Home Open Access News Finance Tackling skills shortages & inactivity head-on to deliver a resilient labour market

Tackling skills shortages & inactivity head-on to deliver a resilient labour market

April 6, 2023

Mariya Mincheva from the European Economic and Social Committee, states the case for tackling skills shortages and inactivity head-on to deliver a resilient labour market

The EU has been hit by several consecutive crises since 2020. Starting with COVID-19, lockdowns and supply chain disruptions; the reopening of the economy in 2021 with soaring energy prices and rising inflation; and finally, the war in Ukraine, which provoked a humanitarian emergency with the exodus of millions of people (mainly women with children) fleeing the war that further deepened the economic challenges our societies have to cope with.

Unlike the crisis in 2008, the EU response this time was different. With the SURE instrument and the Recovery and Resilience Facility (RRF), the EU economy was given strong support, allowing it to keep the unemployment rate much lower compared to 2009-2015. (1) The RRF will channel more than EUR 720 billion into Europe’s recovery over the next six years, supporting investments for green and digital transformation; smart, sustainable and inclusive growth; and health, economic, institutional and social resilience, while also supporting policies for the future generation, children and youth.

The geopolitical situation is influencing the demand outlook

However, economic experts differ in their views of how these measures will impact the economy. Currently, the continuing uncertainty surrounding the geopolitical situation is influencing the demand outlook. It is expected to affect companies’ investment decisions and job security and delay the delivery of investment plans in both the private and public sectors.

In its opinion (2) on the Proposal for a Council decision on guidelines for the employment policies of the Member States, (3) adopted on 21 September 2022, the EESC expresses broad support for the proposed guidelines as appropriate and addressing the most urgent issues on the labour market.

The EESC stresses that in a situation of high inflation and with a recession still very likely, the need to ensure a competitive base for investments is even greater. Member States should constantly strive to ensure a business environment that fosters entrepreneurship, contributes to cutting red tape and works towards a truly integrated single market. This is even more relevant with 2023 marking the 30th anniversary of the single market. It is important to mention here the role of the national social partners in the design and implementation of employment, social and economic reforms and policies, as they have proved to be constructive partners to governments in coping with crises. This is equally important when it comes to implementing the European Pillar of Social Rights and the National Recovery and Resilience Plans.

Labour shortages are on the rise in all Member States

Despite the low level of unemployment, labour shortages are again on the rise across the various sectors and in all Member States. The lack of access to a skilled workforce increasingly represents a major obstacle to business operations and growth. We need effective measures to tackle the challenge of labour and skills shortages. Besides implementing active labour market policies to involve inactive and unemployed people, the potential offered by, for example, female employment and female entrepreneurship, as well as legal migration, should be fully harnessed. Labour mobility within the EU as well as legal labour migration should be encouraged. In this respect, the initiative of designating 2023 the “European Year of Skills is an important opportunity.

Also, to reduce the huge level of economically inactive people across the EU (35.9% EU average in 2021, according to Eurostat), (4) efforts are needed to bring those further from the labour market into employment. The diverse forms of work, work flexibility and telework, if duly regulated through legislation or collective bargaining practices at the national level, could be important factors contributing to enabling work for people from vulnerable groups. Public employment service capacity should be enhanced through the digitalisation of their services and by fostering cooperation with private employment services and other relevant labour market players.

Member States should be encouraged to facilitate an enabling framework to employ people

Targeted support and tailored approaches are especially important in the case of long-term unemployed and/or inactive people as it increases their chance of an effective return/entering the labour market and is an essential factor for job retention. Member States, especially those identified as low performers in the Social Scoreboard, should be encouraged, through the consistent use of EU resources, to facilitate an enabling framework for employers to employ people with disabilities or activate self-employment opportunities, whenever possible.

Reducing in-work poverty remains a key challenge across the EU. The EESC maintains that decent work remains the best tool in this respect, along with measures negotiated by the social partners. There is a broad understanding that minimum wages constitute a valuable instrument to address in-work poverty. However, on their own, they are not enough, and the combined action of different policy instruments is necessary. Especially when inflation needs to be calmed down, governments need to assess the increase of minimum wages very carefully to avoid a wage-price spiral.

An important principle here is that benefits and income support measures should be conditional and temporary in order to accompany unemployed people or low earners to new employment opportunities. They should be designed in a way that stimulates people to (re-)join the labour market if their physical/mental/social conditions allow for it. What we also need is to explore different policy options that can serve a valuable purpose in making work pay – e.g. in-work benefits. (5)