The Signal of Applying for a Job Under a Vacancy Referral Scheme

• Author: Eva Van Belle,Valentina Di Stasio,Marijke De Couck,Ralf Caers,Stijn Baert
• Date: 01 April 2019
• Published date: 01 April 2019
• DOI: http://doi.org/10.1111/irel.12230

The Signal of Applying for a Job Under a

Vacancy Referral Scheme*

EVA VAN BELLE, RALF CAERS, MARIJKE DE COUCK ,

VALENTINA DI STASIO and STIJN BAERT

We investigate the signalling effect related to participation in active labor-market

programs. To this end, we conduct an experiment in which human resources pro-

fessionals make hiring decisions concerning fictitious job candidates who apply

either under a job-vacancy referral system or directly. We provide first causal evi-

dence for a substantial adverse effect of referral on the probability of being hired.

In addition, we find that employers perceive referred candidates as being less

motivated than other candidates.

Introduction

In order to alter the trend of persistent unemployment over recent decades,

the majority of Organization for Economic Co-operation and Development

(OECD) countries have invested vast amounts of public funds in active labor-

market policies (ALMPs; Martin 2014; Martin and Grubb 2001). These invest-

ments have logically resulted in a surge in research evaluating the effective-

ness of these policy instruments (Card, Kluve, and Weber 2010, 2017;

Greenberg, Michalopoulos, and Robins 2003; Heckman, LaLonde, and Smith

1999; Kluve 2010; Liechti et al. 2017). The results of these evaluations are

mixed at best. Overall, the effectiveness of ALMPs in terms of exit out of

unemployment depends largely on the type of ALMP, its target group, and the

time horizon of the evaluation (Card, Kluve, and Weber 2010, 2017; Kluve

JEL: J68, J23, C91.

*The authors’affiliations are, respectively, Ghent University, Ghent, Belgium. E-mail: Eva.VanBelle@U-

Gent.be; KU Leuven and University of Seychelles, Brussels, Belgium. E-mail: ralf.caers@kuleuven.be; Vrije

Universiteit Brussel and Odisee University College, Brussels, Belgium. E-mail: Marijke.De.Couck@vub.be;

Utrecht University, Utrecht, the Netherlands. E-mail: v.distasio@uu.nl; and Ghent University, Research

Foundation—Flanders, University of Antwerp, Universit

e catholique de Louvain, IZA, GLO, and IMISCOE,

Ghent, Belgium. E-mail: Stijn.Baert@UGent.be. The authors declare that they have no relevant or material

financial interests that relate to the research described in this study. The authors are grateful to Nick

Deschacht, Greet Van Hoye, and the participants of the 25th Transition in Youth Workshop for their con-

structive suggestions and comments that helped to improve our manuscript.

INDUSTRIAL RELATIONS, DOI: 10.1111/irel.12230. Vol. 58, No. 2 (April 2019). ©2019 The Regents of

the Univers ity of Califo rnia Published by Wiley Periodicals, Inc., 350 Main Street, Malden, MA 02148,

USA, and 9600 Garsington Road, Oxford, OX4 2DQ, UK.

251

2010; Martin and Grubb 2001). Moreover, the few studies that have taken the

costs of these programs into account indicate that the benefits of ALMPs do

not outweigh their costs (Albanese, Cockx, and Thuy 2016; Card, Kluve, and

Weber 2017; Cr

epon et al. 2013; Jespersen, Munch, and Skipper 2008). The

ALMP central to this study, a job-vacancy referral scheme implemented in

Flanders, Belgium, exhibits the same mixed effectiveness. This scheme

matches vacancies with jobseekers and, subsequently, forces jobseekers to

apply for the vacancies matched to them.

1

While some studies find positive

results of this kind of program with respect to exit out of unemployment (Bol-

lens and Cockx 2017; Foug

ere, Pradel, and Roger 2009; van den Berg, Kjærs-

gaard, and Rosholm 2014), others find no impact at all (Engstr€

om, Hesselius,

and Holmlund 2012; van den Berg and van der Klaauw 2006). Moreover,

some of the studies that present positive effects of job-vacancy referrals show

that the higher job-finding rate as a result of referral goes hand in hand with a

lower job quality (van den Berg, Hofmann, and Uhlendorff 2016; van den

Berg and Vikstr€

om 2014).

Measuring the effectiveness of these policies in terms of their desired out-

comes is no doubt important. However, if one aims to reform ALMPs to

increase their effectiveness, one needs to go beyond measuring and look at

possible explanations for the unsatisfactory effectiveness. One possible expla-

nation documented in the literature is the signal associated with ALMPs. Sig-

nalling theory states that when individuals are faced with limited information,

they will use particular components of this information to predict unobserved

factors (Arrow 1973; Blanchard and Diamond 1994; Moscarini 1997; Spence

1973; Vishwanath 1989). In this respect, we can expect a positive as well as a

negative signal sent to prospective employers by a job-vacancy referral.

2

On

the one hand, candidates applying for a position at the request of a public

employment service (PES) have gone through an initial screening process and

have been deemed suitable for the position by the PES. In other words, the

vacancy referral could be seen as a signal of improved suitability (Bellis,

Sigala, and Dewson 2011). On the other hand, employers could see referred

applicants as candidates who do not have the ability to succeed in the labor

market on their own and/or only apply to comply with benefit rules (Bellis,

1

We elaborate on the specifics of this policy and the theoretical channels through which it might affect

our experimental outcomes later in the article.

2

Throughout the present article, we assume that employers are aware if a candidate has been referred to

a vacancy. As explained later, this is a realistic assumption in the case of the referral scheme central to our

study.

252 / EVA VAN BELLE,RALF CAERS,MARIJKE DECOUCK,VALENTINA DISTASIO AND STIJN BAERT