Title page 1

Contents 5

Abstract 6

1. Introduction 7

2. Labour shortages, productivity and investment: a bird's eye view 9

3. The effect of labour shortages on productivity growth: a growth accounting exercise 15

3.1. Within industry effects 17

3.2. Results 20

4. Labour shortages, job quality and wages 23

4.1. Labour shortages are more prevalent in low quality low wage jobs 24

4.2. Labour shortages negatively affect wage growth 26

4.3. Minimum wage increases can mitigate labour shortages 28

5. Conclusions 31

References 33

6. Annex A - The indetification of the effect of labour shortages on productivity growth 37

7. Annex B - Regression equations on wage part 45

Tables 26

Table 1. Within group effect of labour shortages on wage levels and job quality 26

Table 2. Dynamic effect of labour shortages on wage growth 27

Table 3. Labour shortage effects on wage growth 28

Table 4. Effect of minimum wage on labour shortages 31

Graphs 9

Graph 1. Labour market tightness in the EU 9

Graph 2. Labour shortages by sector decompositions 13

Graph 3. Robot intensity: effect of labour shortages - (Robot per 1000s of workers) 14

Graph 4. Productivity growth and its contributions: 2015-2021 16

Graph 4.1. Labour shortages and productivity growth 17

Graph 5. Effects of 1 pps increase in labour shortages 21

Annex Tables 41

Table A1. First stage regressions: effect on labour shortages (All economy) 41

Table A2. Second stage regression: effect on labour productivity and shortages 41

Table A3. Second stage regression: effect on labour productivity and shortages 42

Annex Graphs 42

Graph A1/Chart A.1. Effects of 1 pps increase in labour shortages that is mediated by high robot intensity 42

Graph A2. Labour shortages and productivity growth (2015-2021) 43

Graph A3. Impact of labour shortages according to different instruments (exposure fixed at 2015 shares) 43

Graph A4. Triple interaction 45