When the economy is booming, life is great for employers and employees alike. But things can turn around just as quickly.
In 2007, when I was working for the equity research wing of a multinational investment bank as a fresh graduate, the job market was a busy, mostly happy place. Jobs were plenty, pay was good and career advancement was not just a throwaway line. The no-holds-barred structure of the job market suited everybody. Workers would be courted aggressively by other firms, often meeting in secret, and existing contracts would routinely be voided or rescinded. It was okay because everybody was doing it.
As a result, employees quit at regular intervals for better or higher paying jobs. It wasn’t too much of a problem then, as applicants were plenty too, and old faces would be quickly replaced by new ones. Business was business, after all.
The only person not happy at the situation was our managing director. He would often come in to monthly meetings with the analysts in a foul mood. We would discover that this was triggered by yet another analyst putting in his papers, accepting a job at either a rival firm or some other outfit entirely. As long as offers kept coming, this would keep happening. Even if it meant ditching the current job within a year or two of joining, it often made sense to do so.
It didn’t make sense to him though. He knew that his company was highly desirable as a place from which to poach good workers. After all, it had one of the best training programmes in the industry. A year or so of working there meant that a fresh graduate had learnt many necessary skills, and was ripe for the picking. But it wasn’t always a smart move to move, he felt.
At times, he would try persuasion. Short term financial gains shouldn’t outweigh the gains from sticking on, he would say. “Be patient, be loyal. Good things will come to you.” But patience versus a 50 per cent salary hike is usually a one-sided contest.
At other times, he would lose his cool altogether. “You MBAs,” he would thunder (and I would secretly smirk, since I wasn’t one). “You think that because of your degree you are a law unto yourselves and that you can get away with anything.” He would promise then not to hire any more MBAs, opting instead for engineering students. “How hard is it to learn to read a balance sheet? They can do the same work as you at lower cost to me, and at least they are honest about the fact that they only plan to stay for a couple of years. ” Of course, people still left.
Six years later though, things just ain’t the same. Many of my former colleagues are still in their old jobs, unable to find progress in a stagnant market. Not only are there few new opportunities, with fewer still that offer ‘career advancement’, but also, in a downturn, finding a good firm-worker match has become a difficult exercise.
My current occupation, full-time PhD student of economics and otherwise unemployed, puts me happily out of this mess, but also provides much fodder to analyse these trends. I currently work in the areas of matching markets and resource allocation, theories that neatly describe many interactions between firms and workers, employers and employees, scarcity in resources, changes in the nature of the business cycle and the resulting job contracts.
Consider the following questions. Would a centralised job market for a particular industry do better than the current system of every-firm-hires-for-itself? In any case, what does ‘doing better’ mean? Is what’s good for the worker also good for the firm? Is there a way to find a stable firm-worker matching? In a related sense, is a firm always better off if it faces more applicants to choose from? Does any of this explain the rising popularity of job market related websites like LinkedIn?
In articles to come, we shall throw some economics at these issues and much else besides. Watch this space.