Small and medium-size enterprises, with up to 250 employees, are an important part of the European economy and employment. According to the latest available data (for 2022), these enterprises produced 52% of total value added and employed 64% of all employees in the EU. However, maintaining their competitiveness in a globalized environment during the digital transition and climate change is not an easy task. Continuous modernization in their production, innovative services and products, and the adoption of advanced technologies are needed.
Skilled workers are a key component in achieving all the above and maintaining firms’ competiveness. However, SMEs face greater problems in both hiring and retaining skilled staff than larger firms. In fact, according to an OECD report, small businesses on average adopt new technologies at a slower pace than larger companies- since they cannot compete with larger companies in attracting digital talent
The recent results of the “Eurobarometer” conducted in May 2023 confirm the difficulty of SMEs in finding workers with the appropriate skills. In fact, in the EU as a whole, the vast majority of these businesses (78%) report that finding workers with the right skills is “very difficult” (52%) or “moderately difficult” (26%). The countries with the highest percentage of SMEs that state that it is difficult to find workers with the right skills are Austria (88%), Croatia (89%), and Slovakia (90%). Even in Denmark, the country with the lowest percentage, more than half of the SMEs (52%) report that it is difficult to find workers with the right skills.
Which are the reasons that make it so difficult for SMEs to find workers with the right skills? An obvious reason is that candidates often lack the necessary qualifications. Education systems in several Member States produce an excess of graduates with skills in low demand by the labor market, while at the same time falling short in providing the workforce with the skills demanded by dynamic and innovative economic sectors (the skills mismatch problem).
At the same time, as we have analyzed in a previous In Focus, small and medium-sized enterprises themselves when it comes to investment in training and skill development of their staff often do not implement internship programs for new employees, nor education and training programs so that staff acquires the necessary work skills.
Also, the scarcity of resources limits the ability of SMEs to find and attract workers with the right skills: often SMEs offer lower wages and less attractive working conditions than large enterprises.
SMEs not only find it difficult to attract workers with the right skills, they also struggle to retain them. Across the EU, the majority of these businesses (53%) report that retaining employees with the right skills is “very difficult” (21%) or “moderately difficult”(31%). In Slovakia (77%), Croatia (67%), as well as the Czech Republic, Hungary and Italy (63%), more than six out of ten companies find it very or moderately difficult to retain their skilled staff. In contrast, in Germany (33%), Finland (31%), and Denmark or Sweden (23%), less than one in three SMEs report that they have difficulty retaining skilled workers.
In our country, 86% of small and medium-sized enterprises state that they face difficulties in hiring employees with the right skills – the fifth highest percentage in Europe. This confirms the evidence that Greece is ranking low in the field of matching skills (see previous In focus). In contrast, only 47% of SMEs in Greece, less than the EU average (53%), state that that find it difficult to retain skilled workers, as the high unemployment rate in the country means limited alternative employment opportunities for workers.
The majority view among SMEs across the EU is that local or regional, national and EU level organisations and authorities are not making very much effort or no effort at all, to support SMEs to tackle skills challenges. The Recovery and Resilience Fund is expected to contribute significantly to addressing the problem, as a large amount of funds is devoted in the EU (and in Greece) to reforms related to education, technical training and skills development.
The challenge for Greece and the other member states is to use European funding effectively. The recent results of the “Flash Eurobarometer” suggest that just a handful of SMEs report being ‘very familiar’ with EU funding programmes for skills such as the European Social Fund Plus (5%) and only (3%) with EU policy initiatives for skills such as the Pact for Skills. But without close cooperation and open channels of communication between European institutions, governments, employers, and workers’ organizations, effective interventions in education, technical training, and skills development cannot be designed and implemented.