Forming cartels and finding jobs

Top of the Charts 'Hidden gems' round-up: January 2021

The latest from Resolution Foundation Chief Executive Torsten Bell’s weekly Observer column, Hidden gems from the world of research and academia. Read more of the latest economics and policy research in our weekly reading email, Top of the Charts.


Don’t feel guilty about playing video games, it might land you a job

You’ve all been playing more computer games in lockdown. Don’t deny it – consoles aren’t sold out for no reason.

There’s nothing to be embarrassed about; we need all the help we can get to survive now that we are living 99% of our lives between our own four walls. And, realistically, the alternative is binge-watching old series of Pointless.

Maybe time staring at the screen is far from wasted. Young people have always claimed to be developing real skills while blasting random acquaintances on Fortnite. My seven-year-old seems to think Mario Kart has equipped her for an F1 career. Hefty parental scepticism about these claims is challenged by a recent study that makes the case for employers to check out applicants’ gaming skills, not just their CVs. More specifically, it shows that success at one particular video game – Civilization, a complex strategy game – is correlated with higher scores in traditional recruitment tests for attributes important for managers: problem-solving and organisational skills.

The authors are keen on the “gamification” of recruitment processes, arguing for game-like tests as part of selection decisions because nervous candidates are more likely to be at ease in an immersive form of assessment.

Perhaps we shouldn’t feel too guilty about video-game indulgences – they might just be the route to post-pandemic career success. Or they might just be some harmless fun.

Originally published in the Observer.


Even criminals raise their prices when they form cartels

Economists generally like competition. It helps consumers get a better price if sellers know they could go elsewhere. But economists aren’t usually talking about armed violence or organised crime. So those of you not regularly involved with the mafia should have lots to learn from new research examining competition between El Salvador’s criminal gangs.

El Salvador is a dangerous place. The murder rate was 103 per 100,000 people in 2015, in large part due to two competing gangs: Mara Salvatrucha and Barrio 18. But in 2016 they agreed a non-aggression pact, ending competition for territory. As a result, murders fell by almost half. Beyond the violence, the other big cost of gangs is economic, via the extortion payments they rely on, estimated at more than $700m (£515m) a year, or 3% of El Salvador’s GDP.

Data on 50,000 extortion payments made by truck drivers stopped by gangs shows the non-aggression pact did cut violence but extortion payments soared by 15-20%. More worryingly, this significantly pushed up the prices of crucial goods such as medicines. Hospital visits for some chronic conditions rose almost 10%.

There is a reason many people in El Salvador agree with economists’ pro-competition intuition that the principal beneficiaries of the truce were the gangs themselves.

Originally published in the Observer.


Poverty hits us hard – and not just in the pocket

What determines how productive you are at work? Whether or not you are home schooling is obviously the main answer now. But it’s an important question for normal times and one recent research paper set out to answer by examining the impact of cash payments on the productivity of factory workers in India.

Workers receiving their cash payments earlier worked faster and produced more. This wasn’t because payments made them healthier or more positive. The key effect was to reduce how distracted workers were by financial worries; as a result, they not only produced more but did so with fewer mistakes.

The situation for lower earners in India is very different to that in the UK. But when new data shows that benefit cuts have delivered income falls of 8% for poorer, working-age households it’s hard to believe this hasn’t come with a huge cost in increased anxiety. And those same families have been most likely to take on more debt during Covid, which new research from the Financial Conduct Authority shows carries a price tag beyond the interest: it damages our wellbeing. It suggests falling into debt could cost you £5,500 in “wellbeing terms” (that’s how big a lottery win you’d need to compensate for the happiness fall), particularly because of worries about debt feeling “unmanageable”. When we think about poverty, we need to recognise that it doesn’t just reflect a lack of earnings – it can make it harder to earn or do just about anything.

Originally published in the Observer.


A great new job is just a click away; sadly, that’s also the case for everyone else

Our new Zoom reality has taught us all the importance of a decent internet connection. It isn’t just crucial to the way many of us do our current jobs, it’s also how we find new ones.

In ye olden days, a peasant had to hope their cousin’s cousin knew about a decent job in a neighbouring village. But the interweb makes it much easier to find vacancies offering the type of work we’re after. That should mean better matches, with more workers finding the right jobs so they stick at them, are more productive and earn more. That’s been the view of economists, with research on Norway broadband rollout, for example, finding it led to higher wages and significantly lower unemployment.

But a new study on Germany challenges this, finding no impact on the quality of job matching from the recent spread of high-speed internet. The problem? Fast internet means we all get a better idea of what jobs are out there, and the unemployed do find work more quickly. But the ease of applying online results in a quadrupling of candidates for every job. This problem has probably grown as online recruitment has become the norm. We should have seen this coming. The internet repeatedly teaches us that we can have too much of a good thing and that the peasants always knew a bigger haystack made it harder to find the needle.

Originally published in the Observer.