Addressing Regional Labour Market Imbalances in Austria

1. Introduction

Abstract

This chapter provides a scene-setting introduction to geographic labour market imbalances in OECD countries. It then discusses the role of geographic mobility in reducing these disparities and examines how mobility policies can help jobseekers and workers broaden their job search radius and connect with a wider set of employment opportunities. The chapter then applies this reasoning to the current context of regional labour market differences in Austria and presents the rationale for policy interventions that address individual, structural and institutional barriers to better connect workers and jobseekers with high-demand regions across the country.

In many OECD countries, there are large regional differences in the number of jobseekers relative to available job vacancies. In 2022, 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. These differences in the balance between jobseekers and employment opportunities can arise 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. The combination of these factors also determines the unemployment rates observed across regions within the same country. In OECD countries, the average gap between the regions with the lowest and highest unemployment rates was 4.3 percentage points in 2024.

Geographic mismatches between labour supply and demand can have negative consequences for the economy, workers and public finances. In regions with few jobseekers, employers often struggle to fill vacancies, resulting in labour shortages that constrain productivity and growth. Conversely, in areas with limited job opportunities, jobseekers face greater competition for jobs, resulting in longer unemployment spells, foregone earnings and increased reliance on Public Employment Services (PES). These imbalances also place pressure on public finances, as social protection systems must absorb the higher costs associated with unemployment in regions with excess labour supply.

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. Place-based policies that stimulate labour demand, such as spatially targeted investment subsidies, tend to raise employment most where a high share of the population has historically been out of work (Austin, Glaeser and Summers, 2018[1]). Regional differences in unemployment within countries are often persistent over time, providing a strong rational for place-based interventions (Manning and Petrongolo, 2017[2]). Evidence from OECD countries indeed shows that place-based policies can have positive effects on employment, though their impact on labour productivity is often limited (Criscuolo et al., 2022[3]). Place-based employment policies can be particularly useful in cushioning the effects of regional economic shocks (OECD, 2025[4]). In addition to these policies that aim to create opportunities, supply side intervention can help when jobseekers’ skills do not match the requirements of available local vacancies. Finally, policies that encourage mobility can be most 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. Mobility-promoting policies can also complement place-based efforts by encouraging workers to relocate to targeted regions, thereby strengthening the impact of local development strategies.

A mobile workforce can bring substantial benefits to both workers and the economy, but it also carries risks of deepening regional and social inequalities when mobility flows concentrate towards economic hubs and urban centres. Mobility enables jobseekers to search for employment where opportunities exist, improving the quality of labour market matches and mitigating both structural imbalances and temporary disruptions caused by local economic shocks. Encouraging workers to move to catching-up regions can also support national development strategies that promote more balanced economic growth. Workers themselves benefit from mobility, as expanding the job search to more distant locations increases income prospects, shortens unemployment spells and helps prevent skill depreciation. However, mobility can exacerbate regional disparities if workers predominantly relocate to booming regions or if mainly high-skilled individuals move (Cavalleri, 2021[5]; Diamond and Gaubert, 2022[6]). For receiving regions, unidirectional inflows of workers can generate congestion pressures in urban centres, straining transport, housing and public services (Buchholz, 2022[7]; ITF, 2021[8]; OECD, 2023[9]). Regions losing skilled workers risk being left behind, with potentially adverse economic and social consequences (OECD, 2025[10]; Pike et al., 2024[11]).

Across the OECD, the vast majority of workers search for jobs only within their local labour market, even though causal evidence shows that mobility can expand employment opportunities and raise earnings. Studies consistently find that labour markets are highly local and that job search intensity declines sharply with distance. For example, in the United States, jobseekers are 35 percent less likely to apply to a vacancy ten miles from their home zip code (Marinescu and Rathelot, 2018[12]). In England and Wales, the probability that a random job five kilometres away is preferred to a random local job is only 19 percent (Manning and Petrongolo, 2017[2]). This pattern contrasts with causal evidence, often exploiting natural disasters as exogenous shocks to mobility, which almost uniformly shows that individuals who migrate within their country subsequently experience higher earnings and employment rates than those who remain in place (Jia et al., 2023[13]).

Many people do not move for employment because the potential employment and wage gains from relocating often fail to outweigh financial and non-financial costs related to family ties, housing market frictions, the costs of job switching, and imperfect information about the destination. Analyses of location choice show that in addition to the monetary costs of moving itself, strong family and social networks create additional attachment to the place of residence (Mulder and Gillespie, 2024[14]). Preferences for local cultural amenities can also influence location choices, though generally less than employment opportunities (Niedomysl and Hansen, 2010[15]). The housing market plays a further role through several channels: high housing costs in opportunity-rich regions deter in-migration, particularly among low-educated workers, who may remain in declining areas where income opportunities are weaker but housing is cheaper (Ganong and Shoag, 2017[16]). Homeownership and “mortgage lock-in” also discourage mobility, especially during housing market downturns when property values fall below mortgage debt (Ferreira, Gyourko and Tracy, 2010[17]). Labour market factors add to these barriers. Changing jobs can involve losing firm-specific skills and knowledge, and dual-income households face the additional challenge of co-ordinating two careers (Molloy, Smith and Wozniak, 2017[18]). Finally, informational frictions limit awareness of job prospects elsewhere even when regional economic disparities persist (Schmutz and Sidibé, 2019[19]).

Policies to enable the geographic mobility of workers can be direct, through active labour market measures, or indirect, through mobility-enabling structural policies. Active labour market policies that directly support mobility generally fall into two categories: information provision and financial incentives (Jia et al., 2023[13]). Information provision aims to reduce informational frictions by making workers aware of job opportunities beyond their local labour market. Financial incentives include relocation allowances or moving subsidies that help offset the costs of moving. Targeted training programmes that prepare jobseekers and workers for employment in other regions can further complement these tools. Mobility-enabling structural policies create the conditions for a more efficient allocation of workers across regions, even if the promotion of internal migration is not their primary goal. Such policies include housing measures that improve affordability, investments in physical and digital infrastructure that expand feasible commuting distances, nationwide provision of affordable public services such as childcare and elderly care that allow families to relocate, welfare systems whose generosity does not unduly discourage moving, and national asylum and migrant reception policies that support the integration of migrants and refugees into labour markets across the country.

Geographic labour market disparities in Austria – a strong case for mobility-enabling policies

In Austria, pronounced geographic labour market imbalances make a strong case for mobility-enabling policies. Jobseekers are heavily concentrated in Vienna, where unemployment among individuals aged 15-64 reached 9.5% in 2024, 6.3 percentage points above Salzburg, the region with the lowest rate. Regional unemployment disparities are also significantly higher than the OECD average of 4.3 percentage points. Approximately 40% of all Austrian jobseekers, or around 111 000 individuals, reside in Vienna. The city also shows the lowest labour market tightness in the country, with 85% fewer vacancies per unemployed person than Salzburg, Austria’s tightest region. Among capital regions in the OECD, which are typically among the tightest labour markets compared to other regions in the country, Vienna presents an outlier. At the same time, employers in western Austria face persistent labour shortages in sectors such as tourism, manufacturing and health. Supporting jobseekers to move from Vienna to regions with stronger labour demand would help fill these vacancies, advance regional development objectives outside the capital and ease pressure on public finances and services in Vienna. Importantly, potential destination regions in the West are less exposed to risks of congestion in housing, transport or public services, suggesting that well-designed mobility-promoting policies could generate clear economic and social benefits for both individuals and the Austrian government.

Affordable housing, a family-friendly environment, a large diaspora of immigrants and diverse cultural amenities attract many people, including jobseekers, to Vienna and indirectly hinder labour flows out of the city. Between 2004 and 2023, Vienna’s population increased by 23%, far outpacing the national population growth of 12%.1 Over the same period, Vienna’s real GDP grew by only 25% (Austria: 28%), indicating that high in-migration did not translate into significant gains in real GDP per capita.2 Relatively affordable housing, partly due to rent controls and a large social housing stock, acts as a pull factor and makes relocation to other regions less attractive (Causa and Pichelmann, 2020[20]). Compared with other Austrian federal states, Vienna offers a particularly family-friendly environment, characterised by relatively good availability of childcare services (Statistics Austria, 2025[21]). The city’s large immigrant diaspora continues to draw new arrivals through established communities that provide social, cultural and practical support to newcomers (OECD, 2018[22]). Although Austria allocates asylum seekers to federal states according to population shares, refugees can freely choose their place of residence once they receive full protection status, leading many to settle in Vienna. The city’s distinctive cultural amenities further strengthen its appeal (Hatz, 2008[23]).

Austria’s past efforts in cross-regional job placement have fallen short of substantially reducing the number of jobseekers in Vienna or mitigating labour shortages in the West. The Austrian Public Employment Service (Arbeitsmartkservice – AMS) Vienna has largely targeted the tourism sector, where employers can provide accommodation, and recognised refugees, who often lack formal qualifications, can fill lower-skilled roles. As a result, fewer than 10% of Vienna’s jobseekers are considered for cross-regional placement. Financial support to relocate, such as the distance allowance, has been too low to influence decisions effectively (Amior, 2024[24]; Caliendo, Künn and Mahlstedt, 2017[25]). Other initiatives, including cross-regional job fairs, application trips with AMS staff and training with out-of-region internships, have remained small in scale. Structural factors outside the remit of the Public Employment Service, such as regional differences in social benefits, housing conditions, childcare availability, work permits for non-EU3 third-country nationals and cultural amenities continue to concentrate jobseekers in Vienna and weaken efforts to rebalance labour markets across Austria.

The current Austrian government attaches significant importance to tackling geographic labour market disparities and aims to do so by increasing cross-regional job placements and addressing some of the underlying factors that currently lead to the geographic concentration of jobseekers in Vienna. 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 support geographic mobility. The government aims to intensify the AMS’s cross-regional job placement by optimising placement processes and strengthening support for jobseekers willing to move. Particular emphasis is also placed on better integrating refugees, who make up a large share of Vienna’s jobseekers, through a mandatory “Integration ab Tag 1” (Integration from day 1) programme, faster recognition of foreign qualifications and clearer co-ordination between the AMS and the Austrian Integration Fund (Österreichischer Integrationsfonds - ÖIF). The government further plans to reduce structural barriers to mobility by improving the attractiveness of rural and western regions through investment in public services, including childcare, education and transport infrastructure, and by harmonising the social benefit system to remove financial incentives to remain in high-benefit regions such as Vienna. Together, these measures aim to make relocation more feasible and appealing, helping to address the concentration of jobseekers in Vienna and better match labour supply with demand across Austria. Box 1.1 provides more details on Austria’s 2025-2029 government programme.

Box 1.1. Tackling geographic labour market disparities: a priority in Austria’s 2025-2029 government programme

Austria’s 2025 government programme includes a number of objectives that directly and indirectly relate to the geographic mobility of Austria’s workforce. Objectives include:

• Directly promoting the mobility of jobseekers: Strengthening cross-regional job placement by optimising Public Employment Service (Arbeitsmarktservice – AMS) placement processes to increase the geographic mobility of jobseekers.

• Measures that address geographic labour market disparities:

  • Enhancing the labour market integration of refugees through a mandatory integration programme “Integration ab Tag 1” faster and more transparent recognition of foreign credentials and a clearer distribution of responsibilities and resources between the AMS and the Austrian Integration Fund (ÖIF).

  • Aligning integration and job placement measures, recognising that both need to complement each other, particularly for refugees.

  • Reforming the social benefit system by introducing a harmonised national scheme (“Sozialhilfe NEU”) to reduce regional disparities in benefit generosity and remove incentives to remain in high-benefit regions such as Vienna.

  • Investing in public services and infrastructure in rural regions, including education, childcare and public transport, to improve living standards and increase the attractiveness of these regions for workers from other parts of the country.

  • Promoting affordable housing across Austria, for example by reintroducing the earmarking of housing subsidies (Wohnbauförderung).

Source: Government of Austria (2025[26]), Regierungsprogramm 2025-2029.

This report aims to support policymakers in addressing geographic labour market imbalances in Austria and in improving policies that enable labour mobility. It analyses the extent of internal mobility and commuting from an international perspective, and examines the main barriers to labour mobility in Austria with a particular focus on the movement of jobseekers from Vienna to the Western federal states. It identifies policy solutions by comparing Austria’s existing instruments with international good practices and academic evidence and by drawing on qualitative inputs gathered through focus group interviews with Vienna-based jobseekers and employers in Austria’s Western federal states, Tyrol and Salzburg (see Box 1.2). The report is structured as follows. Chapter 2 analyses the labour market in Vienna in both national and international perspectives, examines internal mobility and commuting patterns in Austria in an international context, and identifies barriers to labour mobility among jobseekers in Vienna. Chapter 3 reviews Austria’s legal framework and current policies aimed at enhancing geographic mobility and provides recommendations to strengthen these policies. Chapter 4 examines structural and institutional factors, including asylum, housing and welfare policies, that contribute to geographic imbalances in Austria’s regional labour markets, and outlines measures to reduce disincentives to a more efficient geographic alignment between workers and labour demand.

Box 1.2. Focus group interviews and employer interviews inform the analysis of this report

Focus Group Interviews

To complement the quantitative analysis on labour mobility barriers faced by jobseekers in Vienna and the potential of different mobility-enhancing policies, focus group interviews (FGIs) were conducted with a total of 14 jobseekers. Participating jobseekers were recruited based on several characteristics of the jobseeker pool in Vienna to gather inputs from a diverse group:

• Education: at most mandatory schooling (50%) and post-mandatory schooling (50%) completed.

• Migration background: Austrian-born individuals (25%), immigrants from the European Union (25%), and humanitarian migrants1 (50%).

• Gender: male (50%) and female (50%).

Participants further varied in socio-economic characteristics such as their age and professional experience. The interviews were held in Vienna. All participants were recruited in collaboration with the Austrian Public Employment Service (Arbeitsmarktservice – AMS). Participation was voluntary, and all respondents completed the interviews which lasted about two hours. The interviews were informal to encourage open conversations.

Employer interviews

Interviews with a total of ten companies based in Tyrol and Salzburg were conducted to enrich this report’s analysis with the employers’ perspectives on recruitment challenges and their experience with cross-regional hiring. The companies were recruited in collaboration with the AMS, which identified companies in Tyrol and Salzburg that operate in industries with strong labour shortages and that match the experience of jobseekers in Vienna. Labour shortages in Tyrol and Salzburg were identified based on the industries’ regional tightness (i.e. the number of vacancies per jobseeker in federal state). Ten employers from the following industries were recruited:

• Tourism, i.e. accommodation and food services (four companies)

• Health and care services (two companies)

• Manufacturing (three companies)

• Wholesale and retail trade (one company)

1. The term “humanitarian migrants” refers to recognised refugees, beneficiaries of subsidiary protection, and sponsored or resettled refugees and is used throughout this report (OECD, 2023[27]).

References

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Notes

← 1.  Population growth in Vienna calculated based on the OECD’s dataset “Population by age and sex – Cities and Functional Urban Areas (FUAs)”. Population growth in Austria calculated based on the OECD’s dataset “Historical Population Data”.

← 2.  Real GDP growth in Vienna based on the OECD’s dataset “Real gross domestic product (ROPI-adjusted for inflation) – Regions”. Real GDP growth in Austria based on the Eurostat dataset “Gross domestic product (GDP) and main components (output, expenditure and income)”.

← 3.  Throughout the report, the term non-EU nationals refers to individuals who are nationals of countries outside both the European Union (EU) and the European Free Trade Association (EFTA). References to the EU in this report are used in an extended sense and also cover the EFTA countries, i.e. Iceland, Liechtenstein, Norway and Switzerland.