Europe needs stronger job market policies, including greater investment in lifelong learning, to combat the threat of inequality and economic stagnation arising from labour shortages and skills mismatches, researchers from the EU-funded WeLaR project said.
In a policy brief, “Labour market matching and quality of work in a changing world”, the WeLaR researchers show how digitalisation, climate change, demographic shifts, and globalisation are reshaping the European labour market, making it harder to connect workers with available jobs.
Sectors like healthcare, ICT, construction, and agriculture are struggling to fill roles. Meanwhile, the rapid growth of digital and green industries is creating new opportunities, but a lack of skills prevents many workers from finding employment. Eurostat data reveals that over 40% of employers struggle to find qualified candidates. Regional disparities add to the strain, with different parts of Europe facing distinct labour shortages and skill gaps.
The researchers argue that expanding access to upskilling and reskilling programmes and introducing other lifelong learning initiatives is essential, particularly for workers from declining industries.
“Labour market mismatches are not just a temporary disruption: they reflect long-term structural changes,” explains Mikkel Barslund of HIVA – KU Leuven, a co-author of the brief. “We must align workforce skills with industry’s needs, while improving working conditions. Otherwise, the shortages will persist, and inequality will widen.”
Fixing the crisis requires more than just upskilling, the researchers stress. Poor job quality – low wages, unstable contracts, and limited career prospects – is pushing workers away from critical sectors. Stronger worker protections, wage coordination, and restrictions on precarious contracts can make jobs more attractive.
For instance, limiting fixed-term contracts can encourage employers to invest in stable, high-quality jobs. Coordinated wage bargaining could prevent downward wage pressures that drive in-work poverty. Developing frameworks for regional or sectoral wage coordination can harmonise labour market conditions and address regional disparities in employment opportunities.
Furthermore, family-friendly policies, such as parental leave and flexible hours, can boost workforce participation, ensuring stable incomes for many families and also reducing in-work poverty.
Trade unions also play a crucial role in addressing job insecurity, negotiating fair pay, and pushing for better working conditions, particularly for low-income workers, migrants, and women.
“Tackling Europe’s workforce challenges requires a coordinated effort from policymakers, businesses, and unions,” says Karolien Lenaerts, of HIVA – KU Leuven, another co-author. “It’s not just about filling vacancies. It’s about creating jobs people want to stay in.”
Mikkel Barslund, Karolien Lenaerts, Cristiano Perugini, Fabrizio Pompei and Laurène Thil (2024). POLICY BRIEF: Labour market matching and quality of work in a changing world: the role of labour market regulations, collective bargaining and investments in up- and re-skilling.
Read the full brief here.
