As the world economy emerges from the pandemic and the threat of rising unemployment recedes another employment problem is emerging in many countries: a  shortage of labour.

‘We are running into a global workforce crisis come 2030 with an overall labour shortage and a huge skill mismatch and big cultural challenge’, says human resources expert Rainer Strack. Strack is a senior partner and managing director at the Düsseldorf office of The Boston Consulting Group. He believes attracting and retaining skilled will a key challenge for businesses and organisations in the coming years. Struck emphasises that ‘people are a scarce resource and businesses have to work to understand them better.’

As global economic growth has rebounded this year shortages of workers have emerged in different sectors in many developed countries these include: truck drivers, farm workers, hospitality employees and healthcare workers. The COVID-19 pandemic delivered a global shock to labour markets and there has been a ‘re-ordering’ of the different sectors people work in as economies recover.

One important factor influencing labour markets in developed countries is demographic change. An ageing population in many nations has seen older people leave the labour force and not be replaced by the same number of young people entering it. There is also evidence of people in the labour market turning their backs on low paid work with unattractive working condition. Economists have sited this as an important reason for a shortage of truck drivers and farm workers.

The consequences of a global shortage of labour may bring significant benefits to workers who could see their wages rise and working conditions improve. The shortage may also offer employees more choice in the types of jobs they can apply for and working conditions they can demand. But if labour costs rise this may work its way through to higher prices and higher inflation. There may also be short term disruptions to the supply of some goods as many countries are experiencing in fuel, food and building supplies.

A global labour shortage also raises interesting questions about migration. If there is a shortage of truck drivers in one country, then if can be made up by migrant truck drivers from somewhere else in the world. This is particularly the case in the European Union where there is free movement of labour between countries. Opponents of migration often claim that immigration drives down wages and job opportunities of domestic workers, but if there is ‘nobody to pick the crops in the fields or deliver your petrol’ what else can you do?

Points to discuss with a class

1. How do the demographic changes mentioned in the blog affect the labour market in a country?

2. Discuss the impact of the labour market changes identified in the blog on consumers, producers and the government.

2. How might the changes in the labour market considered in the blog affect income inequality in a country?

3. What impact might the changes in the labour market have on a country's long run economic growth?