Professional agents take substantial fractions of client wages: 3-10% in sports,10-15% in music, 10-20% in acting, and 15% for writers. Somewhat relatedly, job recruiters take 10-30% of a first year salary, and home realtors take 2-3% of home sales.
The market could allocate and compensate worker productivity perfectly, yet if the worker doesn't understand how their choices are influencing their productivity, an agent could help them.
Recruiter usually don't negotiate salary for you, don't help you to navigate your career toward more reward salaries in the future or self satisfaction, don't help you to advance in the company and don't negotiate better salary after you start.
I cannot see how most workers are in the need of an agent, and are probably being underpaid, and that the job market is efficient at allocating the resources can be both true at the same time.
It seems you think that for most workers the advice and help available from friends and associates is all they need; there's no point in getting more help from a specialist.
I'm also puzzled by why tutors, coaches, and mentors are not getting a share of their pay by betting on their customer, even if it was combined with a (lower) hourly wage.Maybe the enforcement of the payment due the performance is not worth doing if the customer just refuse to pay and you need to file a judicial complaint.There is also the extra work of measuring your customers to adjust the ratio of hourly pay and the bet you can take, and I think most people cannot do it now, and it would take some time for them to calibrate themselves before they lose money on bad bets or charging too much, and scaring potential customers.
I think both of them can be overcame, but they might still be more expensive than the expected extra return.I'm also not sure how a customer would react to such proposal, paying less (or nothing) for now, but pay more after they succeed, but I guess most people would be suspicious, thinking that there might be a trick hidden somewhere, until they can see their peers doing the same.I think people would also resent having to pay something after succeeding since there is no more work being done by the agent.
But, I think that the biggest problem is how much control the agent would have over the customer.Maybe it works in music, film, and sports because the work of the agent is completely different form the worker and because we only see the ones that the agent work is effective, if you are not humble enough to be manageable, no agent will want to work with you, and your career might end even if you are still very talented.For common people, the distinction of the worker's work and the agent's gets smaller, and if the worker would listen to the agent, they are probably already listening to advice given by their friends and other experts and there is not much more to be gained by having an agent (and maybe paying by hour really makes sense when some advice is needed).If the worker doesn't listen to other people advice and cannot make big money, they are just a waste of the agents time, who will only advise them if there is no performance dependence.
You ask why more people don't use agents for their careers: but they do, it's just not thought of that way. It's called out-placement services, whereby someone pays an agency on a sliding scale to help them find a better job. There is also the example of schools that get paid a fraction of a student's first years salary once they are employed.
I'm a programmer who isn't in the Bay Area, and I typically get jobs through recruiters. I'm currently a contract employee, so there is a third party vendor I'm working through (something I've done a number of times, including for this employer previously). While I know it's standard for them to get some percentage of my pay I typically don't pay attention to how much that is. My impression is that there's lots of turnover in recruiting firms, so I'll sometimes get contacted by people who've taken over the contact lists of people who left, but I don't bother to remember any such people because I get too many email from recruiters as it is.
I suspect that it most professions the skills within an agents ambit just don’t make up that much of the variation in pay. Unlike a sports star or CEO in most jobs there is pretty low return on exceptional performance (think a model where the performance of the team is mostly a function of the skill of the least skilled member). As such there isn’t the same opportunity to negotiate for more salary since the market will be competitive and you’ll be interchangeable with any individual who has greater than team minimum skill). Note that CEO sports stars etc are the ones who all hire people for this task.
Another problem here is that using an agent would seem to be a credible signal that you won’t be able to get the job on your own merits. Since there is no real ability to negotiate up the salary the only thing an agent could help achieve is to land you a more elite job than you can on your own. Hence making the agent themselves a reason not to hire you.
I think I don't totally follow what the difference is.
If I need a job, and contact a 3rd party recruiter (not someone affiliated with a single company), and tell them what sort of job I want, and they line up interviews for me, isn't that the same thing? Or is the objection that I should be willing to pay directly rather than have the employer pay?
Seems to me the big difference is really in frequency of transaction. If I'm a comedian, I need to line up multiple gigs a week. If I'm a software engineer, I need a gig every few years. So I don't actually spend a very large proportion of my labor finding gigs, and so I don't get a ton of leverage by outsourcing it unless I think I can hire someone who is much better than me.
One comment on this also about recruiters in practice: Most recruiters are truly horrible and really just forward resumes around willy-nilly. There aren't a ton of recruiters out there who are actually good at listening or of knowing a good fit when they see one, and the ones that are good at those things make a lot of money. Being really good requires a lot of in-depth knowledge of technology usually held by expert practitioners who have many other opportunities available.
Hi Robin, do you recommend "The Economics of Contracts (2nd Ed)" by Salanie for further reading in this space? and/or other books? Thanks in advance
Why not charge a % of the salary *increase* than a % of their salary?
Not to my knowledge.
Sorry, I'm just repeating what I read on Quora. I don't know any more than that!
We are building this at Placement.com!
The market could allocate and compensate worker productivity perfectly, yet if the worker doesn't understand how their choices are influencing their productivity, an agent could help them.
Recruiter usually don't negotiate salary for you, don't help you to navigate your career toward more reward salaries in the future or self satisfaction, don't help you to advance in the company and don't negotiate better salary after you start.
All of those are part of an agent job.
I cannot see how most workers are in the need of an agent, and are probably being underpaid, and that the job market is efficient at allocating the resources can be both true at the same time.
It seems you think that for most workers the advice and help available from friends and associates is all they need; there's no point in getting more help from a specialist.
I'm also puzzled by why tutors, coaches, and mentors are not getting a share of their pay by betting on their customer, even if it was combined with a (lower) hourly wage.Maybe the enforcement of the payment due the performance is not worth doing if the customer just refuse to pay and you need to file a judicial complaint.There is also the extra work of measuring your customers to adjust the ratio of hourly pay and the bet you can take, and I think most people cannot do it now, and it would take some time for them to calibrate themselves before they lose money on bad bets or charging too much, and scaring potential customers.
I think both of them can be overcame, but they might still be more expensive than the expected extra return.I'm also not sure how a customer would react to such proposal, paying less (or nothing) for now, but pay more after they succeed, but I guess most people would be suspicious, thinking that there might be a trick hidden somewhere, until they can see their peers doing the same.I think people would also resent having to pay something after succeeding since there is no more work being done by the agent.
But, I think that the biggest problem is how much control the agent would have over the customer.Maybe it works in music, film, and sports because the work of the agent is completely different form the worker and because we only see the ones that the agent work is effective, if you are not humble enough to be manageable, no agent will want to work with you, and your career might end even if you are still very talented.For common people, the distinction of the worker's work and the agent's gets smaller, and if the worker would listen to the agent, they are probably already listening to advice given by their friends and other experts and there is not much more to be gained by having an agent (and maybe paying by hour really makes sense when some advice is needed).If the worker doesn't listen to other people advice and cannot make big money, they are just a waste of the agents time, who will only advise them if there is no performance dependence.
Distributors often take a large % of final revenue. That's not the same issue.
You ask why more people don't use agents for their careers: but they do, it's just not thought of that way. It's called out-placement services, whereby someone pays an agency on a sliding scale to help them find a better job. There is also the example of schools that get paid a fraction of a student's first years salary once they are employed.
I'm a programmer who isn't in the Bay Area, and I typically get jobs through recruiters. I'm currently a contract employee, so there is a third party vendor I'm working through (something I've done a number of times, including for this employer previously). While I know it's standard for them to get some percentage of my pay I typically don't pay attention to how much that is. My impression is that there's lots of turnover in recruiting firms, so I'll sometimes get contacted by people who've taken over the contact lists of people who left, but I don't bother to remember any such people because I get too many email from recruiters as it is.
I suspect that it most professions the skills within an agents ambit just don’t make up that much of the variation in pay. Unlike a sports star or CEO in most jobs there is pretty low return on exceptional performance (think a model where the performance of the team is mostly a function of the skill of the least skilled member). As such there isn’t the same opportunity to negotiate for more salary since the market will be competitive and you’ll be interchangeable with any individual who has greater than team minimum skill). Note that CEO sports stars etc are the ones who all hire people for this task.
Another problem here is that using an agent would seem to be a credible signal that you won’t be able to get the job on your own merits. Since there is no real ability to negotiate up the salary the only thing an agent could help achieve is to land you a more elite job than you can on your own. Hence making the agent themselves a reason not to hire you.
I think I don't totally follow what the difference is.
If I need a job, and contact a 3rd party recruiter (not someone affiliated with a single company), and tell them what sort of job I want, and they line up interviews for me, isn't that the same thing? Or is the objection that I should be willing to pay directly rather than have the employer pay?
Seems to me the big difference is really in frequency of transaction. If I'm a comedian, I need to line up multiple gigs a week. If I'm a software engineer, I need a gig every few years. So I don't actually spend a very large proportion of my labor finding gigs, and so I don't get a ton of leverage by outsourcing it unless I think I can hire someone who is much better than me.
One comment on this also about recruiters in practice: Most recruiters are truly horrible and really just forward resumes around willy-nilly. There aren't a ton of recruiters out there who are actually good at listening or of knowing a good fit when they see one, and the ones that are good at those things make a lot of money. Being really good requires a lot of in-depth knowledge of technology usually held by expert practitioners who have many other opportunities available.
You've just asserted the same claim, not offered an argument for it.