Model of Interactions Between Supply and Demand on the Labor Market

Abstract

The article assesses the relationship between labor demand and labor supply in Russia. Labor demand and labor supply are described by two sets (vectors) of indicators that drive their formation. The study model also includes labor migration, informal employment, and the labor force participation of the elderly as supply factors to fill the labor shortage and ensure the equilibrium of the labor market. The study is based on the statistics provided by Rosstat for 2006–2018 by Russian regions. The study found that, since 2014, there was a trend towards stronger relationship between labor supply and labor demand, which can be explained by a policy aimed at retaining skilled workers amid the lower labor cost, expectations of increased economic activity, and labor shortage due to demographic factors and migrant outflow. Russian labor market is adapting to the difficult macroeconomic environment by expanding its labor relations practices (such as underemployment) rather than by laying off workers. Inclusion of indicators in the model allowed to assess their impact on the interactions between labor demand and labor supply. Employment of the population aged 60–72 years old proved to be the most significant factor among all the indicators of supply and demand in the labor market, which points out to its high potential in ensuring a balanced labor market.