Connecting Employers and Workers: Can Recommendations from the Public Employment Service Act as a Substitute for Social Contacts?

This article investigates how employers value recommendations from the public employment service (PES) compared to recommendations from a social contact for their hiring decision. The importance of social contacts in the labour market creates inequality by putting those with a weak social network at a disadvantage. It is therefore important to know if public agencies acting as labour market intermediaries (LMI) can compensate for this disadvantage. This question is investigated by means of a factorial survey experiment conducted among Swiss human resources professionals. The results demonstrate that employers value recommendations from social contacts as well as the PES. However, the latter is not able to fully substitute for the effect of social networks.