The challenge of labour availability: Measures taken in the wrong direction


UEL's focus

 The availability of talent is one of the main challenges for Luxembourg and its companies, both to ensure their competitiveness today and tomorrow. 

A short-and long-term necessity

Despite a high level of salaries by international comparison, Luxembourg is currently experiencing a labour shortage. This unavailability is increasingly perceived as an obstacle to business development. The Chamber of Commerce’s Economy Barometer showed that 55% of Luxembourg companies consider the lack of qualified labour as the main challenge for their economic development in 2023, placing it at the top of the list of challenges. The Chamber of Trade’s business survey indicated that in the second quarter of 2022, 70% of craft enterprises also confirmed a lack of personnel. Finally, the first employment barometer carried out by UEL in collaboration with fr2s among recruitment agencies confirmed that the current very tight employment market concerns all economic sectors. 

To succeed in its digital and environmental transitions, Luxembourg will need employees trained in this perspective. However, these professions are already suffering from an aggravated shortage situation.

Luxembourg will also have to find talent to replace the growing number of people retiring. Currently 120,000 employees, or about 25% of the workforce, are 50 years old or older. Overall, the recruitment needs in Luxembourg by 2030 are estimated at some 300,000 employees. 

A war for talent

The need for talent comes within the context of a general labour shortage on a European scale. While it is true that the shortage has never been greater in Luxembourg (and indeed affects all economic sectors and profiles), the scale of the situation is even greater in many other European countries. For example, as the graph below shows, the vacancy rate, the reference indicator in this respect, is lower in Luxembourg than the European average and almost half as high as in countries such as Germany, Belgium or the Netherlands. 

This reality also concerns all economic sectors. For example, while the shortage in the construction sector is a recognized reality in Luxembourg, the vacancy rate in Luxembourg is “only” 1.3%, compared to an average of 4.0% in the euro area. 

Job vacancy rate (2022-Q3; Eurostat)

Companies are struggling to find the right skills in Luxembourg, in the Greater Region and gradually throughout the EU. While other European countries are also facing a shortage of talent, looking for the same profiles and are adapting an incentive policy to attract them, we can only regret that the recruitment process for non-EU employees is subject to administrative formalities that are disproportionate to the purpose (for more details, see FEDIL’s Position on attracting talent from outside the European Union). In this context, UEL welcomes the willingness of the government to give immediate access to the labour market to family members of third country nationals. 

A challenge taken in the wrong direction

In view of the challenge of the availability of labour, UEL sees that many actions and situations go against the grain in several respects: We will not mention the current debate on a possible reduction of working time, which is likely to be on the agenda of the next legislative elections and which would only aggravate the situation. Let’s just say that if working time is reduced, more labour will be needed, which is already in short supply today. 

We could deal with economic aspects (mismatch on the labour market, cost of mobility and housing), societal aspects (work-life balance, teleworking, commuting time) or demographic aspects (ageing of the population and exhaustion of the pool of available jobs in the Greater Region), but in this paper we will limit ourselves to legal and regulatory aspects in which the legislator plays a more or less decisive role. 

The rigidity of the labour market and the regulatory inflation, in a context of ever higher absenteeism due to illness, reduce the workforce available for productive and value-creating activities. The accumulation of leave in a context of absenteeism reduces effective working time, while the cumulating obligations of reporting, control and other audits reduce productive working time.

The growth of secondary/improductive tasks (i.e. reporting) in companies is illustrated by the evolution of the number of auditor vacancies reported to ADEM. This number has tripled in recent years and now stands at 1,500. This occupation alone accounts for more than 10% of all vacancies reported to ADEM. We could also correlate the inflation of reporting obligations with the stagnation of productivity in Luxembourg, as confirmed by the latest report of the National Productivity Council. 

Although each of the measures or leaves taken individually may appear positive, their accumulation has heavy consequences on companies and the economy.  

With 26 days of annual recreational leave (Article L. 233-4 of the Labour Code) and 11 public holidays per year (Article L. 232.2 of the Labour Code), i.e. 37 days per year, Luxembourg is one of the European countries with the most days not worked. In addition to these “normal” recreational leaves, a multitude (25 currently exist!) of special leaves have been created (most recently the caregiver’s leave and the leave for force majeure), others have been extended (paternity leave increased from 2 days to 10 days in 2018) or made more attractive (the number of people who benefited from parental leave between 2017 and 2021 increased by 41%, i.e. much more than the number of employees (+13%)).

UEL would also like to recall the importance in this context of adapting the legal framework in order to make the organisation of work more flexible and allow companies to manage these absences.  

The generosity of the pension system also plays an essential role in the availability of labour in Luxembourg.  Indeed, the retirement age (61) and the employment rate of 55-64 year old’s (44%) are among the lowest of all OECD countries. UEL deplores this situation which, in addition to being unsustainable in view of the natural ageing of the population and the long-term financing of pensions, leads to a loss of knowledge transmission between generations. It should also be remembered that employment growth is a necessary (but not sufficient) condition to ensure the financing of our pension system on a pay-as-you-go basis. 

The reports of the Absenteeism Observatory show that absenteeism due to illness is increasing every year and now represents a direct annual cost (National Health Fund, Employers’ Mutual Insurance Fund and employers) of over 1 billion euros. According to the latest STATEC economic report (2022-2), the absenteeism rate in 2022 will even exceed the rates recorded in the years 2020 and 2021, despite a decline in coronavirus infections.

In conclusion, although the negative economic outlook for 2023 should ease the labour shortage somewhat, the situation will remain critical in the coming months. UEL therefore calls on every stakeholder involved in the socio-economic development of Luxembourg to make Luxembourg soil as attractive as possible on the international labour market and to consider each of their actions in terms of their consequences on the availability of labour. Our economic and societal resilience is at stake.