Labor shortages have become a pressing issue as EU economies recover from COVID-19.
The European Commission designated 2023 as the European Year of Skills: a year dedicated to equipping people with the right skills for quality jobs and assisting companies in addressing skills shortages within the EU.
As EU economies begin to recover from the COVID-19 pandemic, labor shortages have emerged as a pressing issue. Addressing these shortages, however, requires more than just skills development: improving job quality is crucial.
The extent and impact of labor shortages in the EU
By the end of 2022, the average EU vacancy rate had reached a historic high of around 3%. Approximately a third of EU employers report that these shortages are limiting their ability to produce and deliver services. This struggle to find talent is particularly acute in Austria, Belgium, Czechia, Germany, and the Netherlands. However, shortages are evident in certain sectors and occupations in most member states.
The impact of these labor shortages is far-reaching. Employers face daily challenges to meet production targets, deliver quality services, and innovate and grow their business due to a lack of a suitably trained workforce. Moreover, workers often face work intensification if their employer is unable to fill vacancies in a timely fashion, which can potentially further aggravate shortages in affected organizations and occupations.
The exacerbation of labor shortages by the pandemic
The COVID-19 pandemic exacerbated labor shortages in sectors such as health, and information and communication. The construction, hospitality and retail sectors, which were severely impacted by pandemic-related restrictions, are struggling to rebuild their workforces. Many former employees have transitioned to jobs with better working conditions.
On top of this, the green and digital transitions in Europe are creating a demand for new skills, leading to a mismatch in sectors like construction where the lack of specific skills is putting Member States’ ambitious carbon-neutrality targets at risk.
Addressing labor shortages: the need for a comprehensive approach
While many countries have taken steps to address these issues through stronger labor market policies and education and training measures, these are often not sufficient to solve the labor shortage issue. To effectively address shortages, we must go beyond skills and fully understand the drivers behind the lack of labor supply.
An analysis of data from the European Working Conditions Telephone Survey (EWCTS) 2021 shows that labor shortages are particularly prevalent in sectors with poor job quality. This is measured by an index that compares “job demands” with “job resources.” The health sector is the most ‘strained’, followed by transport, agriculture, commerce, and hospitality—all sectors experiencing significant labor shortages.
The role of pay and working conditions in addressing labor shortages
Most of the measures to address shortages in healthcare and long-term care seek to address pay and working conditions. While specific payments to attract healthcare professionals to certain regions have shown some impact, focusing on pay alone is often insufficient without other interventions to increase the attractiveness of working and living conditions.
Beyond pay, the nature of employment relationships plays a pivotal role in attracting and retaining talent. People want more than just a decent salary: they want greater autonomy over working hours, access to training, career prospects, and to do work that they actually find meaningful. Therefore, any strategy to address labor shortages must take into account these factors and strive to improve overall job quality.
The impact of gender segregation on labor shortages
Another feature of the sectors experiencing shortages is that they are highly gender segregated. Health is heavily female-dominated, while information and communication and construction are heavily male-dominated. Addressing gender imbalances at work must be prioritized, as should efforts to encourage women who are outside the labor market to take up work.
Conclusion: a holistic approach to addressing labor shortages
While initiatives such as the European Year of Skills are welcome, and improving skills can certainly help to address labor shortages, they are not a silver bullet. To address these challenges effectively, a clear understanding of the drivers behind shortages in specific sectors and occupations and the policy context is needed.
Targeted measures to address shortages can be developed with the ongoing involvement of key stakeholders, including social partners, who are best placed to understand current and future requirements in the labor market.
Moreover, it is crucial to recognize that improving job quality is as important as skills development in addressing labor shortages. This includes ensuring fair pay, improving working conditions, and addressing gender imbalances in the workplace.
In conclusion, addressing labor shortages in the EU requires a holistic approach that goes beyond skills development to include improving job quality and addressing structural issues in the labor market. By doing so, we can create a more inclusive and sustainable labor market that benefits all stakeholders.
Publisher: Eurofound
