The skills gap – an economic burden for the EU

An employee preoccupied at work. [Shutterstock]

Digitalisation, the transition towards a greener economy, demographic changes… have increased the skills gap. As workers and companies struggle to deal with it, the European economy is suffering. The EU is working to reduce it.

According to the Skills for jobs database by the Organisation for Economic Co-operation and Development (OECD), at least 80 million workers in Europe are mismatched in terms of qualifications.

This means workers lack the proper qualification for the job they have been hired to do, either because they are under-qualified or overqualified. According to the OECD, this is the case for 42% of workers in Greece, 41% in Portugal or 37% in Germany. 

The so-called ‘skills shortage’ has an economic impact both on workers and businesses.  

On the one hand, the workers who perform tasks they are not qualified for tend to earn up to 24% less than those properly qualified. In Italy, this results in salaries reduced by 4,000 euros per year; and around 8,000 in Germany. 

On the other hand, companies experience difficulties in hiring people for the openings they have. This results in long-time unfilled positions, which leads to delays in the production process. 

Moreover, if companies end up hiring under-qualified people for the job, they will have to spend money and time to train them, which also slows the adoption of new technologies. 

According to the 2019 annual economic survey by Eurochambres, a representative of the business communities in Europe, the lack of skilled workers is one of the biggest challenges faced by European companies.

All this has a wider economic impact. According to the OECD, countries with labour market imbalances also show lower productivity levels.

Addressing the Tripartite Social Summit in October last year, Eurochambres President Christoph Leitl warned: “We are sleep-walking into a highly damaging socio-economic crisis by failing to address growing skills mismatches across much of the EU.”

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Main findings 

The data the OCDE has collected over the last years showed that skills shortages are the most common among high-skilled occupations, particularly management positions, the health care, teaching or the information and communication technology sectors.

More than five out of 10 jobs that are hard-to-fill are found in high-skilled occupations. 

Finland, the Netherlands and Sweden are the EU nations most affected by this shortage among the countries the OCDE analysed. In the Finish case, high-skilled workers shortage goes up to more than 95%. 

However, almost 40% of the positions that are difficult to fill can be found in the so-called medium-skilled segment. Hungary, Romania and Bulgaria are among the countries with the highest shortage of medium skilled workers. 

Low-skilled jobs, on the contrary, are commonly easy to fill in European countries. 

This database also reflects the ongoing developments in the labour market as a result of the structural and demographic changes, but also of the automation that accompanies the digital revolution. 

“Data confirm that the shift towards a knowledge-based digital economy is already underway and that governments, workers and firms altogether face many challenges ahead,” the OCDE report highlighted.

More than seven out of 10 graduates in humanities and arts are employed in a job unrelated to their specialisation, and the same goes for graduates in science and agriculture, who struggle to find a job in their field. 

However, those who study social sciences, business, law and health-related degrees are more likely to find a job in their field of study. 

“Strengthening career guidance and building robust information systems for families and students can help reduce the extent of these mismatches, supporting individuals in their education choices,” the OECD recommended. 

The solution lies not only in adapting education but in designing adult learning programs to enable workers to continue re-skilling.

The European response 

In 2016, the European Commission launched a New Skills Agenda for Europe. However, education and training remain a national competence. 

The Commission considered that skills “are a pull factor for investment” and a “catalyst” for job creation and growth. “They are key to social cohesion,” the EU executive argued.

The actions in the agenda aimed mainly to provide better information on the current state of the labour market, guidance for member states on how to improve education systems and enhance collaboration between stakeholders – trade unions, companies and education institutions – to find solutions to the problem. 

The Commission also intended to ease the integration of skilled migrants in the European labour market, something highly recommended by the OECD, which has also been requested by businesses.

Though many of the actions in the agenda are yet to be fully developed, the EU has been supporting the improvement of workers’ skills through the Europe 2020 Agenda, the use of structural funds or the Erasmus+ programme as well, and plans to keep doing so in the future.

The European Pillar of Social Rights, adopted in 2017, recognises the right to quality, inclusive and life-long education and training and might be another tool to close the skills gap if this is translated into legislation.

“The EU should ensure training rights and opportunities for all workers,” the European Trade Union Confederation (ETUC) said.

This right, they insist, “should go hand in hand with the establishment of a “right to paid educational leave,” as workers should be equipped to remain in employment while continued digitisation, automation, and artificial intelligence change their everyday work.

“The investment in human capital is not that sexy as the investment into physical capital. We should change this,” Vice-President for Jobs, Growth, Investment & Competitiveness Jyrki Katainen said in a recent interview with EURACTIV. 

However, EU actions alone will not be enough. The Commission, therefore, called on national, regional and local authorities, as well as businesses, employers and the civil society to work to provide their own response to the challenges ahead.

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