A specter is haunting Europe: no skills

DAVID HECKER/AFP

Angela Merkel showed some serious diplomatic acumen at this week’s G8 summit, riding herd on world leaders and wringing concessions from the United States on climate change—thus avoiding an embarrassing setback for Germany’s first female chancellor. 

But Merkel and here European colleagues will need more than just political skills if they are to address Europe’s latest crisis … of skills. The continent has a massive shortage of skilled workers across a range of sectors. The Financial Times reports that Merkel’s Germany is considering opening up its labor market to foreigners, primarily due to an “exodus” of qualified workers that includes academics, medical professionals, engineers and corporate staff. Coupled with demographic pressures, including a seriously below-replacement population rate, Germany—which has traditionally favored protecting its labor market—has little choice but to consider welcoming immigrants into its workforce.

At the same time, eastern European countries are also beginning to face a chronic labor shortage. Wages in some sectors have risen by as much as 50 percent in the past year, and emigration from eastern Europe to western Europe has exacerbated the shortage. Even though Poland, for instance, has a high unemployment rate of 13 percent, companies are still unable to find sufficiently skilled workers to recruit, and many people who remain in eastern Europe are unwilling to move even within their country’s borders to fill open positions. Indeed, companies are now forced to look to places like China for workers. That may not be good enough, and the region’s growth may suffer as investors look elsewhere to avoid these labor crunches.