Ensuring Sustainable Employment and Competitiveness in the EU Food and Drink Industry:
Meeting the Challenges of the Labour Market
A joint initiative of the Social Partners in the EU Food and Drink Industry
Executive Summary
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Contents
1. Introduction and Research Aims .......................................................................3
2. Methodology and Definitions ...........................................................................3
3. Key Findings and Recommendations ...............................................................4
Economic importance ........................................................................................................ 4
The FDMP workforce .......................................................................................................... 5
Economic & policy context ................................................................................................. 6
Skills and qualifications of the workforce ........................................................................ 7
Drivers of change in the FDMP sector ............................................................................... 8
Current and future skills issues in the food and drink industry ...................................... 9
Labour market challenges ................................................................................................ 10
Identification of existing good practice .......................................................................... 11
Effectiveness of current systems for meeting skills needs .............................................. 13
With the financial support of the European Commission (VS/2012/0239)
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1. Introduction and Research Aims
In January 2013 the European Federation of Food Agriculture and Tourism (EFFAT) and FoodDrinkEurope jointly commissioned Improve, the UK Sector Skills Council, and CERES to deliver a food and drink manufacturing and processing (FDMP) labour market research study across the European Union (EU).
The research was supported financially by the European Commission and had the overarching objective of providing an updated economic analysis and overview of the structure and demographic make-up of the FDMP sector and workforce. The specific research aims for this research were to:
l Deliver an overview of the sector’s economic performance and workforce demographics;
l Identify, define and map current and emerging workforce skills and competence needs;
l Compile a compendium of good practices on employability and up-skilling measures;
l Provide relevant analysis and conclusions to enable the EU Food & Drink social partners to draw conclusions and prepare further steps.
l Produce 20/25 job profiles with some associated possible career path progressions
2. Methodology and Definitions
In order to achieve the objectives of this research, the research team deployed a mixed methodology which included both primary and secondary research. Key components of the methodology included:
l A detailed review of existing statistical evidence;
l A comprehensive literature review; and,
l More than 35 interviews with sector employers, social partners, sector experts and other stakeholders.
The scope of this research project was defined using the European classification system (NACE) and was agreed as being codes 10 and 11.
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3. Key Findings and Recommendations
Economic importance
Evidence from this research has demonstrated the critical importance of the FDMP sector to the economy of the European Union. The FDMP sector represents the largest component of the EU manufacturing sector in terms of turnover, value added and employment. While economically important in all member states, the FDMP sector is of particular importance to a number of countries, including Cyprus, Greece, Ireland and Bulgaria where it accounts for more than 20% of manufacturing gross value added.
Across the EU as a whole, there are approximately 300,000 FDMP businesses, although the vast majority of these are small and medium sized enterprises (SMEs). While SMEs account for under half of total turnover, they are particularly important in terms of employment with around three-fifths of all employees working for SMEs.
The EU FDMP sector is also important in relation to international trade with the EU economy collectively benefiting from a positive trade balance of approximately 11 billion Euros in 2012 as a result of the export of food and drink products. The specific make-up of this trade varies, however, between areas of the EU, with the Mediterranean largely responsible for fresh fruit and vegetables and continental Europe focusing more on meat and dairy production. These differences are often driven by differences in climate as well as culture and traditions.
While the sector has undoubtedly been affected by the financial crisis and the ensuing recession across much of the developed world, evidence relating to output and employment suggests that the FDMP sector has shown greater resilience to the economic downturn than many other European sectors. FDMP is one of only two of these sectors that have returned to pre-recession levels in terms of employment and economic output.
Recommendations
l The European Commission needs to recognise the importance of the FDMP sector to the EU economy and should develop a specific strand of industrial policy that supports the further development and growth of the sector in the future and values its specific features.
l In order to support the further development of the FDMP sector, the quality of the economic and employment statistics for the sector needs to be improved, both the data that comes from official organisations, such as Eurostat, but also through more informal, qualitative channels such as social dialogue between the sector’s social partners.
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The FDMP workforce
Collectively, the FDMP sector employs approximately 4.5 million people across the 27 member states, of which 4.1 million are employees with the remainder being self-employed. Women represent approximately 43% of all employees which, although lower than the male share of employment, is three percentage points more than the corresponding figure from a decade earlier. Women are, however, under-represented in managerial and technical level roles.
The FDMP sector is affected by having an ageing workforce and has experienced a drop of between 30-40% of young employees between the ages of 15-24 over recent years. The sector has witnessed a corresponding growth in the volume of prime-age and older workers that has raised the average age of the sector’s workforce.
Another observed trend over the last decade has been the growth in temporary contracts at the expense of permanent appointments. Much of this growth in temporary appointments across the EU has been on an involuntary basis, e.g. individual employees would have preferred a permanent contract but one was not available.
Migrant workers from both inside and outside the EU have become an increasingly important feature of the workforce in many (although not all) EU countries over the course of the last decade. A 2011 estimate suggests that there may well be as many as 400,000 migrant workers in the FDMP sector, of which 200,000 are EU nationals. The proportion of migrant workers in the workforce rose from around 5% to nearly double this figure in the course of a decade.
The FDMP sector workforce has a greater proportion of what experts, including the Commission refer to as “precarious workers” than the economy as a whole, and it also has greater numbers of employees in the medium-low income band (37% versus 24%) than the all sector average for the EU.
Total employment in the FDMP sector has fallen in all EU countries over the last decade as a result of both the economic slump and the long-term trend towards automation and other productivity raising measures. This reduction in total employment has, however, been felt more acutely by full-time male employees than by women, who are more likely to work on a part-time basis and where there has been a smaller degree of contraction.
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Recommendations
l The FDMP social partners need to work together to consider the implications of a number of important changes in the sector’s workforce such as an ageing workforce and the growth in what experts, including the Commission refer to as “precarious workers”. This should form a key component of the on-going work programme of social dialogue between the social partners.
l In order to address the issue of gender stereotyping, the FDMP social partners should proactively engage with other sectors that have already made efforts to address this problem and should seek to identify best practice which can be applied within a FDMP context.
l The FDMP social partners need to work together to determine measures that will help to integrate migrant workers into the workforce. In particular, efforts need to focus on how to effectively tackle language barriers and provide adequate occupational health and safety (OSH) and food safety training to all employees.
Economic & policy context
The 2008 economic crisis has had a profound and long-lasting impact on the economy of many EU countries with, for example, there now being an estimated 10 million fewer jobs than before the recession. The economic crisis has also accelerated trends that have long been evident across the EU economy, with the decline in manufacturing employment speeding up over recent years being just one example.
Young people entering the labour market for the first time have particularly felt the brunt of the economic downturn, with around 5.5 million young people aged 15-24 in the EU currently out of work. This represents just under a quarter (22%) of all young, economically active EU citizens and has rightly been a focus of much debate and action, at both an EU and individual nation state level.
There is a large degree of consensus amongst academics that the ability to anticipate future demands for skills and then plan effectively to respond to them is a key component of an effective labour market. The type and level of sophistication of forecasting labour market needs varies dramatically across EU countries and there is a wide acknowledgement that more needs to be done to enhance labour market forecasting techniques.
At an economy-wide level, the evidence points to a polarisation of skill demands with a continuing reduction in the volume of jobs requiring either no or low qualifications and an increase in the demand for employees with high (graduate level) qualifications. This polarisation could mean that, even if the EU economy returns to high levels of growth, unemployment may remain high, as many unemployed individuals lack the skills and qualifications to access these new job opportunities.
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Apart from the current overall deficit in the demand for labour, the main causes of Europe’s skills mismatch are identified as being a combination of asymmetric information between employers and potential employees, imperfect information on the labour market and differences between people and transaction costs. It is believed that the main focus of national governments in addressing these mismatches should be tackling the asymmetric information between employers and potential employees and improving labour market information (LMI).
Recommendations
l National governments and other partners need to focus on bringing the quality of labour market forecasting in all member states up to that of the best in the EU. The sharing of best practice examples of this should be encouraged and facilitated.
l Employers in the FDMP sector need to be supported to look at ways of developing career pathways that will enable individuals to progress from entry level production roles into higher technical or managerial roles.
l More high-quality sector-based labour market information (LMI) needs to be available across all EU countries to help address the problem of asymmetric information between employers and potential employees and skills mismatches. Sharing best practice may again be one way of maximising the effectiveness of this work, and should be led by sector skills councils or equivalent bodies where they exist.
Skills and qualifications of the workforce
At an aggregate level, the FDMP workforce is less well-qualified than the general EU working population, with 30% possessing only low-level qualifications, compared with only 21% across the EU economy as a whole. The FDMP workforce also compares poorly with the general population in relation to higher level qualifications, with just 14% possessing high level qualifications as compared to an all-sector average of 30%.
While the overall incidence of training in the FDMP sector may be reasonably high, the evidence suggests that FDMP businesses generally focus their approaches to training and workforce development on adhering to legislative and regulatory requirements as well as those of their key customers such as large retailers. Training is, therefore, generally regarded as a means of demonstrating compliance, rather than as a proactive tool for driving business development. Much of the training activity that is delivered relates to food safety, health and safety and employee induction, with relatively little spent on activity likely to make the organisation more productive.
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Recommendation
l In order to win the argument that training is an investment rather than simply a cost, it is recommended that the FDMP social partners support work to develop a range of detailed case studies of how training and workforce development has had real financial and business benefits for those companies that have used training to drive business growth and encourage innovation. Matched plant studies might be one possible method of demonstrating the return on investment from training and workforce development.
Drivers of change in the FDMP sector
A number of discernible factors are driving change within the FDMP sector which will shape the sector over the course of the next decade and beyond.
A key driver for the sector is consumer preferences. There is a need for the FDMP industry to better understand the desires of customers, such as concerns about health and nutrition, concerns about obesity, convenience and packaging with zero environmental effects. With food demands rising, along with increasing prices of raw materials and the impact of the recession, customers’ eating habits are changing and they are looking to buy more affordable and convenient food from supermarkets, which has had an impact on their FDMP suppliers. They are under continuous pressure to reduce costs and this is making it harder for FDMP businesses to plan and invest in the future.
The strong influence of large multiple retailers over the FDMP industry looks likely to be a continuing issue. With many FDMP companies being SMEs, these large retailers have an unequal bargaining power and can exert strong pressure on FDMP companies to comply with their requirements.
Globalisation and market power has increased food and drink companies’ ability to distribute their functions and disperse their activities globally. This together with changes in trade regulations, the availability of more skilled workers overseas and cheap foreign locations mean that there is now greater freedom for food and drink companies to locate their production operations outside of the EU.
Developments in science and technology are important for the FDMP industry, but there has been a reluctance, particularly amongst SMEs, to invest in new and alternative production methods, which has contributed to the FDMP sector becoming one of the least profitable in the EU. There are a range of new technologies which could deal with a variety of issues, including climate change, reducing food waste and energy efficiency. There are also new processes and technologies that create less waste and more efficient processing and transport techniques.
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As mentioned above, environmental change will be a continuing issue for the future of the sector. Fluctuations in the cost of commodities, due to oil price rises and crop failures due to poor weather conditions, have led to increasing food prices. With rising demand for food and the potential impact of climate change, global food systems may not be sustainable. There is therefore a need for new technologies and processes, as well as increased public awareness of environmental issues and limits.
As a result of these drivers, European FDMP businesses will need to continue to invest in training and skills, in order to remain competitive and develop ‘world class practices’ in their businesses. New skills will allow new technologies that best meet consumer needs to be implemented. The industry also needs to be able to adapt and change, especially to respond to the challenges of globalisation. Its workforce requires the skills to manage change and understand how best to adapt their manufacturing processes, both to meet customer needs and ensure sustainability.
Recommendations
l Large multiple retailers need to be persuaded of the importance of working in constructive partnership with their suppliers in order to avoid potential negative implications for the FDMP sector and the quality of its products
l The EU and national governments need to review how they can support FDMP businesses, especially SMEs, to exploit the potential which new technology has to offer in terms of driving up productivity. In particular, raising awareness of existing schemes and initiatives to support technology take-up would seem to be needed.
l Both employers and employees in the FDMP sector need to recognise the drivers impacting upon the future of the sector and the need to adopt a culture of lifelong learning in order to be able to respond to these drivers.
Current and future skills issues in the food and drink industry
There is a need to improve the image of the FDMP sector, especially amongst young people. This is particularly a problem given the changing demographics and an ageing workforce, which could lead to a shortage of labour for the industry in the next 15-20 years if it is not addressed. The FDMP sector is not seen as an attractive choice for workers, particularly with regard to providing career opportunities, and it has difficulty recruiting some of the skills it requires. This has led to shortages of employees with higher levels skills, such as food scientists and technologists, nutritionists and new product designers. Changes in technology require employees who are adaptable, such as food engineers who can work on bespoke machinery, and high quality managers and supervisors to implement new manufacturing and food processing techniques. These will help to drive competitiveness and create a world class sector.
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There is also a need for FDMP companies to develop basic skills amongst those in production roles and to ensure that businesses have sufficiently trained employees to become managers and supervisors. This should include the commercial negotiation skills required to deal with the supply chain customers, especially the large retailers, and skills to support exporting opportunities. Leadership skills are also felt to be lacking, with a need for better communication and succession planning.
Recommendations
l The FDMP social partners need to identify, and then help disseminate, best practice across the EU on how individual countries are addressing the problems associated with the sector’s poor image. In particular, this work should focus on effectively addressing the many misconceptions that exist about what it is like to work in the FDMP sector and the career opportunities that it provides.
l Employers in the FDMP industry need to be persuaded of the benefits of improving succession planning in order to help address the industry’s shortage of first line supervisors and managers. The job profiles developed as part of this research could, perhaps, be used to help show the range of career progression routes that are available.
Labour market challenges
Recruitment difficulties were highlighted by both industry experts/social partners and employers, especially for higher-level food science and technology roles. It is felt that potential applicants with these skills are often reluctant to enter the sector, as it was considered unattractive when compared to other industries, such as pharmaceuticals, automotive and aerospace.
In many EU countries there are also not enough potential applicants to fill production level roles, due to the high incidence of university education amongst young people. It was also felt that young people are often ill-prepared to meet the demands of working in manufacturing and that employers are therefore forced to up-skill new recruits; the educational standards of new entrants to the labour market are felt to have declined over the last 20 years, leading to businesses having to improve even the basic literacy and numeracy skills of some new recruits. This is linked to the poor image of the sector; it is felt that work in the FDMP sector can be inhospitable and repetitive, with a lack of obvious career pathways, which is not what many young people want. Relatively low and uncompetitive pay is also contributing to these issues, as the sector is unable to compete in recruiting the best people and retaining highly skilled workers.
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Demographic changes are also an increasing concern, as there are fewer young people in many EU countries, and even fewer choosing to work in the FDMP sector. This is forcing employers to reassess how they recruit, and examine the potential of employing other groups in the labour market, such as older workers and women, to fill gaps in their workforce. This means the average age of the workforce is increasing, which could lead to long-term problems related to, for example, succession planning. In key craft areas, such as cheese, bread and chocolate production, there are concerns that the lack of young recruits could lead to the loss of specialist knowledge.
Some sub-sectors such as butchery are almost entirely reliant upon migrant labour. Whilst this source of labour meets the current level of demand, there is a concern that these migrants may not always be available to meet this shortage in the domestic workforce. Deficiencies in speaking, reading and writing skills in the local language amongst some migrants could have serious consequences, especially in relation to compliance with food safety and health and safety requirements.
A shortage of people willing to step up into managerial and supervisory roles is also a problem; employers feel that people are not looking to progress and are content with remaining on the shop floor. It is vital that workers are encouraged to progress their careers as managers and first line supervisors are a key factor in delivering higher productivity and innovation.
Recommendations
l More imaginative approaches to recruitment need to be encouraged amongst employers in the FDMP sector. This may take many forms including greater use of social media as well as better targeting of groups in the labour market that have not historically been well used, such as women returners and older workers seeking to move from other sectors.
l The full potential of apprenticeship programmes needs to be harnessed across all EU countries. There are a number of EU countries where apprentices are seen sceptically as a form of cheap labour rather than an important recruitment route into the sector. All the social partners in the sector need to be persuaded of the true long-term benefits of effective apprenticeship arrangements. Again, sharing best practice from EU countries, where they do work well, would be beneficial.
Identification of existing good practice
It was felt that building effective education-business links are crucial in order to explain the wide diversity of roles and career opportunities in the FDMP industry. Schemes such as letting teachers spend a period in industry so they can better understand the work of the sector; a substantial period of paid work experience for young people; and an ‘Academy in the Community,’ which allowed recent graduates and apprentices to work as education ambassadors giving their experience of working in the industry to young people at schools and colleges were all highlighted as best practice. For example, it was felt that these education ambassadors can help to tackle the negative stereotypes of the FDMP industry and raise awareness of job and career opportunities in it amongst students and teachers.
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The crucial role played by the parents of young people in shaping career decisions was also highlighted in this research, and projects which have sought to include them in their information awareness raising campaigns about the potential and opportunities of the FDMP sector seem to have achieved greater success.
Similarly, encouraging social dialogue between employers and employees can help to foster good industrial relations in the workplace and help in designing effective solutions to training and skills issues.
Job enhancement and rotation have also been used as ways to improve job satisfaction by addressing the issue of unattractive, repetitive roles in the FDMP sector. They allow workers to have greater flexibility by acting in a variety of roles such as, for example, production operators undertaking preventive maintenance. This also increases workers’ skills and allows high skilled employees to work on more technical matters.
Recommendations
l Governments, employers, the social partners and educationalists need to support a range of measures that better link the worlds of business and education. Programmes which enable teachers/lecturers to spend time in the FDMP industry, as well as those which help employees from the sector to engage directly with young people about the realities of working in the FDMP sector, should especially be encouraged.
l While education ambassador programmes in the FDMP sector were felt to be useful, the participants need to be properly trained to allow them to better engage with young people.
l Future initiatives aimed at addressing misconceptions about the FDMP sector should pay greater attention to reaching and informing the parents of young people as they often play a key role in shaping the education and career decisions of their children.
l Supporting greater use of social dialogue between the social partners in the FDMP sector should be encouraged. This has been shown to have helped design effective solutions to labour market and skills challenges in the EU countries where they have been used.
l Employers need to be encouraged to look at ways of redesigning work roles in order to address concerns about the repetitive and uninteresting nature of some roles in the FDMP sector. The business benefits of job enhancement techniques also need to be empirically established and shared more widely, especially amongst SMEs.
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Effectiveness of current systems for meeting skills needs
Opinions varied significantly between countries and stakeholder groups about the effectiveness of the current education, training and skills systems to meet the needs of the FDMP sector.
Generally, it was felt that university skills development was not sufficiently focused on the development of skills that are actually required in the workplace. There is a lack of practical experience in many courses, both in understanding the realities of a modern FDMP workplace as well as lacking a grounding in basic commercial/business skills. Whilst graduates may have a deep knowledge of the subject they have studied, they often have no knowledge of how a business actually operates, such as budgeting, exporting and accountancy. It was also felt that the education provision is too often outdated, sometimes using obsolete machinery and not meeting the needs of the sector.
It was also felt that apprenticeships could have a greater role in training in a number of EU countries. However, there are concerns amongst trade unions in some countries that apprentices can be an exploitable source of cheap labour. There is also a concern that apprenticeships are only available for young people, whereas they should be made accessible to new recruits of all ages. This is linked to concerns that skilled workers have no way to continue their professional development, despite the importance of skills development.
Even amongst businesses that recognise the importance of training it was felt that SMEs are often unable to release sufficient employees at any one time for training because of the demands of the production process.
Recommendations
l Higher education institutions should be required to have their courses validated on a regular basis by FDMP industry representatives in order to ensure that their educational content is relevant to the modern requirements of the sector and that their equipment and techniques remain up to date.
l The social partners in the FDMP sector should explore the potential value of having regional training co-operatives that would enable groups of SMEs to collaborate in order to allow employees to attend training courses whilst still allowing individual companies to meet their production demands.
l Apprenticeship programmes should be open to all new recruits to the FDMP sector rather than be simply the preserve of young people. This is particularly important in unlocking the potential of previously under-utilised groups, such as women returners and older workers seeking to change careers.
