Landing the first job: the value of intermediaries in online hiring

Online marketplaces for remote labor services allow workers and firms to contract with each other directly. Despite this, a large fraction of the workforce is affiliated with small, autonomous intermediary organizations that are widespread within these markets. This paper shows that intermediaries have emerged primarily to signal to employers that inexperienced affiliated workers are high-quality. Workers affiliated with an intermediary have substantially higher job-finding probabilities and wages at the beginning of their careers. After an initial employment period, only the best non-affiliates find future work, but the wages of those who do find work catch up with affiliates' wages. Wage convergence is due to heightened wage responsiveness to public feedback received on the job for non-affiliates. Other possible explanations for the presence of intermediaries, such as the facilitating team production or increasing worker productivity, explain, at most, only a small share of the affiliation premium. The results indicate that intermediaries are an endogenous response to an inefficiency where too few inexperienced workers are hired because firms do not capture the full benefits of the on-the-job talent discovery. Intermediaries increase the efficiency of remote labor markets by improving the allocation of inexperienced workers to jobs.