Skills shortages in the EU: what difference with non-EU firms and how to adjust?

Available data show that a large share of EU employers report continuous difficulties in finding workers with the necessary skills. Skills shortages may limit firms’ productivity and hamper competitiveness. Additionally, problems in finding suitable workers may imply a great investment of resources in the hiring process, taking them away from other more productive activities. 

To address lack of staff in the EU, companies turn to short-term contracts, digital technologies or cessation of some activities. Providing further training to staff appears to bring results for large companies but fails to resolve issues for SMEs, according to JRC analysis.

Skills shortages in EU vs non-EU countries

Using data from a Eurobarometer survey that was conducted in the second half of 2023 and collected information on more than 19,350 companies, the first policy brief – Are EU Member States suffering from skill shortages more than other countries? – examines differences in the extent of skills shortages between firms within the EU and outside the EU (i.e., Canada, Iceland, Japan, Norway, North Macedonia, Switzerland, Türkiye, UK and US). The analysis is based on indicators capturing employer perceptions of skills shortages. 

The results indicate that EU firms perceive more difficulties in recruiting staff with adequate skills than comparable firms outside the EU. Specifically, the likelihood that a firm in the EU finds it very difficult to recruit staff with the right skills is estimated, on average, to be 40.6%, whereas the similar figure for a firm outside the EU is 29.2%.

EU firms are also found to be more likely to report problems in filling jobs for master’s or PhD degree holders and in hiring R&D experts than their non-EU counterparts. This finding is particularly relevant given the significant contribution of highly skilled individuals in enhancing innovation and economic growth. 

Tackling skills shortages: strategies and impact

To effectively tackle skills shortages, long-term strategies involving changes in industrial policies, active labour market programmes and training schemes are needed. Meanwhile, in the short-term, it is important to investigate the success of the strategies implemented by companies to adapt their operations in the face of the lack of qualified workforce. 

This issue is addressed in another policy brief, Adapting to skill shortages: what strategies to follow?, based on data from the above-mentioned Eurobarometer survey.

One possible strategy is to invest in the training of existing staff. Another one is hiring temporary workers or subcontract their work to other companies. In some sectors (e.g., manufacturing), employers may cope with skills shortages by increasingly relying on digital technologies. Finally, for some firms the lack of suitable workers may lead to the abandonment of specific product lines and/or the withdrawal from certain areas of activity.

The results show that the use of short-term employment contracts and/or subcontracting, increased reliance on digital technologies, and the abandonment of certain product lines and/or areas of activity are all measures that helped firms offset the negative impact of skills shortages on their turnover. While the training and upskilling of existing staff is found to be a successful strategy for large firms, this is not the case for small and medium-sized enterprises (SMEs). 

This would seem to suggest that SMEs face several challenges such as time constraints, or budget limitations that may render their investment and efforts in upskilling employees less effective than large firms. 

In an attempt to increase the amount and quality of training provided by SMEs, the author of the brief recommends additional measures to reduce the cost of training for SMEs, raise the awareness of SMEs’ managers about the importance and the benefits of re-skilling existing staff, and promote collaborative learning initiatives among SMEs. 

Finally, it is important to bear in mind that in March 2024 the European Commission presented an action plan to address skills shortages that involves working together with Member States and social partners. This action plan is part of the EU’s strategy to improve its competitiveness and promote its economic and social resilience. 

Related links

Are EU Member States suffering from skill shortages more than other countries? 

Adapting to skill shortages: What strategies to follow?