Tight labour markets threaten EU growth, innovation and long-term goals

Prolonged labour shortages in the EU affect growth, innovation and the bloc’s ability to achieve its digital and green targets, as around 80% of EU employers struggle to recruit workers with the right skills. Currently, the skills of one in three employees in the EU are mismatched with their job, with 17% overqualified and 13% underqualified.

Eurofound's new report Company practices to tackle labour shortages provides updated evidence on the persistence of labour shortages amid declining levels of labour market slack in the EU and at Member State level, and details organisational policies aimed at attracting workers to occupations in which shortages are common.

In addition to broader impacts on economic growth and innovation, the report notes that labour shortages can also have profound implications for working conditions, as existing workforce experience intensified work, increasing the likelihood of stress and burnout, leading to absences and exits that exacerbate the situation.

Eurofound analysis indicates that job vacancies in the EU have increasingly been filled by workers moving jobs, thereby gaining better wages and conditions, rather than by unemployed people entering employment. This could signal ineffective activation policies, particularly for those outside the labour market or underemployed. At the same time, more remains to be done to update education and initial vocational training curricula and invest in ongoing training.

In 2023, a quarter of EU companies were forced to recruit workers without the required skills. An additional 18% report fewer than one in five recruits having the necessary skills. Many employers have adapted positively to increasingly focus on marketing and employer branding, offering better pay, and non-wage benefits in order to ensure recruitment and employee retention.

Labour market slack data suggest that employers still rely largely on a constant pool of labour. There is not enough being done to address shortages, and further actions are required to engage groups outside the labour market, as well as to enable involuntary part-time workers to work additional hours. This requires enhanced public policy regarding care provision; integrating people not in employment, education or training (NEET) and people with disabilities; and introducing more effective targeted activation policies, for example for low-skilled and migrant workers.

The report notes the importance of effectively integrating Ukrainian refugees and third country migrants by addressing barriers to sustainable recruitment, including avoiding skills underutilisation. Solutions include streamlining processes to regularly update the identification of shortage occupations for the purposes of granting work permits to third-country nationals, as well as the recognition of qualifications gained abroad and the offer of language training and integration services with the involvement of the social partners.

Overall public policy intervention relating to labour shortages should be combined with the greater involvement of the social partners and employers, since among the latter active engagement with the integration of underutilised groups is currently more limited.

Download the report: Company practices to tackle labour shortages

Additional data:

• EU vacancy rate by sector, Q3 2019–Q3 2023 (%)
• Reasons SMEs face difficulties recruiting staff, by occupation and size category, EU, 2023 (% of SMEs)
• Companies providing training, 2015 and 2020 (%)
• SMEs facing difficulties finding workers with the right skills, EU Member States, 2023 (% of SMEs)
• Strategies used to address skills shortages in SMEs, EU, 2023 (% of SMEs)
• SMEs that recruited non-EU workers, EU and Member States, 2023 (% of SMEs)
• Reasons why SMEs did not recruit from outside the EU, 2023 (% of SMEs)