Hidden reserve of the labor market is likely to remain hidden

Demographics and declining immigration reinforce the shortage of skilled workers. Is there a solution to this problem? There is untapped potential among the unemployed, underemployed and in particular in the "hidden reserve."

The shortage of skilled workers will intensify

Not only is Switzerland's working population no longer expanding, it is also aging. If current trends continue, by 2040 the percentage of the total population in gainful employment will have fallen from 54% to 49%. In addition, one in five workers will be over 55 years of age.

This situation is exacerbated by a decline in the immigration of foreign workers. In view of the existing shortages in some sectors, it is therefore a matter of making better use of the existing potential within Switzerland.


Shortage of skilled workers, primarily in engineering, managerial and technical professions

Aggregate index of the shortage of skilled workers: The higher the number, the stronger the indication of a shortage. Only occupations with a significant shortage are shown.
Source: State Secretariat for Economic Affairs, Credit Suisse

Over 800,000 people interested in more work

The most recent survey conducted by the Swiss Federal Statistical Office showed that there were 837,000 people aged between 15 and 74 who had potential for more work. They include the unemployed, the underemployed and the so-called "hidden reserve."

These three groups together represent 13.2% of the permanent resident population of Switzerland. Initial figures for 2017 point to similar numbers. Even though the proportion varies from canton to canton, there is still great potential in this area.

Four main groups with untapped potential

Permanent resident population (15-74 years old) by detailed labor market status

Groups Definition Number of persons
Unemployed according to International Labor Organization criteria: actively looking for work and could take up a new job within two weeks
Hidden reserve: looking for work, not available
Looking for a job, but not available for work at short notice (within two weeks)
Hidden reserve: available, not looking for work
Not looking for work at the moment, but would basically like to work and would also be available
Underemployed Part-time workers who would like to increase their degree of employment 332,000
Total   837,000

Source: Swiss Federal Statistical Office (Swiss Labor Force Survey, SAKE), Credit Suisse

Potential among the unemployed and underemployed is limited

Looked at more closely, the potential among the unemployed is likely to be limited. The unemployment rate in Switzerland is currently at a very low level. Moreover, a large proportion of unemployment is either structural, because the profiles of job seekers do not match the vacancies, or due to the time it takes to find a suitable new job.

Nor is it easy to tap the potential of underemployed people. It would seem to be obvious that these part-time employees should increase their workload at the companies they currently work for. Apparently, however, there is no need for this because there is a mismatch between supply and demand.

Shortage of skilled workers: Potential in the hidden reserve

More promising is the hidden reserve: people who are not currently working but would be interested in doing so. This consists of two groups: on the one hand, people who are looking for work but are not available at short notice; on the other hand, people who would be available but are not currently looking for work. The first group mostly consists of young people who are often still in training or further education and will only be able to work afterwards.

The second group consists mainly of older workers – just before or after retirement – and women. This second group is particularly interesting, especially as it indicates that the hidden reserve also exists in sectors where the shortage of skilled workers is particularly pronounced. For example, a total of 14,000 people from the hidden reserve would be available in the technical and IT occupations – only slightly less than the number of unemployed.


Untapped potential also in sectors with a pronounced shortage of skilled workers

Potentially unexploited labor force (15-74 years old) by occupational category, number of persons, 2016
Source: Swiss Federal Statistical Office (Swiss Labor Force Survey, SAKE), Credit Suisse
* These results should be treated with caution because of the small sample size.

The key challenge: Reconciling work and family life

However, the statistics also reveal that the hidden reserve has remained relatively stable in recent years despite a shortage of skilled workers. It has not been possible to bring these people into the labor market. For women, family responsibilities are the main reason why they are not actively seeking work. Measures that more successfully reconcile family and work could help to free up this untapped potential in the hidden reserve. These could include tax incentives for dual earners, and additional and cheaper crèche places and day schools.

Such measures could perhaps also encourage people who are not currently in gainful employment or interested in working to enter the labor market. For almost half of the 26 to 58-year-olds in this group, family responsibilities are also the decisive reason for them not being in work.


Family and health are the main reasons for 26 to 58-year-olds not seeking work

Reason why person (15-74 years old) is not looking for work, "Available persons, not looking for work" (VP-NAS) and "Other persons not in gainful employment," 2016
Source: Swiss Federal Statistical Office (Swiss Labor Force Survey, SAKE), Credit Suisse

Hidden reserve will probably remain "hidden"

For older workers, by contrast, not only is demand on the labor market limited due to high wages and social security costs, but the supply is also questionable. Of all those aged 66 to 74, only just under 7% expressed an interest in working beyond retirement age. Most are enjoying their well-deserved retirement or would only work if the work was attractive and well paid.

An obvious option here would be to make better use of this potential by raising the statutory retirement age. However, this seems to be taboo, as the discussions about the 2020 Pension Reform showed. At the same time, it is difficult for people over 50 to find a new job once they have become unemployed. Both factors indicate that if economic policy measures continue to be implemented as tentatively as in the past, the hidden reserve will probably remain largely hidden for the time being.

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