Several important challenges affect Europe‘s future labour market, including an ageing society; rapid technological changes and development; increasing demand for certain categories of labour;
and uncertainty about future growth in European economies in a number of sectors and occupations. Identifying and addressing labour market shortages is a key policy tool in overcoming the expected challenges. Shortages occur on the labour market when demand for a particular type of labour exceeds the available supply at prevailing pay and working conditions of employment. Shortages emerge as a result of the lack of workers available or interest in accepting a job at the current conditions (labour shortages) and the lack of workers with the relevant skills (skill shortages).
Two different types of labour shortages can be identified: cyclical and structural shortages. Skills mismatches will always exist as a part of the frictional dynamics of the labour market and due to the business cycles (i.e. cyclical labour shortages). However, persistent or structural shortages can be detrimental to economic recovery and growth. Some structural changes, such as the adoption of new technologies, may increase the demand for certain skills that are not available in the labour market in the short run, creating skills shortages even when unemployment is high. Therefore, one of the main challenges faced by policy makers is identifying real, structural labour shortages, which cannot be met by the local labour force even if the labour market is functioning well or measures are taken to improve it, e.g. by supporting labour matching or by investing in education and training.