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Startup jobs lost appeal during pandemic

  • Economic downturns negatively affect entrepreneurship by limiting talent flows towards younger firms, suggests a new study

The coronavirus crisis may have led to a shift of job seekers away from early-stage startups towards more established and mature firms, a new study has found.

Job applicants on AngelList Talent, a start-up hiring platform, have looked for significantly larger employers since 13 March than earlier, say Shai Bernstein of Harvard Business School and others. The US had announced a state of national emergency on 13 March due to the pandemic.

The study was published as a working paper by the US National Bureau of Economic Research.

The researchers use proprietary data from AngelList Talent to find that candidates became about 20% more likely to search for firms with staff size of more than 500 after this date. Early-stage ventures got fewer applications per job posting.

The paper suggests this was probably because of heightened risk aversion among workers. Job seekers may feel large and more established employers offer better job security during an economic downturn than early-stage ventures or startups do.

Interest in startups declined even as job seekers broadened other search parameters. Candidates also became less choosy, as they were more open to part-time jobs and internships, lower salaries, and a wider variety of jobs, markets, and locations than earlier.

This “flight to safety" was largely driven by the more experienced and high-quality job seekers. This could lead to a decline in the quantity and quality of talent flows towards startups, especially the nascent ones, the authors argue.

This trend, however, may not necessarily mean that early-stage firms faced difficulties attracting workers. It is possible that the influx of new, high-quality job seekers was large enough to offset the negative effect of the changed worker preferences, the authors say.

Also read: Flight to safety: how economic downturns affect talent flows to startups

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