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Private Deception and the Rise of Public Employment Offices in the United States, 1890-1930

In: Studies of Labor Market Intermediation

  • Woong Lee

At the turn of the 20th century, state and local governments in the United States began to establish public employment offices. These non-profit governmental organizations match job seekers and businesses, one of their main objectives being to protect job seekers from fraudulent activities by private employment agencies. In this paper, I propose a theory that describes the malpractices of private employment agencies as a situation of asymmetric information between job seekers and the private employment agencies, which could cause adverse selection in the labor exchange market. The establishment of public employment offices can be viewed as a policy device to eliminate low-quality private employment agencies committing malpractices. I show that public employment offices helped lower the degree of asymmetric information. The majority of job seekers who used public employment offices were unskilled workers, immigrants, or migrants, who were vulnerable to exploitation by private employment agencies. I also find that the role of public employment offices was especially important for interstate migrants who were most lacking in information and networks in their new environment.

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This chapter was published in:
  • David H. Autor, 2009. "Studies of Labor Market Intermediation," NBER Books, National Bureau of Economic Research, Inc, number auto07-1, August.
  • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 3588.
    Handle: RePEc:nbr:nberch:3588
    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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    Web page: http://www.nber.org
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    1. David H. Autor & Susan Houseman, 2005. "Do Temporary Help Jobs Improve Labor Market Outcomes for Low-Skilled Workers? Evidence from 'Work First'," NBER Working Papers 11743, National Bureau of Economic Research, Inc.
    2. Kubler, Dorothea, 1999. " Coexistence of Public and Private Job Agencies: Screening with Heterogeneous Institutions," Public Choice, Springer, vol. 101(1-2), pages 85-107, October.
    3. Yavas, Abdullah, 1994. "Middlemen in Bilateral Search Markets," Journal of Labor Economics, University of Chicago Press, vol. 12(3), pages 406-29, July.
    4. Randall W. Eberts & Harry J. Holzer, 2004. "Overview of Labor Exchange Policies and Services," Book chapters authored by Upjohn Institute researchers, W.E. Upjohn Institute for Employment Research.
    5. Pissarides, C A, 1979. "Job Matchings with State Employment Agencies and Random Search," Economic Journal, Royal Economic Society, vol. 89(356), pages 818-33, December.
    6. Joshua L. Rosenbloom & William A. Sundstrom, 2003. "The Decline and Rise of Interstate Migration in the United States: Evidence from the IPUMS, 1850-1990," NBER Working Papers 9857, National Bureau of Economic Research, Inc.
    7. Price V. Fishback & Shawn Everett Kantor, 2000. "A Prelude to the Welfare State: The Origins of Workers' Compensation," NBER Books, National Bureau of Economic Research, Inc, number fish00-1, August.
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