In 1970, George Akerlof published a paper on the used car market, which later earned him the Nobel Prize. The logic goes like this. The seller knows what condition the car is in. The buyer does not. They only see external signs and understand that among the offers there are both good specimens and "lemons"—hidden junk. Unable to distinguish between them, the buyer is willing to pay an average price.
Then the most interesting part begins. For the owner of a truly good car, the average price is disadvantageous—so they leave the market. Those for whom the average price is a good deal remain, that is, the owners of worse cars. The average quality drops, buyers notice this, reduce their willingness to pay—and the cycle repeats. The market gradually washes out quality, without any malicious intent from anyone.
In the labor market, information asymmetry works both ways, and this makes the picture even more interesting.
From the employer's side: a candidate's real abilities are not directly visible. A resume and an interview are crude proxies. If a company does not know how to distinguish the level, it leans towards an "average" rate and average conditions. A strong candidate who knows their worth is not interested in such an offer—they simply don't consider it. Those for whom the offer is favorable remain in the applicant pool. The company concludes that the market is weak.
From the candidate's side, it is exactly the same. The real quality of the employer—the manager's adequacy, the state of processes, what happens after the probation period—is not visible at the entrance. The candidate sees a job opening, a website, a couple of interviews. Unable to distinguish a good company from a bad one, they factor in an average risk: they demand a salary premium "just in case," take longer to make a decision, and keep other options open longer. Meanwhile, a good company pays for the reputation of the market as a whole, rather than its own.
What helps: reducing asymmetry rather than fighting its consequences. On the employer's side, this means work samples and structured evaluation instead of intuition—they make the candidate's quality visible, allowing the company to pay differentiately rather than by the average. On the employer brand side—giving the candidate verifiable signals instead of promises: real access to the future team, honest feedback, specifics instead of wording about a "friendly team." What is valuable is what is expensive for a bad company to imitate.