6. Conclusions
Policies addressing labour shortages aim to increase labour supply in certain skills groups and areas of the labour market, or to improve the matching between labour supply and demand. Labour supply can be increased in different (complementary) ways: reducing taxes on labour income or other tax-benefit reforms; removing barriers to work, for example by facilitating access to childcare facilities; ensuring an active inclusion approach that embeds conditions and effective support for benefit recipients who can work to re-integrate into the labour market; and making the EU more attractive for migrants in some specific skills groups and facilitating their temporary or permanent migration to the Union. Policies supporting efficient matching of labour supply and demand are crucial to addressing labour shortages and thus can have a significant positive impact on the economy. Developing skills intelligence to understand current and future skills needs, as well as access to effective PES, can also play an important role. Complementing these efforts with policies to improve working conditions can further mitigate shortages, particularly in occupations and sectors experiencing considerable job strain. This chapter presented several policies that could help to address labour shortages, although the various policy tools cannot be ranked in terms of their general effectiveness. In addition, the same objectives can often be achieved using a combination of policy measures.
Targeted tax reforms can effectively strengthen work incentives for some population groups. This increases their labour supply and can alleviate labour shortages in some sectors and occupations. In general, targeted tax reforms have a significantly larger impact on labour supply than across-the-board PIT cuts and as such promote active inclusion as also highlighted in the 2023 Council Recommendation on adequate minimum income. Moving from joint family to individual taxation could generate a significant increase in aggregate participation rates, especially among secondary earners ‒ predominantly women ‒ thus helping to increasing their participation.
Labour force participation can be significantly increased among some population groups by reducing barriers to work. For example, expanding ECEC access and making childcare more affordable for households could help to increase the ECEC participation levels towards the new 2030 ECEC participation target of 45%, as well as facilitating the labour market participation of mothers of young children. Simulations show that an increase in formal childcare provision to the targeted 45% participation rate would significantly increase the labour force participation of mothers in selected Member States.
Targeted labour migration policy is another potential way to reduce labour shortages in specific skills groups. Attracting third-country nationals with the right skills and facilitating labour matching between migrants and employers could add significant value to the workforce in the EU, helping to support economic activity and increase GDP. The population increase would also lead to more demand for goods, further boosting the economy. Smooth integration of these workers into the labour market and society requires rapid recognition of their qualifications attained abroad, as well as tailored support measures, such as language courses and upskilling or reskilling opportunities.
Better alignment of skills demand and supply through vocational training of jobseekers or people at risk of unemployment can also help to address labour and skills shortages. An evaluation of a voucher-based training programme in Lithuania found that involving employers in the choice of training available to individuals, combined with a commitment to hire people on completion of their training, can create favourable employment outcomes and help to address local skills shortages. An evaluation of two labour market programmes in Finland found that forecasting and anticipation of local development within the PES system can help to ensure that provision of training is in line with skills needs.
Social partners are key actors in tackling labour and skills shortages. They provide tailored training, improve working conditions and labour market relevance of adult learning opportunities, and collaborate with PES. Across the EU, social partners develop activities to address skills needs and labour shortages, including in key sectors such as healthcare, social services, and education. Strengthening the role of social partners in decision-making remains a common objective of the Member States, as well as a key principle of the European Pillar of Social Rights.
Overall, skills will be crucial to ensure EU competitiveness, support resilience and the green and digital transitions, and secure the future of the European welfare model. The 2023 European Year of Skills puts skills at the core of the policy agenda. The Pact for Skills and the Blueprint Skills Alliances, adopted under the European Skills Agenda, are important measures to understand and foster the supply of skills needed in key sectors, including the increasing demand for digital and green skills under the twin transition. To pave the way for successful and fair transition, Member States endorsed the EU 2030 and 2030 Digital Compass targets, according to which at least 60% of adults should participate in training and 80% should have at least basic digital skills. The Recommendations on individual learning accounts, and VET will also help people to update their skillsets. The Recommendation on effective active support to employment provides broader policy guidance on managing labour market transitions. Finally, there are measures that address other root causes of labour shortages, most notably the Directive on Adequate Minimum Wages, which has the potential to improve pay conditions in some shortage occupations.