The document discusses labour market shortages that can occur even during times of unemployment. It provides statistics showing unemployment and job vacancy rates in several European countries. While counterintuitive, shortages can exist alongside unemployment due to lags in the business cycle and imbalances between specific skills/locations. Reasons for shortages include quantitative shortfalls, qualitative skill mismatches, and unattractive job conditions. Recent trends like technological change, globalization, and demographics may be exacerbating shortages. Potential policy solutions involve actions across education, employers, and governments to better align skills with needs and increase overall employment.

1. Labour market shortages in
times of unemployment
Joost Bollens
HIVA K.U.Leuven
Design Charles & Ray Eames - Hang it all © Vitra

2. Labour market shortages
• Some figures & facts
• Causes & explanations
• Some possible policy answers
22-11-2011 2

3. Preamble : why it matters
• Potentially very high cost
– Unemployment
• Productive capacity that remains idle
• Unemployment benefits, activation cost
• Effects on well-being
– Unfilled (or hard to fill) vacancies
• Less production
• Lower income for society (taxes, social security,…)
• Hampers innovation and growth
• Estimate : 7% of GDP
22-11-2011 3

4. Quarterly job vacancy rate (NL)
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
22-11-2011 4

5. Quarterly unemployment rate (NL)
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
22-11-2011 5

6. Unemployment & Vacancy rates (NL)
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
22-11-2011 6

7. Business cycle effects
• Vacancies : leading
• Unemployment : lagging
→ Sometimes both series will move in the same
direction
→ It is not necessarily “unnatural” to observe
increasing vacancy rates (≈± shortage) and
rising unemployment at the same time (also :
leading and lagging economic sectors)
22-11-2011 7

8. Unemployment & vacancy rates (Germany)
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
2010 2011
22-11-2011 8

9. Unemployment & vacancy rates (Sweden)
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
2009 2010 2011
22-11-2011 9

10. Unemployment & vacancy rates (Czech Rep.)
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
2008 2009 2010 2011
22-11-2011 10

11. Unemployment & vacancy rates (Spain)
25.0
20.0
15.0
10.0
5.0
0.0
2009 2010 2011
22-11-2011 11

12. Macro versus micro
• Until now : aggregate level (labour market)
• But also imbalances for specific subgroups:
– Occupations
– Qualification and/or skill
– Economic Sectors/Industries
– Regions
– Age groups
–…
22-11-2011 12

13. Hard-to-fill jobs
Top 10 jobs employers are having difficulty filling , Europe*, 2006-2011 Comparison
2006 2007 2008 2009 2010
Skilled trades workers 2 1 1 1 1
Technicians 10 2 2 3 3
Engineers 7 3 4 4 6
Sales representatives 1 4 6 2 2
Managers/executives 8 6
Drivers 5 5 3 5 4
Secretaries, personal assistants, administrative assistants & office support 8
9 6 9 staff
Production operators 3
Laborers 8 5 7
Mechanics 7 10
Source : Manpower Group, 2011 Talent Shortage Survey Result
22-11-2011 13

14. Hard-to-fill vacancies : reasons (1/2)
• “Quantitative” : Too few (or no) job seekers
available for the post (e.g. “engineers”, “nurses”)
• “Qualitative” : Enough applicants, but lacking
certain qualities
– Lacking required skills/qualification/experience :
“skill shortage”
– Other perceived qualitative inadequacies
(motivation, work attitude,…)
22-11-2011 14

15. Hard-to-fill vacancies : reasons (2/2)
• Nature of the job: employment conditions,
unattractive work (low wage, health, safety,
stress, working time, work-life balance,
training opportunities,…), bad reputation,…
• Overlapping
• Unrealistic requirements?
22-11-2011 15

16. Evolution? (for Flanders, Belgium)
Occupations with hard-to-fill vacancies according to reason (Vlaams
Gewest, data: VDAB)
8 11 8 8 11 10 10 9 10 14 14
22 20 21 18
25 20 22
51 47 46
57
70 69 70 72
65 66 64
41 42 44
35
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Quantitative Qualitative Employment conditions
22-11-2011 16

17. Is the problem getting worse?
• Recent evolutions that (possibly) explain why
currently some imbalances are becoming
more severe than what used to be the case
22-11-2011 17

18. Technological change
• 1990s : Skill biased technological change
– bias in favour of skilled workers
• Job polarization? Technology replaces labour
in routine tasks
(+) Well-paid skilled jobs (non-routine
cognitive skills)
(+) Low paid least skilled jobs (non-routine
manual skills) (e.g. cleaning)
(-) Middle jobs : routine man. & cog. skills
22-11-2011 18

19. Globalization
• Import low-skill-commodities from low wage
countries instead of producing them here:
relative demand for unskilled labour decreases
• More realistically : import commodities and
services for which place of production does not
matter: e.g. canned food vs fresh food, but also
software development vs nursing. Low skill?
High skill? Routine or non routine?
16 november 2011 Joost Bollens 19

20. Demography and other
• Demography
– Baby boomers are reaching retirement age
– Active population decreases, difficulties to
replace retired
• Short time work arrangements
– Temporary adjustment of working hours
instead of dismissals
– Labour hoarding more important in firms
with high skill intensity
– Effect on composition of unemployment?
22-11-2011 20

21. How to solve?
• Many parties involved, they have to act
together (employers, individual workers, social
partners, central and regional governments
and EU, PES, education & training sector,
industries/sectors,…).
• Sense of urgency? ↔ Piecemeal development
• No one-size-fits-all solution
– Quantitative vs. Qualitative vs. Employ. Conditions
– Specificity : sectoral, occupational level
16 november 2011 Joost Bollens 21

22. Education & training
– Dis/incentives for choice of specific study fields?
– Making curricula more responsive towards labour
market needs?
– Qualifications or skills?
– Recognition of non-formal/informal learning
– Promote standing of vocational education
– Not only at “the age of 20”. Make “LLL for all” a
reality (avoiding skill obsolence, but much more)
– Over-qualification discussion : too many university
graduates (…)
16 november 2011 Joost Bollens 22

23. Employers
• Change recruitment practice
– Use more channels
– Look for workers in other regions, or move plant?
– Migrant workers (but 1 & 2)
– …
• Change working conditions
• Change work organization
– Drop/reduce hiring standards and compensate with
training of new recruits
– Upskill existing employees
– Recur to overtime working (… )
– …
16 november 2011 Joost Bollens 23

24. PES & governments
• Invest in brokerage role
• Invest in effective ALMP’s
• Exploit shortage situation to upskill & promote
vulnerable groups
• Fight l.market discrimination by all (legal) means
• Promote mobility of individuals
• Invest in anticipating skill needs development
• Increase employment rate (e.g. (effective)
retirement age)
16 november 2011 Joost Bollens 24