Forecasting Labour and Skills Shortages: How Can Projections Better Inform Labour Migration Policies?

Abstract

Many countries in the European Union (EU) face serious skills and labour shortages in a number of sectors, despite persistently high rates of unemployment. In most cases, these shortages result from problems of mismatch between labour demand and supply. Many governments have resorted to labour migration programs as a more rapid and effective means of addressing shortages. Estimating the need for labour immigration to fill labour gaps and shortages requires: an understanding of the causes of current and potential labour and skill shortages; estimation and projection of their scale; and evaluation of the appropriateness of different policy responses for reducing shortages, including migration policy. This paper focuses on the first two points, and concludes with a brief discussion of the third. The authors begin by defining shortages and categorising the different determinants of these. They then document the linear and cyclical trends that generate these shortages in European countries. This is followed by a review of the different methods for estimating and forecasting shortages, and a look at how such estimates are made in a number of OECD countries. In conclusion, the authors consider which kind of shortages warrant migration policy as a preferred or required solution.