Skills shortages in the European Union (EU) present a significant challenge to economic growth, competitiveness, and innovation. These shortages have occurred as a result of a misalignment between the skills possessed by the workforce and the skills demanded by employers.

Last week, the European Commission released their Action Plan on Skills Shortages which highlighted some of the key challenges facing the European Union together with proposed solutions.  These solutions are proffered against a backdrop of continued rapid technological changes requiring workers with up-to-date skills in areas such as digital literacy, data analysis, and advanced manufacturing. Additionally, demographic ageing and declining working-age populations in some regions are causing an exacerbation of skills shortages. Moreover, older workers exiting the labour market often possess valuable skills and experience that are not easily replaced by younger generations.

The strategic Action Plan aims to provide a comprehensive framework for addressing skills shortages within the EU, with targeted actions and initiatives designed to build a skilled and adaptable workforce capable of driving sustainable economic growth and competitiveness. In doing so it details the specific actions and initiatives tailored to the unique challenges faced by EU member states.

Rising Labour and Skills Shortages

The rising labour and skills shortages across all EU Member States pose significant challenges to economic growth and competitiveness. The European Commission’s strategic Action Plan identified 42 occupations as EU-wide shortage occupations highlights the breadth of the issue, indicating that specific skills are in high demand but in short supply across the entire EU.  Additionally, results from a Eurobarometer survey, highlighted that nearly two-thirds of small and medium-sized businesses (SMEs) reported difficulty in finding the talent they need, underscoring the widespread nature of the problem, affecting businesses of all sizes.

The plan also drew attention to the fact that approximately 70% of EU companies experience difficulties in recruiting ICT (Information and Communication Technology)  specialists. Demand for digital skills is expected to more than double by 2030. Less than 20% of ICT specialists and graduates are women.This underscores the critical need for action to address the growing demand for digital skills and the persistent gender imbalance in the ICT sector within the European Union.

Demographic Change in the European Union

The key drivers of skills shortages outlined in the plan, included demographic change, the green and digital transitions, poor working conditions, and geopolitical shifts, which underscore the multifaceted nature of the challenges facing the labour market within the European Union Addressing these drivers therefore requires a comprehensive approach that considers both immediate and long-term strategies Europe’s demographic landscape is undergoing a notable shift, characterised by several key trends:

• One of the most significant shifts is the ageing of Europe’s population. Advances in healthcare and improvements in living standards have led to longer life expectancies, resulting in a larger proportion of older adults. This demographic trend additionally has implications for pension systems, healthcare services, and the overall economy.
• Many European countries are experiencing declining birth rates, with fertility levels below the replacement rate of around 2.1 children per woman. Factors contributing to this trend include increased access to contraception, changing family structures, and socioeconomic factors such as urbanisation and women’s workforce participation.
• Migration plays a crucial role in shaping Europe’s demographic landscape. While some countries experience natural population decline due to low birth rates and ageing populations, migration can offset population losses and contribute to population growth in certain regions. Migration also brings cultural diversity and contributes to economic growth and labour market dynamics.
• Urbanisation is another prominent trend in Europe, with more people moving to cities in search of economic opportunities, better infrastructure, and improved quality of life. This trend has implications for housing, transportation, and environmental sustainability, as well as social and economic disparities between urban and rural areas.
• Europe’s population is becoming increasingly diverse due to migration and globalisation. This diversity brings opportunities for cultural exchange, innovation, and economic development but also poses challenges related to social cohesion, integration, and managing diversity in multicultural societies.
• There are significant regional disparities in demographic trends within Europe. While some regions experience population growth due to natural increase and migration, others face population decline and ageing due to low birth rates, outmigration, and economic stagnation. These disparities pose challenges for regional development, service provision, and social cohesion.
• The proportion of older adults relative to the working-age population, known as the age dependency ratio, is increasing in many European countries. This trend places strains on social welfare systems and public finances, as fewer working-age individuals support a growing population of retirees.

These shifts in Europe’s demographic landscape have wide-ranging implications for policymakers, businesses, and society as a whole. Addressing the challenges associated with population ageing, declining birth rates, and migration requires innovative solutions and proactive policies aimed at promoting sustainable development, social inclusion, and economic growth in the region.

Five Key Policy Areas for Action on EU Skills Shortages

The strategic Action Plan from the European Commission focused on five key policy areas for action.

1. Supporting the Activation of Underrepresented groups

Supporting the activation of underrepresented groups in the labour market, including women, older and younger people, and those with migrant backgrounds, is crucial for promoting inclusive economic growth and reducing inequalities in the European Union.

• Implement policies to promote gender equality in the workplace, such as equal pay for equal work, gender-neutral recruitment processes, and measures to address workplace discrimination and harassment.
• Invest in education and training programs tailored to the needs and interests of women, including STEM (Science, Technology, Engineering, and Mathematics) education and vocational training in non-traditional fields.
• Implement age-friendly workplace policies, including flexible working arrangements, phased retirement options, and opportunities for mentorship and knowledge transfer.
• Provide support for lifelong learning and skills development to help older workers adapt to changing job requirements and technological advancements.
• Expand access to education and vocational training programmes, including apprenticeships, internships, and on-the-job training opportunities.
• Foster more partnerships between educational institutions and businesses to ensure that curricula are aligned with industry needs and provide students with practical skills and work experience.
• Address barriers to employment faced by migrants, including language barriers, lack of recognition for foreign qualifications, and discrimination in the labour market.
• Provide language training and cultural orientation programmes to help migrants integrate into the workforce and society.
• Support initiatives that facilitate the recognition of foreign credentials and qualifications, such as credential evaluation services and bridging programs.

• Implement targeted support programmes to help inactive individuals re-enter the labour market, including vocational training, job placement services, and counselling.
• Address barriers to employment, such as lack of skills, transportation issues, childcare responsibilities, and health concerns.
• Provide incentives for employers to hire and retain individuals from underrepresented groups, including subsidies for training and wage subsidies for hiring disadvantaged workers.

1. Support for Skills Training and Education

Providing support for skills, training, and education is crucial for ensuring that individuals have the necessary qualifications and competencies to succeed in the European labour market.  Policymakers across Europe can support skills development through updating curricula, utilising skills intelligence tools, and leveraging EU funding opportunities.

• Work with educational institutions to update curricula to reflect current and future labour market needs, including emerging industries and technologies.
• Foster greater partnerships between educational institutions and businesses to co-develop curricula and provide students with real-world insights and experiences.

• Invest in Skills Intelligence Tools and labour market data analysis to identify current and future skills needs and trends.
• Use Skills Forecasting Models to anticipate demand for specific occupations and industries, allowing educational institutions to align their programmes accordingly.
• Utilise Inclusive Skills 1st Matching Platforms that connect job seekers with training opportunities tailored to their skills and interests and visualise in real time the Skills Supply and Demand across geographies and industries such as that provided by abodoo.

• Access EU funding programmes such as the European Social Fund (ESF) and the European Regional Development Fund (ERDF) to support skills development initiatives.
• Allocate Skills Funding for projects aimed at updating curricula, modernising vocational training programmes, and promoting lifelong learning opportunities.
• Support cross-border collaborations and partnerships between EU member states to exchange best practices and innovative approaches to skills development.
• Recognise the growing importance of Digital Skills in the modern economy and prioritise investments in digital literacy training and education such as the incredible education being delivered by EIT Digital
• Integrate Digital Skills Training into school curricula at all levels and provide opportunities for upskilling and reskilling for workers in all sectors.
• Support initiatives that aim to bridge the digital divide and ensure equal access to digital education and training opportunities for all segments of society.
• Recognise the need for skills development in the context of the green transition and invest in training programmes that equip workers with the skills needed for sustainable and environmentally friendly industries. EIT InnoEnergy are a leading example of this.
• Integrate sustainability principles and environmental education into educational curricula across disciplines to promote awareness and understanding of environmental issues.
• Leverage EU funding programmes such as the European Green Deal to support initiatives focused on green skills development and environmental education.

1. Improve Working Conditions

Improving working conditions is essential for ensuring the well-being of workers, enhancing productivity, and promoting social justice.

• Encourage the negotiation of collective agreements between employers and trade unions to establish fair wages, benefits, and working conditions.
• Provide incentives for employers and unions to engage in productive negotiations, such as tax incentives or subsidies for companies that adopt collective agreements.
• Include provisions in collective bargaining agreements to ensure access to training and skill development opportunities for workers.
• Collaborate with employers, trade unions, and educational institutions to develop training programs tailored to the needs of specific industries and occupations.
• Use collective bargaining mechanisms to negotiate fair wages that reflect workers’ skills, experience, and contributions to the organisation.
• Implement wage transparency measures to promote fairness and equity in pay practices and address gender and racial wage gaps.
• Negotiate collective agreements that include provisions for flexible working arrangements, such as telecommuting, flexible hours, and compressed workweeks.
• Promote initiatives that support employee well-being, such as wellness programmes, mental health support services, and initiatives to prevent workplace burnout.

1. Improve intra-EU mobility

Improving fair intra-EU mobility for workers and learners is essential for fostering economic integration, promoting skills development, and addressing labour market needs.

• Establish programmes and initiatives that facilitate the mobility of learners within the EU, such as exchange programmes (Erasmus), internships, and work-study arrangements.
• Provide financial support, including grants and scholarships, to learners who wish to undertake exchange programmes or work experience in another EU member state.
• Develop Digital Platforms and tools to streamline the process of posting workers across EU member states, including online portals for employers to register postings, submit required documentation, and comply with relevant regulations.
• Strengthen the mutual recognition of qualifications and skills acquired in different EU member states to facilitate mobility and ensure that individuals can effectively contribute to the labour market.
• Harmonise certification and accreditation processes across EU countries to simplify the recognition of qualifications obtained abroad and promote seamless mobility for workers and learners.
• Expand the use of digital credentials and certificates to provide secure and portable proof of qualifications and skills, making it easier for individuals to demonstrate their abilities to prospective employers.
• Address social and economic barriers that may hinder intra-EU mobility, such as language barriers, cultural differences, and disparities in living standards.
• Foster cooperation and exchange between EU member states, educational institutions, employers, and other stakeholders to share best practices, promote innovation, and address common challenges related to intra-EU mobility.
• Encourage greater collaboration on research and development projects, joint initiatives, and knowledge-sharing platforms to support mobility and skills development across borders.

1. Attract Talent from Outside the EU

Attracting talent from outside the EU is crucial for addressing skills shortages, promoting innovation, and driving economic growth.

• Foster partnerships between EU institutions, businesses, educational institutions, and governments in non-EU countries to identify and attract talented individuals.
• Establish talent exchange programmes, research collaborations, and joint initiatives that facilitate the movement of skilled workers, researchers, and entrepreneurs between the EU and partner countries.
• Create a centralised platform or database, to showcase job opportunities, research positions, and entrepreneurship programmes available to talented individuals from non-EU countries.
• Collaborate with EU member states, businesses, educational institutions, and other stakeholders to populate the EU Talent Pool with diverse and high-quality opportunities across various sectors and regions.
• Simplify and streamline visa and immigration procedures for skilled workers, researchers, entrepreneurs, and other talented individuals from non-EU countries.
• Highlight the benefits of living, working, and studying in the EU, including its vibrant cultural scene, high quality of life, world-class educational institutions, and diverse career opportunities.
• Invest in education, research, and innovation to create a dynamic and attractive environment for talented individuals from around the world.
• Develop initiatives to support skills development, entrepreneurship, and innovation among both EU and non-EU citizens, fostering collaboration and knowledge exchange across borders.
• Promote the EU as a hub for cutting-edge research, technology, and creativity, positioning the region as a magnet for talent and a global leader in innovation and entrepreneurship.

Key Takeaway

The key drivers of skills shortages outlined, including demographic change, the green and digital transitions, poor working conditions, and geopolitical shifts, underscore the multifaceted nature of the challenges facing the labour market within the European Union (EU). Addressing these drivers requires a comprehensive approach that considers both immediate and long-term strategies.

What’s evident is that a combination of grassroots and pan-European approaches, placing citizens at the core, will prevail. Consistent impact assessment is crucial to closing the Skills Gap, ensuring no one is left behind, and fostering resilient Talent Pipelines for Europe’s prosperous future.