Europe’s labour market is hitting record-high employment levels, yet many critical sectors are grappling with severe worker shortages. Labour market economists call for inclusive policies to bridge these gaps, which are affecting industries such as healthcare and construction, by bringing underrepresented groups into the market.
A new policy brief from the EU-funded Project WeLaR shows that non-EU migrants, individuals with low education, NEETs (Not in Employment, Education, or Training), and people with disabilities are now largely excluded from employment opportunities. Researchers argue that addressing barriers to their entry into the labour market is essential to fill current job vacancies and prepare for the broader workforce challenges of the future.
Labour shortages are not just a short-term mismatch between supply and demand: the researchers found that they are deeply rooted in broader megatrends, including an ageing population, digitalisation, the green transition, and globalisation. While these trends are disrupting traditional industries, they are also creating opportunities to build a more resilient labour market — if policymakers act fast.
“Europe’s ageing population is putting serious pressure on the workforce,” explains Laurène Thil, a researcher at HIVA KU Leuven and co-author of the brief. “Longer life expectancy and falling birth rates are shrinking the pool of available workers. The strain is especially hard on older women, who are often forced to leave their jobs or reduce hours to care for ageing relatives.”
At the same time, digitalisation is transforming the nature of work, offering new pathways for people who might otherwise be excluded. Flexible and remote working options are opening doors for caregivers, individuals with disabilities, and those living in rural areas, who have the lowest activity rate, an average of 55.8% in 2022.
“Promoting remote work and flexible hours can make workplaces more inclusive,” says Karolien Lenaerts, a researcher from HIVA KU Leuven and co-author of the brief. “Workers who may have been excluded from traditional office-based employment due to disability, geography or family responsibilities can now engage more easily in paid remote work.”
The researchers stress that overcoming these challenges will require a coordinated approach. Policymakers must reduce barriers to participation by investing in affordable childcare, introducing flexible work arrangements, and launching targeted programmes for marginalised groups. Meanwhile, employers and unions must foster a culture of lifelong learning to equip workers with the skills they need for the digital and green economies.
“This is not just about plugging immediate labour gaps,” says Mikkel Barslund, a researcher at HIVA KU Leuven and a co-author of the brief. “It’s about ensuring the long-term sustainability of Europe’s welfare systems, fostering economic growth, and improving well-being. Addressing skills mismatches and expanding access to work will help build a labour market ready to tackle future challenges.”
Solving Europe’s labour challenges will require collaboration among employers, unions, and governments. The researchers say that while systemic measures can create supportive frameworks, individuals and companies must also take responsibility for adapting to new career realities.
Mikkel Barslund, Karolien Lenaerts, Laurène Thil (2024). POLICY BRIEF: Labour supply in a changing world: the effects of ageing, digitalisation,the green transition, and globalisation.
See the brief here
