The Shocking Impact of Job Vacancies on Your Business's Bottom Line

We've come across some interesting research* that delves into the financial impact of job vacancies on businesses. This study looks at job-posting data from the French government and information on firms' financial performance to provide valuable insights.

The researchers found that doubling the time needed to fill a job vacancy results in a 3 per cent drop in profits. Moreover, companies experiencing average hiring difficulties can expect a 5 per cent decline in sales. These findings highlight the significant impact of hiring challenges on a company’s growth, urging companies and policymakers to give this issue more attention.

Examining the Data

Ronchi and her coauthors used a comprehensive dataset, analysing job openings from every private firm in France between 2009 and 2017. They measured hiring difficulties by assessing the time taken to fill openings for various occupations within the same local labour market. They also looked at the “occupational mix” of each firm. For instance, if it becomes harder to hire mechanical engineers, a firm like Renault, which relies more on these engineers than Peugeot, would be more affected. By examining these differences, the researchers could quantify how changes in recruitment times for specific occupations impacted individual firms.

Calculating Hiring Difficulty Scores

The researchers derived an equation to produce a “score” (between 0 and 1) representing the hiring difficulty faced by each firm annually from 2009 to 2017. They then matched these scores against the firms’ balance sheets for the same period. This approach allowed them to directly relate hiring difficulties to firm performance.

Impact on Business Performance

The results were striking. A company with an average hiring difficulty score of 0.2 could expect a 5 per cent drop in sales and a 3 per cent decrease in profitability. Employment and capital investment also fell by 8 per cent, indicating that firms struggling to find workers couldn’t simply invest more in machinery as a substitute.

Variations Across Firms

Not all firms experience the same level of recruiting friction. The study found that labour-intensive firms, with a high ratio of employees to assets, faced more severe impacts, with negative effects on profitability and growth more than doubling. The effect was even more pronounced for specialised occupations such as nurses, IT engineers, and banking executives.

Implications for Policymakers

These findings show that hiring difficulties are a key determinant of growth and should be taken seriously. Policymakers should prioritise these challenges by increasing the local labour supply. Ignoring these issues could hinder economic growth, especially for productive, expanding firms.

Insights from Our Recruitment Experts

Our team at SF Recruitment believes this research underscores the importance of effective recruitment strategies. "In our 26 years of experience, we've seen firsthand how hiring delays can impact a company's performance," says Mike Lattimer, Managing Director at SF Recruitment. "This study offers concrete data to support what we've long observed—hiring challenges are a major obstacle to growth." We understand how hiring challenges can restrict your business's growth. Leveraging our market insights, recruitment experience, and extensive networks, we are here to support your business in overcoming these obstacles and achieving your growth potential. Let us help you navigate these challenges and thrive.

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*Insights from Economic Research by Thomas Le Barbanchon, Maddalena Ronchi, and Julien Sauvagnat:

For more detailed information on the research, please refer to the original study: CEPR Discussion Paper No. 17891.