{"paper_id":"121df1a7-e62e-4a60-8525-da8672a8cc08","body_text":"Labor Shortages and the Quality of Working Life: Workplace and Household Dimensions from Matched Employer–Employee Data in Japan | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article Labor Shortages and the Quality of Working Life: Workplace and Household Dimensions from Matched Employer–Employee Data in Japan Kazuma Sato This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-7904928/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract In recent years, tightening labor markets across several OECD countries have given rise to widespread labor shortages. Although such shortages are often associated with favorable outcomes, including higher wages, they also coincide with heavier workloads and longer working hours, which may compromise physical and mental health and lower job satisfaction. This study investigates the relationship between labor shortages and job satisfaction using Japanese matched employer–employee data that allow for the identification of shortages at the firm level. Our analysis yields four key findings. First, a consistent negative association is observed between labor shortages and job satisfaction across OLS, ordered logit, matching estimators, and instrumental variable methods. Second, the adverse patterns emerge most clearly when shortages continue for at least two years, indicating that prolonged shortages tend to accumulate pressures that eventually diminish job satisfaction. Third, declines in job satisfaction are most pronounced when shortages are linked to organizational shortcomings—specifically, limited review of business processes and insufficient investment in labor-saving technologies and rationalization measures. Fourth, employees in shortage-exposed firms report longer working hours, fewer opportunities for rest during breaks and leisure activities, and reduced time spent with family at dinner. JEL classification codes : J21; J28 labor shortage job satisfaction matched employer-employee data Figures Figure 1 Figure 2 1. Motivation Labor shortages have attracted growing attention across OECD countries in recent years. Causa et al. ( 2025 ) examined this phenomenon and documented significant labor shortages in the United States, the United Kingdom, Austria, Japan, and Germany. Since 2021, the United States and Germany have experienced persistent labor shortages, with labor demand exceeding labor supply. Similarly, the United Kingdom, Austria, and Japan have seen labor supply and demand converge or labor supply fall short of demand, intensifying their labor shortage challenges. Those countries also show high vacancy-to-unemployment ratios, which suggest the labor market tightness 1 . Labor shortages have both positive and negative consequences. On the positive side, tight labor market conditions can raise wages for newly hired workers 2 . Brunow et al. (2022), for example, analyzed labor market tightness in Germany and found that workers who entered the labor market under tighter conditions experienced greater wage growth than those starting in more relaxed markets. Similarly, evidence from Japan indicates that rising posted wages in a tight labor market are associated with higher average wages for regular employees (Furukawa et al., 2025 ). Additionally, Adrjan and Lydon ( 2019 ) measure labor market tightness using the number of clicks per job posting and demonstrate that both wage levels and wage growth rates are significantly higher in tight labor markets. On the negative side, however, labor shortages often increase working hours for those who remain employed, particularly in industries most affected by shortages. A tight labor market can therefore lead to heavier workloads, longer hours, and greater physical and emotional strain (Causa et al. 2025 ). These burdens are likely to undermine job satisfaction, yet empirical research directly examining this channel remains limited. However, it is essential to examine the relationship between labor shortages and job satisfaction from three perspectives. First, research in this area remains limited. While a substantial body of work has examined the relationships between income, working hours, and job satisfaction, relatively few studies have investigated the role of labor shortages, which have only recently emerged as a significant issue. For instance, Causa et al. ( 2025 ) documented a negative association between labor shortages and both physical and mental health, but did not examine their impact on job satisfaction. Similarly, Clark ( 2003 ), Clark et al. ( 2010 ), and Shields et al. ( 2009 ) analyzed the relationship between aggregate unemployment and well-being, relying on regional or national unemployment rates. However, they interpreted aggregate unemployment primarily as a measure of social stigma rather than as an indicator of labor market tightness. More broadly, existing research on labor shortages has focused on their effects on wages (Börschlein et al., 2024 ; Brunow et al., 2022 ; Domash and Summers, 2022 ; Furukawa et al., 2025 ), firm production (Le Barbanchon et al., 2023 ; Acemoglu and Restrepo, 2017 ; Acemoglu, 2010 ), and technology adoption (Lipowski, 2024 ; San, 2023 ; Acemoglu and Restrepo, 2022 ). In contrast, the relationship between labor shortages and job satisfaction remains largely unexplored. Second, labor shortages may create ripple effects through their influence on job turnover and mobility. Job satisfaction is closely linked to workers’ turnover and job-changing behavior (Akerlof et al., 1988 ; Clark et al., 1997; Freeman, 1978 ). If reduced job satisfaction due to labor shortages leads to higher turnover, this could trigger a vicious cycle in which shortages become even more severe. Third, concerns arise from the long-term nature of labor shortages. In several OECD countries, demographic changes—such as declining birth rates and population aging—have reduced the working-age population, suggesting that labor shortages are unlikely to ease in the short term. To design effective policy responses, it is therefore urgent to clarify the relationship between labor shortages and job satisfaction. This study investigates the relationship between labor shortages and job satisfaction in Japan, a country currently facing severe labor supply constraints. Our contribution to the literature is threefold. First, we employ matched employer–employee data that allow us to identify labor shortages at the firm level. Specifically, we use the Survey on the Current Situation and Working Styles Surrounding Labor Shortages , conducted by the Japan Institute for Labor Policy and Training (JILPT). This dataset combines information from both company surveys and surveys of full-time employees, making it possible to capture the presence or absence of labor shortages within each firm. Unlike prior studies such as Clark ( 2003 ), Clark et al. ( 2010 ), and Shields et al. ( 2009 ), which relied on aggregate measures of labor market tightness, our approach focuses directly on the firm where the employee works. Second, we examine the heterogeneous effects of labor shortages by incorporating information on both the timing and the causes of shortages. When assessing the impact of labor shortages, it is insufficient to consider only whether a shortage occurs; the duration of the shortage also matters. Short-term shortages can often be managed by adjusting the working hours of existing employees. By contrast, prolonged shortages are more difficult to address in this way and may ultimately reduce job satisfaction by worsening working conditions. The causes of labor shortages are equally important. If shortages arise from economic recovery or strong business performance, the resulting sense of vitality within firms may mitigate their negative effects on job satisfaction. However, if shortages stem from rising employee turnover or difficulties in recruitment, the work environment and interpersonal relationships are likely to deteriorate, increasing the risk of a decline in job satisfaction. Third, we employ two measures of job satisfaction, together with related indicators such as monthly working hours, mental separation from work during breaks, relaxation during breaks/leisure time, sufficient leisure time for recovery, and weekday family dinner time, to provide a comprehensive assessment of the consequences of labor shortages. Labor shortages in the workplace can also be related to family life, which is closely linked to overall well-being (Argyle 2001 ). They often lead to longer working hours, reducing both rest time and time spent with family. This dynamic may contribute to lower job satisfaction and should therefore be taken into account when analyzing the broader consequence of labor shortages. Our analysis yields four key findings. First, firm-level labor shortages are negatively associated with workers’ job satisfaction. This result is robust across estimation methods, remaining consistent when using OLS, ordered logit, matching estimators, and instrumental variable (IV) methods. Moreover, the negative association is particularly pronounced among male workers, those without a university degree, married individuals, and those who have children. Second, the results concerning the timing of labor shortages indicate that no significant association is observed when shortages have lasted less than two years. However, job satisfaction declines significantly when the labor shortage lasts for at least two years. This suggests that short-term shortages can often be absorbed through temporary adjustments, but prolonged shortages lead to an accumulation of burdens, ultimately reducing job satisfaction. Third, analysis of labor shortage causes reveals that job satisfaction declines significantly when shortages stem from failure to review business processes and insufficient investment in labor-saving and rationalization measures. Fourth, workers in firms facing labor shortages are more likely to experience longer working hours. They are also less likely to take time to relax during breaks or leisure, and are less likely to have dinner with their families. 2. Literature review 2.1 Theoretical background Labor shortages can influence employees’ well-being through several interrelated mechanisms grounded in both labor economics and household economics. Following Becker’s ( 1965 ) time allocation framework, individual utility depends on the trade-off between market work, leisure, and home production. When firms face persistent labor shortages, the workload borne by existing employees typically increases, reducing the time available for leisure and household activities. This reallocation of time away from non-market domains lowers overall well-being, even when wages remain unchanged. Beyond this basic time–utility trade-off, labor shortages can heighten job demands and psychological strain. According to Karasek’s ( 1979 ) job strain model, greater job demands—arising from longer working hours and intensified workloads—elevate stress levels and thereby diminish job satisfaction. In this context, a persistent shortage of labor functions as a structural constraint that sustains excessive workloads and undermines employees’ ability to psychologically detach from work. Empirical evidence from Hamermesh and Lee ( 2007 ) supports this mechanism, showing that time pressure and work intensity contribute to stress and fatigue. Collectively, these dynamics suggest that the consequences of labor shortages extend beyond productivity concerns, encompassing deterioration in both subjective well-being and job satisfaction. From the perspective of household economics, the effects of workplace strain often spill over into the family domain. Hildenbrand et al. (2024) and Noda ( 2020 ) emphasize that work–family balance is a critical determinant of life satisfaction and overall welfare. When long working hours and sustained stress reduce the time and energy devoted to family interactions, the resulting deterioration in family life may further weaken job satisfaction. This phenomenon, known as “workload spillover” (Bolger et al., 1989 ; Westman, 2001 ), has been empirically documented: excessive work demands disrupt family relationships (Frone, 2003 ; Ilies et al., 2007 ), while family strain in turn undermines work engagement and performance (Frone, 2003 ; Westman et al., 2008 ). Taken together, these theoretical insights imply that the relationship between labor shortages and job satisfaction should be understood as a multidimensional process linking workplace strain, impaired recovery, and reduced family well-being. 2.2 Empirical analysis Job satisfaction has been the focus of considerable scholarly inquiry, yet it continues to warrant attention for two principal reasons. First, it constitutes a salient indicator of the utility that individuals derive from employment, and the measurement of this utility offers valuable guidance for policymaking (Clark and Oswald, 1996 ; Clark, 2005 ; Van Praag and Ferrer-i-Carbonell, 2004 ). Second, job satisfaction is intrinsically linked to employees’ turnover intentions, organizational commitment, and firm-level productivity. Accordingly, a thorough understanding of its determinants provides critical insights for firms (Akerlof et al., 1988 ; Clark, 2005 ; Freeman, 1978 ). Little research has examined the relationship between firm-level labor shortages and job satisfaction. However, several studies have investigated the association between national or regional unemployment rates and well-being (Clark, 2003 ; Clark et al., 2010 ; Shields et al., 2009 ). These studies employ unemployment rates to examine social stigma effects rather than labor market tightness per se. For example, Clark ( 2003 ) analyzes how regional unemployment rates affect both employed and unemployed individuals using the British Household Panel Survey (BHPS). The study hypothesizes that in high-unemployment areas, the prevalence of joblessness reduces the social stigma associated with being unemployed. The empirical results support this hypothesis, demonstrating that unemployed men's well-being increases with higher regional unemployment rates. Similar findings have been documented across multiple countries, including the United Kingdom (Shields et al., 2005), Australia (Shields et al., 2009 ), South Africa (Powdthavee, 2007 ), Switzerland (Stutzer and Lalive, 2004 ), and Germany (Clark et al., 2008 ). Related research has examined the relationship between working hours and job satisfaction. Theoretically, longer working hours should reduce job satisfaction by decreasing leisure time and increasing physical fatigue. However, empirical findings are mixed: some studies find a negative association between working hours and job satisfaction(Clark 1996 ;Bender et al༎2005), while others report no significant relationship (Van Praag et al. 2003 ). In Japan, empirical findings remain inconsistent. Asano and Kenzyou (2012), using data from regular employees in Japan, the UK, and Germany, demonstrate that both satisfaction with working hours and life satisfaction decline with longer working hours. Conversely, Nomura ( 2018 ) finds no significant relationship between weekly working hours and job satisfaction, either linear or nonlinear. Other research suggests a U-shaped relationship between working hours and job satisfaction. Kuroda and Yamamoto ( 2019 ) propose that while job satisfaction initially decreases with longer hours, non-monetary job rewards—such as self-actualization and feelings of being valued—may eventually dominate. When these positive effects outweigh the negative impacts of long hours, job satisfaction can reverse direction and increase. Empirically, Kuroda and Yamamoto ( 2019 ) find that job satisfaction begins to rise when weekly working hours exceed 55 hours, confirming this U-shaped pattern. 3 Japanese context 3.1 The Context of Labor Shortages in Japan This study focuses on Japan, which provides a particularly compelling case for examining the implications of labor shortages for several reasons. First, among advanced economies, Japan has experienced one of the most pronounced declines in fertility alongside rapid population aging, resulting in a contraction of the working-age population. The working-age population peaked in 1995 and has since been in steady decline, while the total population reached its peak in 2008 and has continuously decreased since 2011. Over the past quarter century, these demographic trends have intensified constraints on labor supply, raising concerns about the sustainability of economic growth and contributing to persistent labor shortages. Second, unlike EU member states, Japan’s insular geography and marked linguistic and cultural distinctiveness create substantial barriers to immigration. Consequently, Japan faces a dual challenge: a shrinking working-age population driven by demographic change, and limited capacity to offset this decline through inward migration. This unique combination has produced labor supply constraints of unusual severity compared to other advanced economies. A detailed analysis of Japan’s case thus offers critical insights into how labor supply constraints shape firm behavior and broader socioeconomic outcomes. 3.2 The Current State of Japan's Labor Shortages A labor shortage refers to a situation in which the available labor supply falls short of the level required for corporate activity. To assess labor shortages in Japan, we examine the effective job openings-to-applicants ratio and the unemployment rate (Fig. 1). The effective job openings-to-applicants ratio, which measures the number of job openings per job seeker, serves as an indicator of labor market tightness. A value greater than one implies that the number of job openings exceeds the number of job seekers. As shown in Fig. 1, this ratio has remained consistently above one since June 2014. Although it temporarily declined during the COVID-19 pandemic, it subsequently recovered and reached 1.14 in June 2025, reflecting persistent labor shortages. The unemployment rate displays a similar pattern. It has been on a downward trend since July 2009, with a temporary increase during the pandemic, before gradually falling to 2.5 percent in June 2025—one of the lowest levels observed in recent decades. Additional evidence of labor shortages is provided by the Cabinet Office’s Corporate Awareness Survey on Diversifying Workforces (2019) 3 , in which approximately 70 percent of firms reported experiencing either a “shortage” or a “slight shortage” of labor. This indicates that labor shortages are not only observable in aggregate indicators but are also widely recognized by firms themselves. 3.3 The Potential for Increased Working Hours as a Response to Labor Shortages in Japan In Japan, firms tend to respond to labor shortages by extending the working hours of incumbent employees rather than by engaging in new recruitment. This section examines the background to this tendency from three perspectives. First, the decision reflects a comparison of the costs associated with new recruitment versus the extension of working hours. From a labor economics standpoint, firms facing labor shortages choose between hiring additional workers and lengthening the hours of existing employees based on a cost–benefit calculation. Oi ( 1962 ) defined as “quasi-fixed costs” those costs that increase with the number of employees but not with hours worked, and showed that the larger these costs are, the more likely firms are to adjust through hours rather than headcount. Similarly, when overtime premiums are low or when new recruits require substantial training expenditures, firms’ incentives to adjust through working hours are strengthened (Higuchi, 2010 ). In Japan, the statutory overtime premium remained at 25 percent from the enactment of the Labor Standards Act in 1947 until 2007. Following the 2008 revision, the premium for overtime exceeding 60 hours per month was raised to 50 percent or more, but the rate for overtime below 60 hours has remained at 25 percent—a relatively low level by international standards. This comparatively modest overtime premium, together with high quasi-fixed and training costs, may have encouraged Japanese firms to address labor shortages primarily through adjustments in working hours. Second, Japan’s distinctive employment practices reinforce this tendency. Japanese firms are characterized by long average job tenure and a strong emphasis on the accumulation of firm-specific skills (Yamamoto, 2019 ). These features make dismissals more difficult and induce firms to be more cautious with new recruitment. Consequently, even under labor shortages, firms have stronger incentives to rely on working-hours adjustments rather than on expanding employment. Third, the ambiguity of job definitions within firms also plays a role. As Ono ( 2018 ) points out, job responsibilities in Japanese firms are often loosely defined, with division of labor less clearly established than in other advanced economies. Employees may therefore devote time not only to core tasks but also to peripheral duties. This flexibility implies that when temporary vacancies arise, firms can address them by expanding or modifying the responsibilities of existing employees rather than by new hiring. Such flexibility, however, comes at the cost of increased burdens on incumbent workers during periods of labor shortage. Taken together, Japan’s cost structures, employment practices, and flexible job definitions combine to strengthen the tendency of firms to rely on adjustments in working hours rather than new hiring when confronted with labor shortages. 4. Data The primary data employed in this study are drawn from the Survey on Labor Shortages and Work Styles conducted by JILPT in 2019. This survey was designed to examine the effects of labor shortages and was implemented using a corporate database maintained by a credit research agency, from which firms were stratified and sampled by industry and firm size. The survey consists of two components: a corporate survey and an employee survey. The corporate survey covered 4,599 firms, while the employee survey included 16,752 regular employees. This dataset has three notable advantages. First, the corporate survey contains detailed items on labor shortages, allowing us to link labor shortage conditions at the firm level with employee job satisfaction. Second, the employee survey provides rich individual-level information, including demographic attributes such as age, education, marital status, and presence of children, along with multiple measures of job satisfaction. Third, the two surveys can be matched, enabling the integration of firm-level characteristics into the employee-level analysis. The dataset also has a limitation: both surveys are cross-sectional and conducted only once in 2019, making it difficult to control for unobserved time-invariant factors. For the purpose of this study, the analysis is restricted to male and female regular employees under the age of 60, thereby excluding those at or beyond the statutory retirement age. While the analysis primarily relies on variables from the employee survey, several firm-level variables are drawn from the corporate survey. After excluding observations with missing values, our final sample comprises 7,376 full-time employees across 2,272 firms. 5. Estimation methods This study employs ordinary least squares (OLS) estimation to examine how labor shortages are related to job satisfaction among regular employees. The estimation equation is specified as follows: $$\\:{JS}_{ij}={\\gamma\\:}+{\\theta\\:}{P}_{ij}+{\\delta\\:}^{{\\prime\\:}}{Z}_{ij}+{\\omega\\:}_{ij}$$ 1 In Eq. ( 1 ), subscript i indexes individuals and subscript j indexes employing firms. The dependent variable captures job satisfaction through two dimensions: “I am satisfied with my job,” “I am satisfied with the work environment.” The original survey responses range from 1 (always applicable) to 5 (never applicable). We reverse-code all measures so that higher values correspond to higher levels of job satisfaction. \\(\\:{P}_{ij}\\) is a dummy variable that equals 1 if individual i 's employing firm j experiences labor shortages, and 0 otherwise. The firm-level survey asks: \"Please indicate the current status of your company's employment levels (staffing) at the time of this survey.\" Responses are measured on a five-point scale: 1 (severe shortage), 2 (moderate shortage), 3 (appropriate), 4 (moderate excess), and 5 (severe excess). We define \\(\\:{P}_{ij}\\) = 1 for firms reporting either severe shortage (1) or moderate shortage (2), and \\(\\:{P}_{ij}\\) = 0 for all other responses 4 . The variable \\(\\:{P}_{ij}\\) offers two key advantages. First, it enables the measurement of labor shortages at the firm level. When relying solely on microdata collected from individuals, it is difficult to capture firm-level labor shortages. By employing employer–employee matched data, however, we can incorporate information from firm surveys and directly measure labor shortages at the organizational level 5 . Second, the use of \\(\\:{P}_{ij}\\) mitigates concerns about reverse causality. If employees themselves were asked to assess the extent of labor shortages in their workplace, those with lower job satisfaction might be more inclined to perceive or report a shortage 6 . This potential bias arises because dissatisfied workers may evaluate their work environment more negatively and, as a result, exaggerate the presence of labor shortages. In such a case, the shortage measure would conflate objective conditions with subjective perceptions, thereby confounding the relationship between labor shortages and job satisfaction. In contrast, the data employed in this study measure labor shortages through firm questionnaires completed by employers rather than employees. Thus, the entity reporting labor shortages is distinct from the individual providing information on job satisfaction, substantially reducing—if not eliminating—the risk of reverse causality. Moreover, as confirmed in the robustness checks presented later in the paper, the results are not driven by reverse causality 7 . \\(\\:{Z}_{ij}\\) represents individual and firm characteristics, including: female dummy, age dummies, marriage dummy, children dummy, education dummies, tenure dummies, occupation dummies, firm size dummies, industry dummies, and regional block dummies. Additional firm-level variables include the proportion of regular employees among total staff (1 = ≤ 30%, 2 = 40%, 3 = 50%, 4 = 60%, 5 = 70%, 6 = 80%, 7 = 90%, 8 = 100%), the proportion of female regular employees (1 = 0%, 2 = 0–5%, 3 = ~ 10%, 4 = ~ 20%, 5 = ~ 30%, 6 = ~ 40%, 7 = ~ 50%, 8 = ≥ 60%), and the proportion of employees aged 60 or older (1 = 0%, 2 = 0–5%, 3 = ~ 10%, 4 = ~ 20%, 5 = ~ 30%, 6 = ~ 40%, 7 = ~ 50%, 8 = ≥ 60%) 8 . \\(\\:{\\gamma\\:}\\) represents the constant term, and \\(\\:{\\omega\\:}_{ij}\\) denotes the error term The coefficient of primary interest in Eq. ( 1 ) is \\(\\:{\\theta\\:}\\) , which captures the association between labor shortages and job satisfaction. We hypothesize that this relationship operates through the following mechanism: (1) labor shortages reduce total labor input at the workplace, (2) workload redistribution occurs among existing employees, (3) increased burden on workers generates psychological and temporal stress, and (4) job satisfaction consequently declines. Based on this theoretical framework, we expect \\(\\:{\\theta\\:}\\) to be negative. We employ OLS estimation to test this hypothesis, with standard errors clustered at the firm level. Since our survey samples multiple employees from the same firms, individual observations are not independent. Employees within the same organization likely experience common shocks through shared organizational culture, human resource policies, and other firm-specific factors. Firm-level clustering addresses this potential correlation in the error terms. To verify the robustness of our findings, we supplement the OLS analysis with five alternative estimation methods: Ordered logit, Propensity Score Matching (PSM; Heckman et al., 1997 ), Inverse-Probability-Weighted Regression Adjustment (IPWRA; Imbens and Wooldridge, 2009 ; Wooldridge, 2007 , 2010 ), Entropy Balancing (Hainmueller, 2011 , 2012 ), and IV method. Descriptive statistics are reported in Table 1, with Fig. 2 illustrating the distribution of our job satisfaction dependent variables. All job satisfaction measures, although somewhat biased, exhibit a central tendency around the middle value (3) of the five-point Likert scale. Our principal explanatory variable indicates that nearly two-thirds of workers in the sample (65.7%) are employed in firms reporting labor shortages. Regarding demographic characteristics, 59.3% of workers are married and 60.2% have children. Age, educational attainment, and tenure exhibit relatively balanced distributions across categories. Clerical positions constitute the most common occupational group. The distribution of firm size is skewed toward smaller enterprises, consistent with Japan’s dual economy structure dominated by small and medium-sized firms. The shares of workers in manufacturing, medical services, and welfare services are comparatively high. 6. Estimation results 6.1 Base estimates Table 2 reports the results of OLS estimations of the relationship between labor shortages and job satisfaction among regular employees. The reported coefficients correspond to firm-level labor shortage dummies. Columns (1) and (3) present unconditional estimates without covariates, while columns (2) and (4) include the full set of individual and firm characteristics as controls. The results indicate that all coefficients on the labor shortage dummies are negative and statistically significant. This implies that employees in firms experiencing labor shortages report systematically lower levels of job and work environment satisfaction. These findings are broadly consistent with prior expectations and align with the results of Causa et al. ( 2025 ). Examining coefficient magnitudes, we observe that labor shortages associate more strongly with work environment satisfaction than with overall job satisfaction. The coefficients increase in absolute value when individual and firm characteristics are controlled, suggesting that omitted variable bias initially attenuates the estimated associations. Nevertheless, the magnitudes remain modest across all specifications, indicating relatively limited economic significance. Overall, the findings reinforce the view that labor shortages are associated with multiple challenges for employee well-being, extending beyond heavier workloads alone. In particular, the observation that the strongest associations appear in relation to workplace conditions and psychological strain highlights the need for corporate strategies that explicitly take these dimensions into account when responding to labor shortages. 6.2 Robustness check This section examines the robustness of the baseline estimates presented in Table 2 using four complementary approaches. First, we assess the possibility of reverse causality. While our primary analysis evaluates the association of labor shortages with job satisfaction, it is conceivable that the direction runs in the opposite way—namely, that low job satisfaction among employees contributes to the emergence of labor shortages, for example through higher quit rates. Although the measure of labor shortages employed here is constructed at the firm level from employer surveys—thereby limiting the scope for individual-level reporting bias—any reverse causality, if present, could still influence the estimated associations. To address this concern, we exploit information on employees’ job satisfaction one year prior, which is available for individuals who remained with the same firm, and data on the timing of labor shortages within the past year 9 . If reverse causality is absent, labor shortages emerging within the past year should not be systematically associated with lagged job satisfaction. Conversely, if reverse causality exists, lower levels of job satisfaction in the previous year would predict subsequent recognition of labor shortages, implying a significant correlation between the two variables. We formally test this hypothesis by estimating an OLS specification that includes the same set of control variables as Eq. ( 1 ). The results, reported in Table 3 , indicate that the coefficients on the dummy variable for labor shortages arising within the past year are not statistically significant. These findings provide evidence against the presence of reverse causality. Second, we examine the potential influence of survivorship bias. Specifically, workers with low job satisfaction are more likely to exit their firms, which may result in the observed sample being disproportionately composed of more resilient and relatively satisfied workers. If such bias is present, the negative association of labor shortages with job satisfaction would be underestimated. Ideally, this could be examined by analyzing the relationship between lagged job satisfaction and subsequent turnover; however, the dataset used in this study does not contain information on workers who have already left the firm. As a second-best approach, we investigate whether the impact of labor shortages differs systematically across tenure groups. The logic is as follows: if survivorship bias is present, long-tenured workers—who are on average more satisfied and less likely to quit—should exhibit weaker negative associations with labor shortages. In contrast, if the relationship between labor shortages and job satisfaction does not vary by tenure, survivorship bias can be considered negligible. To examine this, we construct interaction terms between tenure dummies and the labor shortage dummy and estimate their coefficients using OLS. The results, presented in Table 4 , show coefficients for labor shortages, tenure dummies, and their interactions. None of the interaction terms are statistically significant, suggesting that the role of survivorship bias is likely to be limited. Third, we test the robustness of our baseline results by employing alternative estimation strategies, including an ordered logit model, PSM, IPWRA, and entropy balancing. While the baseline specifications rely on OLS, job satisfaction is measured on an ordinal scale. To address this measurement property, we re-estimate the association between labor shortages and job satisfaction using an ordered logit model. In addition, we implement matching-based approaches to address potential selection bias arising from systematic differences between workers employed at firms experiencing labor shortages and those at firms without such shortages. PSM matches individuals in the treatment group (workers employed at firms facing labor shortages) and the control group (workers at firms without shortages) based on their propensity scores—the estimated probability of being in the treatment group conditional on observed covariates—thereby ensuring comparisons are made between observationally similar individuals. IPWRA combines inverse probability weighting with regression adjustment, using the inverse of the propensity score as a weight, which both corrects for selection bias and improves estimation efficiency. Entropy balancing constructs sampling weights by solving a set of balancing constraints that enforce exact equality in the first and second moments of covariates between the treatment and control groups, thus achieving balance in both means and variances of individual attributes (Hainmueller, 2011 , 2012 ). These methods are particularly valuable in observational settings, where treatment assignment is non-random, and OLS estimates of treatment effects may be biased either upward or downward. By employing these alternative approaches, we can evaluate whether the estimated effects of labor shortages on job satisfaction are robust to concerns about functional form and selection bias. In practice, we compare the results from these matching estimators with those obtained from the baseline OLS specifications. For PSM, we employ kernel matching with an Epanechnikov kernel and a bandwidth of 0.06. Standard errors are computed using bootstrapping with 200 replications. To ensure the common support condition, we exclude treated observations whose propensity scores fall outside the minimum–maximum range of the control group’s score distribution. The propensity score distributions, presented in Appendix 2, indicate substantial overlap between the treatment and control groups. For IPWRA, we cluster standard errors at the firm level to maintain consistency with the OLS estimates. In the case of entropy balancing, we impose balancing constraints on the first and second moments of the covariates to evaluate the association between labor shortages and job satisfaction. Across all matching procedures, the same set of covariates used in Eq. ( 1 ) is employed for matching. The results of the balance diagnostics, reported in Appendix 3, show that most differences in covariates between the treatment and control groups become statistically insignificant after matching. The estimation results are reported in Table 5 . Panel A presents the coefficients for job satisfaction, and Panel B indicates those for work environment satisfaction. Across Panels A through B, all coefficients are consistently negative and statistically significant 10 . This finding indicates that firm-level labor shortages are systematically associated with lower levels of job and work environment satisfaction. Moreover, these results are closely aligned with the OLS estimates reported in Table 2 . A comparison of the magnitude of the coefficients between Table 2 and the alternative estimation methods (PSM, IPWRA, and entropy balancing) reveals only minor differences, suggesting that any bias attributable to the choice of estimation technique is likely to be small. Fourth, we address the potential concern of omitted variable bias by employing an IV approach. Although the preceding robustness checks suggest that reverse causality and survivorship bias are unlikely to drive our results, unobserved firm- or worker-level heterogeneity may still confound the estimated association between labor shortages and job satisfaction. To mitigate this concern, we estimate an IV model that exploits exogenous variation from two firm-level instruments obtained from the corporate survey: (1) the firm’s expectations regarding its personnel surplus or shortage three years in the future, and (2) the firm’s planned level of commitment to implementing measures to mitigate labor shortages over the same period. The first instrument is constructed from firms’ responses to the question on their anticipated personnel situation three years ahead. The original survey item provided five ordered categories ranging from “severe shortage” to “severe surplus.” We recoded this variable into a binary indicator equal to one if the firm reported either a “severe shortage” or a “moderate shortage,” and zero otherwise. The second instrument is based on firms’ stated intentions regarding their efforts to address future labor shortages. Respondents were asked to indicate their level of commitment on a five-point scale ranging from “1. very proactive” to “5. not proactive at all.” This variable was recoded as one if the firm selected “1. very proactive,” “2. proactive,” or “3. somewhat proactive,” and zero otherwise. These variables are expected to satisfy the two key conditions for valid instruments—relevance and exclusion. The relevance condition is plausible because a firm’s current experience with labor shortages directly shapes its expectations and strategic planning for the near future. Firms currently facing severe shortages are more likely to anticipate continued shortages and to plan proactive countermeasures. This should yield a strong empirical correlation between our instruments and the endogenous variable, which we formally verify in the first-stage regression results. The exclusion restriction is also credible given the temporal and informational separation between the instruments and the outcome variable. An individual employee’s current job satisfaction is largely determined by contemporaneous workplace conditions—such as workload intensity, interpersonal relations, and managerial practices—rather than by the firm’s long-term strategic expectations or plans. It is highly implausible that an employee’s current well-being would be directly affected by management’s forward-looking assessments of staffing needs three years ahead, which are typically internal and undisclosed. Instead, any influence of these expectations on current job satisfaction would operate solely through their effect on the firm’s present staffing situation, namely the current labor shortage 11 . By exploiting this exogenous variation in firms’ forward-looking assessments, the IV estimation allows us to obtain more causally reliable estimates of the impact of labor shortages on employee job satisfaction. Table 6 presents the results of the IV estimation. The upper panel of the table reports the first-stage estimates, showing the coefficients of the two instrumental variables. Both instruments exhibit positive and statistically significant coefficients, indicating that firms anticipating a shortage of personnel three years ahead are more likely to experience a current labor shortage. Similarly, firms that report actively planning measures to mitigate future shortages are also more likely to face current shortages. These relationships are consistent with theoretical expectations and support the relevance of the instruments. To further assess instrument strength, we report the first-stage F-statistics in Table 6 . In all specifications, the F-statistics exceed the conventional threshold value of 10, suggesting that weak-instrument concerns are not warranted. Additionally, the overidentification test does not reject the null hypothesis that the instruments are uncorrelated with the error term, thereby supporting their validity. The endogeneity tests reject the null hypothesis of exogeneity for the labor shortage dummy—at the 10% significance level for job satisfaction and the 5% level for workplace environment satisfaction—confirming that endogeneity is indeed a concern in the OLS estimates. Turning to the second-stage results, the coefficients on the labor shortage dummy are negative and statistically significant across both models. The estimated magnitudes are approximately twice as large as those obtained from the OLS estimations reported in Table 2 . This suggests that unobserved firm- or worker-level characteristics, which are negatively correlated with both labor shortages and satisfaction, may have attenuated the OLS estimates 12 . The IV estimates therefore reveal a more pronounced deterioration in job and workplace satisfaction associated with labor shortages. Taken together, these findings reinforce the robustness of the negative relationship between labor shortages and employee well-being, while highlighting that the OLS results likely provide a conservative estimate of this relationship 13 . 6.3 Additional analysis This section presents five additional analyses. First, we explore how the association between labor shortages and employee satisfaction varies across demographic and organizational characteristics. The sample is divided by gender, educational attainment, marital status, and parenthood status to examine potential heterogeneity. Table 7 summarizes the OLS estimates: Panel A reports the results for job satisfaction, and Panel B presents those for work environment satisfaction. Columns (1)–(2), which show gender-specific results, indicate that a negative association between labor shortages and satisfaction emerges only among men. This pattern may reflect men’s stronger attachment to the labor market and greater responsiveness to changes in workplace conditions. Columns (3)–(4) present estimates by educational attainment. Workers without a university degree display significant declines in both job and work environment satisfaction when facing labor shortages, whereas no significant relationship is observed among university-educated workers. The relatively stronger association among the less educated may be linked to their concentration in routine or manual tasks that are more susceptible to redistribution of workload during shortages. Columns (5)–(6) show results by marital status. Negative associations appear only among married individuals. One possible explanation is that married workers face role expectations in both work and family domains, so additional work demands during shortages may heighten tensions between these domains. Extended working hours can also reduce time spent with family members, potentially straining spousal relationships and lowering perceived satisfaction at work. Finally, columns (7)–(8) report results by parenthood status. Individuals with children exhibit consistently negative associations between labor shortages and both satisfaction measures. This pattern may reflect the increased time and physical demands of childcare, which make it challenging to manage longer or more intensive working hours. Reduced time with children and heightened fatigue may, in turn, diminish parents’ overall sense of balance between work and family life, coinciding with lower reported satisfaction. Overall, these results suggest that the relationship between labor shortages and employee satisfaction is not uniform but varies systematically across demographic groups, with particularly pronounced associations among men, less-educated workers, and employees with family responsibilities. Second, we examine the relationship between the timing of labor shortage onset and job satisfaction. Our baseline analysis only considers whether labor shortages exist, but the underlying mechanisms likely differ depending on whether shortages are recent or chronic. If only recent labor shortages are negatively related to job satisfaction, this would suggest that satisfaction initially declines due to adjustment challenges but recovers as firms adapt to shortage conditions. Conversely, if longer-standing shortages show stronger negative effects, this would indicate that chronic shortages increase workload and overtime, leading to sustained satisfaction decline. We investigate which scenario characterizes the data using four timing categories: (1) shortages within one year, (2) shortages 1–2 years ago, (3) shortages 2–5 years ago, and (4) shortages over five years ago. The reference group comprises firms without labor shortages. Control variables and firm-clustered standard errors follow Eq. ( 1 ). Table 8 reports the OLS estimates based on the duration of labor shortages. Firms that experienced shortages only within the past two years show no statistically significant association with either job satisfaction or work environment satisfaction. In contrast, firms reporting shortages lasting two to five years, and those with shortages persisting for more than five years, display consistently negative and statistically significant coefficients. These patterns suggest that short-term shortages may be manageable through temporary adjustments, whereas prolonged shortages are accompanied by accumulated strain and perceptions of inequity, which correspond to lower reported satisfaction levels. Sustained labor shortages may also signal organizational rigidity or limited adaptive capacity, both of which can coincide with a deterioration of the work environment. From a policy perspective, the findings highlight the importance of preventing the institutionalization of chronic shortages rather than relying solely on short-term remedial measures. Designing systems that facilitate backup staffing arrangements and promote fair workload allocation could help organizations maintain a stable level of employee satisfaction and workplace cohesion over time. The third supplementary analysis examines whether the association between labor shortages and job satisfaction varies depending on the underlying reasons for the shortages. The corporate survey identified fourteen potential reasons, including business expansion associated with economic recovery, insufficient review of business processes, limited investment in labor-saving and rationalization initiatives, difficulties in recruiting new personnel, increases in voluntary turnover, inadequate revision of employment management practices, lack of in-house expertise, rising resistance to reassignment, and increases in employees taking leave for childcare, caregiving, or medical treatment. Additional factors include an increase in employees reaching retirement age, the outflow of workers to urban areas, and the legacy of past hiring restrictions. OLS estimates were obtained to examine how the relationship between labor shortages and job satisfaction differs across these categories, with results summarized in Tables 9 and 10 . The estimates reveal substantial heterogeneity across the identified reasons. Although most coefficients associated with labor shortages are negative and statistically significant, their magnitudes vary considerably. Shortages linked to managerial or investment deficiencies—particularly the insufficient review of business processes and limited investment in labor-saving or rationalization measures—are associated with notably lower levels of both job and work environment satisfaction. Specifically, the coefficient for unreviewed business processes corresponds to approximately 4.4 times the magnitude of that reported in Table 2 for job satisfaction and 2.8 times for work environment satisfaction, suggesting a broad deterioration in workplace well-being. Likewise, limited investment in labor-saving and rationalization measures coincides with a pronounced reduction in satisfaction, with coefficients roughly three times larger for job satisfaction and 2.6 times larger for work environment satisfaction than those presented in Table 2 . By contrast, shortages associated with external or less controllable circumstances—such as business expansion amid economic recovery or temporary absences due to childcare leave—show relatively smaller negative associations with satisfaction. These differences imply that shortages arising from internal managerial constraints tend to coincide with more persistent and organization-wide challenges, whereas those linked to external or cyclical developments appear less detrimental to employees’ overall evaluations of their work environment. The fourth supplementary analysis examines outcomes beyond job satisfaction. The underlying mechanism hypothesized in this study is that labor shortages increase individual workloads, which in turn raise working hours and stress levels. To empirically assess this pathway, we analyze five additional indicators. First, we consider monthly working hours. Second, we examine mental separation from work during breaks, based on the survey question: “During breaks or leisure time such as holidays, are you able to detach yourself psychologically from work and avoid thinking about it?” Responses were originally coded from 1 (always able) to 4 (never able). For ease of interpretation, we reverse the scale so that higher values indicate a greater ability to detach from work. Third, we assess relaxation during breaks and leisure time, based on the question: “During breaks or leisure time such as holidays, are you able to relax?” Again, responses were recoded from 1 (always able) to 4 (never able), and reversed such that higher values correspond to a greater ability to relax. Fourth, we analyze sufficient leisure time for recovery, measured by the question: “Is your leisure time sufficient for recovery from work-related fatigue?” The original four-point scale ranged from 1 (sufficient) to 4 (insufficient), and was reversed so that higher values indicate greater sufficiency. Finally, for married respondents, we examine weekday family dinner time, based on the question: “On weekdays, are you able to share dinner with your family or children?” The original four-point scale ranged from 1 (always able) to 4 (never able), and was reversed so that higher values indicate greater frequency. The OLS estimates are reported in Table 11 . The coefficients represent firm-level labor shortage dummies, with the same set of covariates as in Eq. ( 1 ). Column (1) shows that employees in firms experiencing labor shortages work, on average, 2.068 additional hours per month, confirming that labor shortages increase workloads and extend working hours. Columns (2) through (5) reveal that the coefficients are uniformly negative and statistically significant. These results indicate that employees in shortage-affected firms are less able to detach mentally from work, less able to relax during leisure time, more dissatisfied with the sufficiency of their leisure hours, and less likely to share weekday dinners with their families. For the final supplementary analysis, we further explore the mechanisms underlying the relationship between labor shortages and job satisfaction by incorporating the dependent variables from Table 11 as additional explanatory variables. The estimation results are presented in Table 12 . Panel A indicates the estimated results using job satisfaction as the dependent variable, and Panel B shows those using work environment satisfaction as the dependent variable. The analysis using job satisfaction as the dependent variable (Panel A) yields an important insight: the association between labor shortage and lower job satisfaction appears to operate primarily through insufficient psychological and physical recovery from work. In column (1), where monthly working hours are controlled for, the coefficient on the labor shortage dummy remains statistically significant at the 10% level, though the level of significance declines relative to the baseline estimates in Table 2 . This pattern suggests that longer working hours may serve as one pathway linking labor shortages to diminished satisfaction. However, once indicators of recovery quality are included, the coefficient on the labor shortage variable decreases markedly and becomes statistically indistinguishable from zero. Specifically, when the measures of relaxation during breaks and sufficient leisure time for recovery are introduced in columns (3) and (4), the coefficients fall to − 0.039 and − 0.036, respectively, losing statistical significance in both cases. In column (6), where all mediating variables are jointly included, the association remains statistically insignificant. Taken together, these findings indicate that the link between labor shortages and lower job satisfaction is largely transmitted through workers’ diminished ability to detach mentally and physically from work during non-working hours, leading to inadequate recovery rather than merely reflecting an increase in workload. In contrast, the results for workplace environment satisfaction as the dependent variable (Panel B) show a different pattern. The negative association with labor shortages remains stable even after sequentially adding the mediating variables related to working hours and recovery quality (columns (1)–(5)) or when all controls are included simultaneously (column (6)). This consistent pattern implies that the deterioration in workplace environment satisfaction under labor shortages cannot be fully explained by individual-level factors such as working time or recovery quality. Rather, it may reflect more structural and organizational dimensions—such as inefficiencies in work processes, persistent tension within teams, or insufficient managerial and institutional support within the firm. A comparison between Panels A and B highlights that the mechanisms through which labor shortages are linked to employee well-being differ across the domains of satisfaction considered. Job satisfaction appears to be closely connected with the quality of recovery from work, whereas workplace environment satisfaction is more closely related to the organizational and structural characteristics of the firm. This finding underscores the importance, for firms confronting labor shortages, of not only addressing excessive working hours but also ensuring that employees can achieve full psychological detachment and high-quality rest during non-working time—conditions that are essential for sustaining satisfaction with one’s work itself 14 . 7. Conclusion In recent years, tightening labor markets across several OECD countries have generated widespread labor shortages. While these shortages produce positive outcomes such as wage increases, they also intensify employee workloads and extend working hours, potentially compromising physical and mental health while reducing job satisfaction. This study examines the relationship between labor shortages and job satisfaction using Japanese matched employer-employee data that identifies firm-level labor shortages. Our analysis yields four key findings. First, we document a robust negative relationship between labor shortages and job satisfaction, consistent across OLS, ordered logit, matching estimators and IV method. Second, adverse associations emerge primarily when labor shortages persist for at least 2 years, suggesting that prolonged shortages create cumulative burdens that ultimately erode job satisfaction. Third, job satisfaction declines most significantly when shortages stem from organizational failures—specifically, inadequate business process reviews and insufficient investment in labor-saving technologies and rationalization measures. Fourth, workers in shortage-affected firms experience longer working hours, reduced opportunities for relaxation during breaks and leisure time, and diminished family dinner time. Our analysis demonstrates a clear negative relationship between firm-level labor shortages and worker job satisfaction. This relationship exhibits distinct temporal patterns: short-term labor shortages (within two year) show no statistically significant consequences, while persistent shortages (more than 2 years) generate substantial reductions in job satisfaction. This finding suggests that labor shortage consequences accumulate over time, progressively deteriorating worker satisfaction through prolonged exposure. The causal origins of labor shortages critically influence their severity. Shortages stemming from organizational deficiencies—inadequate business process reviews and insufficient investment in labor-saving technologies—produce the most severe declines in employee satisfaction. Conversely, shortages arising from external factors such as economic expansion or increased family leave usage generate relatively modest reductions. These differential outcomes highlight that workers respond more negatively to perceived management failures than to exogenous market conditions. This evidence underscores the importance of examining not merely the presence of labor shortages, but their duration and underlying causes. Our findings reveal that labor shortages extend beyond increased working hours to encompass broader life disruption through workload spillover processes (Bolger et al., 1989 ; Westman, 2001 ). Specifically, workers in shortage-constrained firms experience reduced capacity for relaxation during breaks, persistent work-related thoughts during leisure time, and diminished family interaction. This spillover from workplace to home domains creates a potentially self-reinforcing cycle wherein deteriorating work-life balance further undermines job performance, potentially exacerbating the original staffing constraints. The findings carry several implications for labor and human resource policy. First, as prolonged shortages appear to coincide with reduced job satisfaction, measures to improve work organization—such as business process review, task automation, and investment in labor-saving technologies—may help alleviate employee burdens. Second, policies promoting flexible working arrangements and recovery-oriented scheduling could sustain well-being without necessarily expanding labor supply. Finally, given the demographic context of Japan’s aging workforce, addressing labor shortages through productivity-enhancing innovation rather than intensifying workloads is essential for maintaining sustainable household welfare. Several limitations of this study warrant acknowledgment. First, the analysis relies on data from 2019, limiting the ability to examine relationships over time. Since the COVID-19 pandemic has substantially altered labor market dynamics, extending this research to multiple time points would help assess whether these relationships have persisted or changed. Second, the sample is restricted to regular employees due to data constraints. As non-regular employment continues to expand in Japan, exploring whether similar patterns hold for these workers represents an important avenue for future research. Finally, while the IV approach adopted in this study addresses potential endogeneity, it has inherent limitations. The validity of the instruments depends on assumptions that cannot be fully verified, and the resulting estimates reflect a local average treatment effect rather than a population-wide relationship. Future work should explore quasi-experimental designs that generate exogenous variation in labor supply or demand. Exploiting such settings through a difference-in-differences framework would enable a more precise and dynamic assessment of how labor shortages influence employees’ well-being and job satisfaction. Declarations Acknowledgments : Data from the Survey on the Current Situation and Working Styles Surrounding Labor Shortages was provided by the data archive of the Japan Institute for Labor Policy and Training (JILPT). This study was supported by JSPS Grants-in-Aid for Scientific Research (KAKENHI) in Japan (22H04911). Funding : This work was supported by JSPS Grants-in-Aid for Scientific Research (KAKENHI) in Japan (22H04911). Conflict of Interest : The data archive of the JILPT provided the microdata to graduate students and researchers who belong to university, national, public, or private research institutes, with the limitation that it is used for nonprofit and academic purposes. Therefore, to replicate the results of this study, please submit an application form to the office of the data archive of JILPT to borrow the data. Other than these, the authors have no conflicts of interest directly relevant to the content of this article. 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( 2025 ) identify several contributing factors to these labor shortages: demographic shifts including declining birth rates and population aging, skill mismatches between available workers and job requirements, deteriorating job quality and working conditions, and reduced immigration flows. Research shows that workers' wages increase when labor markets tighten and alternative job options become more available. Two mechanisms explain this wage growth: first, workers gain stronger negotiating leverage (Mortensen and Pissarides, 1994 ; Burdett and Mortensen, 1998 ; Hagedorn and Manovskii, 2008 ; Hall and Milgrom, 2008 ), and second, employers raise wages to discourage workers from reducing effort (Shapiro and Stiglitz, 1984 ). The details of this survey can be found on the following site ( https://www5.cao.go.jp/j-j/wp/wp-je19/h09_fchu0105.html (in Japanese)). Validating the key explanatory variable—the firm-level dummy for labor shortage—is essential for ensuring the credibility of the analysis. To this end, we calculate the correlation coefficients between the labor shortage dummy and six indicators of firm performance and human resource management over the past three years, derived from the corporate survey: growth in operating profits, growth in sales, improvement in new employee retention after three years, improvement in new employee retention after seven years, increase in turnover rates, and improvement in job offer fulfillment rates. The results are presented in the Appendix 1. The correlation analysis provides strong support for the validity of the labor shortage dummy. Growth in operating profits and sales is positively and significantly correlated with labor shortages, consistent with the mechanism whereby business expansion drives increased labor demand. Retention rates of new employees (after three and seven years) are negatively correlated with labor shortages, indicating that firms with stronger employee retention are less likely to experience shortages. By contrast, increases in turnover rates are positively and significantly correlated with labor shortages, suggesting that workforce outflows are a key contributing factor. Finally, improvements in job offer fulfillment rates are negatively correlated with labor shortages, reflecting that firms with stronger recruitment capacity are better able to avoid shortages. All of these associations align with theoretical expectations. Expanding firms face greater labor demand, while firms with weak retention or recruitment capacity struggle to secure sufficient personnel. This consistent pattern of correlations demonstrates the construct validity of the labor shortage measure employed in this study and supports the reliability of the subsequent empirical results. A potential concern is that unobserved firm characteristics—such as managerial quality or organizational culture—could simultaneously be related to both labor shortages and employee satisfaction. Although the data do not allow for full identification of causal effects, the matched employer–employee structure substantially mitigates this concern. Because labor shortages are measured at the firm level based on employer responses rather than employee perceptions, the likelihood of individual-level reporting bias is limited. Reverse causality could bias our estimates if workers' perceptions of labor shortages are influenced by their job satisfaction levels. Specifically, dissatisfied workers may systematically overreport labor shortages while satisfied workers may underreport them, leading to upward bias in the estimated negative effect. Beyond reverse causality, selection bias may arise if workers with lower job satisfaction are more prone to quit, leaving a sample of remaining workers with relatively higher satisfaction levels at the survey date. We address this concern in the robustness check section and find evidence suggesting that this bias has minimal impact on our results. Earnings and working hours are widely recognized as key correlates of job satisfaction (Bender et al., 2005 ; Clark, 1997 ; Clark and Oswald, 1996 ; Hamermesh, 1977 ; Levy-Garboua and Montmarquette, 2004 ; Sloane and Williams, 2000 ). Nevertheless, these variables were excluded from the baseline specification due to concerns that they may function as “bad controls” (Angrist and Pischke, 2009 ), potentially reflecting outcomes of the same underlying mechanisms rather than exogenous determinants. To assess the sensitivity of the findings, we additionally estimated models that include earnings and working hours among the explanatory variables. The corresponding results are reported in Table 12 and Appendix 7. The employer survey measures labor shortage onset timing using four discrete periods: (1) within one year, (2) 1–2 years prior, (3) 2–5 years prior, and (4) more than five years prior to the survey date. Same variable is used in the analysis of Table 8 . We also estimate PSM specifications using nearest neighbor matching and radius matching. The results reported in Appendix 4 indicate that all coefficients on the labor shortage dummy are negative and statistically significant, consistent with the findings in Table 5 . While the exclusion restriction cannot be tested directly, following consideration supports its plausibility in this context. First, the instruments used—firms’ three-year-ahead forecasts of personnel shortages and their planned commitment to mitigation measures—reflect forward-looking managerial expectations rather than current workplace conditions. These forecasts are typically formulated by senior management as part of strategic planning processes and are not routinely disclosed to, or directly perceived by, individual employees. Therefore, they are unlikely to influence employees’ present job satisfaction through psychological or informational channels. Nonetheless, it is acknowledged that complete exclusion cannot be guaranteed in observational settings. It remains possible that firms anticipating future shortages may already exhibit latent managerial characteristics—such as lower employee engagement—that also shape current satisfaction levels. To address this concern, we conduct an additional sensitivity check by including proxy variables for managerial characteristics (change in new employee retention rate three years after joining the company over the last three years and change in employee turnover rate over the last three years) in the estimation. The results, reported in Appendix 5, remain robust, suggesting that any residual direct association between the instruments and job satisfaction is unlikely to drive the main findings. A plausible explanation for the larger magnitude of the IV estimates relative to the OLS results is that the OLS coefficients are biased toward zero due to unobserved firm- or worker-level heterogeneity that is negatively correlated with both labor shortages and job satisfaction. For instance, firms with stronger management practices, higher technological capabilities, or better internal communication may both experience fewer labor shortages and maintain higher employee satisfaction levels. Because such unobserved characteristics are not fully captured in the available control variables, the OLS estimates likely understate the association between shortages and satisfaction. Another complementary interpretation arises from the local average treatment effect (LATE) perspective. The IV estimates capture the average relationship for the subset of firms whose current labor shortage status is influenced by their forward-looking personnel assessments and planned mitigation efforts—the so-called “compliers.” These firms are typically more aware of workforce planning challenges and may face particularly acute or persistent shortages that have stronger implications for employee well-being. Consequently, the larger IV coefficients can be understood as reflecting this local treatment effect rather than the average effect across all firms. Taken together, these considerations suggest that the stronger relationship observed in the IV estimation does not contradict the OLS findings but rather provides a sharper characterization of the firms most affected by persistent labor supply constraints. We further assess the robustness of our findings by modifying the operational definition of the labor shortage indicator. In the baseline specification, the dummy variable equals one for firms experiencing either severe or moderate shortages. To examine whether the results differ by shortage intensity, we disaggregate these categories and create separate dummy variables for severe and moderate shortages, with firms reporting no shortage serving as the reference group. In addition, we estimate models that use the original five-point labor shortage scale as a continuous measure. Appendix 6 reports the OLS estimates. Panel A presents the results based on separate severity dummies, whereas Panel B summarizes those obtained from the continuous specification. In Panel A, the coefficients for severe shortages are larger in absolute value than those for moderate shortages across all dimensions of job satisfaction. This pattern indicates that more pronounced shortages are systematically associated with lower satisfaction levels, consistent with theoretical expectations. Most coefficients exhibit the expected negative sign and reach conventional levels of statistical significance. Panel B shows that when the labor shortage variable is treated as continuous, statistically significant negative coefficients are observed for satisfaction with the work environment, while the estimate for job satisfaction remains insignificant. A plausible interpretation is that job satisfaction may fluctuate not only under conditions of labor shortage but also in contexts of labor surplus, a possibility that merits further inquiry. We further examine whether the estimated relationship between labor shortages and job satisfaction is mediated by earnings. Specifically, we re-estimate the model by including the logarithm of earnings as an additional control variable. The results, reported in Appendix 7, show that the coefficients on the labor shortage dummy remain negative and statistically significant, with only minor changes in magnitude. This finding suggests that earnings are unlikely to play a substantial mediating role in the association between labor shortages and job satisfaction. Tables Tables 1 to 12 are available in the Supplementary Files section. Additional Declarations No competing interests reported. Supplementary Files Tables.docx Appendices.docx Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. Our growing team is made up of researchers and industry professionals working together to solve the most critical problems facing scientific publishing. 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10:06:23\",\"extension\":\"jpg\",\"order_by\":1,\"title\":\"Figure 1\",\"display\":\"\",\"copyAsset\":false,\"role\":\"figure\",\"size\":148566,\"visible\":true,\"origin\":\"\",\"legend\":\"\\u003cp\\u003eSee image above for figure legend\\u003c/p\\u003e\",\"description\":\"\",\"filename\":\"1.jpg\",\"url\":\"https://assets-eu.researchsquare.com/files/rs-7904928/v1/37bd118602c386e71fff051e.jpg\"},{\"id\":95526064,\"identity\":\"f053d3a9-8bd8-4a74-9e46-4fef5c5a0ea9\",\"added_by\":\"auto\",\"created_at\":\"2025-11-10 10:06:11\",\"extension\":\"jpg\",\"order_by\":2,\"title\":\"Figure 2\",\"display\":\"\",\"copyAsset\":false,\"role\":\"figure\",\"size\":77119,\"visible\":true,\"origin\":\"\",\"legend\":\"\\u003cp\\u003e\\u003cstrong\\u003eThe distribution of dependent variables\\u003c/strong\\u003e\\u003c/p\\u003e\",\"description\":\"\",\"filename\":\"2.jpg\",\"url\":\"https://assets-eu.researchsquare.com/files/rs-7904928/v1/5526fff72d853fafc00b58ba.jpg\"},{\"id\":106994004,\"identity\":\"eb99cd92-7f6c-41a0-b97b-e2006ef9840c\",\"added_by\":\"auto\",\"created_at\":\"2026-04-15 15:02:00\",\"extension\":\"pdf\",\"order_by\":0,\"title\":\"\",\"display\":\"\",\"copyAsset\":false,\"role\":\"manuscript-pdf\",\"size\":974645,\"visible\":true,\"origin\":\"\",\"legend\":\"\",\"description\":\"\",\"filename\":\"manuscript.pdf\",\"url\":\"https://assets-eu.researchsquare.com/files/rs-7904928/v1/5d45459e-7fd7-4803-b3b1-9c2d8282370c.pdf\"},{\"id\":95365865,\"identity\":\"bad36251-8cd4-4d71-af82-83afc5baa01a\",\"added_by\":\"auto\",\"created_at\":\"2025-11-07 08:39:52\",\"extension\":\"docx\",\"order_by\":1,\"title\":\"\",\"display\":\"\",\"copyAsset\":false,\"role\":\"supplement\",\"size\":51696,\"visible\":true,\"origin\":\"\",\"legend\":\"\",\"description\":\"\",\"filename\":\"Tables.docx\",\"url\":\"https://assets-eu.researchsquare.com/files/rs-7904928/v1/9464412fba2d0e03730ba965.docx\"},{\"id\":95365864,\"identity\":\"23e31067-f1e3-4866-b3de-922b3bf28fee\",\"added_by\":\"auto\",\"created_at\":\"2025-11-07 08:39:52\",\"extension\":\"docx\",\"order_by\":2,\"title\":\"\",\"display\":\"\",\"copyAsset\":false,\"role\":\"supplement\",\"size\":40250,\"visible\":true,\"origin\":\"\",\"legend\":\"\",\"description\":\"\",\"filename\":\"Appendices.docx\",\"url\":\"https://assets-eu.researchsquare.com/files/rs-7904928/v1/08a30221e19a840f67833558.docx\"}],\"financialInterests\":\"No competing interests reported.\",\"formattedTitle\":\"\\u003cp\\u003eLabor Shortages and the Quality of Working Life: Workplace and Household Dimensions from Matched Employer–Employee Data in Japan\\u003c/p\\u003e\",\"fulltext\":[{\"header\":\"1. Motivation\",\"content\":\"\\u003cp\\u003eLabor shortages have attracted growing attention across OECD countries in recent years. Causa et al. (\\u003cspan citationid=\\\"CR15\\\" class=\\\"CitationRef\\\"\\u003e2025\\u003c/span\\u003e) examined this phenomenon and documented significant labor shortages in the United States, the United Kingdom, Austria, Japan, and Germany. Since 2021, the United States and Germany have experienced persistent labor shortages, with labor demand exceeding labor supply. Similarly, the United Kingdom, Austria, and Japan have seen labor supply and demand converge or labor supply fall short of demand, intensifying their labor shortage challenges. Those countries also show high vacancy-to-unemployment ratios, which suggest the labor market tightness\\u003csup\\u003e1\\u003c/sup\\u003e.\\u003c/p\\u003e\\u003cp\\u003eLabor shortages have both positive and negative consequences. On the positive side, tight labor market conditions can raise wages for newly hired workers\\u003csup\\u003e2\\u003c/sup\\u003e. Brunow et al. (2022), for example, analyzed labor market tightness in Germany and found that workers who entered the labor market under tighter conditions experienced greater wage growth than those starting in more relaxed markets. Similarly, evidence from Japan indicates that rising posted wages in a tight labor market are associated with higher average wages for regular employees (Furukawa et al., \\u003cspan citationid=\\\"CR25\\\" class=\\\"CitationRef\\\"\\u003e2025\\u003c/span\\u003e). Additionally, Adrjan and Lydon (\\u003cspan citationid=\\\"CR4\\\" class=\\\"CitationRef\\\"\\u003e2019\\u003c/span\\u003e) measure labor market tightness using the number of clicks per job posting and demonstrate that both wage levels and wage growth rates are significantly higher in tight labor markets. On the negative side, however, labor shortages often increase working hours for those who remain employed, particularly in industries most affected by shortages. A tight labor market can therefore lead to heavier workloads, longer hours, and greater physical and emotional strain (Causa et al. \\u003cspan citationid=\\\"CR15\\\" class=\\\"CitationRef\\\"\\u003e2025\\u003c/span\\u003e). These burdens are likely to undermine job satisfaction, yet empirical research directly examining this channel remains limited. However, it is essential to examine the relationship between labor shortages and job satisfaction from three perspectives.\\u003c/p\\u003e\\u003cp\\u003eFirst, research in this area remains limited. While a substantial body of work has examined the relationships between income, working hours, and job satisfaction, relatively few studies have investigated the role of labor shortages, which have only recently emerged as a significant issue. For instance, Causa et al. (\\u003cspan citationid=\\\"CR15\\\" class=\\\"CitationRef\\\"\\u003e2025\\u003c/span\\u003e) documented a negative association between labor shortages and both physical and mental health, but did not examine their impact on job satisfaction. Similarly, Clark (\\u003cspan citationid=\\\"CR17\\\" class=\\\"CitationRef\\\"\\u003e2003\\u003c/span\\u003e), Clark et al. (\\u003cspan citationid=\\\"CR20\\\" class=\\\"CitationRef\\\"\\u003e2010\\u003c/span\\u003e), and Shields et al. (\\u003cspan citationid=\\\"CR51\\\" class=\\\"CitationRef\\\"\\u003e2009\\u003c/span\\u003e) analyzed the relationship between aggregate unemployment and well-being, relying on regional or national unemployment rates. However, they interpreted aggregate unemployment primarily as a measure of social stigma rather than as an indicator of labor market tightness. More broadly, existing research on labor shortages has focused on their effects on wages (B\\u0026ouml;rschlein et al., \\u003cspan citationid=\\\"CR12\\\" class=\\\"CitationRef\\\"\\u003e2024\\u003c/span\\u003e; Brunow et al., \\u003cspan citationid=\\\"CR13\\\" class=\\\"CitationRef\\\"\\u003e2022\\u003c/span\\u003e; Domash and Summers, \\u003cspan citationid=\\\"CR22\\\" class=\\\"CitationRef\\\"\\u003e2022\\u003c/span\\u003e; Furukawa et al., \\u003cspan citationid=\\\"CR25\\\" class=\\\"CitationRef\\\"\\u003e2025\\u003c/span\\u003e), firm production (Le Barbanchon et al., \\u003cspan citationid=\\\"CR39\\\" class=\\\"CitationRef\\\"\\u003e2023\\u003c/span\\u003e; Acemoglu and Restrepo, \\u003cspan citationid=\\\"CR2\\\" class=\\\"CitationRef\\\"\\u003e2017\\u003c/span\\u003e; Acemoglu, \\u003cspan citationid=\\\"CR1\\\" class=\\\"CitationRef\\\"\\u003e2010\\u003c/span\\u003e), and technology adoption (Lipowski, \\u003cspan citationid=\\\"CR41\\\" class=\\\"CitationRef\\\"\\u003e2024\\u003c/span\\u003e; San, \\u003cspan citationid=\\\"CR48\\\" class=\\\"CitationRef\\\"\\u003e2023\\u003c/span\\u003e; Acemoglu and Restrepo, \\u003cspan citationid=\\\"CR3\\\" class=\\\"CitationRef\\\"\\u003e2022\\u003c/span\\u003e). In contrast, the relationship between labor shortages and job satisfaction remains largely unexplored. Second, labor shortages may create ripple effects through their influence on job turnover and mobility. Job satisfaction is closely linked to workers\\u0026rsquo; turnover and job-changing behavior (Akerlof et al., \\u003cspan citationid=\\\"CR5\\\" class=\\\"CitationRef\\\"\\u003e1988\\u003c/span\\u003e; Clark et al., 1997; Freeman, \\u003cspan citationid=\\\"CR23\\\" class=\\\"CitationRef\\\"\\u003e1978\\u003c/span\\u003e). If reduced job satisfaction due to labor shortages leads to higher turnover, this could trigger a vicious cycle in which shortages become even more severe. Third, concerns arise from the long-term nature of labor shortages. In several OECD countries, demographic changes\\u0026mdash;such as declining birth rates and population aging\\u0026mdash;have reduced the working-age population, suggesting that labor shortages are unlikely to ease in the short term. To design effective policy responses, it is therefore urgent to clarify the relationship between labor shortages and job satisfaction.\\u003c/p\\u003e\\u003cp\\u003eThis study investigates the relationship between labor shortages and job satisfaction in Japan, a country currently facing severe labor supply constraints. Our contribution to the literature is threefold. First, we employ matched employer\\u0026ndash;employee data that allow us to identify labor shortages at the firm level. Specifically, we use the \\u003cem\\u003eSurvey on the Current Situation and Working Styles Surrounding Labor Shortages\\u003c/em\\u003e, conducted by the Japan Institute for Labor Policy and Training (JILPT). This dataset combines information from both company surveys and surveys of full-time employees, making it possible to capture the presence or absence of labor shortages within each firm. Unlike prior studies such as Clark (\\u003cspan citationid=\\\"CR17\\\" class=\\\"CitationRef\\\"\\u003e2003\\u003c/span\\u003e), Clark et al. (\\u003cspan citationid=\\\"CR20\\\" class=\\\"CitationRef\\\"\\u003e2010\\u003c/span\\u003e), and Shields et al. (\\u003cspan citationid=\\\"CR51\\\" class=\\\"CitationRef\\\"\\u003e2009\\u003c/span\\u003e), which relied on aggregate measures of labor market tightness, our approach focuses directly on the firm where the employee works. Second, we examine the heterogeneous effects of labor shortages by incorporating information on both the timing and the causes of shortages. When assessing the impact of labor shortages, it is insufficient to consider only whether a shortage occurs; the duration of the shortage also matters. Short-term shortages can often be managed by adjusting the working hours of existing employees. By contrast, prolonged shortages are more difficult to address in this way and may ultimately reduce job satisfaction by worsening working conditions. The causes of labor shortages are equally important. If shortages arise from economic recovery or strong business performance, the resulting sense of vitality within firms may mitigate their negative effects on job satisfaction. However, if shortages stem from rising employee turnover or difficulties in recruitment, the work environment and interpersonal relationships are likely to deteriorate, increasing the risk of a decline in job satisfaction. Third, we employ two measures of job satisfaction, together with related indicators such as monthly working hours, mental separation from work during breaks, relaxation during breaks/leisure time, sufficient leisure time for recovery, and weekday family dinner time, to provide a comprehensive assessment of the consequences of labor shortages. Labor shortages in the workplace can also be related to family life, which is closely linked to overall well-being (Argyle \\u003cspan citationid=\\\"CR7\\\" class=\\\"CitationRef\\\"\\u003e2001\\u003c/span\\u003e). They often lead to longer working hours, reducing both rest time and time spent with family. This dynamic may contribute to lower job satisfaction and should therefore be taken into account when analyzing the broader consequence of labor shortages.\\u003c/p\\u003e\\u003cp\\u003eOur analysis yields four key findings. First, firm-level labor shortages are negatively associated with workers\\u0026rsquo; job satisfaction. This result is robust across estimation methods, remaining consistent when using OLS, ordered logit, matching estimators, and instrumental variable (IV) methods. Moreover, the negative association is particularly pronounced among male workers, those without a university degree, married individuals, and those who have children. Second, the results concerning the timing of labor shortages indicate that no significant association is observed when shortages have lasted less than two years. However, job satisfaction declines significantly when the labor shortage lasts for at least two years. This suggests that short-term shortages can often be absorbed through temporary adjustments, but prolonged shortages lead to an accumulation of burdens, ultimately reducing job satisfaction. Third, analysis of labor shortage causes reveals that job satisfaction declines significantly when shortages stem from failure to review business processes and insufficient investment in labor-saving and rationalization measures. Fourth, workers in firms facing labor shortages are more likely to experience longer working hours. They are also less likely to take time to relax during breaks or leisure, and are less likely to have dinner with their families.\\u003c/p\\u003e\"},{\"header\":\"2. Literature review\",\"content\":\"\\u003cdiv id=\\\"Sec3\\\" class=\\\"Section2\\\"\\u003e\\u003ch2\\u003e2.1 Theoretical background\\u003c/h2\\u003e\\u003cp\\u003eLabor shortages can influence employees\\u0026rsquo; well-being through several interrelated mechanisms grounded in both labor economics and household economics. Following Becker\\u0026rsquo;s (\\u003cspan citationid=\\\"CR9\\\" class=\\\"CitationRef\\\"\\u003e1965\\u003c/span\\u003e) time allocation framework, individual utility depends on the trade-off between market work, leisure, and home production. When firms face persistent labor shortages, the workload borne by existing employees typically increases, reducing the time available for leisure and household activities. This reallocation of time away from non-market domains lowers overall well-being, even when wages remain unchanged.\\u003c/p\\u003e\\u003cp\\u003eBeyond this basic time\\u0026ndash;utility trade-off, labor shortages can heighten job demands and psychological strain. According to Karasek\\u0026rsquo;s (\\u003cspan citationid=\\\"CR37\\\" class=\\\"CitationRef\\\"\\u003e1979\\u003c/span\\u003e) job strain model, greater job demands\\u0026mdash;arising from longer working hours and intensified workloads\\u0026mdash;elevate stress levels and thereby diminish job satisfaction. In this context, a persistent shortage of labor functions as a structural constraint that sustains excessive workloads and undermines employees\\u0026rsquo; ability to psychologically detach from work. Empirical evidence from Hamermesh and Lee (\\u003cspan citationid=\\\"CR31\\\" class=\\\"CitationRef\\\"\\u003e2007\\u003c/span\\u003e) supports this mechanism, showing that time pressure and work intensity contribute to stress and fatigue. Collectively, these dynamics suggest that the consequences of labor shortages extend beyond productivity concerns, encompassing deterioration in both subjective well-being and job satisfaction.\\u003c/p\\u003e\\u003cp\\u003eFrom the perspective of household economics, the effects of workplace strain often spill over into the family domain. Hildenbrand et al. (2024) and Noda (\\u003cspan citationid=\\\"CR43\\\" class=\\\"CitationRef\\\"\\u003e2020\\u003c/span\\u003e) emphasize that work\\u0026ndash;family balance is a critical determinant of life satisfaction and overall welfare. When long working hours and sustained stress reduce the time and energy devoted to family interactions, the resulting deterioration in family life may further weaken job satisfaction. This phenomenon, known as \\u0026ldquo;workload spillover\\u0026rdquo; (Bolger et al., \\u003cspan citationid=\\\"CR11\\\" class=\\\"CitationRef\\\"\\u003e1989\\u003c/span\\u003e; Westman, \\u003cspan citationid=\\\"CR56\\\" class=\\\"CitationRef\\\"\\u003e2001\\u003c/span\\u003e), has been empirically documented: excessive work demands disrupt family relationships (Frone, \\u003cspan citationid=\\\"CR24\\\" class=\\\"CitationRef\\\"\\u003e2003\\u003c/span\\u003e; Ilies et al., \\u003cspan citationid=\\\"CR35\\\" class=\\\"CitationRef\\\"\\u003e2007\\u003c/span\\u003e), while family strain in turn undermines work engagement and performance (Frone, \\u003cspan citationid=\\\"CR24\\\" class=\\\"CitationRef\\\"\\u003e2003\\u003c/span\\u003e; Westman et al., \\u003cspan citationid=\\\"CR57\\\" class=\\\"CitationRef\\\"\\u003e2008\\u003c/span\\u003e).\\u003c/p\\u003e\\u003cp\\u003eTaken together, these theoretical insights imply that the relationship between labor shortages and job satisfaction should be understood as a multidimensional process linking workplace strain, impaired recovery, and reduced family well-being.\\u003c/p\\u003e\\u003c/div\\u003e\\u003cdiv id=\\\"Sec4\\\" class=\\\"Section2\\\"\\u003e\\u003ch2\\u003e2.2 Empirical analysis\\u003c/h2\\u003e\\u003cp\\u003eJob satisfaction has been the focus of considerable scholarly inquiry, yet it continues to warrant attention for two principal reasons. First, it constitutes a salient indicator of the utility that individuals derive from employment, and the measurement of this utility offers valuable guidance for policymaking (Clark and Oswald, \\u003cspan citationid=\\\"CR21\\\" class=\\\"CitationRef\\\"\\u003e1996\\u003c/span\\u003e; Clark, \\u003cspan citationid=\\\"CR18\\\" class=\\\"CitationRef\\\"\\u003e2005\\u003c/span\\u003e; Van Praag and Ferrer-i-Carbonell, \\u003cspan citationid=\\\"CR54\\\" class=\\\"CitationRef\\\"\\u003e2004\\u003c/span\\u003e). Second, job satisfaction is intrinsically linked to employees\\u0026rsquo; turnover intentions, organizational commitment, and firm-level productivity. Accordingly, a thorough understanding of its determinants provides critical insights for firms (Akerlof et al., \\u003cspan citationid=\\\"CR5\\\" class=\\\"CitationRef\\\"\\u003e1988\\u003c/span\\u003e; Clark, \\u003cspan citationid=\\\"CR18\\\" class=\\\"CitationRef\\\"\\u003e2005\\u003c/span\\u003e; Freeman, \\u003cspan citationid=\\\"CR23\\\" class=\\\"CitationRef\\\"\\u003e1978\\u003c/span\\u003e).\\u003c/p\\u003e\\u003cp\\u003eLittle research has examined the relationship between firm-level labor shortages and job satisfaction. However, several studies have investigated the association between national or regional unemployment rates and well-being (Clark, \\u003cspan citationid=\\\"CR17\\\" class=\\\"CitationRef\\\"\\u003e2003\\u003c/span\\u003e; Clark et al., \\u003cspan citationid=\\\"CR20\\\" class=\\\"CitationRef\\\"\\u003e2010\\u003c/span\\u003e; Shields et al., \\u003cspan citationid=\\\"CR51\\\" class=\\\"CitationRef\\\"\\u003e2009\\u003c/span\\u003e). These studies employ unemployment rates to examine social stigma effects rather than labor market tightness per se. For example, Clark (\\u003cspan citationid=\\\"CR17\\\" class=\\\"CitationRef\\\"\\u003e2003\\u003c/span\\u003e) analyzes how regional unemployment rates affect both employed and unemployed individuals using the British Household Panel Survey (BHPS). The study hypothesizes that in high-unemployment areas, the prevalence of joblessness reduces the social stigma associated with being unemployed. The empirical results support this hypothesis, demonstrating that unemployed men's well-being increases with higher regional unemployment rates. Similar findings have been documented across multiple countries, including the United Kingdom (Shields et al., 2005), Australia (Shields et al., \\u003cspan citationid=\\\"CR51\\\" class=\\\"CitationRef\\\"\\u003e2009\\u003c/span\\u003e), South Africa (Powdthavee, \\u003cspan citationid=\\\"CR47\\\" class=\\\"CitationRef\\\"\\u003e2007\\u003c/span\\u003e), Switzerland (Stutzer and Lalive, \\u003cspan citationid=\\\"CR53\\\" class=\\\"CitationRef\\\"\\u003e2004\\u003c/span\\u003e), and Germany (Clark et al., \\u003cspan citationid=\\\"CR19\\\" class=\\\"CitationRef\\\"\\u003e2008\\u003c/span\\u003e).\\u003c/p\\u003e\\u003cp\\u003eRelated research has examined the relationship between working hours and job satisfaction. Theoretically, longer working hours should reduce job satisfaction by decreasing leisure time and increasing physical fatigue. However, empirical findings are mixed: some studies find a negative association between working hours and job satisfaction(Clark \\u003cspan citationid=\\\"CR21\\\" class=\\\"CitationRef\\\"\\u003e1996\\u003c/span\\u003e;Bender et al༎2005), while others report no significant relationship (Van Praag et al. \\u003cspan citationid=\\\"CR55\\\" class=\\\"CitationRef\\\"\\u003e2003\\u003c/span\\u003e). In Japan, empirical findings remain inconsistent. Asano and Kenzyou (2012), using data from regular employees in Japan, the UK, and Germany, demonstrate that both satisfaction with working hours and life satisfaction decline with longer working hours. Conversely, Nomura (\\u003cspan citationid=\\\"CR44\\\" class=\\\"CitationRef\\\"\\u003e2018\\u003c/span\\u003e) finds no significant relationship between weekly working hours and job satisfaction, either linear or nonlinear. Other research suggests a U-shaped relationship between working hours and job satisfaction. Kuroda and Yamamoto (\\u003cspan citationid=\\\"CR38\\\" class=\\\"CitationRef\\\"\\u003e2019\\u003c/span\\u003e) propose that while job satisfaction initially decreases with longer hours, non-monetary job rewards\\u0026mdash;such as self-actualization and feelings of being valued\\u0026mdash;may eventually dominate. When these positive effects outweigh the negative impacts of long hours, job satisfaction can reverse direction and increase. Empirically, Kuroda and Yamamoto (\\u003cspan citationid=\\\"CR38\\\" class=\\\"CitationRef\\\"\\u003e2019\\u003c/span\\u003e) find that job satisfaction begins to rise when weekly working hours exceed 55 hours, confirming this U-shaped pattern.\\u003c/p\\u003e\\u003c/div\\u003e\"},{\"header\":\"3 Japanese context\",\"content\":\"\\u003cdiv id=\\\"Sec6\\\" class=\\\"Section2\\\"\\u003e\\u003ch2\\u003e3.1 The Context of Labor Shortages in Japan\\u003c/h2\\u003e\\u003cp\\u003eThis study focuses on Japan, which provides a particularly compelling case for examining the implications of labor shortages for several reasons. First, among advanced economies, Japan has experienced one of the most pronounced declines in fertility alongside rapid population aging, resulting in a contraction of the working-age population. The working-age population peaked in 1995 and has since been in steady decline, while the total population reached its peak in 2008 and has continuously decreased since 2011. Over the past quarter century, these demographic trends have intensified constraints on labor supply, raising concerns about the sustainability of economic growth and contributing to persistent labor shortages. Second, unlike EU member states, Japan\\u0026rsquo;s insular geography and marked linguistic and cultural distinctiveness create substantial barriers to immigration. Consequently, Japan faces a dual challenge: a shrinking working-age population driven by demographic change, and limited capacity to offset this decline through inward migration. This unique combination has produced labor supply constraints of unusual severity compared to other advanced economies. A detailed analysis of Japan\\u0026rsquo;s case thus offers critical insights into how labor supply constraints shape firm behavior and broader socioeconomic outcomes.\\u003c/p\\u003e\\u003c/div\\u003e\\u003cdiv id=\\\"Sec7\\\" class=\\\"Section2\\\"\\u003e\\u003ch2\\u003e3.2 The Current State of Japan's Labor Shortages\\u003c/h2\\u003e\\u003cp\\u003eA labor shortage refers to a situation in which the available labor supply falls short of the level required for corporate activity. To assess labor shortages in Japan, we examine the effective job openings-to-applicants ratio and the unemployment rate (Fig.\\u0026nbsp;1). The effective job openings-to-applicants ratio, which measures the number of job openings per job seeker, serves as an indicator of labor market tightness. A value greater than one implies that the number of job openings exceeds the number of job seekers. As shown in Fig.\\u0026nbsp;1, this ratio has remained consistently above one since June 2014. Although it temporarily declined during the COVID-19 pandemic, it subsequently recovered and reached 1.14 in June 2025, reflecting persistent labor shortages.\\u003c/p\\u003e\\u003cp\\u003eThe unemployment rate displays a similar pattern. It has been on a downward trend since July 2009, with a temporary increase during the pandemic, before gradually falling to 2.5 percent in June 2025\\u0026mdash;one of the lowest levels observed in recent decades. Additional evidence of labor shortages is provided by the Cabinet Office\\u0026rsquo;s Corporate Awareness Survey on Diversifying Workforces (2019)\\u003csup\\u003e3\\u003c/sup\\u003e, in which approximately 70 percent of firms reported experiencing either a \\u0026ldquo;shortage\\u0026rdquo; or a \\u0026ldquo;slight shortage\\u0026rdquo; of labor. This indicates that labor shortages are not only observable in aggregate indicators but are also widely recognized by firms themselves.\\u003c/p\\u003e\\u003c/div\\u003e\\u003cdiv id=\\\"Sec8\\\" class=\\\"Section2\\\"\\u003e\\u003ch2\\u003e3.3 The Potential for Increased Working Hours as a Response to Labor Shortages in Japan\\u003c/h2\\u003e\\u003cp\\u003eIn Japan, firms tend to respond to labor shortages by extending the working hours of incumbent employees rather than by engaging in new recruitment. This section examines the background to this tendency from three perspectives.\\u003c/p\\u003e\\u003cp\\u003eFirst, the decision reflects a comparison of the costs associated with new recruitment versus the extension of working hours. From a labor economics standpoint, firms facing labor shortages choose between hiring additional workers and lengthening the hours of existing employees based on a cost\\u0026ndash;benefit calculation. Oi (\\u003cspan citationid=\\\"CR45\\\" class=\\\"CitationRef\\\"\\u003e1962\\u003c/span\\u003e) defined as \\u0026ldquo;quasi-fixed costs\\u0026rdquo; those costs that increase with the number of employees but not with hours worked, and showed that the larger these costs are, the more likely firms are to adjust through hours rather than headcount. Similarly, when overtime premiums are low or when new recruits require substantial training expenditures, firms\\u0026rsquo; incentives to adjust through working hours are strengthened (Higuchi, \\u003cspan citationid=\\\"CR33\\\" class=\\\"CitationRef\\\"\\u003e2010\\u003c/span\\u003e). In Japan, the statutory overtime premium remained at 25 percent from the enactment of the Labor Standards Act in 1947 until 2007. Following the 2008 revision, the premium for overtime exceeding 60 hours per month was raised to 50 percent or more, but the rate for overtime below 60 hours has remained at 25 percent\\u0026mdash;a relatively low level by international standards. This comparatively modest overtime premium, together with high quasi-fixed and training costs, may have encouraged Japanese firms to address labor shortages primarily through adjustments in working hours.\\u003c/p\\u003e\\u003cp\\u003eSecond, Japan\\u0026rsquo;s distinctive employment practices reinforce this tendency. Japanese firms are characterized by long average job tenure and a strong emphasis on the accumulation of firm-specific skills (Yamamoto, \\u003cspan citationid=\\\"CR60\\\" class=\\\"CitationRef\\\"\\u003e2019\\u003c/span\\u003e). These features make dismissals more difficult and induce firms to be more cautious with new recruitment. Consequently, even under labor shortages, firms have stronger incentives to rely on working-hours adjustments rather than on expanding employment.\\u003c/p\\u003e\\u003cp\\u003eThird, the ambiguity of job definitions within firms also plays a role. As Ono (\\u003cspan citationid=\\\"CR46\\\" class=\\\"CitationRef\\\"\\u003e2018\\u003c/span\\u003e) points out, job responsibilities in Japanese firms are often loosely defined, with division of labor less clearly established than in other advanced economies. Employees may therefore devote time not only to core tasks but also to peripheral duties. This flexibility implies that when temporary vacancies arise, firms can address them by expanding or modifying the responsibilities of existing employees rather than by new hiring. Such flexibility, however, comes at the cost of increased burdens on incumbent workers during periods of labor shortage.\\u003c/p\\u003e\\u003cp\\u003eTaken together, Japan\\u0026rsquo;s cost structures, employment practices, and flexible job definitions combine to strengthen the tendency of firms to rely on adjustments in working hours rather than new hiring when confronted with labor shortages.\\u003c/p\\u003e\\u003c/div\\u003e\"},{\"header\":\"4. Data\",\"content\":\"\\u003cp\\u003eThe primary data employed in this study are drawn from the Survey on Labor Shortages and Work Styles conducted by JILPT in 2019. This survey was designed to examine the effects of labor shortages and was implemented using a corporate database maintained by a credit research agency, from which firms were stratified and sampled by industry and firm size. The survey consists of two components: a corporate survey and an employee survey. The corporate survey covered 4,599 firms, while the employee survey included 16,752 regular employees.\\u003c/p\\u003e\\u003cp\\u003eThis dataset has three notable advantages. First, the corporate survey contains detailed items on labor shortages, allowing us to link labor shortage conditions at the firm level with employee job satisfaction. Second, the employee survey provides rich individual-level information, including demographic attributes such as age, education, marital status, and presence of children, along with multiple measures of job satisfaction. Third, the two surveys can be matched, enabling the integration of firm-level characteristics into the employee-level analysis. The dataset also has a limitation: both surveys are cross-sectional and conducted only once in 2019, making it difficult to control for unobserved time-invariant factors.\\u003c/p\\u003e\\u003cp\\u003eFor the purpose of this study, the analysis is restricted to male and female regular employees under the age of 60, thereby excluding those at or beyond the statutory retirement age. While the analysis primarily relies on variables from the employee survey, several firm-level variables are drawn from the corporate survey. After excluding observations with missing values, our final sample comprises 7,376 full-time employees across 2,272 firms.\\u003c/p\\u003e\"},{\"header\":\"5. Estimation methods\",\"content\":\"\\u003cp\\u003eThis study employs ordinary least squares (OLS) estimation to examine how labor shortages are related to job satisfaction among regular employees. The estimation equation is specified as follows:\\u003cdiv id=\\\"Equ1\\\" class=\\\"Equation\\\"\\u003e\\u003cdiv format=\\\"TEX\\\" class=\\\"mathdisplay\\\" id=\\\"FileID_Equ1\\\" name=\\\"EquationSource\\\"\\u003e\\n$$\\\\:{JS}_{ij}={\\\\gamma\\\\:}+{\\\\theta\\\\:}{P}_{ij}+{\\\\delta\\\\:}^{{\\\\prime\\\\:}}{Z}_{ij}+{\\\\omega\\\\:}_{ij}$$\\u003c/div\\u003e\\u003cdiv class=\\\"EquationNumber\\\"\\u003e1\\u003c/div\\u003e\\u003c/div\\u003e\\u003c/p\\u003e\\u003cp\\u003eIn Eq.\\u0026nbsp;(\\u003cspan refid=\\\"Equ1\\\" class=\\\"InternalRef\\\"\\u003e1\\u003c/span\\u003e), subscript \\u003cem\\u003ei\\u003c/em\\u003e indexes individuals and subscript \\u003cem\\u003ej\\u003c/em\\u003e indexes employing firms. The dependent variable captures job satisfaction through two dimensions: \\u0026ldquo;I am satisfied with my job,\\u0026rdquo; \\u0026ldquo;I am satisfied with the work environment.\\u0026rdquo; The original survey responses range from 1 (always applicable) to 5 (never applicable). We reverse-code all measures so that higher values correspond to higher levels of job satisfaction.\\u003c/p\\u003e\\u003cp\\u003e\\u003cspan class=\\\"InlineEquation\\\"\\u003e\\u003cspan class=\\\"mathinline\\\"\\u003e\\\\(\\\\:{P}_{ij}\\\\)\\u003c/span\\u003e\\u003c/span\\u003e is a dummy variable that equals 1 if individual \\u003cem\\u003ei\\u003c/em\\u003e's employing firm \\u003cem\\u003ej\\u003c/em\\u003e experiences labor shortages, and 0 otherwise. The firm-level survey asks: \\\"Please indicate the current status of your company's employment levels (staffing) at the time of this survey.\\\" Responses are measured on a five-point scale: 1 (severe shortage), 2 (moderate shortage), 3 (appropriate), 4 (moderate excess), and 5 (severe excess). We define \\u003cspan class=\\\"InlineEquation\\\"\\u003e\\u003cspan class=\\\"mathinline\\\"\\u003e\\\\(\\\\:{P}_{ij}\\\\)\\u003c/span\\u003e\\u003c/span\\u003e = 1 for firms reporting either severe shortage (1) or moderate shortage (2), and \\u003cspan class=\\\"InlineEquation\\\"\\u003e\\u003cspan class=\\\"mathinline\\\"\\u003e\\\\(\\\\:{P}_{ij}\\\\)\\u003c/span\\u003e\\u003c/span\\u003e = 0 for all other responses\\u003csup\\u003e4\\u003c/sup\\u003e.\\u003c/p\\u003e\\u003cp\\u003eThe variable \\u003cspan class=\\\"InlineEquation\\\"\\u003e\\u003cspan class=\\\"mathinline\\\"\\u003e\\\\(\\\\:{P}_{ij}\\\\)\\u003c/span\\u003e\\u003c/span\\u003e offers two key advantages. First, it enables the measurement of labor shortages at the firm level. When relying solely on microdata collected from individuals, it is difficult to capture firm-level labor shortages. By employing employer\\u0026ndash;employee matched data, however, we can incorporate information from firm surveys and directly measure labor shortages at the organizational level\\u003csup\\u003e5\\u003c/sup\\u003e. Second, the use of \\u003cspan class=\\\"InlineEquation\\\"\\u003e\\u003cspan class=\\\"mathinline\\\"\\u003e\\\\(\\\\:{P}_{ij}\\\\)\\u003c/span\\u003e\\u003c/span\\u003e mitigates concerns about reverse causality. If employees themselves were asked to assess the extent of labor shortages in their workplace, those with lower job satisfaction might be more inclined to perceive or report a shortage\\u003csup\\u003e6\\u003c/sup\\u003e. This potential bias arises because dissatisfied workers may evaluate their work environment more negatively and, as a result, exaggerate the presence of labor shortages. In such a case, the shortage measure would conflate objective conditions with subjective perceptions, thereby confounding the relationship between labor shortages and job satisfaction. In contrast, the data employed in this study measure labor shortages through firm questionnaires completed by employers rather than employees. Thus, the entity reporting labor shortages is distinct from the individual providing information on job satisfaction, substantially reducing\\u0026mdash;if not eliminating\\u0026mdash;the risk of reverse causality. Moreover, as confirmed in the robustness checks presented later in the paper, the results are not driven by reverse causality\\u003csup\\u003e7\\u003c/sup\\u003e.\\u003c/p\\u003e\\u003cp\\u003e\\u003cspan class=\\\"InlineEquation\\\"\\u003e\\u003cspan class=\\\"mathinline\\\"\\u003e\\\\(\\\\:{Z}_{ij}\\\\)\\u003c/span\\u003e\\u003c/span\\u003e represents individual and firm characteristics, including: female dummy, age dummies, marriage dummy, children dummy, education dummies, tenure dummies, occupation dummies, firm size dummies, industry dummies, and regional block dummies. Additional firm-level variables include the proportion of regular employees among total staff (1\\u0026thinsp;=\\u0026thinsp;\\u0026le;\\u0026thinsp;30%, 2\\u0026thinsp;=\\u0026thinsp;40%, 3\\u0026thinsp;=\\u0026thinsp;50%, 4\\u0026thinsp;=\\u0026thinsp;60%, 5\\u0026thinsp;=\\u0026thinsp;70%, 6\\u0026thinsp;=\\u0026thinsp;80%, 7\\u0026thinsp;=\\u0026thinsp;90%, 8\\u0026thinsp;=\\u0026thinsp;100%), the proportion of female regular employees (1\\u0026thinsp;=\\u0026thinsp;0%, 2\\u0026thinsp;=\\u0026thinsp;0\\u0026ndash;5%, 3\\u0026thinsp;=\\u0026thinsp;~\\u0026thinsp;10%, 4\\u0026thinsp;=\\u0026thinsp;~\\u0026thinsp;20%, 5\\u0026thinsp;=\\u0026thinsp;~\\u0026thinsp;30%, 6\\u0026thinsp;=\\u0026thinsp;~\\u0026thinsp;40%, 7\\u0026thinsp;=\\u0026thinsp;~\\u0026thinsp;50%, 8\\u0026thinsp;=\\u0026thinsp;\\u0026ge;\\u0026thinsp;60%), and the proportion of employees aged 60 or older (1\\u0026thinsp;=\\u0026thinsp;0%, 2\\u0026thinsp;=\\u0026thinsp;0\\u0026ndash;5%, 3\\u0026thinsp;=\\u0026thinsp;~\\u0026thinsp;10%, 4\\u0026thinsp;=\\u0026thinsp;~\\u0026thinsp;20%, 5\\u0026thinsp;=\\u0026thinsp;~\\u0026thinsp;30%, 6\\u0026thinsp;=\\u0026thinsp;~\\u0026thinsp;40%, 7\\u0026thinsp;=\\u0026thinsp;~\\u0026thinsp;50%, 8\\u0026thinsp;=\\u0026thinsp;\\u0026ge;\\u0026thinsp;60%)\\u003csup\\u003e8\\u003c/sup\\u003e. \\u003cspan class=\\\"InlineEquation\\\"\\u003e\\u003cspan class=\\\"mathinline\\\"\\u003e\\\\(\\\\:{\\\\gamma\\\\:}\\\\)\\u003c/span\\u003e\\u003c/span\\u003e represents the constant term, and \\u003cspan class=\\\"InlineEquation\\\"\\u003e\\u003cspan class=\\\"mathinline\\\"\\u003e\\\\(\\\\:{\\\\omega\\\\:}_{ij}\\\\)\\u003c/span\\u003e\\u003c/span\\u003e denotes the error term\\u003c/p\\u003e\\u003cp\\u003eThe coefficient of primary interest in Eq.\\u0026nbsp;(\\u003cspan refid=\\\"Equ1\\\" class=\\\"InternalRef\\\"\\u003e1\\u003c/span\\u003e) is \\u003cspan class=\\\"InlineEquation\\\"\\u003e\\u003cspan class=\\\"mathinline\\\"\\u003e\\\\(\\\\:{\\\\theta\\\\:}\\\\)\\u003c/span\\u003e\\u003c/span\\u003e, which captures the association between labor shortages and job satisfaction. We hypothesize that this relationship operates through the following mechanism: (1) labor shortages reduce total labor input at the workplace, (2) workload redistribution occurs among existing employees, (3) increased burden on workers generates psychological and temporal stress, and (4) job satisfaction consequently declines. Based on this theoretical framework, we expect \\u003cspan class=\\\"InlineEquation\\\"\\u003e\\u003cspan class=\\\"mathinline\\\"\\u003e\\\\(\\\\:{\\\\theta\\\\:}\\\\)\\u003c/span\\u003e\\u003c/span\\u003e to be negative.\\u003c/p\\u003e\\u003cp\\u003eWe employ OLS estimation to test this hypothesis, with standard errors clustered at the firm level. Since our survey samples multiple employees from the same firms, individual observations are not independent. Employees within the same organization likely experience common shocks through shared organizational culture, human resource policies, and other firm-specific factors. Firm-level clustering addresses this potential correlation in the error terms.\\u003c/p\\u003e\\u003cp\\u003eTo verify the robustness of our findings, we supplement the OLS analysis with five alternative estimation methods: Ordered logit, Propensity Score Matching (PSM; Heckman et al., \\u003cspan citationid=\\\"CR32\\\" class=\\\"CitationRef\\\"\\u003e1997\\u003c/span\\u003e), Inverse-Probability-Weighted Regression Adjustment (IPWRA; Imbens and Wooldridge, \\u003cspan citationid=\\\"CR36\\\" class=\\\"CitationRef\\\"\\u003e2009\\u003c/span\\u003e; Wooldridge, \\u003cspan citationid=\\\"CR58\\\" class=\\\"CitationRef\\\"\\u003e2007\\u003c/span\\u003e, \\u003cspan citationid=\\\"CR59\\\" class=\\\"CitationRef\\\"\\u003e2010\\u003c/span\\u003e), Entropy Balancing (Hainmueller, \\u003cspan citationid=\\\"CR28\\\" class=\\\"CitationRef\\\"\\u003e2011\\u003c/span\\u003e, \\u003cspan citationid=\\\"CR27\\\" class=\\\"CitationRef\\\"\\u003e2012\\u003c/span\\u003e), and IV method.\\u003c/p\\u003e\\u003cp\\u003eDescriptive statistics are reported in Table\\u0026nbsp;1, with Fig.\\u0026nbsp;\\u003cspan refid=\\\"Fig1\\\" class=\\\"InternalRef\\\"\\u003e2\\u003c/span\\u003e illustrating the distribution of our job satisfaction dependent variables. All job satisfaction measures, although somewhat biased, exhibit a central tendency around the middle value (3) of the five-point Likert scale. Our principal explanatory variable indicates that nearly two-thirds of workers in the sample (65.7%) are employed in firms reporting labor shortages. Regarding demographic characteristics, 59.3% of workers are married and 60.2% have children. Age, educational attainment, and tenure exhibit relatively balanced distributions across categories. Clerical positions constitute the most common occupational group. The distribution of firm size is skewed toward smaller enterprises, consistent with Japan\\u0026rsquo;s dual economy structure dominated by small and medium-sized firms. The shares of workers in manufacturing, medical services, and welfare services are comparatively high.\\u003c/p\\u003e\"},{\"header\":\"6. Estimation results\",\"content\":\"\\u003cdiv id=\\\"Sec12\\\" class=\\\"Section2\\\"\\u003e\\u003ch2\\u003e6.1 Base estimates\\u003c/h2\\u003e\\u003cp\\u003eTable\\u0026nbsp;\\u003cspan refid=\\\"Tab1\\\" class=\\\"InternalRef\\\"\\u003e2\\u003c/span\\u003e reports the results of OLS estimations of the relationship between labor shortages and job satisfaction among regular employees. The reported coefficients correspond to firm-level labor shortage dummies. Columns (1) and (3) present unconditional estimates without covariates, while columns (2) and (4) include the full set of individual and firm characteristics as controls. The results indicate that all coefficients on the labor shortage dummies are negative and statistically significant. This implies that employees in firms experiencing labor shortages report systematically lower levels of job and work environment satisfaction. These findings are broadly consistent with prior expectations and align with the results of Causa et al. (\\u003cspan citationid=\\\"CR15\\\" class=\\\"CitationRef\\\"\\u003e2025\\u003c/span\\u003e).\\u003c/p\\u003e\\u003cp\\u003eExamining coefficient magnitudes, we observe that labor shortages associate more strongly with work environment satisfaction than with overall job satisfaction. The coefficients increase in absolute value when individual and firm characteristics are controlled, suggesting that omitted variable bias initially attenuates the estimated associations. Nevertheless, the magnitudes remain modest across all specifications, indicating relatively limited economic significance.\\u003c/p\\u003e\\u003cp\\u003eOverall, the findings reinforce the view that labor shortages are associated with multiple challenges for employee well-being, extending beyond heavier workloads alone. In particular, the observation that the strongest associations appear in relation to workplace conditions and psychological strain highlights the need for corporate strategies that explicitly take these dimensions into account when responding to labor shortages.\\u003c/p\\u003e\\u003c/div\\u003e\\u003cdiv id=\\\"Sec13\\\" class=\\\"Section2\\\"\\u003e\\u003ch2\\u003e6.2 Robustness check\\u003c/h2\\u003e\\u003cp\\u003eThis section examines the robustness of the baseline estimates presented in Table\\u0026nbsp;\\u003cspan refid=\\\"Tab1\\\" class=\\\"InternalRef\\\"\\u003e2\\u003c/span\\u003e using four complementary approaches.\\u003c/p\\u003e\\u003cp\\u003eFirst, we assess the possibility of reverse causality. While our primary analysis evaluates the association of labor shortages with job satisfaction, it is conceivable that the direction runs in the opposite way\\u0026mdash;namely, that low job satisfaction among employees contributes to the emergence of labor shortages, for example through higher quit rates. Although the measure of labor shortages employed here is constructed at the firm level from employer surveys\\u0026mdash;thereby limiting the scope for individual-level reporting bias\\u0026mdash;any reverse causality, if present, could still influence the estimated associations. To address this concern, we exploit information on employees\\u0026rsquo; job satisfaction one year prior, which is available for individuals who remained with the same firm, and data on the timing of labor shortages within the past year\\u003csup\\u003e9\\u003c/sup\\u003e. If reverse causality is absent, labor shortages emerging within the past year should not be systematically associated with lagged job satisfaction. Conversely, if reverse causality exists, lower levels of job satisfaction in the previous year would predict subsequent recognition of labor shortages, implying a significant correlation between the two variables. We formally test this hypothesis by estimating an OLS specification that includes the same set of control variables as Eq.\\u0026nbsp;(\\u003cspan refid=\\\"Equ1\\\" class=\\\"InternalRef\\\"\\u003e1\\u003c/span\\u003e). The results, reported in Table\\u0026nbsp;\\u003cspan refid=\\\"Tab3\\\" class=\\\"InternalRef\\\"\\u003e3\\u003c/span\\u003e, indicate that the coefficients on the dummy variable for labor shortages arising within the past year are not statistically significant. These findings provide evidence against the presence of reverse causality.\\u003c/p\\u003e\\u003cp\\u003eSecond, we examine the potential influence of survivorship bias. Specifically, workers with low job satisfaction are more likely to exit their firms, which may result in the observed sample being disproportionately composed of more resilient and relatively satisfied workers. If such bias is present, the negative association of labor shortages with job satisfaction would be underestimated. Ideally, this could be examined by analyzing the relationship between lagged job satisfaction and subsequent turnover; however, the dataset used in this study does not contain information on workers who have already left the firm. As a second-best approach, we investigate whether the impact of labor shortages differs systematically across tenure groups. The logic is as follows: if survivorship bias is present, long-tenured workers\\u0026mdash;who are on average more satisfied and less likely to quit\\u0026mdash;should exhibit weaker negative associations with labor shortages. In contrast, if the relationship between labor shortages and job satisfaction does not vary by tenure, survivorship bias can be considered negligible. To examine this, we construct interaction terms between tenure dummies and the labor shortage dummy and estimate their coefficients using OLS. The results, presented in Table\\u0026nbsp;\\u003cspan refid=\\\"Tab5\\\" class=\\\"InternalRef\\\"\\u003e4\\u003c/span\\u003e, show coefficients for labor shortages, tenure dummies, and their interactions. None of the interaction terms are statistically significant, suggesting that the role of survivorship bias is likely to be limited.\\u003c/p\\u003e\\u003cp\\u003eThird, we test the robustness of our baseline results by employing alternative estimation strategies, including an ordered logit model, PSM, IPWRA, and entropy balancing. While the baseline specifications rely on OLS, job satisfaction is measured on an ordinal scale. To address this measurement property, we re-estimate the association between labor shortages and job satisfaction using an ordered logit model. In addition, we implement matching-based approaches to address potential selection bias arising from systematic differences between workers employed at firms experiencing labor shortages and those at firms without such shortages. PSM matches individuals in the treatment group (workers employed at firms facing labor shortages) and the control group (workers at firms without shortages) based on their propensity scores\\u0026mdash;the estimated probability of being in the treatment group conditional on observed covariates\\u0026mdash;thereby ensuring comparisons are made between observationally similar individuals. IPWRA combines inverse probability weighting with regression adjustment, using the inverse of the propensity score as a weight, which both corrects for selection bias and improves estimation efficiency. Entropy balancing constructs sampling weights by solving a set of balancing constraints that enforce exact equality in the first and second moments of covariates between the treatment and control groups, thus achieving balance in both means and variances of individual attributes (Hainmueller, \\u003cspan citationid=\\\"CR28\\\" class=\\\"CitationRef\\\"\\u003e2011\\u003c/span\\u003e, \\u003cspan citationid=\\\"CR27\\\" class=\\\"CitationRef\\\"\\u003e2012\\u003c/span\\u003e). These methods are particularly valuable in observational settings, where treatment assignment is non-random, and OLS estimates of treatment effects may be biased either upward or downward. By employing these alternative approaches, we can evaluate whether the estimated effects of labor shortages on job satisfaction are robust to concerns about functional form and selection bias.\\u003c/p\\u003e\\u003cp\\u003eIn practice, we compare the results from these matching estimators with those obtained from the baseline OLS specifications. For PSM, we employ kernel matching with an Epanechnikov kernel and a bandwidth of 0.06. Standard errors are computed using bootstrapping with 200 replications. To ensure the common support condition, we exclude treated observations whose propensity scores fall outside the minimum\\u0026ndash;maximum range of the control group\\u0026rsquo;s score distribution. The propensity score distributions, presented in Appendix 2, indicate substantial overlap between the treatment and control groups. For IPWRA, we cluster standard errors at the firm level to maintain consistency with the OLS estimates. In the case of entropy balancing, we impose balancing constraints on the first and second moments of the covariates to evaluate the association between labor shortages and job satisfaction. Across all matching procedures, the same set of covariates used in Eq.\\u0026nbsp;(\\u003cspan refid=\\\"Equ1\\\" class=\\\"InternalRef\\\"\\u003e1\\u003c/span\\u003e) is employed for matching. The results of the balance diagnostics, reported in Appendix 3, show that most differences in covariates between the treatment and control groups become statistically insignificant after matching.\\u003c/p\\u003e\\u003cp\\u003eThe estimation results are reported in Table\\u0026nbsp;\\u003cspan refid=\\\"Tab6\\\" class=\\\"InternalRef\\\"\\u003e5\\u003c/span\\u003e. Panel A presents the coefficients for job satisfaction, and Panel B indicates those for work environment satisfaction. Across Panels A through B, all coefficients are consistently negative and statistically significant\\u003csup\\u003e10\\u003c/sup\\u003e. This finding indicates that firm-level labor shortages are systematically associated with lower levels of job and work environment satisfaction. Moreover, these results are closely aligned with the OLS estimates reported in Table\\u0026nbsp;\\u003cspan refid=\\\"Tab1\\\" class=\\\"InternalRef\\\"\\u003e2\\u003c/span\\u003e. A comparison of the magnitude of the coefficients between Table\\u0026nbsp;\\u003cspan refid=\\\"Tab1\\\" class=\\\"InternalRef\\\"\\u003e2\\u003c/span\\u003e and the alternative estimation methods (PSM, IPWRA, and entropy balancing) reveals only minor differences, suggesting that any bias attributable to the choice of estimation technique is likely to be small.\\u003c/p\\u003e\\u003cp\\u003eFourth, we address the potential concern of omitted variable bias by employing an IV approach. Although the preceding robustness checks suggest that reverse causality and survivorship bias are unlikely to drive our results, unobserved firm- or worker-level heterogeneity may still confound the estimated association between labor shortages and job satisfaction. To mitigate this concern, we estimate an IV model that exploits exogenous variation from two firm-level instruments obtained from the corporate survey: (1) the firm\\u0026rsquo;s expectations regarding its personnel surplus or shortage three years in the future, and (2) the firm\\u0026rsquo;s planned level of commitment to implementing measures to mitigate labor shortages over the same period.\\u003c/p\\u003e\\u003cp\\u003eThe first instrument is constructed from firms\\u0026rsquo; responses to the question on their anticipated personnel situation three years ahead. The original survey item provided five ordered categories ranging from \\u0026ldquo;severe shortage\\u0026rdquo; to \\u0026ldquo;severe surplus.\\u0026rdquo; We recoded this variable into a binary indicator equal to one if the firm reported either a \\u0026ldquo;severe shortage\\u0026rdquo; or a \\u0026ldquo;moderate shortage,\\u0026rdquo; and zero otherwise. The second instrument is based on firms\\u0026rsquo; stated intentions regarding their efforts to address future labor shortages. Respondents were asked to indicate their level of commitment on a five-point scale ranging from \\u0026ldquo;1. very proactive\\u0026rdquo; to \\u0026ldquo;5. not proactive at all.\\u0026rdquo; This variable was recoded as one if the firm selected \\u0026ldquo;1. very proactive,\\u0026rdquo; \\u0026ldquo;2. proactive,\\u0026rdquo; or \\u0026ldquo;3. somewhat proactive,\\u0026rdquo; and zero otherwise.\\u003c/p\\u003e\\u003cp\\u003eThese variables are expected to satisfy the two key conditions for valid instruments\\u0026mdash;relevance and exclusion. The relevance condition is plausible because a firm\\u0026rsquo;s current experience with labor shortages directly shapes its expectations and strategic planning for the near future. Firms currently facing severe shortages are more likely to anticipate continued shortages and to plan proactive countermeasures. This should yield a strong empirical correlation between our instruments and the endogenous variable, which we formally verify in the first-stage regression results.\\u003c/p\\u003e\\u003cp\\u003eThe exclusion restriction is also credible given the temporal and informational separation between the instruments and the outcome variable. An individual employee\\u0026rsquo;s current job satisfaction is largely determined by contemporaneous workplace conditions\\u0026mdash;such as workload intensity, interpersonal relations, and managerial practices\\u0026mdash;rather than by the firm\\u0026rsquo;s long-term strategic expectations or plans. It is highly implausible that an employee\\u0026rsquo;s current well-being would be directly affected by management\\u0026rsquo;s forward-looking assessments of staffing needs three years ahead, which are typically internal and undisclosed. Instead, any influence of these expectations on current job satisfaction would operate solely through their effect on the firm\\u0026rsquo;s present staffing situation, namely the current labor shortage\\u003csup\\u003e11\\u003c/sup\\u003e.\\u003c/p\\u003e\\u003cp\\u003eBy exploiting this exogenous variation in firms\\u0026rsquo; forward-looking assessments, the IV estimation allows us to obtain more causally reliable estimates of the impact of labor shortages on employee job satisfaction.\\u003c/p\\u003e\\u003cp\\u003eTable\\u0026nbsp;\\u003cspan refid=\\\"Tab7\\\" class=\\\"InternalRef\\\"\\u003e6\\u003c/span\\u003e presents the results of the IV estimation. The upper panel of the table reports the first-stage estimates, showing the coefficients of the two instrumental variables. Both instruments exhibit positive and statistically significant coefficients, indicating that firms anticipating a shortage of personnel three years ahead are more likely to experience a current labor shortage. Similarly, firms that report actively planning measures to mitigate future shortages are also more likely to face current shortages. These relationships are consistent with theoretical expectations and support the relevance of the instruments. To further assess instrument strength, we report the first-stage F-statistics in Table\\u0026nbsp;\\u003cspan refid=\\\"Tab7\\\" class=\\\"InternalRef\\\"\\u003e6\\u003c/span\\u003e. In all specifications, the F-statistics exceed the conventional threshold value of 10, suggesting that weak-instrument concerns are not warranted. Additionally, the overidentification test does not reject the null hypothesis that the instruments are uncorrelated with the error term, thereby supporting their validity. The endogeneity tests reject the null hypothesis of exogeneity for the labor shortage dummy\\u0026mdash;at the 10% significance level for job satisfaction and the 5% level for workplace environment satisfaction\\u0026mdash;confirming that endogeneity is indeed a concern in the OLS estimates.\\u003c/p\\u003e\\u003cp\\u003eTurning to the second-stage results, the coefficients on the labor shortage dummy are negative and statistically significant across both models. The estimated magnitudes are approximately twice as large as those obtained from the OLS estimations reported in Table\\u0026nbsp;\\u003cspan refid=\\\"Tab1\\\" class=\\\"InternalRef\\\"\\u003e2\\u003c/span\\u003e. This suggests that unobserved firm- or worker-level characteristics, which are negatively correlated with both labor shortages and satisfaction, may have attenuated the OLS estimates\\u003csup\\u003e12\\u003c/sup\\u003e. The IV estimates therefore reveal a more pronounced deterioration in job and workplace satisfaction associated with labor shortages. Taken together, these findings reinforce the robustness of the negative relationship between labor shortages and employee well-being, while highlighting that the OLS results likely provide a conservative estimate of this relationship\\u003csup\\u003e13\\u003c/sup\\u003e.\\u003c/p\\u003e\\u003c/div\\u003e\\u003cdiv id=\\\"Sec14\\\" class=\\\"Section2\\\"\\u003e\\u003ch2\\u003e6.3 Additional analysis\\u003c/h2\\u003e\\u003cp\\u003eThis section presents five additional analyses. First, we explore how the association between labor shortages and employee satisfaction varies across demographic and organizational characteristics. The sample is divided by gender, educational attainment, marital status, and parenthood status to examine potential heterogeneity. Table\\u0026nbsp;\\u003cspan refid=\\\"Tab8\\\" class=\\\"InternalRef\\\"\\u003e7\\u003c/span\\u003e summarizes the OLS estimates: Panel A reports the results for job satisfaction, and Panel B presents those for work environment satisfaction.\\u003c/p\\u003e\\u003cp\\u003eColumns (1)\\u0026ndash;(2), which show gender-specific results, indicate that a negative association between labor shortages and satisfaction emerges only among men. This pattern may reflect men\\u0026rsquo;s stronger attachment to the labor market and greater responsiveness to changes in workplace conditions. Columns (3)\\u0026ndash;(4) present estimates by educational attainment. Workers without a university degree display significant declines in both job and work environment satisfaction when facing labor shortages, whereas no significant relationship is observed among university-educated workers. The relatively stronger association among the less educated may be linked to their concentration in routine or manual tasks that are more susceptible to redistribution of workload during shortages. Columns (5)\\u0026ndash;(6) show results by marital status. Negative associations appear only among married individuals. One possible explanation is that married workers face role expectations in both work and family domains, so additional work demands during shortages may heighten tensions between these domains. Extended working hours can also reduce time spent with family members, potentially straining spousal relationships and lowering perceived satisfaction at work. Finally, columns (7)\\u0026ndash;(8) report results by parenthood status. Individuals with children exhibit consistently negative associations between labor shortages and both satisfaction measures. This pattern may reflect the increased time and physical demands of childcare, which make it challenging to manage longer or more intensive working hours. Reduced time with children and heightened fatigue may, in turn, diminish parents\\u0026rsquo; overall sense of balance between work and family life, coinciding with lower reported satisfaction.\\u003c/p\\u003e\\u003cp\\u003eOverall, these results suggest that the relationship between labor shortages and employee satisfaction is not uniform but varies systematically across demographic groups, with particularly pronounced associations among men, less-educated workers, and employees with family responsibilities.\\u003c/p\\u003e\\u003cp\\u003eSecond, we examine the relationship between the timing of labor shortage onset and job satisfaction. Our baseline analysis only considers whether labor shortages exist, but the underlying mechanisms likely differ depending on whether shortages are recent or chronic. If only recent labor shortages are negatively related to job satisfaction, this would suggest that satisfaction initially declines due to adjustment challenges but recovers as firms adapt to shortage conditions. Conversely, if longer-standing shortages show stronger negative effects, this would indicate that chronic shortages increase workload and overtime, leading to sustained satisfaction decline. We investigate which scenario characterizes the data using four timing categories: (1) shortages within one year, (2) shortages 1\\u0026ndash;2 years ago, (3) shortages 2\\u0026ndash;5 years ago, and (4) shortages over five years ago. The reference group comprises firms without labor shortages. Control variables and firm-clustered standard errors follow Eq.\\u0026nbsp;(\\u003cspan refid=\\\"Equ1\\\" class=\\\"InternalRef\\\"\\u003e1\\u003c/span\\u003e).\\u003c/p\\u003e\\u003cp\\u003eTable\\u0026nbsp;\\u003cspan refid=\\\"Tab4\\\" class=\\\"InternalRef\\\"\\u003e8\\u003c/span\\u003e reports the OLS estimates based on the duration of labor shortages. Firms that experienced shortages only within the past two years show no statistically significant association with either job satisfaction or work environment satisfaction. In contrast, firms reporting shortages lasting two to five years, and those with shortages persisting for more than five years, display consistently negative and statistically significant coefficients. These patterns suggest that short-term shortages may be manageable through temporary adjustments, whereas prolonged shortages are accompanied by accumulated strain and perceptions of inequity, which correspond to lower reported satisfaction levels. Sustained labor shortages may also signal organizational rigidity or limited adaptive capacity, both of which can coincide with a deterioration of the work environment. From a policy perspective, the findings highlight the importance of preventing the institutionalization of chronic shortages rather than relying solely on short-term remedial measures. Designing systems that facilitate backup staffing arrangements and promote fair workload allocation could help organizations maintain a stable level of employee satisfaction and workplace cohesion over time.\\u003c/p\\u003e\\u003cp\\u003eThe third supplementary analysis examines whether the association between labor shortages and job satisfaction varies depending on the underlying reasons for the shortages. The corporate survey identified fourteen potential reasons, including business expansion associated with economic recovery, insufficient review of business processes, limited investment in labor-saving and rationalization initiatives, difficulties in recruiting new personnel, increases in voluntary turnover, inadequate revision of employment management practices, lack of in-house expertise, rising resistance to reassignment, and increases in employees taking leave for childcare, caregiving, or medical treatment. Additional factors include an increase in employees reaching retirement age, the outflow of workers to urban areas, and the legacy of past hiring restrictions. OLS estimates were obtained to examine how the relationship between labor shortages and job satisfaction differs across these categories, with results summarized in Tables\\u0026nbsp;\\u003cspan refid=\\\"Tab9\\\" class=\\\"InternalRef\\\"\\u003e9\\u003c/span\\u003e and \\u003cspan refid=\\\"Tab10\\\" class=\\\"InternalRef\\\"\\u003e10\\u003c/span\\u003e.\\u003c/p\\u003e\\u003cp\\u003eThe estimates reveal substantial heterogeneity across the identified reasons. Although most coefficients associated with labor shortages are negative and statistically significant, their magnitudes vary considerably. Shortages linked to managerial or investment deficiencies\\u0026mdash;particularly the insufficient review of business processes and limited investment in labor-saving or rationalization measures\\u0026mdash;are associated with notably lower levels of both job and work environment satisfaction. Specifically, the coefficient for unreviewed business processes corresponds to approximately 4.4 times the magnitude of that reported in Table\\u0026nbsp;\\u003cspan refid=\\\"Tab1\\\" class=\\\"InternalRef\\\"\\u003e2\\u003c/span\\u003e for job satisfaction and 2.8 times for work environment satisfaction, suggesting a broad deterioration in workplace well-being. Likewise, limited investment in labor-saving and rationalization measures coincides with a pronounced reduction in satisfaction, with coefficients roughly three times larger for job satisfaction and 2.6 times larger for work environment satisfaction than those presented in Table\\u0026nbsp;\\u003cspan refid=\\\"Tab1\\\" class=\\\"InternalRef\\\"\\u003e2\\u003c/span\\u003e. By contrast, shortages associated with external or less controllable circumstances\\u0026mdash;such as business expansion amid economic recovery or temporary absences due to childcare leave\\u0026mdash;show relatively smaller negative associations with satisfaction. These differences imply that shortages arising from internal managerial constraints tend to coincide with more persistent and organization-wide challenges, whereas those linked to external or cyclical developments appear less detrimental to employees\\u0026rsquo; overall evaluations of their work environment.\\u003c/p\\u003e\\u003cp\\u003eThe fourth supplementary analysis examines outcomes beyond job satisfaction. The underlying mechanism hypothesized in this study is that labor shortages increase individual workloads, which in turn raise working hours and stress levels. To empirically assess this pathway, we analyze five additional indicators. First, we consider monthly working hours. Second, we examine mental separation from work during breaks, based on the survey question: \\u0026ldquo;During breaks or leisure time such as holidays, are you able to detach yourself psychologically from work and avoid thinking about it?\\u0026rdquo; Responses were originally coded from 1 (always able) to 4 (never able). For ease of interpretation, we reverse the scale so that higher values indicate a greater ability to detach from work. Third, we assess relaxation during breaks and leisure time, based on the question: \\u0026ldquo;During breaks or leisure time such as holidays, are you able to relax?\\u0026rdquo; Again, responses were recoded from 1 (always able) to 4 (never able), and reversed such that higher values correspond to a greater ability to relax. Fourth, we analyze sufficient leisure time for recovery, measured by the question: \\u0026ldquo;Is your leisure time sufficient for recovery from work-related fatigue?\\u0026rdquo; The original four-point scale ranged from 1 (sufficient) to 4 (insufficient), and was reversed so that higher values indicate greater sufficiency. Finally, for married respondents, we examine weekday family dinner time, based on the question: \\u0026ldquo;On weekdays, are you able to share dinner with your family or children?\\u0026rdquo; The original four-point scale ranged from 1 (always able) to 4 (never able), and was reversed so that higher values indicate greater frequency.\\u003c/p\\u003e\\u003cp\\u003eThe OLS estimates are reported in Table\\u0026nbsp;\\u003cspan refid=\\\"Tab11\\\" class=\\\"InternalRef\\\"\\u003e11\\u003c/span\\u003e. The coefficients represent firm-level labor shortage dummies, with the same set of covariates as in Eq.\\u0026nbsp;(\\u003cspan refid=\\\"Equ1\\\" class=\\\"InternalRef\\\"\\u003e1\\u003c/span\\u003e). Column (1) shows that employees in firms experiencing labor shortages work, on average, 2.068 additional hours per month, confirming that labor shortages increase workloads and extend working hours. Columns (2) through (5) reveal that the coefficients are uniformly negative and statistically significant. These results indicate that employees in shortage-affected firms are less able to detach mentally from work, less able to relax during leisure time, more dissatisfied with the sufficiency of their leisure hours, and less likely to share weekday dinners with their families.\\u003c/p\\u003e\\u003cp\\u003eFor the final supplementary analysis, we further explore the mechanisms underlying the relationship between labor shortages and job satisfaction by incorporating the dependent variables from Table\\u0026nbsp;\\u003cspan refid=\\\"Tab11\\\" class=\\\"InternalRef\\\"\\u003e11\\u003c/span\\u003e as additional explanatory variables. The estimation results are presented in Table\\u0026nbsp;\\u003cspan refid=\\\"Tab2\\\" class=\\\"InternalRef\\\"\\u003e12\\u003c/span\\u003e. Panel A indicates the estimated results using job satisfaction as the dependent variable, and Panel B shows those using work environment satisfaction as the dependent variable.\\u003c/p\\u003e\\u003cp\\u003eThe analysis using job satisfaction as the dependent variable (Panel A) yields an important insight: the association between labor shortage and lower job satisfaction appears to operate primarily through insufficient psychological and physical recovery from work. In column (1), where monthly working hours are controlled for, the coefficient on the labor shortage dummy remains statistically significant at the 10% level, though the level of significance declines relative to the baseline estimates in Table\\u0026nbsp;\\u003cspan refid=\\\"Tab1\\\" class=\\\"InternalRef\\\"\\u003e2\\u003c/span\\u003e. This pattern suggests that longer working hours may serve as one pathway linking labor shortages to diminished satisfaction. However, once indicators of recovery quality are included, the coefficient on the labor shortage variable decreases markedly and becomes statistically indistinguishable from zero. Specifically, when the measures of relaxation during breaks and sufficient leisure time for recovery are introduced in columns (3) and (4), the coefficients fall to \\u0026minus;\\u0026thinsp;0.039 and \\u0026minus;\\u0026thinsp;0.036, respectively, losing statistical significance in both cases. In column (6), where all mediating variables are jointly included, the association remains statistically insignificant. Taken together, these findings indicate that the link between labor shortages and lower job satisfaction is largely transmitted through workers\\u0026rsquo; diminished ability to detach mentally and physically from work during non-working hours, leading to inadequate recovery rather than merely reflecting an increase in workload.\\u003c/p\\u003e\\u003cp\\u003eIn contrast, the results for workplace environment satisfaction as the dependent variable (Panel B) show a different pattern. The negative association with labor shortages remains stable even after sequentially adding the mediating variables related to working hours and recovery quality (columns (1)\\u0026ndash;(5)) or when all controls are included simultaneously (column (6)). This consistent pattern implies that the deterioration in workplace environment satisfaction under labor shortages cannot be fully explained by individual-level factors such as working time or recovery quality. Rather, it may reflect more structural and organizational dimensions\\u0026mdash;such as inefficiencies in work processes, persistent tension within teams, or insufficient managerial and institutional support within the firm.\\u003c/p\\u003e\\u003cp\\u003eA comparison between Panels A and B highlights that the mechanisms through which labor shortages are linked to employee well-being differ across the domains of satisfaction considered. Job satisfaction appears to be closely connected with the quality of recovery from work, whereas workplace environment satisfaction is more closely related to the organizational and structural characteristics of the firm. This finding underscores the importance, for firms confronting labor shortages, of not only addressing excessive working hours but also ensuring that employees can achieve full psychological detachment and high-quality rest during non-working time\\u0026mdash;conditions that are essential for sustaining satisfaction with one\\u0026rsquo;s work itself\\u003csup\\u003e14\\u003c/sup\\u003e.\\u003c/p\\u003e\\u003c/div\\u003e\"},{\"header\":\"7. Conclusion\",\"content\":\"\\u003cp\\u003eIn recent years, tightening labor markets across several OECD countries have generated widespread labor shortages. While these shortages produce positive outcomes such as wage increases, they also intensify employee workloads and extend working hours, potentially compromising physical and mental health while reducing job satisfaction. This study examines the relationship between labor shortages and job satisfaction using Japanese matched employer-employee data that identifies firm-level labor shortages. Our analysis yields four key findings.\\u003c/p\\u003e\\u003cp\\u003eFirst, we document a robust negative relationship between labor shortages and job satisfaction, consistent across OLS, ordered logit, matching estimators and IV method. Second, adverse associations emerge primarily when labor shortages persist for at least 2 years, suggesting that prolonged shortages create cumulative burdens that ultimately erode job satisfaction. Third, job satisfaction declines most significantly when shortages stem from organizational failures\\u0026mdash;specifically, inadequate business process reviews and insufficient investment in labor-saving technologies and rationalization measures. Fourth, workers in shortage-affected firms experience longer working hours, reduced opportunities for relaxation during breaks and leisure time, and diminished family dinner time.\\u003c/p\\u003e\\u003cp\\u003eOur analysis demonstrates a clear negative relationship between firm-level labor shortages and worker job satisfaction. This relationship exhibits distinct temporal patterns: short-term labor shortages (within two year) show no statistically significant consequences, while persistent shortages (more than 2 years) generate substantial reductions in job satisfaction. This finding suggests that labor shortage consequences accumulate over time, progressively deteriorating worker satisfaction through prolonged exposure. The causal origins of labor shortages critically influence their severity. Shortages stemming from organizational deficiencies\\u0026mdash;inadequate business process reviews and insufficient investment in labor-saving technologies\\u0026mdash;produce the most severe declines in employee satisfaction. Conversely, shortages arising from external factors such as economic expansion or increased family leave usage generate relatively modest reductions. These differential outcomes highlight that workers respond more negatively to perceived management failures than to exogenous market conditions. This evidence underscores the importance of examining not merely the presence of labor shortages, but their duration and underlying causes.\\u003c/p\\u003e\\u003cp\\u003eOur findings reveal that labor shortages extend beyond increased working hours to encompass broader life disruption through workload spillover processes (Bolger et al., \\u003cspan citationid=\\\"CR11\\\" class=\\\"CitationRef\\\"\\u003e1989\\u003c/span\\u003e; Westman, \\u003cspan citationid=\\\"CR56\\\" class=\\\"CitationRef\\\"\\u003e2001\\u003c/span\\u003e). Specifically, workers in shortage-constrained firms experience reduced capacity for relaxation during breaks, persistent work-related thoughts during leisure time, and diminished family interaction. This spillover from workplace to home domains creates a potentially self-reinforcing cycle wherein deteriorating work-life balance further undermines job performance, potentially exacerbating the original staffing constraints.\\u003c/p\\u003e\\u003cp\\u003eThe findings carry several implications for labor and human resource policy. First, as prolonged shortages appear to coincide with reduced job satisfaction, measures to improve work organization\\u0026mdash;such as business process review, task automation, and investment in labor-saving technologies\\u0026mdash;may help alleviate employee burdens. Second, policies promoting flexible working arrangements and recovery-oriented scheduling could sustain well-being without necessarily expanding labor supply. Finally, given the demographic context of Japan\\u0026rsquo;s aging workforce, addressing labor shortages through productivity-enhancing innovation rather than intensifying workloads is essential for maintaining sustainable household welfare.\\u003c/p\\u003e\\u003cp\\u003eSeveral limitations of this study warrant acknowledgment. First, the analysis relies on data from 2019, limiting the ability to examine relationships over time. Since the COVID-19 pandemic has substantially altered labor market dynamics, extending this research to multiple time points would help assess whether these relationships have persisted or changed. Second, the sample is restricted to regular employees due to data constraints. As non-regular employment continues to expand in Japan, exploring whether similar patterns hold for these workers represents an important avenue for future research. Finally, while the IV approach adopted in this study addresses potential endogeneity, it has inherent limitations. The validity of the instruments depends on assumptions that cannot be fully verified, and the resulting estimates reflect a local average treatment effect rather than a population-wide relationship. Future work should explore quasi-experimental designs that generate exogenous variation in labor supply or demand. Exploiting such settings through a difference-in-differences framework would enable a more precise and dynamic assessment of how labor shortages influence employees\\u0026rsquo; well-being and job satisfaction.\\u003c/p\\u003e\"},{\"header\":\"Declarations\",\"content\":\"\\u003cp\\u003e\\u003cstrong\\u003eAcknowledgments\\u003c/strong\\u003e: Data from the \\u003cem\\u003eSurvey on the Current Situation and Working Styles Surrounding Labor Shortages\\u003c/em\\u003e was provided by the data archive of the Japan Institute for Labor Policy and Training (JILPT). This study was supported by JSPS Grants-in-Aid for Scientific Research (KAKENHI) in Japan (22H04911).\\u003c/p\\u003e\\n\\u003cp\\u003e\\u003cstrong\\u003eFunding\\u003c/strong\\u003e: This work was supported by JSPS Grants-in-Aid for Scientific Research (KAKENHI) in Japan (22H04911).\\u003c/p\\u003e\\n\\u003cp\\u003e\\u003cstrong\\u003eConflict of Interest\\u003c/strong\\u003e: The data archive of the JILPT provided the microdata to graduate students and researchers who belong to university, national, public, or private research institutes, with the limitation that it is used for nonprofit and academic purposes. Therefore, to replicate the results of this study, please submit an application form to the office of the data archive of JILPT to borrow the data. Other than these, the authors have no conflicts of interest directly relevant to the content of this article.\\u003c/p\\u003e\\n\\u003cp\\u003e\\u003cstrong\\u003eAuthor Contributions\\u003c/strong\\u003e\\u003c/p\\u003e\\n\\u003cp\\u003eKazuma Sato performed all the work in this study, including material preparation, data collection, analysis, and writing the first draft.\\u003c/p\\u003e\\n\\u003cp\\u003e\\u003cstrong\\u003eCompliance with Ethical Standards\\u003c/strong\\u003e\\u003c/p\\u003e\\n\\u003cp\\u003e\\u003cstrong\\u003eResearch involving Human Participants and/or Animals\\u003c/strong\\u003e\\u003c/p\\u003e\\n\\u003cp\\u003ePermission to use the data used in this paper was obtained from the participants for academic purposes and on the condition that the data be anonymized.\\u003c/p\\u003e\\n\\u003cp\\u003e\\u003cstrong\\u003eInformed consent\\u003c/strong\\u003e\\u003c/p\\u003e\\n\\u003cp\\u003eNot applicable.\\u003c/p\\u003e\"},{\"header\":\"References\",\"content\":\"\\u003col\\u003e\\n\\u003cli\\u003eAcemoglu, D. 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(2009). Mostly harmless econometrics: An empiricist\\u0026apos;s guide. Princeton University Press.\\u003c/li\\u003e\\n\\u003cli\\u003eArgyle, M. (2001). The psychology of happiness (2nd ed.). Routledge.\\u003c/li\\u003e\\n\\u003cli\\u003eAsano, H., \\u0026amp; Kenjo, E. (2012). Rōdō jikan to manzokudo: Nichi-doku-ei no hikaku kenkyū [Working hours and satisfaction: A comparative study of Japan, Germany, and the United Kingdom]. In E. Takeishi (Ed.), Kokusai hikaku no shiten kara nihon no wāku-raifu-baransu o kangaeru [Thinking about Japan\\u0026apos;s work-life balance from the perspective of international comparison]. Minerva Shobō (in Japanese).\\u003c/li\\u003e\\n\\u003cli\\u003eBecker, G. S. (1965). A theory of the allocation of time. The Economic Journal, 75(299), 493\\u0026ndash;517.\\u003c/li\\u003e\\n\\u003cli\\u003eBender, K. A., Donohue, S. M., \\u0026amp; Heywood, J. S. (2005). Job satisfaction and gender segregation. Oxford Economic Papers, 57(3), 479\\u0026ndash;496.\\u003c/li\\u003e\\n\\u003cli\\u003eBolger, N., DeLongis, A., Kessler, R., \\u0026amp; Wethington, E. (1989). The contagion of stress across multiple roles. Journal of Marriage and the Family, 51, 175\\u0026ndash;183.\\u003c/li\\u003e\\n\\u003cli\\u003eB\\u0026ouml;rschlein, E.-B., Bossler, M., \\u0026amp; Popp, M. (2024). Scarce workers, high wages? IZA DP No. 17447.\\u003c/li\\u003e\\n\\u003cli\\u003eBrunow, S., L\\u0026ouml;sch, S., \\u0026amp; Okhrin, O. (2022). Labor market tightness and individual wage growth: evidence from Germany. J Labour Market Res, 56, 16.\\u003c/li\\u003e\\n\\u003cli\\u003eBurdett, K., \\u0026amp; Mortensen, D. T. (1998). Wage differentials, employment size, and unemployment. International Economic Review, 39(2), 257\\u0026ndash;273.\\u003c/li\\u003e\\n\\u003cli\\u003eCausa, O., Soldani, E., Nguyen, M., \\u0026amp; Tanaka, T. (2025). Labour shortages and labour market inequalities: Evidence and policy implications. OECD Economics Department Working Papers No. 1832.\\u003c/li\\u003e\\n\\u003cli\\u003eClark, A. E. (1997). Job satisfaction and gender--Why are women so happy at work? Labour Economics, 4, 341\\u0026ndash;372.\\u003c/li\\u003e\\n\\u003cli\\u003eClark, A. E. (2003). Unemployment as a social norm: Psychological evidence from panel data. Journal of Labor Economics, 21, 323\\u0026ndash;351.\\u003c/li\\u003e\\n\\u003cli\\u003eClark, A. E. (2005). What makes a good job? Evidence from OECD countries. In A. Bazen, C. Lucifora, \\u0026amp; W. Salverda (Eds.), Job quality and employer behavior (pp. 10\\u0026ndash;30). Palgrave.\\u003c/li\\u003e\\n\\u003cli\\u003eClark, A. E., Knabe, A., \\u0026amp; R\\u0026auml;tzel, S. (2008). Unemployment as a social norm in Germany. OEPpapers on Multidisciplinary Panel Data Research 132.\\u003c/li\\u003e\\n\\u003cli\\u003eClark, A. E., Knabe, A., \\u0026amp; R\\u0026auml;tzel, S. (2010). Boon or bane? Others\\u0026rsquo; unemployment, well-being and job insecurity. Labour Economics, 17, 52\\u0026ndash;61.\\u003c/li\\u003e\\n\\u003cli\\u003eClark, A. E., \\u0026amp; Oswald, A. (1996). Satisfaction and comparison income. Journal of Public Economics, 8, 233\\u0026ndash;242.\\u003c/li\\u003e\\n\\u003cli\\u003eDomash, A., \\u0026amp; Summers, L. H. (2022). How tight are U.S. labor markets? NBER WORKING PAPER SERIES, Working Paper 29739.\\u003c/li\\u003e\\n\\u003cli\\u003eFreeman, R. (1978). Job satisfaction as an economic variable. American Economic Association, 68, 359\\u0026ndash;141.\\u003c/li\\u003e\\n\\u003cli\\u003eFrone, M. R. (2003). Work-family balance. In J. C. Quick \\u0026amp; L. E. Tetrick (Eds.), Handbook of occupational health psychology (pp. 143\\u0026ndash;162). American Psychological Association.\\u003c/li\\u003e\\n\\u003cli\\u003eFurukawa, K., Hogen, Y., \\u0026amp; Kido, Y. (2025). Labor market of regular workers in Japan: A perspective from job advertisement data. Journal of the Japanese and International Economies, 75, 101339.\\u003c/li\\u003e\\n\\u003cli\\u003eHagedorn, M., \\u0026amp; Manovskii, I. (2008). The cyclical behavior of equilibrium unemployment and vacancies revisited. American Economic Review, 98(4), 1692\\u0026ndash;1706.\\u003c/li\\u003e\\n\\u003cli\\u003eHainmueller, J. (2012). Entropy balancing for causal effects: A multivariate reweighting method to produce balanced samples in observational studies. Political Analysis, 20(1), 25\\u0026ndash;46.\\u003c/li\\u003e\\n\\u003cli\\u003eHainmueller, J., \\u0026amp; Xu, Y. (2011). Ebalance: A Stata package for entropy balancing [MIT Political Science Department research paper]. SSRN Electronic Journal, 24.\\u003c/li\\u003e\\n\\u003cli\\u003eHall, R. E., \\u0026amp; Milgrom, P. R. (2008). The limited influence of unemployment on the wage bargain. 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RIETI Discussion Paper Series 10-J-010 (in Japanese).\\u003c/li\\u003e\\n\\u003cli\\u003eHildenbrand, K., Daher, P., Topakas, A., \\u0026amp; Gan, X. (2023). Multidimensional work-nonwork balance: are balanced employees productive at work and satisfied with life? The International Journal of Human Resource Management, 35(6), 1048\\u0026ndash;1087.\\u003c/li\\u003e\\n\\u003cli\\u003eIlies, R., Schwind, K. M., Wagner, D. T., Johnson, M. D., DeRue, D. S., \\u0026amp; Ilgen, D. R. (2007). When can employees have a family life? The effects of daily workload and affect on work-family conflict and social behaviors at home. Journal of Applied Psychology, 92, 68\\u0026ndash;79.\\u003c/li\\u003e\\n\\u003cli\\u003eImbens, G. W., \\u0026amp; Wooldridge, J. M. (2009). Recent developments of the econometrics of program evaluation. Journal of Economic Literature, 47(1), 5\\u0026ndash;86.\\u003c/li\\u003e\\n\\u003cli\\u003eKarasek, R. (1979). 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Available at SSRN: https://ssrn.com/abstract=4998044.\\u003c/li\\u003e\\n\\u003cli\\u003eMortensen, D. T., \\u0026amp; Pissarides, C. A. (1994). Job creation and job destruction in the theory of unemployment. The Review of Economic Studies, 61(3), 397\\u0026ndash;415.\\u003c/li\\u003e\\n\\u003cli\\u003eNoda, H. (2020). Work-life balance and life satisfaction in OECD countries: A cross-sectional analysis. Journal of Happiness Studies, 21, 1325\\u0026ndash;1348.\\u003c/li\\u003e\\n\\u003cli\\u003eNomura, A. (2018). Hataraki-kata ga shigoto manzokudo・seikatsu manzokudo ni ataeru eikyō [The impact of work style on job satisfaction and life satisfaction]. Works Discussion Paper, No.21 (in Japanese).\\u003c/li\\u003e\\n\\u003cli\\u003eOi, W. Y. (1962). Labor as a quasi-fixed factor. Journal of Political Economy, 70(6), 538\\u0026ndash;555.\\u003c/li\\u003e\\n\\u003cli\\u003eOno, H. (2018). Why do the Japanese work long hours? Sociological perspectives on long working hours in Japan. Japan Labor Issues, 2(5), 35\\u0026ndash;49.\\u003c/li\\u003e\\n\\u003cli\\u003ePowdthavee, N. (2007). Are there geographical variations in the psychological cost of unemployment in South Africa? Social Indicators Research, 80, 629\\u0026ndash;652.\\u003c/li\\u003e\\n\\u003cli\\u003eSan, S. (2023). Labor supply and directed technical change: Evidence from the termination of the Bracero Program in 1964. American Economic Journal: Applied Economics, 15(1), 136\\u0026ndash;163.\\u003c/li\\u003e\\n\\u003cli\\u003eShapiro, C., \\u0026amp; Stiglitz, J. E. (1984). Equilibrium unemployment as a worker discipline device. American Economic Review, 74(3), 433\\u0026ndash;444.\\u003c/li\\u003e\\n\\u003cli\\u003eShields, M., \\u0026amp; Wheatley Price, S. (2005). Exploring the economic and social determinants of psychological and psychosocial health. Journal of the Royal Statistical Society (Series A), 168, 513\\u0026ndash;538.\\u003c/li\\u003e\\n\\u003cli\\u003eShields, M., Wheatley Price, S., \\u0026amp; Wooden, M. (2009). Life satisfaction and the economic and social characteristics of neighbourhoods. Journal of Population Economics, 22, 421\\u0026ndash;443.\\u003c/li\\u003e\\n\\u003cli\\u003eSloane, P. J., \\u0026amp; Williams, H. (2000). Job satisfaction, comparison earning and gender. Labor, 14, 473\\u0026ndash;502.\\u003c/li\\u003e\\n\\u003cli\\u003eStutzer, A., \\u0026amp; Lalive, R. (2004). The role of social work norms in job searching and subjective well-being. Journal of the European Economic Association, 2, 696\\u0026ndash;719.\\u003c/li\\u003e\\n\\u003cli\\u003eVan Praag, B. M., \\u0026amp; Ferrer-i-Carbonell, A. (2004). Happiness quantified: A satisfaction calculus approach. Oxford University Press.\\u003c/li\\u003e\\n\\u003cli\\u003eVan Praag, B. M., Frijters, P., \\u0026amp; Ferrer-i-Carbonell, A. (2003). The anatomy of subjective well-being. Journal of Economic Behavior \\u0026amp; Organization, 51(1), 29\\u0026ndash;49.\\u003c/li\\u003e\\n\\u003cli\\u003eWestman, M. (2001). Stress and strain crossover. Human Relations, 54, 557\\u0026ndash;591.\\u003c/li\\u003e\\n\\u003cli\\u003eWestman, M., Etzion, D., \\u0026amp; Gattenio, E. (2008). International business travels and the work-family interface: A longitudinal study. Journal of Occupational and Organizational Psychology, 81, 459\\u0026ndash;480.\\u003c/li\\u003e\\n\\u003cli\\u003eWooldridge, J. M. (2007). Inverse probability weighted estimation for general missing data problems. Journal of Econometrics, 141(2), 1281\\u0026ndash;1301.\\u003c/li\\u003e\\n\\u003cli\\u003eWooldridge, J. M. (2010). Econometric analysis of cross section and panel data (2nd ed.). MIT Press.\\u003c/li\\u003e\\n\\u003cli\\u003eYamamoto, I. (2019). Hataraki-kata kaikaku kanren-hō ni yoru chō-jikan rōdō zesei no kōka [The effect of the work style reform law on correcting long working hours]. Japan Labor Review, 702, 29\\u0026ndash;39 (in Japanese).\\u003c/li\\u003e\\n\\u003c/ol\\u003e\"},{\"header\":\"Footnotes\",\"content\":\"\\u003col\\u003e\\u003cli\\u003e\\u003cspan\\u003e Causa et al. (\\u003cspan citationid=\\\"CR15\\\" class=\\\"CitationRef\\\"\\u003e2025\\u003c/span\\u003e) identify several contributing factors to these labor shortages: demographic shifts including declining birth rates and population aging, skill mismatches between available workers and job requirements, deteriorating job quality and working conditions, and reduced immigration flows.\\u003c/span\\u003e\\u003c/li\\u003e\\u003cli\\u003e\\u003cspan\\u003e Research shows that workers' wages increase when labor markets tighten and alternative job options become more available. Two mechanisms explain this wage growth: first, workers gain stronger negotiating leverage (Mortensen and Pissarides, \\u003cspan citationid=\\\"CR42\\\" class=\\\"CitationRef\\\"\\u003e1994\\u003c/span\\u003e; Burdett and Mortensen, \\u003cspan citationid=\\\"CR14\\\" class=\\\"CitationRef\\\"\\u003e1998\\u003c/span\\u003e; Hagedorn and Manovskii, \\u003cspan citationid=\\\"CR26\\\" class=\\\"CitationRef\\\"\\u003e2008\\u003c/span\\u003e; Hall and Milgrom, \\u003cspan citationid=\\\"CR29\\\" class=\\\"CitationRef\\\"\\u003e2008\\u003c/span\\u003e), and second, employers raise wages to discourage workers from reducing effort (Shapiro and Stiglitz, \\u003cspan citationid=\\\"CR49\\\" class=\\\"CitationRef\\\"\\u003e1984\\u003c/span\\u003e).\\u003c/span\\u003e\\u003c/li\\u003e\\u003cli\\u003e\\u003cspan\\u003e The details of this survey can be found on the following site (\\u003cspan class=\\\"ExternalRef\\\"\\u003e\\u003cspan class=\\\"RefSource\\\"\\u003ehttps://www5.cao.go.jp/j-j/wp/wp-je19/h09_fchu0105.html\\u003c/span\\u003e\\u003cspan address=\\\"https://www5.cao.go.jp/j-j/wp/wp-je19/h09_fchu0105.html\\\" targettype=\\\"URL\\\" class=\\\"RefTarget\\\"\\u003e\\u003c/span\\u003e\\u003c/span\\u003e (in Japanese)).\\u003c/span\\u003e\\u003c/li\\u003e\\u003cli\\u003e\\u003cspan\\u003e Validating the key explanatory variable\\u0026mdash;the firm-level dummy for labor shortage\\u0026mdash;is essential for ensuring the credibility of the analysis. To this end, we calculate the correlation coefficients between the labor shortage dummy and six indicators of firm performance and human resource management over the past three years, derived from the corporate survey: growth in operating profits, growth in sales, improvement in new employee retention after three years, improvement in new employee retention after seven years, increase in turnover rates, and improvement in job offer fulfillment rates. The results are presented in the Appendix 1. The correlation analysis provides strong support for the validity of the labor shortage dummy. Growth in operating profits and sales is positively and significantly correlated with labor shortages, consistent with the mechanism whereby business expansion drives increased labor demand. Retention rates of new employees (after three and seven years) are negatively correlated with labor shortages, indicating that firms with stronger employee retention are less likely to experience shortages. By contrast, increases in turnover rates are positively and significantly correlated with labor shortages, suggesting that workforce outflows are a key contributing factor. Finally, improvements in job offer fulfillment rates are negatively correlated with labor shortages, reflecting that firms with stronger recruitment capacity are better able to avoid shortages. All of these associations align with theoretical expectations. Expanding firms face greater labor demand, while firms with weak retention or recruitment capacity struggle to secure sufficient personnel. This consistent pattern of correlations demonstrates the construct validity of the labor shortage measure employed in this study and supports the reliability of the subsequent empirical results.\\u003c/span\\u003e\\u003c/li\\u003e\\u003cli\\u003e\\u003cspan\\u003e A potential concern is that unobserved firm characteristics\\u0026mdash;such as managerial quality or organizational culture\\u0026mdash;could simultaneously be related to both labor shortages and employee satisfaction. Although the data do not allow for full identification of causal effects, the matched employer\\u0026ndash;employee structure substantially mitigates this concern. Because labor shortages are measured at the firm level based on employer responses rather than employee perceptions, the likelihood of individual-level reporting bias is limited.\\u003c/span\\u003e\\u003c/li\\u003e\\u003cli\\u003e\\u003cspan\\u003e Reverse causality could bias our estimates if workers' perceptions of labor shortages are influenced by their job satisfaction levels. Specifically, dissatisfied workers may systematically overreport labor shortages while satisfied workers may underreport them, leading to upward bias in the estimated negative effect.\\u003c/span\\u003e\\u003c/li\\u003e\\u003cli\\u003e\\u003cspan\\u003e Beyond reverse causality, selection bias may arise if workers with lower job satisfaction are more prone to quit, leaving a sample of remaining workers with relatively higher satisfaction levels at the survey date. We address this concern in the robustness check section and find evidence suggesting that this bias has minimal impact on our results.\\u003c/span\\u003e\\u003c/li\\u003e\\u003cli\\u003e\\u003cspan\\u003e Earnings and working hours are widely recognized as key correlates of job satisfaction (Bender et al., \\u003cspan citationid=\\\"CR10\\\" class=\\\"CitationRef\\\"\\u003e2005\\u003c/span\\u003e; Clark, \\u003cspan citationid=\\\"CR16\\\" class=\\\"CitationRef\\\"\\u003e1997\\u003c/span\\u003e; Clark and Oswald, \\u003cspan citationid=\\\"CR21\\\" class=\\\"CitationRef\\\"\\u003e1996\\u003c/span\\u003e; Hamermesh, \\u003cspan citationid=\\\"CR30\\\" class=\\\"CitationRef\\\"\\u003e1977\\u003c/span\\u003e; Levy-Garboua and Montmarquette, \\u003cspan citationid=\\\"CR40\\\" class=\\\"CitationRef\\\"\\u003e2004\\u003c/span\\u003e; Sloane and Williams, \\u003cspan citationid=\\\"CR52\\\" class=\\\"CitationRef\\\"\\u003e2000\\u003c/span\\u003e). Nevertheless, these variables were excluded from the baseline specification due to concerns that they may function as \\u0026ldquo;bad controls\\u0026rdquo; (Angrist and Pischke, \\u003cspan citationid=\\\"CR6\\\" class=\\\"CitationRef\\\"\\u003e2009\\u003c/span\\u003e), potentially reflecting outcomes of the same underlying mechanisms rather than exogenous determinants. To assess the sensitivity of the findings, we additionally estimated models that include earnings and working hours among the explanatory variables. The corresponding results are reported in Table\\u0026nbsp;\\u003cspan refid=\\\"Tab2\\\" class=\\\"InternalRef\\\"\\u003e12\\u003c/span\\u003e and Appendix 7.\\u003c/span\\u003e\\u003c/li\\u003e\\u003cli\\u003e\\u003cspan\\u003e The employer survey measures labor shortage onset timing using four discrete periods: (1) within one year, (2) 1\\u0026ndash;2 years prior, (3) 2\\u0026ndash;5 years prior, and (4) more than five years prior to the survey date. Same variable is used in the analysis of Table\\u0026nbsp;\\u003cspan refid=\\\"Tab4\\\" class=\\\"InternalRef\\\"\\u003e8\\u003c/span\\u003e.\\u003c/span\\u003e\\u003c/li\\u003e\\u003cli\\u003e\\u003cspan\\u003e We also estimate PSM specifications using nearest neighbor matching and radius matching. The results reported in Appendix 4 indicate that all coefficients on the labor shortage dummy are negative and statistically significant, consistent with the findings in Table\\u0026nbsp;\\u003cspan refid=\\\"Tab6\\\" class=\\\"InternalRef\\\"\\u003e5\\u003c/span\\u003e.\\u003c/span\\u003e\\u003c/li\\u003e\\u003cli\\u003e\\u003cspan\\u003e While the exclusion restriction cannot be tested directly, following consideration supports its plausibility in this context. First, the instruments used\\u0026mdash;firms\\u0026rsquo; three-year-ahead forecasts of personnel shortages and their planned commitment to mitigation measures\\u0026mdash;reflect forward-looking managerial expectations rather than current workplace conditions. These forecasts are typically formulated by senior management as part of strategic planning processes and are not routinely disclosed to, or directly perceived by, individual employees. Therefore, they are unlikely to influence employees\\u0026rsquo; present job satisfaction through psychological or informational channels. Nonetheless, it is acknowledged that complete exclusion cannot be guaranteed in observational settings. It remains possible that firms anticipating future shortages may already exhibit latent managerial characteristics\\u0026mdash;such as lower employee engagement\\u0026mdash;that also shape current satisfaction levels. To address this concern, we conduct an additional sensitivity check by including proxy variables for managerial characteristics (change in new employee retention rate three years after joining the company over the last three years and change in employee turnover rate over the last three years) in the estimation. The results, reported in Appendix 5, remain robust, suggesting that any residual direct association between the instruments and job satisfaction is unlikely to drive the main findings.\\u003c/span\\u003e\\u003c/li\\u003e\\u003cli\\u003e\\u003cspan\\u003e A plausible explanation for the larger magnitude of the IV estimates relative to the OLS results is that the OLS coefficients are biased toward zero due to unobserved firm- or worker-level heterogeneity that is negatively correlated with both labor shortages and job satisfaction. For instance, firms with stronger management practices, higher technological capabilities, or better internal communication may both experience fewer labor shortages and maintain higher employee satisfaction levels. Because such unobserved characteristics are not fully captured in the available control variables, the OLS estimates likely understate the association between shortages and satisfaction. Another complementary interpretation arises from the local average treatment effect (LATE) perspective. The IV estimates capture the average relationship for the subset of firms whose current labor shortage status is influenced by their forward-looking personnel assessments and planned mitigation efforts\\u0026mdash;the so-called \\u0026ldquo;compliers.\\u0026rdquo; These firms are typically more aware of workforce planning challenges and may face particularly acute or persistent shortages that have stronger implications for employee well-being. Consequently, the larger IV coefficients can be understood as reflecting this local treatment effect rather than the average effect across all firms. Taken together, these considerations suggest that the stronger relationship observed in the IV estimation does not contradict the OLS findings but rather provides a sharper characterization of the firms most affected by persistent labor supply constraints.\\u003c/span\\u003e\\u003c/li\\u003e\\u003cli\\u003e\\u003cspan\\u003e We further assess the robustness of our findings by modifying the operational definition of the labor shortage indicator. In the baseline specification, the dummy variable equals one for firms experiencing either severe or moderate shortages. To examine whether the results differ by shortage intensity, we disaggregate these categories and create separate dummy variables for severe and moderate shortages, with firms reporting no shortage serving as the reference group. In addition, we estimate models that use the original five-point labor shortage scale as a continuous measure. Appendix 6 reports the OLS estimates. Panel A presents the results based on separate severity dummies, whereas Panel B summarizes those obtained from the continuous specification. In Panel A, the coefficients for severe shortages are larger in absolute value than those for moderate shortages across all dimensions of job satisfaction. This pattern indicates that more pronounced shortages are systematically associated with lower satisfaction levels, consistent with theoretical expectations. Most coefficients exhibit the expected negative sign and reach conventional levels of statistical significance. Panel B shows that when the labor shortage variable is treated as continuous, statistically significant negative coefficients are observed for satisfaction with the work environment, while the estimate for job satisfaction remains insignificant. A plausible interpretation is that job satisfaction may fluctuate not only under conditions of labor shortage but also in contexts of labor surplus, a possibility that merits further inquiry.\\u003c/span\\u003e\\u003c/li\\u003e\\u003cli\\u003e\\u003cspan\\u003e We further examine whether the estimated relationship between labor shortages and job satisfaction is mediated by earnings. Specifically, we re-estimate the model by including the logarithm of earnings as an additional control variable. The results, reported in Appendix 7, show that the coefficients on the labor shortage dummy remain negative and statistically significant, with only minor changes in magnitude. This finding suggests that earnings are unlikely to play a substantial mediating role in the association between labor shortages and job satisfaction.\\u003c/span\\u003e\\u003c/li\\u003e\\u003c/ol\\u003e\"},{\"header\":\"Tables\",\"content\":\"\\u003cp\\u003eTables 1 to 12 are available in the Supplementary Files section.\\u003c/p\\u003e\"}],\"fulltextSource\":\"\",\"fullText\":\"\",\"funders\":[],\"hasAdminPriorityOnWorkflow\":false,\"hasManuscriptDocX\":true,\"hasOptedInToPreprint\":true,\"hasPassedJournalQc\":\"\",\"hasAnyPriority\":false,\"hideJournal\":true,\"highlight\":\"\",\"institution\":\"\",\"isAcceptedByJournal\":false,\"isAuthorSuppliedPdf\":false,\"isDeskRejected\":\"\",\"isHiddenFromSearch\":false,\"isInQc\":false,\"isInWorkflow\":false,\"isPdf\":false,\"isPdfUpToDate\":true,\"isWithdrawnOrRetracted\":false,\"journal\":{\"display\":true,\"email\":\"info@researchsquare.com\",\"identity\":\"researchsquare\",\"isNatureJournal\":false,\"hasQc\":true,\"allowDirectSubmit\":true,\"externalIdentity\":\"\",\"sideBox\":\"\",\"snPcode\":\"\",\"submissionUrl\":\"/submission\",\"title\":\"Research Square\",\"twitterHandle\":\"researchsquare\",\"acdcEnabled\":true,\"dfaEnabled\":false,\"editorialSystem\":\"\",\"reportingPortfolio\":\"\",\"inReviewEnabled\":false,\"inReviewRevisionsEnabled\":true},\"keywords\":\"labor shortage, job satisfaction, matched employer-employee data\",\"lastPublishedDoi\":\"10.21203/rs.3.rs-7904928/v1\",\"lastPublishedDoiUrl\":\"https://doi.org/10.21203/rs.3.rs-7904928/v1\",\"license\":{\"name\":\"CC BY 4.0\",\"url\":\"https://creativecommons.org/licenses/by/4.0/\"},\"manuscriptAbstract\":\"\\u003cp\\u003eIn recent years, tightening labor markets across several OECD countries have given rise to widespread labor shortages. Although such shortages are often associated with favorable outcomes, including higher wages, they also coincide with heavier workloads and longer working hours, which may compromise physical and mental health and lower job satisfaction. This study investigates the relationship between labor shortages and job satisfaction using Japanese matched employer–employee data that allow for the identification of shortages at the firm level. Our analysis yields four key findings. First, a consistent negative association is observed between labor shortages and job satisfaction across OLS, ordered logit, matching estimators, and instrumental variable methods. Second, the adverse patterns emerge most clearly when shortages continue for at least two years, indicating that prolonged shortages tend to accumulate pressures that eventually diminish job satisfaction. Third, declines in job satisfaction are most pronounced when shortages are linked to organizational shortcomings—specifically, limited review of business processes and insufficient investment in labor-saving technologies and rationalization measures. Fourth, employees in shortage-exposed firms report longer working hours, fewer opportunities for rest during breaks and leisure activities, and reduced time spent with family at dinner.\\u003c/p\\u003e\\n\\u003cp\\u003e\\u003cstrong\\u003eJEL classification codes\\u003c/strong\\u003e: J21; J28\\u003c/p\\u003e\",\"manuscriptTitle\":\"Labor Shortages and the Quality of Working Life: Workplace and Household Dimensions from Matched Employer–Employee Data in Japan\",\"msid\":\"\",\"msnumber\":\"\",\"nonDraftVersions\":[{\"code\":1,\"date\":\"2025-11-07 08:39:48\",\"doi\":\"10.21203/rs.3.rs-7904928/v1\",\"editorialEvents\":[{\"type\":\"communityComments\",\"content\":0}],\"status\":\"published\",\"journal\":{\"display\":true,\"email\":\"info@researchsquare.com\",\"identity\":\"researchsquare\",\"isNatureJournal\":false,\"hasQc\":true,\"allowDirectSubmit\":true,\"externalIdentity\":\"\",\"sideBox\":\"\",\"snPcode\":\"\",\"submissionUrl\":\"/submission\",\"title\":\"Research Square\",\"twitterHandle\":\"researchsquare\",\"acdcEnabled\":true,\"dfaEnabled\":false,\"editorialSystem\":\"\",\"reportingPortfolio\":\"\",\"inReviewEnabled\":false,\"inReviewRevisionsEnabled\":true}}],\"origin\":\"\",\"ownerIdentity\":\"52c9f77d-b208-4925-9378-07972f7cfc39\",\"owner\":[],\"postedDate\":\"November 7th, 2025\",\"published\":true,\"recentEditorialEvents\":[],\"rejectedJournal\":[],\"revision\":\"\",\"amendment\":\"\",\"status\":\"posted\",\"subjectAreas\":[],\"tags\":[],\"updatedAt\":\"2026-04-12T19:54:05+00:00\",\"versionOfRecord\":[],\"versionCreatedAt\":\"2025-11-07 08:39:48\",\"video\":\"\",\"vorDoi\":\"\",\"vorDoiUrl\":\"\",\"workflowStages\":[]},\"version\":\"v1\",\"identity\":\"rs-7904928\",\"journalConfig\":\"researchsquare\"},\"__N_SSP\":true},\"page\":\"/article/[identity]/[[...version]]\",\"query\":{\"redirect\":\"/article/rs-7904928\",\"identity\":\"rs-7904928\",\"version\":[\"v1\"]},\"buildId\":\"8U1c8b4HqxoKbykW_rLl7\",\"isFallback\":false,\"isExperimentalCompile\":false,\"dynamicIds\":[84888],\"gssp\":true,\"scriptLoader\":[]}","source_license":"CC-BY-4.0","license_restricted":false}