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

Carolin Linckh, Samuel Muehlemann and Harald Pfeifer

No 217, Economics of Education Working Paper Series from University of Zurich, Department of Business Administration (IBW)

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.

Keywords: Recruiting; Labor market tightness; Wages; Hiring standard; Hiring cost; On the Job Training (search for similar items in EconPapers)
JEL-codes: J23 J24 J31 J63 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2024-04
New Economics Papers: this item is included in nep-hrm and nep-lma
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Persistent link: https://EconPapers.repec.org/RePEc:iso:educat:0217

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