Europe is facing a shortage of skilled workers. The Basque experience could be the answer

Europe is facing a shortage of skilled workers. The Basque experience could be the answer

Europe is facing a demographic time bomb, and it’s threatening to worsen already critical labour shortages.

By 2035, there will be about 50 million fewer people of working age in Europe than in 2010.

Meanwhile, global GDP growth for 2023 stands at the lowest annual rate since the 2008 financial crisis, with the exception of the pandemic period, and prices of food and services continue to rise.

As we have seen in the past, the stress of a downturn can have generation-long impacts and, in some cases, hollow out labour forces as those with in-demand skills migrate to more resilient economies.

How countries approach these structural challenges will partly determine economic productivity in the years to come.

EU member states are struggling to attract workers

According to Eurostat, more than 75% of EU companies already struggle to find professionals with the necessary skills to fill jobs, hampering economic growth.

Moreover, shortages in sectors vital to the green and digital transition risk attaining common objectives of the EU’s industrial strategy.

The European Commission launched a key report earlier this month looking into what drives the lack of human capital and how to reverse it.

Many of these difficulties are linked to the inability of member states to attract and retain workers — with its impact being 10 times larger than that of skills requirements.

AP Photo/Francois Mori
People stand on a giant card of the Europan Union, during an opening ceremony at the Champs de Mars, in Paris, 2008 - AP Photo/Francois Mori

It reveals that many of these difficulties are linked to the inability of member states to attract and retain workers — with its impact being 10 times larger than that of skills requirements.

Yet, skills are still a crucial part of the equation. The report strongly highlights the need for skills intelligence, which meaningfully blends quantitative and qualitative information on labour market needs and skills, allowing skills anticipation.

This intelligence should inform targeted migration policy, another of the report’s main recommendations.

Basque Country's bold approach

The semi-autonomous Basque Country in northern Spain has dealt with many of the challenges wrought by demographic change and talent-flight first-hand.

It is one of Europe’s oldest regions, with 22% of its population aged 65 and over.

The loss of skills to retirement, coupled with an exodus of talent following the 2008 downturn, forced us to turn to proactive and innovative talent attraction policies and come up with what I consider the most comprehensive approach to tackling critical skills shortages in the EU.

Our strategy combines tax incentives and publicly funded relocation and headhunting services, which complement the central government’s visa schemes, to ensure that talent attraction is targeted and can drive economic growth and prosperity in the long run.

AP Photo/Alvaro Barrientos
A Tamborillera carries a Basque flag as she marches during El Dia Grande celebrations in the Basque city of San Sebastian, January 2019 - AP Photo/Alvaro Barrientos

Today, the city of Bilbao, the Basque Country’s main capital, is considered one of the world’s leading urban centres for talent retention capacity and has been recognised as the tenth-best large European city in terms of attraction of direct foreign investment by the fDi Intelligence magazine.

Our strategy combines tax incentives and publicly funded relocation and headhunting services, which complement the central government’s visa schemes, to ensure that talent attraction is targeted and can drive economic growth and prosperity in the long run.

High-skilled professionals who relocate to the Basque Country are offered an income tax rebate of up to 50% for up to 11 years. It is the boldest aspect of our approach on behalf of the Government of Biscay and the Basque Government.

A tailored approach to tackle real obstacles

We collaborate with the regional government and Basque universities and carry out our own research to gauge labour demand in real-time.

This intelligence allows us to micro-target our response to particular sectors and feed major employers in our region, such as Iberdrola and Mercedes.

We travel to European capitals and beyond to meet skilled professionals who may be considering relocating. We realise that we must go to them – they’re not necessarily going to come to us.

Markus Schreiber/AP
People walk upstairs at an underground station with an European flag in Berlin, June 2015 - Markus Schreiber/AP

It is a full package approach, which comprises setting up personal meetings or Zoom calls with individuals and talking through the benefits of migrating — including what we can offer in terms of income tax rebates and relocation packages.

In our experience, it is as important to persuade the partner and family of a skilled professional that the move would be a good idea.

So we’ve set up help for families in relocating, in finding a suitable school for the children of professionals, in advising on where to rent an apartment, and in helping find jobs for partners.

This tailored approach that tackles the real obstacles to moving has helped us relocate 700 skilled workers to the Basque Country in the past five years alone.

Meanwhile, the situation across Europe worsens

The Basque country isn’t alone in prioritising skills shortages. Italy, for example, offers generous tax rebates to encourage worker relocation.

Yet, labour shortages and the country’s historic brain drain still persist, and this is hindering the country’s ability to implement projects worth billions of euros under the EU’s post-pandemic recovery programme.

The situation is expected to worsen over the next three years, when Eurostat estimates the number of people hitting retirement age will exceed the number of new workers entering the labour market.

Both Italy’s urgent need for talent and Greece’s plans for digitalisation could benefit from an initiative similar to ours, which promotes and strengthens the government’s policies by creating synergies among them.

Czarek Sokolowski/AP
People read leaflets associated with the Schuman Parade in Warsaw, May 2014 - Czarek Sokolowski/AP

Greece’s latest attempt to draw talent in is its Digital Nomad Visa. But, these visas are not a panacea for the digitalisation of the economy, which the country has identified as a main objective in the years to come.

Although these visas are important to create an ecosystem of innovation, Greek companies still struggle to recruit in the country due to a lack of both soft and technical skills, including in IT, according to Manpower.

Digital nomads may add to the ecosystem but do not necessarily benefit industry needs.

While tax incentives and visa schemes are important elements in attracting skilled workers, they are often presented as stand-alone policies.

Both Italy’s urgent need for talent and Greece’s plans for digitalisation could benefit from an initiative similar to ours, which promotes and strengthens the government’s policies by creating synergies among them.

For instance, in Spain and the Basque Country, securing visas for people coming from Spanish-speaking Latin America is a key priority.

This has prompted us to offer a wider service, including bureaucratic guidance, and, as a consequence, we have seen the success rate of applications increase.

A more proactive effort is needed

Ultimately, European countries need to be far more interventionist and all-rounded in their efforts.

One of the European Commission report’s main recommendations to address labour shortages is to support the efficient matching of labour supply and demand.

Publicly funded headhunting services not only support talent attraction strategies but can attract a greater number of workers in critical fields and change the deep-rooted perceptions that Italy and Greece have no opportunities for young skilled workers by informing on the real opportunities these locations hold.

Although no region is absolutely alike, there are lessons that can be adopted and scaled from the Basque model as EU member states prepare for the next wave of economic uncertainty and consequent clamour for talent.

Ivan Jiménez is Managing Director of Bizkaia Talent, a not-for-profit talent agency funded by the provincial Government of Biscay and the Basque Government along with Basque Universities, research and technology centres, and the largest industry clusters.

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