The lack of labor in Denmark has long posed a serious challenge to the country's business life and economic growth. New calculations from Dansk Erhverv paint a gloomy picture of how this problem has affected companies' turnover - in the past three months alone, it has cost at least DKK 31 billion, he writes. The lost potential for growth and competitiveness not only puts companies under pressure, but also society's overall ability to maintain and expand welfare in the future writes Dansk Erhverv.
In this article, we delve into the extent of the labor shortage and its consequences for the Danish economy, the day-to-day operations of companies and the necessary political measures to ensure future growth and prosperity. We also look at the structural challenges Denmark faces and the solutions needed to ensure a stable and competitive labor market in the coming years.
The Consequences of the Labor Shortage: Turnover, Growth and Rejected Customers
Danish companies are increasingly faced with a situation where they cannot fill the necessary positions to meet demand. This lack of qualified employees means that companies have to turn away customers and say no to potentially lucrative orders. The consequence is a stagnation in growth and lost income, which burdens both companies and the economy as a whole.
According to Dansk Erhverv's latest analysis, in the last three months, Danish companies have experienced losses of at least DKK 31 billion as a direct result of labor shortages. Brian Mikkelsen, CEO of Dansk Erhverv, states:
"These are drastic figures which emphasize that the lack of labor is still a big and real problem. And it will only get worse, because Denmark and large parts of the EU are facing severe demographic headwinds, where we will have more elderly people and fewer people in the workforce.” writes Dansk Erhverv.
This statement underlines the seriousness of the problem and points to the demographic challenges Denmark is facing. Towards 2030, the workforce will be significantly reduced, and it is estimated that Denmark will lack around 90,000 working people – a number that could have serious consequences for both the private and public sectors.
Demographic Challenges: More Older People and Fewer in the Workforce
The aging population is one of the main reasons why the labor shortage in Denmark is expected to become even more pronounced in the future. As in many other European countries, life expectancy is increasing and more people are reaching retirement age, while fewer young people are entering the labor market. This demographic development creates a bias that puts pressure on both the public and private labor markets.
The lack of labor affects across sectors, but some industries are particularly hard hit. The service industry, the health sector and the construction industry are just some of the areas where it has become increasingly difficult to find and retain qualified employees. The lack of hands means that the existing employees are often overloaded and that companies have to reduce their activities or reject tasks, which directly affects their turnover.
Demographic Predictions and Future Consequences
According to population projections, the proportion of elderly citizens in Denmark will increase significantly in the coming years. At the same time, the active workforce will decline, creating an unsustainable situation where fewer taxpayers have to fund more pensioners and care for the elderly. This imbalance will inevitably lead to an increased burden on the state's welfare system and create financial pressure for future generations.
The Companies' Struggles: Limited Growth Opportunities and Increased Competition
Dansk Erhverv's analysis shows that more than one in three companies in Denmark indicate a lack of labor as a significant obstacle to growth and development. When companies are left with unfilled positions and a lack of qualifications, their ability to expand their business activities, invest in innovation and improve their competitiveness is hampered.
The lack of labor also creates greater competition for the available resources. This can mean that companies have to increase their wage costs in order to attract and retain employees, which puts pressure on their operating costs. At the same time, there will be a greater focus on automation and digitization to reduce dependence on labour. But even with these technological solutions, it can be difficult to maintain the same production levels that a fully staffed workforce could have ensured.
Need for Action: Policy Solutions to Address the Labor Shortage
The solution to the labor shortage requires political measures that go beyond short-term patchwork solutions. Dansk Erhverv and Brian Mikkelsen emphasize that there is a need for a broad effort that focuses both on retaining older people in the labor market, attracting foreign labor and reforming the tax system to make it more attractive to work.
1. Retention of Older Workforce
One of the most obvious solutions to the demographic challenge is to increase employment among older citizens who are still able to work. Brian Mikkelsen points out that there are currently several schemes that enable early withdrawal from the labor market. He suggests that these arrangements be revised and made more restrictive:
"Right now, for example, there are five schemes where you can withdraw from the labor market before the national pension with public kroner at your back. That's too many. Of course, you should be able to withdraw from the labor market as a worn-out person, but something must be done about the fact that too many healthy and able-bodied people leave the labor market before they reach retirement age."
This opinion reflects a desire to ensure that only the most necessary retirement arrangements are maintained, so that healthy and able-bodied older people remain in the labor market for longer.
2. Tax reductions to increase work motivation
Another important factor in attracting and retaining labor is to make it economically attractive to work. Brian Mikkelsen emphasizes the need for tax breaks as a means of increasing the labor supply. By lowering taxes on work, the government can create incentives for both the young and the elderly to stay longer in employment.
High taxation of income can act as a demotivator for both full-time and part-time employees, and by lowering this burden, more people may have an incentive to work more hours, stay longer in the labor market or avoid early retirement.
3. Attracting Foreign Labor
With an aging population and an increasing need for labor, it is necessary to attract foreign workers who can fill the vacant positions. However, Denmark has a bureaucratic system that often hinders the immigration of qualified foreign workers. According to Brian Mikkelsen, Denmark should reduce bureaucracy and streamline case processing times for foreign workers.
"Right now there are too many stumbling blocks in the form of heavy bureaucracy, long case processing times and so on. We cannot afford that in the future," says Brian Mikkelsen.
In order to attract and integrate foreign workers, Denmark should also focus on creating an attractive and welcoming culture, where new employees feel welcome and have access to the necessary support to be able to settle permanently.
Increased Automation and Digitization as Remedies in the Long Term
Although the labor market's demographic challenges require quick solutions, technological advances such as automation and digitization can help in the longer term. Automation can reduce the need for manual labor in certain sectors, while digitization streamlines workflows and
Source: Danish Business.
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