Some Sectors in Europe Face a Labor Shortage

By CARTER DOUGHERTY

Published: March 10, 2007

FRANKFURT, March 9 — Corinne Margot is reaching deep into her bag of tricks to find new employees.

Ms. Margot, the director of human resources for Soitech, a fast-growing French manufacturer of semiconductors, has created a Web site that lets managers identify and recruit engineers directly, bypassing her own office for the sake of efficiency.

And she is bringing in people from outside France — indeed, outside Europe — to plug the gaps.

Ms. Margot is also traveling to French universities and technical schools to plant the idea of a career in semiconductors in the minds of young people, hoping they remember the name Soitech as well. But despite her efforts, as she grimly acknowledges, Soitech’s stretched work force is still struggling to keep up with the orders coming in.

“We haven’t had to tell customers to wait yet,” Ms. Margot said, “but it’s coming.”

For a continent where high unemployment has defined economic life for much of the last three decades, it may seem counterintuitive that Europe could be facing a labor shortage. But that is very much the case across important swaths of the European economy, as reflected in surveys and interviews with executives.

And it is precisely the most dynamic, future-oriented industries that have been hardest hit. For recruiting departments around Europe, 2007 could be the worst year in memory.

At the end of 2006, the unemployment rate of the 13-country euro zone was 7.5 percent, its lowest level since 1993. Jean-Claude Trichet, president of the European Central Bank, is fond of pointing out that this is still a “very high level,” with 11.1 million people out of work, and far higher than the 4.5 percent rate in the United States.

But this cyclical upswing in Europe, in contrast to the softening in the United States, is accentuating labor bottlenecks. Europe’s pickup began in earnest last year, yet, according to the European Central Bank, many companies handled much of the new work that flowed into factories and offices by increasing productivity and lengthening work hours. Now that they are turning to the labor market for new hires, they are finding that the pickings are slim.

The cyclical problems are layered atop a structural one. Europe’s painful shift from heavy industry to more specialized manufacturing and services, combined with generally low prestige for highly technical professions, has outpaced what Europe’s educational system has to offer.

“People that are available on the labor market do not correspond to what the corporate sector needs,” said Véronique Riche-Flores, chief economist for Société Générale in Paris. “They simply have different qualifications, or none at all.”

Sometimes the solution is higher salary and better benefits. But more often than not, companies have to find ways to work around a limited supply of qualified employees — by nurturing young talent, finding people from overseas, or simply moving operations outside Europe.

Measured by the European Commission’s main survey on labor shortages and interviews across industries from computer hardware to software to machine tools to fashion and banking, the shortage of employees has not been this acute since the technology boom years at the start of this decade. Some recruiters have to think back even further to remember a time when their work was so difficult.

“My colleagues are constantly asking how far I have come in finding them new people,” said Andreas Weber, head of personnel for the SMS Group, a German engineering company that builds manufacturing technology. “But if I don’t have applicants, I have nothing to offer them.”

Europe’s giant companies are not immune. Klaus Kleinfeld, chief executive of Siemens, the engineering conglomerate, said that it had 2,500 positions open in Germany alone. Over the last year, the shortage has become acute enough that Siemens has begun bringing employees out of retirement to work on specific projects.

“Our growth rates is now mostly limited by our human resources capacity,” Mr. Kleinfeld said.

The scarcity of qualified labor is already hitting the bottom lines in the major economies, and companies like Soitech seem sure to follow in the footsteps of companies that have been forced to forsake sales opportunities.

Electrical engineering — in which midsize family-owned businesses in Germany, known as the Mittelstand, lead the way in Europe — is a case in point. In 2006, employment in this industry rose for the first time since 2001, but the 6,000 to 8,000 new positions it would like to create this year may not materialize.

The Association of German Engineers estimates there were 22,000 open engineering positions in Germany at the end of 2006, in building, energy, machine tools and other areas. That is 30 percent more than the previous year. Since one employed engineer generates 2.3 jobs in other areas, the group estimates the value of economic activity lost at about 3.7 billion euros in Germany alone, or about $4.8 billion.

In the face of such acute shortages, many companies are assuming a role previously dominated by the state in Europe: They are going into universities, technical academies and even secondary schools to make their case directly to young people. Although that has been done before, executives say today’s missionary work in European schools has a different quality.

“We are reaching out to schools to try and encourage students to prepare themselves in the best possible way not just for working in our field, but in any field,” said Albert Tacchella, chairman of Ucimu, the Italian machine tool manufacturing association.

UniCredit, which in 2005 cemented the largest cross-border banking merger in Europe when it bought the HVB Group of Germany, recently created UniManagement, a combination research institute and management school for crucial executives.

“These are the lengths that companies go to train and keep their top employees,” said Anna Simioni, chief executive of UniManagement.

Recruiting more people from outside Europe is another persistent theme. At Soitech, there has been an explosion in the number of nationalities represented over the last few years, from a handful to at least 19 today. “We are beginning to recruit on an international market rather than a French market,” Ms. Margot, the personnel chief, said.

But this pool of engineers, who in any case face bureaucratic hurdles to work in France, is limited, since they need to speak French to communicate with the technicians they supervise.

Moving jobs offshore is another alternative. The SMS Group has found itself weighing whether to move parts of the business to its operations in China, India, the United States and Brazil. In years past, assuming costs alone did not drive them out of Germany, the company would have been inclined to keep high-skill jobs at home, in part to foster good communication with headquarters. Now, positions that could stay in Germany for cost reasons are headed abroad for lack of personnel.

“We are trying to keep our core competencies here,” Mr. Weber, the personnel chief for SMS, said, “but simpler tasks are headed abroad.”

Eric Sylvers contributed reporting from Milan.