The Labour Market Is a Network, Not an Auction

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The Labour Market Is a Network, Not an Auction<br>Most jobs are never advertised. The discipline that explains why is one HR was never taught.

Andrew Marritt<br>Aug 05, 2026

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Ask a room full of people how they got their current job and you will hear a pattern. A former colleague mentioned an opening. A friend of a friend made an introduction. Someone they worked with years ago got in touch. A recruiter found them - which is to say, a professional whose entire job is being a node in other people’s networks found them. A minority will have answered an advertisement cold. In most rooms, it is a small minority.<br>We have known this formally for fifty years. In 1973 a young sociologist named Mark Granovetter published a paper in the American Journal of Sociology called “The Strength of Weak Ties”. It is, by most counts, among the most cited papers in the whole of social science, and it began with a survey question much like the one above. Granovetter asked professional, technical and managerial workers in a Boston suburb how they had found their jobs. Most of those who found work through a personal contact had found it through someone they saw occasionally or rarely - an acquaintance, a former colleague, a friend from an old chapter of life. Fewer than one in five had found their job through someone they saw often.<br>That finding, and the theory behind it, opened up a field that most HR practitioners, and I suspect many of my readers from psychology and economics, have never been formally introduced to: economic sociology - the study of how economic life actually runs on social structure. This issue is that introduction. I think you will find, as I did, that it explains things about recruitment that neither psychology nor economics can reach on their own - and that it has now passed one of the largest experiments ever run on a theory in social science.

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The market you were taught in school

To see why the sociology matters, start with the model it displaced.<br>The textbook picture of a market comes from the nineteenth-century economist Léon Walras, and economists still call it the Walrasian auction. Imagine an auctioneer standing between everyone who wants to sell something and everyone who wants to buy it. The auctioneer calls out a price. If more people want to buy than sell, the price rises; if more want to sell than buy, it falls. Eventually a price is found at which supply exactly meets demand, everyone trades, and the market clears. Nobody needs to know anyone. The goods are interchangeable, the buyers and sellers are anonymous, and the only information that matters is the price. If you took an introductory economics course, this is the machinery behind the supply and demand curves you drew: the curves themselves just record willingness to buy and to sell, and the auctioneer’s price adjustment is how the market is assumed to find the point where they cross.

This is a perfectly good model of the market for wheat or copper - homogenous products. Applied to labour, it makes three assumptions, each of which this series has already spent an article dismantling. It assumes workers of a given type are interchangeable - but the productivity differences between people in the same job are enormous, as we saw in Issue 5. It assumes quality is visible at the point of sale - but every hire is a bet made in the dark, as we saw in Issue 6. And it assumes that a worker’s value is a fact about the worker - when a large component of productivity is match-specific: the same person is differently productive at different firms, in different teams, under different managers.<br>Add the plainest fact of all - that most jobs are filled through people rather than through anything resembling an auction - and the textbook model is not simplified so much as wrong in its architecture. The labour market does not clear through prices. It matches through relationships.<br>What I find striking, and what makes this a very Working Ideas story, is that two disciplines reached this conclusion independently and spent decades barely citing each other. Sociology got there through Granovetter and the study of networks: economic action, he later argued, is embedded in concrete social relations, not conducted between strangers. Economics got there through the study of search and matching - the recognition that when meeting is costly and quality is revealed slowly, the process by which workers and firms find each other matters more than the wage - work recognised in the 2010 Nobel award to Peter Diamond, Dale Mortensen and Christopher Pissarides, and, as we will see later, in the 2012 award to Alvin Roth and Lloyd Shapley for showing that matching processes can be deliberately designed. When two fields that do not read each other abandon the same model, the model deserves to stay abandoned. The Walrasian auction, as a model of the labour market, is that model.

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