Labour market remained resilient/poverty broadly constant in 2022
Despite Russia’s war of aggression against Ukraine, high inflation, and an economic slowdown, the EU labour markets have demonstrated remarkable resilience in 2022. The EU experienced a new record level of employment (213.7 million people), with a record employment rate of 74.6%. At the same time the unemployment rate decreased to the record 6.2%, and youth unemployment to 14.5%. Labour shortages, which have increased significantly since the COVID-19 pandemic, remain high. The share of people at risk of poverty or social exclusion remained stable at 21.6% in 2022 with social transfers reducing poverty by more than one third on average in the EU. However, real household income declined, as high inflation continued to erode purchasing power. This resulted in a rise in severe material and social deprivation (from 6.3% to 6.7%).
Persistent labour shortages are found across all skills levels
Shortages are particularly prevalent in construction, healthcare, science, technology (notably ICT), engineering and mathematics (STEM.), including high, middle and low-skilled occupations. Looking ahead, shortages in both high-skilled and low-skilled occupations are expected to continue as the population ages and the green and digital transitions advance.
Impact of digital transitions is limited mostly to ICT
Only a few occupations in the EU labour market require a high digital intensity of work and all are found in the ICT professional and technician occupational groups. Indeed, one third of the skills required for an ICT professional are digital skills, while for most other occupations digital skills represent less than a tenth of all skills needed.
Highest digital intensity of work by occupation, 2021, EU-27
Low labour market participation affects shortages
The aging population is a major trend affecting labour shortages, considering that, fewer people will be working and consumption by an increasing older population will remain sustained. While the working age population (20-64-year-olds) reached a record of 272 million people in 2009, it declined to 265 million by 2022, and is expected to drop to 258 million by 2030.
The lower labour market participation of women, lower-educated people, people with a migrant background, as well as of older and young people also contributes to labour shortages. The potential contribution of women to increasing the activity rate is the highest among those groups (7.1 pp), adding around 17.3 million more active people by 2030. Fully exploiting the unused potential and fostering transitions across sectors towards those in high demand (e.g. renewable energy sector) is key.
Effects of individual characteristics on participation probability among people aged 20-64, 2004-2020, EU-27
Shortages in green transition
The green transition is projected to lead to employment growth in several sectors and occupations, where new vacancies may be difficult to fill. The investment needs for retraining, reskilling and upskilling in manufacturing of strategic net-zero technologies are estimated between 1.7 billion EUR and 4.1 billion EUR up to 2030. This corresponds to between 198 000 additional jobs and 468 000 additional jobs under different scenarios.
Additional jobs in manufacturing and related investment needs until 2030
Skills shortages are key in certain occupations
Jobs shortages are often linked to insufficient supply of workers with highly specialist skills, for example in the STEM occupations, including ICT. In some occupations shortages might be exacerbated by evolving skills and employment needs.
Poor working conditions explain certain shortages
Employers’ difficulties in finding people with the right skills are often linked to their inability to attract and retain workers (e.g. due to poor working conditions or human resource management). “Job strain”, which refers to difficult work environment, organisation and time, is substantially above the EU average for nurses, carers, drivers, cooks and bartenders, doctors and cleaners.
Job quality index (%), by shortage occupation, EU-27
Workers born outside the EU help mitigating shortages
Migrant workers born outside the EU are more often employed in occupations facing persistent labour shortages, in particular in low-skilled occupations. They are 8.7 pp more likely to work in occupations with persistent labour shortages compared to workers born inside the EU.
Factors connected to the probability of being employed in labour shortage occupations vs non-labour shortage occupations, 2021, EU-27
Gender segregation hampers labour shortages
Most shortage occupations are dominated either by men or by women – 86% of these occupations are not gender-balanced. This also mirrors gender segregation in the respective field of studies, which is why the pool of people to fill vacancies is limited.
Proportion of women in shortage occupations (% of all workers in a given occupation), EU-27
Policy options to mitigate persistent and future labour shortages
- Reforming tax and benefit systems can improve work incentives, which can help alleviate labour shortages. In general, tax reforms targeting low-income earners have a significantly greater impact on people’s labour supply than across-the-board personal income tax (PIT) cuts.
- Investing in adult learning and skills development and training programmes, as well as better job matching with people’s education, experience, and skills.
- Improving working conditions in certain jobs to attract additional workers, including by involving social partners.
- Making available accessible, affordable, and high-quality early childhood education and care can contribute to addressing labour shortages by removing barriers to entering the labour market. Overall, increasing childcare participation among children aged 0-2 living in households below median income to the Barcelona target of 45% would increase the participation of mothers by 5 pp in Italy, 10 pp in Hungary, and 17 pp in Austria.
- Promoting targeted labour migration from non-EU countries to reduce labour shortages in specific skills groups.
- Enhancing social dialogue and involving social partners in training, improving working conditions, and facilitating adult learning opportunities.
