Looking at expected labour shortages in rural areas of Denmark the biggest challenges are in farming, tourism, restaurants, and manufacturing. (Photos: Freepik and Unsplash)

Labour shortages are a key economic and political issue in Denmark, both in terms of ensuring the necessary labour is available to avoid short-term loss of growth, and ensuring employers can access the skills needed to adapt to longer-term megatrends such as the green transition and digitalisation (Bak et al. 2022). With its small open economy, Denmark has generally performed well according to key economic indicators. Growth levels have bounced back following the Covid-19 crisis, driven in particular by strong international exports – although over the past year or so this element has mostly been down to a handful of large corporations in the pharmaceutical (notably Novo Nordisk) and transport (notably Mærsk) industries. While the growth of these large companies has prevented Denmark’s economy from entering recession (DØRS 2024), it has increased economic vulnerability to shifts in regulation or demand (OECD 2024). Unemployment, meanwhile, has generally remained low, indicating the capacity of the Danish ‘flexicurity’ model – characterised by high levels of flexibility for employers, high levels of security for employees, and high levels of support in finding new roles (Ilsøe & Larsen 2023: 3) – when it comes to maintaining labour force competitiveness. The most important flexicurity mechanisms are activation and upskilling; low hiring and firing costs; and a flexible wage-bargaining system. The latter involves negotiating wages through collective agreements that nevertheless leave room for firm-level discussions, thereby providing scope for responding to changing economic circumstances (Bredgaard & Madsen 2018).

Relatedly, employment in Denmark has reached record-breaking levels, prompting concerns about labour shortages in both the public and private sector. In the public sector, shortages are particularly acute in health and long-term care (nurses, social and health assistants) – exacerbated by a rapidly ageing population – as well as other parts of the welfare sector (e.g. pedagogues, teachers). In the private sector, labour shortages are experienced most intensely in the information and communication technology (ICT) and service sectors (OECD 2024: chap. 2). Although immigration as a potential means of addressing labour shortages has featured more prominently in recent political debates, labour shortages are more commonly addressed through reforms that increase domestic labour supply (e.g. limiting student allowances, shortening graduate programmes) or the supply of relevant skills (e.g. promoting vocational skills, welfare education programmes, ICT skills).

Many of these national-level labour shortage issues are also pressing concerns in rural areas. As the following section argues, labour shortages are an important problem in both the private and public sectors, with employers struggling to find workers with the right skills. These problems are only expected to intensify over the coming years. One key difference when it comes to urban and rural areas, however, is their respective economic structures. While growth and employment in the aggregate economy is driven by the private service sector and knowledge-based production – which is strongly represented in urban areas, particularly Copenhagen (Hansen & Winther 2012) – when it comes to rural employment, it is farming, fishing, manufacturing industry and tourism that are more important (DØRS 2015). This also means the sectors that have, on aggregate, seen the strongest employment growth in the Danish economy are not well represented in rural areas (Manniche & Hansen 2023).

In terms of economic development and employment, rural areas rely on sectors characterised by weaker growth than those centred in cities and the Capital Region (Eriksson et al. 2017). Moreover, long-term centralisation trends have led to rural areas experiencing a decrease in public employment levels. Particularly important in this respect was a major 2007 reform that merged 271 local municipalities into 98 larger municipalities, and 13 regional counties into 5 major national regions (Larsen 2024). Recent figures presented by the Economic Council of the Labour Movement (AE 2023) show that employment in Copenhagen has increased by 25% since 2008, while, conversely, employment levels in Western and Southern Zealand and Western Jutland are lower than in 2008. Relatedly, VIVE (2020) argues that the downturn following the 2008 financial crisis substantially accelerated ‘double urbanisation’ – firstly, the citizens of a municipality are increasingly moving to the larger cities within that municipality in search of jobs and education, and, secondly, citizens are increasingly moving into larger urban municipalities based around regional growth centres.

Although employment across the Danish economy has now been restored to pre-2008 levels, there remain significant differences between rural and urban areas, with stronger employment growth in the largest cities (Ministry of Cities, Rural Areas and the Church 2023: 20). In particular, job creation has been most pronounced in and around Copenhagen (Manniche & Hansen 2023: 54–55). Thus, whereas some urban areas have experienced a 20–30% increase in the number of work places over the period 2008–2018, some rural areas have seen a corresponding 15–25% decrease (VIVE 2020: 1–2; see also Larsen et al. 2023: 126).

The most recent available figures indicate that employers experience failed recruitments at about the same rate in the Capital Region (23%) as in most other parts of Denmark (e.g. 25% in Northern Jutland, 21% in Western Jutland and 27% in Southern Jutland) (STAR 2024). They also show that the sectors with the highest aggregate failed recruitment rates are: hotels and restaurants (34%); construction (32%); retail (26%); and industry (25%).

Research on rural labour shortages in Denmark is generally very limited. In this section, we mainly draw on the quantitative analyses conducted by Larsen et al. (2023), which evaluate the extent of labour shortages in rural areas and specific economic sectors. Data for these analyses came from Statistics Denmark and covered the years 2014–2019. Projected labour shortages are calculated for 2025.

Larsen et al. (2023) confirm that farming, forestry and fishery, as well as manufacturing, is best represented in rural municipalities. Given Denmark’s strongest employment growth has taken place in other sectors – notably ICT, services and construction – it comes as little surprise that rural areas have not experienced employment growth comparable to municipalities with large cities or situated close to Copenhagen (Larsen et al. 2023: 22). Larsen et al.’s analysis (2023) indicates that projected labour shortages will be largest in rural municipalities, with Western Jutland hardest hit, while municipalities with large cities or that are in/near Copenhagen will have a small surplus of labour. Here, expected falls in labour supply due to retirement and relocation will have an outsize impact on rural municipalities.

Martin B. Carstensen
Department of Business and Social Science Roskilde University

Larsen et al.’s (2023) analysis suggests that, in the aggregate, the largest projected labour shortages will be in construction and health, with all parts of Denmark expected to experience shortages. Conversely, surpluses are expected in the food, furniture and metal industries, as well as in finance and insurance. In terms of expected labour shortages in rural areas, the biggest challenges lie in farming, tourism and hospitality, and manufacturing.

As stated above, Larsen et al. (2023) point to three sectors particularly hard-hit by labour shortages in rural municipalities: farming, hotels and restaurants, and manufacturing. Although their analysis does not allow for systematic testing of potential causes, they do offer explanations as to why this is the case. In farming, they argue that industrialisation of activities into a high-technology export sector has changed the profile of those employed in the sector, leading to reduced tolerance for demanding working hours and conditions. Moreover, the farming sector is part of international supplier and distribution systems, and so less locally anchored. Foreign labour is more frequently used compared to the rest of the Danish labour market, but even so the sector struggles to attract the necessary number of workers (Larsen et al. 2023: 120).

In the tourism sector, which has contributed significantly to the economies of many rural municipalities over recent years (Ministry of Cities, Rural Areas and the Church 2023), hotels and restaurants are struggling to find qualified employees, particularly trained chefs and waiters (Larsen et al. 2023: 128). This is the case nationally, with hotels and restaurants hardest hit by labour shortages (STAR 2024), a challenge attributable to the low education levels generally required of those in the sector, rendering it susceptible to competition from rival sectors. Moreover, the sector’s working conditions – seasonal work, unstable and shifting working hours, and low wages – often make recruitment difficult. According to Larsen et al. (2023: 121), the Covid-19 pandemic has made it even more difficult to recruit young people and foreign workers.

Construction also struggles to fill positions. Despite having seen weaker (although still significant) rural employment growth compared to the other two sectors mentioned, the shortage of vocationally trained people is so large that rural municipalities are particularly when it comes to construction (Larsen et al. 2023: 102). A similar problem applies to industrial manufacturing companies in rural municipalities – while the category covers a variety of companies, they all tend to depend on vocationally skilled labour that is becoming increasingly difficult to attract (Larsen et al. 2023: 87).

Larsen et al. (2023) do not specify any causes for the projected labour shortages. In this section, therefore, we draw on insights from relevant researchers, think tanks and organisations to outline four explanations – broadly related to urbanisation, economic development, demographic changes and centralisation of the public sector – for labour shortages in rural areas in Denmark. Although we present them separately, it should be stressed that these developments are interrelated in multiple, complex ways.

In Denmark, as in most other advanced economies, the structural shift towards a knowledge economy has promoted a strong tendency towards urbanisation (Eriksson et al. 2017). Given that the economic sectors experiencing the greatest employment growth are generally sited in and around large cities, particularly Copenhagen, it is unsurprising that people – not least young people – are drawn towards these areas. According to figures provided by the Ministry for Cities, Rural Areas and the Church (2023: 6), 70% of the municipalities positioned relatively far away from large cities have experienced a decline in population. Migration away from rural areas typically takes the form of double urbanisation, with residents moving to the largest urban area in the municipality, as well as the largest cities in the country. Coupled with falling birth rates, this has led to a steady decrease in Denmark’s rural population. This in turn presents difficulties when it comes to maintaining basic functions in rural localities, including providing companies with a stable supply of labour.

This is not to say that no one is migrating to rural areas. In terms of those moving in this direction, however, a net increase in people with relatively weak labour market attachment, lower education levels and long-term benefit recipients can be observed (Ministry of the Interior 2021). One possible reason driving migration towards rural areas is lower housing expenses, a supposition supported by Aner and Hansen (2014), who argue that such moves tend to happen more frequently during periods of economic crisis, with a key motivation being the lower deposits demanded by the private rental market. Along similar lines, the Ministry of Cities, Rural Areas and the Church (2021) writes that ‘the further away from the capital area and Aarhus, the lower the income of the migrants’.

Of course, people with higher education do also move to rural areas. Aner and Hansen (2014) identify three groups of people within this category most likely to make this move: 1) the newly educated; 2) rural migrants with young children; and 3) mid-career people aged 40 or more. Broadly speaking, each of these groups is driven by different motivations: the first move to gain a job that can kickstart their career; the second move in pursuit of more housing space; and the third move in order to achieve a less stressful, perhaps more nature-oriented, lifestyle.

It is also worth noting that recent research has indicated a ‘counter-urbanisation’ tendency (Nørgaard et al. 2023). Andersen et al. (2022: 17), for example, observe that ‘counter-urban migrants who move to the periphery are not decisively different from anyone else who moves’, and that the number of people with higher education moving to rural areas from citieshas increased by 60% between 2005 to 2020. They also suggest that public workplaces being relocated to outside Copenhagen has been important in promoting this development.

A recent paper by Manniche and Hansen (2023) argues that Danish business policy has unintentionally placed rural areas at a disadvantage. Given that Denmark – along with other advanced economies – is transitioning from an industrial economy to a knowledge economy dependent on specialised skills and innovation, the country’s business strategy has been directed at promoting an institutional and economic infrastructure conducive to this development. With most such industries based in and around large cities, however, this approach has led to increasing economic inequality along geographic lines.

Danish business policy has concentrated on supporting particularly competitive sectors, niches or areas of specialisation (Nørgaard & Brendstrup 2010), with the most recent reform of the system for business promotion (‘erhvervsfremmesystem’ in Danish) (Erhvervsministeriet 2018), dividing responsibility up between the national and local (municipal) level. However, the 13 business areas designated as particularly promising based on an assessment of their technological productivity only represent a relatively small proportion of the country’s employment. While some of these areas are relevant to rural areas (e.g. food production, tourism and hospitality), most speak to urban economic structures (e.g. finance and fintech, robot and drone technology, digital technology, animation). This narrow focus on particularly competitive industries has meant a lack of comparable support for business areas of particular importance to rural areas. In the words of Manniche and Hansen (2023: 63), ‘The national business and innovation policy have not contributed to geographically balanced development, as its allocation of support funds has unintentionally favoured the largest urban areas with greater innovation capacity’.

Another driver of labour shortages, particularly going forward, is the decreasing number of young people in rural areas. As noted by the Ministry for Cities, Rural Areas and the Church (2023: 7), there are still more births than deaths nationwide, but ‘In most municipalities further away from the larger cities, there is a deficit of births, meaning more deaths than births occur’. Moreover, AE (2019) shows that in many rural areas the number of births fails to compensate for the large numbers of young people migrating to cities and the number of people leaving the workforce. This trend is only likely to be exacerbated in coming years by a more general – national – tendency towards smaller birth cohorts (Larsen et al. 2023). This poses a challenge to youth education institutions (e.g. vocational schools, gymnasiums), which will find it increasingly difficult to attract enough students (Ministry of Cities, Rural Areas and the Church 2021: 11). A recent analysis by SMV Danmark (an organisation representing the interests of small and midsize Danish companies) argues that, ‘In 83 out of the country’s 98 municipalities, there will be fewer young people aged 15 to 19 by 2038. For more than a third of the municipalities, they are even projected to lose at least 15 percent, while 12 municipalities are set to lose at least 20 percent’ (SMV Danmark 2023: 3).

Research shows that education is a key driver in the migration of young people from rural areas (DØRS 2015: 247; Nørgaard et al. 2022: 31). Analysis by Andersen (2017) suggests that 20% of those who leave rural areas in connection with education move back within three years of having completed their studies. This encompasses some variation between education groups: 25–30% of those with a vocational education, 20% of those with a medium-length education, 15% of those with a Bachelor’s degree and approximately 10% of those with a longer higher education, return. The study also shows that more women than men with a higher education return to their hometown municipality. Moreover, the further the distance and the longer the stay away from the home municipality, the less likely an individual is to return. In sum, while rural municipalities are generally adept at getting young people through secondary education (‘ungdomsuddannelse’ in Danish), they rarely benefit from doing so. Instead, many young people leave behind the rural areas they originate from as they progress further in the education system.

As argued above, dissuading vocationally trained workers from migrating away is crucial for rural areas. In this respect, Larsen et al. (2021) observe that an important determinant of whether people leave their rural municipality is not where they go to school, but where they do their apprenticeship. In addition, rural municipalities primarily retain skilled workers who grew up and were educated in the local area, while struggling to attract skilled labour from outside (Larsen et al. 2021). Thus, approximately 80% of employed skilled workers residing in a peripheral municipality in 2017 grew up in the same or a neighbouring municipality. Larsen et al. (2023: 19) conclude that peripheral, rural municipalities face a significant problem, as they ‘have a high proportion of young people who choose a vocational education, but due to lack of access to school, apprenticeships, and perhaps also jobs, they end up leaving the local area while they are still in education’. Overall, this suggests that the ability of peripheral municipalities to attract skilled workers from outside is severely limited (Nørregaard et al. 2022: 31).

The importance of retaining education institutions in rural areas has also been documented in analyses indicating that more than 80% of graduates from vocational schools and approximately 75% of graduates from business academies remain in the region they completed their education (Danske Regioner 2016). Analysis by DAMVAD Analytics (2018) shows that around 40% of students attending institutions in Copenhagen, Aarhus, Odense and Aalborg have been attracted from outside areas to the respective city, with 72% of newcomers staying on once they have completed their education. Moreover, just over half the newcomers to medium-sized cities still live there one year after completing their education. Despite education being such an important driver in the migration of young people from rural to urban areas, the Council of the Labour Movement (AE 2021) documents that while in the mid-1990s there was at least one short- or mid-level education institution in 62 of today’s 98 municipalities, by 2018 this was only the case for 44 municipalities. In the context of vocational education, debates about the quality of education point to the challenge of some rural schools having too few teachers and students, suggesting a need to limit the number of schools (Voldby 2022).

What national and/or regional policies are in place to address the labour shortage challenges outlined in the previous section? Below, the strategies and solutions currently being pursued in Denmark’s rural areas are presented.

Rural labour markets are challenged by significant outward mobility in relation to education. At the same time, rural companies struggle to attract employees, particularly those who are vocationally trained (Larsen et al. 2023: 12). One response from rural municipalities has been to development policies and infrastructures aimed at attracting citizens.

Nørgaard et al. (2022), having conducted a survey of every Danish municipality, reveal that almost all the country’s rural and peripheral municipalities have a settlement strategy or initiatives designed to entice newcomers. The study also shows that ‘where previously the focus was primarily on attracting more residents to the municipalities, the focus is now more motivated by the desire to attract labour’ (Nørgaard et al. 2022: 79). Relatedly, Ærø & Andersen (2017) point out that several municipalities have sought to attract a target group already familiar with the region and municipality. This is supported by the responses to Nørregaard et al.’s (2022: 31) survey, which indicate that approximately a third of municipalities aim to attract young people who previously lived in the municipality.

In attempting to attract citizens, municipalities collaborate with external parties such as companies, educational institutions and housing associations. Key tools include: ‘1) website with information for potential domestic newcomers and likewise 2) website with information for potential foreign newcomers, 3) settlement consultant(s), 4) newcomer/trial housing, 5) marketing campaigns, and 6) participation in education fairs’ (Nørgaard et al. 2022: 21).

There has been broad political recognition that rural areas are suffering from centralisation and migration towards cities. As such, a number of initiatives have been launched over recent years aimed at promoting education opportunities in rural areas. In May 2021, the Danish government presented 19 such initiatives, for example setting a goal that 60% of study places in four major welfare education programmes (nurse, school teacher, pedagogue, social worker) should be located outside the largest cities by 2030. This is to be attained through both the relocation of existing study places and the creation of new ones. Another of the initiatives is to relocate university study places to areas outside the large cities, supported by more favourable funding and limits on the uptake of students at large city universities.

In 2015, the Danish government announced that 3,900 state jobs in the capital would be relocated to other parts of the country, with the aim of being ‘closer to citizens and companies’. The decision reflected an attempt to address what was a very uneven distribution of state jobs. As noted by Larsen (2024: 1): ‘if we look at the nearly 12,000 new state jobs that were created in Denmark in the period 2008–20, 98% were located within the country’s four largest urban districts (Copenhagen, Aarhus, Odense, Aalborg), whereas, during the same period, approximately 900 state jobs were lost in the rest of Denmark’.

In 2018, the reallocation of a further 4,000 jobs was announced. Ultimately, 7,927 state jobs were reallocated, equating to about one-fifth of all state jobs in the Capital Region (Larsen 2024: 2). In many cases, the relevant institutions were state agencies (or parts of agencies). In their study of the effects of the relocations in two cities (Esbjerg and Ringkøbing-Skjern), Schmidt et al. (2021: 6) find that they had ‘very limited, or no, effect on private employment’, and that ‘there are few – or no – signs that either multiplier or displacement effects are dominant’. It is also worth noting that these jobs were moved to cities rather than rural areas, potentially promoting migration to the largest conurbations in rural municipalities.

Interest organisation Balance Danmark points out that during the period of state job relocation, an even larger increase in the number of state jobs situated in the capital and its surrounding areas has taken place, suggesting the relocation has failed to achieve the rebalancing it aimed for. Balance Denmark (2023: 6) conclude that ‘The development in the geographical distribution of state jobs from 2015 to 2023 shows a massive underlying centralisation alongside the relocations’.

One solution to rural labour shortages that has garnered attention over the past two decades is the substitution of skilled labour with highly educated labour. The basic premise is that the skills shortages experienced by companies can at least partly be addressed by employing highly educated graduates – of which there is an excess – rather than training up those who are already employed. The idea has gained particular traction in debates about how best to support the skills needs of small and midsize companies, although knowledge on the effectiveness of this strategy when it comes to tackling labour shortages remains limited (Jespersen & Klindt 2021).

In their study of substitution efforts in eight small and midsize companies, Jespersen and Klindt (2021: 12) conclude that capacity for substituting labour is positively related to the size of a company. This is because smaller businesses typically have a shorter planning horizon, which limits the time and space available for the internal training often necessary for substitution. Also relevant is how open a company’s approach to recruitment is. If a company has very specific skill demands, substitution is not a viable option, whereas companies that are, in principle, more ‘open’ have an easier time substituting labour.

Fjalland and Hegelund (2021), based on their work in Skive and Esbjerg, discuss substitution’s potential as a strategy for attracting labour by companies outside the major urban centres (although it should be noted that Esbjerg is the fifth largest city in Denmark). One key challenge is that many companies lack a proactive approach, instead waiting for potential higher education recruits to make an approach and demonstrate their relevance. Here, the active work of higher education institutions in demonstrating their graduates’ relevance to a broader segment of companies is important. The employability of university graduates would be further strengthened by exposure to relevant companies during their studies.

In addition to the above, companies highlight the following factors as conducive to employing university graduates (Fjalland & Hegelund 2021: 46):

The issue of rural labour shortages is relevant to two pressing agendas in Danish politics. Firstly, there is a broader debate about labour shortages in the country’s economy, both in the short and especially long term. Secondly, there is increasing political contention concerning the growing divergence between large cities – especially Copenhagen – and rural areas. Despite the issue’s political importance, uncertainty persists on how – or even whether – it can be addressed over the longer term given the structural pressures working against sustained economic development in rural areas.

A key challenge in this regard is the complexity of the problem. As has been pointed out, rural labour shortages are in large part due to structural shifts caused by multi-faceted demographic and economic changes, the outcomes of which are difficult to predict. Building a coherent policy strategy therefore requires critical thinking across a range of policy fields (which at present are often kept in silos), as well as the ability to fend off other societal interests that place less emphasis on rural development.

At the same time, it is important to acknowledge that different rural areas face significant variations in the problems faced, with some areas actually flourishing. This suggests that while significant resources should be made available to address rural labour shortages, they will need to be adjusted to the geographical setting in question. It also points to the necessity of engaging a diverse range of stakeholders in developing solutions to the broader structural challenges faced.

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