Denmark eyes looming skills shortage as economy picks up

After a lacklustre recovery from the 2008 financial crisis, Denmark's central bank has warned that the labour market faces a squeeze as unemployment falls, the population ages and young people shun vocational jobs.

Denmark eyes looming skills shortage as economy picks up
Denmark is seeing fewer and fewer people interested in, and qualified for, manufacturing and transport jobs. Photo: Iris
At Technical Education Copenhagen, traineeships for another 20 to 30 lorry drivers could probably have been found if only people were interested in them, according to Anders Wendelboe, a head of education at the vocational training college.
In a country where work-life balance is highly valued, a wrongful perception that the job came with irregular working hours was putting some people off, he speculated.
“Young people today would like to have leisure time, they would like to have a family,” he said.
A lack of skilled workers was also threatening growth at Teccon Form, a company in the western town of Holstebro making tools for injection moulding, employing around 20 people.
“There has probably been too much focus on having a university education,” chief executive Michael Nederby lamented.
“There has been a slightly higher status around that, and we are fighting against that,” he said, adding that he had been forced to raise salaries to compete with other employers.
Central bank warning
Denmark's central bank last week warned that the country was technically at full employment and that the economy could be hit if the country did not find ways of growing its labour force.
“Unemployment has now reached its 'structural level' … There are, so to speak, no labour reserves among the unemployed,” it said in a quarterly report.
“There are already signs of pressures in the labour market. The clearest indications are reporting of labour shortages in both the construction and manufacturing sectors,” it added.
Seasonally adjusted unemployment stood at 4.2 percent in July, according to data from Statistics Denmark based on the number of people on unemployment benefits and in labour market activation programmes.
The number rises to 6.2 percent under the so called ILO (International Labour Organization) measure, which is used to compare unemployment in different countries.
Denmark was badly hit by a burst property bubble during the 2008 financial crisis and growth has lagged the economies of neighbouring Sweden and Germany.
The country's central bank believes economic output will edge up 0.9 percent this year and 1.5 percent in 2017.
No quick fix
“The problem is the greatest among vocationally trained labour with technical skills, such as electricians, industry technicians and mechanics,” said Steen Nielsen, head of labour market policy at the Confederation of Danish Industry.
A previous reform raising the age of retirement, as well as using foreign labour — mostly from other EU countries — would help plug the skills gap in the short term, he added.
Still, as Denmark's population ages, that is unlikely to be enough.
“A shift is taking place in the labour market,” said Stine Pilegaard Jespersen, the head of labour market and education policy at the Confederation of Danish Enterprise.
“More elderly are leaving the labour market … and the young who are coming in are much less likely to have a vocational education than those who are leaving,” she added.
Two of the country's top markets for foreign labour, Germany and Poland, also have ageing populations and will also see their workforce shrink over the coming decades, she noted.
Denmark received 21,000 asylum seekers last year, and many Danes worry that the new arrivals — like previous generations of refugees — will struggle to find work, putting pressure on the Scandinavian country's welfare state.
While some professions facing labour shortages, such as bakers and butchers, could offer opportunities, refugees were unlikely to play a major part in fixing the problem, Jespersen said.
A survey published by Denmark's integration ministry in May showed that 55 percent of newly arrived refugees had only completed primary school, while eight percent had no education whatsoever.
“What we typically see with refugees is that they don't have very strong skills. Many of them are very young and don't have a lot of schooling, and they also don't have a lot of work experience,” said Nielsen.
“On top of that there is a big language barrier,” he added.

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Number of people on Danish welfare benefits increases, reversing trend

After several years of decreases, the number of people whose income is supported by the state has gone up in 2019.

Number of people on Danish welfare benefits increases, reversing trend
File photo: Thomas Lekfeldt/Ritzau Scanpix

The second quarter of this year saw the number of people receiving the various forms of social welfare support reach 701,400, according to Statistics Denmark – an increase of 6,900.

The figures encompass all forms of social welfare payments, including support paid to people out of work (kontanthjælp, dagpenge, fleksjob) and special types of pension (efterløn, førtidspension) but not the state student grant (SU) or state pension (folkepension).

But the 2019 increase is due to a raise in the retirement age from 65 years to 65.5 years as of January 1st, 2019, according to Statistics Denmark.

That meant an increase in overall size to the group which falls into categories encompassed by the welfare benefits figure.

An additional 200 people available to the labour market are out of work compared with last year. 1,000 more people are receiving the dagpenge unemployment insurance, which is partly state-funded, while 1,200 left the system.

Although the number of people receiving benefits has increased this year, it is still some 150,800 lower than it was in 2010 and is close to the lowest figure recorded since 1987.

Reductions in the total in recent years have been related to lower unemployment and fewer people receiving the special pensions.

A strong Danish economy has contributed to this, as have pension reforms meaning many have had to work longer before retiring.