Headhunters Are Responsible For Income Inequality

Posted by Jeff Pelliccio on Nov 1, 2016 9:00:00 AM

In ICS insights

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In the staffing industry, we have heard predictions of the demise of headhunters ever since first aired a Super Bowl ad in 1999. It certainly felt like a major disruption in the staffing industry. But fast forward seventeen years: headhunters are still thriving; no longer exists.

To be fair, Yahoo bought in 2002 and Monster ultimately took that site over in 2010. Despite a series of acquisitions, however, headhunters still show superior performance when it comes to hiring talent. Monster as a ubiquitous job board is, well, a monster in the staffing industry. It is a very useful tool, but only a tool. It cannot replace headhunters and recruiters.

A paper recently published by Alexey Gorn essentially links headhunters to an ever increasing wage gap. Not revolutionary. Yes, of course, it is true that headhunters add to income inequality. We enjoy meeting ambitious candidates and getting to know all of our prospects one-on-one. It is our responsibility to negotiate impressive compensation for our impressive recruits. That is it; that is why we show up to work every day.

Wage growth for almost half of the top 1% can be clearly and directly traced back to headhunters offering exclusive opportunities to high-skilled workers. The sort of opportunities that naturally come with a paycheck most will never see. Additionally, if companies pay higher fees to those staffing firms, they attract even higher percentages of those top-tier applicants. For everyone involved, the numbers are going up, up, and up.

This is great news, right? If headhunters truly facilitate employers to find superb talent and ensure that great employees receive a big paycheck, then why does everyone not use them? By providing great service, headhunters have increased wealth and subsequently pumped more money into the economy.

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How have headhunters created waves in the larger economy exactly?

  1. The most basic responsibility of headhunters is to know about jobs: how many, what types, and potential earnings. This gives them a macro-view of the business environment and a keen sense of how to handle the next best moves.
  2. Headhunters encourage less-qualified employees and candidates to develop their professional skills. Marginal candidates can become top-qualified prospects with guidance from a great headhunter.
  3. Most importantly: the savviest headhunters practice passive recruiting. This means they go beyond only staffing unfilled positions with only current job searchers. Headhunters keep in touch with a network of professionals, employed or not, and anticipate jobs that will become available in the future.

Why do recruiters continue to dominate over job boards?

  1. Headhunters do not wait for the brightest people to come to them. Monster, Indeed, and LinkedIn receive a huge number of resumes from applicants. Many people, however, do not even log in to update skills on a resume until they are “on the job market” so many sites skip the best candidate because of an outdated profile.
  2. Headhunters have more than applicants; they have equally huge databases with information from applicants past, present, and future. This asset allows them to approach professionals who are not actively seeking a job.
  3. Job hunting no longer has to be a time-sucking shadow job. Headhunters decrease time between jobs, or frictional unemployment. They match candidates to companies better and faster. And, further, a candidate can be contributing more work if he or she spends less time filtering through posts on Indeed and LinkedIn.
  4. Headhunters are better matchmakers. By getting to know both sides of the hiring equation, recruiters and recruiting firms continue to succeed in matching people to organizations.
  5. Candidates are more likely to land a job they actually want, to negotiate a bigger salary or better benefits, and to expand their professional network with a personal touch.
  6. Companies have built a relationship with recruiting agencies and trust them enough to interview the candidates presented to them.
  7. Headhunters are, above all, human. No matter how sophisticated the technology, job boards cannot do what real flesh-and-blood people do. In fact, LinkedIn and other online resources have proven to suppress hiring and exclude otherwise qualified people.
  8. Headhunters can see beyond the keywords and resumes; they can determine significant qualities of companies and candidates that cannot be quantified. We are the ones that are making the phone calls to say, “Mr. Manager I need you to look at this person. I know the resume doesn’t yet scream senior developer but….”  And many times those people get the job.
  9. Job seekers like the blatant advantage of having a human assist with their job searches. No one wants to be vetted by robots and watered down to a host of keywords. I don’t. In an industry dominated by online job boards and automated algorithms, headhunters take the time to meet face-to-face, shake hands, and get to know each individual. At the end of the day (or the end of the pay period or the end of the fiscal year), this personal touch will always help the bottom line.

Do not let negative connotations surrounding “increasing wage gap” and “income inequality” cloud your judgment about headhunters. People are bringing more money home, companies are seeing bigger profits, and both individuals and companies are spending that extra cash. As a result, we have seen tremendous growth in newer fields; Information Technology is a great example.

But people still hesitate before reaching out to recruiters. What are the misconceptions about working with headhunters?

  • They do not want to risk their current job position and fear that a headhunter contract may somehow leave them exposed.
  • They do not understand their own value of working with a headhunter who needs job candidates working in the market, who already offer in-depth knowledge and experience, versus candidates simply on the market, getting started.
  • They do not want to feel disloyal to their employer by answering the call of a headhunter.
  • They worry that recruiters charge an exorbitant fee for their services, which is something we would never impose on a job candidate, even after a successful placement.
  • They simply do not understand what a headhunter does and how invaluable their skills, dedication, and connections are.

If it is true that headhunters are the cause behind higher pay, what could we do with this information?

  1. Colleges and universities can do away with their out-of-touch campus career centers and outsource to headhunters who can help recent graduates.
  2. Local governments can start programs to have people entering the workforce build relationships with professional recruiters / headhunters.
  3. New tax policies can allow for a higher top rate of income tax because of the higher earnings brought by the greater efficiencies.
  4. Gorn’s study focused primarily on the US and Europe, but imagine the possible advancements if headhunters played a bigger role worldwide, especially if we brought our sensibility and expertise to emerging markets. 

One more point to add: Gorn’s abstract described a sharp increase in top wages although it did not mention the change in the occupations. I would assume already-high salaries for Information Technology talent have grown immensely in the last 30 years.

We can stop blaming the usual suspects: stock markets and Fed policies, Democrats and Republicans, bankers and CEOs. We can stop relying solely on Indeed, Career Builder, and Monster. We can ultimately embrace the role headhunters play and use it as an advantage. Yes, the wage gap is appalling. But I truly believe that the staffing industry can elevate all workers.