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Blame Headhunters for Increasing Wage Gap

Research suggests professional recruiting firms are contributing to rising earnings inequality
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Here's something to talk about the next time a headhunter calls you.

The share that the top 1 percent of earners in the U.S. take from total wages has almost doubled since the 1970s, and Alexey Gorn, a researcher at Bocconi University in Milan, Italy, suggests it may have something to do with the simultaneous rise of professional recruitment firms. In a paper, presented at last week’s European Economic Association conference in Geneva he argues that at least 40 percent of top earners’ wage growth can be traced back to headhunters offering exclusive opportunities to high-skilled workers at the best firms -- along with a paycheck that less-well trained people won't ever see.

“Headhunters are better at screening because they collect huge databases of candidates, and so they can pick already knowing the person’s skills and experience levels,” Gorn said in a telephone interview. The fact that they are able to approach workers who are usually not actively seeking a job reduces labor-market frictions and allows for more efficient matching, which also leads to proportionally higher wages, he said.