Migration: one solution to labour shortages?
The growing strain from an ageing workforce and declining birth rates has resulted in significant labour market tightness across many OECD countries. This situation has intensified competition, and in this context, it is important to understand how evolving migration routes impact job markets and what challenges employers face when hiring foreign nationals.
Migration is a complex phenomenon and analysing the unadulterated effect of it on economies is challenging, if not virtually impossible. The overall impact depends on numerous factors, including whether or not migration is controlled by governments. Nevertheless, this much is clear: in markets experiencing labour shortages, workforce immigration can partially alleviate the situation.
In recent decades, migration to OECD countries has surged to unprecedented levels. In 2022 alone, over six million permanent new immigrants (excluding Ukrainian refugees) arrived in OECD countries, setting a new record for permanent migration.
Permanent migration refers to the total of permanent migrants, including but not limited to workers. It was driven upwards by a rise in humanitarian and managed labour migration, with more than a third of OECD countries seeing their highest levels in at least 15 years. Family migration remained the largest category, accounting for 29% of all permanent migration, whilst managed labour migration and free mobility each made up 21%.
Permanent labour migration to OECD countries has been steadily increasing over the last decade. In 2022, over 1.1 million new permanent labour migrants were recorded, representing a 36% rise on the previous year and a 53% increase since 2019. Notably, the number of new permanent labour migrants doubled in the United Kingdom and increased by 59%, 39%, and 26% in Germany, the United States and France, respectively.
Temporary labour migration is a typical response to short-term labour needs and it plays a crucial role in alleviating the pressure caused by tight labour markets. OECD countries welcome millions of temporary workers annually. In 2022, the United States was the top destination, receiving about 40% of all temporary labour migrants. Other leading countries, such as Australia, Canada and Japan, saw their permit levels double or more compared to previous years. Within the EU, temporary labour migration increased by 18% from 2021 and 4% compared to 2019.
With labour demand on the rise, migration has increasingly become a focal point for policy makers. Countries such as Australia and Germany are revamping their labour migration policies, while others are setting new targets to attract skilled workers. Amid these developments, it’s crucial to understand the challenges employers face when hiring foreign employees.
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