Is Internet Job Search Still Ineffective?

Abstract

Using National Longitudinal Survey of Youth (NLSY97) data for 2005–8, we find that unemployed persons who look for work online are re-employed about 25% faster than comparable workers who do not search online. This finding contrasts with previous results for 1998–2001, and is robust to controls for cognitive test scores and detailed indicators of Internet access. Internet job search (IJS) appears to be most effective in reducing unemployment durations when used to contact friends and relatives, to send out resumes or fill out applications and also to look at advertisements. We detect a weak positive relationship between IJS and wage growth between jobs. Over the past decade, the Internet has been credited for substantial reductions in search frictions in markets ranging from life insurance to apartment rentals (Brown and Goolsbee, 2002; Kroft and Pope, 2010). In contrast, studies of the Internet’s effects on labour market matching have been few in number and, on balance, find little or no evidence of a friction-reducing effect. For example, Kuhn and Skuterud (2004) find that unemployed workers who look for work online have longer unemployment durations than comparable non-Internet searchers, whereas Kroft and Pope (2010) find no evidence that the rapid expansion of Craigslist as a job search tool has affected city-level unemployment rates. 1 At least on the surface, these results seem puzzling, in view of the dramatic expansion of online job search sites as well as the general decline in communication costs associated with the Internet. Both of these changes should increase the arrival rate of matches between job searchers and vacancies, thereby reducing search frictions in labour markets. In this study, we provide new evidence relevant to this ‘puzzle’ of ineffective Internet job search (IJS) using data on young US jobseekers during the period 2005–8, taken from the National Longitudinal Survey of Youth (NLSY97). Our main result is that Internet searchers’ unemployment durations are about 25% shorter than comparable workers who search offline only. Specifically, after replicating Kuhn and Skuterud’s (2004) estimate of a counterproductive effect of IJS using their current population survey (CPS) data from 1998–2001 for this age group, we show that this counterproductive effect is reversed in the more recent period in the same regression specification. This reversal holds whether or not we control for a possible source of endogenous selection – searchers’ scores on a widely used cognitive skills test – that was not available in the earlier data. We speculate that improvements in technology over this period, ranging from better online job sites to network externalities associated with greater overall Internet penetration, might explain this change over time.