Cash bonuses for interviews a sign of the times in euro zone jobs boom

Website developers are in short supply in Europe's post-pandemic economy, so Stefan Knoll is using unorthodox tactics to hire them and other staff.

The founder of Deutsche Familienversicherung, a fast-growing insurer based in Frankfurt, is offering €500 to anyone who interviews for a vacancy, another €1,000 to those who make it to a second round, and €5,000 more to those who complete a six-month probation.

"It is particularly difficult to find anyone with IT skills," he said. "We compete with giants like Allianz who can easily hire hundreds of people around the world – but we are not interested in hiring people in India, we want people here in Frankfurt."

Knoll’s unusual strategy is symptomatic of the staff shortages spreading across Germany and much of Europe. The result is a bullish labour market that gives EU countries a rare chance to end the high levels of joblessness and underemployment that have bedevilled the bloc since the 2008 financial crisis.

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The shortages are particularly visible in IT and healthcare; in construction, where demand has been turbocharged by booming house prices and an infusion of EU funding for green retrofitting projects; and in hospitality, where ever-changing rules make jobs seem less secure and more onerous.

But the labour shortages are evident in other sectors too. A survey of 9,000 German companies by the KfW development bank and Ifo research group in October found 43 per cent were hampered by a lack of qualified staff – a record high since German reunification in 1990.

In France, 54 per cent of service sector businesses are also finding it hard to recruit – the highest on record in a survey conducted since 2000. The government now offers subsidies to help the long-term unemployed train with employers that have unfilled posts.

Rebound speed

The speed of the rebound has been remarkable. After the 2008 financial crisis, EU unemployment rose for four years. Now, by contrast, it is at an all-time low, falling to 7.2 per cent in November. Even youth unemployment has fallen, closing in on a record low at 15.5 per cent.

This is despite the end of most short-time work schemes introduced to mitigate coronavirus’ economic impact: the European Central bank estimates only 1.8 per cent of workers were still furloughed in October, versus 20 per cent in April 2020.

“It has been a super-swift labour market recovery in Europe,” said Katharina Utermöhl, senior economist at Allianz. “We will see the upswing continuing in 2022 to set record lows in unemployment.”

Although the Omicron variant may yet deliver a setback, economists expect employment to continue growing, spurred by the EU’s €800 billion recovery plan. Unlike the US and UK, labour market participation is already above pre-pandemic levels in France and Spain, and only just short in Italy and Germany. Across the EU, the percentage of people aged 20 to 64 with a job stands at an all-time high of 73.5 per cent.

"Over the next couple of years the euro zone will have a substantially stronger economy than before because government spending will be higher and spending by companies will be higher," said Peter Schaffrik, global macro strategist at RBC Capital Markets,

Claus Vistesen of Pantheon Macroeconomics said that if growth forecasts are correct, the euro zone employment will enter "uncharted territory", with the biggest gains in countries such as Spain and Italy that lagged for years.

That gives governments a rare opportunity to drive through reforms to help Europe’s long-term unemployed. Furthermore, although EU workers are not yet receiving the large wage increases that many US workers enjoy, they are well placed to bargain for better pay and conditions.

Philippe Martin, chair of the independent Council of Economic Analysis advising France's government, noted that more French employers are hiring staff on secure, permanent contracts, reversing the trend of more precarious, short-term arrangements. A deal reached this month in the hospitality sector, delivering an average 16 per cent pay rise, is also a sign that wage pressures are building.

“It is much easier to have positive labour market reforms in an environment where the economy is growing,” Vistesen said.

Boosting quality

In contrast with previous reforms, which were aimed chiefly at boosting the quantity of jobs, governments are now focusing on raising their quality.

Germany’s coalition government has pledged to introduce a €12 minimum wage that will benefit some 7 million workers, despite employers warning it could hit hiring.

Spain, meanwhile, is launching a crackdown on temporary contracts, which account for a quarter of the workforce, in reforms agreed between business and unions but yet to pass parliament.

Rafael Doménech, head of economic analysis at BBVA, said these reforms were “not ambitious enough to solve the structural problems of the Spanish labour market”, with unemployment at 14.1 per cent in November.

Even so, Ignacio de la Torre, chief economist at Arcano Partners, noted that Spain's economy was adding 90,000 jobs a month, and the next round of collective bargaining deals should lead to significantly higher wages.

Italy has a different problem: although unemployment is lower than in Spain, too many people choose not to work, women especially. But Rome, the biggest recipient of EU funds, now aims to create 264,480 childcare places over four years as part of a €26 billion plan to boost the participation of women and young people.

Guidogiorgio Bodrato, economist at Berenberg, said Italy's jobs recovery was still at an early stage, with many new jobs on insecure temporary contracts. Even so, EU recovery funds would spur public sector hiring while tax cuts could boost private sector employment.

“Demand is really solid and is going to stay solid for at least the next three years,” he said. “Even with a lag, Italian employment is improving very fast.” – Copyright The Financial Times Limited 2022