Improving Job Matches in the U.S. Labor Market - Research Report

Sep 18, 2026

Improving signaling and certification of worker skills supports better educational outcomes and stronger worker–job alignment in the U.S. labor market. The paper analyzes survey evidence from 2,599 NFIB firms to explain why new hires underperform expectations, then studies worker and firm characteristics that generate successful matches. It also evaluates how information gathering—such as references and intermediary recommendations—affects productivity and profitability, and reviews evidence on the effectiveness of the U.S. Employment Service.

LanguageEnglish

CategoryResearch & Report

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Pages66

Reading Time2 h 46 min

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Improving Job Matches in the U.S. Labor Market

How Effective Is the Matching of Young Workers to Jobs?

JOHN BISHOPCornell University # Improving Job Matches in the U.S.Labor Market EDUCATIONAL AND POLITICAL LEADERs are calling for improvements inthe signaling and certification of worker skills.During the 1992 electioncampaign,President Bill Clinton called for"a national examinationsystem to measure our students'and schools'progress"in meeting thenational educational standards.¹In 1989 the Secretary of Labor's Com-mission on Workforce Quality urged schools to develop easily un-derstood transcripts which at the request of students,are readily availableto employers.These transcripts should contain documentable measuresof achievement in a variety of fields as well as attendance records."² For educational reformers,better signaling of job skills is not an endin itself,but a means of inducing students,parents,teachers,and schoolboards to place greater priority on learning.It will not be easy,however,to design a system that certifies academic and occupational achievement;attracts employer participation;satisfies federal nondiscrimination re-quirements;and maximizes student incentives to learn,teacher incen-tives to set high standards,and parental incentives to demand and payfor a quality education. Improving education is not the only reason to improve signaling ofskills:Better matching of workers to jobs also creates private and socialeconomic benefits.Jovanovic and Moffitt(1990)have estimated,forexample,that if the'information about the job match that arises as abyproduct of experience"were obtained instead by"a perfect screen 1.Clinton and Gore(1992,p.85). 2.Commission on Workforce Quality and Labor Market Efficiency(1989,p.12). at the beginning of their working life,"'the earnings of younger workerswould be higher by as much as 13 percent.³ This paper examines how government can facilitate betterjob match-ing.The first section describes the results of a recent survey by theNational Federation of Independent Business(NFIB)on the experienceof 2,599 firms with new hires.Managers of small and medium firmswere very often unpleasantly surprised by the performance of new hires.After six months on the job,more than one-quarter of new hires wereproducing less than 75 percent of what was anticipated when they werehired. The second section examines the characteristics of workers and firmsthat produce successfuljob matches.It appears thatemployers rationallyuse the information they have about job applicants.Mismatches thusarise from imperfect information,not fromimperfect use of the availableinformation.What kinds of errors in predicting worker skills and per-sonality are responsible for the large negative differentials betweenactual and expected productivity?This question was tackled by ex-amining the relationship between the surprise in productivity realiza-tions and ex post assessments of six separate skill and personalitydimensions.This analysis suggests that reliable ex ante assessments ofwork habits,of occupational skills at the time of hiring,and of theability to learn new occupational and job skills would generate signif-icant improvements in matching workers to jobs. The third section examines the effect of investments in informationgathering on the quality of job matches.Worker productivity and matchprofitability appear to be higher when employers have obtained rec-ommendations from individuals who know the candidate well.Workershired on the basis of a reference obtained from a previous supervisoror from someone whose recommendation had been used in the pastwere significantly more productive.Those hired on the basis of a rec-ommendation by a personnel office were significantly less productiveand profitable than those recruited through friends,relatives,and currentemployees. I also investigated the quality of matches facilitated by labor marketintermediaries such as schools,the U.S.Employment Service(ES)in 3.Boyan Jovanovic,personal communication,July 17,1992,summarizing the findingsof Jovanovic and Moffitt(1990

FAQs

What problem does the paper address in the U.S. labor market?

It addresses the difficulty of improving job matching by better signaling and certification of worker skills to reduce mismatches between workers and jobs.

What does the NFIB survey contribute to the analysis?

The survey provides data from 2,599 firms about their experiences hiring and training workers, including surprises in new-hire productivity after six months.

How do references and intermediaries affect match quality?

Matches are more productive and profitable when employers obtain recommendations from people who know the candidate well, while referrals from some public agencies can be associated with worse outcomes.

Sep 18, 2026

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