novanudgeclub
- Apr 26, 2021
- 4 min read

Solving unemployment crisis through Behavioural Science

Updated: May 24, 2021

The Covid-19 pandemic has caused many changes in the world as we knew it. In particular, the economy was very affected, forcing businesses sectors to either adapt or disappear. This produced a large impact on unemployment rates, which increased to 9.4%-12.6% across OECD countries in 2020 and still remains high. The unemployment rate of a country is a key indicator of its economic health, in the way that low unemployment rates indicate that a country has a higher political stability, and their citizens have a better purchasing power. Thus, it’s critical that governments invest resources and provide structural assistance to help the unemployed get back to work and help to restore the economy. To reduce this problem, there are some low-cost and easy to implement behavioural approaches that should be taken into account to support job seekers finding a job.

During the search for employment, people are faced with many challenges that influence their decision-making, sometimes leading them to act in irrational ways and relying their decisions on cognitive biases without being aware of it. Although we usually think that every unemployed person is actively looking for jobs, people tend to procrastinate and underestimate the task of job searching. Insights from behavioural economics show that some biases might come into play, such as overconfidence in the task of job searching, as well as a present bias, known as a tendency to opt for instant rather than long term rewards. One possible strategy to reduce the influence of these biases is to use an action plan, in order to reduce the gap between intention and action. The principle behind an action plan is to simplify a complex task by breaking it into small specific actions. By creating weekly goals such as the number of applications, identification of job opportunities and the number of hours spent on job searches, jobseekers received 24% more responses in their applications and a 30% increase in job offers, compared to people who didn’t use an action plan. This happened because an action plan improves the quality and frequency of job search.

Most of the times, people don’t consider working in a different sector as the one they used to, which narrows down the available opportunities. Behavioural insights can help people consider new job opportunities. Through interactive online tools, information can be provided regarding skills, previous roles and work style preferences. Additionally, job seekers might face a special difficulty in writing an effective resume or cover letter. Even if a good candidate is well informed and motivated to find a job, submitting low-quality applications reduces the chances of getting it. In Australia, a team of behavioural scientists developed a website called My Job Goals with instructions and templates to create a resume and a cover letter, while also providing job search tips. This simple tool increased the number of job seekers finding employment by 45% compared to the group who didn’t get access to this website.

Moreover, individuals might experience feelings of failure and low confidence in their abilities to work, making it important to help them invest time focusing on their professional skills during the search period. They should be directed to short, high-quality and free available online courses to boost their confidence and to make them value learning new competencies and skills. Providing simple tools that match relevant courses according to a person’s preferences helps reducing choice overload (i.e., a cognitive impairment that makes it harder to choose when faced with several options), thus increasing uptake and successfully completing the training.

Another strategy that behavioural science can help job seekers with is when searching for job adverts. To help job seekers in their decisions, job boards and adverts should provide detailed information about the predictability of hours, flexible work options, payment and progression opportunities. Many people look for flexibility in a job, such as working in a part-time regime, having flexible start and finishing hours or working from home. Even though 60% of workers end up working at a flexible schedule, a lack of information about flexible working options in jobs adverts might reduce the number of qualified candidates applying to the position. The global job site Indeed in collaboration with The Behavioral Insights Team – Nudge Unit, developed a simple nudge to tackle this issue. A nudge is a concept defined by Sunstein and Thaler (2008) as any aspect of the choice architecture that alters people's behaviour in a predictable way without forbidding any options. On the Indeed website, employers couldn’t inform in a simple way that they were open to flexibility unless they wrote it in the job description. The intervention focused on adding a simple multiple-choice question: What flexible working options would you consider for this role? to nudge employers to provide the information needed. When creating job adverts, employers could make a deliberate decision about their job offers’ flexibility and communicate it to candidates much easily. This intervention increased the jobs advertised as flexible by 20%, while also boosted up to 30% more applications of candidates to jobs adverts that referred flexibility working hours. In sum, when employers are more transparent about flexible work options in job adverts, application rates increase significantly.

We spend most of our lives investing and working in our professional careers. Our jobs give us a sense of belonging, making it part of who we are and contributing to positive health and wellbeing. In most cases, being unemployed is not a choice and can have a massive impact in many aspects of our lives. Even though unemployment is a multifactorial issue, our behaviour towards it might affect how long we take to find a job. Thus, implementing behavioural solutions to help job seekers find employment must be taken into account, especially with the current situation of unemployment rates due to the Covid-19 pandemic.

Author

Mariana Marques