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Displaced workers are more likely to be hired by a firm where they have a former coworker

26.08.2022

The international empirical evidence shows that between 30 and 50 percent of jobs are obtained through personal connections. These connections may play an important role in the labor market as information providers who facilitate the matching process between workers and firms. This mainly occurs because they may provide information about job opportunities and/or refer job applicants.

The connections are identified as the contacts established with former coworkers. The estimates suggest that displaced workers are roughly three times more likely to be hired by an employer where at least one former coworker is employed relative to other displaced workers from the same firm closure event who do not have such a tie to the new firm. This effect is more pronounced when considering strong connections, such as the coworkers who shared the same job title and are, therefore, more likely to have interacted at the workplace.

For further details see Garcia-Louzao and Silva (2021): “Coworker Networks and the Labor Market Outcomes of Displaced Workers: Evidence from Portugal”, Banco de Portugal Working Papers 2021/21.

Prepared by Marta Silva and Jose Garcia-Louzao. The opinions expressed in the article are those of the authors and do not necessarily coincide with those of Banco de Portugal or the Eurosystem.

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