The Financial Times on Germany 9

The Financial Times on Germany 7



EUROPE: Eurozone wakes up to changing face of labour

By Ralph Atkins, Financial Times
Published: Jun 02, 2007

Dariusz Wojcik is a 28-year-old Pole who speaks good English and has always fancied driving a tram. For Veolia Transport, which operates Dublin's new Luas light railway system in Ireland where he works, that makes him a much sought-after man. The group is stepping up its efforts to recruit Poles because of the shortage of experienced drivers at home.

"We have had a number of applications from Polish train drivers. We'd really love to get them in but often their English is poor," says Frank Scott-Lennon, human resources manager.

Labour shortages are not restricted to fast-growing economies such as Ireland but are becoming a feature of the 13-country eurozone.

In Germany, which still restricts workers entering from Poland, asparagus farmers are having difficulties finding labourers at harvest time. Recently, shortages of skilled workers have become acute in the fast-expanding engineering sector.

Even in public transport - where the squeeze on public finances has led to massive job cuts - shortages are em-erging. "We expect recruitment to become harder," says Reinhold Bauer, labour director at Stuttgarter Strassenbahn, a bus and tram operator in southern Germany. "All the forecasts show that the labour market will improve - and that means it will be harder to find employees."

Such anecdotal evidence highlights the significantly changed face of the eurozone labour market.

Mass unemployment after the 1970s oil shocks is gradually subsiding; unemployment data yesterday showed the eurozone unemployment rate falling to 7.1 per cent in April - the lowest since records began in 1993. The Organisation for Economic Co-operation and Development forecasts a fall to 6.6 per cent in 2008. "It is clear that there has been an important structural im-provement. Those sorts of rates are not a million miles from what would have been considered a respectable unemployment rate in the US a few years back," says Kevin Daly, economist at Goldman Sachs.

Meanwhile, vacancies are rising - a possible indicator of labour shortages. Consistent eurozone data are un-available but vacancies in France and Germany last year reached the highest level since at least 1990, according to the OECD.

In France, where Veolia Transport has its headquarters, Ralf Gottwald, deputy director of human resources, envisages recruitment problems. He regards France as "in effect near a full employment situation", with the jobless total massaged down by government schemes and the level of benefits putting those out of work off re-entering the active labour force.

However, Raymond Tor-res, head of the OECD's employment analysis division, warns against misinterpreting the trends. "You are starting to have significant labour shortages," he says. "But that is co-existing with significant non-employment." Rather than classified as jobless, those out of work are on sickness or disability benefits, for instance.

Rising labour shortages are also symptomatic of other problems - including universities producing graduates in subjects with limited job opportunities.

The European Central Bank offers a similarly cautious judgment. Jean-Claude Trichet, ECB president, points out that since 1999, more than 12m jobs have been created in the eurozone - more than in the same period in the US.

Labour market and tax reforms have increased the proportion of older people and women in employment as well as improving incentives to work.

The ECB frets that labour shortages will lead to higher wages. So far there is scant sign of that happening.

In Ireland, unit labour costs have risen faster than for the eurozone as a whole. But at least at Dublin's light railway, a tight labour market is not seen as a big hurdle. Mr Scott-Lennon says: "It is a hindrance for us in that we have to spend a lot of time to get the people that we want, but we have adequate staff at the moment and expansion will happen."