State of the housing for workers in a blue-collar economy

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As central European countries have grown richer and richer after the end of communism in 1989, we have witnessed a big trend that most people no longer want to work manually. It is safe to say there is a nice flywheel between the fact that local people are shifting from the secondary manufacturing sector into the tertiary service sector and the increased wealth connected to economic growth.

Businesses in industries such as manufacturing, construction, agriculture etc. … are very important for the country’s economy. So where do they find the needed workforce, when local people are drifting away from this crucial sector? — They import it!

The shortage of blue-collar workforce in the CEE region caused by increased well-being, low birth-rate, and the salary competition is one of the biggest mobility drivers in the EU. Historically many people from Czech Republic, Slovakia, Poland have been working in the secondary sector in Germany as it is one of the richest regions in Europe. Nowadays this trend is shifting also to its eastern neighbours. Both Czechia and Poland have seen dramatic growth when it comes to GDP/capita (the Czechs are set to overtake Spain and Italy in the next few years), and therefore there is an ever-increasing demand for secondary sector workers. We can support the above statement with the following findings.

  • The number of foreign workers without permanent residency in the Czech Republic rose by 100 thousand in the past 5 years.
  • Most of the applicants for residency permits apply for jobs such as craftsmen and repairers, machine and equipment operators, unskilled workers (source: Czech Ministry of Labour and Social Affairs)
  • According to the Czech Chamber of Commerce, even with the increasing number of foreign workers, companies still need somewhere between 300–400 thousand workers to satisfy the demand, of which most require only primary education (even unfinished).
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Companies are putting tremendous effort into hiring these employees from selected? countries. In the Czech Republic, it is mainly Ukraine, Slovakia, Russia, Bulgaria, Romania, and Poland. They recruit through various channels — own recruiting points, social&marketing, but mainly specialized employment agencies.

Due to the high demand for these employees, recruitment is very competitive. Employees and agencies need to provide excellent service in terms of paperwork and moving agenda. Therefore it is becoming the industry standard that housing becomes a mandatory part of the job offer.

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Foreign workers are accommodated in dedicated hostels/dormitories or apartments. Usually, they stay in rooms with 2–6 beds, with a shared bathroom, kitchen and living room. The conditions in these accommodations are not always of good quality. The length of the stays depends on the industry — a few weeks for construction companies and long-term stays for manufacturing companies.

These hostels/dormitories are not like hotels or hipster hostels, which travellers book during holidays. The majority of them are not listed on any modern booking portals or marketplaces. They do not use any property management software and surprisingly some of them don’t even have a proper computer. These hostels are owned by regional old-time entrepreneurs who don’t know anything about digitalization and innovation. It is not hard to believe that accommodation in this vertical is the last bastion of accommodation that is still pen&paper based and is ready for disruption.

We are all very familiar with booking services such as booking.com, Airbnb, and Trivago when we travel. It is hard to imagine our planning without these services. But this is not applicable when it comes to accommodation booking and planning for the workers. It is important to say that it is always the company or the agency who does the booking.

We can see that the workers’ housing market is surprisingly large (roughly EUR 1 Billion in CZ alone) and it is steadily growing. Our company Accomango sees there is a substantial opportunity to create a value-added service in this non-digitalised market.

Key reasons why now is the ideal time to pursue opportunities in this market.

  • Growing demand for foreign workers, who will need accommodation services.
  • In the article How B2B Marketplaces are changing procurement, Robin Dechant describes the shift from horizontal to verticalized procurement solutions, and why now is an excellent time for building B2B Marketplaces.
  • Companies are getting used to new technologies that help them to increase their efficiency.

What is very interesting is that these B2B Marketplaces are often building very tailored workflow software for a specific buying persona in a particular industry, which decreases the need for customization.

There is enormous potential for streamlining these procurement processes and automating parts of it. This can free up time from repetitive work that fails to leverage the capabilities of the procurement department for more strategic purchasing, innovation, and researching new and better materials.

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Notice that booking accommodation for workers falls neatly into the procurement process within the company; that is the workflow that we hope to digitize.

Founder at Accomango, Background in Mathematics, Consulting (BCG), Venture Capital (Enern Investments) & Startups

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