Are Skills a Constraint on Firms? New Evidence from Russia

The paper uses a unique survey of recruitment firms to look at how Russian firms perceive the supply of skills in the labour market and how well those skills match to their demand for labour. Firms invest significant amounts of time in search to fill vacancies and search time is unambiguously increasing in skills. These skill gaps are associated with significant wage premia and are perceived to have negative consequences for the output mix and productivity. A small job postings experiment also finds that search time increased yet further for activities considered relatively innovative. Further, using Russian Ministry of Labour data for all legal migrant applications in 2010 and matching the migrant to the sponsoring firm, we find that there is some – albeit limited - evidence of firms using migrants to address high skill shortages. However, the overwhelming majority of migrants are skilled or unskilled workers; a reflection of the low underlying rates of innovation and associated demand for high skill jobs.