June 21. 2024. 6:00

The Daily

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Sisyphus’ skills shortage

As businesses and governments cry out for more skilled workers, it is good to know that in a properly functioning market, skills and labour force shortages will never be fully filled.

In politics, it’s normal to think about jobs as if there were a fixed amount of potential jobs that society should aim to fill. In this mindset, labour force shortages are half-empty glasses that we need to fill.

The danger of looking at labour markets in such a way is that there is always a danger of overflowing, in which new water pushes out the water already in the glass. This is the picture politicians have in mind when they warn that migrants might steal the jobs of locals.

However, the picture is not only dangerous – it is also wrong. An economy is not static, as a glass of water, an economy is dynamic.

If an engineer moves to Europe to “fill a skills shortage”, she will need an apartment that somebody needs to build, she will need some food that somebody needs to grow and cook, she will need teachers to educate her children, and she will need a doctor to heal her when she falls sick.

Filling one skills shortage thus creates many others. It’s like the famous Sisyphus, rolling his rock forever upwards.

Of course, equating skills shortages with labour force shortages might be too simplified a way to look at it. Some jobs won’t be needed anymore, which will free up the labour force to acquire new skills that are more in need.

Still, taking into account the shrinking European population, and taking as a given that we do not want the economy to shrink, immigration will be necessary.

For example, the European Commission set itself a goal of reaching 20 million IT specialists in the European workforce by 2030. Even if Europe achieved this goal without additional immigration by means of extraordinary educational efforts: Who will do the building, nursing, cooking, cleaning, teaching jobs that the 20 million chose not to do?

Another favourite means to fight the skills shortage is increasing female labour force participation. But then who will do the domestic labour – the cooking, the cleaning, the childcare – that falls predominantly to women?

“Men!”, you will correctly shout, but that does not solve the skills shortage. You either get them through immigration, thus creating additional labour needs, or by men cutting back on their current employment, thus creating another labour shortage.

This is not to say that fighting skills shortages and labour force shortages is futile, quite the opposite.

Companies and governments should do all they can to invest in getting the skills they need, be it through educational programmes, making it easier for women to take part in the labour force, or through labour-friendly immigration systems, even if it is a Sisyphean task.

Labourforce shortages are a sign of a thriving economy, skills shortages point to an innovative economy. Only in a depression is there no skills shortage.

Or, as French philosopher Albert Camus put it: “One must imagine Sisyphus happy.”

This week, the European statistics office Eurostat released its most recent data on the gender pay gap in Europe. According to this data, women in the EU earn 12.7% less than men on average in 2021.

This is a slight decrease of 0.2 percentage points compared to 2020.

The data used in this graph measures the difference between the average gross hourly earnings of men and women working in enterprises with 10 or more employees. The data is not adjusted for job position or the economic sector.

On the bright side, Luxembourg seems to have become the first European country to eliminate the gender pay gap with women earning 0.2% more than men on average.

The European laggards in the fight against the gender pay gap are Estonia and the German-speaking countries: Austria, Switzerland, and Germany.

The graph also shows the development of the gender pay gap over the past ten years from 2012 to 2021. Looking at these numbers, Spain is the clear winner, having decreased the gender pay gap by nearly ten percentage points.

Of the large EU countries, Germany decreased its gender pay gap by more than average, while France stagnated.

In the EU average, the gender pay gap decreased by 3.7 percentage points over 10 years. Assuming the same speed of change going forward, the gender pay gap will likely close in about 34 years.

At that point, most of the readers of this newsletter will be in retirement, experiencing a gender pension gap instead.

ECON committee of the EU Parliament votes on MiFID II and MiFIR. On Wednesday (1 March) the MEPs settled on a common text regarding the review of the Markets in Financial Instruments Directive (MiFID II) and the Markets in Financial Instruments Regulation (MiFIR). Among other measures, the committee spoke in favour of an EU-wide consolidated tape, an electronic system which combines sales volume and price data from different exchanges to provide a continuous live feed and a single reference price for each asset class.

EU negotiators agree on rules defining European green bonds. The European Parliament and member states reached a provisional agreement on Tuesday (28 February) to establish requirements for a European green bond standard for environmentally sustainable bonds. The regulation, presented by the Commission in 2021, aims to define which financial products can be labelled as European green bonds, enabling investors to better identify bonds aligned with the EU green goals and limiting the risk of greenwashing of financial products. The regulation needs to be formally approved by EU countries and the Parliament before entering into force.

European Public Prosecutor’s Office (EPPO) investigated €6.7 billion worth in VAT fraud in 2022. Having set up shop in June 2021, the EPPO this week released its first full annual report for the year 2022. By the year’s end, there were “1117 active investigations for overall estimated damages of €14.1 billion,” 47% of which were linked to VAT fraud. The activities of the EPPO seem to have an effect on the ground, as EURACTIV Croatia and EURACTIV Bulgaria report.

EU Auditors call out complexity of EU financial landscape. In a new report, the EU Court of Auditors criticises the “patchwork construction” of the EU’s public budget landscape, calling it “overly complex and not fully publicly accountable.” It recommends to refrain from setting up more financial instruments outside the EU budget.

EU Commission wants common purchasing of ammunition. According to reports by Der Spiegel, the EU Commission is set to propose common purchasing of 155-mm ammunition through the European Defence Agency to secure the supply for Ukraine and replenish the shrinking stockpiles in Europe. In a further small step towards a common industrial policy, it would provide a guaranteed amount of demand for ammunition producers.

Core inflation in Spain hits record not seen since 1986. Core inflation in Spain hit a new record in February, a level not seen in the last 37 years, despite all price containment measures implemented by Sanchez’s left-wing government. Read more.

France sees record number of foreign investments in 2022. Over 1,700 new foreign investment projects were identified in France in 2022 – a new national record – which should secure or create more than 58,000 jobs, according to findings published by public agency Business France on Monday. Read more.

Finnish dock workers paralyse foreign trade. The dock workers’ strike – which has gone on for two weeks now – has now paralysed Finland’s foreign trade, with no imports and exports going through any of the country’s ports. Read more.

Budapest-based Russian ‘spy bank’ faces bankruptcy. The Budapest-based International Investment Bank (IIB), which has almost 50% Russian and 25.27% Hungarian ownership, has used up nearly all of its liquidity reserves after being hit by EU sanctions. Read more.

Zagreb identifies key priorities for using billions of euros from European Social Fund. The country is entitled to draw some €2.27 billion from the European Social Fund Plus (ESF+) in the 2021-27 period, Croatia’s Labor Minister Marin Piletic said on Monday. Read more.

Sellers’ inflation, Profits and Conflict: Why can Large Firms Hike Prices in an Emergency? Isabella Weber and Evan Wasner of the University of Massachusetts Amherst argue that the US Covid-19 inflation was predominantly a sellers’ inflation that derives from the ability of firms with market power to hike prices. According to this paper, policy should aim to contain price hikes at the impulse stage to prevent inflation from the onset.

A new order of trade: Avantika Goswami explores whether developing countries and the climate can gain from the massive turn towards protectionism and industrial policy that is observable in the US and in the EU.

Debt and Power in Pakistan: Kate Mackenzie and Tim Sahay argue that, although plenty of blame for the economic woes of overly indebted Pakistan should go to the IMF and the World Bank, Pakistan is being plundered by its own elites.

Crisis in abundance: Why did the Russian economy fail to collapse and is there a crisis on the horizon? Oleg Itskhoki takes the reader through how the Russian government weathered the sanctions from the West, and why 2023 might become more difficult than 2022 in this regard.