Europe's labor market challenges: Explaining worker shortages and skills gaps

More than 75% of European Union companies are struggling to find the right people with the right skills to fill their job openings, as reported by Eurostat. Europe is facing a big problem in the job market. There aren’t enough workers, and this is hurting the region’s economy.

Nonso Onowu on November 10, 2023 Average reading time: 5 min
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Europe's labor market challenges: Explaining worker shortages and skills gaps

As of the end of 2022, the average EU vacancy rate hit a historic high of approximately 3%, as per the latest Eurofound research. Nearly a third of EU employers express that these shortages are hindering their productivity and service delivery. The struggle for talent is most pronounced in Austria, Belgium, Czechia, Germany, and the Netherlands, though shortages are observable in various sectors and occupations across Member States.

The skills gap issue isn’t just a problem for individual businesses; it’s affecting the entire economy. This shortage has led to the slowest global GDP growth since the 2008 financial crisis, which might make skilled workers consider moving to more stable economic places outside the EU. 

Exploring the reasons for the shortage of skills in Europe

Reason 1: The impact of reduced work hours

A key factor contributing to the labor shortage is the reduction in average working hours, a trend exacerbated by the COVID-19 pandemic. When individuals work fewer hours, it disrupts the job market, making production more challenging and causing prices to rise. 

In the Eurozone, people are working 2.2% fewer hours than they did before the pandemic, significantly affecting the labor market.

The worker shortage is not solely due to typical fluctuations or an aging workforce; rather, it predominantly results from reduced working.

As a result, the EU now has about 3.8 million more people working shorter hours. This means there’s a greater demand for workers, and people are earning more money. It’s important to note that this change doesn’t only impact one specific age group or generation. It affects people of all ages and genders, not just Generation Z.

There are several reasons for this shift, including more people taking sick leave, companies keeping employees for future needs, and changes in the types of people working in the job market, with more women and younger workers taking part.

When people get a raise or earn more money, they don’t always choose to work more. Instead, they might prefer to have more leisure time and enjoy their higher income.

This can be a challenge for businesses because they might offer higher pay to keep their employees loyal and motivated, thinking it will make them work more. However, it can turn out differently, with employees wanting to work less even if they’re paid more.

Reason 2. Allocation of skills and gaps

To solve these issues, a collective effort is required to bridge the skills gap, enhance education and training, and facilitate worker mobility to regions and positions in need of their expertise. The European Commission underscores the significance of skills intelligence, an approach that combines quantitative and qualitative data to comprehensively understand labor market requirements and skill needs. 

One important suggestion from the Commission is to use this information to make rules about who can move where for work (migration policies).

Think of jobs as different pieces of a jigsaw puzzle. The Commission recommends that we fit the right people (with the skills) into the right jobs, like finding the right spot for each puzzle piece. This way, the job market runs smoothly, businesses do better, and that helps the European Union’s economy become stronger and more stable. It’s like making sure everything fits together nicely, just like a puzzle.

Best Practice
The Success Story of the Basque Country  

The Basque Country, situated in northern Spain, has effectively tackled labor shortages by implementing a comprehensive strategy that blends tax incentives and publicly funded relocation services to attract and retain skilled professionals.

Highly skilled individuals who opt to relocate to the Basque Country can benefit from substantial income tax rebates, making the region an appealing choice for those seeking financial advantages and career prospects. 

basque country flag

This strategy goes beyond mere talent attraction; it places a strong emphasis on addressing the practical challenges faced by professionals and their families during the relocation process. This approach includes helping families find suitable schools for their children, offering guidance on housing options, and actively assisting the partners of these professionals in securing job opportunities. 

This tailored approach has resulted in the successful relocation of numerous skilled workers to the Basque Country in recent years, fostering a supportive environment that encourages them to establish their lives and careers within this vibrant community

Reason 3. Low productivity and high labor demand

Low productivity can set off a chain reaction, creating a demand for more hands on deck. And when skilled workers are hard to come by, it’s like trying to find a needle in a haystack. The COVID-19 curveball only made things more challenging, especially in critical sectors like healthcare and tech.

It’s like trying to assemble a dream team for a project, but some key players are missing. As Europe bounces back, certain industries are in dire need of fresh talent with the right skills. The solution? enhance the appeal of certain places and jobs, lend a helping hand to groups facing barriers, and make the job-hunting journey a bit more straightforward.

In the end, it’s like teamwork. Businesses and governments should work together to make things work. So, simply put, when work isn’t smooth, add more workers, make the job scene exciting, and see good things happen. Everyone wins, and the job gets done right!

Maintaining resilience in the face of challenges  

Dealing with tough situations and staying strong is important. In Europe, even though there are problems with the economy, the job market is doing well. Many people have jobs, and not many people are looking for work. But, there are still issues. Some jobs don’t have enough workers, especially in certain areas. To fix this, the government can do things like help adults learn new skills, make sure men and women have the same job opportunities, make it easier for people to start working, make working conditions and pay better, bring in workers from other places, and talk with people to make decisions together.

A group called EURES made a list of the top 15 jobs that don’t have enough workers in 2022. Jobs like construction workers, nurses, and software developers are on the list.


But, the situation is different in each country. Some places need more workers in some jobs, and in other places, there are too many people for certain jobs. This list can help people who are looking for jobs choose ones that are needed more.

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