What causes labour shortages?

What causes labour Labour shortages

       occur where there is a demand for labour in a particular occupation, but a lack of workers who are available and qualified to do the job. 

A tower of styrofoam bricks is meant to symbolize the labour market that would collapse without skilled labourers as part of a PR campaign in Berlin. (© picture alliance / ZB )

Shortages can take a number of different forms. Aggregate shortages occur in situations of full employment, where there are simply not enough workers to meet demand for labour. Far more frequent, though, is the problem of shortages due to mismatch of labour demand and supply. This refers to a situation where the number of workers is sufficient to fill jobs, but workers are unable or unwilling to fill vacancies for one of the following reasons:

• Qualifications mismatch: workers do not have the necessary education, training or experience to fill vacancies
• Preferences mismatch: they may have adequate qualifications, but do not want to do a particular job because of inadequate pay, status or working conditions
• Regional mismatch: they are able and in principle willing to do the job, but are located in the wrong geographical area and are not ready to move
• Mismatch due to information deficits: workers are not matched to jobs because of a lack of information on existing vacancies, or inadequate recruitment procedures on the part of employers.

Shortages due to mismatch can coexist with high levels of unemployment, as is the case in many European countries including Germany. 

Aggregate shortages and mismatch on the labour market occur as a result of two types of changes. First, they may occur where changes in labour demand outpace corresponding shifts in the size or composition of the labour force. Such changes are often generated by growth in the economy as a whole, or in particular sectors; changes in the international division of labour that affect the location of production and services; or by technological change and changes in productivity. Second, shortages may be generated by decreases in labour supply. The labour force may become smaller or its skills or occupational composition may change. This is often as a result of demographic change, trends in the qualifications structure of those entering the labour market, or declining participation rates.