Europe Heads for Jobs Crunch That May Be Deeper Than the U.S.’s

 


The labor shortage that is hitting the U.S. as the nation rebounds from the pandemic is also coming to Europe, where it could prove even more difficult to fix.

Like the U.S., where April’s payroll growth fell far short of expectations, Europe will struggle to match workers with jobs. That’s despite unemployment at more than 7% in the European Union -- and more than twice as high in Greece and Spain -- which isn’t predicted to return to pre-crisis levels before 2023.

Unemployment rates are still higher than before the pandemic

In the short term, coronavirus travel restrictions mean workers can’t cross borders as easily as usual within the 27-nation bloc. That’s a problem because the EU is about to start dishing out its 800 billion-euro ($977 billion) recovery fund, which is focused on environmental and digital industries that will require specialized workers.

But the networks and pipelines that provide new workers have also been disrupted, which will have a lingering impact. Job fairs have been canceled and vocational training programs upended. Universities have seen a slump in foreign students. That will all exacerbate the existing challenge of the region’s unfavorable demographics.

Brexit has imposed an additional barrier to the movement of labor because the trade deal between the U.K. and EU that started this year includes restrictions on movement and only limited mutual recognition of some qualifications.

“In Europe, the problems are more structural,” said Axel Pluennecke, an economist at the German Economic Institute in Cologne. “Especially in the technical professions, areas like digitization, decarbonization, there will be big demand for qualified workers. You really have to wonder whether this demand will be met.”

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The region is already feeling some of the impact of the border closures imposed during the pandemic. Net migration to Germany, Europe’s largest economy, fell by about a third in 2020. Norway is short of specialized hospitality workers such as foreign rafting guides, and relaxed entry restrictions last month to include workers “strictly necessary to avoid downtime in projects or businesses for the next four months.”

Movement Slows

Net migration to Germany fell during the pandemic

Source: German Federal Statistics Office

Swedish battery-cell manufacturer Northvolt AB needs 3,000 workers for a factory under construction in Skellefteå, and its chief executive -- former Tesla Inc. executive Peter Carlsson -- has repeatedly highlighted access to expertise as a key challenge.

An EU report in December identified shortages in construction, engineering, software development and -- more prominently than in the past -- healthcare.

Likewise, training schools have been hit by closures and social distancing rules. Signups for vocational programs in Germany, which prepare young people for hundreds of specialized professions, declined more than 9% last year in a “clear effect” of the pandemic, according to the nation’s statistics office.

Austria, which has a similar system, had more than 8,000 unfilled training positions at the end of April. The Austrian Economic Chambers resorted to deploying virtual-reality goggles, which Deputy Secretary General Mariana Kuehnel said helps highlight less well-known career opportunities to young people.

German universities had almost 30% fewer international students last year, and many studied online from their home countries, eliminating the social interactions that often convince them to stay for a job after graduating.

“The challenge for companies, for countries, is to synchronize the job disruption with the job creation,” said Alain Dehaze, chief executive of Swiss-based global recruitment agency Adecco Group AG. “You’ll have structural changes in mobility, in consumption, and it’ll have an impact on jobs.”

Demographic Dilemma

Some economies might benefit if the crisis stops their best workers leaving. Poland, Romania and Italy --- the main countries of origin for skilled EU migrants in 2019 -- are also among the biggest beneficiaries of the bloc’s recovery fund. They’ll see their demand for specialized jobs rise.

Systems for matching skilled workers with the companies that require them will also ultimately be rebuilt. But that will take time, and the delay will exacerbate a problem that Europe was struggling with even before the pandemic -- an aging population.

Germany’s workforce, for example, is projected to shrink by about 4 million by 2030 as the baby-boomer generation retires.

“German companies will have to increasingly look outside of the EU to meet their demand for skilled labor,” said Ulrich Kober, head of integration and education at the Bertelsmann Stiftung. “Migration from other EU countries doesn’t cut it anymore.”

That poses a political challenge for governments. They may find themselves under pressure to double down on attracting foreign workers despite high local unemployment, the Brussels-based Migration Policy Institute Europe wrote in a report in February.

“Governments will need to carefully consider the sensitivities around continuing to recruit from abroad,” it said.

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