The Weakness of Common Job Contacts

Many people obtain job information from friends and acquaintances. However, one factor

influencing labor-market outcomes that is ignored in the literature is the presence of overlapping

friendship circles in social networks. We find that overlapping friendship networks produce

correlated information flows, resulting in an increased probability of two events: either receiving

redundant job offers or receiving no job offers at all. Consequently, people with common

contact networks exhibit worse employment prospects even if they have the same number

of information providers and compete with the same number of people for vacancies. In

quantitative terms, the impact of overlapping friendship circles rivals that of the number of

direct contacts and contacts’ contacts. This implies that the results in Calvó-Armengol (2004)

only apply for networks where people’s friends are neither connected nor have common

contacts. Because overlapping friendship circles are a crucial aspect of strong relationships, our

findings uncover an alternative mechanism behind ‘‘The Strength of Weak Ties’’ (Granovetter,

1973): their ability to maintain independence in job information flows. We further show that

people with common job contacts earn lower incomes on average. However, conditional on

being employed, their expected wage is higher because they can take advantage of the multiple

job offers received by selecting the one with the highest pay.