Episode 29 – Lack of skilled workers & strategies left and right of the mainstream

The demographic change is a phenomenon that is observed in a lot of industrialized countries. Due to a continuous reduction of the birth-rate since the 1960s, the population in industrialized countries on average gets older and less. The competition for talents becomes fiercer and firms of all sizes have to develop sustainable strategies to develop, acquire and bind employees for the future – the quality of goods and therefore the competitiveness is directly related to the humans behind. According to surveys from the German Chamber of Industry and Commerce, the lack of skilled labor is the largest risk for the national business cycle. One out of three firms cannot fill all vacancies and a growing share of firms is not receiving applications for their vacancies any more. This circumstance turned into reality. As this is a structural trend, there will be no reverse in the near future. Additionally, the German labor market only proved limited resources. A low unemployment-rate due to an extremely positive business climate is on the one side positive for the overall economy, on the other side it limits the supply of workers for firms, which are indicating a large labor demand. The question is, where can we identify available potential and resources?

Promissing options left and right of the mainstream

Good news first, there are promising options (we will pick up examples in the following paragraphs). Bad news, it will be expensive and not easy. Firms have to face the fact that to get adequately skilled employees, there is a large need to retrain them. This is expansive more necessary compared to previous years and moreover it is more expansive to attract people to the firm due to the market conditions. A decade ago, it was sufficient to place vacancies at the regional labor office, newspaper and other media – due to a higher supply, firms could choose among amounts of applications. As the labor market is more or less empty and demographic changes occur, the labor supply has been shrinking.  Companies have to provide to the applicants more than just the job (e.g. mobile devices, cars, work-life-balance programs, sports activities, health care offers etc.) and also employer branding has become more and more relevant.

Silver workers treasure

Moreover, in order to get skilled people, they have to look left and right of the mainstream. So, they have to look at so-called labor market reserves and older employees. Older cohorts of employees who are at the end of the usual careers are on average much healthier than in former times. Very often, they are also quite open and interested in prolonging their careers when the offer is correct and lucrative for them. Therefore, the labor market for people 65-65+ is currently one of the most dynamic labor markets in Germany – more than 10 percent of the people between 65 and 70 years are still employed/working. Of course, mostly they do not work full time, but they give contributions to firms in areas where it is highly valuable. For firms, it can be a strategic approach to keep in touch with retired staff and give them a signal that they’re welcome to return, earn additional money besides their drawn pension and make a valuable contribution for their former firm. It’s financially attractive and rewarding for older employees – additionally, as the incentives and motivation have changed, older employees are more willing and interested to work than it might have been in the earlier days which leads to a win-win situation for employees and firms.

Optimization of family and work integration

Additional potential can be seen in the group of women that have given birth to children and want to return into working life. A positive effect for firms can be seen in the trend, that the maternity/parental leave women take off has been shrinking in the past years – therefore, the gap employers have to compensate has become smaller and the obsolescence of skills can be reduced. In order to prevent women to change their employer in between before and after giving birth, firms more than ever have to signal those women, that they really want and need them back.

One reason why women in parental leave overthink changing employers is because they are disappointed that the firm never asked how they are doing, if they are interested in picking up their work and when they are planning to return. As firms cannot afford that anymore, it is important to stay in contact and actively send the signal that they want and need women in parental leave back, support them in the integration process. Creating a flexible working environment is not easy for firms, but it creates incentives for mothers to return earlier and with a higher volume of working time/hours. In the context of demographic change and an aging society, the compatibility of family and work is not just about child care but also about care of the elderly. Therefore, also employed men might need additional flexibility due to the care for their parents or grandparents. Flexibility is not easy to guarantee and implement, but it can contribute to keep employees in the firm. For example, home office days can bring huge benefits for people that want to combine work and child or family care. Of course, this is not possible for every profession and working place, but in many cases it can be a win-win situation.

Governmental support needed

Government can also contribute to keep older employees longer in working life by setting sensible financial incentives. But one has to assert, that in Germany, the incentives for an early entry into retirement are strong. Given the demographic effects, the fact that the baby-boomer generation is about to enter retirement and less people entering the labor market, it is questionable if a pension scheme based on a pension age of 63 is economically rational. In contrast to that, firms would be open for governmental activities that aim on keeping elderly longer in the working cycle and setting signals that elderly workers are highly welcome to stay longer at their firms. Although it is not popular for government to increase the pension age it is important to create a political framework that matches the economic circumstances. Larger cohorts of older employees in working life on the one side and technological progress (digitization) on the other side leads to an increasing need for further education – (further) education and the idea of lifelong learning has become more important than ever.

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