New research project on labour market sorting begins at School of Economics

This ambitious project aims to unravel the intricate interplay of skills, preferences, job characteristics, and amenities in the labour market, shedding light on the factors that determine which workers end up in which jobs. 

Led by Dr Pawer Gola, Multidimensional Sorting with Imperfectly Transferable Utility (“MULTIDIMENSORTING”) addresses the complex nature of the labour market, where workers and jobs vary not only in skills but also in preferences, amenities, and other critical dimensions. The research recognizes that such heterogeneity significantly influences how individuals are matched with employment opportunities, presenting unique challenges that have yet to be fully explored. 

According to Dr Gola, "The presence of both skill and preference heterogeneity creates a multifaceted sorting puzzle in the labour market. Workers' characteristics are multidimensional, and the variability in preferences and amenities often makes utility imperfectly transferable between job matches. These complexities require a fresh perspective." 

The project is structured around two key objectives: 

1. Develop General Theoretical Frameworks: 

• The research team seeks to establish theoretical foundations for understanding labour market sorting under both transferable utility (TU) and imperfectly transferable utility (ITU). Traditionally, multidimensional sorting problems have eluded analytical solutions under TU, and similar challenges are expected under ITU. To address this, the project will develop monotone comparative statics results, providing critical insights into the sorting process. 

2. Apply Theoretical Frameworks to Practical Challenges: 

• Building on the general tools developed, the project will tackle specific problems within the labour market. 

• Workers' Sorting Across Firms: The research will investigate how workers' preferences for relative pay impact their sorting across different firms. The study recognizes that workers may vary in the strength of this preference, which adds an additional layer of complexity to the sorting process. 

• Impact of Remote Work Proliferation: The project will also explore the effects of the growing trend of remote work on labour market sorting. This challenge is inherently multidimensional with ITU, considering that workers differ in skill levels and their inclination toward remote work, while jobs differ in complexity and suitability for remote work. 

By addressing these critical questions, MULTDIMENSORTING hopes to provide policymakers, businesses, and academics with a more nuanced and comprehensive understanding of labour market dynamics. The project's outcomes have the potential to guide future policies and practices, facilitating a more efficient and equitable labour market. 

As this innovative research unfolds, the School of Economics invites collaboration and engagement from the academic community, industry stakeholders, and the public to collectively advance our understanding of labour market sorting in the 21st century. 

This project was accepted by the ERC (European Research Council) Starting Grant 2022 call and has been funded through the UKRI (UK Research and Innovation) guarantee fund.  

For further inquiries and updates on this research project, please contact our Research Office at Econ-research@ed.ac.uk.