WANTED has slightly modified the construction of its Supply/Demand Ratios to improve results for job seekers.
Specifically, the linear construction of the index did not accommodate for the fact that larger markets represent more opportunities for job seekers compared to smaller markets, even at identical per capita "job posting rates".
The Supply/Demand Ratios are meant to represent a "probability scale" of finding a job in a specific market. More job ads implies a greater "variety" of jobs, which in turn increases the likelihood that any one worker will be able to find a suitable job in that market. In addition, larger markets tend to have more employers. Even if companies from two different cities behave the same in terms of the average number of listed job vacancies, a larger number of companies simply represent a better aggregate employment opportunity. (If a worker gets turned down by an employer for a job, chances are he'll get turned down again if he applies to a different but similar position at the same company).
For example, our previous method would have treated two markets of different sizes as the same:
10 job ads for 100 workers in Market A = 0.1 job ads/worker
20 job ads for 200 workers in Market B = 0.1 job ads/worker
Since both these "Local Hiring Demand Ratios" would have been divided by the same "Average National Hiring Demand Ratio", per our methodology, their Supply/Demand Ratios would have been identical.
Our new non-linear specification for both the Local Hiring Demand Ratio and National Hiring Demand ratio allows the larger market to have a "better" Supply/Demand Ratio:
10 job ads for 100 workers in Market A = 0.1 'non-linear' job ads/worker
20 job ads for 200 workers in Market B = 0.112 'non-linear' job ads/worker
This modified calculation generates a 12% difference.
All Entries