and economic policy, both nationally and internationally, is focused on the latest trends that we mentioned.
Notwithstanding the recency and novelty of these changes, the evolution of the job market is surely fundamental: policy instruments and regulatory frameworks to govern them are under scrutiny and evaluation.
However, in the rest of the article, we will argue that the two “technical” features of the job market, search costs and information asymmetry, are far from having become irrelevant and that they could be addressed with blockchain-based solutions.
Smoother and safer job interactions are important objectives per se, but the macroeconomic impact of possible improvements in this field should not be underestimated also from a statistical point of view.
How have the developments of Information and Communication Technology (ICT) affected the job market in terms of search costs and information asymmetry?
Let us recall the “Stage 0” of the job market: an offline world where companies and job seekers, in order to match with each other, could rely upon only the word-of-mouth of peers, the press and the local job agencies.
ICT has determined a three-stage progress of the digitization of the job market:
- Thanks to database and network technologies, large recruitment agencies become able to collect a significant amount of data about companies and job seekers, and to connect local job agencies, enabling effective internal data exchange.
- Thanks to the Internet and the WWW, new subjects, the online job agencies, emerge: they allow easier and remote input and visualization of career data and job postings. Recruitment agencies are still relevant, because of their physical presence and the complementary services they offer to companies (candidate interviewing, CV screening, legal advice, etc.), and work together with online job agencies.
- Thanks to larger broadband, mobile access, cloud infrastructure and new software paradigms, LinkedIn brings the social network approach to the job market. However, the scope of “IT scaled” word-of-mouth and professional networking seems limited to certain sectors of the economy (software and media, mainly) or to top-level senior company positions. Recruitment agencies remain relevant for the same reasons outlined above and LinkedIn acts as another, very important, online job agency.
As a consequence, search costs have been reduced, but the information asymmetry problem has not been addressed at all.
In addition, even though it is easier to enter career data and post a job offering online rather than at local job agencies, there are still wasteful inefficiencies due to the private nature of these databases: the data input is duplicated for each agency (time-consuming, poor user experience) and the input is not normalized at industry level (no machine-friendly standardization, resulting in aggregate costs).
Using blockchain-based solutions
The application of blockchain technology to the job market could sprout a new era of demand-offer matching.
Blockchains are permanent, trust-ensuring and timestamped databases: immutable digital ledgers with a distributed architecture and a documented chronology.
At Tombolini & Associati, we envision three major opportunities for blockchain technology to dramatically reduce search costs and information asymmetry in the job market:
- career and company data certification
- career and company data standardization
- career and company data publication
Institutions and entities that issue certificates of education achievements, work experience and professional competency of job seekers can timestamp and publish the information on the blockchain. Similarly, institutions and entities that collect and audit financial and legal data of companies can timestamp and publish the information on the blockchain.
For example, the Bernstein.io web application allows to certify and timestamp documents on the Bitcoin blockchain and the IPFS (InterPlanetary FileSystem) can be used as a blockchain-based distributed document repository.
As for standardization, two well-known and widespread XML standard formats already exist for career data and company data: Europass CV XML and XBRL (eXtensible Business Reporting Language).
A blockchain-based universal identifier for entities (products, people, etc.) could be used as a reference pointer to blockchain-certified career data and company data, stored publicly on IPFS.
In this way, the problem of non-certified and non-standardized “data silos” owned by single job market intermediaries could be overcome with a public namespace of certified and machine-friendly, standardized career data and company data, readily available in a distributed and redundant fashion.
The resulting public records would have two features that are necessary for efficient automatic data processing and demand-offer matching: transparency and standardization, which means that data can be trusted and, thus, manipulated.
The whole society is the stakeholder of the job market and the social impact of a renewed trust between the parties involved and of a more efficient and faster matching of job-seekers and companies has numerous and rich dimensions: health, security and equality, at least.