When employers struggle to fill open positions, the conversation often turns to wages. The assumption is straightforward: if employers paid more, they would attract more applicants and hiring would become easier.
A new study published in the European Economic Review suggests the reality may be far more complex.
Researchers examined hiring behavior using survey data linked to administrative employment records in Denmark. Their findings indicate that hiring difficulties are influenced not only by labor costs, but also by recruitment challenges, training requirements, and employer perceptions of job candidates.
In other words, hiring challenges may be as much about how employers search for talent and evaluate candidates as they are about compensation.
The researchers found that many employers experience difficulty identifying suitable candidates and often hesitate to hire when they anticipate significant onboarding or training costs. These concerns can slow hiring decisions even when employers have genuine workforce needs.
The study also found that younger and smaller firms often face greater hiring challenges because they have fewer resources available for recruiting, screening, and training workers.
One of the most interesting findings involved employer perceptions of unemployment.
Many employers expressed a preference for hiring individuals who are already employed rather than those who are unemployed. Some employers view unemployment as a signal that skills may have deteriorated or that a candidate may be less productive, regardless of whether that assumption is accurate. Employers who held these views were more likely to report hiring difficulties and labor market frictions.
While this study was conducted in Denmark, its findings are consistent with challenges observed in labor markets around the world. Employers in many countries report difficulties identifying qualified candidates, concerns about training costs, and a tendency to favor currently employed applicants. Although labor market institutions vary from country to country, the study highlights hiring behaviors and perceptions that workforce professionals are likely to recognize across a wide range of economic and geographic contexts.
While the study focuses on Denmark, workforce professionals across North America, Europe, Australia, and other regions are likely to recognize many of the same hiring challenges. The specific labor market conditions may differ, but the role of employer perceptions, recruitment friction, and training concerns appears to transcend national boundaries.
For workforce professionals, these findings carry important implications.
Much of workforce development traditionally focuses on helping individuals build skills and credentials. Skills remain critical, but this research suggests that workforce professionals must also pay attention to how employers make hiring decisions and how those decisions may unintentionally create barriers for qualified job seekers.
A job seeker may possess the required skills, experience, and motivation, yet still face obstacles if employers rely on assumptions associated with periods of unemployment.
This raises important questions for workforce agencies, workforce boards, career centers, and economic development organizations:
Are employers accurately assessing talent, or are they relying on assumptions that may exclude qualified candidates?
Are workforce programs helping employers reduce the perceived risks associated with hiring individuals who have experienced unemployment?
Are employers being encouraged to view training and onboarding as investments rather than costs?
Are there opportunities to create more direct interactions between employers and job seekers so that capabilities can be demonstrated rather than assumed?
The study also highlights the importance of reducing hiring friction.
Employers frequently cite uncertainty about candidate quality, lengthy recruitment processes, and concerns about onboarding as barriers to hiring. Workforce organizations can play an important role by helping employers streamline recruitment, expand work-based learning opportunities, develop internship pathways, support job trials, and create stronger connections between employers and talent.
The broader lesson is that workforce challenges are not solely supply-side problems. They are also information problems, perception problems, and decision-making problems.
As labor markets continue to evolve, workforce professionals may need to think beyond skills gaps and talent shortages. Understanding how employers evaluate candidates—and what assumptions influence those evaluations—may become just as important as understanding the skills employers say they need.
Organizations that can help bridge both the skills gap and the perception gap may be best positioned to help workers, employers, and communities succeed in an increasingly complex labor market.
As workforce professionals seek to strengthen labor market outcomes, the question may no longer be simply, “Do workers have the skills employers need?” It may also be, “Are employers seeing the talent that is already available?”
“The challenge is not always finding workers. Sometimes it is helping employers see the talent that is already in front of them.”