Responses of Austrian Firms to a Decline in Demand – Results of a Company Survey

Based on a survey of around 560 Austrian firms conducted within Wage Dynamics Network (WDN) of the ESCB this study investigates how these firms respond to a decline in demand. About 80% of the firms surveyed report that they consider cutting costs a relevant or highly relevant measure in response to a demand shock. The interpretation of the responses suggests that such cost cuts mitigate, at least in part, the drop in output and thus tend to dampen the shock. Furthermore, 55% of firms stated that they would primarily cut nonlabor costs, while 45% would rather cut labor costs; also, firms would rather dismiss employees than cut their base wages. This attitude of Austrian firms can be mainly traced to their fear of declines in labor productivity.