The Algorithmic Barrier: Quantifying Artificial Frictional Unemployment in Automated Recruitment Systems

TL;DR

This paper investigates how automated recruitment systems cause artificial frictional unemployment by misinterpreting candidate skills, and demonstrates that semantic matching improves hiring efficiency and reduces economic costs.

Contribution

It formalizes artificial frictional unemployment caused by keyword-based screening and proposes semantic matching as a solution to improve labor market efficiency.

Findings

Semantic matching improves recall and matching efficiency.

Automated systems contribute to artificial unemployment.

Semantic alignment reduces economic costs of hiring.

Abstract

The United States labor market exhibits a persistent coexistence of high job vacancy rates and prolonged unemployment duration, a pattern that standard labor market theory struggles to explain. This paper argues that a non-trivial portion of contemporary frictional unemployment is artificially induced by automated recruitment systems that rely on deterministic keyword-based screening. Drawing on labor economics, information asymmetry theory, and prior work on algorithmic hiring, we formalize this phenomenon as artificial frictional unemployment arising from semantic misinterpretation of candidate competencies. We evaluate this claim using controlled simulations that compare legacy keyword-based screening with semantic matching based on high-dimensional vector representations of resumes and job descriptions. The results demonstrate substantial improvements in recall and overall matching efficiency without a corresponding loss in precision. Building on these findings, the paper proposes a candidate-side workforce operating architecture that standardizes, verifies, and semantically aligns human capital signals while remaining interoperable with existing recruitment infrastructure. The findings highlight the economic costs of outdated hiring systems and the potential gains from improving semantic alignment in labor market matching.