Addressing Regional Labour Market Imbalances in Austria

In many OECD countries, there are large regional differences in the number of jobseekers relative to available job vacancies. Within OECD countries, the region with the tightest labour market offered on average more than five times as many vacancies per jobseeker as the region with the fewest job opportunities per jobseeker in 2022. These regional differences in the balance between jobseekers and employment opportunities can stem from factors such as the number and type of employers operating locally, how well the skills and characteristics of the local workforce match employers’ needs, and the extent to which workers are willing or able to move to regions where their skills are in higher demand.

Depending on the underlying causes of geographic labour market imbalances, governments can support workers in high-unemployment areas either by strengthening local employment opportunities or by helping workers move to regions with better job prospects. Respecting individuals’ right to stay in their communities, many OECD countries pursue place-based industrial and skills policies that create local job opportunities, help jobseekers acquire the skills needed to work locally, and support career transitions. Such policies are particularly relevant when regions face challenges such as declining industries, poor digital or transport infrastructure, or limited innovation capacity. They can also help when jobseekers’ skills do not match the requirements of available local vacancies. At the same time, evidence shows that geographic mobility can expand employment opportunities and increase earnings, particularly when workers’ skills are in high demand outside their region of residence. Policies that encourage mobility can be effective where clear geographic mismatches persist between high-unemployment and high-vacancy regions and where workers’ skills would be better rewarded elsewhere. In such situations, supporting the geographic mobility of workers can generate benefits for both individuals and public finances.

In Austria, unemployment is high in Vienna, while labour demand is strong in other parts of the country, particularly in the Western federal states. In 2024, Vienna’s unemployment rate among individuals aged 15-64 stood at 9.5%, 6.3 percentage points above Salzburg, the federal state with the lowest rate at 3.2%. To put this into perspective, although Vienna accounts for only 22% of Austria’s population, it is home to more than 40% of all jobseekers, roughly 111 000 individuals, reflecting relatively low labour demand, with only 0.2 job vacancies per jobseeker compared with 1.3 in Salzburg.

Many job vacancies in other parts of Austria match the skills and experience of Vienna’s jobseekers but relatively few people leave the capital for work. OECD estimates show that a large share of jobseekers from Vienna could be matched with suitable positions elsewhere in Austria based on their industry experience and education. This share ranges from 20% of Vienna’s jobseekers in a conservative scenario, in which all jobseekers across Austria who are registered with the Austrian Public Employment Service (Arbeitsmarktservice – AMS) are first matched with suitable local positions, to 67% in an upper-bound scenario, in which jobseekers from Vienna are matched with vacancies elsewhere regardless of whether vacancies can be filled with local jobseekers. However, in 2024, only 16% of jobseekers registered with the AMS in Vienna took up employment outside Vienna’s city core, which constitutes Vienna’s labour market district. In other parts of Austria, by contrast, 67% of jobseekers accepted jobs outside their labour market district.

Despite stronger employment prospects outside the capital, Vienna’s population continues to grow rapidly, while real GDP per capita growth has remained modest. Between 2004 and 2023, the city’s population increased by 23%. This represents almost twice the national rate of 12%, driven mainly by international migrants, of whom 42% held a tertiary education degree in 2022, but also by continued positive net internal migration. Over the same period, Vienna’s real GDP grew by only 25% compared with 28% nationwide, suggesting that in-migration has not translated into significant productivity gains.

Promoting the geographic mobility of workers and jobseekers from Vienna into regions with high labour demand has become a priority of the Austrian government and the AMS, but efforts have so far fallen short of their objectives. Large population pressures in Vienna, a high number of jobseekers whose skills do not match available local vacancies, and persistent labour shortages in Austria’s Western federal states have led the Austrian government to introduce policies that promote geographic mobility. Initiatives to encourage mobility have focused mainly on providing information to jobseekers in Vienna about job opportunities elsewhere and on offering financial relocation incentives. The AMS targets jobseekers in Vienna with prior experience in the tourism industry and recognised refugees to fill vacancies in tourism in the Western federal states, where labour shortages are acute. The AMS focuses on the tourism industry because it can sanction the refusal of a job offer requiring relocation only if the employer provides accommodation, which is mostly the case in the tourism industry. In addition, jobseekers with health-related limitations or care responsibilities are excluded from cross-regional matching, resulting in a very narrow target group. Fewer than 10% of jobseekers in Vienna are currently identified as potential candidates identified by the AMS’s Centre for Cross-Regional Placement (Überregionales Vermittlungszentrum). While information on interregional job opportunities exists, it is spread across multiple AMS platforms, which makes it challenging for jobseekers to access all relevant details when exploring employment in another region. Financial incentives, such as the discontinued relocation support (Übersiedlungsbeihilfe), which provided lump-sum payments to incentivise moving, and the current distance allowance (Entfernungsbeihilfe), which subsidises commuting or secondary housing expenses, have targeted low-wage workers and have seen very low take-up, a common challenge in comparable OECD programmes targeting low-wage workers with limited willingness to relocate.

The availability of social housing as well as family and welfare policies are contributing to Vienna’s relative attractiveness, discouraging out-migration. Vienna’s relatively extensive social housing supply accommodates 42% of its residents, at least twice the share in any other federal state, including those with other large urban centres (except for Styria with 22.3%). Evidence shows that affordable social housing can create lock-in effects, particularly for low-wage workers, as relocating may mean losing access to subsidised housing if similarly affordable options are not available outside the capital. In Vienna, families receive substantially greater public support than in other parts of Austria, regardless of parents’ employment status. Vienna offers the most generous childcare provision in the country, with free full-day childcare for children under six, while most other federal states only provide free half-day childcare for specific age groups. Similarly, social welfare benefits for families with children are considerably higher in Vienna than elsewhere. For example, families with four children entitled to social benefits (Sozialhilfe) receive a maximum amount of 2 996 EUR per month in Vienna (disregarding housing allowances), the most generous federal state, compared to 2 297 EUR in Upper Austria as of 2025. The social benefit amounts received in practice, including partial benefit reception, reflect these differences as families with four or more children received an average of EUR 1 797 in Vienna compared with EUR 1 041 in Upper Austria in 2025.

Strong diaspora networks lead a large share of humanitarian migrants to settle in Vienna, despite better employment prospects in other parts of Austria. Although the initial dispersal system allocates asylum seekers to federal states according to their population share, placing only 15% in Vienna, around 78% of all humanitarian migrants ultimately settle in the capital once protection is granted. Among humanitarian migrants, defined as all migrants who have obtained refugee status or another recognised protection status, who arrived in 2015 and later moved from the Western federal states to Vienna, around 60% of working-age individuals were employed in 2023, compared with 80% of those from the same arrival cohort who moved from Vienna to another federal state.

To address challenges related to geographic labour market disparities and encourage worker mobility to high-demand areas, the Federal Ministry for Labour, Social Affairs, Health, Care and Consumer Protection and the Austrian Public Employment Service, AMS, could support jobseekers in moving from Vienna to regions with stronger labour demand, advance regional development objectives outside the capital and ease pressure on public finances and services by considering the following policies:

• Expand target groups among jobseekers for cross-regional job placement: Rather than restricting its efforts to those suitable to work in the tourism industry, the AMS’s Centre for Cross-Regional Placement in Vienna could extend its activities to all jobseekers who have recently moved to the capital, excluding those with care obligations or health limitations. The requirement for employers to provide accommodation for those classified as suitable for cross-regional job placement could be lifted to broaden the range of industries eligible for placement. In the tourism industry, however, relocation would likely still need to be linked to employer-provided accommodation, as the remoteness of many employers and the high cost of housing in tourist destinations make it difficult for jobseekers to secure accommodation independently.

• Enhance information provision and co-ordination on cross-regional job placement through an integrated one-stop platform and expanded outreach activities: Drawing inspiration from OECD countries such as Canada, the AMS could consolidate its existing online tools into a single, user-friendly platform providing information on regional labour markets, occupations, skills needs and available financial support. Integrating services such as the job barometer (JobBarometer), job information system (Berufsinformationssystem) and career compass (Karrierekompass) would lower search costs. Cross-regional job fairs and company visits could be expanded beyond tourism and better co-ordinated between AMS branches to improve job matching and reduce uncertainties about distant job opportunities.

• Re-design financial mobility support to better incentivise moving for different groups of workers and geographic distances: Drawing on lessons from OECD countries such as Australia and Sweden, financial assistance could be structured around two components: reimbursement of actual relocation costs to improve cost efficiency and a tiered financial incentive. Reimbursing real moving costs, rather than providing fixed amounts, would increase cost efficiency and better reflect the distance moved, while payment through vouchers or direct supplier transfers could reduce liquidity constraints. A second, tiered incentive component could vary by regional labour demand and be disbursed in stages to promote long-term employment outcomes. For workers placed in low-wage jobs in other regions, the level of financial support would need to be raised substantially to increase take-up, as low-wage workers typically do not benefit from a high wage premium through a better skills match when relocating.

To address geographic labour market disparities in the long term and incentivise worker mobility to high-demand areas, Austria could, through co-ordination across ministries and levels of government, tackle the institutional and structural factors that contribute to persistent regional imbalances by considering the following recommendations:

• Increase the supply of social housing in high-demand areas outside Vienna and mitigate the lock-in effect in the social housing system: Increasing the supply of social housing in regions outside Vienna through a more widespread use of social housing provisions in new real estate development agreements could represent a cost-effective way to contribute to making housing comparably affordable. To make the social housing system more mobility-friendly, residency or queuing requirements could be waived for employment-related moves across federal states, while those who move for employment could be granted the right to return to social housing in their home region within a defined period.

• Seek to harmonise family-related social policies across Austrian federal states to decrease the incentive to relocate to Vienna: Expanding affordable full-time employment-compatible childcare in other federal states by extending opening hours and coverage would support working parents who reside there as well as facilitate interregional mobility. In parallel, efforts to better harmonise child-related social benefit entitlements across federal states, so that allowances for each additional child are roughly equivalent for any given family size would also help align non-employment-related relocation incentives. Adapting the child-related allowances to a regional housing cost index would account for regional differences in housing affordability.

• Better integrate humanitarian migrants into the labour market in other regions of Austria to reduce non-employment-related secondary movements to Vienna. Austria could draw on the Swedish model by incorporating regional labour market conditions into the quota-based dispersal of asylum seekers, while ensuring that all federal states have the administrative and housing capacity to host their allocated share. To further support the efficient labour market integration of humanitarian migrants, Austria could further draw inspiration from practices in Germany and limit the relocation of humanitarian migrants to regions with already high concentrations of this group, while still permitting relocations for employment purposes. In parallel, asylum seekers with a high probability of receiving protection could be granted access to integration courses sooner after arrival to strengthen their employability and facilitate earlier labour market entry in their first location of residence.