Labour: the scarce production factor of the future
Wim Boonstra and Hans Stegeman
Economic Research Department
The problem: increasing shortage of skilled labour
The labour market is increasingly being confronted with a shortage of well-educated workers. This is evident from a relatively large number of vacancies that are often difficult to fill. The problem is not only quantitative in nature; more and more there is a poor qualitative match between supply and demand on the labour market. As a consequence of population ageing, accompanied as it is by a shrinking workforce, this qualitative and quantitative mismatch will become more acute in the decades ahead. Severe bottlenecks are looming in many sectors, including education, health care, commercial services, construction, and industry. Employers are facing a shortage of not only higher educated workers, but also of skilled workers, such as electricians and construction workers – in other words, craftsmen.
The forces of supply and demand on the labour market inevitably result in a rise in the costs of skilled labour. Calls for wage restraint from politicians and employers will increasingly lose their relevance. Successful enterprises experiencing growing labour productivity thanks to innovation can afford higher wages. These companies will not hesitate to pay this price for skilled labour, leaving the weaker companies floundering as a result of rising wage costs. The danger is that the trade unions will try to harness the labour shortage to exact higher general wage rises – even for less skilled labour. If this should happen, the result will be an accelerated erosion of employment at the lower end of the labour market. Somewhat paradoxically, then, the shortage of skilled staff will lead to increased unemployment among the less skilled. Additionally, higher general wage increases will also result in rising wage costs in the health care and government sectors, which will put the affordability of the welfare state under even more pressure than is already the case.
Reasons enough therefore, to further explore the labour factor in this edition of the Outlook. We will outline the main aspects of the problem and its possible solutions. We aim to show that all parties involved – employees, employers and government – will have to demonstrate considerable creativity and commitment. The challenge is big, but there is a lot at stake. If we fail to optimize labour force participation and at the same time boost labour productivity further, the result will be reduced economic growth in the years ahead. The funding of all collective provisions will subsequently run into trouble, particularly that of the increasingly costly health care services. There is therefore no shortage of motivation to commit to achieving as much economic growth as possible.