Europe 2020 indicators - employment
- Data from June 2017. Most recent data: Further Eurostat information, Main tables. Planned article update: May 2018.
The Europe 2020 strategy is the EU’s agenda for growth and jobs for the current decade. It emphasises smart, sustainable and inclusive growth as a way of strengthening the EU economy and preparing its structure for the challenges of the next decade.
Employment is a key policy component of the Europe 2020 strategy. Paid employment is crucial for ensuring sufficient living standards and it contributes to economic performance, quality of life and social inclusion, making it one of the cornerstones of socioeconomic development and well-being.
Europe 2020 strategy target on employment
This article analyses progress towards the EU's employment target, which is monitored through the headline indicator ‘Employment rate — age group 20 to 64’. This is complemented by contextual indicators on the characteristics of the labour force and on employment and unemployment trends. The analysis looks into the structure of the EU’s labour force and its long-term influence on employment in relation to the strategy’s main target groups such as young, older, low-skilled workers, women and migrants. The article also covers short-term factors related to the economy’s cyclical development (represented by GDP growth) such as employment growth of different economic sectors, non-standard work contracts and youth unemployment. Finally, the analysis investigates inefficiencies in the labour market by examining over-qualification rates, labour force and employment trends by educational attainment, job vacancy rate and long-term unemployment.
- In 2016 the employment rate in the EU reached 71.1 %. As a result the distance to the Europe 2020 employment target of 75 % narrowed to 3.9 percentage points.
- In 2016, seven Member States — Lithuania, Germany, the Czech Republic, Sweden, Ireland, Estonia and Latvia — had already met their respective national employment targets.
- Employment rates across the EU tend to show a north-south divide on a country as well as regional level. Some of the best performing countries such as Germany, Sweden and the United Kingdom also record high regional employment rates.
- In Scandinavian and western European countries employment rates tend to be higher in rural areas. Whereas in most Baltic, southern, central or eastern Member States cities exhibit higher employment rates.
- Considerably lower employment rates are observed for women than men. The gender employment gaps are widest for women in age groups associated with having caring responsibilities for children, dependent family members or grandchildren.
- People with low educational attainment form one of the most disadvantaged groups in the labour market, exhibiting low employment rates.
- Educational attainment levels and knowledge of their host county’s language have a strong influence on how well non-EU citizens integrate into the labour market. People who migrated to the EU to join their families or for international protection are among the most disadvantaged groups in the labour market.
- Long-term changes in the demographic structure of the EU population add to the need to increase employment rates. Despite a growing population, the EU’s low fertility rates and rising life expectancy are shrinking its labour force and increasing its old-age dependency ratio. Higher employment rates, especially for women, older workers and young people, are therefore needed to compensate for the expected decline of the working-age population (aged 20 to 64) by 1.9 million people by 2020.
- Following the recovery in GDP and employment growth, the share of newly employed people is at its highest level since 2009.
- Between 2008 and 2016, employment grew fastest in the professional, scientific and technical sector and the administrative sector, but declined the most in the construction and agricultural sectors.
- Over the past few years increases in part-time work and fixed-term contracts have been observed. Young people have been the most affected, with 16.0 % of 15 to 24 year olds involuntarily employed on time-limited contracts and 8.4 % involuntarily in part-time work in 2016.
- With an unemployment rate of 18.7 % in 2016, young people aged 15 to 29 were clearly at a disadvantage compared with the overall population.
- Improving qualification levels is essential to meet the growing demand for a highly skilled labour force in the EU.
- Recent projections show the EU is relatively on track to match educational achievements to labour market needs, with labour supply exceeding the demand for all qualifications types.
- In 2016, 10.8 million people worked in occupations below their qualification level.
- Data on job vacancies point to a possible deterioration in the job-matching process from 2010 to 2014. Unemployment rose while job vacancies remained stable or increased. However, in between 2014 and 2016 the labour market expanded, showing falling unemployment rates and increasing vacancy rates.
- Since 2013 long-term unemployment has been declining but still accounts for nearly half of all unemployment.
- 1 Main statistical findings
- 2 See also
- 3 Further Eurostat information
- 4 External links
- 5 Notes
Main statistical findings
EU employment on the rise again – signs of gradual recovery
The headline indicator ‘Employment rate — age group 20 to 64’ shows the share of employed 20 to 64 year olds in the total EU population .
In 2016, 71.1 % of the EU population aged 20 to 64 were employed. This is by far the highest share that has been observed since 2002. However, it is still 3.9 percentage points behind the EU 2020 employment target of 75 %. The target excludes people below the age of 20 because many 15 to 19 year olds are still in education or training and are not seeking employment. As a result they tend to show low activity rates — only 20.3 % were part of the labour force in 2016 .
Not all people are economically active. In 2016, 6.5 % of the population were unemployed, the remaining 22.5 % were inactive, meaning they were not (actively) looking for work.
North–south divide in employment rates across the EU
In 2016 employment rates among Member States ranged from 56.2 % in Greece to 81.2 % in Sweden (see Figure 2). Northern and central European countries recorded the highest rates; eight countries even exceeded the 75 % EU employment target. With employment rates below 65 %, Mediterranean countries dominated the lower end of the scale. Employment rates in EFTA countries Iceland and Switzerland were higher than in any Member State.
Between 2008 and 2013, employment fell in most EU countries, since then it recovered for all Member States except Luxembourg, which experienced rising employment between 2008 and 2013 and a small decline of 0.4 percentage points since 2013. However, in 16 Member States the employment rates were still below 2008 levels in 2016. This indicates these countries may still have not fully recovered from the impacts of the crisis on their labour markets. The strongest falls were recorded in Greece (– 10.1 percentage points), Cyprus (– 7.7 percentage points) and Spain (– 4.6 percentage points). However, all these countries were back on a ‘growth path’ by 2016. Since 2008 employment rates have grown the most in Malta (10.4 percentage points) and Hungary (10.0 percentage points).
To reflect different national circumstances, the common EU target has been translated into national targets. These range from 62.9 % for Croatia to 80.0 % for Denmark, the Netherlands and Sweden. In 2016, seven Member States had already met their national employment targets. Lithuania surpassed its national target by 2.4 percentage points, with an employment rate of 75.2 %. Germany, the Czech Republic, Sweden, Ireland, Estonia and Latvia also recorded employment rates above their national targets. Of the remaining Member States, Malta was closest to its national target, with 0.4 percentage points below. Greece and Spain were the most distant, at 13.8 and 10.1 percentage points below their national targets, respectively.
Compared with the world’s other main economies, the EU employment rate lies in the middle of the range (see Figure 3). In most non-EU G20 countries, the employment rate ranged between 74.3 % for Japan and 61 % for Mexico. Three countries experienced lower levels in 2016, Saudi Arabia (52.5 %), India (49.9 %) and South Africa (43.7 %).
Highest employment rates recorded in regions in north-western and central Europe
The differences in the employment rate across Member States, shown in Figure 2, are also reflected in the cross-country regional distribution of employment rates (at NUTS 2 level). Map 1 shows that the highest regional employment rates were mainly recorded in north-western and central Europe, particularly in Germany, Sweden, the United Kingdom, the Netherlands, Austria and the Czech Republic. In 2016, the Finnish region ‘Åland’ had the highest employment rate in the EU, at 86.2 %, followed by ‘Stockholm’ (Sweden) and ‘Berkshire, Buckinghamshire and Oxfordshire’ (United Kingdom), both 83.4 %. At the other end of the scale, the lowest rates were observed around the Mediterranean, in particular in southern Italy and Spain, and in Greece, as well as in the French overseas regions and the outlying Spanish autonomous cities (Ceuta and Melilla). In 2016, the Italian regions Campania, Calabria and Sicilia had the lowest employment rates in the EU of less than 45 %.
Map 2 shows the change in regional employment rates since 2008. Among the 275 NUTS 2 regions for which data are available, 43 % experienced a fall in their employment rates over the observed period. Among the hardest hit were several regions in Greece, with reductions of 8 percentage points or more. In contrast, employment rates increased in 154 regions from 2008 to 2016. Growth rates of 4 percentage points or more were observed in 57 of these regions, 24 of which were in Germany. Increases of more than 8 percentage points were recorded for regions in Hungary (Észak-Alföld, Észak-Magyarország, Dél-Dunántúl, Dél-Alföld), Malta, the United Kingdom (Inner London – West), Germany (Berlin), Romania (Nord-Est), Poland (Dolnoslaskie) and France (Corse).
Urban areas in Baltic, southern and eastern Member States reporting higher employment rates
Employment rates vary not only between regions, but also by degree of urbanisation. This reflects differences in economic performance, industrial structure and the skill composition of the local population. In 2016, the EU employment was almost equally distributed among more and less densely populated areas, with cities recording an employment rate of 71.1 %, towns and suburbs 71.2 % and rural areas 70.8 % (for age group 20 to 64) . However, in most western European countries (Belgium, Germany, France, the United Kingdom, the Netherlands and Austria) employment rates tend to be higher in rural areas. In contrast, most Baltic (Estonia, Latvia and Lithuania), southern (Spain, Italy, Cyprus and Malta) and central or eastern Member States (Bulgaria, Hungary, Poland, Slovakia, Romania and Croatia) exhibit higher employment rates in cities. The exceptions are Greece, which records higher employment rates in rural areas (60.1 %) than in cities (54.5 %), Slovenia (70.8 % in rural areas, 68.9 % in cities) and Portugal, which also has slightly higher employment rates in rural areas than in cities, 70.7 % and 69.2 % respectively. In the Nordic EU countries, the Czech Republic, Slovenia and Ireland, the urban-rural employment rates differ only slightly. This pattern is also roughly mirrored in the differences in poverty by degree of urbanisation (see also the ‘Poverty and social exclusion‘ article).
Lower employment rates of younger and older people
In 2016, the employment rate of people aged 30 to 54 was significantly higher than for the overall working-age population aged 20 to 64 (see Figure 4). In contrast, considerably lower employment rates were observed for young people aged 20 to 29. In addition, the employment gap between the young cohort and those aged 30 to 54 years has widened in recent years. This may reflect the generally less secure position of young people to the labour market, which makes youth employment more sensitive to the macro-economic situation than adult employment. Another important root cause might be the structural characteristics of school-to-work transitions. These structural factors include, among others, unsatisfactory outcomes of education and training systems, segmentation of labour markets affecting young people in particular, as well as the low capacity of public employment services to provide tailored services to young people and limited outreach to young people in the most vulnerable situations (European Commission, 2016).
The lowest employment rate among the working-age population was reported for the group aged 55 to 64 years. However, employment in this group has risen more or less continuously since 2002. Growth has been even more pronounced for older women (19.8 percentage points) than for older men (13.8 percentage points) since 2002. These increases could be linked to structural factors such as cohorts with better educational attainment moving up the age pyramid as well as recent pension reforms, such as increases in the pensionable age, the age for early retirement and length of contribution. This has led to longer working lives for both women and men (European Commission, 2016, p. 16). The duration of working life is measured as the number of years a person aged 15 is expected to be active in the labour market. Over the past years, this has risen in the EU by 2.5 years, from 32.9 years in 2002 to 35.4 years in 2015. The rise was higher for women (3.3 years) than for men (1.7 years). However, in 2015 men could still expect to stay in work much longer (37.9 years) than women (32.8 years) . Other factors that have extended working life include flexible working time and work organisation, access to training for older workers and long-term care and childcare provision (European Commission, 2016, p. 16).
These trends reaffirm the Europe 2020 strategy’s focus on 55 to 64 year old men and women as a way of boosting the overall employment rate: ‘A longer working life will both support the sustainability and the adequacy of pensions, as well as bring growth and general welfare gains for an economy. Higher employment rates among older people are also a precondition for the EU’s ability to reach the 2020 target, just as adequate pension systems are a precondition for achieving the poverty reduction target’ (European Commission, 2012) (see also the ‘Poverty and social exclusion‘ article).
Interestingly, for a majority of Member States (19 countries in total), and most notably for Spain, Ireland, Italy, Portugal and Bulgaria, the rise in the employment rate for older people (aged 55 to 64) between 2006 and 2016 was associated with a fall in the employment rate for younger people (aged 20 to 24) . In this context, the higher employment rates for the older age groups are likely to contribute to increases in the overall employment rate unless it is counterbalanced by bigger increases in youth unemployment or youth inactivity.
Employment rates for younger and older people are considerably lower than the average employment rates. However, while employment rates for the elderly are rising, young people are one of the most vulnerable groups on the labour market.
Women still have lower employment rates but the gender employment gap is shrinking
Despite women becoming increasingly well qualified and even out-performing men in terms of educational attainment (see also the ‘Europe 2020 indicators — poverty and social exclusion’ article), the employment rates and activity rates of women are lower than those for men. But for all age groups, the gender employment gap — the difference in employment rates between men and women — has been decreasing. A number of structural factors influencing the participation of women in the labour market may account for why they have been ‘catching up’ with men. These include changes in social values and attitudes, policies enabling women to reconcile paid work with household responsibilities such as child care provision, flexible working hours, reduction in financial disincentives and pension reforms (European Commission, 2016, p. 22). European employment policies promoting new forms of flexibility and security are addressing the specific situation of women to help raise their employment rates in line with the headline target.
However, despite an increasing share of women in the EU labour force, their absolute numbers are still fewer than men. In 2016, the gender employment gap was highest for 30 to 34 year olds, at 14.3 percentage points. This age group also showed the highest activity rate gap between men and women at 14.5 percentage points. This is not surprising as this is the age when women are more likely to take responsibility for childcare and household duties than men. In addition to caring responsibilities, women can face strong financial disincentives in tax-benefit systems when entering the labour market or wanting to work more. Time out of the labour force for these reasons might also affect employment in later years because finding a job becomes more difficult the longer a person is not employed. This might partially explain why gender employment gaps in 2016 were smaller for younger cohorts.
Gender gaps in older age cohorts are also particularly high, which may be a result of a cohort effect (women who had not participated in the labour force when they were young moving up the age pyramid) or reflect the lack of care facilities for grandchildren or dependent parents. Women are more likely than men to take on care responsibilities for elderly or dependent family members with long-term care needs and are therefore more likely to reduce their working hours or leave the labour market. In addition to care responsibilities, difficulties in finding a job after prolonged unemployment can further affect the employment rate of older female cohorts (European Commission, 2016).
Higher education levels increase employability
Educational attainment levels are another reason why employment rates vary between different labour groups.
Employment rates are generally higher for more educated people (see Figure 6). In 2016, the employment rate among tertiary education graduates was much higher than the EU average total (71.1 %). In contrast, just slightly more than half of those with at most primary or lower secondary education were employed. The employment rate for people with upper secondary or post-secondary non-tertiary education was in between these levels and slightly above the overall EU average employment rate.
These findings underline the importance of education for employability. Increasing educational attainment and equipping people with skills for the knowledge society are, therefore, a major focus of European employment policies addressing Europe 2020 headline targets on employment and education (see ‘Education’ article).
Employment rates among non-EU migrants are comparatively low
Economic migration is becoming increasingly important for the EU’s ability to deal with a shrinking labour force and expected skills shortages. According to European Commission estimates, without net migration the working-age population aged 15 to 64 will shrink by 12 % in 2030 and by 33 % in 2060 compared with 2009 levels (European Commission, 2010).
Country of origin can impact the labour market performance of individuals. Migrant workers from countries outside the EU tend to occupy low-skilled and insecure jobs with temporary contracts and poorer working conditions. Much lower employment rates are reported for this group than for EU citizens (see Figure 7) (European Commission, 2016, p. 177). In 2016, the employment rate of non-EU nationals aged 20 to 64 was 14.5 percentage points below the total employment rate. Migrants are also among the first to lose their jobs during economic setbacks. In addition, in the past few years, the EU experienced an unprecedented inflow of asylum seekers, with submitted asylum applications reaching 2.2 million in 2015 and the first nine months of 2016 (European Commission, 2016, p. 15). However, asylum seekers are not a homogeneous group. Their integration into the labour market depends highly on their level of education and the knowledge of the host-country language. Nevertheless, refugees are a small group among non-EU migrants (7 %). In 2014, more than half of non-EU born migrants aged 15–64 came to the EU for family reasons, followed by those who came for work (25 %) and study (7 %). The lowest employment rates were observed for those who migrated for family reunification and refugees, 53 % and 56 % respectively (European Commission, 2016, p. 114 ff.).
EU’s labour force is shrinking because of an ageing population
Employment rates are a result of the interplay between the supply of and demand for workers in the labour market. Workers supply labour to businesses and businesses demand labour from workers, both in exchange for wages. Consumers play an important role in businesses’ labour needs through their demand for products and services, which in turn is influenced by the economy’s cyclical development. Labour supply is characterised by the number of working-age people available to the labour market (determined by demographic structure) and the skills they offer (approximated by their education and training). However, the demographic structure of the economically active population, and its education levels, are two important factors that are hard to influence in the short term.
The EU is confronted with a growing, but ageing population, driven by low fertility rates and a continuous rise in life expectancy. This ageing, already apparent in many Member States, will lead to a higher share of older people and a lower share of people aged 20 to 64 in the total population in the coming decades (see Figure 8). According to the European Commission Demography report 2015, this means that despite a growing population, the EU labour force is shrinking, which may lead to future labour shortages. This is a potential threat to economic growth, which may have to rely solely on productivity gains in future. It may also increases the burden on the employed population to provide for the rising social expenditure requirements of an ageing population.
Over the past two decades the total EU population has grown from 475 million in 1990 to more than 510 million in 2016 . Between 2002 and 2016 the number of older people aged 65 and above increased by 25 %. The rise was particularly steep for the group aged 80 or over. The working age population aged 20 to 64 years grew only slightly, by 3 % over the same period. In contrast, the number of 0 to 19 year olds fell by 6 %.
While the most recent projections predict rapid growth in the number of older people, the population aged 20 to 64 years is expected to start shrinking in the next few years as more baby boomers born between 1946 and 1964 enter their 60s and retire. As a result, the share of 20 to 64 year olds is expected to gradually decline from 60 % in 2015 to 59 % in 2020. This equals a reduction of 2 million people. At the same time, the number of older people aged 65 or over will grow by about 9 million, meaning that in 2020 every fifth person in the EU will be 65 or above. As Figure 8 shows, these trends will continue at an even faster rate in the following decade. The population aged 20 to 64 is expected to shrink further and those aged 65 or over are expected to make up almost a quarter of the total population in 2030.
The baby boomer generation was the result of high fertility rates in several European countries over a 20- to 30-year period to the mid-1960s. They continue to comprise a significant part of the working population, however, the first of this large group are now reaching retirement age. As a result of these demographic changes the old-age dependency ratio has increased from 23.9 % in 2002 to 29.3 % in 2016 . This ratio shows the share of the population aged 65 and above compared with the population of 20 to 64 year olds. This means that while there were 4.2 people of working age for every dependent person over 65 in the EU in 2002, this number had fallen to 3.4 people by 2016. By 2030, the old-age dependency ratio is projected to reach 39.1 %, meaning there will be fewer than three people of working age for every dependent person over 65 .
These trends underline the importance of making the most of the EU’s labour potential by raising the employment rate for men and women over the coming years. To meet labour market needs in a sustainable way, efforts are needed to help people stay in work for longer. Particular attention needs to be given to women, older workers and young people. With regard to young people, it is important to help them find work as soon as they leave education and ensure they remain employed.
Employment and unemployment trends
Employment (and unemployment) rates are closely linked to the business cycle. Usually this is expressed in terms of GDP growth, which can be seen as a measure of an economy’s dynamism and its capacity to create jobs. Figure 9 illustrates this relationship, showing similar patterns for GDP growth, employment growth and the share of newly employed people in total employment .
As Figure 9 illustrates, GDP growth brought about a job-rich recovery in 2016 with employment picking up by 1.5 %. However, GDP growth is not necessarily associated with employment growth. In 2010 and 2011, GDP growth picked up as well, while employment remained at a standstill. This pattern of ‘jobless growth’ stems from the fact that GDP grew mostly because of an increase in productivity and hours worked, leaving little room for employment growth (European Commission, 2012).
The link between GDP growth and employment growth is also reflected in the share of newly employed people as a share of total employment. This dropped considerably in 2009, following the contractions in GDP and employment in the same year. In 2016, following the recovery in GDP and employment growth, the share of newly employed people was at its highest level since 2009 (13.9%).
Professional, scientific and technical sector and administrative sector show strongest signs of jobs recovery
Jobs growth is unevenly distributed across economic sectors and strongly dependent on general economic conditions as well as developments within these sectors. Overall, employment across all EU economic sectors rose slightly between 2008 and 2016 (see Figure 10). High-end occupations related to professional, scientific and technical activities grew the fastest. Traditional service sectors also experienced employment growth.
However, the construction, agriculture and manufacturing sectors, which were also heavily affected by the economic crisis, showed the strongest declines between 2008 and 2016. Because these sectors are male-dominated, it is plausible that men have been affected more strongly by the decline in these sectors than woman .
Involuntary non-standard work contracts most widespread among young people
In 2016, 13.3 % of employees aged 20 to 64 in the EU were working on a fixed-term contract. Temporary employment has been relatively stable around 13 % over the past decade, with a slight upward tendency. It was most widespread among young people, with 43.8 % of 15 to 24 year olds working on a time-limited contract. Temporary employment was much lower among 25 to 54 year olds at 12.1 % and for older people aged 55 to 64 at 6.7 % .
The significant over-representation of young people in temporary work reflects not only changes in labour market demand, but also structural features of educational systems and cultural norms. In many Member States, for instance, young people prefer temporary work because they are participating in education and training or because of public policies promoting autonomy from an early age (for example, monthly support allowance, availability of affordable housing and free education) (European Commission, 2012, p. 33).
However, for many people a fixed-term contract, rather than a permanent one, is not always a personal choice. In this respect, data on involuntary temporary employment provides a better insight into the overexploitation of fixed-term contracts. In 2016, 8.7 % of employed 20 to 64 year olds were involuntarily working on temporary contracts (see Figure 11). Again, the share was much higher for young people aged 15 to 24, at 16.0 %. Despite some fluctuations, the overall trend since 2006 indicates growing use of involuntary fixed-term contracts. Although fixed-term contracts could act as a stepping stone for young graduates to permanent jobs, there is also the risk that young people stay trapped in a series of temporary contracts (European Commission, 2012, p. 91).
In 2016, 18.8 % of all employees aged 20 to 64 in the EU worked on a part-time contract. More than a quarter (28.5 %) were in involuntary part-time employment. The share of involuntary part-time employed in total employment rose from 4.4 % in 2008 to 5.4 % in 2016. As with involuntary temporary employment, young people are affected the most (see Figure 12). For all age groups the share of women in involuntary part-time employment exceeded that of men. The gender gap is widening with age, from 4 percentage points for 15 to 20 year olds to 5.1 percentage points for the 50 to 64 age group.
The expansion of involuntary part-time work in recent years indicates that an increasing number of people undertake part-time employment not by choice, for example, for more flexible arrangements that allow better reconciliation between work and private life, but because they cannot find a full-time job (European Commission, 2016, p. 90). Involuntary part-time employment is another sign of labour market segmentation, which could have important implications for income and potentially increase the risk of poverty and social exclusion (European Commission, 2016, p. 90).
Younger people are at higher risk of unemployment
In 2016, 8.4 % of 20 to 64 year old EU residents were unemployed, which is a 2.2 percentage point improvement compared to 2013 when the unemployment rate peaked at 10.6 %. However, the unemployment rate does not include people who became discouraged and stopped looking for work because they are not considered part of the labour market. Nevertheless, they still represent a potential additional pool of the work force. In 2016, 8.8 million people in the EU were available and would have liked to work but were not seeking employment. This equals 2.3 % of the population aged 15 to 74  .
Like employment, a clear link exists between unemployment and education: unemployment rates are generally lower for people with higher education levels. In 2016, only 5.1 % of 15 to 74 year olds with tertiary education were unemployed, whereas 16.1 % of people with at most lower secondary education were looking for a job .
Young people aged 15 to 24 generally face a higher risk of being unemployed. In 2016, their unemployment rate was more than double the rate for the entire age group of 15 to 74 year olds. The risk of unemployment is particularly high for low-educated young people who have completed only lower secondary education (early leavers from education and training; see the ‘Education‘ article). However, the group of unemployed persons aged 15 to 24 is not necessarily large, as many young people are studying full-time and are therefore neither working nor looking for a job. The youth unemployment ratio, which reflects the share of unemployed for the whole population of the same age group, is much lower and rose from 6.9 % in 2008 to 7.8 % in 2016.
In the context of the Europe 2020 strategy, it is important that young people maximise their professional working lives by engaging in employment as soon as possible and staying employed. This is specifically addressed through the flagship initiative ‘Youth on the Move’ (see 'Policies tackling youth unemployment' in the ‘Data sources and availability’ section below).
Skills mismatches in the labour market
A well-functioning labour market depends largely on matching the labour force’s skills and qualifications to those demanded by employers. Although some skills mismatch is inevitable, high and persistent mismatches can be costly for employers, workers and society at large (European Commission, 2015). Matching educational outcomes and labour market needs is a key component of the Europe 2020 strategy. ‘Equipping people with the right skills for employment’ has been identified as one of four priorities of the flagship initiative ‘An Agenda for new skills and jobs’. In particular, the impact of the economic crisis and persistently high unemployment have increased the need to better understand where future skills shortages are likely to lie in the EU (European Commission, 2010) .
Changes in labour force skills outpacing changes in employment trends
According to estimates from the European Centre for the Development of Vocational Training Cedefop, the distribution of skills in the labour force largely matched the qualification requirements of the labour market in 2016. However, labour supply exceeded demand for all qualification types, with the difference being particularly high for the low- and medium-level qualifications. The demand for a skilled labour force is likely to continue; the most recent forecasts from Cedefop indicate that between 2016 and 2025 about 15 million jobs requiring high educational attainment will be created, while low-qualified jobs will decline by more than 6 million (see Figure 14).
Overall, the Cedefop forecasts show a parallel rise in skills from both the demand and the supply side until 2025. Skill levels are expected to change faster for the labour force than those required by the job market. For instance, the share of the labour force holding only primary or lower secondary education is expected to decrease from 20.7 % in 2016 to 16.8 % in 2025, whereas the share of positions for people with low-level qualifications are projected to fall from 18.8 % to 15.4 %. However, this parallel development does not prevent potential skills mismatches, such as over-qualification (see section below).
Higher over-qualification rates for most Member States
Skill mismatch is most commonly seen as the inability of employers to fill vacancies despite high unemployment. But it is not only a problem for those hiring or looking for a job, it also affects most of the labour force, for example in times of weak employment demand more people take jobs below their qualification or skills level. This can hamper economic productivity and individual potential, especially when more highly educated people are trapped in jobs without opportunities to continually develop and use their skills (Cedefop, 2015). According to the Cedefop survey results, in 2014 about 25 % of highly qualified first job entrants were overqualified for their position (Cedefop, 2015). These figures challenge the labour market relevance of skills and qualifications (European Commission, 2015). Furthermore, concerns have been raised that the intensified skill mismatch might undermine the long-term potential of the EU skilled labour force (Cedefop, 2015).
Figure 15 shows the over-qualification rate by country. Over-qualification refers to the situation where a person has a level of skill or education higher than is required for his or her job. Over-qualification may be measured in several ways. In this article, the over-qualification rate is defined as the share of persons with at least upper secondary education working in elementary occupations among all employed persons with the same level of education. Elementary occupations do not require any particular formal education but consist of simple and routine tasks which mainly require the use of hand-held tools and often some physical effort.
In 2016, 10.8 million people with at least upper secondary education worked in elementary occupations. This equals a share of 4.8 % of all those employed. Among Member States the share of overqualified workers ranged in 2016 from 9.9 % in Latvia to 2.2 % in Portugal (see Figure 15). In nine Member States the share declined between 2008 and 2016 and was the strongest in Austria and Bulgaria, by 1.6 percentage points. At the other extreme, the share rose by more than one percentage point in five countries (Ireland, Belgium, France, Hungary, Croatia and Italy).
There are many reasons why people may have to take on a job below their qualification level. Young workers, mostly females, are at higher risk, although gender differences vary between countries. This higher risk may be attributed to competition for jobs and the relatively high proportion of young workers in non-standard employment (ILO, 2014).Tertiary education graduates who hold a degree in certain fields such as humanities, languages and arts, other social sciences, but also business and law are also more likely to work in occupations below their qualification level. In addition, the characteristics of a particular job can be a factor. Individuals in non-standard contract jobs and those employed in smaller-sized firms are more likely to see their education underutilised. Over-qualification is a wide-spread phenomena among international as well as EU-born migrants (European Commission, 2015). This might be a result of migrants lacking country-specific skills to capitalise on their formal qualifications on the job (for example, language skills), but also imperfect recruitment policies and problems of recognition. Last but not least, overqualified people are more likely to have been unemployed before accepting their current job (Cedefop, 2015).
Signs of economic expansion with increasing job vacancies and decreasing unemployment
Job vacancy statistics provide an insight into the demand side of the labour market, in particular the unmet labour demand. A job vacancy is defined as a paid post that is newly created, unoccupied or about to become vacant. The employer must be taking active steps and be prepared to take further steps to find a suitable candidate from outside the enterprise. The employer must also intend to fill the position either immediately or within a specific time period. A vacant post that is only open to internal candidates is not treated as a ‘job vacancy’.
Quarterly job vacancy statistics are used for business cycle analysis and for assessing mismatches in labour markets. Of particular interest is the relationship between vacancies and unemployment. The so-called Beveridge curve reflects their negative correlation (see Figure 16). During economic contractions there are few vacancies and high unemployment, while during expansions there are more vacancies and the unemployment rate is low.
Structural changes in the economy can cause the Beveridge curve to shift. During times of uneven growth across regions or industries — when labour supply and demand are not matched efficiently — the vacancy and unemployment rates can rise at the same time. Conversely, they can both decrease when the matching-efficiency of the labour market improves. This could be, for example, due to a better flow of job vacancy information thanks to the internet. Empirical analysis of the curve can be challenging because both movements along the curve and shifts can take place at the same time with different intensities.
Data for the period 2008 to 2009 show a movement along the Beveridge curve, mirroring the impacts of the economic crisis on job vacancies and unemployment. Since 2010, however, movements of the Beveridge curve itself point to a possibly substantial deterioration in the matching process: unemployment has been growing, while the job vacancy rate has remained stable or has also been increasing. This was the case in the fourth quarter of 2013 and the first quarter of 2014. This indicates unemployment has become more structural (European Commission, 2012). This poorer matching at the European level may reflect disparities across Member States: most of the job vacancies have been created in countries with comparatively low unemployment. In the period 2014 to 2016 an upward movement along the Beveridge curve can be seen, illustrating an expansionary phase with falling unemployment rates and increasing vacancy rates. EU policies that address job vacancies aim to improve the functioning of the labour market by trying to match supply and demand more closely (see ‘Data sources and availability’ below).
Slight easing in long-term unemployment
Long-term unemployment poses a serious challenge to the EU because of its negative social and financial implications for individuals and society as a whole. On an individual level, in the absence of an adequate and well-functioning social protection system, long-term unemployment could reduce income, increase the risk of poverty and social exclusion and affect health. It can also lead to deterioration of skills and human capital, hindering future employability, productivity and earnings (European Commission, 2016, p. 26). At the societal level, prolonged unemployment harms economic growth and social cohesion. High rates of long-term unemployment could have further and long-lasting consequences for the EU labour market and economy given that probability of moving from unemployment to inactivity increases with the time spent unemployed (European Commission, 2016, p. 26).
In 2016, 9.6 million people or 4 % of the active population in the EU were in long-term unemployment. In the last years since 2013, the unemployment rate dropped by 1.1 percentage points. Nevertheless, long-term unemployment emerges as the main employment legacy of the crisis as the proportion of long-term unemployed among all unemployed rose from 36.9 % in 2008 to 46.4 % in 2016.
Outlook towards 2020
Overall, in 2016 the EU was 3.9 percentage points below its employment target value of 75 %, to be met by 2020. According to the 2014 European Commission Communication ‘Taking stock of the Europe 2020 strategy for smart, sustainable and inclusive growth’, even if all countries were to meet their national Europe 2020 targets, the overall EU employment rate would only grow to 74 %, just below the 2020 target. Ageing of the working population and the associated rise in economic dependency adds a sense of urgency to the need to improve the functioning of the labour market. The EU risks undermining its growth potential and future prosperity unless it is ‘able to put more people to work and ensure they work more productively and for longer, in line with the increase in life expectancy and healthy life years’ (European Commission, 2014, p. 9). While a large share of young and well-educated people will be available to work (also see the article on ‘Education’), achieving the Europe 2020 employment target will require greater use of the potential labour force, including women, older people and so far inactive adults such as migrants (European Commission, 2014).
The EU youth unemployment rate is more than double the overall unemployment rate (18.7 % compared with 8.6 %). Bringing young people into the labour market is crucial to avoid eroding competence or insufficient skill acquisition (European Commission, 2016, p.28). Increasing the relevance of education and supporting a secure transition from education to employment — as emphasised in the flagship initiatives ‘An Agenda for new skills and jobs’ and ‘Youth on the Move’, and the EU employment package ‘Towards a job-rich recovery’ — are key policy steps towards improving the employment prospects of young people. The ‘Youth Employment Package’ proposes specific recommendations on how to fight youth unemployment and enable young people to gain access to jobs, traineeships or apprenticeships. In particular it includes a Recommendation to Member States to implement a Youth Guarantee to ensure that all young people up to age 25 receive a quality offer of a job, continued education, an apprenticeship or a traineeship within four months of leaving formal education or becoming unemployed. The implementation of a Youth Guarantee scheme receives EU funding support. The ‘Youth Employment Initiative’ reinforces and accelerates measures outlined in the Youth Employment Package, particularly focusing on young people not in education, employment or training in regions with a youth unemployment rate above 25%.
Increasing the labour force participation of women would require comprehensive family policies, which improve the compatibility of child-rearing and employment. Universal access to high-quality childcare services for children, availability of part-time work and access to parental leave are proven as particularly effective in this respect (European Commission, 2016, p.16). Highly relevant EU actions in this direction also include the promotion of new forms of flexibility and security on the labour market as outlined in the flagship initiative ‘An Agenda for new skills and jobs: A European contribution towards full employment’ and addressed by the EU employment package ‘Towards a job-rich recovery’.
Integrating older people and migrants into the labour market might be challenging because a large portion tend to have low education levels (European Commission, 2014). Against future projections for increased demand for high-skilled labour, these groups are therefore more likely to join the less skilled part of the labour force. In this respect, it would be imperative for Member States to design and put in place active labour market policies combined with targeted policy measures for lifelong learning and comprehensive integration. Enabling mobile people to better capitalise on their formal qualifications would also enhance their employability and improve growth prospects.
Data sources and availability
Indicators presented in the article:
- Employment rate age group 20-64 (t2020_10)
- Breakdown by country (t2020_10)
- Breakdown by NUTS 2 regions (lfst_r_lfe2emprt)
- Breakdown by degree of urbanisation (lfst_r_ergau)
- Breakdown by age groups (lfsa_pganws, t2020_10, tsdde100)
- Gender employment gap (lfsa_ergan)
- Population age structure by major age groups (demo_pjan, proj_15npms)
- Old-age dependency ratio and projections (demo_pjan)
- Activity rates by age and gender (lfsa_pganws)
- GDP growth, employment growth and newly employed persons (nama_10_gdp, lfsi_grt_a, lfsa_enewasn)
- Employment growth by economic sector (lfsa_egan2)
- Involuntary temporary employees (lfsa_etgar, lfsa_etgaed, lfsa_eegaed, lfsa_etpgan)
- Involuntary part-time employment (lfsa_etgar, lfsa_etgaed, lfsa_eegaed)
- Unemployment rate by age group (lfsa_urgaed)
- Youth unemployment ratio (tespm080)
- Labour force and employment by educational attainment (Cedefop 2015 skills forecasts)
- Share of people with at least upper secondary education working in elementary occupations (lfsq_egised)
- Job vacancy rate (jvs_q_nace2)
- Long-term unemployment (tsdsc330)
Employment and other labour market-related issues are at the heart of the social and political debate in the EU. Paid employment is crucial for ensuring sufficient living standards and it provides the necessary base for people to achieve their personal goals and aspirations. Moreover, employment contributes to economic performance, quality of life and social inclusion, making it one of the cornerstones of socioeconomic development and well-being.
The EU’s labour force is shrinking as a result of demographic changes that have led to a greater share of older people than younger people in the population. Because of these changes, a smaller number of workers are now supporting a growing number of dependent people, putting the sustainability of Europe’s social model, welfare systems, economic growth and public finances at risk. In addition, the economic crisis, exposed structural weaknesses in the EU’s economy. At the same time, global challenges are intensifying and competition from developed and emerging economies such as China and India is increasing .
To face the challenges of an ageing population and rising global competition, the EU needs to make full use of its labour potential. The Europe 2020 strategy, through its ‘inclusive growth’ priority, places a strong emphasis on job creation. One of its five headline targets addresses employment, with the aim of raising the employment rate of 20 to 64 year olds to 75 % by 2020. This goal is supported by the so-called ‘Employment Package’, which seeks to create more and better jobs throughout the EU.
The EU’s employment target is closely interlinked with the other strategy goals on research and development (R&D) (see the article on 'R&D and innovation '), education (see the article on 'Education') and poverty and social exclusion (see the article on ‘Poverty and social exclusion’). Better educational levels increase employability and higher employment rates can in turn contribute to economic performance and poverty alleviation, thus addressing the strategy’s inclusive growth objective. Moreover, boosting R&D capacity and innovation could improve competitiveness and thus contribute to job creation.
What is meant by ‘activity’, ‘employment’, ‘unemployment’ and ‘labour force’?
People are classified as employed, unemployed and economically inactive according to the definitions of the International Labour Organisation (ILO). On the EU level the two main sources for this data are the EU Labour Force Survey (EU LFS) and National Accounts (including GDP).
The EU LFS is a large sample survey of private households, excluding the population living in institutional households (such as workers’ homes or prisons). The survey classifies respondents as employed, unemployed or economically inactive based on information collected through the survey questionnaire, relating mainly to their activity during a reference week. The EU LFS data refer to the resident population, so the results relate to the country of residence of people in employment, rather than to their country of work .
‘Labour force’ refers to the economically active population. This is the total number of employed and unemployed people. Persons in employment are those who, during the reference week, did any work for pay or profit, or were not working but had a job from which they were temporarily absent. The term ‘work’ is defined as any work for pay or profit during the reference week, even for as little as one hour. Pay includes cash payments or payment in kind (payment in goods or services rather than money), regardless of whether or not payment was received in the week the work was done. Anyone who receives a wage for on-the-job training that involves the production of goods or services is counted as being in employment. Self-employed and family workers are also included.
Employment rates represent the share of employed persons in the total population in the same age group; they are typically published for the age group 15 to 64 years. However, in a majority of Member States it is rare to attain secondary education while working (even part-time). Therefore, 15 to 19 year olds who are still in education or training are in the main not seeking employment. Students that attain higher levels of education tend to enter the labour market later. This is in line with the strategy’s headline targets on education that promote further education (see the article on ‘Education’). As a result, the lower age limit of the Europe 2020 strategy’s employment target has been raised to 20 years . The upper age limit for the employment rate is usually set to 64 years, taking into account statutory retirement ages across Europe .
Unemployed persons comprise people aged 15 to 74 who were:
- Without work during the reference week, meaning they neither had a job nor were at work (for one hour or more) in paid employment or self-employment.
- Available to start work, meaning they were available for paid employment or self-employment before the end of the two weeks following the reference week.
- Actively seeking work, meaning they had taken concrete steps in the four-week period ending with the reference week to seek paid employment or self-employment or who found a job starting within three months.
The unemployment rate is the number of unemployed persons as a percentage of the labour force representing the total number of people who are employed and unemployed.
The youth unemployment rate is the unemployment rate of people aged 15 to 24; for the purpose of this article the analysis is extended to 15 to 29 year olds, which is the age group addressed by the EU Youth Strategy. In contrast, the youth unemployment ratio is the percentage of unemployed young people compared to the total population of that age group (not only the active, but also the inactive such as students).
The long-term unemployment rate is the number of people unemployed for 12 months or longer as a percentage of the labour force.
The economically active population is the sum of employed and unemployed persons. In contrast, inactive persons are those who, during the reference week, were neither employed nor unemployed. The activity rate is the share of the population that is economically active. The earliest age that a person can leave full-time compulsory education in the EU is 15  and in many Member States this is also the minimum employment age .Therefore, activity rate measures the economic activity of people aged 15 years or older.
Further Eurostat information
Methodology / Metadata
- Communication from the Commission to the European Parliament and the Council COM(2011) 211 final Towards robust quality management for European Statistics
- Regulation (EC) No 223/2009 of 11 March 2009 on European statistics
- European Commission, Taking stock of the Europe 2020 strategy for smart, sustainable and inclusive growth, COM(2014) 130 final, 2014.
- The reason for choosing this age group over the ‘usual’ working-age population 15 to 64 years old is explained in the section ‘“Activity”, “employment”, “unemployment” and “labour force” – main definitions’ earlier in this chapter.
- Source: Eurostat (online data code: (lfsa_pganws))
- Source: Eurostat (online data code: (lfst_r_ergau))
- Source: Eurostat (online data code: (tsdde420)).
- Source: Eurostat (online data code: (lfsa_ergan)).
- Note that the total population figures presented here differ from the population concept used in the EU LFS, which only covers resident persons living in private households, excluding the population living in institutional households (such as workers’ homes or prisons). The data are based on Eurostat data tables ( (demo_pjan)) and ( (proj_15npms)).
- Source: Eurostat (online data code: (tsdde510)).
- Source: Eurostat (online data code: (tsdde511)).
- People who started their job within the past 12 months.
- Source: Eurostat (online data code: (lfsa_egan2)).
- Source: Eurostat (online data code: (lfsa_etpgan)).
- The target population of the EU LFS are resident persons living in private households, excluding the population living in institutional households (such as workers’ homes or prisons).
- Source: Eurostat (online data code: (lfsi_sup_a)).
- Source: Eurostat (online data code: (lfsa_urgaed)).
- European Commission, Europe 2020 — A strategy for smart, sustainable and inclusive growth, COM(2010) 2020 final, Brussels, 2010 (p. 5, 7, 17), European Commission, An Agenda for new skills and jobs: A European contribution towards full employment, COM(2010) 682 final, Strasbourg, 2010 (p. 2).
- This difference may be significant in countries with large cross-border flows.
- João Medeiros & Paul Minty, Analytical support in the setting of EU employment rate targets for 2020, Working Paper 1/2012, European Commission (Directorate-General for Employment, Social Affairs & Inclusion), Brussels, 2012 (p. 12).
- European Commission (Directorate-General for Economic and Financial Affairs), The 2012 Ageing Report: Economic and budgetary projections for the EU27 Member States (2010–2060), 2012 (p. 99).
- To take into account people that would like to (or have to) work after the age of 64 but are unable to find a job, the upper age limit for the unemployment rate is usually set to 74. As a result, the observed age group for unemployed persons is 15 to 74 years.
- João Medeiros and Paul Minty, Analytical support in the setting of EU employment rate targets for 2020, Working Paper 1/2012, European Commission (Directorate-General for Employment, Social Affairs & Inclusion), Brussels, 2012 (p. 58).
- European Commission (Directorate-General for Justice), Age and Employment, Publications Office of the European Union, Luxembourg, 2011 (p. 50).