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Question: Why do passive job seekers have an advantage over companies looking to hire?

Answer: Fear of making a hiring mistake is the driving force behind this practice. It leads to some employers judging job applicants by their employment status, although it has nothing to do with their talent or ability. It seems clear that part of what drives this fear is that the hiring manager does not trust their instincts.

Good jobs are often filled by the HR department or a recruiter asking someone employed if they would consider a change or finding a candidate that looks like a great match on LinkedIn, even though they are used to reaching out to them to consider the job. (Strong hint here, keep your profile current)

The employer assumes in these cases that they don’t need to worry about why the candidate left their last job and that the person must have value since they have a job. The employer puts themselves in a position of a buyer. They may overpay and find they don’t have all the necessary facts. A potential employee must present their case as part of a seller. They still decide on whether to take the job, but they also have to explain why they should get the job, and in the case of a company approaching a currently employed person, they have already taken the first step in the “buying” process.

These folks are called "passive candidates." They are only candidates for a job once someone from the employer reaches them.

Why would any employer prefer someone a recruiter finds on LinkedIn -- someone who may never have heard of your company -- to someone who has invested time and energy in contacting you to inquire about employment?

These issues bring the subject of loyalty into some focus. For example, will the employee a company steals or entices to leave their current employer be loyal to them? For example, would a potential employee who researched the market and determined that his best fit might be with a particular company is more dedicated to it because of the work it took to find that job?

Do you know if hiring ethics belongs in this discussion? I am reminded of a friend who told me he was hired away from another company around 1950. He was working for a company that sold to stores in San Francisco. He was well known, and the more significant competitor had been impressed by his work. Things changed for him at his company and he approached the leading competitor and was taken to the company president in his interview. My friend had taken a lot of their business and it was obvious that he would be a valuable new hire. The President saw it that way and hired my friend under a particular condition. The new hire was not allowed to call on any accounts, not just his own but any accounts in the area, for one year and was required to work in the warehouse. The reason was that the hiring company wanted to avoid exploiting their competitor. Non-compete clauses were not used at that time in this area and field, but company ethics, when practiced, were all that was needed. My friend stayed loyal to this company and their President throughout his career from that point forward.