How the Internet and Social Networks reduce the Unemployment Rate

The famous economists, Blanchard and Katz, described the labor market as a continuous flow in which companies hire and separate from workers, while there are employees who leave their jobs in search of better opportunities, forcing employers to seek replacements. The unemployment explaining this continuous flow is called Frictional Unemployment.
  • From the Employer point of view, it is clear that vacancies are not filled automatically, but there are Staffing processes lead by the HR departments that are very time consuming..
  • Similarly, it takes significant time and effort for workers to find a suitable job, as they have to select companies, send their resumes, do the interviews and negotiate the hiring terms and conditions.
Against this background, the Internet and Social Networks are increasing the speed of communication in the labor market:

  • Internet has reduced the  average period to fill a vacancy thanks to the possibility to announce jobs, collect resumes and contact candidates through job search portals and Social Networks
  • Candidates speed up their searches as they can access vacancies and company information, send resumes, select companies and get referrals instantly over the Internet.
Consequently, we can argue that Social Networks and the Internet help reduce the Frictional Unemployment.

* Abstract from the article published in Spanish in the Quarterly Review of the Faculties of Law, Economics and Business Administration of ICADE, No. 85, January-April 2012, with M. J. Martin and A. Núñez