The Theory Behind Jobmaps

The job market is often talked about as if it were a simple bazaar: jobs here, people there, and supply automatically meets demand. But it's not that simple. In 2010, economists Peter Diamond, Dale Mortensen and Christopher Pissarides received the Nobel Prize for a model that corrects exactly this misconception.

The so-called Diamond-Mortensen-Pissarides model – DMP for short – describes why people and positions don't simply find each other. In short: costs arise on both sides because searching takes time, money and nerves. Economists call these matching problems. We call it friction.

The model makes clear that job markets don't run smoothly on their own, but are full of obstacles:

1. Geographic – The job is where nobody wants to move.

2. Skills – Requirements and abilities don't match.

3. Information – Employers don't know who's available. Applicants don't know if applying is worth it.

4. Psychological – Uncertainty, doubt about meeting expectations.

5. Timing – Companies don't search when people want to switch.

6. Signaling – Saying "I'm looking" costs – money for companies, reputation for employees.

Demographic change amplifies all these frictions: Fewer young people are coming up, older ones switch less often, skills become outdated faster. The market doesn't become more efficient on its own.

All of this means the job market never looks like a perfectly synchronized dance. Instead, applicants and employers often stand next to each other on the floor – but not in the same rhythm.

The DMP model reduces this complexity to a simple insight: searching only pays off when the expected gain exceeds the costs.

For employees, this means: A new job must not only be better, but significantly better – enough to outweigh time, effort and risk. Plus: those still employed risk being outed.

For employers, it means: A job posting only pays off when the additional return from a new employee exceeds the vacancy costs – posting fees, HR effort, opportunity costs.

Frictions increase these costs. They're not just measured in money, but also in time, energy and nerves. The result: people search less actively, companies post less frequently. Instead of movement, there's standstill.

This is exactly why we see phenomena like the Beveridge curve, which shows that even with high unemployment, positions remain unfilled. It's not supply or demand that's missing. It's the connection between them.

For us, this was a key moment. The real question isn't: Are there enough jobs or enough people? But rather: How can both sides find each other more easily?

If frictions are the problem, then we need to find ways to reduce them:

First: Lower search costs for employees. The first step needs to become smaller – less effort, less risk, less uncertainty.

Second: Lower search costs for employers. Posting shouldn't be expensive and cumbersome – otherwise vacancies remain invisible.

Third: Increase matching efficiency. Better information on both sides, less noise, clearer signals.

Not all of this is implemented yet, some is still under construction, much we'll learn along the way. But the direction is clear: less friction, more movement.

The Diamond-Mortensen-Pissarides model (Nobel Prize in Economics 2010) explains how frictions slow down the job market.

Search costs for employees (cw) include time, energy, risk and the outing problem. Vacancy costs for employers (k) include posting costs, HR effort and opportunity costs. Matching efficiency (e) describes how well supply and demand find each other.

Key message: Jobs and people don't automatically find each other. The lower the frictions, the more movement in the market.

More on the DMP model: Nobelprize.org – Prize in Economic Sciences 2010