Public employment services, employers and the failure of placement of low-skill workers in six European countries

Abstract

The paper explains why across Europe very few job matches are facilitated by public employment services (PES), looking at the existence of a double-sided asymmetric information problem on the labour market. It is argued that although a PES potentially reduces search costs, both employers and employees have strong incentives not to use the PES. The reason is that employers try to avoid the ‘worst’ employees, and employees try to avoid the ‘worst’ employers. Therefore PES get caught in a low-end equilibrium that is almost impossible to escape. The mechanisms leading to this low-end equilibrium are illustrated by means of qualitative interviews with 40 private employers in six European countries.