shortage of skilled workers? “Counteract the scarcity through wage increases”

According to Ifo President Clemens Fuest, companies could counteract the shortage of skilled workers with higher wages and better working conditions. The economist explained that higher wages mean that workers are increasingly deployed where they are more productive. Wages and working conditions improved particularly where they were too low from a market perspective. If employees with low incomes benefit disproportionately, inequality also decreases.

"Precisely because there are signs of a demographically-related shortage in the labor supply, it is important to adapt to the shortage in terms of competition," wrote Fuest and Simon Jäger, directors of the Bonn Institute for the Study of Labor (IZA) in an essay.

The legislature could remove obstacles to competition and review short-time work, which may counteract a change of job. Reforms of the immigration system, childcare or spouse splitting should not be put on the back burner. "Above all, however, it is up to the collective bargaining parties themselves to counteract the shortage through wage increases where there is a shortage of workers," wrote the economic researchers.

According to Ifo company surveys, every second company sees itself restricted by the shortage of skilled workers. "From an economic point of view, there is a simple answer to scarcity: the price increase", or in the labor market the wage increase. Employees then moved to higher-wage, higher-productivity jobs. Some companies would have to withdraw from the market, some activities would be eliminated or automated. “In macroeconomic terms, however, this results in a profit. In addition, people with higher wages are more willing to take a job,” the researchers explained.

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