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Beggars cannot be choosers: The effect of labor market tightness on hiring standards, wages, and hiring costs

Author

Listed:
  • Carolin Linckh
  • Samuel Muehlemann
  • Harald Pfeifer

Abstract

This paper analyzes the relationship between labor market tightness and firms' hiring behavior. We use unique linked employer-employee data to show that firms lower their hiring standards in tight labor markets, but we find no evidence that firms increase the starting wages of new hires. Exploiting detailed data on pre- and post-match hiring costs, we find that both cost components increase with the degree of tightness in the labor market. However, as pre-match search costs make up only a small share of the total hiring costs, our results highlight the importance of the post-match hiring costs for firms' adjustment to tightness.

Suggested Citation

  • Carolin Linckh & Samuel Muehlemann & Harald Pfeifer, 2024. "Beggars cannot be choosers: The effect of labor market tightness on hiring standards, wages, and hiring costs," Economics of Education Working Paper Series 0217, University of Zurich, Department of Business Administration (IBW).
    • Handle: RePEc:iso:educat:0217
    as

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    More about this item

    Keywords

    Recruiting; Labor market tightness; Wages; Hiring standard; Hiring cost; On the Job Training;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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