Wall Street needs a solution: the IB labor market is unraveling
I can only speak to the investment banking labor market (the market for investment banking summer interns and full-time analysts), but it's clear that the recruiting timeline is being pushed up earlier and earlier.
Traditionally, the banks would recruit students during the winter/spring of their junior year. In the past two recruiting cycles, however, this timeline has been pushed to the summer/fall of junior year. There have also been more and more sophomore programs (with Moelis starting its first sophomore program this year). I wouldn't be surprised if the recruiting process only gets pushed up earlier and earlier, until the situation becomes so ridiculous that all the banks decide to do something about it.
This is a classic example of a market unraveling and symptomatic of failed market design. Since all the banks want to get the best candidates, they too compete, which explains why when one bank begins recruiting earlier, all the other banks follow suit. When markets unravel, recruiting becomes more stressful and unpredictable for both parties (both the candidates and the banks). If you were to think of the outcomes of such a market as matches between candidates and banks, these matches would be sub-optimal. Not only are banks making hiring decisions based on fewer semesters of performance (GPA, extracurricular involvement, etc.), but they are also making these decisions without carefully considering all their options. Alternatively, the students fortunate enough to receive offers often have to make decisions within a short time frame (exploding offers), which forces them to take an undesirable risk. All parties would benefit if the recruiting process were changed.
This kind of problem is not new -- it has existed in the market for judicial clerkships (law students applying to be clerks) and in the market for residents (medical students applying for residency positions). In the past, this issue has been solved with some sort of universal regulation/rule or algorithm, which I think might work in this case.
Any thoughts on this issue and potential solutions?
