Scarce Workers, High Wages?

Erik-Benjamin Börschlein (), Mario Bossler () and Martin Popp ()
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Erik-Benjamin Börschlein: Institute for Employment Research (IAB), Nuremberg
Mario Bossler: Institute for Employment Research (IAB), Nuremberg
Martin Popp: Institute for Employment Research (IAB), Nuremberg

No 17447, IZA Discussion Papers from Institute of Labor Economics (IZA)

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.

Keywords: labor market tightness; wages; labor shortage; occupations; wage inequality (search for similar items in EconPapers)
JEL-codes: J31 J63 J64 (search for similar items in EconPapers)
Pages: 75 pages
Date: 2024-11
New Economics Papers: this item is included in nep-eur and nep-lma
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