Olan McEvoy
Research expert covering the European Union for society, economy, and politics.
Get in touch with us nowWhat is driving labor and skills shortages in Europe?
Shortages in the European labor market are the result of factors which have been long in the making - declining populations, underinvestment in education, poor job matching - as well as more recent challenges which have shaken the European economy, most notably the COVID-19 pandemic. In the post-pandemic reopening of the European economy, labor demand has reached all-time highs, as businesses have rushed to keep up with high consumer demand which was pent-up during the lockdowns.Unemployment has fallen to new lows in the European Union, reaching six percent in 2023, while the job vacancy rate - a measure of vacant positions as a share of all jobs in an economy - was around three percent in the Eurozone in the same year, and even higher in countries such as Belgium, the Netherlands, Austria, and Germany. 82 percent of employers in Germany reported having difficulty in finding talented candidates for open positions in 2024. At the same time, long-term trends are also impacting labor shortages, as many Europeans are heading into retirement during the 2020s, with few workers having the appropriate skills to replace them.
The sectors of the European economy which are facing labor shortages
European countries are facing particularly severe shortages of workers for manual labor such as bricklayers, carpenters, plumbers, electricians, welders, and sheet metal workers. These jobs tend to be focused on the construction sector, which has seen its job vacancy rate spike since 2017 - in the third quarter of 2023, the job vacancy rate for the construction sector in the EU was 3.4 percent, compared to 2.9 percent in the services sector, and two percent in the industrial sector.Another area which has seen an acute shortage of skilled staff in recent years has been in healthcare, where nurses and other healthcare staff have been in short supply. This trend is compounded by the fact that nursing and other healthcare-related positions were rated the most straining occupations in Europe during 2023, making it even more difficult to attract staff to positions which are often not highly paid. Compounding this issue is the declining value of real wages across Europe due to inflation, making work in low-pay sectors unattractive compared to alternatives.
Policies aimed at alleviating labor market shortages in Europe
In the short-run, many European countries are altering their immigration systems in order to attract skilled workers from around the globe. Migrant workers make up around 14 percent of the workforce in shortage occupations, compared to just 8 percent in non-shortage occupations, with skills-based immigration applications and the simplification of residence and naturalization processes seen as a way to make European countries more attractive to labor migrants. In the long-run, European countries are facing aging populations, meaning that their workforce is shrinking with time.In order to combat growing dependency ratios in Europe, countries are investing in education and skills-development with the aim of boosting labor productivity in order to offset this decline in working-age people. While this is the goal of most European countries, the 2022 results from the OECD's Program for International Student Assessment (PISA) show how far there is to go in this area, as most countries saw declining student assessment scores across math, sciences, and reading comprehension.
