Chapter 3:

Labour shortages intensify

Takeaways

The number of unfilled jobs in the EU reached a historic high in 2022, with a vacancy rate of 3%, more than double that of 2013. A third of managers say that labour shortages are a factor limiting production.

Labour shortages are particularly severe in construction, information and communication technology (ICT) and healthcare. Different factors drive the lack of labour depending on the sector, so measures to tackle the issue need to identify and then target those drivers.

Labour shortages in the ICT sector arise largely from a mismatch between the skills workers bring to the market and the skills employers are looking for. A multiplicity of factors are driving labour shortages in the health and care sector, but low pay in many occupations and poor working conditions are significant contributors.

A persistent undersupply of labour threatens businesses’ ability to grow and their capacity to innovate and remain competitive, which ultimately has a negative impact on the whole economy. Around a third of EU managers reported that labour shortages were a factor limiting production and service delivery in 2022.

Shortages occur across the economy, but they are particularly acute in construction, healthcare and ICT – sectors at the forefront of shaping a future Europe as it confronts demographic ageing, digitalisation and decarbonisation. Meeting the 2030 targets for GHG emissions reduction, as the previous chapter signalled, is dependent on the capability of the construction sector to build a renewable energy infrastructure and to retrofit the built environment to improve its energy performance. The speed of digitalisation is reliant on the availability of a highly skilled workforce to develop and implement new technologies; without the necessary human capital in the ICT sector, the EU could fall behind global competitors in this critical area. And a shortfall in the health and long-term care workforce impedes this sector from delivering the level of treatment and care that it can potentially provide, leading to rising inequality in the accessibility of healthcare.

With a tight labour market, where demand exceeds supply, the labour shortage is not likely to be solved any time soon. In part, the cause is demographic: Europe’s labour force is contracting as its population shrinks and ages. The pandemic aggravated the problem: the upswing in demand for goods and services in its wake has pushed businesses to expand their workforces. Skills mismatch is another significant factor – workers lack the skills that employers are looking for. Eurofound’s European Company Survey in 2019 found that 77% of European companies have difficulty finding candidates with the required skills for available positions.

There is, however, a pool of working-age adults currently not working that could be tapped, given the right policy mix. It includes workers already in the labour market: those who are registered as unemployed and those who are underemployed (in work but not working the number of hours they would like to). It also includes people who want to work but are unable to do so for various reasons, such as family responsibilities, lack of labour market skills or a language barrier. Eurostat estimates that this group amounts to 27.5 million people, many of whom are women, migrants and discouraged workers (people who have given up looking for work).

There is a recognition that the situation is not going to right itself without intervention, and Eurofound undertook a project to identify the types of programmes that are being implemented by governments and non-government organisations (NGOs) across the Member States. Some of these target groups outside the labour market, providing the training and other supports they need to transition into work. Other programmes address existing labour, seeking to upskill those who lack skills, to retain those who have cause to leave and to encourage others to move to less-developed regions.

Labour shortages in the ICT sector arise largely from a lack of workers with the right skills. Digital technologies are advancing rapidly and demand for specialised skills is high, but neither workers in the labour market nor new entrants educated with these skills are in sufficient supply.

The urgent need to address the skills gap across this and other sectors motivated the Commission to designate 2023 the European Year of Skills, a campaign that runs up to May 2024. It aims to mobilise multiple stakeholders – including EU institutions, government departments and agencies, companies, education providers and the social partners – to help companies reskill and upskill. Regarding digital skills specifically, the EU’s Digital Decade policy programme has set targets that at least 80% of adults will have basic digital skills and that 20 million ICT specialists will be employed in the EU by 2030.

Most of the programmes tackling labour shortages in ICT identified by Eurofound are oriented towards upskilling and retraining workers in the sector. They focus on identifying current and future skills needs, developing curricula that match employers’ requirements and delivering training to a variety of target groups. Some target small and medium-sized enterprises (SMEs), helping them to develop training plans, and to source, fund and deliver ongoing training in ICT skills. Broader interventions address skills gaps of a more generic nature in the context of the digital transition, emphasising the need to develop and update basic digital skills to fully participate in society and gain access to the labour market.

Bringing more women into ICT would help to tackle the shortfall in labour supply. According to the European Institute for Gender Equality (EIGE), women account for only around 17% of IT specialists. Several initiatives that aim to build up the digital skills base are directed at attracting more women to the sector – raising awareness of opportunities among female students early in education and attracting them into IT-focused further and tertiary education.

Other programmes try to bring underutilised groups into the sector, such as inactive women and young people not in employment, education or training (NEETs). One German initiative, the ReDI School of Digital Integration, targets individuals with a migrant background, and offers language training and networking to ease their labour market integration.

Experience has shown that training alone is often not enough to get these groups into work. Successful initiatives provide wide-ranging supports such as help with travel costs, childcare, individualised coaching, detailed career guidance and follow-up. They also collaborate closely with employers to provide work experience and placements.

The situation for the health and care sector is more complex and multifaceted. Its current workforce is ageing and exiting the labour market; as well as replacing these workers, the sector must expand to meet the rising demand from an older population. But recruitment slowed when health budgets were cut by austerity measures in response to the 2008–2012 economic crisis, and the sector has much catching up to do. Along with understaffing, underinvestment in many Member States has led to insufficient acute care beds, inadequate facilities and long waiting lists. This damages the perception of the sector, and for high-skilled occupations, may deter potential recruits from making the high level of commitment required to undertake the lengthy and demanding training involved.

Low overall wages as well as low wages in healthcare are a factor contributing to the brain drain of healthcare staff from eastern to western Europe. Many countries have difficulty attracting healthcare professionals, especially general practitioners (GPs), to rural areas, because of poor health infrastructure and lack of opportunities for career development.

Poor working conditions are widespread in the sector, which makes it difficult to retain and attract workers. Findings from the European Working Conditions Telephone Survey (EWCTS) 2021 show that the percentage of health sector employees with the worst quality jobs (jobs classified as extremely strained and highly strained) is higher than average: 19% of health workers in the EU worked in extremely or highly strained jobs in 2021 compared with 11% across all economic sectors (Figure 9).

Figure 9: Share of extremely and highly strained jobs in the healthcare sector compared with all sectors, EU Member States, 2021 (%)

Source: EWCTS 2021

Many of the initiatives seeking to improve labour supply in the health and care sector address pay and working conditions. For instance, Romania increased the basic net wage of primary care doctors by 130% and nurses by 63% in 2018. Several initiatives incentivise GPs to locate to rural areas by offering additional allowances, monthly top-up payments and one-off payments. However, focusing on pay alone is often insufficient without other interventions to increase the attractiveness of working and living conditions. Efforts to provide access to training and career progression, for instance, have an important role to play in attracting and retaining staff. An initiative in Spain provides rehabilitation for doctors with mental health or addiction problems, where networks of collaborating professionals assist doctors undergoing treatment and provide support to them.

To tap into underutilised groups, programmes often focus on integrating migrants with medical training, by recognising qualifications gained abroad and providing additional training, including language training, if required.