14. September 2021
Hugues Chevalier, Economist
Even though the unemployment rate has not yet returned to its pre-crisis level (7.1% in the European Union in June) and the level of employment remains below that of February 2020, a general shortage of labour force is observed in Europe (and in the United States). All sectors are affected, but services (hotels, restaurants, health, IT, etc.) are particularly hit. Job vacancies are reaching peaks with, for example, more than one million per day in France, or higher level of offers, up to 30% (Italy), compared to the pre-crisis situation. In Denmark, a study reports that 21% of large companies have turned down orders due to lack of manpower. In Germany, the Dehoga trade union (food and hotel industry) estimates that one in six employees has left these sectors, that is nearly 300,000 workers. In the UK, Brexit adds yet another layer to the chaos, as 1.3 million Europeans have left the country with the pandemic and have not returned, or cannot do so because they don’t have a working permit. Several factors are at the origin of this situation. In the short term, we are witnessing more bottlenecks than a real shortage: all sectors have started to recruit at the same time. As with electronic components, it will take several months for the situation to adjust itself. However, a structural change could also be at the origin of this situation under the joint effects of the changes of life post pandemic and the accelerated aging of the population. If this situation were to last, then we could see a shift in the labour market with wage negotiation power transferred to the workers / unions after 40 years of wage moderation. And that could further accelerate inflation. Yet, with the exception of the UK, there are no unusual wage increases in Europe. By the start of 2022, we will see whether this shortage is set to last or not, and whether wages will be structurally impacted.