Author: Dr Lina Klesper - Legal Assistant at PKF Malta
Published on Business Today: 13th July 2023

Europe is currently facing a significant challenge: a scarcity of skilled workers across various industries. This shortage can hinder economic growth, technological advancements and overall competitiveness.

A recent analysis of labour market imbalances in Europe, including the EU27, Norway, and Switzerland, revealed labour shortages in 29 countries.  The 2022 EURES Report on labour shortages and surpluses by the European Labour Authority found 38 specific occupations which are classified as widespread shortages which were dominated by three groups of occupations; craft occupations; healthcare occupations, and occupations related to software.

These shortages have been persistent for the past five years, indicating a structural nature rather than temporary. To tackle this issue, European countries must adopt a strategic, multi-faceted approach that encompasses education and training reforms, immigration policies and fostering innovation.

As the 2022 EURES Report shows, various factors influence the demand for and supply of labour. Those need to be taken into consideration to sustainably solve Europe´s labour problem. On the demand side, macroeconomic conditions, technological changes such as automation, transition to a climate-neutral economy with the emergence of new types of jobs, sectoral shifts in employment, regional shifts in employment demand, and employers' preferences for example for part-time contracts all play a role.

The terms and conditions of employment also influence the demand with focus on relative wage levels and workplace well-being. On the supply side, labour market participation in general, population ageing, education and training levels, individual work preferences, migration and mobility, and active labour market policies are influential. These factors collectively shape the dynamics of labour demand and supply.

Moreover, regarding the supply side, the report showed that while the economic activity rates generally increased from 2010 to 2021, it did so unequally for different groups divided by age, sex and citizenship status. Particularly women and migrants remain disadvantaged compared to men and citizens born in a country contributing to the labour market slack.

This highlights that the approaches European countries are to follow must take those disadvantages, particularly concerning women and migrants in the equal access to the labour market into consideration to make sure that no one is left behind and excluded.  What is the situation in Malta?  Since a decade, there was a high demand for foreign labour as more Maltese young people are leaving Malta to work abroad and there’s been a significant change in Malta’s demographic due to Malta’s low fertility rate. Quoting Joanne Bondin, president of the Malta Employers Association, the island faced a rapid change in demographics over the past decade as more young people seek employment abroad combined with a fertility rate which is the lowest in Europe, and among the lowest worldwide.

Bondin was referring to an interview with The Malta Independent on Sunday in which President George Vella questioned whether Malta, as the most densely populated country in Europe, could continue importing “more foreigners to keep the economic wheel turning”. Yet, there is no easy solution towards solving the chronic scarcity of workers apart from immigration.

The major reason for the acceptance of migrant workers by organizations is to overcome severe labour market shortages, an aging workforce, and the retirement of baby boomers, which has been observed in Europe.  One of the primary ways to combat the scarcity of skilled workers is by focusing on education and training initiatives. The high level of early school leavers in Malta diodes does not help when digitalization and now A.I competence is sought from workers. Ideally, European countries should prioritize the development of robust vocational training programs that equip individuals with practical skills aligned with industry demands.

By forging strong partnerships between educational institutions and businesses, students can gain hands-on experience and industry-relevant knowledge.  Governments should also invest in promoting science, technology, engineering, and mathematics (STEM) education to nurture a future-ready workforce. Additionally, fostering lifelong learning opportunities through upskilling and reskilling programs can enable workers to adapt to evolving industry needs.  Fostering close collaboration between educational institutions and businesses is key to bridging the gap between academia and industry.

Those collaborations would encourage universities and research centres to engage in joint projects with companies promoting knowledge exchange, applied research, and innovation. Establishing internship programs, apprenticeships and industry-academia partnerships can provide students with real-world exposure and enable them to develop practical skills.  Moreover, industry experts can contribute to curriculum development to ensure it remains aligned with industry requirements, promoting the production of job-ready graduates. Is the mantra of implementing Flexible Immigration Policies working?

Europe should consider implementing tighter flexible immigration policies to address the shortage of skilled workers. Streamlining visa processes and easing work permit restrictions can attract international talent, such as nomad worker schemes, thus helping to fill the skills gap. Establishing pathways for qualified professionals, entrepreneurs and students to enter and contribute to the European workforce can invigorate industries and promote economic growth.

Countries can also initiate bilateral agreements to facilitate talent exchange programs, encouraging the free movement of skilled workers within the European Union.

Encouraging innovation and entrepreneurship is essential for addressing the scarcity of skilled workers. Governments should establish favourable conditions for startups, providing tax incentives, access to funding, and supportive regulatory frameworks.

Initiatives like incubators and accelerators can foster an environment conducive to entrepreneurial growth. By nurturing an innovation ecosystem, Europe can attract skilled workers seeking professional growth and collaboration opportunities. Furthermore, fostering a culture of innovation within existing companies can inspire employees and create an attractive work environment. In that context, it should be on top of companies´ agendas to accelerate digital transformation in the short term to accelerate innovation in the long run.

To conclude, Europe can overcome the scarcity of skilled workers through a comprehensive strategy combining education reforms, collaboration between academia and industry, flexible immigration policies, and promoting innovation. By addressing these areas and pursuing a socially just transition to a green economy, Europe can cultivate a dynamic workforce capable of driving economic progress and sustaining its competitive advantage in the global market, especially in light of the Green Deal and the sluggishness of China post-Covid recovery.

Author: Dr Lina Klesper - Legal Assistant at PKF Malta
Published on Business Today: 13th July 2023
Get in touch: info@pkfmalta.com