Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/237715 
Authors: 
Year of Publication: 
2021
Series/Report no.: 
ECB Working Paper No. 2576
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
Tight labour markets are usually accompanied by mounting wage pressures. Yet, in the past decade, wage growth has remained subdued despite the appearance of widespread labour shortages. This paper re-examines labour market conditions since 2007 through the lens of a novel indicator, relative labour shortages (RLS), based on data from a large representative business survey in Sweden. Four main results emerge from the analysis: (1), the time-series average of RLS suggested much weaker labour market conditions during the 2013−2019 recovery from the Great Recession and during the Covid-19 pandemic in 2020 than qualitative surveys or the vacancy-unemployment ratio. (2), the reason is that RLS contains a time-varying intensive margin of labour shortages not recorded in most surveys, which has been trending downwards since the Great Recession. (3), fixed-effects regressions with several aggregate-, sector, region and establishment-level controls confirm that RLS is strongly and positively correlated with annual wage growth at the establishmentlevel. (4), sector-level wage Phillips curves show that the subdued level of RLS can help explain the sluggish wage growth in Sweden since the Great Recession.
Subjects: 
Wage inflation
labour markets
survey data
JEL: 
C80
E31
E60
J23
J31
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-4762-6
Document Type: 
Working Paper

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