Cedefop predicts major changes in the composition of the workforce in the decade ahead as coronavirus affects retirement decisions. Europe’s ageing working population, resulting in declining future participation rates, is accompanied by the end of the working life of the so-called baby boomers (born between 1946 and 1964), which are all expected to have retired by 2030.
This brings about serious concerns as in some industries where baby boomers thrived (such as manufacturing), millennials now struggle to engage. This situation is expected to create shortage of talent in the decade ahead, with employers finding it difficult to fill vacant posts.
Cedefop’s skills forecast found that nine in ten future job openings will occur due to a need to replace existing workers, the most common reason being retirement. Any estimation of future job openings needs to include this element, which is often neglected as we tend to focus only on expanding or contracting sectors and occupations. The 2020 skills forecast includes estimations of replacement demands by sector.
It remains to be seen how coronavirus will impact on the retirement decision. Skills forecast Cedefop expert Ilias Livanos suggests that ‘despite the lack of recent evidence in Europe, and the fact that it largely depends on the pandemic itself as well as the responses to its consequences, the coronavirus crisis may lead more people to retirement for safety reasons or due to the bad economy.’
Coronavirus impact on future replacement needs
The table below shows skills forecast estimations on future replacement needs for 2021-30 by main sector of economic activity, coupled with information on the economic impact of coronavirus on sectors by the ILO. More than half of the replacement needs will be in sectors where coronavirus has had a high or medium-high economic impact. Coronavirus may lead even more people working in these sectors to early retirement. For instance, ‘wholesale, retail trade, trade & repair of motor vehicles’ is the sector with the highest expected replacement needs – about 11 million over the next decade across the EU-27. At the same time, this is a sector whose employees are highly exposed to the risk of coronavirus.
Another sector with a high rate of replacement needs is the ‘human health and social work’ sector; even though it was not affected in an economic sense due to its crucial role over this period, its employees include a high share of people aged 61+ while at the same time having been exposed to high risk. This could potentially lead workers who are close to retirement to leave the workforce earlier than originally planned.
Nevertheless, the needs to replace workers in sectors with a high coronavirus economic impact may not fully materialise, as firms may decide to cut costs by not replacing retiring workers. For instance, the ‘accommodation and food service’ is a sector that has been hit hard by the pandemic, while its employees are exposed to high risk. This may lead to both early retirement and non-replacement by the firms. Cedefop’s ongoing research estimates that coronavirus is expected to reinforce automation.
Despite the current difficulties in estimating the exact outcome of the pandemic on retirement and future job openings, frictions in the labour market – already anticipated before the pandemic – are expected to intensify.
Detailed results of the 2020 skills forecast are available on Cedefop’s skills forecast data visualisation tool.