KUALA LUMPUR - Countries across Europe and Central Asia (ECA), once known for sending workers abroad, are now becoming destinations for migrants as they confront growing labour shortages, according to the World Bank’s ECA Economic Update Fall 2025.

The shift marks a major demographic turning point for the region, where shrinking workforces are prompting governments to seek new ways to sustain growth and maintain competitiveness.

Migration, the report said, is providing temporary relief by filling critical roles in high-skill and care sectors while also contributing to labour market resilience and social inclusion.

How is the labour landscape changing? The World Bank noted that many ECA economies are facing population decline, ageing workforces, and rising dependency ratios.

To offset these trends, countries are turning to migrant labour as an immediate solution to fill gaps in both low and high-skilled occupations.

Refugees and economic migrants are playing an increasingly important role, helping stabilise local economies and addressing shortages in sectors such as healthcare, education, and digital services.

Why is strengthening foundational education important? The report emphasised that long-term sustainability depends not only on migration but also on equipping the local workforce with relevant skills.

Strengthening primary and secondary education is crucial to ensure that all students acquire literacy, numeracy, and problem-solving abilities early on.

“Developing strong foundational skills among vocational education students is critical to improve employment outcomes,” the World Bank said.

It recommended reforming vocational education systems by delaying early student tracking and involving the private sector in apprenticeships and work-based learning.

The report also highlighted that consolidation and improved management in higher education can reduce duplication, streamline curricula, and generate cost savings that can be reinvested in quality improvements.

How are skills being updated for a modern economy?

ECA countries are being encouraged to modernise their skills development and credentialing systems to better reflect the realities of today’s labour markets.

The World Bank advised moving away from traditional degree-based systems towards modular, competency-based certification frameworks that measure practical abilities rather than formal qualifications.

“Expanding workplace learning and increasing access to high-quality training opportunities is essential to boost productivity,” it said.

Governments can also support cost-sharing initiatives, skills assessments, and foundational skill upgrades before workers enter advanced training.

According to the report, labour market observatories and modern employment services can reduce mismatches between worker skills and job requirements, improving efficiency across industries.

How can labour markets become more inclusive?

Encouraging broader participation, especially among women, youth, and disadvantaged groups, is another priority.

The report said that access to childcare, elder care, and flexible work arrangements can significantly increase female labour force participation.

“Access to public and private daycare and elder care significantly increases female labour force participation, including for older workers,” it noted.

Targeted labour market policies, particularly those that integrate vocational and soft skills training with hands-on experience have been shown to deliver strong results in helping vulnerable groups find employment.

How can workers be protected during employment transitions?

The World Bank underscored that social protection plays a vital role in helping workers adapt to technological change and shifting job patterns.

Effective unemployment insurance systems, combined with active labour market measures, can improve job matching and encourage re-employment.

“Unemployment insurance with activation requirements improves the quality of job matching,” the report said.

Combining income support with vocational training and portable benefits can ensure workers experience a just transition between jobs or sectors.

Localised social policies, it added, help stabilise incomes and protect vulnerable communities from sudden disruptions.

What does active ageing and workforce retention involve?

As populations age, extending working lives and investing in lifelong learning have become central to maintaining productivity.

The World Bank said that improving healthcare access and continuous skills development helps older adults remain active in the workforce.

“Age-friendly workplaces and labour policy reforms can maintain productivity and reduce dependency ratios,” the report said.

Behavioural changes, social engagement, and workplace adaptation were also cited as essential to promote healthy and active ageing.

How can countries retain talent and encourage mobility?

Beyond migration inflows, ECA countries are also looking to retain skilled workers and attract return migrants.

The organisation suggested that smaller economies could focus on developing niche sectors capable of keeping qualified workers at home.

“Smaller countries could focus on developing niche sectors, which may become strong enough to retain qualified workers,” it said.

The report noted that bilateral migration agreements can help build sustainable labour markets and foster greater regional mobility.

Can migration alone address demographic challenges?

The World Bank said that migration alone cannot resolve the region’s demographic challenges. Combining migration strategies with reforms in education, skills development, inclusion, social protection, and active ageing policies will allow ECA countries to navigate workforce decline and maintain economic resilience.