By Rajesh Mehta and Manu Uniyal
The European Union (EU) is beginning to run dry with a skilled labour force. While this problem persists across all company sizes, Small and Medium Businesses (SMEs) are most affected, as indicated by many pan-EU surveys.
A Eurobarometer survey (Sep/Oct 2023) conducted across 27 EU Member States found that almost half of European SMEs faced qualified labour shortages. It showed that 47 per cent of industry and 50 per cent of the manufacturing sectors had difficulties in finding relevant technical staff.
In a European Commission press release (March ’24) titled ‘Tackling labour and skills shortages in the EU’ nearly 63 per cent of SMEs revealed that they failed to find the required talent. Similar situations were found across 42 other occupations.
The two primary reasons for skill shortages are the slow replacement rate between the exiting older and young workers and long-term underinvestment in key education areas like engineering etc.
Ageing Europe Young India
While India’s demographic dividend comes of age, Europe retires. As of January 2023, of the total EU population of 448.8 million people, 50 per cent were older than 44.5 years and 21.3 per cent were 65 years and over.
Two things will happen between now and 2100 – The EU dependency ratio will climb 33 per cent approximately to 60 per cent by 2100 and the working-age population will contract by 57.4 million.
What this translates for Indians, is an abundance of opportunities across many sectors, both at home and abroad. Anyone who wants to dip their toes into this opportunity must upskill early with available online degrees such as an online marketing master’s degree.
EU Elections, shrinking skill and tax base: A question of the European future
Europe today stands united and divided simultaneously. United, because most Europeans agree on the issues challenging Europe and want to see some change. Divided, because of the divergent directions of implementation of those changes each party group presents.
The rising right is unabashedly challenging the liberal left on many fronts, especially, on the idea of an open liberal Europe that leads the world as a model of humanistic and democratic values. One pertinent example of this is the handling of the migration issue not to mention climate and Russia-Ukraine crisis, economy and employment.
So how can the EU maintain its global position as a leader in IT and manufacturing, be one of the largest global economies and sustain its high standards of living/welfare with a shrinking skill and tax base?
Perhaps, the answer to this lies in how robustly and positively EU and India engage with each other. Something that might get a stronger push post-June 6th to 9th as EU citizens vote in the 10th European Union (EU) elections.
Can India be the answer to Europe’s skill shortage?
India-EU relations will grow expeditiously irrespective of the outcome of both the Indian and the EU elections. Between the ‘China challenge’ and the ‘Russian roulette’, the EU needs a robust and reliable partner that has shared values and interests.
Sectors with most possibilities & potential
While many areas have a skill shortfall within the EU, here are some sectors where opportunities exist and will continue to rise from an Indian perspective.
The COVID period highlighted cross-EU digital deficit, divide and discrepancies. Unless there is swift and successful digitalisation, the EU cannot fully implement its policies, be it climate change, migration management, electric vehicles (EV), internet of things, AI, automation etc. India as a software leader can help the EU in all the stages of its digital development and delivery.
Also read: India’s display revolution will bank on LCD technology for years to come
EU auto sector transition from internal combustion engine (ICE) to electric vehicles (EV)
More than 13 million people are directly or indirectly employed within the EU automotive sector, that is 6.1 per cent of total EU employment. 2.6 million people work in direct manufacturing of motor vehicles, representing 8.5 per cent of EU employment in manufacturing.
But the problem is not just that of a continual declining labour force but also that the EU car manufacturing giants are still mainly producing combustion engines. This is further compounded by their significant lag in EV innovation and manufacturing. Meanwhile, Chinese EV manufacturers with their high quality, competitively priced EVs knocking on the EU market are becoming a political and an economic headache for the EU. In order to avoid the EU becoming a dumping ground for cheap Chinese EV cars, in late 2023, the European Commission launched an anti-subsidy investigation into the battery electric vehicles (BEV) from China. Depending on the outcome, the EU could impose anti-subsidy duties on such Chinese imports.
Here lies a big opportunity for Indians to step into both the hardware and software side of things. India can not only provide a dependable and competitive manufacturing and innovation base for the EU automotive giants but also supply them with a trained technical workforce.
Given the EU’s lack of skilled people, especially in its technical and infrastructure sectors, engineers, technicians are in high demand. Around 75 per cent of employers in 21 European countries could not find workers equipped with the right skills in 2023. This is an increase of 42 per cent in 2018. Technician roles existed in one-third of SMEs. However, they encounter a shortage of technically trained staff, for ex., lab workers and mechanics. Around 42 per cent of European SMEs reported facing shortages of technicians. This is, by far, the most-identified job role with skills shortages. India producing nearly a million engineering graduates annually can fill this gap too.
China is the EU’s 3rd largest trading partner while India doesn’t even figure in the top 10. With the possibility of changing EU policies towards China, India has an opportunity to increase its depth of engagement with the EU and start creating ecosystems that will allow it to become one of the top 5 trading partners of the EU.
But to translate this opportunity into reality, India has to develop its skill and education sector in a way that trains Indians in a way so they can seamlessly integrate into the EU economic ecosystem and labour markets.
(The authors: Rajesh Mehta is an international consultant in the field of Market Entry, Innovation, and Public Policy. Manu Uniyal, is a media consultant and a writer based in Sweden, working in the areas of India-Nordic geo political and economic interactions, innovation & start-ups. Views are the authors’ own and not necessarily those of financialexpress.com.)