In many countries the shortage of skilled labor (including professionals, experts, and specialists at all levels) is THE crucial factor that companies name when it comes to current and future challenges for positive business development. According to a survey by ManpowerGroup (2021) around 69% of participating companies report a shortage of skilled labor; compared to that in 2019 – before the pandemic – this figure was at 54% and in 2009 even lower at 30% (ManpowerGroup 2019). On the other hand, there is an increased need for recruitment.
Situation on the German labor market
In Germany companies struggle as well: According to a survey by the German Chamber of Industry and Commerce (2021, p.5), the risk arising by the shortage of skilled labor ranks even higher than the risk from increasing prices for energy and commodities or economic policies. The effect additionally is intensified by the demographic change: while the baby boomers of the post-war generation go into retirement, significantly fewer young people enter the workforce. Current forecasts show that the number of people of working age (between 20 and 65 years) will have decreased by 3.9 mn. by the end of 2030 and even by as much as 10.2 mn. until 2060 (BMWI 2021). The initially expected easing of the labor market due to the COVID pandemic also failed to materialize. Although after-effects within companies are still noticeable, the challenges in recruitment are even greater than before the crisis. A shortage analysis by the Federal Employment Agency (2021) presents that the average vacancy period of job openings respectively the time to fill a vacancy has increased continuously from 57 days in 2010 (Federal Employment Agency 2020) to 122 days per vacancy in 2021; some vacancies cannot be filled at all. Particularly affected by this development are medium sized companies. Should these developments continue in the future, the shortage in skilled labor could not only have critical impact on individual companies but on the overall economic performance.
Impact on recruitment strategies
Companies must adapt to the situation and develop new strategies to find and retain talent1:
1. Investing in vocational education and continuing professional training to fill the internal talent pipeline
One reaction to the labor market situation is the further intensification of vocational education and continuing professional training. Through dual education programs, incl. dual study programs, young talents are tied to companies at an early stage in their career and are quickly operational after graduating due to the professional experience gained during their studies. Regular training ensures that existing employees are equipped for the challenges of the future.
2. Recruitment of additional skilled labor on the external labor market
In a situation where skilled labor is scarce, companies struggle regarding the so called „War for Talents“. A study by KOFA (1/2022) shows that even today the total of job openings exceeds the total of unemployed people with a formal qualification2 – the average number of applications to a job opening is decreasing. Placing a job advertisement typically does not suffice to find suitable employees. On the one hand, employers must increase their attractiveness on the labor market by positioning themselves accordingly.
On the other hand, recruitment needs to break new ground. This includes exploiting talent pools whose potential is not yet exhausted, e.g. by increasing participation of parents in the active labor market (see excerpt I), by engaging the so-called Silver Workers (see excerpt II) as well as the recruitment of skilled employees from abroad (see excerpt III). The overall market situation, however, also shows that an active search is indispensable.
I. Participation of parents in the active labor market: Almost 50% of women in Germany work part time (DIHK 2021). Thus, the rate of full employment amongst women is higher in almost every other EU country. Furthermore, women are underrepresented in professional life with an employment rate of 71,8% (Micro census 2020). Since the majority of economically inactive women have a proficient level of training, it is up to us to put this potential to better use and to make it easier for parents to participate in the active workforce, respectively to increase in working hours.
II. Silver Worker: In the future, the workforce of all generations will be needed even more than today to use the available expertise as well as experience even after exceeding the age for retirement. Therefore, corresponding measures and incentives must be created.
Therefore, the recruitment strategy for addressing potential candidates is key. In addition to classical measures such as (online) job advertisements, job fairs or recruiting events, proactive ways, e.g. employee referrals, active sourcing and / or headhunting / executive search are gaining in importance. Hiring a headhunting firm to directly approach candidates (incl. active sourcing) is effective as shown by a survey conducted by the Institute for German Economic Research (2019).
3. International recruiting
Looking at the international labor market, networking across markets will play a more significant role in the future. For one thing, the external, national labor market can only partially provide remedy due to current developments (negative balance with 350,000 more people leaving the workforce than entering it) (DIHK 2021).
On the other hand, the permeability of markets is pushing companies to diversify – whether it be the recruitment of skilled labor from abroad for the national market or for international markets (e.g. international plant sites, branches, subsidiaries, or sales / market development). Networks such as CFR have identified the need for cross-national recruitment and can increase the reach for companies by approaching candidates directly.
III. Skilled personnel from abroad: „In order to permanently maintain the current level of labor force potential, from now on every year there would need to be a surplus of 400,000 people immigrating to Germany vs. emigrating.“ (BMWI 2021) To succeed in this endeavor, the work location must be attractive and barriers to immigration must be lowered.
1 The list states an extract of potential strategies. Additional measures are not being discussed, amongst them the recruitment of expat returnees, inclusion, digitization / automation, or the promotion of lateral entries.
2 Shortage of specialists = number of job openings nationwide for which arithmetically there are no qualified unemployed people available (KOFA)
Article written by Mientje Krüger, CFR Global Executive Search Germany
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