Peter Diamond, Dale Mortensen, and Christopher Pissarides:
3 Share Nobel Economics Prize for Labor Analysis: The 2010 Nobel Memorial Prize in Economic Science was awarded ... to Peter A. Diamond, Dale T. Mortensen and Christopher A. Pissarides for their work on markets where buyers and sellers have difficulty finding each other, in particular in labor markets.
For decades, the researchers have studied what happens when ... workers have different skills and weaknesses, and where all companies have different types of jobs they need to fill. In many cases, there are significant search costs to finding the ideal match between a buyer and a seller of a good, like the job to a job-seeker.
Professor Diamond, 70, an M.I.T. professor and a nominee to the Federal Reserve Board who was effectively blocked by the Senate earlier this year, first developed a broad theoretical framework for studying markets with search costs in 1971. Professors Mortensen, 71, of Northwestern University, and Pissarides, 62, of the London School of Economics, later worked with Professor Diamond to apply the theory to the labor market in particular, and how government policy could improve the matching of workers to jobs. ...
The work is considered by many researchers to be particularly timely in today’s economic climate, in which many developed countries like the United States are facing stubbornly high unemployment rates. For example, the theory developed by the three economists has been used to try to design alternative unemployment benefit systems, and to determine how hiring and firing costs affect the unemployment rate.
In a telephone interview during the Nobel news conference in Sweden, Professor Pissarides said that he thought the work being honored had one lesson in particular for today’s policymakers: “What we should really be doing is make sure the unemployed do not stay unemployed for too long, to try to give them direct work experience,” so that they “don’t lose their attachment to the labor force.” ...
The last point about keeping people's "attachment to the labor force" through direct work experience is important, and policymakers haven't done nearly enough to make this happen.
Update: I have a few comments on their contributions, and quite a few links to other comments, at MoneyWatch.