Seminar: Wage concessions as an indicator for labour shortages?

Time: 13.00-14.00 hours
Location: CPB-office, Van Stolkweg 14, The Hague

Presentation: Judith Czepek (IAB)

Discussant: Anja Deelen (CPB)

Language: English

Registration:  Please register here

Abstract subject:
Rising wages are often understood as a reaction of firms towards a shift between labour demand and labour supply. Therefore, labour shortages may lead to an increasing probability for firms to pay higher wages than originally planned. Since firms may compensate only for anticipated shortages on the labour market, wage concessions probably turn out to be an inadequate indicator for labour shortages. Individual characteristics such as a high qualification or a long job experience of the candidate are reasons for higher wages. Supply-sided the firm’s size or low wages make wage concessions more reasonable. Additionally, difficulties in staffing may lead to wages being higher than originally planned. Our special feature is that we are able to observe different dimensions of labour shortages. Using more than one indicator allows us to distinguish between perceived labour shortages, experiences of unfilled vacancies, and the effective tightness of the labour market. Labour tightness is measured by the relation of occupationally specific supply and demand in West and East Germany. Results show that substandard payments increased wage concessions. The negative effect of above average payment disappeared controlling for labour shortages. Both, firm perception as well as market conditions played a role. Thus, it is indeed important to distinguish between subjective and objective grading of labour shortage. In line with the expectations, wage negotiation increased with ascending qualification. However, results showed no higher probability for better qualified workers if labour market tightness existed.

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