The labour market is turning into a workers’ market

Die Schweiz ist bereits seit mehreren Jahren von einem zunehmenden Arbeitskräftemangel betroffen. Im Vordergrund stehen dabei nicht konjunkturell bedingte Schwankungen, sondern strukturelle Ungleichgewichte. Eine GDI-Studie identifiziert verschiedene Stellschrauben, die den Fachkräftemangel beheben können.
1 September, 2023 by
The labour market is turning into a workers’ market
GDI Gottlieb Duttweiler Institute

The following text is based on an extract from the GDI study "Strategies for dealing with the labour shortages", which can be obtained from our website.

The labour shortage is turning the labour market into a workers’ market. An increasing number of employees are free to choose who they want to work for. That means that employers are under pressure to make the employment conditions as attractive as possible, either through pay (market), flexible working conditions (organisation) or the purpose of the job (culture).

A high job attractiveness is indispensable for employers to fill vacancies. However, it is clear that increasing the job attractiveness will hardly alleviate labour shortages on a macroeconomic level. Insofar as partial aspects of work, such as flexible working hours or purpose of work, are not unique, one can hardly expect to bring many new people into the labour market. It is rather mainly relative advantages that a company has over its competitors, which, however, are lost the moment the competition catches up. Nevertheless, meeting the employees’ wishes is indispensable in a labour market – it is necessary on a business level, but not sufficient in macroeconomic terms.

Enhancing employer attractiveness with financial incentives

​The economic response to the scarcity of any good is increasing its price. Increasing wages is thus the most obvious measure against labour shortages. However, it is uncertain how many new workers this would bring into the market. But it would result in a market “shake-out”. Companies unable to pay higher wages fall behind, since employees would switch to companies where their labour is used more productively – at least that is the economic theory.

In 2021, the wage adjusted for purchasing power fell by 0.8% compared to 2020 according to the Federal Statistical Office. The wage decline amounted to almost 2% in 2022, based on the high inflation – despite labour shortages. It can, however, already be observed in the US labour market, that the lowest income brackets in particular are experiencing wage growth. The wage gap even seems to be closing slightly in the US since the pandemic. The reason is that since the pandemic, low-income workers have increasingly quit their jobs because of poor pay. The labour market is less dynamic in Switzerland. However, it is probable in the medium term that employees and thus wages will start to move and put employers under pressure. The preconditions are met since only about 50% of the respondents in the employee survey are satisfied with their wages.

Wages, however, are more than just the money transferred to the account on a monthly basis. They comprise additional benefits (e.g. GA travelcards, smartphone or fitness subscriptions), social benefits, but also working hours. Employees are facing the decision of whether they should pay for a smartphone subscription for their employees or pay them slightly more each month. Depending on individual needs, the same franc may, if invested in one place (e.g. social benefits) attract and retain employees more than when invested in another (e.g. additional benefits).

Learn more about employer attractiveness and possible measurements like a four-day week, flexibility and variety of work or health care issues in the study "Strategies for dealing with the labour shortage", conducted by the Gottlieb Duttweiler Institute on behalf of the Migros Group.

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