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How Do Firms Respond to Hiring Difficulties? Evidence from the Federal Reserve Banks' Small Business Credit Survey

Author

Listed:
  • Mels de Zeeuw
  • Ellie Terry

Abstract

Using data from the Federal Reserve Banks' 2017 Small Business Credit Survey (SBCS), this paper investigates the various ways in which different types of firms with less than 500 employees experience and address hiring difficulties, including when they decide to increase compensation. {{p}} The authors find significant variation in hiring difficulties by type of firm, and a firm's response appears to depend on the nature of the problem. The most common response is to increase compensation, with firms that experience competition from other employers being the most likely to do so. Other common responses were to engage in nonproduction activities?like training and job restructuring?that may boost longer-run productivity. {{p}} The results provide insight for policymakers trying to understand the linkage between compensation, labor market tightness, and productivity. Further, the variation in hiring difficulties across firm industry, education requirement, and geographic location informs economic and workforce development practitioners and policymakers working to develop targeted interventions.

Suggested Citation

  • Mels de Zeeuw & Ellie Terry, 2018. "How Do Firms Respond to Hiring Difficulties? Evidence from the Federal Reserve Banks' Small Business Credit Survey," FRB Atlanta Community and Economic Development Discussion Paper 2018-1, Federal Reserve Bank of Atlanta.
    • Handle: RePEc:fip:fedacd:2018-01
    DOI: 10.29338/dp2018-01
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    File URL: https://www.frbatlanta.org/-/media/documents/community-development/publications/discussion-papers/2018/01-how-do-firms-respond-to-hiring-difficulties-2018-06-07.pdf
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    Cited by:

    1. Bertheau, Antoine & Larsen, Birthe & Zhao, Zeyu, 2023. "What Makes Hiring Difficult? Evidence from Linked Survey-Administrative Data," Discussion Paper Series in Economics 20/2023, Norwegian School of Economics, Department of Economics.

    More about this item

    Keywords

    small business; labor markets; hiring difficulty; wages;
    All these keywords.

    JEL classification:

    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • 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
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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