Machine learning for labor market matching

Abstract

"This paper develops a large-scale machine learning framework to improve labor market matching using rich administrative data. Matching is defined as a job seeker entering employment in a specific occupational field. We exploit comprehensive employment biographies from Germany, covering individual characteristics and job-related information, to estimate employment probabilities across occupations and generate personalized job recommendations. The contribution lies in demonstrating why machine learning methods are particularly well suited for administrative labor market data and outperform traditional statistical approaches. We compare logit, ordinary least squares (OLS), k-nearest neighbors, and random forest (RF). RF consistently achieves the highest predictive performance. Its advantage is rooted in key methodological properties: RF builds an ensemble of decision trees trained on bootstrap samples, introduces random feature selection at each split, and aggregates predictions through majority voting. This enables RF to capture nonlinear relationships and complex interactions, remain robust in high-dimensional settings, and reduce overfitting — features that are particularly relevant for heterogeneous and imbalanced administrative data. Compared to conventional models, RF better exploits the full informational content of employment histories, especially when estimating on all employment spells rather than restricting the sample to unemployment-to-employment transitions. The sample comprises approximately 55 million spells, representing about 6 percent of the German workforce from 2012 to 2018. Our results suggest that ML-based matching, relative to standard statistical approaches, could hypothetically reduce the unemployment rate by up to 0.3 percentage points, highlighting the practical relevance of RF-based decision support for labor market policy." (Author's abstract, IAB-Doku, © Elsevier) ((en))

Cite article

Mühlbauer, S. & Weber, E. (2026): Machine learning for labor market matching. In: Machine learning with applications, Vol. 23. DOI:10.1016/j.mlwa.2026.100861