top of page

Labour Market Tightness in Advanced Economies



A labour market is “tight” if vacant jobs are plentiful and available workers are hard to find. This is the kind of market we have in developed economies today.


A labour market is “tight” if vacant jobs are plentiful and available workers are hard to find. This is the kind of market we have in developed economies today. According to a recent article by McKinsey, this is not a pandemic-induced phenomenon. Rather, the labour market tightness continues a long-term trend that started in 2010, when advanced economies began their protracted recovery from the 2008 financial crisis.

What led to this situation and what consequences should businesses and job seekers expect?


Low Unemployment Rates


As of 2024, the unemployment rates in advanced economies continue to reflect the tight labour market conditions. The OECD's 2024 Economic Outlook indicates that unemployment remains at or near record lows in advanced economies. The International Monetary Fund (IMF) reported that the average unemployment rate across these economies was 4.7% in 2023, down from 5.5% in 2019. Countries like the United States, Germany, and Japan have consistently reported unemployment rates below 4%, indicating strong labour demand.

These figures underscore the persistent demand for labour despite various economic challenges (demographic challenges, productivity slowdowns, persistent inflation).

Low unemployment rates indicate a demand for workers, and it leads to the recruitment challenges for employers and driving innovation in HR technology sectors. Job boards and job aggregators like Jobsora.com are seeing increased demand for their services as businesses seek more efficient ways to attract and retain talent in a highly competitive market. 


High Job Vacancy Rates


Alongside low unemployment, job vacancy rates have risen. The Eurostat noted that the job vacancy rate in the European Union reached 2.5% in the fourth quarter of 2023, the highest since 2006. Increased job vacancies can constrain real economic output; they represent demand for goods and services that businesses are unable to fulfill. In seven of the eight countries (except Japan) unfilled job vacancies in 2023 were higher than in 2019, before the onset of COVID-19, when they were in turn higher than their median levels from 2010 to 2019.


Employee&Employer Perspective 


High job vacancy rates have several consequences for businesses. Firstly, they lead to increased recruitment costs as companies need to offer higher wages and better benefits to attract the limited pool of available talent. This can strain financial resources and reduce profit margins. Secondly, extended time-to-hire periods disrupt business operations and project timelines, leading to potential productivity losses. Thirdly, businesses often rely more on temporary or contract workers to fill gaps, which can result in higher operational costs and challenges in maintaining workforce stability. Additionally, high vacancy rates force companies to invest heavily in training and development programs to upskill their existing employees, further increasing operational expenses. These factors collectively hinder business growth and competitiveness in the labour market.


Employees may benefit from high job vacancy rates. This can lead to increased wage growth, greater job mobility, and improved career advancement opportunities due to the high demand for labour. This can empower workers to demand fair treatment and improved workplace policies. However, wage growth could be good news for individual workers in the short term, but it is concerning if employers have to put up prices to fund large pay rises, fuelling further inflation and harming living standards for everyone.


I believe technology and automation are mitigating the tight job market. Technologies like job boards or job aggregators improve the efficiency and accuracy of the hiring process through the matching algorithms that connect employers with suitable candidates faster. Automation also reduces administrative tasks, allowing companies to focus on strategic activities. 


Yes, there are several parties in this problem, and it is directly related to other job market challenges, such as skill mismatch, demographic challenges, and the rise of the gig economy. There will always be challenges, but the main thing is not to bring the situation with a tight labour market to a global economic crisis. 


Valentyn Peltek, CEO and Co-Founder at Jobsora 


Jobsora.com is an all-inclusive online job search platform created to connect job seekers with potential employers by providing a comprehensive and easy-to-use resource for discovering employment opportunities.


We operate in 36+ countries and are used by 20M candidates per month.

With a focus on improving the efficiency, personalisation and accessibility of the job search experience, Jobsora aims to change the way people approach the job search process, minimising the time and effort traditionally required.

bottom of page