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Help wanted: the drivers and implications of labour shortages

Author

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  • Groiss, Martin
  • Sondermann, David

Abstract

Labour shortages have become prevalent across advanced economies. Yet, little is known about which firms are more likely to face them and the impact they have on the labour market. We create a firm-level data set spanning 28 EU countries, 283 regions and 18 sectors, contributing to close this gap. We find that structural factors play the dominant role. Firms in regions with limited labour supply as well as innovative and fast-growing firms are particularly prone to face labour shortages. Moreover, shortages tend to aggravate at business cycle peaks. In a second stage, we empirically determine the impact of labour shortages on wages and hiring. Firms with higher shortages pay a wage growth premium to keep and attract workers, increasingly so if they face excess demand. At the same time, those are the firms that hire less than the average. JEL Classification: C36, E24, J20, J23, J30

Suggested Citation

  • Groiss, Martin & Sondermann, David, 2023. "Help wanted: the drivers and implications of labour shortages," Working Paper Series 2863, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20232863
    Note: 943715
    as

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    More about this item

    Keywords

    labour shortages; matching; shift-share instrument; tightness;
    All these keywords.

    JEL classification:

    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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