Harnessing the Inactive Population to Address Labour Shortages in the Republic of Moldova

Abstract

Labour shortages have emerged as a structural constraint to economic development in the Republic of Moldova, driven by demographic decline, sustained outmigration, and persistently low labour force participation. Despite the presence of a sizeable economically inactive population, the extent to which inactivity can be harnessed to alleviate labour shortages remains insufficiently quantified. This study addresses this gap by proposing a transparent, scenario-based framework to assess the realistic activation potential of the inactive population under prevailing structural constraints. Using official data from the National Bureau of Statistics for the third quarter of 2025, the inactive population is decomposed into three mutually exclusive groups: structurally unavailable, conditionally activatable, and potentially activatable. Based on this classification, conservative activation scenarios are constructed to estimate upper ceilings for feasible labour supply mobilisation. The results indicate that more than half of the inactive population is structurally unavailable for activation in the short to medium term, primarily due to ageing and migration-related constraints. The realistic activation margin is concentrated in a limited subset of conditionally and potentially activatable individuals, such as caregivers, students, and discouraged workers. Scenario-based estimates suggest that, even under favourable policy conditions, activation could mobilise at most between 136 and 232 thousand persons, implying that labour market activation alone cannot fully offset labour shortages. These findings underscore the need to treat activation as a complementary policy tool rather than a standalone solution. The study concludes that effective responses to labour shortages in Moldova require a coordinated strategy combining selective activation of inactive populations, improvements in job quality and wage-setting mechanisms, productivity-enhancing investments, and targeted labour migration policies. UDC: 331.526+331.101.262(478); JEL: J21, J23, J61, J68, O15