‘Contagious Unemployment’ May Be to Blame as Companies Struggle to Find Workers

May 25, 2021

3 min Read

HR manager conducting job interview with candidate on video call, COVID-19 pandemic concept.

martin-dm / Getty Images

Commitment to Our Readers

GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.

20 Years
Helping You Live Richer

Reviewed
by Experts

Trusted by
Millions of Readers

The latest theory on why companies are having difficulty finding new workers is “contagious unemployment,” according to a new working paper.

See: Top Resume Mistakes That Hold Job-Seekers BackFind: What To Do If You Haven’t Heard Back About That Dream Job

Businesses recorded 8.1 million open jobs in April, up from 7.5 million in February. Unemployment rates continue to rise from 6% in March to 6.1% in April, according to Labor Department Data, as reported by MarketWatch.

Because of the unemployment rate and the growing number of help wanted signs, some states are offering return-to-work bonuses up to $2,000 to encourage people back to work. MarketWatch noted that Arizona is providing money to cover three months worth of child-care costs for returning workers earning less than $25 per hour.

It’s been hypothesized that federal unemployment benefits have given some people a reason to not return to the workforce.

A working paper published by the National Bureau of Economic Research has a different theory.

“Unemployed workers send over 10 times as many job applications in a month as their employed peers, but are less than half as likely per application to make a move,” writes Niklas Engbom, an assistant professor at New York University Stern School of Business.

“I interpret these patterns as the unemployed applying for more jobs that they are less likely to be a good fit for,” he added.

See: Why You Need To Be ‘Upskilling’ To Stay Competitive in the Job MarketFind: 10 Questions You Should Ask Before Accepting a Job Offer

Today's Top Offers

Engbom also noted that during high periods of unemployment, it becomes more difficult for companies to determine who is a good fit for the position as workers pivot to other industries, reports MarketWatch. By raising the cost of recruiting, there is a “short-lived adverse shock” which has a negative effect on the job-finding rate.

Peter Cappelli, the George W. Taylor professor of management at the Wharton School and a director of its Center for Human Resources says companies should take more responsibility for the hiring process by offering jobs internally with more realistic requirements, added MarketWatch.

“Businesses have never done as much hiring as they do today. They’ve never spent as much money doing it. And they’ve never done a worse job of it,” Cappelli claims.

More From GOBankingRates