The state of the European labour market — and why now is the time to leverage the power of MSPs

As countries throughout Europe confront the reality of enduring labour market tightness, research indicates they are resorting to a solution that’s provided stability for generations: contingent labour. Among European countries, the Netherlands and Germany stand out, relying on temporary employment more extensively than at least 18 other EU27 nations and the UK. In fact, more than a quarter of the Dutch workforce is contingent, the result of labour laws that make the overall costs to hire and dismiss permanent workers higher than for temporary workers.

At AgileOne , our managed services program (MSP) serves as the backbone of a contingent work model that is already trusted by countless companies across Europe. Providing a single point-of-contact to manage workforce procurement and governance strategies, MSPs allow companies to streamline talent acquisition processes while providing extraordinary insight into supplier and temporary labour performance. They are especially useful in times of economic transition, when both labour and financials are tight, which is why they’ve become the gold standard in workforce solutions in many parts of the world.

How effectively European countries deploy creative strategies like MSPs to respond to the elevated rates of job vacancies and other economic challenges will set the tone for generations to come. Against this backdrop, AgileOne just released Workforce Solutions Market Overview: Fall 2023 Edition agileone-market-study-europe-fall-2023.pdf (agile-one.com). Combining the latest economic data and insights from around the world with leading workforce solutions, the report is the latest in a series of resources we’re offering to help companies find opportunities amid global uncertainty.

Leveraging our research, here’s a summary of the key trends impacting European countries right now:

●?????? The economy of the Netherlands is on track for a gradual recovery by the end of 2023, aided by government price caps on surging energy costs and projected growth rates of 0.8 per cent in 2023 and 1.6 per cent in 2024. Despite a low unemployment rate of 3.6 per cent in July, the tight labour market and high inflation are constraining substantial economic expansion and affecting job opportunities. Companies are facing reduced demand and are downsizing production, even as the European Central Bank takes measures to combat inflation. In this environment, businesses are exploring alternative workforce strategies that cater to the preferences of younger generations like Gen Z and Millennials, creating opportunities for freelance and contingent work. The country is also experiencing a shift toward becoming a global hub for science, especially in research and development sectors like life sciences, medical technologies, and biotechnology, which have seen employment grow by almost 15 per cent between 2013 and 2019 — roughly twice the pace of general employment.

●?????? Germany’s economy faces an impending labour shortage as its current workforce of 47 million is due to stop growing at any moment — if it hasn’t already. Unless something changes, Germany’s labour supply is projected to decrease by 3 million people over the next decade, which will have negative implications for economic growth and inflation pressures. That’s the equivalent of a 7 per cent reduction in the German workforce. Just to maintain flat growth, Germany needs to recruit approximately 400,000 skilled migrants per year. While an influx of Ukrainian refugees has temporarily boosted the population, a long-term solution may involve companies actively seeking younger workers, particularly from Gen Z. Employers are wise to accommodate this demographic’s expectations for work by embracing technology, offering continuous learning, and promoting diversity, equity, and inclusion.

●?????? The UK is grappling with sluggish economic growth and persistent inflation, growing by only 0.2 per cent in the second quarter of 2023, as the Bank of England continues to raise interest rates to combat inflation. Compounding these challenges is a "missing workers" phenomenon, with 400,000 fewer people employed or seeking employment compared to pre-pandemic levels. This phenomenon may be attributed to various factors, including mental health conditions, physical ailments like back and neck pains potentially linked to remote work, and an increase in post-viral fatigue associated with so-called “long COVID.” By contrast, Ireland's economy is thriving, driven by manufacturing and favorable tax policies, with projected GDP growth rates of 5.5 per cent in 2023 and 5.0 per cent in 2024 despite labour shortages. Both the UK and Ireland could benefit from comprehensive workforce planning, including skills mapping and greater employment flexibility, to address current and future labour needs.

●?????? The business climate in France remains stable, with a 7.2 per cent unemployment rate that is near a record low. Despite this, the country faces labour market tightness and recruitment challenges, particularly in sectors like healthcare, technology, and low-carbon mobility. For example, at least 120 hospital emergency departments scaled back operations in 2022 due to staffing issues, according to data presented in our report. French workers remain one of the world's most disengaged workforces, a situation possibly exacerbated by the government's contentious move to raise the retirement age and a post-pandemic shift to remote work. To adapt, French companies are streamlining recruitment processes, reducing office sizes in favor of flexible 'third places,' and becoming more mission-driven to improve the employee experience.

Each of these country-level trends shares a common theme: in an era of labour market tightness, it’s imperative for companies to deepen their talent pools. With a significant portion of the working population facing retirement in the next decade, the success of the global economy will be staked on how effectively companies can tap into the next generation of workers. That’s the promise of contingent arrangements, which appeal to every generation of workers — from Gen Z, which is highly motivated by opportunities to learn new skills, to those approaching retirement age who might be searching for a better work/life balance in a nontraditional work environment. Contingent hiring has an added benefit for companies, too — especially when it’s scaffolded by an effective MSP program. It’s cost-effective and comes without the rigid commitment of a traditional hire.

Changing times call for a change in approach, and at AgileOne , we’re with you every step of the way as you navigate today’s complex, changing marketplace. Download our Workforce Solutions Market Overview, Fall 2023 Edition here agileone-market-study-europe-fall-2023.pdf (agile-one.com) and contact me to discuss making the transition to an MSP model.