Poland’s numbers weren’t good in 2012, but are pretty much catastrophic in 2023. In 11 years, the number of entrepreneurs whose operations are hampered by labour shortages doubled in Poland. Now, if you think that sounds bad, entrepreneurs in countries such as Croatia have seen their operations hampered by an increase of 2300%. You don’t need to be an Excel wizard to see that labour shortages are everywhere in European spheres, but vary in each country.
In 2012, an average of 7% all European manufacturing entrepreneurs saw their production limited by a shortage of workers. Eleven years later, that European mean has increased to 26%, meaning that a quarter of all European entrepreneurs see their operations hampered. “You see that talent shortages remain one of Europe’s largest issues”, says Arjan Ruis, who works for labour market data and Talent Intelligence specialist Intelligence Group.
Thermometer for the tight labour market
While Ruis calls the graph ‘worrying’, he says it’s important to note the statistic is limited to manufacturing entrepreneurs — as well as when Eurostat started publicly stating the statistics. “When comparing with 2012, you have to remember that the economy appeared to be on hiatus then. So you are comparing a mountain to a hill, so to speak. But nevertheless worrying that such a large proportion of entrepreneurs in the industry are struggling with a shortage of staff.”
“It’s worrying that such a large proportion of entrepreneurs in the industry are struggling with a shortage of staff.”
Leading indicator for other economies
But the relevancy of the graph is particularly relevant to central and eastern Europe, where manufacturing is, on average, a larger share of the overall economy than in the rest of Europe. “The statistic is very relevant and acts as a kind of thermometer of the tightness of the European labour market.”
“Many sectors depend on what happens in the manufacturing industry. So if one industry cannot produce enough because there is a shortage of personnel, other sectors that use those products are affected.”
That’s not all, according to Ruis. As manufacturing is what he describes as a sector that serves as a leading indicator. It means that whatever happens in that sector could potentially have the same repercussions across the rest of the economy. “Thus, the indicator also has a short-term predictive character. Many sectors depend on what happens in the manufacturing industry. So if one industry cannot produce enough because there is a shortage of personnel, other sectors that use those products are affected. Take the construction industry, for example, which depends on the wood and building materials.”
Understanding preferences and desires
If there are shortages everywhere then it means there is a European-wide shortage of staff, Ruis notes. So where do the solutions lie? “There’s always an option to bring in staff from abroad, from Asia or Africa for example, but then other things come into play. Is your country desirable for them to move to, or is it a real structural solution to begin with? After all, migrants need somewhere to live, eat and demand care.”
“I think it’s all about understanding labour supply and demand, on a local, regional, national and international level.”
“Because shortages are not the same everywhere within Europe, it means the continent has room to improve with regards to labour migration. While the European Commission actively encourages it, a continent-wide breakthrough seems pretty far away. I think it’s all about understanding labour supply and demand, on a local, regional, national and international level.”
“You need to understand the preferences and desires of what workers want and need”, Ruis says. “Then you can answer the follow-up questions: How can you entice people from abroad to come and work for you? What should you offer them? Amassing answers to those questions should be the starting point for many struggling sectors, including the manufacturing industry.”
Increasing labour productivity
If recruiting new personnel from abroad just isn’t an option, Ruis points to the necessity of increased productivity. “Generally speaking, productivity levels have dipped in Europe”, he says. “Aggregate labour productivity growth has been trending downwards for decades, both in the euro area and in other major economies, as per an ECB report. As labour markets continue to be tight, there’s a simple need to do more with the same number of people.”
