Immigration and innovation can ease EU worker shortage

Significance

Wage growth was subdued in 2022, at 2.8%, even as unemployment declined to 6.7%, as a symptom of productivity growth slowing further since the pandemic. Policy is shifting towards radical innovation to cover areas of chronic shortage.

Impacts

• Northern Europe’s ‘robot density’ lead will bolster the EU’s hunt for automated transport and farming solutions where shortages are acute.
• Budget strains make it hard to reduce public debt and may restrict the public investment needed to drive longer-term productivity growth.
• New social policies aimed at increasing participation, especially among women, may better suit European welfare models than US/UK ones.
• Lower unemployment in eastern EU member states is raising wages there, and makes technological upgrading more crucial in those states.