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Scarce Workers, High Wages?

Author

Listed:
  • Börschlein, Erik-Benjamin

    (Institute for Employment Research (IAB), Nuremberg)

  • Bossler, Mario

    (Institute for Employment Research (IAB), Nuremberg)

  • Popp, Martin

    (Institute for Employment Research (IAB), Nuremberg)

Abstract

Labor market tightness tremendously increased in Germany between 2012 and 2022. We analyze the effect of tightness on wages by combining social security data with unusually rich information on vacancies and job seekers. Instrumental variable regressions reveal positive elasticities between 0.004 and 0.011, implying that higher tightness explains between 7 and 19 percent of the real wage increase. We report greater elasticities for new hires, high-skilled workers, the Eastern German labor market, and the service sector. In particular, tightness raised wages at the bottom of the wage distribution, contributing to the decline in wage inequality over the last decade.

Suggested Citation

  • Börschlein, Erik-Benjamin & Bossler, Mario & Popp, Martin, 2024. "Scarce Workers, High Wages?," IZA Discussion Papers 17447, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp17447
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    More about this item

    Keywords

    labor market tightness; wages; labor shortage; occupations; wage inequality;
    All these keywords.

    JEL classification:

    • 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
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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