## Labor Market in Liechtenstein

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### A. Labor Market Characteristics: Cross-border Commuters and Foreign Nationals
- Liechtenstein is an export-oriented economy specializing in engineering and financial services.
- High reliance on non-resident workers: non-resident workers outnumber residents (Figure 1b).
- Commuters comprise the greater share of employment, particularly in higher-skilled occupations.
- Growth in commuters has led to employment exceeding population (Figure 1a) and the job market becoming more comprised of foreign nationals (Figure 2).
- The vast majority of commuters travel from Switzerland and Austria; the share of Swiss commuters has increased over time (Figures 1c, d).
- In recent years, eight out of ten vacancies have been filled by non-resident workers.

### B. Skills Mismatch and the Distribution of Wages
- Commuters are more likely than residents to be employed in higher-skilled occupations (Figure 3):
  - In the industry sector, 23 percent of commuters are engineers, compared to 13 percent of residents.
  - In the industry sector, 12 percent of commuters are construction workers compared to 29 percent of residents.
  - In the services sector, 21 percent of non-resident workers worked in financial services compared to 12 percent of residents.
- The need for skilled workers has led to a wage premium for commuters (Figures 3c, 3d).
- Implemented labor policy measures to upskill residents include:
  - promoting vocational training;
  - strengthening dual training;
  - promoting digital skills;
  - partnering with educational institutions to integrate digital content into training programs.
- Note: The categorization by level of skills is indicative; an alternate method yields similar qualitative results.

### C. Infrastructure Constraints and Productivity
- Despite the inflow of high-skilled labor, productivity has not grown; without imported skilled labor, productivity growth is likely to have been even lower.
- High traffic and congestion during peak commuting hours has become a much-discussed topic (Mobility Concept Report, 2030).
- Policy implication: continuing to invest in skills training and productivity-enhancing infrastructure is important to promote productivity and growth.
- Real GDP per capita decomposition highlights contributions of labor productivity and labor utilization (Figure 4).

### D. Increasing Labor Supply
- Aggregate labor supply has increased over time while the labor market has become tighter:
  - Labor force participation rate of residents increased to 77.8 percent in 2023 from under 74 percent a decade ago.
  - The unemployment rate declined and is now lower than the EU average and other comparator countries.
- Labor supply of women and older workers remains relatively low:
  - Labor force participation rate of women was 72.2 percent in 2023, more than 10 percentage points below that of men.
  - Participation rate of older workers was 56.6 percent in 2023.
- Unemployment and labor exit dynamics:
  - The unemployment rate of women is lower than that of men and has declined more over the past decade and a half.
  - Women may be more likely than men to leave the labor force if they cannot find a suitable job; household income distributions may make one salary sufficient in some households.
- Gender wage gap:
  - The gender wage gap averages around 14 percent, higher than the EU average.
  - The gap has decreased across the age distribution since 2006 but remains significant.
  - The gap rises with age and averages above 21 percent for female workers above age 45.
  - Taxable income of women tends to drop with age, while it keeps rising until age 60 for men.
  - Tertiary enrollment trends: percent of males enrolled declined from 58 percent in 2015 to 50 percent in 2022; percent of females increased from 42 percent to 50 percent over the same period.
- Legal framework: The Gender Equality Act seeks to ensure workplace equality, prohibiting discrimination based on gender, marital or family status, and pregnancy or maternity in employment relationships.

### E. Conclusion: Policy Recommendations and Planned Measures
- Persistent skill shortages across industry and services despite commuter growth.
- Implemented measures to upskill residents:
  - state-supported vocational training in new technologies and industry-specific skills;
  - a dual-training system linked to the private sector that includes courses in fintech and automated manufacturing;
  - a digital skills transformation program aimed to boost IT skills in finance and engineering;
  - programs promoting retraining for workers from other sectors into finance and engineering.
- Infrastructure development, including in cross-border transport, could reduce congestion and travel time for high-skilled commuters, leading to higher aggregate productivity.
- Further planned measures to upskill residents:
  - Centers to support R&D, fostering collaboration between business and education to prepare skilled workers for future technologies.
  - Further education for mechanical engineers on energy-efficient machines and in the financial sector for sustainable investments.
  - Training programs to enhance skillsets of older workers for new technological roles.
  - Collaboration with the EU and Switzerland in education and research to attract highly qualified specialists to Liechtenstein.
  - Further training in fintech, blockchain, cryptocurrencies, and automated advisory services.
  - Further training in automation, robotics, and additive manufacturing processes.
- Measures to address gender pay disparities and lower labor supply of women and older workers:
  - Actions recognized in the 2024 report “Measures to Increase Workforce Potential and Labor Force Participation” include offering flexible work options, extending parental leave for men, creating part-time positions aligned with qualifications, and supporting childcare facilities and expanding childcare options within schools.
  - Other suggested measures: greater public investment in childcare facilities, enhanced job re-training and integration programs for new mothers returning to the labor force.
  - Planned measures to promote older workers’ labor supply: extension of the retirement age, flexibility in work schedules, pre-retirement career counselling, encouraging longer employment within the public administration, and improving work environments for extended employment in later years.

*Source: IMF Selected Issues Paper SIP/2025/047, completed on March 5, 2025.*

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_Source: https://www.imf.org/-/media/files/publications/selected-issues-papers/2025/english/sipea2025047.pdf_