On the prevalence and intensity of labour shortages

Survey-based indicators of labour shortages are often based on the number of respondents that experience a shortage – the prevalence – overlooking the crucial element of shortage intensity. Using data from a large representative business survey in Sweden, this paper constructs an establishment-level measure of labour shortage intensity, by considering the number of positions in shortage and total employment at the establishment. According to the data, the average intensity of labour shortages has decreased by 32% since 2007. A new aggregate indicator of relative labour shortages (RLS) that accounts for both the average intensity and prevalence of labour shortages indicated more subdued labour market conditions in Sweden during the recovery from the Great Recession and the COVID-19 pandemic than other indicators. Failing to account for the decline in the intensity of labour shortages mostly affects labour shortages in industry and less in services sectors.