Costly Skills Shortage

Skills shortage has dominated the headlines for years. We've gotten used to it. But the term puzzles. Companies can't find people, positions remain unfilled, demographics are pressing – so the narrative goes. Looking at the numbers, it gets complicated. +1.5 million workers in 30 years – yet still a shortage? Wages rising moderately, even though scarcity should drive up prices? Something doesn't add up.

Since 1990, 1.5 million workers have been added. Switzerland now has 5.3 million employed – plus 40 percent in three decades.

The economy ran well, Covid aside. Demand for workers rose – and was met. Boris Zürcher, twelve years head of the Labour Directorate at SECO, sees the high immigration as a "collateral effect of the practiced monetary and exchange rate policy."¹ Low interest rates, currency interventions, a relatively cheap Switzerland. "These are Swiss companies hiring people."¹

And where did the growth flow? Between 2011 and 2021, over 130,000 new positions emerged in the non-market sector – healthcare, education, administration. Growth of 1.6 percent per year, almost twice as fast as the private sector. Workers missing elsewhere.

Despite boom and immigration: "skills shortage" everywhere. Recruitment difficulties at record levels, the Adecco Index rises year after year.

But wages tell a different story, despite "shortage", there's little to celebrate. Plus 3.3 percent since 2012 – while GDP per capita grew by almost 10 percent, real GDP even by 26 percent. If there's really a shortage, prices should react. One would think.

The market isn't blocked either. Around one million job changes happen every year. 20 percent of the workforce turns over annually. Liquidity is there.

Zürcher puts it bluntly: "There's no such thing as shortage. There are prices, quantities, and reactions."¹

If there's no shortage – why does it still feel like one? Our hypothesis: recruitment costs.

Active sourcing, headhunters, employer branding, wage premiums – around two-thirds of companies spend between 500 and 10,000 francs per hire.² Those are the direct costs.

The indirect ones weigh heavier. Every unfilled position slows things down: projects stall, teams are overloaded, growth waits. The opportunity costs of a vacancy often exceed recruitment costs themselves.

Large companies can respond. They have HR departments, budgets, reach – and access to the international labour market. Zürcher: "Swiss companies can recruit from a labour market of a quarter billion workers."¹ But that applies mainly to the big ones.

SMEs don't have that. An open position means: interrupt your own work, post ads, sort applications – all on the boss, alongside daily business.

The math is simple: Same difficulties, fewer resources, higher relative costs.

The market is there. The people are there. But connection costs – and the costs are unevenly distributed.

For SMEs this might mean: Don't compete with budget, compete with visibility. The numbers point in this direction. What's happening on the other side – with the people who work – we'll look at in the next post.

¹ Boris Zürcher on the podcast "Denk dänk", Avenir Suisse, April 2025.