Employment and labour markets

The pandemic aggravated labour shortages in some sectors; the problem is now emerging in others

Following the declines in employment rates and working hours across Europe in 2020, [1] economies began to show signs of recovery during the first quarter of 2021. The gradual rekindling of economic activity has led to a surge in demand for workers and reawakened concerns over labour shortages. Difficulty filling vacancies was thought to be among the key factors holding back growth, competitiveness and service delivery in a number of sectors prior to the COVID-19 outbreak. Despite a temporary weakening in demand for labour during the pandemic, this was not the case in all sectors, with some seeing pre-existing shortages worsen.

As Figure 1 shows, demand for labour, as measured by the job vacancy rate, reached pre-pandemic levels during the first quarter of 2021. Job vacancy rates are escalating in the construction and information and communication sectors, where skills shortages had become a structural problem, unrelated to short-term economic swings, well before the COVID-19 pandemic. In eastern Europe, the faster-than-predicted economic recovery, combined with growth in industrial output, has overheated the labour market and generated recruitment bottlenecks in the manufacturing sector. [2] Demand for workers has also surged in the hospitality sector, where the easing of the pandemic restrictions has seen employers struggling to find workers to fill vacancies.

Figure: Job vacancy rates in the EU27 (%), by sector, Q2 2018–Q1 2021

Many factors driving labour shortages

On the supply side, the current labour shortages are driven by the disruption of intra-EU mobility and migration flows, by workers switching sectors during the pandemic, and by workers’ reluctance to take up jobs in certain sectors because of concerns over wages and working conditions.

As regards mobility and migration, the COVID-19 pandemic has complicated procedures to apply for and obtain work permits, [3] increasing labour shortages in sectors such as agriculture and healthcare, where migrants make up a large part of the labour force. In Germany, inward migration fell by around 25% in 2020, leading to labour shortages across multiple sectors. [4] With restrictions on the movement of people across Europe’s borders dragging on in response to the emergence of new virus variants, it remains unclear when cross-border mobility will reach pre-pandemic levels.

Some workers opted to change jobs during the pandemic so that they could continue to earn a living. Reports from the hospitality industry show that uncertainty about business closures and reopening has led some workers to permanently change jobs. [5] In Ireland, the available information suggests that as much as 30% of the workforce in the hospitality sector has moved to another sector. [6] In Czechia, trade unions note that the pandemic has pushed women and young people out of the labour market while also diverting workers away from the hospitality sector towards employment offered by online platforms and delivery services. [7]

Low wages and poor working conditions are another reason for labour shortages in certain sectors. What is driving down employment in low-paid or low-skilled jobs is not the ‘fiscal profligacy’ of governments. Short-term working schemes and similar supports have provided a lifeline for both workers and employers while also ensuring that unemployment levels are kept in check. Rather than substantially discouraging workers’ return to work, these schemes have helped to avert a potentially disastrous shock to the labour market that could have seen many more workers sliding into unemployment and inactivity. What keeps workers from seeking employment in certain jobs is the lack of employment and income security, poor career prospects and the demanding nature of the work, combined with low pay and poor working conditions. In Greece, a country where labour shortages were almost non-existent prior to the pandemic, employers in the hospitality sector currently have difficulties finding workers, in part because of the unattractive job prospects. [8]

Pandemic aggravates shortages in health and care services

In 2020, all European countries reported an insufficient supply of nurses, general practitioners and long-term care workers. Labour shortages have long been a fact of life in healthcare. Data published by the World Health Organization show that the deficit of labour in healthcare is structural in the EU. Already in 2013, there was an estimated deficit of 1.6 million workers in the sector, which was predicted to rise to 4.1 million by 2030. [9] In countries like Austria, Germany and the Netherlands, provision of home-based long-term care relies heavily on workers from eastern Europe and other countries and therefore was badly impacted by travel restrictions. The long-term care sector already suffers from labour shortages due to its lack of appeal to workers, with relatively low levels of pay, challenging working conditions and often poor career prospects.

Addressing problem requires a complex policy mix

The pandemic has exposed the vulnerabilities of European labour markets and the need for sustained investments in a suitable policy mix to address labour shortages. While investment in skills is vital for inclusive and sustainable growth in the context of the green and digital transitions, [10] the examples given above suggest that policies should also address the broader issues of job quality, migration and the enhanced integration of groups currently outside the labour market.

Image © Heidi/Adobe Stock Photos


References

  1. ^ DW (2021), Labor shortages are back to haunt Czech economy, 23 June.
  2. ^ Today (2021), Analysis: Remember me? With fast recovery, labour shortage haunts Eastern Europe, 8 June.
  3. ^ European Migration Network (2020), COVID-19’s impact on migrant communities, 24 June.
  4. ^ The Local (2021), Germany ‘desperately searching’ for skilled workers to plug shortage, 23 June.
  5. ^ RTÉ (2021), Some employers struggling to re-hire staff after lockdown, 18 May.
  6. ^ Irish Examiner (2021), Restaurants warn severe jobs crisis looming, 2 May.
  7. ^ DW (2021), Labor shortages are back to haunt Czech economy , 23 June.
  8. ^ Financial Times (2021), Greece struggles to find tourism workers due to risk of more lockdowns, 22 June.
  9. ^ Michel, J. P. and Ecarnot, F. (2020), ‘The shortage of skilled workers in Europe: Its impact on geriatric medicine’, European Geriatric Medicine, Vol. 11, No. 3, pp. 345–347.
  10. ^ European Commission (2020), European Skills Agenda , July 2020.

Research carried out prior to the UK’s withdrawal from the European Union on 31 January 2020, and published subsequently, may include data relating to the 28 EU Member States. Following this date, research only takes into account the 27 EU Member States (EU28 minus the UK), unless specified otherwise.

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