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The costs of hiring skilled workers

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  • Blatter, Marc
  • Muehlemann, Samuel
  • Schenker, Samuel

Abstract

This paper analyzes the structure of hiring costs for skilled workers. We use novel Swiss administrative firm-level survey data that provide direct and detailed measures of hiring costs, including recruitment and adaptation. Results show that average hiring costs range, depending on firm size, from 10 to 17weeks of wage payments. The structure of hiring costs is convex. Marginal hiring costs increase with the number of hires and reach up to 24weeks of wage payments. We find no evidence for a fixed cost component. Hiring costs also increase with the hiring rate (the ratio of hires and skilled workers), confirming convexity. Hiring costs generally increase with skill requirements for job applicants, and depend on macroeconomic conditions: a 1% point increase in the unemployment rate reduces average hiring costs by more than 5%.

Suggested Citation

  • Blatter, Marc & Muehlemann, Samuel & Schenker, Samuel, 2012. "The costs of hiring skilled workers," European Economic Review, Elsevier, vol. 56(1), pages 20-35.
  • Handle: RePEc:eee:eecrev:v:56:y:2012:i:1:p:20-35
    DOI: 10.1016/j.euroecorev.2011.08.001
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    More about this item

    Keywords

    Hiring costs; Labor adjustment costs;

    JEL classification:

    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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