Why is There Labour Shortages Across Europe?
Demographic factors, difficult to find employment and few skills. What the EU suggests. But unemployment is at a lower level than ever..
Today we have two conflicting data: the lowest level of unemployment but many difficulties in finding employment. Why?The situation where there is a low unemployment rate but a shortage of available workforce can be caused by various factors, including workers’ geographic mobility, lack of specific skills or qualifications required by employers, restrictive migration policies, or difficulty in obtaining work permits for foreign workers. To address this issue, it is necessary for employers and governments to work together to identify specific solutions for the sectors and regions facing workforce shortages.
Brussels, 5 April 2023 – 5 MINUTES READ
Europe has been facing a severe labor shortage problem in recent years. Employers across various industries are struggling to find suitable candidates for open positions, even though millions of people are still unemployed in the region. The solution, many believe, is to invest in upskilling and reskilling the workforce. However, as the Eurofound report suggests, skills alone may not be enough to solve labor shortages in Europe.
The last Report of Eurofound acknowledges that upskilling and reskilling are crucial for building a skilled workforce that can adapt to the changing demands of the labor market. With new technologies and industries emerging, workers need to learn new skills to remain relevant and employable. However, the report argues that relying solely on skills development to address labor shortages may not be enough.
One reason for this is that there are demographic factors at play that are limiting the supply of labor in Europe. For instance, the population in many European countries is aging, and the birth rate is declining. This means that there are fewer young people entering the workforce to replace retirees. In addition, many countries are also experiencing net migration outflows, which further reduces the labor pool.
Another factor that contributes to labor shortages is the mismatch between the skills that employers require and those that job seekers possess. Even if workers have the necessary technical skills, they may lack other competencies such as communication, teamwork, and problem-solving. Employers are increasingly looking for workers who have a combination of technical and soft skills, but many job seekers are not adequately prepared to meet these requirements.
Moreover, the Eurofound report notes that there are structural issues in the labor market that make it difficult to address shortages through skills development alone. One such issue is the prevalence of low-wage and precarious jobs, which make it difficult for workers to invest in training and education. Many workers in low-wage jobs do not have the financial resources or time to pursue training or education, even if they are aware of the opportunities available to them.
Another structural issue is the lack of coordination between employers, education providers, and policymakers. Often, employers do not communicate their skill needs effectively to education providers, leading to a mismatch between the skills that workers have and those that employers require. Additionally, education providers may not have the necessary resources to provide training and education that is aligned with the needs of the labor market.
Which solutions other than skills?
If skills alone may not be enough to solve labor shortages in Europe, what other solutions can be explored? The last Report of Eurofound suggests several complementary strategies that can help address labor shortages. For instance:
- One strategy is to focus on improving the quality of jobs, particularly those that are low-wage and precarious. This can be achieved by increasing the minimum wage, improving working conditions, and providing workers with greater job security. When workers are paid better and have more stable jobs, they are more likely to invest in training and education.
- Another strategy is to improve the coordination between employers, education providers, and policymakers. This can be achieved through greater dialogue and collaboration between these stakeholders. Employers need to communicate their skill needs effectively to education providers, who can then design training and education programs that meet these needs. Policymakers can also play a role in supporting these efforts by providing funding and incentives for employers and education providers to work together.
- A third strategy is to invest in active labor market policies that help workers find employment. This can include programs that provide job search assistance, training, and education, as well as financial support such as unemployment benefits. These policies can help reduce the duration of unemployment for job seekers and help them acquire the skills needed to succeed in the labor market.
Finally, the Report of Eurofound suggests that there is a need to address the demographic factors that are limiting the supply of labor in Europe. This can be achieved through policies that encourage immigration and family-friendly policies that support work-life balance and encourage
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Sources: Eurofound, Eurostat and © European Union, 1995-2023