Price and quantity adjustments in the Austrian labour market

Austria is among the very few countries in the European Union which have managed to maintain comparatively low unemployment rates and high employment rates. In international comparison Austrian unemployment is very stable over the business cycle. This is mainly due to the high sensitivity of the labour force on cyclical conditions and, partly, also on the relatively weak responsiveness of employment to cyclical fluctuations in output, the latter being possibly attributable to the high degree of real wage flexibility in Austria. However, we also found evidence for outsider effects in the Austrian wage setting process stemming from the increased share of long term unemployed, which plausibly reflect human capital effects on reemployment possibilities for persons being unemployed for extended periods of time. Relative wage structures, on the other hand, appear to be rather rigid.