Landing the First Job: The Value of Intermediaries in Online Hiring

Abstract

Online markets for remote labor services allow workers and firms to contract with each other directly. Despite this, intermediaries -called outsourcing agencies -have emerged in these markets. This paper shows that agencies signal to employers that inexperienced workers are high quality. Workers affiliated with an agency have substantially higher job-finding probabilities and wages at the beginning of their careers compared to similar workers without an agency affiliation. This advantage declines after high-quality non-affiliated workers receive good public feedback scores. The results indicate that intermediaries have arisen endogenously to permit a more efficient allocation of workers to jobs.

Buyer Uncertainty About Seller Capacity: Causes, Consequences, and a Partial Solution

“…For example, Pallais (2014) shows via a field experiment that past worker experience in online labor markets is an excellent predictor of being hired for subsequent work on the platform. Stanton and Thomas (2016) use data from an online labor market to show that agencies (which act as quasifirms) help workers find jobs and break into the marketplace. Agrawal et al (2016) investigate what factors matter to employers in making selections from an applicant pool and present some evidence of statistical discrimination.…”

Why the Referential Treatment: Evidence from Field Experiments on Referrals

“…Though there is at present no explicit referral mechanism on oDesk, employers can solicit referrals from their current workers and workers can recommend people they know to their employers. oDesk also has agencies, formal groups of oDesk workers often formed through o-ine connections (Stanton and Thomas, 2014).…”

“…Our paper adds to this literature by directly analyzing worker performance and by 5 There are a number of recent papers that use oDesk to learn about general features of labor markets. See, for example, Horton (2013b), Ghani et al (2014), Horton (2014), Lyons (2014), Pallais (2014), Stanton and Thomas (2014), and Gilchrist et al (2015).…”

“…Stanton and Thomas (2014) carefully analyzes oDesk agencies, formal groups of oDesk workers often formed through o-ine connections. Agency-a¢ liated workers pay a fraction of their earnings to their agency and, in return, their agency a¢ liation is listed on their resume.…”

Inefficient Hiring in Entry-Level Labor Markets

“…The pro…le of each agency-a¢ liated worker contained the agency's average feedback score as well as the worker's own feedback score. Stanton and Thomas (2012) show that agencies were a way for workers to signal their quality. They …nd that agency-a¢ liated workers were much more likely to obtain a …rst job and earned higher wages in their …rst jobs than non-a¢ liated workers.…”