Europe’s struggle with youth unemployment will soon give way to a major challenge of a very different kind: severe skilled labour shortages as it enters in an era of demographic decline. New mobility policies would secure a talent pipeline, a key determinant of prosperity, writes Christal Morehouse.
Christal Morehouse, Senior Project Manager, Bertelsmann Stiftung.
Europe is pioneering a new era of human history. It will become the first continent to decline demographically based on the free will of its citizens, and in times of peace and relative prosperity.
As the baby boomer generation exits European labor markets and economic competition from emerging economies rapidly increases, Europe will struggle to attract and retain talent. Forging innovative policies that better match job seekers with job openings, and that foster intra-EU labor mobility could help EU Member States remain talent hubs.
Policymakers must not only look at past trends to create policies for the future. Europe’s future will hold challenges that are in contradiction to both the problems and solutions of the past. Policymakers’ ability to address the new challenges ahead, and pass legislation to meet them, will increasingly affect levels of well-being across Europe.
Market forces alone are not enough
Labor mobility within the EU is responding only sluggishly to market forces. According to Eurostat and the European Labor Force Survey, in 2012 just 6.6 million workers in the EU27 were citizens from another EU member state. This equates to roughly 2% of the total working age population (15 to 64 year olds) and 1.3% of the overall population of the EU27 in 2012.
Intra-EU labor mobility remains a relative rarity. Indeed the lack of intra-EU labor mobility is demonstrably holding Europe back. The European Council estimated the economic losses due to economic inactivity or unemployment among young people to be 153 billion euro in 2011. That is roughly 1.2% of EU GDP.
When compared with the percentage of the aggregate international migrant population, which is just over 3 percent of the world’s population, intra-EU mobility appears distinctly meager. Especially so considering that the vast majority of international migrants must overcome legal barriers, face greater financial burdens to move, have fewer rights and protections upon arrival abroad and must often bridge great distances to live abroad. So unblocking the lifeline of intra-EU talent must go beyond the creation of a legal framework for free movement.
Europe likely to lose favor as a talent hub
The EU has exhibited notably contradictory ‘body language’ regarding mobility. In 2004, Germany reacted to the accession of eastern European states to the EU by limiting mobility and delaying it as much as the rules would allow. But Germany has since evolved into a “willing hub” for mobile EU workers.
The United Kingdom was a pioneer in opening its labor markets to intra-EU labor migrants. Yet its politicians have since adopted off-putting rhetoric and proposed policies to weaken its long-standing attractiveness as a destination for mobile EU workers. Spain meanwhile has involuntarily reversed its “migration polarity” in recent years, shedding migrant populations that it had previously attracted.
Policymakers have been concerned about both the potential success and failure of enhanced intra-EU labor mobility. When EU mobility occurs, critics express concern about brain drain. When it does not occur enough to fill labor shortages in tune with business cycles, and to alleviate high unemployment levels in certain regions, critics express concern about brain waste.
The aggregate ambivalence in the EU surrounding the fear of movement and the fear of non-movement must be resolved. A social and political consensus must be reached on this issue, if EU mobility is to become a reality, strength and comparative advantage of the EU.
A “European fair deal on talent” strategy
The EU must urgently develop more effective strategies for fostering EU mobility. A “European fair deal on talent” strategy could contribute to increasing the EU’s economic competitiveness and economic rebalancing among the member states.
In cases where this talent is employed to the benefit of another EU country, a “talent mobility stabilizer” mechanism could be implemented in the short-term by EU member states.
Accordingly, the talent-lending country could receive a “talent investment package” to grow its future domestic talent pool and improve employment prospects at home. Such an initiative could be referred to as a European fair deal on talent.
The temporary talent mobility stabilizer would consist of an economic package administered at the EU level. In accordance with benchmarks, EU countries that are net beneficiaries of talent could target investment at EU countries that “lend” domestically grown talent to their neighbors, in the short term. Such an economic package could be ring-fenced to benefit programs that develop the talent pipeline and reduce unemployment, for example investment in education, training, lifelong learning and in skills matching initiatives.
Such a mechanism would have to be discussed and developed among EU member states. A European fair deal on talent could, for example, be governed by indicators such as:
- flows of intra-EU mobility and specifically intra-EU labor mobility,
- scope of employment of EU nationals in other EU countries,
- overall unemployment and youth unemployment levels in countries lending talent
- macroeconomic growth indicators and projections.
The collection of benchmarks could include an indicator on unemployment rates among mobile EU citizens. The talent investment package could be included as a component in the next multi-year portfolio of the EU Commission. Or it could be created as a short term, stand-alone fund at the EU level, initially on a pilot basis.
The Urgency of Now
In the short term Europe should add to its “toolbox” for growing and retaining talent, as well as matching that talent with employment opportunities. Talent attracts talent, and its exodus can lead to rapid talent depletion.
In the longer-term the EU will have to develop a strategy for a global fair deal on talent. It will have to invest in growing talent both at home and abroad, as well as compete for mature talent globally.