Mounting labour shortage hampers production in manufacturing industry

14/03/2007 13:40

The manufacturing industry in the Netherlands is being increasingly hampered by the shortage on the labour market. Since the middle of 2006, manufacturers in the metal, electrical engineering and transport equipment sector have been reporting that the shortage of workers has impeded production growth. Economic growth leads to a higher labour demand. The labour force grows at a slower rate and is also ageing across the board.

Companies affected by labour shortage

Companies affected by labour shortage

Metal and electrical sector mainly affected

Within the manufacturing industry, themetal, electrical engineering and transport equipment sector is suffering most from the labour shortage. At the beginning of 2007, 10 percent of manufacturing companies reported that production growth is being hampered by a shortage of workers. In the other sectors of manufacturing this percentage fluctuated between  0 and 3, according to Statistics Netherlands’ business sentiment survey.

Production and opinions on order books, metal, electrical engineering and transport equipment sector

Production and opinions on order books, metal, electrical engineering and transport equipment sector 

More and more orders

Since the middle of 2006, order books of companies in the metal, electrical engineering and transport equipment sector have been getting fuller and fuller. The contentment index of manufacturers about their order books reached a record high. Over 12 percent more manufacturers reported a large number than a small number of orders. Production in this sector of manufacturing grew twice as fast as in other sectors of manufacturing in December 2006: by nearly 11 percent compared with nearly 6 percent for manufacturing as a whole.

The strong increase in the demand for products from the metal, electrical engineering and transport equipment sector, such as consumer electronics, machines and means of transport, has pushed up the demand for labour in this sector. This demand cannot be met however. A net 10 percent of companies expect to recruit more staff in the spring of 2007.

Shortage of workers, number of unemployed per unfilled vacancy

Shortage of workers, number of unemployed per unfilled vacancy

Early indication of tight labour market

The proportion of businesses, whose output is hampered by the current shortage of workers is an indication for tightness of the labour market. This becomes evident, if another indicator is taken into account, i.e. the number of unemployed per unfilled vacancy in the Netherlands. In the past, the tightness indicator of manufacturing industry tallied with the economy-wide indicator of labour market tightness.

In the current period of economic prosperity, both indicators also go hand in hand. Since mid-2006, approximately 5 percent of businesses indicated to be restrained by the current shortage on the labour market. Previously, it was only 1 percent. The decrease in the number of unemployed per vacancy also is an indication of labour market tightness.

Economic growth, unemployed and vacancies

Economic growth, unemployed and vacancies

* Number of unfilled vacancies, average of the first three quarters of 2006

Earlier indication of tension on the labour market

In 2006, there were approximately two unemployed available for each unfilled vacancy. This was also the case in 1999. Strikingly, the increased tension on the labour market in a period of economic prosperity now becomes manifest at a much earlier stage than eight years ago.