Skill Shortages: Olga Strietska-Ilina

Skill shortages
Olga Strietska-Ilina
In:
CEDEFOP (ed.)
Modernising vocational education and training
Fourth report on vocational education and training research in Europe: background report
Volume 1.
Luxembourg: Office for Official Publications of the European Communities, 2008
(Cedefop Reference series)
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Skill shortages
Olga Strietska-Ilina
Abstract
This contribution reviews selected literature on skill shortages mostly at European level and
partly in Member States, focusing on existing concepts related to skill shortages and on
methods of measurement. It attempts to identify main skills and occupations in which
shortages are reported, putting together results of available statistics, irregular surveys and
analyses mostly at European level and as far as possible in Member States.
Skill shortages have adverse effects at company, regional, national and eventually European
levels. They mostly affect technology – and knowledge –intensive industries with the highest
potential for growth and positive spin-off on the whole economy and employment.
The following main reasons for skill shortages are identified: labour-market tightness – small
labour reserve; economic, social and institutional conditions; skills mismatch; and deficiency
in recruitment practices, work organisation, wage policies and working conditions.
The analysis shows that high-skill intensive as well as elementary occupations are expected in
shortage but increasing demand for higher skilled people is expected across all occupations
due to technological change and innovation. According to various reports from individual
Member States, the current shortage occupations are: healthcare professions, IT specialists,
managers, marketing specialists, financial analysts, scientists, engineers, teachers,
construction workers, hotel and catering professions, truck drivers, childminders, sales
representatives, cleaners, etc. Member States report labour shortages in similar occupations
and the projections identify analogous shortages in terms of level of education and
occupations throughout the EU (European Union). It is, therefore, important to recognise the
skill/labour shortage as a European-wide problem which needs European-level policy
measures.
The specific skills gaps are also similar across countries and sectors. Apart from technical
skills which are occupation and industry specific, and apart from ICT skills and foreign
languages, companies require social and personal skills and often rate them higher than
technical and theoretical knowledge and formal qualifications. These skills are: team working,
interpersonal communication, initiative, creativity, entrepreneurship, leadership and
management, presentation skills, ability to learn, etc. Additionally the new discourse on the
changing nature of skills required on the labour market reveals that personal characteristics
2
appear most frequently, such as flexibility, motivation, loyalty, commitment, self-presentation
(aesthetic labour).
The contribution concludes with several suggestions to improve the knowledge base on skill
shortages in Europe, such as improvement of vacancy statistics, introduction of comparable
enterprise surveys at national level or alternatively conducting a European-level survey on
skill deficiencies and recruitment difficulties among companies, and further support to the
project of developing a pan-European forecasting of skill needs.
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Table of contents
1. Introduction......................................................................................................................... 7
1.1. Rationale and objectives of the study....................................................................... 7
1.2. Delimiting the scope of the contribution.................................................................. 8
1.3. Operational terminology and concepts..................................................................... 8
2. Approaches and methods of measuring skill shortages.................................................... 10
2.1. EU-level measurement – state of art ...................................................................... 10
2.2. Approaches and methods used in Member States .................................................. 13
2.3. Sectoral studies in the EU ...................................................................................... 17
3. General employment trends.............................................................................................. 19
4. Main reasons for skill shortages ....................................................................................... 27
5. Skill shortage and technological change and innovation.................................................. 38
6. Which skills? The changing meaning of skill................................................................... 43
7. Labour shortage ................................................................................................................ 45
8. Consequences of – and ways to tackle – skill shortages .................................................. 49
8.1. Adverse effects of skill shortages........................................................................... 49
8.2. Measures to tackle skill shortages.......................................................................... 50
9. Conclusions and recommendations for policy and future research .................................. 54
9.1. The damaging effects of skill shortages are multiplying from company
through national to European level ........................................................................ 54
9.2. Reasons for skill shortages..................................................................................... 54
9.3. Expected shortages in high-skill intensive and elementary occupations but
demand for highly skilled people expected to increase across occupations
due to technological change and innovation .......................................................... 55
9.4. Recognise skill shortages as a European-wide problem ........................................ 55
9.5. European problems need European solutions ........................................................ 55
9.6. Recognition that not all skill-shortage problems can be solved by the
supply of skills ....................................................................................................... 56
9.7. Changing nature of the demand for skills and further research into the
question and its consequences for education and training ..................................... 56
9.8. Improve the knowledge base on skill shortages in Europe: comparable
vacancy statistics; comparable enterprise surveys; pan-European forecasting...... 57
Annex ....................................................................................................................................... 58
List of abbreviations................................................................................................................. 62
Bibliography............................................................................................................................. 63
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List of tables, figures and boxes
Tables
Table 1: Employment rate in EU-25 by the level of educational attainment,
2000-05 ........................................................................................................... 19
Table 2: Summary of findings: skill shortages in Member States EEO review
(2001).............................................................................................................. 28
Table 1A: GDP growth rate ............................................................................................. 57
Table 2A: Employment growth ....................................................................................... 58
Table 3A: Unemployment rates of the total population by level of education
1994-2005 EU-25 by country ......................................................................... 59
Figures
Figure 1: Unemployment rate by level of educational attainment between 2000
and 2005 in the EU-25 .................................................................................... 19
Figure 2: Employment change by occupation in EU-25 in 2000-05 (000) .................... 20
Figure 3: Unemployment change by occupation of previous employment in EU-
25 and EU-15 in 2000-05 (000)...................................................................... 21
Figure 4: Employment change by sector (NACE) in EU-25 in 2000-05 (000) ............. 22
Figure 5: Employment by occupation and highest level of education attained
(change 2000-05 in 000) in EU-25 ................................................................. 23
Figure 6: Comparison of the percentage of the population aged 20-24 and 25-64
having completed at least upper secondary education in EU-25, EU-15
and EU-10 between 1999-2005 ...................................................................... 24
Figure 7: Tertiary education graduates (in 000) in EU-25, EU-15 and EU-10 in
1999-2004 ....................................................................................................... 24
Figure 8: Employment by age group and economic activity ......................................... 44
Figure 9: Employment by age group and occupation (%) ............................................. 45
Boxes
Box 1: Employers skills surveys in the UK................................................................ 14
Box 2: Forecasting model in the Netherlands ............................................................ 15
Box 3: Elaboration of the system of identification of skill shortages in the
Czech Republic: a complex approach............................................................. 17
Box 4: An example from Australia............................................................................. 40
Box 5: A survey on changes in the workplace among Irish employees..................... 41
5
Box 6: Research on initial experiences of young people at work .............................. 43
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1. Introduction
1.1. Rationale and objectives of the study

The European summit in Lisbon set an ambitious target ‘to become the most competitive and
dynamic knowledge-based economy in the world capable of sustainable economic growth
with more and better jobs and greater social cohesion’. After a mid-term evaluation of
implementation of the Lisbon strategy, the agenda was refocused on growth and jobs. The
renewed strategy puts emphasis on the development of productivity and competitiveness
based on knowledge economy, research, innovation and development. A more dynamic
European economy is expected to create jobs and secure high employment rates. Skill
shortages and skill mismatches on the European labour market may appear as serious
obstacles to implementing the agenda.
Research in Member States confirms that skill shortages have adverse consequences at
various levels. At firm level skill shortages may result in higher wages, higher recruitment
costs, lower productivity, lower quality, increased investments in current personnel, market
losses, greater workload and pressure on current personnel, etc. Skill shortages may result in
lower company competitiveness and, with a higher concentration at regional and greater
spread at national level, could eventually deteriorate the overall competitiveness and prevent
growth of the regional and/or national economy. Skill shortages prevent investments in and
development of knowledge-intensive and innovative industries, for instance, economic sectors
which have been recognised as a driving force of growth. This may eventually cause
withdrawal to new markets outside the EU.
The challenge for experts and policy-makers, therefore, appears to identify geographical
areas, sectors and occupations where skill shortages are most acute and most likely to have a
significant negative long-term impact on the European economy, so that policies to combat
and prevent skill shortages can be designed and addressed effectively.
In the framework agreement of the European social partners on actions for the lifelong
development of competences and qualification (2002) the identification and anticipation of
competences and qualifications demanded on the labour market is considered the first
priority. In the integrated guidelines for growth and jobs for 2005-08, the European
Commission introduced a guideline ‘improve matching of labour market needs’ through
several measures including better anticipation of skill needs, and labour-market shortages and
bottlenecks (Integrated guideline No 20; European Commission, 2005a), and a guideline
‘adapt education and training systems in response to new competence requirements’ through
better identification of occupational needs and anticipation of future skill requirements
(Integrated guideline No 24; European Commission, 2005a).
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1.2. Delimiting the scope of the contribution
The subject of skill shortages is rather broad and is covered by vast academic and policy-
applied research literature, especially at national level. The wealth of literature in some
Member States appears conceptually and methodologically useful but not helpful for shedding
light on the skill-shortage situation at European level. National-level data and research
conclusions are not genuinely comparable. At the same time only limited research results are
available at European level. These are mostly performed at sectoral level and stay beyond the
primary angle of this contribution.
It is, therefore, necessary to delimit the scope of this paper. It reviews selected literature on
skill shortages mostly at European level and partly in Member States, focusing on existing
concepts related to skill shortages and on methods of measurement. The contribution attempts
to identify main skills and occupations in which shortages are reported, putting together
results of available statistics, irregular surveys and analyses mostly at European level and as
far as possible in Member States.
1.3. Operational terminology and concepts

The lack of uniformity of definition has been a major problem in research of skill shortages.
The term ‘skill shortage’ is used very loosely in Anglo-Saxon and European literature.
Sometimes ‘recruitment difficulties’ imply all forms of skills problems; in others, ‘skill
shortages’ is used as the overarching phrase. In the present contribution we shall be operating
with several terms: skill shortages, labour shortages, skill gaps, recruitment difficulties,
adopting the following definitions:
‘Skill shortage’ is a genuine lack of adequately skilled individuals available in the accessible
labour market with the type of skill being sought and which leads to a difficulty in
recruitment (NSTF, 1998). A skill shortage characterises the situation where employers are
unable to recruit staff with the skills they are looking for at the going rate of pay (EEO,
2001b). This could result from basic lack of people (when unemployment levels are very
low), significant geographical imbalances in supply (sufficient skilled people in the labour
market but not easily accessible to available jobs), or a genuine shortfall in the number of
appropriately skilled individuals – either at new entrant level, or for higher level skilled
occupations (NSTF, 1998). The term, therefore, refers to both quantitative and qualitative
shortages of skills. The term ‘skill shortage’ will be used throughout this report as an
overarching concept, which substitutes more specific terminological expressions provided
hereinafter.
According to the European Employment Observatory (EEO, 2001b) the term ‘labour
shortage’ stands to denote the situation of an overall shortage of labour at national level
across sectoral and occupational levels (although often the labour shortage is sector and
occupation related), often used to refer to the quantitative lack of labour.
8
‘Shortage occupations’ define the situation of the shortage of labour with types and levels of
qualifications suitable – as perceived by employers – for specific occupations. The term
however is often used to describe the situation on the labour market in quantitative terms,
where ‘shortage occupations’ and ‘surplus occupations’ are identified as the result of a
macroeconomic forecast.
‘Skills gaps’ is used to describe the qualitative mismatch between the supply or availability of
human resources and the requirements of the labour market. ‘Skills gaps’ exist where
employers feel that their existing workforce have inadequate skill types/levels to meet their
business objectives; or where new entrants to the labour market are apparently trained and
qualified for occupations but still lack a variety of the skills required (NSTF, 1998).
‘Recruitment difficulties’ is an umbrella term incorporating all forms of employer recruitment

problems, not specifying the reason. Such problems can be caused by skill shortage but also
by poor recruitment practices, poor perceived image of the industry, low remuneration, or
poor terms and conditions of employment, and can occur even where there are sufficient
skilled individuals available and accessible for work. Terminologically we should distinguish
‘difficult-to-fill vacancies’ and ‘difficult-to-fill occupations’, where the latter manifest a
higher concentration of recruitment difficulties in certain occupations either nationwide or
geographically-bound and may be seen as symptoms of skill shortages.
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2. Approaches and methods of measuring skill
shortages
2.1. EU-level measurement – state of art

A major problem in identifying labour shortages and skill gaps in Europe is the absence of
detailed and reliable statistics, with sufficiently long-time series, on vacancies, unfilled
vacancies, the length of time to fill vacancies and specific qualitative requirements for the
pursued workforce. While public employment services (PES) in some Member States have
some or all of the necessary data, many Member States face the problem of incomprehensive
coverage and lack of reliability of vacancies reported by PES. In spite of the obligation for
employers to register vacancies in PES databases in many countries, penalties for
disrespecting the requirement are rare, and thus vacancy statistics cover only 15-60 % of all
vacancies according to various estimates (EEO, 2001a; EEO, 2001b, Strietska-Ilina, 2003).
At the European level there is an attempt to improve and analyse PES vacancy statistics with
the help of European network of PES and as a result of collaboration between national PES
and the Directorate General for Employment, Social Affairs and Equal Opportunities of the
European Commission (Ricciardi, 2004) ( 1 ). The network and its expert group attempt to
establish the European PES vacancy monitor (EPVM) to derive supplementary information
on sectors with recruitment difficulties. The monitor, for instance, uses a stock-flow indicator
of processing time (SFIPT) to interpret the average processing time of vacancies. Sectors with
high SFIPT rates indicate potential recruitment difficulties. The monitor works on ISCO 3-
digit level, and although not all countries are involved and time series are not long enough,
and regardless of many technical problems, work is in progress. There is a vivid interest
among national PES to continue work on the monitor, which has been explained by a strong
feeling of recruitment difficulties in certain sectors and occupations. The current database
includes all quarterly data on vacancy notification from most Member States and it allows to
do time trends on notifications by occupation and sector. The network appointed
representatives to explore ways in which the usefulness of the database as a means of
identifying skill shortages can be improved ( 2 ). This work at European level will hopefully
bring some useful results in the near future after they are discussed with national PES
representatives.
( 1) See also the web page of the European employment strategy (European Commission Directorate General
for Employment and Social Affairs) on PES:
http:\\ec.europa.eu\employment_social\employment_strategy\pub_empl_services_en.htm [cited
14.3.2007].
( 2) Information from John McGrath, FÁS – the National Employment and Training Authority in Ireland,
member of the PES European network.
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Another EU-level source on vacancy statistics is Eurostat’s vacancy survey. The data are
obtained from representative stratified sample surveys of businesses in participating Member
States. The quarterly collection started in 2001 but only in a few Member States; for most
countries only data from 2003 are available and to date not all Member States provide all data
in a comparable format. The Eurostat vacancy survey includes several indicators: number of
job vacancies, number of occupied jobs, job vacancy rate, job vacancy rate quarter on quarter
change, job vacancy rate year on year change by the industrial classification of economic
activities (NACE). Especially the job vacancy rate ( 3 ) (and its dynamic indicators when
sufficiently long time series are available) would be a very useful tool to measure the demand
for workers by sectors. Unfortunately at the moment only partial and provisional data are
available at EU level and none are available by sector. The job vacancy rate using provisional
data for EU-25 is 1.9 % (2006 second quarter) which means less than two job openings for
every 100 jobs filled, with some variations across Member States showing above-average
rates in Germany and the Netherlands (3 %), Estonia (2.9 %), Finland (2.7 %) and the UK
(2.3 %) ( 4 ). Too short time series make it impossible to produce the Beveridge curve – the
tool to measure efficiency of the labour market ( 5 ).
There are many other gaps in general data on employment, unemployment, earnings and other
fields in standard EU-level statistics, which could be helpful as contextual and additional
indicators to pinpoint the skill shortage situation in Europe. For instance, employment rate
statistics by ISCO and education level, dynamic of earnings by NACE and in skill-intensive
NACE, where only partial Member States level data are available, dynamic of earnings by
ISCO, etc.
There is no major European-level enterprise survey on skill shortages and recruitment

practices which could provide comparable results across countries and shed light on the
situation from the employers’ point of view. Many Member States use such surveys at
( 3) The job vacancy rate measures the proportion of total job vacancies to the number of occupied posts plus
number of job vacancies multiplied by 100.
( 4) The above-average vacancy rate does not necessarily indicate labour-market tightness/labour shortages. It
may result also from inefficiency of PES in matching the demand for workers and available jobseekers,
or mismatch in the demand and supply of labour (structural unemployment). In composition with high
employment rates and low unemployment (limited pool of jobseekers) a higher vacancy rate may signal
labour-market tightness. This may be the case in the Netherlands, Finland and the UK. The data however
are provisional and not very instructive since no information is available on specific sectors and
occupations of potential tightness.
( 5) The Beveridge curve is a graphical representation of the relation between unemployment and the job
vacancy rate and can indicate easy match or severe mismatch of workers to employment (OECD, 2003).
The lack of reliable data has been long a problem for producing the curve for EU and Member States.
One attempt was the OECD Employment Outlook 2003, relying on individual data provided by national
PES, which were not entirely robust and comparable. The analysis suggested the growing mismatch of
vacancies and those looking for work in Europe as a whole and in particular in Austria, Belgium,
Germany and Norway, whereas the curve indicated an improved matching situation in the Netherlands
(see explanations about the Beveridge curve and related graphs in OECD, 2003, p. 31-35).
11
national level (Section 2.2) and it may be useful for the future to consider a possibility of
either harmonising these efforts or establishing a regular EU enterprise survey which would
help to identify skill gaps, shortage occupations and recruitment difficulties, and ways to
overcome those in Europe. The latter can be done using an existing EU-level regular business
survey or using positive practice of ad hoc surveys.
For instance, the European Commission conducted labour-market surveys of employers and
employees as part of its joint harmonised programme of business and consumer surveys. In
1999 the Directorate General for Economic and Financial Affairs commissioned a special ad
hoc survey to gather the views of employers and employees on actual and expected labour-
market evolutions and assessment of the work situation in manufacturing, retail trade and
service sectors among old Member States (Boswell et al., 2004). A similar ad hoc survey was
conducted in 2004 in EU-25 (Buscher et al., 2005). Among others the survey asked about
plans for business expansion/reduction in the coming one to two years and related reasons
including the impact of technological change on demand. The survey gathered information on
the skills composition of employment in given sectors (however non-comparable between
1999 and 2004 surveys). This type of survey may, therefore, be useful for providing a more
detailed breakdown of what sorts of skills are in demand, and how this is affected by
technological change. Such data may also help inform models for projecting future demand or
extrapolation (Boswell et al., 2004, Buscher et al., 2005).
There is no tool at European level to measure future shortages (and surpluses) occupations
and types/levels of education, which could be done with the help of econometric forecasting
by occupation and education. At European level forecasting has not been developed yet. In
autumn 2005 a feasibility workshop on establishing European skill needs forecasting was
organised by Cedefop’s early identification of skill needs network (Skillsnet). Participants
unanimously supported the idea of developing European level forecasts, concentrating on the
demand side and using available standardised European data. Such an approach will only
bring limited data in the short run but will help identify data gaps and methodological
problems. Due to its focus on the demand side, information on shortage and surplus
occupations/education categories will not be available as it can be measured only against
supply. However, in the longer term the project intends to include the supply side and actively
involve Member States in filling data gaps and in harmonising forecasting systems which
differ substantially from one country to another and, therefore, are not comparable now. This
project will, therefore, hopefully bring some comparable data on future skill shortages at
European level in the long term.
Several EU-level reports produced employment projections and depicted possible areas of
tension from the point of view of demographic changes that Europe would witness in the next
10 to 15 years. Effects of the ageing society on the labour force in the knowledge-based
economy and possible labour shortages as a consequence was the angle of research conducted
by the Institute for Prospective Technological Studies as a part of the foresight activities
(Coomans, 2005). The study estimated employment growth based on current employment
rates by levels of educational attainment and produced demographic projections and
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projections of labour supply. Another example of the supply-side projection was analysis of
the prospective consequences for employment which derive from demographic trends across
the EU (Alphametrics, 2005) based on analysis of changes in the structure of employment in
its sectoral and occupational composition and associated skill requirements. These trends
were confronted with the projected labour supply assuming certain GDP and productivity
growth rates, and finally projecting labour-market imbalances.
An attempt to evaluate the situation of skill shortages across old Member States was made by
the EEO, which gathered country reports in 2001. The information provided by Member
States was very useful, although it differed greatly in its character and structure and there was
no intention to compare results. Some information from the analysis is provided below in the
next section.
2.2. Approaches and methods used in Member States

Given the aforementioned lack of reliable vacancy statistics most Member States use
alternative quantitative and qualitative methods and sources for identifying skill and labour
shortages. Here we provide a short review of methods and approaches.
Employer surveys, which ask questions on the difficulties experienced in finding suitable
personnel, are a widely used source of information on skill shortages in most Member States.
Although questionnaires tend to include similar questions across Member States, their
structures, samples and methods of data collection are very different and thus results are not
comparable. The surveys are mostly used to produce an analysis of short-term skill shortages
at national, regional, local and/or sectoral levels. However, evidence from such surveys is
often criticised for not being representative and for producing a static picture. Both problems
however can be solved by conducting surveys with a large and representative sample at
regular intervals. The reliability of information gathered through surveys is very questionable
when the data gathered are evaluated in quantitative terms because they present the situation
not entirely objectively but as perceived by employers and thus usually arrive at inflated
figures ( 6 ). This causes major problems for interpreting the results of such surveys.
Nevertheless, they can often yield some interesting information on employer perceptions of
the skills of potential recruits as well as of any existing skills deficits within their
organisation. The greatest value of such surveys is their qualitative approach in identifying
skill gaps – information which can never be discovered by quantitative analysis or forecasting
which uses occupations as the proxy for skills. The most active in using employers’ surveys is
the UK, which applies comparable questionnaires for skill audits commissioned regularly by
( 6) There is also evidence from case studies that skill problems are under-reported by respondents – not all
skill shortcomings are necessarily recognised as such by managers in companies (Mason, 2004, p. 5). It
is, therefore, difficult to conclude to what extent and on what aspects reporting from companies is either
exaggerated or undervalued.
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the skills task force covering large employer samples. Data analysis is performed in
combination with other available statistics (Box 1).
Box 1: Employers skills surveys in the UK
The first report of the national skills task force (NSTF) was published in 1998. It gave
important definitions and framework for identification of skill shortages (NSTF, 1998). A
regular employer skills survey (ESS) was introduced in 1999, and examined the nature,
extent, causes and implications of skills deficits in the UK. The main objective was to provide
policy advice on the priority skill areas to which resources should be allocated. The
methodology was based on a telephone survey of 23 000 employers and a face-to-face survey
of 4 000 employers, case studies, analysis of employment projections by occupation through
2009, estimates of rates of return on vocational qualifications and basic skills, and
comparisons between Germany, France and the UK (NSTF, 1999). The later 2003 and 2004
surveys were commissioned by the Learning and Skills Council in partnership with Sector
Skills Development Agency and the Department for Education and Skills. Both used
representative sample surveys among employers in England (72 000 interviews in 2003 and
27 000 interviews in 2004). The 2003 survey was the largest and followed the ESS of 1999,
2001 and 2002. An earlier longer-time series on skill needs in Britain (1990-98) in
combination with ESS provides valuable time-series data on employers’ recruitment
difficulties, skill deficiencies and workforce development activities in companies (IER and
IFF, 2003). The most recent study revealed that although skill shortages continue to affect
around a quarter of employers, overall there was a slight easing of skill gaps among existing
staff and in several vacancies where skill shortages were experienced in comparison with
previous surveys (LSC et al., 2005).
The survey is a valuable source of information on skill deficiencies and hard-to-fill vacancies,
including the reasons, and it is a valuable tool for formulating short-term policy responses to
skill shortages, including migration measures.
Source: NSTF, 1998, 1999; IER and IFF, 2003; LSC et al. 2004.
Deficiencies of vacancy data and their insufficient coverage of real vacancy posts sometimes
are solved by analysis of job advertisements in media and on the Internet. For instance, the
Federal Institute for Vocational Training (BIBB) conducted research of job advertisements for
the IT sector in Germany in 2002. The analysis used a representative sample of job
advertisements in the sector and a subsequent survey of the advertisers. The objective was to
compare the skills and qualifications employers were looking for with what proved to be
available in the market. The study found that about a fifth of job vacancies remain unfilled six
months after being advertised. Employers described the lack of multiskilled specialists and
soft skills as candidates’ principal shortcoming (Cedefop, Bott, 2004). Studies of
advertisements are often used as an additional tool to measure skill shortages along with
forecasting and employers’ surveys (Strietska-Ilina, 2003).
One of the most frequent methods of measuring future skill shortages is a forecasting macro
model with an occupational and qualification matrix. Such models are widely used in the
14
Netherlands (produced by ROA, see Box 2), Ireland (ESRI), Germany (WZB, IAB), France
(BIPE), Finland (NBE), UK (IER) and others (Cedefop, Tessaring, 2003) ( 7 ). The models
vary across countries but use in principle the same approach: they project demand side
information derived from employment demand by industries and the supply side information
on demography, education and training, comparing demand and supply, and eventually
arriving at identification of future surplus and shortage occupations and qualifications. The
main strength of such an approach is nationwide level of projection and a possibility of
longer-term forecasts (5-10 years), predicting future skill shortages and thus giving policy-
makers the potential for policy adjustment. The weakness of such forecasts is roughness of
the information, level of aggregation and lack of information on quality of skills and
qualifications required. A serious deficiency of forecasting models is extrapolation of
previous trends to the future, which appears especially flawed in the circumstances of
reforming economies, policy interventions and exogenous shocks.
Box 2: Forecasting model in the Netherlands
The Research Centre for Education and the Labour Market (ROA) of Maastricht University
has developed a forecasting model for the labour-market situation of different types of
education on the Dutch labour market. Every two years ROA compiles forecasts of changes in
the labour market in the medium term (for a period of five years) to give those making
choices on further studies the best possible information on the state of the labour market. The
projection is broken down into 34 economic sectors, 127 occupational groups and 104 types
of education. The most recent forecast was produced for the period 2003-08. ROA’s forecasts
encompass expansion demand as well as replacement demand. An indication of future labour-
market prospects for newcomers to the labour market is calculated, for each type of education,
by comparing the expected flows of demand and supply, and surplus as well as shortage
education categories are identified. The National Careers Guidance Information Centre (LDC)
incorporates ROA’s labour-market information in various information products for vocational
and educational guidance. Besides various ministries (education, social affairs, economic
affairs, agriculture), PES, educational institutes, personnel managers, advisory councils, etc.,
all use different parts of the information system for their decision-making.
Source: Cedefop, Cörvers, 2003.
Measuring adjustment behaviour as a reaction to skills shortages is another method to monitor

skill shortages. Such measures (training provision, higher wage costs, lower productivity,
etc.) mostly include self-observations of companies and thus are not totally objective and
measurable. They are mostly based on employers’ surveys mentioned above. The major
difficulty in the analysis of behaviour as perceived by employers is to determine what
( 7) ROA: Research Centre for Education and the Labour Market, Maastricht University; ESRI: Economic
and Social Research Institute; WZB: Social Science Research Centre Berlin; IAB: Institute for
Employment Research; BIPE: Economic Studies and Strategic Counselling; NBE: National Board of
Education; IER: Institute for Employment Research, University of Warwick
15
situation can be regarded as normal. However, there are some attempts to measure adjustment
behaviour externally. One example was in Austria. The level of skill shortages was attempted
to be mirrored in the number of job-to-job movements where a wage premium of more than
15 % was paid. The study ( 8 ) was based on a microdata set (3.5 million employees and
350 000 employers).The inter-firm flows of employees were measured. According to the
figures gathered there were 305 000 job-to-job transactions in Austria in 2000 and in 97 000
of these cases a wage premium of 15 % as paid to attract skilled workers (EEO, 2001b, p. iii).
About 66 % of these jobs concerned employees with certified skills: 87 % of those white-
collar occupations and 13 % blue-collar employment (EEO, 2001a, p. 41). The tighter the
conditions on a skills market, the larger the share of inter-firm employee flows accompanied
by wage rises (EEO, 2001a, p. 40-41). Such methodology, however, can hardly be used under
the conditions of an ongoing wage adjustment to market conditions in transition economies or
in conditions of economic restructuring. Furthermore, the method cannot record skill
shortages which are covered by alternative, non-financial, arrangements (e.g. training the
existing personnel, attracting foreign labour force).
Another method of determining skill shortages is comparisons (Borghans et al., 1997). This
method is used in several countries (the Netherlands), but most often at international level.
Such comparisons can be done across time, between different occupations, sectors, or skills,
and between countries or regions. For instance, analyses of general employment trends by
sector/occupation/skill level across countries or regions sheds light on employment demand at
the aggregate level. Comparisons with competitive economies (the EU versus Canada, Japan
and the US) or comparisons with sectors of expected similar development (trends in the ICT
skills demand analysed from the perspective of other new technologies and their demand for
skills) provide a useful benchmark. There are three major difficulties with such comparative
approach:
(a) lack of standard comparable data;
(b) roughness (aggregate level) of the data suitable for comparisons;
(c) lack of comparability of systems and contexts.
Nevertheless, if interpreted with caution, such comparisons provide interesting insights and
offer useful information on the level of general trends.
( 8) The study was performed by Synthesis Forschungsgesellschaft, Wien, commissioned by the Federal
Ministry for Economy and Labour.
16
Box 3: Elaboration of the system of identification of skill shortages in the Czech Republic: a
complex approach
The study on skill shortages in the Czech Republic was conducted in 2002-03. The study
identified main skills gaps, shortage occupations, and effects of shortages and advised on
measures to tackle them. It combined available data and included several surveys. The study
included analysis of trends in employment and skills by sectors, industries, occupations and
education levels in the Czech Republic and, where possible, in comparison with selected
Member States. The study further analysed PES vacancy statistics, conducted an enterprise
survey among 900 enterprises, an opinion survey among PES counsellors in all labour offices
in all regions, an additional survey of 277 private employment agencies (headhunters). The
study also included content analysis of vacancy advertisements in selected printed and
Internet media. It additionally analysed dynamic of wages by occupation. As deficiencies of
individual data and methods were compensated by a complex approach, an objective picture
of the situation of skill shortages was obtained. Some new aspects of the methodology may be
included in the future when, for example, data from the econometric forecasting model, time
series of vacancy statistics and others are available.
Source: Strietska-Ilina, 2003, Cedefop, Strietska-Ilina, 2004.
The most complex approaches to measuring and understanding the phenomenon of skill
shortages include measurement and interpretation of results of various sources, such as
econometric analyses, international comparisons of the number of skills available, a survey of
employees and/or school leavers, a vacancy survey including corrective actions, a survey
among employers, measurement of trends in certain industries and occupations and
verification of results by expert panels and social partners. Such approaches are mostly used
at sectoral and regional levels and they are especially popular in France (network of regional
observatories of employment and training (OREF) and some sectoral observatories, Céreq
network), Spain (Forcem, regions), Ireland (Forfás), Portugal (Ministry of Employment), UK
(QCA, IER, others), etc., (Cedefop, Tessaring, 2003) ( 9 ). Such holistic approaches (see.Box
3) can measure skill shortages both quantitatively and qualitatively to provide information on
the shortage and surplus skills, skill gaps, labour costs and other adjustment policies and
perceived skill shortages by labour-market actors.
2.3. Sectoral studies in the EU

Although sectoral approaches go beyond the interest of this contribution, it is worth
mentioning that sector-level analyses are rare examples of information provision on skill
needs in general and skill gaps/shortages in particular at cross-country level.
( 9) OREF: Regional Observatory of Employment and Training; Céreq: Centre for Research of Education,
Training and Employment; Forcem: Foundation for Continuing Training; Forfás: expert group on future
skill needs; QCA: Qualification and Curriculum Authority; IER: Institute for Employment Research,
University of Warwick
17
For instance, the ICT sector was a good example of European-level collaboration of
researchers, business and social partners. The sector considered facing significant skill
shortages. It was estimated at the time that one million ICT workers were at shortage, mostly
system designers and analysts as reported by Member States (EEO, 2001b, p. iv). Career
space was created as a forum of cooperation and expertise in 1999 and started analysing the
nature of skill shortages and gaps in the ICT sector. The major finding was that Europe needs
a public-private partnership to improve the situation. It was also found that the skills
mismatch was often addressed at the wrong level of education (graduate engineering level),
whereas lower levels of training and skill shortages among users often were not adequately
addressed (Niitamo, 2004).
Subsequently the e-skills forum was created by the European Commission’s Directorate
General for Enterprise in 2002 as a forum where big ICT companies could share their views
with other stakeholders in the industry to address the skill shortage situation. The forum
started to develop e-skills framework to harmonise national good practices (Niitamo, 2004).
A study on supply and demand of e-skills in the EU was prepared by a research team (RAND)
on behalf of the European Commission and the European e-skills forum (Frinking et al.,
2005) Among others, the study addressed skills shortage, mismatch and gap in e-skills, the
latter being defined as three different types of skill: ICT user skills, ICT practitioner skills,
and e-business skills. The study confirmed that in 2004 there were no widespread significant
shortages of ICT practitioners at aggregate EU level and, therefore, many forecasts and
predictions made earlier in 2001 proved to be wrong. Nevertheless, skill mismatch (gap) is
the key issue rather than shortage in absolute numbers of ICT practitioners (Frinking et al.,
2005).
Several sectors have been included in sectoral analyses in the framework of cooperation in
Cedefop’s international network on early identification of skill needs (Skillsnet). In particular
Skillsnet looked at the situation in tourism as a sector of high mobility in Europe where one
can speak of an emerging European labour market. The work demonstrated that although
tourism is one of the most dynamic sectors in Europe and it enjoys high growth prospects,
success of its development may be hindered by the oft-reported skill deficiencies among the
workforce. Tasks and activities in the sector are changing in line with technological,
economic and social changes (Cedefop, Strietska-Ilina and Tessaring, 2005).
Skillsnet also looks at new technology sectors, such as nanotechnology. Nanotechnology has
a large range of applications, for example automobile industry, pharmacy, textile industry,
chemical industry, medicine, etc. It offers enormous potential that can open up new
production routes. The study on nanotechnology identified that Europe has already a shortage
of specialists and scientists with tertiary education, and this shortage is expected to increase in
the future. Experts predict that in three to five years the need for workers with related skills at
intermediate level education and training will grow significantly (Cedefop, Abicht et al.,
2006). Skillsnet plans to focus on other sectors, such as agri-food chains and forestry-wood
processing chains, biotechnology, etc.
18
3. General employment trends
The overall employment rate in 2005 reached 63.8 % and remained 6.2 percentage points
below the employment rate target for 2010 set by the Lisbon agenda (European Commission,
2006a). Despite several economic and labour-market measures, employment in Europe
responded slowly to an upturn in economic growth in the first half of 2004 that followed the
slowdown in the 2000-03 period. Employment growth was however limited at 0.6 % and
remained low (around the 0.5 % mark or below) for three years in a row (European
Commission, 2004c).
There is a close relationship between economic growth and labour-market performance and
the slowdown in 2001-05 was responsible for lack of job creation. Economic growth in the
EU averaged 2.4 % for 2004 as a whole (1.1 % in 2003) but dropped back to 1.6 % in 2005
(see Table 1A in annex). The forecast for 2006 and 2007 expects a GDP growth rate of 2.1
and 2.6 respectively. If the slowdown is over and economic growth will become more
pronounced in the coming period, it will positively influence employment prospects, as
aspired to by the renewed Lisbon strategy ( 10 ). Labour-market bottlenecks may, therefore, be
expected to rise, especially in geographical areas of higher growth rate where employment
demand may increase (new Member States but also Ireland and Finland): the pool of the
unemployed and inactive population (especially older workers and women) may solve labour-
market bottlenecks only to a certain degree.
Unemployment in Europe in 2005 remained high – at 8.7 % – and decreased only slightly
compared to 2003, and youth unemployment remained twice as high – 18.7 % (EC, 2006a;
2005b). However, there is persistent unemployment and long-term unemployment and
reported labour and skill shortages on the labour market reported by many Member States
(see further in Chapter 4). Only about 34 % of the unemployed population in the EU is low-
skilled (Eurostat, second quarter 2005): it is, therefore, not only necessary to have an
adequate level of skills per se, but also equally important that these skills correspond to the
changing requirements of the labour market.
It is true that the higher the level of educational attainment, the lower the unemployment rate,
nevertheless rates by level of educational attainment remained almost unchanged since 2000
(Figure 1). The data by country (Table 3A in the Annex), however, demonstrate that in
several Member States (Czech Republic, Germany, Poland, Slovakia) the unemployment rate
of the low qualified increased significantly depicting the structural changes in demand but
also reflecting the overall deteriorating unemployment situation. The Member States which
(10) It is however important to bear in mind that the impact of economic growth on labour demand is
dependent on several factors, such as productivity growth, regulatory frameworks, working hours, and
economic growth may not necessarily translate into more jobs (Boswell et al., 2004). Productivity growth
is an important factor which may prevent creation of additional jobs. The factor will remain important
especially in new Member States where economic restructuring is ongoing.
19
managed to significantly increase employment, also better managed to keep the low-qualified
in employment.
Figure 1: Unemployment rate by level of educational attainment between 2000 and 2005
in EU-25
14
12
10
4
ISCED 0-2
2 ISCED 3-4
ISCED 5-6
0
2000 2001 2002 2003 2004 2005
Source : Eurostat database 2006.

ISCED 0-2: pre-primary,
Pre-primary, primary and lower secondary education
education;
ISCED 3-4: upper
Upper secondary
secondary and
and post-secondary
post-secondary non-tertiary
non-tertiary education
education;
ISCED 5-6: tertiary
Tertiaryeducation
education
Also labour force survey data on employment rates in EU-25 between 2000 and 2005 (Table
1) demonstrate that the highest and the most stable rates are enjoyed by those with tertiary-
level education, whereas the employment rate of low-qualified (ISCED 0-2) is more than
twice as low and it suffered from a further drop by 2.2 percentage points between 2000 and
2005.
Table 1: Employment rate in EU-25 by level of educational attainment, 2000-05

2000 2001 2002 2003 2004 2005
Total (ISCED 1997) 51.1 51.4 51.4 51.4 51.3 51.8
ISCED 0-2 35.6 34.5 34.3 34.1 33.5 33.4
ISCED 3-4 63.3 63.1 62.8 62.3 62 62.2
ISCED 5-6 76.7 77 76.7 76.5 76.3 76.1
NB: ISCED 0-2: pre-primary, primary and lower secondary education;
ISCED 3-4: upper secondary and post-secondary non-tertiary education;
ISCED 5-6: tertiary education
Source: Eurostat database 2006, labour force survey data, 2nd quarter
20
The situation does not look so straightforward when analysing employment trends by
occupation ( 11 ).
Figure 2: Employment change by occupation in EU-25 in 2000-05 (000)
ISCO 9
ISCO 8
ISCO 7
ISCO 6
ISCO 5
ISCO 4
ISCO 3
ISCO 2
ISCO 1
Total
-2000 0 2000 4000 6000 8000 10000
Source : Eurostat database 2006, LFS data, 2nd Quarter 2000 and 2005, own calculation
ISCO 1 – legislators, senior officials and managers
ISCO 2 – professionals
ISCO 3 – technicians and associate professionals
ISCO 4 – clerks
ISCO 5 – service workers and shop and market sales workers
ISCO 6 – skilled agricultural and fishery workers
ISCO 7 – craft and related trades workers
ISCO 8 – plant and machine operators and assemblers
ISCO 9 – elementary occupations
Employment growth in the period between 2000 and 2005 (Figure 2) was particularly
significant among skill-intensive occupations: technicians and professionals (ISCO 3 and 2),
legislators, senior officials and managers (ISCO 1). Growth however was also notably
significant among elementary occupations (ISCO 9). To the contrary, there was a decline of
employment among medium-skill intensive occupations of craft workers (ISCO 7),
agricultural and fishery workers (ISCO 6) and clerks (ISCO 4).
(11) ISCO-88 (international standard classification of occupations) distinguishes three groups according to
skill intensity: low (ISCO 8-9: plant and machine operators and assemblers, elementary occupations),
medium (ISCO 4-7: clerks, service workers and shop and market sales workers, skilled agricultural and
fishery workers, craft and related trades workers) and high (ISCO 1-3: legislators, senior officials and
managers, professionals, technicians and associate professionals). Besides, two groups of workers are
differentiated, non-manual (ISCO 1-5) and manual (ISCO 6-9).
21
Figure 3: Unemployment change by occupation of previous employment in EU-25 and
EU-15 in 2000-05 (000)
ISCO 9
ISCO 8
ISCO 7
ISCO 6
ISCO 5
ISCO 4
ISCO 3
ISCO 2
ISCO 1 EU-15
EU-25
Total
-1700 -1200 -700 -200 300
ISCO 4 – clerks
Overall a number of the unemployed in the EU between 2000 and 2005 according to
occupation of previous employment (Figure 3) increased in all occupations with the exception
of elementary occupations (ISCO 9) where a significant decrease of the unemployed was
recorded. The situation changed little among skilled agricultural and fishery workers (ISCO
6) and legislators and managers (ISCO 1) and professionals (ISCO 2).
22
Figure 4: Employment change by sector (NACE) in EU-25 in 2000-05 (000)
A-B) Agriculture, hunting, forestry and fishing

C) Mining and quarrying
D) Manufacturing
E) Electricity, gas and water supply
F) Construction
G)Wholesale and retail trade and repair
H) Hotels and restaurants
I) Transport, storage and communication
J) Financial intermediation
K) Real estate, renting and business activities
L) Public administration and defence; compulsory social security
M) Education
N) Health and social work
O) Other community, social, personal service activities
P) Activities of households
-2500 -1500 -500 500 1500 2500 3500
The employment change by sector (Figure 4) demonstrates significant declines in

manufacturing and agriculture, and to a lesser extent in mining and quarrying. Particular
growth was enjoyed in the real estate sector, renting and business activities, health and social
work, education, as well as in wholesale and retail, hotel and catering, and construction.
Overall primary and secondary sectors demonstrate decrease in employment whereas
services, both skill-intensive and less demanding for skills, and construction enjoy growth in
employment.
Development of the skill composition of employment by occupation (Figure 5) demonstrates

a drop in significance of low-qualified in majority of occupations but elementary ones, yet
also surprising increase of low-qualified among legislators, managers, professionals and
technicians, for instance the most skill-demanding occupations. Interestingly, the share of
secondary and tertiary educated workers among elementary occupations is also significant.
23
Figure 5: Employment by occupation and highest level of education attained (change
2000-05 in 000) in EU-25
ISCO 9 ISCED 5-6

ISCED 3-4
ISCO 8
ISCED 0-2
ISCO 7
ISCO 6
ISCO 5
ISCO 4
ISCO 3
ISCO 2
ISCO 1
-1200 -700 -200 300 800 1300 1800 2300 2800
ISCO 4 – clerks
Both trends may signify substitution of qualifications (occupational attainment mismatch) as a

result of shortage of workers with relevant education as well as the changing nature of
occupations per se where significance of formal qualification in employment is blurred.
Redistribution of skills towards the higher end was most pronounced among technicians and
professionals (ISCO 3 and 2). As it was mentioned earlier (Figure 2) these were exactly those
occupations which enjoyed the highest growth in employment. Further, services and sales
workers (ISCO 5) and clerks (ISCO 4), for instance medium-skill non-manual occupations,
absorbed more higher-skilled personnel.
The skills composition of employment with a clear trend towards upskilling however may not
only be linked to demand (pull factor) but also to supply of a higher educated workforce on
the market (push factor ( 12 )).
(12) A similar trend was discovered by the project Educational expansion and labour market (EDEX). Its
conclusions showed that educational expansion has a strong supply effect and that demand for skills
actually follows supply (Béduwé and Planas, 2003).
24
Figure 6: Comparison of the percentage of the population aged 20-24 and 25-64 having
completed at least upper secondary education in EU-25, EU-15 and EU-10
between 1999 and 2005
100
EU-25 EU-15 EU-10
90
80
70
60
50
40
30
20
10
0
20-24 25-64 20-24 25-64 20-24 25-64 20-24 25-64 20-24 25-64 20-24 25-64 20-24 25-64
1999 2000 2001 2002 2003 2004 2005
Source : Eurostat database 2006, LFS adjusted series, annual data, own calculation.
Figure 6 shows that overall there was an increase in the population which attained at least
upper secondary education (upper secondary and above) over time and that there is a positive
intergenerational change towards higher levels of educational attainment among younger
cohorts. Particularly high values are demonstrated in new Member States where 84 % of adult
population and almost 90 % of young people aged 20-24 have achieved at least upper
secondary education.
Figure 7: Tertiary education graduates (in 000) in EU-25, EU-15 and EU-10 in 1999-
2004
3500
EU-25 EU-15 EU-10
3000
2500
2000
1500
1000
500
0
1999 2000 2001 2002 2003 2004
Source : Eurostat database 2006, own calculation.
Figure 7 shows that overall EU-25 demonstrates clear and steady growth in numbers of
tertiary-level graduates in recent years, but reveals that new Member States perform
25
significantly worse than the rest of the EU in terms of absolute numbers. New Member States,
however, enjoy spectacular growth with the percentage change between 1999 and 2004 far
exceeding old Member States.
Therefore on the supply side the upskilling trend is clearly demonstrated. It is a question
whether it is a reaction to the demand side and a response to technological change and
innovation, or perhaps partially a social trend of paying tribute to education as a value in
itself. In any case, leaving apart ‘the chicken and egg’ dilemma, it is necessary to recognise
that the supply side represents a certain push factor in the development of skill composition in
employment, given the change towards a higher weight of a better educated workforce in all
occupations – those of low, medium and high skill intensity, manual and non-manual.
At the same time employment trends by occupation show positive developments for high-skill
non-manual and for elementary occupations at the same time. From the point of view of
sectoral employment, the sectors of services (both skill-intensive and labour-intensive) and
construction have enjoyed stable growth in employment. If the trend persists in the future, one
can imagine that these are the fields which would continue absorbing the workforce and may
experience skill shortages. The general upskilling trend however proves that there is within-
occupational change of skills composition.
26
4. Main reasons for skill shortages
A genuine attempt to measure skill shortages at European level, for instance cross-country
and across sectors, has not been done. In the framework of the EEO a review of the situation
of skill shortages and measures to tackle them in EU-15 was produced for the EEO annual
conference in 2001 where country reports were presented, with a subsequent EEO spring
review 2001 with a specific focus on a review of labour shortages and skills gaps in the EU
(EEO, 2001a, p. 40). This is almost a unique document (to our knowledge) which attempted
to gather information on skill shortages in Member States. Unfortunately the special-focus
review has not been repeated since then and much of the information is by now outdated. The
review did not follow systematic methodology allowing for comparison but given its unique
character, it remains a valuable source of information. The EEO review mapped the picture of
skill shortages and the information collection in EU-15, which are roughly summarised in
Table 2 ( 13 ).
Member States report different reasons for skill shortages. First, labour-market tightness –
small labour reserve linked to high employment levels and unfavourable demographic factors.
At the time the differences in the scale of skill shortage problems among Member States were
noted, with the Netherlands arguably showing the most significant problems in filling
vacancies as the country approached structurally full employment (EEO, 2001b, p. iv).
Variation was noted also among regions with a higher concentration of skill shortages in more
industrialised regions (north Italy). This reason was reported by many countries, such as
Austria, Belgium (Flanders), Denmark, Finland, France (certain regions), Germany (certain
regions in specific professions), Ireland, Italy (north), Luxembourg, the Netherlands,
Portugal, Sweden, the UK (EEO, 2001a, 2001b).
Currently especially significant problems in filling vacancies linked to tightness of labour

markets are noted in countries which approach structurally full employment (Nordic
countries, the Netherlands and the UK).
The second reason for skill shortages reported by Member States is economic, social and
institutional conditions. For instance, in large urban conglomerations where affordable
housing is scarce and expensive, it appears a barrier to attracting workers (London).
Demotivating social welfare system is another example often cited by Member States
(Finland, Sweden). Inefficient work of PES is also sometimes mentioned (Italy).
The third type of reasons of skill shortages is skills mismatch – by level/field of qualification
and/or specific skills and competences (skills gap). This is precisely the reason for
(13) Another useful document was produced by OECD (Doudeijns, 2003) – a review of findings of national
surveys and forecasts on skill shortages in selected OECD countries. The review, however, concerned
only a couple of Member States and provided information from 2000-01 which differed sometimes from
the one in the EEO review. To avoid confusion this information is not included in Table 2.
27
coexistence of unemployment, including long-term unemployment, and large pools of
vacancies, pointing at structural unemployment. Some countries reported coexistence of skill
shortages calculated in the duration of unfilled vacancies and very high unemployment rates
often concentrated in specific regions. For instance, Brussels demonstrated an example of
structural skill mismatch in the regional labour market with the unemployment rate at the time
of the review 19.1 % compared to the surrounding Brabant area with only 5.2 %. Over half
hard-to-fill vacancies in Brussels were attributed, at least in part, to a lack of bilingual
candidates. Brussels region also had the highest proportion of vacancies filled with workers
with non-relevant education (occupational mismatch) further confirming the skills mismatch
on the local labour market (EEO, 2001a, p. 38; 2001b, p. 5).
Mismatch is reported by a majority of countries as the main reason or one of the reasons for
skill shortages – Germany, Spain, France, Greece, Italy, Luxembourg, Portugal, Finland,
Sweden, the UK ( 14 ). It is also important to underline that it is the type rather than the level of
qualification which matters in the mismatch of supply and demand. Specific skills and
competences appear more important than levels of qualifications.
The fourth reason mentioned sometimes is deficiency in recruitment practices, work

organisation, wage policies and working conditions. Old Member States which particularly
mentioned this reason were Germany, the Netherlands and Portugal. It is however important
to note that this factor plays an important role in recruitment difficulties in all Member States
– to a larger or smaller extent – especially among lower-skill occupations. Whether this has a
direct connection with the problem of skill shortages is highly questionable. Nevertheless, this
is another indication of market failure to solve the problem of recruiting pertinent personnel
for specific business strategies.
(14) Ibid. Again new Member States were not taken onto account in the study but mismatch appears in many
documents as the major reason for skill shortages in many new Member States.
28
Table 2: Summary of findings: skill shortages in Member States EEO review (2001)
Regional mismatch Features Reasons Skills in shortage Methods, sources
Austria
Increasing flow of vacancies into its

Qualified labour, specifically for IT
register and increasing number of
Nationally the gap of professionals the gap is estimated at 6 000 with Monitoring number of
employers experiencing labour Labour-market
certified skills is 16 000. a high economic significance. Health care premium job-to-job
shortages. The adjustment in wages bottlenecks – scarce
Particular example of skill professions. Projected shortage by 2005 – 1 000 transactions;
and in working conditions does not labour reserve
shortages in Styria in technical professions, 3 600 in IT, 850 in projections
help to solve the shortage problem in
commerce
certain sectors (e.g. health care)
Belgium
Lack of bilingual candidates in Brussels region.

Tight labour market in
Brussels region – 19 % Shortages in industrial and service sectors.
Flanders, skills mismatch PES vacancy registrar,
unemployment rate, and Shortages are more acute among managerial and
Cultural and language barriers, in Wallonia. The type newspaper ads,
52 % hard-to-fill highly specialised technical functions (two
coexistence of high unemployment rather than the level of company surveys,
vacancies; widening gap third), but also occupations such as bricklayers,
and labour shortages qualification matters in projections and
between Flanders and truck driving, warehouse work. According to
the mismatch in supply forecasts
Walloon region forecasts there will be shortages of engineers
and demand
and IT specialists, and caring professions
Denmark
29
Nurses, school teachers, managers, academics,
Risk of acute bottlenecks
engineers. Projection 2005-10 – severe labour
caused by economic
shortages are expected to develop for medium- Time series of
upswing. In a longer term
cycle higher education specialists. Skill gaps in unemployment rates
the perspective is
Rising demand for qualified labour, technical competences and craftsmanship, per educational and
dominated by
development of new technology emphasis on the ability to learn and adapt to occupational groups
demographic challenges
new tasks (functional flexibility) and on social and the same type of
which can lead to severe
competences, such as ability to cooperate, work projections
structural labour
in teams. Basic IT and language skills are given
shortages
high priority
Finland
Recruitment difficulties reported in

Tightness of the labour
manufacturing and construction, and in services
Currently labour bottlenecks are market in certain areas, Mid- to long-term
and commerce, for example mechanics,
usually local and sector specific, but mismatch, demographic projections, surveys on
welders, carpenters, heating and ventilation
there is coexistence of persistent challenges may bring in skill gaps and
specialists, childminders, sales representatives,
structural unemployment and labour future serious labour shortages in certain
cleaners. ICTs sector, electronic industry. ICTs
shortages. Skill shortages are shortages, especially in IT industries, statistics of
specialists, engineering and Automatic data
increasing in some sectors and and services sectors. Ministry of Labour,
processing (ADP) experts are in particular
professions Demotivating system of trend barometers
demand, particular lack of IT engineers,
unemployment benefits
electronic engineers and machine engineers
France
30
Specific survey;
Sharp increase in reported recruitment 86 % of employers engaged in construction of
national survey by the
difficulties in industry and public buildings identified recruitment
National Institute for
construction sectors in the period of difficulties; 56 % in the industry sector. IT,
Mismatch; tightness of Statistics and
1990-2001; yet the unemployment hotels, catering and food experience persisted
the labour market in Economic Studies
remains high. Increasing tensions on recruitment difficulties (particularly cooks),
certain areas, difficulties (INSEE) on
the labour market for unqualified. clerical staff and technicians in insurance
in recruiting young recruitment difficulties,
Geographical concentration of certain industry, workers, technicians and supervisors
qualified personnel employment trends
industrial sectors combined with low in electric/electronics industry; nurses, skilled
measurement and
workforce mobility. Demographic and unskilled workers in construction, car
development of
factors industry
indicators
Germany
Mismatch; demography
West Germany, Southern (projected loss of working
Bavaria. Outflow of High unemployment in East Germany, age population), serious Sample surveys;
young and highly skilled low unemployment in West Germany. bottlenecks in certain projections, Federal
from East to West Projections show that the demand for professional categories Engineers, IT technologists, mathematicians, employment Service
Germany for over decade higher qualifications will increase, and and regions. Poor physical scientists, chemists, teachers, hotels statistics, statistics
(net loss due to migration for medium and low qualification will wage/recruitment and catering professions from the training
between 1989 – 1999 decrease. Shortages are confined to conditions adjustment for system, microcensus,
estimated 1.2 million for specific professions and regions certain professions analysis of ads
East Germany) (teachers, hotel and
catering)
31
Greece
University graduates with technological skills,

secondary education technicians and technical
assistants. Serious shortage in ICT professions
Poor information system on skill Labour force survey,
and technicians, mechanical, electrical and
needs, poor communication between Demographic change, unemployment and
chemical engineers, experts in electronics.
the labour-market actors and mismatch vacancy registrar,
Business administrators, project managers,
education and training providers employers’ surveys
marketing experts and financial analysts,
technical professions with secondary vocational
education and training qualifications
Ireland
Labour supply reserve decreasing, re-

Construction workers, IT professions, Vacancy survey,
immigration of Irish nationals not High employment growth
engineering and science professionals, analysis of employment
solving the situation, relying on – tight labour market
technicians and security personnel trends, projections
external migrants
Italy
Mismatch (availability of
North – 43 % of As small and medium-sized enterprises move to
undesirable on the labour-
businesses report expansion involving lesser-qualified employees,
Coexistence of high unemployment market unskilled
difficulties in hiring labour shortages appear among lower qualified Surveys, PES statistics
and labour shortages workforce);
suitable staff (as compared workers. Experts in mathematics, physics and
to 28 % in the South) natural sciences
ineffectiveness of PES
Luxembourg
32
Scarce national pool of labour.
Shortage of labour is an inherent ICT professions, construction workers, Macroeconomic
feature of the Luxembourg economy, Mismatch, tightness of intermediate-level technical and vocational projections, sectoral
importing labour has a long tradition the labour market qualifications, hotel and catering, domestic analyses and company
(30 % of the workforce come from services case studies
outside Luxembourg)
Netherlands
Tightness of the labour

market. Deficiency in Trade, financial and business services, health
Vacancy statistics,
Anticipated skill shortage in highly recruitment practices, and social care, education and civil service
employers’ surveys,
skilled labour work organisations, wage sector, areas of technological development,
projections
policies and working especially ICT
conditions
33
Portugal
Since 1996 a drop in unemployment

has been followed by an increase in
the number of vacancies. The Labour-market
Portuguese economy production bottlenecks – scarce
continues to demand lower skilled labour reserve, mainly Managers, health professions, construction and PES statistics,
personnel, and some highly skilled due to mismatch. Low manufacturing workers, educationists employers’ surveys
remain unabsorbed, although long- wages for lower level
term unemployment also recorded qualifications
among low skilled with employability
problems
Spain
IT sector study of the

Internet-based jobs
Madrid, Catalonia and Shortage of workers with particular
IT programmers and developers; IT analysts. database
Basque country attract qualifications in certain sector (IT,
Seasonal agriculture workers, tourism,
internal migrant labour. health/social care). Preparedness of 26 sector case studies
construction, some specific industries (e.g.
Andalusia and certain employers to recruit personnel Mismatch
metal). Skill gap among managers, professional
Extremadura have the without formal qualification. vacancy statistics
and administrative personnel in technical skills
highest unemployment Coexistence of high unemployment
and computing wage analysis
rates and labour shortages
supply data
Sweden
34
Technology development; rising
Stockholm –slowdown of levels of educational attainment
Occupations in caring and technical sectors. IT
employment growth due among the population; over-educated Mismatch; demotivating Employers’ surveys,
specialists. Construction workers, teachers,
to recruitment problems push less qualified out of the labour welfare system, medium-term forecasts,
university level engineers, hotel and catering
and a growing housing market; number of low-skilled job demographic challenge vacancy statistics
professions
shortage declined and the pool of low-skilled
people are unable to find employment
UK
110 000 skill-shortage vacancies counted.

Relative tightness of Mostly in manufacturing, wholesale and retail
PES vacancy statistics,
labour markets in trades and business services, construction. In
Skill gaps are spread out throughout several national,
London and south-east, Demographic change, occupational terms 40 % of skill shortages are
occupational structure. Employment regional and sectoral
similarly – east and tightness in certain found in associate professionals and craft and
structure is shifting in favour of those surveys, Employers’
south-west. Growth in regions, mismatch (skill skilled occupations. Greater importance of skill
occupations that require continuing Skills Survey,
skill-intensive occupations gaps mostly) gap, especially in generic skills, than labour
learning employment
projected in east, shortage. Gaps are identified in communication
projections
south-east and south-west skills, team working and customer handling, IT
skills
Sources: EEO, 2001a; 2001b
35
All four reasons are interconnected and sometimes impossible to separate from one another.
For instance, the scarce labour reserve due to tightness of the labour market tends to
concentrate on certain occupations, where employers complain that they cannot recruit
personnel with suitable qualifications and skills. At the same time jobseekers with other
qualifications are available on the market. Therefore, the situation can eventually be
characterised as mismatch. In reality it is a combination and interplay of different factors,
including demotivating welfare system and poor working conditions for certain occupations.
As already mentioned, skill gaps among existing staff and job applicants are reported as much
more serious problems than labour shortages. But here comes an important conceptual issue.
Where is the borderline between labour shortage and skill gaps? If the recruited workforce
demonstrates skill deficiencies it might be a consequence of shortage of the workforce with
adequate skills and qualifications. The same concerns skill gaps of job applicants: what is the
primary reason for recruitment difficulties – missing skills or missing labour with the skills
required? This is not just tautology. The issue is a conceptual problem which affects
methodological approaches to measuring skill shortages and even, more generally, measuring
demand for skills. Pure quantitative or pure qualitative measurement might not be sufficient
to see the entire picture. It is also necessary to consider also the employment context, such as
high employment rates in particular regions, sectors or occupations in combination with high
wages compared to the national average or with a high growth rate of wages that might
indicate a real shortage of labour.
One major conceptual problem with the notion of skill shortages on the labour market is why
the market does not solve the problem by market mechanisms. An underlying economic
assumption is that if wages always adjusted to supply and demand there would always be
equilibrium on the labour market. Labour-market adjustment however is limited and takes
time because of inflexible wage structures, adjustment costs, lack of transparency, lack of
coordination of education and vocational training systems with the needs of the labour
market. The supply side of the labour market can only react to demand after some time, given
that the education and training cycle takes up to five years.
Comparison of US/OECD wage differentials on skills demonstrates the importance of effects

of institutions on employment rates and wages (Katz and Autor, 1999). Labour-market
institutions in Europe have had a negative effect through their inflexibility ( 15 ). Institutional
measures reflect exogenous political factors as opposed to responses by market forces. There
were rising wage inequalities and educational and occupational differentials of a similar
magnitude in the US and the UK in several decades, whereas in most OECD countries,
especially in the EU, there was a pattern of declining wage inequality (Katz and Autor, 1999).
(15) Examples of such mechanisms are demotivating system of unemployment and social benefits,
overprotective job security system, minimum wage interventions for certain professional categories and
others.
36
Welfare policies, minimum wage interventions which favour low-income professions
contribute to this.
Comparing EU and US labour markets Freeman (2004) also agrees that labour-market
institutions in Europe have had a negative effect through their inflexibility. Institutional wage
interventions and high social benefits have also reduced incentives to employment generation
and higher returns on education. Job protection in Europe is too high and mobility is too low.
‘[…] EU labour markets suck compared to the perfect invisible hand market of economic
theory. But so does the US labour market. The EU labour market fails on the quantity side of
the market in the volume of employment created for those who seek work. The US labour
market fails on the price side of the market in the pay for those who work and economic
security for those who do not. [...] Like virtually every other economic institution created by
humankind, labour markets are imperfect’ (Freeman 2004, p. 1).
37
5. Skill shortage and technological change and
innovation
The debate on skill-biased technological change has intensified in the past two decades with
the observation that employees with high levels of education and information technology are
becoming more important in the workplace (Spitz, 2004). However, little evidence is
available on how occupational skill requirements have changed in recent decades and whether
any skill gaps and shortages may be linked to technological change. The analysis by Spitz
(2004) investigates skills requirements in the workplace, measured directly by the task
composition of occupations in west Germany. The empirical analysis aggregates individual-
level data on task composition of occupations at the two-digit level in four waves between
1979 and 1999, asking individuals what they actually do in their jobs (direct measurement)
with the help of shift-share analysis. The results show that skill requirements at a workplace
increased substantially, shifting from cognitive and manual routine towards analytical and
interactive activities, which requires educational upgrading in nearly 50 % of cases counting
solely within-occupational changes in task inputs. Even those occupations which were the
least demanding in 1979 now require a greater degree of complexity (Spitz, 2004, p. 22).
Another important finding was that computer technology in the workplace substitutes less
skill demanding – routine and manual – tasks, whereas it complements workers in performing
non-routine cognitive and analytical tasks (Spitz, 2004). This is an important finding from the
point of view of further redistribution of employment towards skill-intensive occupations,
giving a particular pessimistic perspective to employees with low qualifications.
An earlier study (Chennells and van Reenen, 1999) surveyed the evidence on the effects of
technological change on skills, wages and employment based on microeconometric evidence
from 70 empirical studies. The study confirmed a strong effect of technology on skill
requirements increase across researched countries ( 16 ) and wages growth across sectors. The
effects on employment were found ambiguous, demonstrating growth effects of innovation
with less pronounced effects from R&D.
From the point of view of the skill shortage problem it is important that skill-biased
technological change under certain conditions may lead to crowding out of the low-qualified
from the labour market and, therefore, contribute to coexistence of unemployment and skill
shortages on the labour market (mismatch). In spite of evidence of increasing relative scarcity
of low-qualified workers, their labour-market outcomes are deteriorating (also confirmed in
Katz and Autor, 1999). The major driving force of this change is within-occupation (Spitz,
2004) and within-industry shifts towards skills upgrading (Katz and Autor, 1999) confirming
skill-biased technological change.
(16) US research was extended to the manufacturing sectors in six other countries – Denmark, France,
Germany, Japan, Sweden and the UK.
38
If we compare Eurostat data of the educational attainment composition of main occupational
categories in 2000 and 2005, the proportion of those having at least ISCED 3-4, and
especially of those with tertiary education (ISCED 5-6) increased among all categories (see
more in Chapter 3). Certainly the situation is influenced by the supply side of the labour
market –availability of higher-level qualifications pushes lower-qualified out of the market. It
is confirmed by the fact that the proportion of workers with ISCED 3-6 also increased among
elementary occupations, which is an alarming signal for the low-skilled but also a sign of
occupational mismatch and ‘brainwaste’ in Europe. It, however, deserves further research:
does this tendency imply the changing character of certain elementary occupations or
overqualification?
An important finding was that increasing the quantity and quality of the stock of human
capital is an important part of any growth-promoting policy and that technology-related skills
need to be provided to a broad segment of the population (de la Fuente and Ciccone, 2003).
This confirms that the upskilling trend on the supply side of the labour market is also an
important push factor for technological change and innovation, and investment in human
capital in general is at least as important as mere adjustment of education provision to labour
demand.
There are two other equally important issues linked to technological change and innovation.
First, technological processes may potentially lead in certain cases and for certain occupations
to simplification rather than growing complexity of tasks ( 17 ). The increasing proportion of
those with intermediary level qualifications in high-skill occupations may confirm this
tendency. On the other hand, simplification of tasks resulting from technological development
is in no way similar to ‘automatisation’ and ‘robotisation’ of the Fordist economy: while
individual tasks may become easier to handle, their overall composition leads to multiskilling
/multitasking in the workplace, widely reported throughout Europe and among innovative
companies in particular. The skill gap is, therefore, gaining in importance irrespective of
individual task complexity.
The second issue is linked to competitive business and product strategies and demand for
skills. Innovative firms do report skill shortages more frequently than others. Firms’ strategies
to move upmarket in response to competitive pressures result in increase in employers’
demand for skills ( 18 ). High value-added skill-intensive product strategies increase the
demand for skills. This is important in the context of the Lisbon objective to build a
knowledge-driven economy. Low-value added strategies rely on low-wage/low-skill
(17) For instance UK employers’ skill survey of 1999 found that standardisation which is often linked to
technological change sometimes leads to deskilling. Examples of deskilling were found for instance in
insurance and banking with the introduction of automation of household and personal insurance services
systems (NSTF, 1999).
(18) See Mason, 2004. See also results of the national employers’ skill surveys in the UK, 2002/03 survey on
skill shortages in the Czech Republic (Strietska-Ilina, 2003), materials of the European innovation
scoreboard 2004 (Lorenz, 2004).
39
equilibrium. Concentration of the latter strategies in certain territories may lead to adverse
effects on the economy ( 19 ). However, would this mean that companies should be pushed to
put greater emphasis on skills and high-value added product strategies? Research findings
show that firms select strategies suiting best the market environment, finding their niche and
reacting to certain constraints and client expectations (Wilson and Hogarth, 2003; Lloyd,
2005).
Box 4: An example from Australia
The study by Misko and Saunders (2004) examined companies and organisations developing
innovative products and services in manufacturing environments. Most training needs did not
differ from those in ordinary companies with the exception of areas of leading-edge
technologies. Most high-level knowledge is provided by higher education, but vocational
education and training (VET) also has an important role to play. The survey found that in
such cases companies were often working with technologies in advance of that taught by
VET. VET needs to work collaboratively with innovative companies in determining training
needs, developing and providing customised training applicable to the leading-edge
technology involved, and working collaboratively with vendors of products and materials to
innovative companies, to help vendors develop specialised training, and train vendor trainers
and provide access to training facilities (Misko and Saunders, 2004, p. 5). The survey also
found that such companies often operate in extremely competitive international environments
and their clerical, managerial and general support staff require some specific knowledge and
skills, such as protection of intellectual property rights, foreign languages, ability to negotiate,
legal issues.
Source: Misko and Saunders, 2004.
Some research also points out that low-skill/low-wage equilibrium may also be a result of
firms adapting themselves to skill shortages where they change their skill demands
accordingly choosing production technology and/or services that require relatively low
degrees of skill intensity (Mason, 2004). In consequence the economy as a whole might
experience specialisation in trades and production patterns where the comparative advantage
is the price. Nevertheless, skill shortage is not the single constraint and opting for low-
skill/low-wage strategy may be a rational reaction to other factors. Acknowledging the market
will accommodate both types of strategies (skill-intensive high value-added and low-wage
low-value added) leads to an important conclusion that upskilling alone will not create a
knowledge economy and may lead to increasing overqualification of recruited workers unless
other market mechanisms work to accommodate better high value-added/skill intensive
strategies.
(19) The trap of low wage/low skills equilibrium actively discussed in the UK but also in many new Member
States related to the rate of investments in the low-wage segments there.
40
The discussion on polarisation of jobs (‘McJobs’ and ‘MacJobs’: Goos and Manning, 2003)
denotes that intermediate occupations are becoming casualties of technological change. This
may bring important consequences for vocational education and training at ISCED 3 level, if
the demand for such occupations is really shrinking. Indeed in absolute terms in Europe
demand is growing for high-skill occupations and elementary occupations. How this is linked
to technological change remains, however, unclear. In fact ‘good’ jobs and ‘bad’ jobs are
possible at both ends of the occupational ladder: according to Eurostat, the proportion of
precarious employment with temporary contracts and part-time jobs increases among
managerial, professional and technical occupations as well as among elementary occupations.
As mentioned, the growing proportion of those with intermediate and tertiary level skills in
elementary occupations may signal the changing nature of demand in these occupations. On
the other hand 66 % of ISCO1 (legislators, senior officials and managers) possess only
primary, secondary or post-secondary non-tertiary education (up to ISCED 4) out of which
16 % attained only up to lower secondary education (Eurostat online database). This may
mean, rather than polarisation of jobs, the changing character of jobs and skill demand where
soft and personal skills matter more than formal qualifications.
Box 5: A survey on changes in the workplace among Irish employees

A national survey was organised in Ireland into the experience and attitudes of Irish
employees exploring workers’ experiences and attitudes to the changes occurring in the
workplace (see O’Connell et al., 2004). The survey was conducted on behalf of the National
Centre for Partnership and Performance. The study demonstrated that there has been
substantial change at work, particularly with respect to increased responsibilities at work, use
of technology and skill demands, intensification of pace and pressure (O’Connell et al., 2004,
p. 18). Flexible working hours, job sharing, working from home, part-time work are used
more frequently. Introduction of new technology and related skill demands is particularly
frequent in the public sector in Ireland.
From the point of view of eventual skill shortages arising and recruitment problems, it is
important to consider the preparedness of employees to accept the changes. About three-
quarters of employees expressed their willingness to accept increased responsibilities in their
jobs, new technology challenges at work and increased skill needs to carry their jobs. On the
other hand, half of employees are unwilling to accept unsocial working hours, increased
pressure and more close supervision (O’Connell et al. 2004, 131). Given the recognition that
pay has risen along with the changing requirements among Irish employees, it is clear that
eventual tensions in the workplace with a potential danger of recruitment difficulties, have to
be solved by means of more complex measures on top of the pay rise.
Source: O’Connell et al., 2004.
Studying past experiences on introduction of new technologies (ICTs) indicates that the
process was always accompanied by substantial organisational changes in companies such as
instigation of self-management and decentralised decision-making where employees were
empowered to make critical decisions (Christidis et al., 2002, p. 20). From the point of view
of future development of the knowledge-based economy and technological change and
41
innovation an acute shortage of people who can combine expertise in various types of
technologies (automation and nanotechnology) with strong management and entrepreneurial
skills is expected (Christidis et al., 2002, p. 19). This however does not only concern
specialists with higher education and those directly involved in R&D, but also intermediary-
skill personnel, especially when new technologies take a path into a production process and
spread into other industries and occupations (Cedefop, Abicht et al., 2006).
42
6. Which skills? The changing meaning of skill
The specific skills which are reported missing among the current workforce or among job
applicants (skills gap), and more generally skills in demand, are strikingly similar across
countries and sectors. Apart from technical skills which are occupation and industry specific,
and apart from ICT skills and foreign languages, companies require social and personal skills
the most and often rate them higher than technical and theoretical knowledge and formal
qualifications. These skills are well known: teamworking, interpersonal communication,
initiative, creativity, entrepreneurship, leadership and management, presentation skills, ability
to learn, etc. ( 20 ).
The new discourse on the changing nature of skills required on the labour market reveals that
personal characteristics appear most frequent, such as flexibility, motivation, loyalty,
commitment but also self-presentation (aesthetic labour) which denotes not only
psychological and emotional requirements but also certain expectations from physical
appearance (Nickson et al., 2003; 2004; Bolton, 2004; Payne, 2000; 2004). The growing
importance of this type of skill made Jonathan Payne speak of ‘the unbearable lightness of
skill’ (‘we are all skilled now’) and hesitate about the weight of professional knowledge and
competences in the modern economy (Payne, 2000).
Box 6: Research on initial experiences of young people at work

Employers often complain about the quality of young school leavers, about lack of loyalty
and long-term commitment to the company. The research conducted by the Leeds
Metropolitan University (Johnson and Burden, 2003) was concerned with initial experiences
of young people at work. By interviewing directly young people prior to entering their first
job and again three to six months later, as well as by interviewing their employers,
researchers found that employers mostly find gaps in ‘softer’ skills and behavioural attributes
with a less prominent role played by formal qualifications. At the same time both young
people and employers agreed that educational institutions were focusing too strongly on
academic skills and qualifications at the expense of employability (Johnson and Burden 2003,
p. vii-viii). Those young people who have had some work experience through work
placements during their studies or part-time work, were better equipped for the world of
work. The most cited skills sought (gaps) were willingness and ability to work (reliability,
punctuality, hard work), willingness to learn and ‘trainability’, initiative, good
communication and interpersonal skills, IT skills (Johnson and Burden, p. 14).
It seems that companies recruit attitudes rather than competences and skills in their
conventional meaning (Callaghan and Thompson, 2002). Indeed, are such skills alpha and
omega for the success of businesses among drivers of change in the knowledge-based
(20) See EC (2004b), NSTF reports 1999-2004, contributions to Schmidt et al., 2003, 2004, etc.
43
economy? Should education and training primarily focus on these requirements? Are these
skills trainable or are they part of social and cultural background, where the family and the
social origin have a large role to play? Does this potentially lead to deterioration of the role of
initial education in the life of individuals? What is the role of practical training in meeting
individual with employers’ expectations during the education/training cycle? These are
important questions for future research.
44
7. Labour shortage
It is important to note that not only growth per se and the subsequent net job creation generate
demand for the workforce. The current demographic trend of the ageing workforce has at
least equally important impact on employment. An ageing society and thus increasing share
of the replacement – as compared to the expansion – demand for employment, is significant in
terms of numbers: according to some estimates 2 to 3 % of those employed retire each year,
which is perhaps two to three times more than the net additional jobs likely to be created in
the coming decade (Alphametrics, 2005).
From the point of view of potential skill shortages it is, therefore, important to analyse in
which industries and occupational groups the workforce has a high share of older workers
likely to retire in the coming years.
Figure 8: Employment by age groups and economic activity
O) Other community, social, personal service activities
N) Health and social work
M) Education
L) Public administration and defence;
compulsory social security
K) Real estate, renting and business activities
J) Financial intermediation
I) Transport, storage and communication
H) Hotels and restaurants

G) Wholesale and retail trade and repair of motor vehicles,
motorcycles and personal and household goods
F) Construction
E) Electricity, gas and water supply

15-24 years old
D) Manufacturing 25-49 years old
C) Mining and quarrying 50-64 years old
65 and over
A-B) Agriculture, hunting, forestry and fishing
0% 20% 40% 60% 80% 100%
Source : Eurostat database 2006, LFS data, 2nd Quarter 2005, own calculation.
As we can see (Figure 8) the ‘ageing’ sectors of economic activity (those that employ more
people over 50 years old) are agriculture, education and healthcare and social work.
According to general employment trends (Figure 4), the shifts in employment indicate
shrinking in the sector of agriculture but good growth prospects in healthcare and social work
and in education. Labour shortages, therefore, may be expected in these growth sectors in
Europe, which is confirmed by reports from the majority of Member States.
45
Figure 9: Employment by age group and occupation (%)
ISCO 9
ISCO 8
ISCO 7
ISCO 6
ISCO 5
ISCO 4
15-24 years old
ISCO 3 25-49 years old
ISCO 2 50-64 years old
65 and over
ISCO 1
0% 20% 40% 60% 80% 100%
Source : Eurostat database 2006, LFS data, 2nd Quarter 2005,

own calculation.
ISCO 4 – clerks
The ‘ageing’ occupations (those where workers over 50 years old represent roughly 25 % or
more – Figure 9) are agricultural and fishery workers (ISCO 6), legislators, senior officials
and managers (ISCO 1), professionals (ISCO 2) and elementary occupations (ISCO 9). Of
those, employment growth was particularly significant for professionals (2), elementary
occupations (9) and legislators, senior officials and managers (1) in the mentioned order
(Figure 2). These occupations may experience shortages of labour linked to the demographic
situation.
According to reports from individual Member States (Table 2) the current shortage
occupations are: healthcare professions (doctors, nurses, care for old/disabled people), IT
specialists (mostly system designers and analysts), managers, marketing specialists, financial
analysts, scientists, engineers (mechanical, electrical, chemical), teachers, construction
workers (carpenters, bricklayers, welders), electricians, heating and ventilation technicians;
hotel and catering professions (cooks, waiters), truck drivers, childminders, sales
representatives, cleaners, etc.
The projection of demographic trends for employment and jobs by Alphametrics (2005)
coincides with the above-mentioned trends and country records, confirming that the shift in
demand towards higher-skill sectors and occupations relative to supply for more highly
educated people may lead to labour-market imbalances, especially in new Member States.
46
This trend, however, is accompanied by steady demand for elementary occupations. The
projected labour shortage, therefore, is not limited to high-skill but also to low-skill activities.
Another long-term employment/demographic projection (up to 2020) by level of education

predicts serious shortage of tertiary education workforce due to lack of capacity of education
to compensate for demographic deficits which could bring negative consequences for
economic growth in all Member States (Coomans, 2005). Only where generational
progression in educational attainment is the highest (Spain, Cyprus, France, Ireland, Poland
and Portugal) can increased participation in tertiary-level education compensate for
demographic stagnation or decline. However, demographic decline may be so steep that
educational progression may not suffice to compensate, with Germany, Italy and Finland
identified in the worst position (Coomans, 2005).
Eurostat data on job mismatches among school leavers ( 21 ) also demonstrate that the higher
the level of educational attainment, the lower the possibility for mismatch in employment ( 22 )
(annex: Table 5). Further, the fields of education which are stipulated as in shortage
demonstrate in general lower rates of mismatch (engineering, construction, health and social
care, services ( 23 )). Country variations however are very high, sometimes still demonstrating
relatively high mismatch (in construction in Italy 43 %, Belgium 37 %; in health and social
care in Greece and in Spain 35 %; in services 81 % in Denmark, 46 % in Italy and 40 % in
Hungary). If these are the fields in shortage in the same country (such as the case of
construction workers in Belgium) the job mismatch may indicate either the skill gap or
labour-market failure to provide conditions to attract employees into the same field. The job
mismatch situation in shortage occupations in Europe may also be partially explained by the
low geographical mobility of the workforce which could ease the situation in other countries
at least to some extent ( 24 ).
To conclude, given the general employment and demographic trends, occurrence of labour
shortage can be expected in the higher end of skill-intensive occupations as well as among
elementary occupations. The within occupational shifts towards higher skills indicate
however that demand for higher skilled people can be expected across occupations due to
technological change and innovation. Member States report labour shortages in similar
occupations (Table 2) and the projections (Alphametrics, 2005, Coomans, 2005) identify
(21) Youth transitions survey, labour force survey 2000 ad hoc module, Eurostat, 2005.
(22) Eurostat’s measurement of job mismatches counts the percentage of school leavers working in a job
outside their field of education. This mismatch is of a different nature than mismatch between demand
and supply on the labour market which can cause labour/skill shortage.
(23) Naturally more regulated fields of activities presume lower mismatch, such as in the field of healthcare.
Nevertheless, the rates are sometimes surprisingly high even in such fields.
(24) Labour migration inside the EU should however be tackled with special care to avoid the situation where
Member States lose specialists whom they need the most themselves. This will be discussed further, as a
measure to tackle labour shortages.
47
analogous shortages in terms of level of education and occupations throughout the EU. It is,
therefore, important to recognise the skill/labour shortage as a European-wide problem which
needs European-level policy measures.
48
8. Consequences of – and ways to tackle – skill
shortages
8.1. Adverse effects of skill shortages

Skills shortages, skills gaps and other recruitment difficulties have significant economic
consequences for affected employers. Skill shortages can be highly damaging to company
productivity, turnover and profitability, and certainly to organisational competitiveness. Skills
shortages may prevent employers from filling posts or make employers accept staff with
suboptimal skills. The result will usually be that the organisation adopts suboptimal working
arrangements, and endures production cuts, lost orders, and dissatisfied customers (Haskel
and Holt, 1999).
Concentration of skill shortage problems in regions damages regional productivity and

competitiveness and in aggregate, the potential exists for serious knock-on effects for the
whole economy. Research in different countries shows that skill shortages mostly affect
technology- and knowledge-intensive industries with the highest potential for growth and
positive spin-off on the whole economy and employment. The damaging effects of skill
shortages, therefore, multiply when they occur in sectors with the highest value added for
economic competitiveness based on qualitative factors and productivity. For achieving higher
productivity companies build their strategies on improved use of modern technology, product
and process innovation, research and development. Such companies require labour with a
higher skills profile. Lack of skills may also reduce investment incentives (both national and
foreign) where innovation, research and development are involved. Thus when skill shortages
occur in occupations with higher qualification levels, the potential damage for the company
and the overall economy is higher.
Low-skill/low-wage equilibrium, discussed earlier, may also be one of the consequences of

skill shortages. Companies adapt themselves to the situation and change their production
technology and/or services that require relatively low degrees of skill intensity. In
consequence the economy as a whole might experience specialisation in trades and
production patterns where the comparative advantage is the price. This effect is called in
economic literature a ‘low skills trap’, where the economy resides in a vicious circle of low
productivity, low training and a small number of skilled jobs (Redding, 1996, Haskel and
Holt, 1999). Under such conditions employers might no longer be aware of experiencing skill
shortages and the market finds itself in equilibrium and thus cannot solve the problem without
intervention of external forces (state, region). For countries where competitiveness is still
often based on the price factor (new Member States, acceding countries), it is important to
avoid getting into the ‘low skill trap’ and becoming a European manual work plant.
49
Skills shortages may force employers to raise salaries to attract suitable candidates, thus
pushing up costs (either raising prices or reducing profitability). Further, offering higher
wages does not always solve a problem. In case of severe labour shortage in certain
occupations or sectors the problem persists and can be only partially or temporarily solved by
higher wages. Higher wage levels for skilled workers may also cause a wider wage
differential by skill: if wages are flexible, the wages of skilled employees may rise relative to
unskilled ones, since firms may raise the corresponding wage levels to attract some of the few
available skilled workers (Lucifora and Origo, 2002). This may result in several
consequences: first (negative), rising inequalities and reduced social cohesion; second
(negative), pushing the inflation rate upwards and thus having a negative impact on economic
competitiveness, and finally, third (positive), relative higher returns on investments into
education and training and thus a higher interest in such investments from individuals.
Increasing wages often goes hand-in-hand with or is altered by greater demands on the firm’s
personnel, more intensive work, higher workload, overtime, and demands for retraining or
upskilling. As a result companies report greater stress on employees and a damaging morale
in the organisation, which was the case for instance in some 50 % of UK companies facing
skill shortages (Haskel and Holt, 1999).
Skill gaps also cause higher unemployment among unskilled or low-skilled workers: skill-
biased technical progress decreases firms’ demand for unskilled workers, who might be more
likely unemployed if they do not adapt their skills to firms’ new requirements (Lucifora and
Origo, 2002). If we consider the effects of skill shortages and skill gaps not only from the
perspective of unfilled vacancies but also from a broader perspective of costs of deteriorating
effects on the employment situation, the costs appear high. Some research suggest a cost as
high as 6.9 to 7.7 % of GDP on average for existing skill gaps in selected Member States ( 25 )
(Lucifora and Origo, 2002, Table 6, 1999 data).
8.2. Measures to tackle skill shortages

Considering the degree of possible effects of skill shortages on national economies and,
therefore, on European economic performance as a whole, Member States introduce policies
to tackle the problem. There is a large variety of measures implemented in recent years.
PES and other government authorities seek to improve the data sources on skill mismatches,
in particular by improving the databases on vacancies (all Member States) and the
information on school-leavers (Austria, France). In particular they try to follow the length of
vacancies unfilled, historic data on vacancies, including specific qualification and soft skills
requirements per vacancy, follow-up surveys on school-leavers at all education levels, etc.
(25) Measured as cost of vacancies + cost of unemployment in the following Member States: Belgium,
Germany, Denmark, Spain, Finland, France, the Netherlands, Sweden and the UK.
50
Most Member States attempt to measure skill shortages and analyse skill gaps to have space
for adjusting lifelong learning policies and strategies. Many Member States also attempt to
forecast skill needs for a medium and long term to enable a better match of the supply of
initial education and demands of the labour market given the long and asynchronous time
periods of adaptations of supply and demand. These efforts have brought significant
improvements in many countries, especially the ones where forecasting and analytical efforts
are tightly linked to providing information, counselling and guidance (the Netherlands). This
information helps young people make right choices and decision-makers make right financial
allocations to courses, modify curricula and introduce new courses which lead to new and
changing qualifications. Such information also feeds into decision-making on labour
immigration policy (Germany, Ireland and the UK) and special measures to attract workers
for certain occupations or with specific skills.
A proactive targeted external mobility – immigration policy by, for example, increasing green
card quotas for immigration with particular skills profiles is another measure to tackle labour
shortages (green card policy in Germany ( 26 ), proactive immigration policy for shortage
sectors and occupations in Ireland and the UK, job-card scheme in Denmark). Cross-border
mobility could ease the situation significantly but there are still many limitations, such as
cultural and language barriers as well as prejudice towards foreign labour – especially the
type coming from central and eastern Europe with a well-spread fear of a dumping effect on
wages and social conditions. Furthering measures of flexible and easy process of recognition
of foreign qualifications, as well as completion of mutual recognition of qualifications inside
the EU, accompanied by social benefits and pension rights transfer along with employment
across borders and by the eventual completion of a single market in services sector – are all
expected finally to contribute to improvement of labour mobility in Europe.
While the issue of mobility and labour force migration is beyond the scope of this analysis, it
is important to underline that the major source of solving labour shortage problems in old
Member States, especially after the 2004 enlargement, were labour immigrants from new
Member States. In most cases they fed into exactly those occupations which were mentioned
in shortage (Traser and Venables, 2005). While the overall effects of opening up borders after
EU enlargement were evaluated as positive, depicting easing the tightness of labour markets
in Ireland, Sweden and the UK on the one side, and helping to alleviate high unemployment
in new Member States (especially Poland and the Baltic countries) on the other side, no
objective evaluation has been given to the effects on the European labour market. This was
mostly young and mobile labour coming from central and eastern Europe, often overqualified
(26) The evaluation of the German green card policy for ICT specialists gave mixed results. In the first phase
not enough specialists came to register (Doudeijns and Dumont, 2003). At a later stage, however, it was
discovered that the need of 250 000 employees in the ICT sector by 2005 was an overestimation. The
ICT sector proved to be vulnerable to cyclical economic effects and part of labour immigrant found
themselves unemployed. Overall however the policy cannot be assessed as a complete failure, because it
has helped put the question of labour immigration prominently on the political agenda in Germany
(Doudeijns and Dumont, 2003).
51
for the jobs offered in the west. ‘Youthdrain’ and ‘braindrain’ in new Member States and
‘brainwaste’ at European level should also be counted as effects. The most alarming however
is the fact that new Member States were sending workers in mostly the same occupations they
themselves experience shortage. Geographical mobility, though still very limited in Europe,
tends to solve skill shortages in some regions and sectors at the expense of others. European-
level problems need European solutions. It needs joint labour immigration policy, and given
the demographic challenge in all EU-25, it probably needs labour immigration from third
countries.
Measures to encourage internal mobility in individual Member States have been explored
only by few Member States (the Spanish Ministry of Labour and the regional authorities of La
Rioja region help the relocation of workers and their families by guaranteeing job quality and
stability; EEO, 2001b).
Member States attempt to increase employment rates of skilled people (women, older
workers). For instance in Denmark measures encouraging various flexible forms of
employment instead of full retirement were introduced (EEO, 2001b). Other measures include
attempts by PES in improving job matching and in providing more training and retraining
measures in the fields mostly affected by skill shortages, training provision in communication
with employers, (re)designing skill profiles of qualifications required by employers in fast
developing sectors and new occupations, increasing individualisation in matching and
placement services (individual action plans), etc.
Finally, all Member States attempt more long-term and targeted planning of provision of
education and training (including retraining) at all levels to tackle the problem of skills gaps
and skill shortages. An integrative systemic approach to lifelong learning encourages various
players to cooperate more actively in achieving agreement on where education and training
go. Companies and social partners realise that education and training planning is an
existential matter for the success of businesses and participate more actively in assisting
school authorities and PES in the process. At regional level round tables are organised with
sectoral representatives, PES, training providers (EEO, 2001a, p. 51, Belgium; France).
Emphasis ranges from incorporation of generic/social skills into initial education and training
to improvement of access to and boosting of provision of tertiary level education.
At company level employers introduce recruitment abroad, job rotation plans for personnel
retraining, diversification of recruitment channels, on-the-job training and collaboration with
schools, temporary work, poaching workers from other enterprises, subcontracting, promoting
internal mobility of personnel, improving working conditions, rearranging the organisation of
work, adjusting working time, improve image of the company (EEO, 2001a, p. 52).
Sometimes employers try to solve skill shortages by outsourcing production to new regions or
countries. This is mostly the case in large firms. Such solutions involve additional
reallocation costs for companies and costs for cultural and social integration of individuals
(mostly imposed not only on the company but also the State). When companies offer
52
attractive salaries or packages (family allowance, moving expenses) to attract qualified labour
from other firms, they in fact create a cycle of knock-on difficulties and ‘braindrain’ among
other firms/regions.
In short, with all the varying range of measures across Member States, what is needed, as
stated in the Austrian report to EEO, ‘a few more green cards and a lot more education and
training!’ (EEO, 2001a, p. 44). It is however important to note that some recruitment
problems cannot be solved by education and training measures alone and have to be
accompanied by measures such as better rate of pay, better economic and social conditions,
including family-friendly provisions, improvement of childcare facilities to attract more
women into the labour market, improved housing, etc.
53
9. Conclusions and recommendations for policy
and future research
9.1. The damaging effects of skill shortages are multiplying

from company through national to European level
Skill shortages have adverse effects at company, regional, national and eventually European
levels. The problem of skill shortages can be highly damaging to company productivity,
turnover and profitability, and organisational competitiveness. Skill shortages force
employers to raise salaries to attract suitable candidates. Higher wage levels for skilled
workers cause a wider wage differential by skill. This may result in rising inequalities and
reduced social cohesion, and push upwards labour costs and inflation thus having a negative
impact for economic competitiveness. Concentration of skill shortage problems in regions
damages regional productivity and competitiveness and in aggregate, the potential exists for
serious knock-on effects for the whole economy. Skill shortages mostly affect technology-
and knowledge-intensive industries with the highest potential for growth and positive spin-off
on the whole economy and employment. The damaging effects of skill shortages are,
therefore, multiplying when they occur in sectors with the highest value added for economic
competitiveness.
9.2. Reasons for skill shortages

Member States report different reasons of skill shortages:
(a) labour-market tightness – small labour reserve linked to high employment levels and
unfavourable demographic factors;
(b) economic, social and institutional conditions (in large urban conglomerations where
affordable housing is scarce and expensive, it appears a barrier to attract workers;
demotivating social welfare system; inefficient work of PES);
(c) skills mismatch – by level/field of qualification and/or specific skills and competences
(skills gap) – which explains the coexistence of unemployment, including long-term
unemployment, and large pools of vacancies, indicating a situation of structural
unemployment;
(d) deficiency in recruitment practices, work organisation, wage policies and working
conditions.
54
9.3. Expected shortages in high-skill intensive and elementary
occupations but demand for highly-skilled people expected
to increase across occupations due to technological change
and innovation
Given general employment and demographic trends labour shortage can be expected at the
higher end of skill-intensive occupations as well as among elementary occupations. From the
point of view of economic activity sectoral employment, services – both skill-intensive and
less demanding for skills – and construction have enjoyed stable growth in employment. If the
trend persists in the future, one can imagine that these are the fields which would continue
absorbing the workforce and may experience skill shortages. The within occupational shifts
towards higher skills indicate, however, that demand for higher skilled people can be
expected across occupations due to technological change and innovation.
9.4. Recognise skill shortages as a European-wide problem

According to reports from individual Member States the current shortage occupations are:
healthcare professions (doctors, nurses, care for old/disabled people), IT specialists (mostly
system designers and analysts), managers, marketing specialists, financial analysts, scientists,
engineers (mechanical, electrical, chemical), teachers, construction workers (carpenters,
bricklayers, welders, electricians, heating and ventilation technicians), hotel and catering
professions (cooks, waiters), truck drivers, childminders, sales representatives, cleaners, etc.
Member States report labour shortages in similar occupations and the projections identify
analogous shortages in terms of level of education and occupations throughout the EU. It is,
therefore, important to recognise the skill/labour shortage as a European-wide problem which
needs European-level policy measures.
9.5. European problems need European solutions

Many Member States attempt to introduce proactive immigration policy measures to
compensate for demographic decline and labour shortages. The major source of solving
labour shortage problems in old Member States, especially after enlargement, were labour
immigrants from new Member States. While the overall effects of opening up borders after
EU enlargement were evaluated as positive to individual Member States, no objective
evaluation has been given to effects on the European labour market. This was mostly young
and mobile labour coming from new Member States, often overqualified for the jobs offered
in the west. ‘Youthdrain’ and ‘braindrain’ in new Member States and ‘brainwaste at European
level should also be counted as effects. From the point of view of skill shortages and in view
of the Lisbon objectives it is necessary to fully use human potential of the labour pool and,
therefore, finding flexible and easy ways to recognise qualifications and skills of immigrants
55
is an important issue for the future. The most alarming, however, is the fact that new Member
States were sending workers in mostly the same occupations they themselves experience
shortage. Geographical mobility, though still very limited in Europe, tends to solve skill
shortages in some regions and sectors at the expense of others. European-level problems need
European solutions. It needs joint labour immigration policy, and given the demographic
challenge in all EU-25, it probably needs labour immigration from third countries.
9.6. Recognition that not all skill-shortage problems can be

solved by the supply of skills
It is however important to note that some recruitment problems cannot be solved by education
and training and other skill supply measures alone and have to be accompanied by such
measures as wage policy, employment protection, institutional efficiency, general market
strategies, better economic and social conditions, including family-friendly provisions,
improvement of childcare facilities to attract more women into the labour market, improved
housing and others.
9.7. Changing nature of the demand for skills and further

research into the question and its consequences for
education and training
The specific skills reported missing among the current workforce or among job applicants
(skills gap) are similar across countries and sectors. Apart from technical skills which are
occupation and industry specific, and apart from ICT skills and foreign languages, companies
require social and personal skills the most and often rate them higher than technical and
theoretical knowledge and formal qualifications. These skills are: team working, interpersonal
communication, initiative, creativity, entrepreneurship, leadership and management,
presentation skills, ability to learn, etc. Additionally the new discourse on the changing nature
of skills required on the labour market reveals that personal characteristics appear most
frequent, such as flexibility, motivation, loyalty, commitment but also self-presentation
(aesthetic labour) which denotes not only psychological and emotional requirements but also
certain expectations from physical appearance. Companies recruit attitudes rather than
competences and skills in their conventional meaning.
These trends put important questions for future research. Are such skills alpha and omega for
the success of businesses among drivers of change in the knowledge-based economy? Should
education and training primarily focus on these requirements? Are these skills trainable or are
they part of social and cultural backgrounds, where the family and social origin have a large
role to play? Does this potentially lead to deterioration of the role of initial education in the
56
life of individuals? What is the role of practical training in meeting individual with
employers’ expectations during the education/training cycle?
9.8. Improve the knowledge base on skill shortages in Europe:

comparable vacancy statistics; comparable enterprise
surveys; pan-European forecasting
One major problem in identifying labour shortages and skill gaps in Europe is the absence of
detailed and reliable statistics on vacancies, including qualitative requirements for the pursued
workforce. National PES efforts to improve this data collection in a standardised manner
across Europe should be continued. Eurostat’s vacancy survey will hopefully continue to
collect valuable information comparable over time and across countries in the future.
There is no major European-level enterprise survey on skill shortages and recruitment

practices which could provide comparable results across countries and shed light on the
situation from the employer’s point of view. Many Member States use such surveys at
national level and it may be useful in the future to consider a possibility of either applying a
common approach or establishing a regular EU enterprise survey which would help to
identify skill gaps, shortage occupations and recruitment difficulties, and ways to overcome
these in Europe. The latter can be done with the help of an existing EU-level regular business
survey or using positive practice of ad hoc surveys, for instance, the joint harmonised
programme of business and consumer surveys.
There is no tool at European level to measure the shortages (and surplus) occupations and
types/levels of education, which could be done with the help of (econometric) forecasting by
occupation and education. At present Skillsnet is trying to develop a European level forecast,
concentrating on the demand side and using available standardised European data. Such
approach will only bring limited data in a short run but will help identify data gaps and
methodological problems. Due to its focus on the demand side, information on shortage and
surplus occupations/education categories cannot yet be obtained as it can be measured only
against supply. However, in a longer term the project intends to include the supply side and to
involve Member States in filling data gaps and in developing common approaches to
forecasting systems. Future development of these activities can significantly improve
knowledge and information on skill shortages in Europe.
57
Annex
Table 1A: GDP growth rate

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
EU-25 1.7 2.7 3.0 3.0 3.9 1.9 1.2 1.2 2.4 1.6 2.1* 2.4*
EU-15 1.6 2.6 2.9 3.0 3.9 1.9 1.1 1.1 2.3 1.5 2.0* 2.2*
Euro zone 1.4 2.5 2.9 2.9 3.8 1.9 0.9 0.7 2.0 1.3 1.9* 2.1*
Euro zone
1.5 2.6 2.9 2.9 3.8 1.9 0.9 0.7 2.0 1.3 1.9* 2.1*
(EU-12)
Belgium 1.2 3.3 1.9 3.1 3.9 1.0 1.5 0.9 2.6 1.2 2.1 2.0
Czech Rep. 4.2 -0.7 -1.1 1.2 3.9 2.6 1.5 3.2 4.7 6.0 4.4* 4.3*
Denmark 2.5 2.7 1.8 2.8 3.3 0.7 0.6 0.7 1.7 3.4 2.3* 2.1*
Germany 1.0 1.8 2.0 2.0 3.2 1.2 0.1 -0.2 1.6 0.9 1.2* 1.6*
Estonia 4.4 11.1 4.4 0.3 7.9 6.5 7.2 6.7 7.8 9.8 7.2* 7.4*
Greece 2.4 3.6 3.4 3.4 4.5 5.1 3.8 4.8 4.7 3.7 3.4* 3.4*
Spain 2.4 3.9 4.5 4.7 5.0 3.5 2.7 3.0 3.1 3.4 3.2* 3.0*
France 1.1 2.4 3.6 3.3 4.1 2.1 1.2 0.8 2.3 1.5* 1.8* 2.3*
Ireland 8.3 11.7 8.5 10.7 9.2 6.2 6.1 4.4 4.5 4.7 4.8* 5.0*
Italy 0.7 1.9 1.4 1.9 3.6 1.8 0.3 0.0 1.1 -0.0 1.5* 1.4*
Cyprus 1.8 2.3 5.0 4.8 5.0 4.1 2.1 1.9 3.9 3.8 4.0* 4.2*
Latvia 3.8 8.3 4.7 4.7 6.9 8.0 6.5 7.2 8.5 10.2 7.7* 7.1*
Lithuania 4.7 7.0 7.3 -1.7 3.9 6.4 6.8 10.5 7.0 7.5 6.2* 5.8*
Luxembourg 1.5 5.9 6.5 8.4 8.4 2.5 3.6 2.0 4.2 4.2* 4.4* 4.5*
Hungary 1.3 4.6 4.9 4.2 6.0 4.3 3.8 3.4 4.6 4.1 3.9* 3.9*
Malta : : 3.4 4.1 6.4 0.4 1.5 -2.5 -1.5 2.5 0.7* 1.1*
Netherlands 3.0 3.8 4.3 4.0 3.5 1.4 0.1 -0.1 1.7 1.1 2.0* 2.4*
Austria 2.6 1.8 3.6 3.3 3.4 0.8 1.0 1.4 2.4 1.9 1.9* 2.2*
Poland 6.2 7.1 5.0 4.5 4.2 1.1 1.4 3.8 5.3 3.2 4.3* 4.5*
Portugal 3.6 4.2 4.8 3.9 3.9 2.0 0.8 -1.1 1.1 0.3 0.8* 1.2*
Slovenia 3.7 4.8 3.9 5.4 4.1 2.7 3.5 2.7 4.2 3.9 4.0* 4.2*
Slovakia 6.1 4.6 4.2 1.5 2.0 3.8 4.6 4.5 5.5 6.0 5.5* 6.3*
Finland 3.8 6.2 5.0 3.4 5.0 1.0 2.2 2.4 3.6 2.1 3.5* 3.1*
Sweden 1.3 2.3 3.7 4.5 4.3 1.1 2.0 1.7 3.7 2.7 3.0* 2.8*
UK 2.7 3.2 3.2 3.0 4.0 2.2 2.0 2.5 3.1 1.8 2.3* 2.8*
Bulgaria -9.4 -5.4 3.9 2.3 5.4 4.1 4.9 4.5 5.6 6.0* 5.5* 5.5*
Croatia 5.9 6.8 2.5 -0.9 2.9 4.4 5.2 4.3 3.8* 3.6* 4.0* 4.4*
Romania : : : -1.2 2.1 5.7 5.1 5.2 8.4 4.1 5.3* 5.0*
Turkey 7.0 7.5 3.1 -4.7 7.4 -7.5 7.9 5.8 8.9 7.4 5.2* 5.1*
Iceland 5.0 5.3 5.5 4.2 5.0 3.3 -1.3 3.6 6.2 6.2* 5.3* :
Norway 5.3 5.2 2.6 2.1 2.8 2.7 1.1 1.1 3.1 2.3 3.0* 1.8*
Switzerland 0.5 1.9 2.8 1.3 3.6 1.0 0.3 -0.3 2.1 1.9 1.6* 1.5*
USA 3.7 4.5 4.2 4.4 3.7 0.8 1.6 2.7 4.2 3.5 3.2* 2.7*
58
Japan 2.6 1.4 -1.8 -0.2 2.9 0.4 0.1 1.8 2.3 2.7 2.2* 1.8*
: not available
* forecast
Source: Eurostat.
Table 2A: Employment growth

1996 1997 1998 1999 2000 2001 2002 2003 2004
EU-25 0.6 1.1 1.6 1.3 1.5 1.4 0.5 0.3 0.6
EU-15 0.6 1 1.8 1.9 2.2 1.5 0.7 0.3 0.7
Belgium 0.3 0.5 1.5 1.3 2 1.4 -0.2 -0.1 0.6
Czech Rep. 0.2 -0.7 -1.4 -2.1 -0.7 -0.1 0.8 1.8 0.1
Denmark 1 1.2 1.5 1 0.4 0.8 -0.2 -1.2 0
Germany -0.3 -0.1 1.2 1.4 1.9 0.4 -0.6 -1 0.4
Estonia -2.3 0 -1.9 -4.4 -1.5 0.8 1.3 1.5 0
Greece -0.4 -2.2 6.2 0.4 0.9 0.3 0.1 1.6 4.1
Spain 1.7 3.6 4.5 4.6 5.1 3.2 2.4 2.6 2.6
France 0.4 0.4 1.5 2 2.7 1.7 0.7 -0.1 0
Ireland 3.6 5.6 8.6 6.3 4.6 3 1.8 2 3.1
Italy 0.6 0.4 1 1.1 1.9 2 1.8 1.2 0.9
Cyprus : -0.3 1 7.9(b) 5.7 4.6 2 1.1(c) 1.5(c)
Latvia -1.9 4.4 -0.3 -1.8 -2.9 2.2 2.3 1 1.1
Lithuania 0.9 0.6 -0.8 -0.5 -3.7(a) -3.3 4 2.3 -0.1
Luxembourg 2.6 3.2 4.5 5 5.7 5.7 3 1.8 2.6
Hungary -0.5 0.2 1.8 3.4 1.3 0.3 0 1.3 -0.7
Malta : : : : 8.1 2.1 -0.7 -0.7 1.4
Netherlands 2.3 3.2 2.6 2.6 2.2 2 0.5 -0.6 -1.4
Austria 0.4 0.9 1.3 1.6 1.0 0.6 -0.1 0.1 0.0
Poland 1.9 2.8 2.3 -2.7 -2.3 1.5 -1.9 -1.2(a) -0.3
Portugal : : : 1.9 1.8 1.6 0.5 -0.4(c) 0.1(c)
Slovenia -2 -2 -0.2 1.4 0.8 0.4 1.6 -0.2 0.4
Slovakia 2.3 -1.2 -0.4 -2.7 -1.8 0.6 -0.5 1.8 -0.3
Finland 1.4 3.3 2 2.5 2.3 1.5 0.9 0 0.3
Sweden -0.8 -1.3 1.6 2.1 2.4 1.9 0.1 -0.3 -0.5
UK 0.9 1.8 1 1.4 1.2 0.8 0.8 1 1
Bulgaria : -3.9 -0.1 -2.1 -3.5 -0.4 0.4 6.3 3.1(c)
Romania : : : : : -0.8 -2.7 -0.1(c) 0.4(c)
: not available
(a) estimated value
(b) break in series
(c) forecast
59
Table 3A: Unemployment rates of the total population by level of education 1994-2005 in
EU-25 by country
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
ISCED 0-2
EU-25 : : : : : : 11.7 10.3 10.7 11.1 11.4 11.4
EU-15 : 12.5 12.7 12.5 12.5 12 10.9 9.3 9.8 10.2 10.4 10.3
Euro zone : 13.6 13.8 14 12.8 12.4 11.2 9.5 9.9 10.5 10.8 10.6
Belgium 12.5 12.4 13.6 12.9 13.4 12.2 9.3 9.2 10 10.2 11.1 12.1
Czech Rep. : : : : 14 18.6 20 19.3 18 19.7 23.4 25.7
Denmark 11.1 10.4 10.4 8.2 7.3 7.2 6.6 5.5 6.2 7.5 8.1 7.2
Germany 14.8 14.2 14.5 16.8 : 15.8 14 13.2 15.3 18 20.3 20.1
Estonia : : : 15.4* 15.7* 18.7 22.4 15.9* 14.9* 12.9* 17.6* 13.5*
Greece 6.2 6.4 6.7 6.8 8.1 9.1 8.5 8.2 7.9 7.4 8.8 8.7
Spain 22.6 21.2 21.5 20.1 18.1 15 14.1 10.5 11.3 11.5 11.4 9.8
France : : : : : : : : : 10.5 10.9 11
Ireland 19.4 16.9 17.3 15 : 9.6 7.4 5.9 6.2 6.5 6.7 6.3
Italy 8.9 9.4 9.9 10.4 10.7 10.5 10 9.3 9.1 9 7.9 7.6
Cyprus : : : : : : 6.6 4.7 3.7 4.5 5.7 6.5
Latvia : : : : 16.5 17.2 20.6 19.8 21.3 15.9 15.2 13.9
Lithuania : : : : 17.2 16.6 22.7 22.1 19.1 20.5 14.5 16.1
Luxembourg 3.7 2.9 3.8 3.2 : 3.7 3.2 1.9* 3.9 3.6 5.5 5
Hungary : : : 13.1 13.3 12.2 10.4 10.4 10.6 11 11.2 12.4
Malta : : : : : : 5.8 4.6 5.8 5.6 5.6 7.3
Netherlands : : 8.1 7.3 5.9 5 3.5 2.1 3 4.7 5.8 6
Austria : : : : : 5.5 5.5 6.3 6 7.6 8.1 8.7
Poland : : : 15.1 14.2 : 22.9 25.1 26.5 27.4 29.6 29.1
Portugal 6.1 6.4 6.8 6.3 4.3 4.2 3.5 3.6 4 5.9 6.4 7.6
Slovenia : : 8.1 7.8 8.3 8.8 10.3 8.3 8.1 10.2 9.3 8.8
Slovakia : : : : 24.5 30.1 37.3 38.3 42.6 44.6 48.9 50
Finland : 17.9 17 16.9 14.4 13.5 12.2 11.2 11.4 11.5 12.4 11.1
Sweden : 10.1 10 12 11.1 9.9 7.7 5.1 4.9 5.3 5.8 9.1
UK 11.2 9.8 9.3 7.9 : 10 8.9 7.6 8.5 7.1 6.7 6.9
Bulgaria : : : : : : 23.9 30.5 28.1 24.7 20.4 17.6
Croatia : : : : : : : : 14.4 14.8 15 13.3
Romania : : : 3.9 3.5 3.7 4.8 4.9 5.9 6.2 8.1 7.1
Iceland : : : : : 2.9 : : 3.2 3 3 :
Norway : : 4.8 3.7 3.5 : : 2.9 3.2 5 4.3 6.4
Switzerland : : 7.9 7.1 5.4 4.8 4.7 3.8 4.7 6.3 7.6 7.8
ISCED 3-4
EU-25 : : : : : : 8 7.6 8 8.2 8.4 8.1
EU-15 : 8.4 8.6 8.8 8.5 7.6 6.8 6.1 6.4 6.9 7.1 7
Euro zone : 8.7 8.9 9.3 8.6 8.3 7.4 6.9 7.2 7.7 8.1 8
60
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Belgium 7.5 7.7 7.6 7.1 7.7 6.7 5.5 4.3 5.6 6.5 6 6.9
Czech Rep. : : : : 4.3 6.4 6.8 6.1 5.5 6.1 6.5 6.3
Denmark 8.3 6 6 4.7 4.6 4.1 3.9 3.3 3.3 4.2 4.9 4.2
Germany 8.9 8.1 8.8 10 : 8.8 8 8.2 8.7 10 10.9 11.2
Estonia : : : 11.3 10.4 12 14.8 12.7 10.3 11.5 10.1 8.3
Greece 8.3 8.6 9.1 9.1 10.5 11.1 11.1 10.1 10 9.5 9.9 9.3
Spain 20.1 19.3 18 17.5 15.3 13.1 11.2 8.2 9.5 9.8 9.3 7.4
France : : : : : : : : : 6.6 6.6 6.5
Ireland 9.6 7.5 7.3 6.6 : 3.7 2.6 2.4 2.9 3 3.2 3
Italy 7.1 7.4 7.6 7.8 8.4 8.2 7.5 6.7 6.4 5.9 5.4 5.2
Cyprus : : : : : : 4.3 3.1 3.3 3.8 3.6 4.3
Latvia : : : : 14.1 14.2 14.6 12.6 12.1 9.7 9.8 8.4
Lithuania : : : : 15.9 15.4 19.7 18.5 14.3 12.1 12 9.1
Luxembourg 1.9* 2.1* 2.0* : : 1.2* 1.6* 1.1* 1.2* 2.6 4.3 3.5
Hungary : : : 7.2 7.4 5.9 5.6 4.6 4.4 4.8 4.7 6
Malta : : : : : : 2 3.3 1.7 2.8 3.6 2
Netherlands : : 4.8 4.1 3.2 2.3 1.9 1.5 1.9 2.5 3.9 4.1
Austria : : : : : 3.1 2.6 2.8 3.1 3.3 3.7 4
Poland : : : 10.1 8.9 : 14 15.9 17.8 17.2 17.2 16.4
Portugal 6.4 6.7 6.1 6.5 4.5 5.3 3.9 2.9* 4.4 5.3 5.5 6.4
Slovenia : : 5 4.8 6.3 6.1 5.7 4.3 5 5.1 5 5.1
Slovakia : : : : 8.8 11.8 14.8 15 14.3 13.2 15.1 13.1
Finland : 15.6 12.7 13.4 11.2 9.5 8.8 8.6 8.6 9 8.3 7.4
Sweden : 8.6 9.5 10.2 9 7 5.2 4 4.1 4.5 5.6 6.1
UK 7.9 7.2 6.6 5.8 : 4.7 4.4 3.6 3.7 3.5 3.7 3.5
Bulgaria : : : : : : 13.8 17.3 15.9 11.2 10.2 8.1
Croatia : : : : : : : : 13.1 12.1 12.3 12
Romania : : : 5 5.4 6.7 7.6 6.8 8 6.5 6.4 6.8
Iceland : : : : : : : : 2.5 2.2 2.5 :
Norway : : 3.4 3.4 2 2 2.3 2.6 2.8 3 2.9 3.8
Switzerland : : 3 2.9 2.9 2.3 2 2.1 2.4 3.3 3.7 3.6
: not available
* unreliable/uncertain data
Source: Eurostat database 2006.
61
List of abbreviations
EEO European Employment Observatory
EES Employers skills survey UK
EU European Union
EU-10 10 new Member States of the European Union
EU-15 15 old Member States of the European Union
EU-25 25 Member States of the European Union
Eurostat Statistical Office of the European Communities
GDP Gross domestic product
ICT Information and communication technology
IER Institute for Employment Research, University of Warwick UK
ISCED International standard classification of education
ISCO International standard classification of occupations
IT Information technology
NACE Industrial classification of economic activities
NESS National employers skills survey UK
NSTF National skills task force UK
OECD Organisation for Economic Cooperation and Development
PES Public employment services
R&D Research and development
ROA Research Centre for Education and the Labour Market, Maastricht NL
University
Skillsnet Early identification of skill needs network
62
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Additional information on Cedefop’s research reports can be found on:

For your information:

• In addition, an executive summary in English, French and German (Forthcoming 2009)

For further information, contact Cedefop project managers:

1.1. Rationale and objectives of the study

1.3. Operational terminology and concepts

‘Recruitment difficulties’ is an umbrella term incorporating all forms of employer recruitment

2.1. EU-level measurement – state of art

There is no major European-level enterprise survey on skill shortages and recruitment

2.2. Approaches and methods used in Member States

Measuring adjustment behaviour as a reaction to skills shortages is another method to monitor

2.3. Sectoral studies in the EU

Source : Eurostat database 2006.

Table 1: Employment rate in EU-25 by level of educational attainment, 2000-05

Figure 2: Employment change by occupation in EU-25 in 2000-05 (000)

-2000 0 2000 4000 6000 8000 10000

-1700 -1200 -700 -200 300

A-B) Agriculture, hunting, forestry and fishing

-2500 -1500 -500 500 1500 2500 3500

The employment change by sector (Figure 4) demonstrates significant declines in

Development of the skill composition of employment by occupation (Figure 5) demonstrates

ISCO 9 ISCED 5-6

-1200 -700 -200 300 800 1300 1800 2300 2800

Both trends may signify substitution of qualifications (occupational attainment mismatch) as a

Source : Eurostat database 2006, own calculation.

Currently especially significant problems in filling vacancies linked to tightness of labour

The fourth reason mentioned sometimes is deficiency in recruitment practices, work

Increasing flow of vacancies into its

Lack of bilingual candidates in Brussels region.

Recruitment difficulties reported in

University graduates with technological skills,

Labour supply reserve decreasing, re-

Tightness of the labour

Since 1996 a drop in unemployment

IT sector study of the

110 000 skill-shortage vacancies counted.

Sources: EEO, 2001a; 2001b

Comparison of US/OECD wage differentials on skills demonstrates the importance of effects

Box 4: An example from Australia

Box 5: A survey on changes in the workplace among Irish employees

Box 6: Research on initial experiences of young people at work

Figure 8: Employment by age groups and economic activity

O) Other community, social, personal service activities

N) Health and social work

I) Transport, storage and communication

H) Hotels and restaurants

E) Electricity, gas and water supply

0% 20% 40% 60% 80% 100%

0% 20% 40% 60% 80% 100%

Source : Eurostat database 2006, LFS data, 2nd Quarter 2005,

Another long-term employment/demographic projection (up to 2020) by level of education

8.1. Adverse effects of skill shortages

Concentration of skill shortage problems in regions damages regional productivity and

Low-skill/low-wage equilibrium, discussed earlier, may also be one of the consequences of

8.2. Measures to tackle skill shortages

9.1. The damaging effects of skill shortages are multiplying