Europe 2020 indicators - employment
- Data from June 2016. Most recent data: Further Eurostat information, Main tables. Planned article update: May 2017.
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 to overcome the structural weakness in Europe’s economy, to improve its competitivenes and productivity and to underpin a sustainable social market economy.
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.
The analysis in this article is based on the headline indicator ‘Employment rate — age group 20 to 64’, which monitors the strategy’s employment target. Contextual indicators are used to present a broader picture, looking into the drivers behind changes in the headline indicator. These include indicators on the characteristics of the labour force and those depicting short-term employment and unemployment trends. First, 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 analysis then shifts to short-term factors related to the economy’s cyclical development (expressed through GDP growth) such as availability of jobs, employment growth of different economic sectors and how these influence job creation, temporary employment and short-term and long-term unemployment. The changes in labour market flows are also analysed to provide a better overview of the underlying dynamics of the labour market.
- In 2015 the employment rate in the EU reached 70.1 %. As a result, the distance to the Europe 2020 employment target of 75 % narrowed to 4.9 percentage points.
- Young people aged 15 to 29, non-EU citizens and people with low educational attainment are some of the most disadvantaged groups on the labour market, exhibiting low employment rates.
- Women, especially those aged 55 to 64 years, and older people in general still have considerably lower employment rates than men and younger groups, respectively.
- Increases in the employment rate, especially for women, older workers and young people, are needed to compensate for the expected decline of the working-age population (aged 20 to 64) by 4.3 million people by 2020.
- Recent projections show the EU is relatively well on track to match educational achievement to labour market needs, with labour supply exceeding the demand for all qualifications types. However, potential skill mismatches such as over-qualification gaps could be expected in the future.
- Between 2008 and 2015, the number of employed persons in age group 20-64 grew fastest in the professional, scientific and technical sector and the administrative sector, but declined the most in the construction and agricultural sectors.
- In the past few years increases in part-time work and the share of fixed-term contracts have been observed. Young people have been the most affected, with 32.5 % of 15 to 29 year olds employed on time-limited contracts in 2015, while 16.2 % of young people aged 15-24 were involuntary working on a temporary contract.
- In 2015, the total EU-28 unemployment rate fell to 9.4 % (age group 15 to 74), showing the first sign of improvement after a long labour market stagnation following the economic crisis.
- With an unemployment rate of 20.4 % in 2015, young people aged 15 to 29 were clearly at disadvantage compared with the overall population.
- Unemployment levels of people with low educational attainment were also high at 17.4 %, compared with 5.6 % for people aged 15 to 74 with a tertiary education.
- Non-EU citizens were among the worst off and the hardest hit by the economic crisis, with their unemployment rate 5.7 percentage points above the EU-28 total in 2015.
- 1 Main statistical findings
- 2 See also
- 3 Further Eurostat information
- 4 External links
- 5 Notes
Main statistical findings
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). Respondents are classified 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. This difference may be significant in countries with large cross-border flows.
Key employment terms include:
- The economically active population is the sum of employed and unemployed persons.
- 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. Economic activity is measured for people aged 15 years or older, which is the earliest that a person can leave full-time compulsory education in the EU . In many EU Member States the minimum employment age is 15.
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. ‘Work’ means 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 employed persons, as a percentage of the same age population. Employment rates represent employed persons, as a percentage of the same age population and are typically published for the age group 15 to 64 years. For the Europe 2020 strategy’s employment target, the lower age limit has been raised to 20 years. The reason was to ensure compatibility with the strategy’s headline targets on education (see the article on ‘‘Educaiton’), in particular the one for raising the tertiary educational attainment of 30-34 years old to at least 40 %. 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 to start within a period of at most three months.
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.
- The unemployment rate is the number of unemployed persons as a percentage of the labour force representing the total number of people 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.
- The long-term unemployment rate is the number of people unemployed for 12 months or longer as a percentage of the labour force.
The term ‘labour force’ refers to the economically active population. This is the total number of employed and unemployed people.
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 .
As shown in Figure 2, the EU’s employment rate grew more or less steadily during the decade before the economic crisis, peaking at 70.3 % in 2008. However, in 2009 the crisis hit the labour market, knocking the employment rate back to its 2006 level. Employment continued to fall to 68.6 % in 2010, before stalling at 68.4 % in 2012 and 2013. After the prolonged stagnation, in 2014 the employment rate started increasing again and in 2015 it reached 70.1 % — close to the 2008 level. As a result, in 2015 the distance to the EU 2020 employment target of 75 % had narrowed to 4.9 percentage points.
North–south divide in employment rates across the EU at Member State level…
Employment rates among Member States ranged from 54.9 % to 80.5 % in 2015 (see Figure 3). Northern and central Europe had the highest rates, in particular Sweden, Germany, the United Kingdom, Denmark, Estonia and the Netherlands. All of these countries exceeded the 75 % EU target. Countries at the lower end of the scale, with employment rates below 65 %, were Spain, Croatia, Italy and Greece. Employment rates in European Free Trade Association (EFTA) countries Iceland and Switzerland were higher than in any other EU Member State. Over the past seven years, employment has fallen in a majority of the EU countries. In 2015, employment rates in 16 Member States were below 2008 levels. This shows that these countries have still not fully recovered from the impacts of the crisis on their labour markets. The strongest falls were recorded in Greece (– 11.4 percentage points), Cyprus (– 8.5 percentage points) and Spain (– 6.5 percentage points). The remaining 12 countries were back on a ‘growth path’ by 2015, surpassing pre-crisis levels. Since 2008 employment rates have grown most significantly in Malta (8.6 percentage points), Hungary (7.4 percentage points) and Germany (4.0 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 2015, four Member States had already met their national employment targets. Germany surpassed its national target by one percentage point, with an employment rate of 78.0 %. Sweden, Estonia and Lithuania also recorded employment rates above their national targets — 80.5 %, 76.5 % and 73.4 %, respectively. Of the remaining Member States, the Czech Republic and Ireland were closest to their national targets with 0.2 percentage points below, followed by Latvia, which was 0.5 percentage points away from its 73 % target. Greece and Spain were the most distant, at 15.1 and 12.0 percentage points below their national targets respectively.
… as well as at regional level
The differences in the employment rate across EU Member States, shown in Figure 3, are also presented in the maps of 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 2015, the Finnish region Åland had the highest employment rate in the EU, at 86.7 %, followed by Stockholm (Sweden) and Småland med öarna (Sweden), with 82.5 % and 82.4 %, respectively. 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 2015, the Italian regions Campania, Calabria and Sicilia had the lowest employment rates in the EU of less than 44 %.
Map 2 shows the change in regional employment rates since 2008. Almost half (47 %) of the 268 NUTS 2 regions for which data are available have experienced a fall in their employment rates since the economic crisis began. Among the hardest hit were several regions in Greece and Spain, with reductions of 8 percentage points or more. Despite the economic crisis, employment rates increased in 130 regions from 2008 to 2015, in two regions from 2010 and 2015 and in six regions from 2012 to 2015. Growth rates of more than 4 percentage points were observed in 32 of these regions, 15 of which were regions in Germany. The highest increases were recorded in Hungary (Észak-Magyarország, Dél-Dunántúl, Észak-Alföld, Dél-Alföld), Malta, Germany (in particular in Chemnitz, Berlin, Sachsen-Anhalt, Lüneburg, Dresden and Leipzig), Romania (Nord-Est and Nord-Vest) and the United Kingdom (Cornwall and Isles of Scilly).
Higher employment rate in urban areas for Baltic, southern and eastern EU Member States
Employment rates vary not only between regions, but also by degree of urbanisation. This reflects differences in economic performance, industrial structure and skill composition of the local population. In 2015, the EU-28 employment was almost equally distributed among more and less densely populated areas, with cities recording an employment rate of 70.0 %, towns and suburbs 70.2 % and rural areas 69.8 % (for age group 20-64) . However, in most Scandinavian (Sweden, Norway and Denmark) and western European countries (Belgium, Germany, France, the United Kingdom, the Netherlands, Austria and Switzerland) employment rates tend to be higher in rural areas. In contrast, most Baltic (Estonia, Latvia, Lithuania), southern (Spain, Italy, Cyprus, Malta) and central or eastern Member States (Bulgaria, the Czech Republic, Hungary, Poland, Slovakia, Romania, Croatia) exhibit higher employment rates in cities. The exceptions are Greece, which records higher employment rates in rural areas (58.6 %) than in cities (53 %), and Portugal, which seems to have similar employment rates in both areas.
Younger and older people have lower employment rates
Employment rates of people aged 30 to 54 are 9 percentage points higher than the overall working-age population (see Figure 4). Young people aged 20 to 29 have even lower employment rates of 8.7 percentage points below the overall working-age population. Furthermore, the employment gap between the young cohort (age group 20 to 29) and those aged 30 to 54 years has widened since the crisis began. Recessions tend to hit younger workers especially hard. Since the onset of the crisis in 2008, the employment rate of young people aged 20 to 29 has dropped by 4.2 percentage points, from 65.6 % in 2008 to 61.4 % in 2015. This reflects their generally weaker attachment to the labour market. They are more likely to be in non-permanent contracts (see the following analysis on ‘temporary contracts’) and are more vulnerable to ‘last-in, first-out’ redundancy policies (European Commission, 2012).
The group aged 55 to 64 years has by far the lowest employment rate among the working-age population. Employment in this group has risen more or less continuously over the past decade, increasing by 14.9 percentage points between 2002 and 2015. Growth was even more pronounced for older women at 17.8 percentage points compared with 11.9 percentage points for men. This age group was also the only one to experience employment growth since the onset of the crisis, rising by 7.8 percentage points between 2008 and 2015. These increases over the past decade could be linked to structural factors such as cohorts with better educational attainment moving up the age pyramid (European Commission, 2016, p. 16).
Increasing employment levels among older workers has also been influenced by recent pension reforms, such as increasing 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 decade, this has risen in the EU by 2.4 years, from 32.9 years in 2002 to 35.3 years in 2014. The rise was higher for women (+ 3.2 years) than for men (+ 1.6 years). However, in 2014 men could still expect to stay in work much longer (37.8 years) than women (32.7 years) . Other factors that have improved the duration of working life include flexible working time and work organisation, access to training by older workers and long-term care and childcare provision (European Commission, 2016, p. 16).
These trends reaffirm the focus of the Europe 2020 strategy on the population group of 55 to 64 year old men and women to boost 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 the achievement of 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 Italy, Spain, Ireland and the Netherlands, the increase in the employment rate for older persons between 2006 and 2015 was associated with a decrease of the employment rate for younger persons . In this context, higher employment rate for the older age groups is likely to contribute to increases in the overall employment rate under the condition that it is not counterbalanced by bigger increases in youth unemployment.
Women still have lower employment rates but the gender employment gap is decreasing
For all age groups, the gender employment gap – the difference in employment rates between men and women – has been decreasing over time. Between 2002 and 2015, the older age groups experienced the greatest narrowing of the gender employment gap ─ 6.1 percentage points for the 45 to 49 age group, 8.8 percentage points for the 50 to 54 age group and 9.5 percentage points for the 55 to 59 age group.
A number of structural factors influencing the labour market participation of women may account for the observed “catching up” of female employment rates over time. 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 workforce, their numbers are still fewer than men. In 2015, the gender employment gap was highest for women aged 30 to 34 years at 14 percentage points (see Figure 5). Women are at more of a disadvantage to men at this age because of motherhood and childcare responsibilities. Time out of the workforce for these reasons might also affect employment in later years as finding a job becomes more difficult the longer a person is not employed. This might partially explain why gender differences in employment rates in 2015 were smaller for younger cohorts (20 to 24 and 25 to 29) but wider for older age groups (in particular for the age group 30 to 34 and 35 to 39). Gender gaps in the older age cohorts (55 to 59 and 60 to 64) are also particularly high, which may be a result of a cohort effect (women not participating 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 exit the labour market. In addition to care responsibilities, early retirement options and difficulties in finding a job after prolonged unemployment can further affect the employment rate of older female cohorts (European Commission, 2015, “Labour market participation of women”). All the age groups between 30 and 49 have experienced a slight increase in the gender employment gap over the past one or two years.
Higher education levels increase employability
Educational attainment levels are another reason for the variation in employment rates between different labour groups.
Figure 6 shows that employment rates are generally higher for more educated people. In 2015, the employment rate among tertiary education graduates (82.7 %) was much higher than the EU average (70.1 %). In contrast, just slightly more than half (52.6 %) 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, at 70.7 % and slightly above the overall EU average employment rate. People with the lowest education levels not only had the lowest employment rate but were also hit hardest by the crisis, experiencing a 4.3 percentage point fall in their employment rate between 2007 and 2015.
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).
Migration as a way to balance the ageing population
Economic migration is becoming increasingly important to 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 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 not only tend to occupy low-skilled and insecure jobs with temporary contracts and poorer working conditions, they also show much lower employment rates than EU citizens (see Figure 7) (European Commission, 2016, p. 177). Migrants were also particularly affected by the economic crisis, being among the first to lose their jobs. In 2015, the employment rate of non-EU nationals aged 20 to 64 was 13.3 percentage points below the total employment rate and 13.9 percentage points below that of EU nationals. This is a significant widening of the gap since the onset of the crisis in 2008, when the difference in the employment rates between non-EU citizens and the total population was only 7.8 percentage points.
One explanation for the large variation in employment rates between EU citizens and third-country nationals might be the levels of qualification, with a large proportion of non-EU citizens having low levels of education. However, analysis shows this is not the norm and the share of third-country migrants with at least upper secondary education who work in low-skilled occupations is higher than for the native population. It should be considered that in many Member States a large share of non-EU citizens have migrated not for economic reasons but to join family members, for education and training or to seek international protection (European Commission, 2016, p. 14).
Characteristics of the labour force: demographic and educational factors
Employment rates result from the interplay between the supply of and demand for workers on 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 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.
EU’s labour force is shrinking because of an ageing population
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 2010, this means that despite a growing population, the EU labour force is shrinking. This will increase the burden on the employed population to provide for the social expenditure caused by an ageing population.
Over the past two decades the total EU population has grown from 475 million in 1990 to almost 509 million in 2015 . Between 2002 and 2015 the number of older people aged 65 and above increased by 22.3 %. There was a particularly steep rise of 50.3 % for the group aged 80 or over. The population aged 20 to 64 years grew only slightly, by 2.9 % over the same period. In contrast, the number of 0 to 19 year olds fell by 6.1 %. While the most recent projections  predict rapid growth in the number of older people, particularly in the group aged 80 years or over, 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 60.2 % in 2015 to 58.9 % in 2020. This equals a reduction of 4.3 million people. At the same time, the number of older people aged 65 or over will grow by about 8.6 million, reaching 20.4 % of the total population in 2020. As indicated in Figure 8, these trends will continue at an even faster rate in the following decade. The population aged 20 to 64 is expected to shrink to 55.9 % and those aged 65 or over to climb to 23.9 %, making up almost a quarter of the total population in 2030.
Figure 9 shows how the baby boomer generation has moved up the age pyramid since 2002. This generation is the result of high fertility rates in several European countries over a 20- to 30-year period to the mid-1960s. Baby boomers 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 26.4 % in 2002 to 31.3 % in 2015. 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 3.8 people of working age for every dependent person over 65 in the EU in 2002, this number had fallen to 3.2 people by 2015. By 2020, the old-age dependency ratio is projected to reach 34.6 %, 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.
Women as well as younger and older people are less economically active…
Not all people are economically active, as shown in Figure 10 which reflects the differences in activity rates between the men and women and across age groups. Activity rates in the EU are consistently higher for men than for women and are generally highest for people aged 30 to 49. The main reason why men and women around 20 years of age do not seek employment is because they are participating in education or training. In 2015, this was the case for about 89 % of the inactive population aged 15 to 24 . On the other hand, people aged 50 or over slowly start dropping out of the labour market because of poor health or retirement. The low activity rates of 15 to 19 year olds due to education or training support the decision to raise the lower age limit for the strategy’s employment target from 15 to 20 years of age.
Parenthood is one of the main factors underlying the gender gap in activity rates. Because women are more often involved in childcare, parenthood is more likely to have an impact on their activity rates than on those for men, especially when care services are lacking or are too expensive. Indeed, the lower activity rates for women aged 25 to 49 years compared with men are a result of women taking care of children or incapacitated adults (38.8 % in 2015) and other family or personal circumstances such as marriage, pregnancy or long vacation (14.8 % in 2015) . In contrast, the main reasons why 25 to 49 year old men did not seek employment were illness or disability (36.5 % in 2015) and participation in education or training (20.5 % in 2015) .
Changes in the skills of the labour force outpacing changes in employment trends
A well-functioning labour market depends largely on matching the labour force’s skills and qualifications to those requested 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).
According to estimates from the European Centre for the Development of Vocational Training (Cedefop) , in 2015 the distribution of skills in the labour force largely matched the qualification requirements of the labour market. 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 workforce is likely to continue ─ the most recent forecasts from Cedefop indicate that between 2015 and 2025 some 16 million jobs requiring high educational attainment will be created, while low-qualified jobs will decline by more than 7 million (see Figure 11).
Overall, the Cedefop forecasts show a parallel rise in skills from both the demand and the supply side until 2025. Changes in skills levels are expected to occur faster for the labour force than on the job market. For instance, the share of the labour force holding only primary or lower secondary education is expected to decrease from 21 % in 2015 to 17 % in 2025, whereas the positions for people with low-level qualifications are projected to fall from 19 % to 16 % from all available jobs. However, this parallel rise does not prevent potential skills mismatches, such as over-qualification gaps. Results from Cedefop’s most recent survey show that skill mismatches do not affect only those unable to find a job because of high unemployment, but most of the workforce. As a result of weak employment demand, intensified by the economic crisis, people are increasingly taking jobs below their qualification or skills level. 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 workforce (Cedefop, 2015).
Short-term 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 12 illustrates this relationship, showing similar patterns for GDP growth, employment growth and the share of newly employed people in total employment (people who started their job within the past 12 months).
Following the double-dip recessions in 2009 and 2012, the EU experienced a pronounced decline in employment. In 2010 and 2011, GDP growth picked up again while employment recovery 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). As a result of another GDP contraction, following the slight recovery in 2010 and 2011, the number of employed people fell again in 2012 and 2013. GDP growth in 2014 brought about a job-rich recovery with employment picking up by 1 %.
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. It rose slightly in the following years, only to drop again to the lowest level of the decade in 2013. In 2014, following the slight recovery in GDP and employment growth, the share of newly employed people returned again to its 2012 level.
Professional, scientific and technical sector and administrative sector show strongest signs of jobs recovery
Growth in jobs is unequally distributed across economic sectors and strongly dependent on general economic conditions as well as developments in these sectors. Overall, employment in all EU economic sectors  recorded a marginal reduction between 2008 and 2015 (see Figure 13). Over the same time, employment levels among high-end occupations related to professional, scientific and technical activities grew the fastest, by about 15 %. Improvement in employment was observed also in traditional service sectors. Over the period 2008–15 employment in the administrative and support service sector grew by 14 %, followed by the health and social work sector (12 %), the accommodation and food service sector (11 %) and the education sector (8 %).
The construction, agriculture and manufacturing sectors were most affected by the economic crisis. Between 2008 and 2015 construction sector employment contracted by about 20 %. The agriculture and manufacturing sectors also experienced relatively strong declines, with employment falling by about 12 % and 11 %, respectively. Stagnation was also observed in the public administration, transport and wholesale and retail trade sectors, where employment fell between 4 % and 2%. Since the crisis had a bigger impact on employment in male-dominated sectors, such as construction and manufacturing, it is not surprising that men accounted for more than 80 % of the decline in employment between 2008 and 2010 in the EU (European Commission, 2012, p. 47).
Temporary contracts most widespread among young people
Although temporary contracts were the first to decline from mid-2008 as a result of activity contraction, since 2012 the proportion of EU employees aged 20 to 64 and working on a fixed-term contract has increased slightly, from 12.8 % in 2012 to 13.3 % in 2015 . Temporary employment in the EU was most widespread among young people, with 32.5 % of 15 to 29 year olds working on a time-limited contract in 2015. Temporary employment was much lower among 20 to 64 year olds at 13.3 % and for older people aged 55 to 64 at 6.5 % in the same year . The significant over-representation of young people in temporary work reflects not only changes in labour market demand, but also structural features of education systems as well cultural norms. In many Member States, for instance, young people prefer temporary work because of participation 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 over a permanent one is not always a personal choice. In this respect, involuntary temporary employment provides a better insight into the overexploitation of fixed-term contracts. In 2015, 8.8 % of employed 20 to 64 year olds were involuntarily working on temporary contracts (see Figure 14). The share was much higher for young people aged 15 to 24, at 16.2 %. 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).
Involuntary part-time work has also increased substantially since the onset of the economic crisis. The share of the population aged 20 to 64 that were in involuntary part-time employment rose from 4.4 % in 2008 to 5.7 % in 2015. This trend affected young people the most with 9 % of those aged 15 to 24 working involuntary in part-time positions (see Figure 15). The share was almost twice as small for the age groups 25 to 49 (5.5 %) and 50 to 64 (5.1 %). For all age groups the share of women employed part-time involuntary exceeded that of men, with the gender gap particularly high for older groups.
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 more flexible arrangements that allow better reconciliation between work and private life (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).
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 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 period of time. 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 (see Figure 16). The curve reflects the negative relationship between vacancies and unemployment. 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 over the past years (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 2015 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).
Urban-rural divide in unemployment across Member States
Unemployment rates also tend to vary by degree of urbanisation. In 2015, unemployment rates were relatively similar across both more and less densely populated areas for the EU-28 as a whole . Overall, the population aged 15 to 74 residing in cities recorded a slightly higher unemployment rate (10.0 %) compared with those living in towns and suburbs and rural areas (9.0 % and 9.1 %, respectively) .
Higher unemployment rates were concentrated in densely populated areas for 12 Member States — mostly countries in Western Europe and Scandinavian countries, but also Greece, Italy and Portugal. Greek city residents had the highest unemployment rate across the whole EU at 26.9 %, which was six percentage points higher than for Greek rural inhabitants.
In six Member States, towns and suburbs recorded the highest unemployment rates, whereas in ten EU-28 countries rural unemployment was the highest. It was mostly rural areas in the Baltic countries and southern and eastern European countries that exhibited the highest levels of unemployment, with thinly populated areas in Spain being particularly affected (24.4 % of unemployment). The biggest difference in unemployment rates between cities and rural areas was recorded in Bulgaria (8.5 percentage points), followed by Lithuania (6.5 percentage points) and Slovakia (5.2 percentage points).
Younger people are at higher risk of unemployment
The EU total unemployment rate (age group 15 to 74) started increasing continuously after the onset of the economic crisis ─ from 7 % in 2008 to 10.8 % in 2013. The gradual economic recovery and labour market upturn reversed this trend in the following two years, with unemployment levels falling to 9.4 % in 2015. Job seekers tend to become discouraged as an economic crisis drags on and some stop looking for work. These people drop out of the labour market and are thus no longer included in the unemployed population. However, they still represent an additional pool of the workforce that could be available to the labour market if the economic situation improves. In the EU, the number of people who are available and would like to work but are not seeking employment has risen by 0.5 percentage points since the onset of the economic crisis, from 2.0 % of the population aged 15 to 74  in 2008 to 2.5 % in 2015 .
Young people aged 15 to 24 generally face a higher risk of being unemployed. In 2015, their unemployment rate was 20.4 % and thus 11 percentage points above the EU average of 9.4 % (for the entire age group 15 to 74). This higher risk is particularly a problem for low-educated young people who have completed only lower secondary education (early leavers from education and training; see the ‘Education’ article).
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).
Education reduces the risk of being unemployed, in particular for young people
As with employment, a clear link exists between unemployment and education: unemployment rates are generally lower for people with better education levels. In 2015, unemployment among those aged 15 to 74 with tertiary education was 5.6 % (see Figure 18). This was significantly lower than the EU unemployment rate of 9.4 %. In contrast, unemployment was considerably higher for those with at most lower secondary education, at 17.4 %.
Unemployment rates tend to be higher for non-EU citizens
Foreign-born workers were among the hardest hit by the economic downturn. This may be because they face a number of disadvantages in the labour market. For example, a large share of third-country migrants work in low-skilled occupations and are more likely to work under temporary employment contracts compared with the native population (European Commission, 2016, p.14). Between 2007 and 2013 the unemployment rate of non-EU citizens increased by almost six percentage points, from 11.9 % in 2007 to 18 % in 2013 . Despite a decrease of almost three percentage points between 2013 and 2015, their unemployment rate remains 5.7 percentage points higher than the EU-28 total (9.4 %).
Gradual increase in long-term unemployment after the economic crisis
The prolonged and deep crisis, followed by a modest recovery, has led to high levels of long-term unemployment. Among the EU-28, long-term unemployment increased from 2.6 % in 2008 to 4.5 % in 2015, with the gender gap for this indicator closing completely in the after-crisis period (see Figure 19).
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).
Labour market flows
Although employment and unemployment indicators provide important information on both the structural and short-term labour market developments, they are to some extent limited because of time lag. Labour market flow statistics are valuable in this respect as they help improve our understanding of the dynamics between these two important indicators (for more information see Eurostat Statistics Explained Article on labour market flows).
The matrix in Table 1 provides an overview of the transitions between the different labour market statuses from the third to the fourth quarter of 2015 for 26 Member States . The data flows are expressed as a percentage of the initial status. Of all the people in the EU who were unemployed in the third quarter of 2015, 64.0 % (12.5 million) remained unemployed in the fourth quarter of 2015, while 17.7 % (3.5 million) moved into employment and 18.4 % (3.6 million) moved towards economic inactivity. The flow of unemployed towards inactivity exceeded the one towards employment, indicating that either more people have become discouraged and decided to stop looking for a job (discouraged workers) or have become unavailable for work.
Looking at all those initially employed in the third quarter of 2015, 95.8 % remained in employment, while 1.7 % were recorded as unemployed in the fourth quarter and 2.5 % became economically inactive. It should be noted that the quarterly flows between employment, unemployment and inactivity tend to be highly seasonal, meaning they depend not only on general economic conditions but also on seasonal factors that are repeated in a similar fashion each year.
Figure 20 shows the data separately for each set of corresponding quarters, which allows observing development over time. The orange bars show the net flow between employment and unemployment, while the blue bars show the net flows between inactivity and unemployment. Negative values indicate net flows out of unemployment, which means unemployment falls. On the other hand, positive values show net flows into unemployment, corresponding to rising unemployment. Consequently, an orange bar with a negative value indicates a net flow from unemployment into employment while a positive value indicates a net flow from employment into unemployment. The same holds for the interpretation of the flow from inactivity indicated by the blue bars. The green line traces the net change in unemployment levels resulting from the combined net flows. For net flows between two quarters, if both the blue and orange bars are positive, then the corresponding green dot represents the sum of both bars. If one bar is positive (inflow into unemployment) and the other is negative (outflow from unemployment), then the green line indicates the net effect of these two flows.
The line, which traces net changes in unemployment levels, peaks in 2011 and 2012 for each quarter (Figure 20). This comes to show that the inflows into unemployment were largest (or outflows from unemployment were smallest) during that period. From 2012 onwards, the line starts to gradually decrease, which indicates a decreasing inflow into unemployment or an increasing outflow from unemployment. From the four figures below it becomes visible that in the second and third quarters most of the declines in unemployment resulted from net flows from unemployment into employment (negative yellow bars), whereas for the first and fourth quarters falls in were mainly driven by net flows from unemployment towards inactivity.
Outlook towards 2020
Overall, in 2015 the EU was 4.9 percentage points below its target value of 75 %, to be met by 2020. Based on recent trends, the European Commission expects the EU employment rate to only reach about 72 % in 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 that they work more productively and for a longer time, 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 (20% compared with 9%) and in most Member States it remains close to historical highs. Bringing young people into the labour market is crucial to avoid erosion of 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, including the implementation of a Youth Guarantee scheme with 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 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 the older people and migrants in the labour market might be challenging since a large portion of them tend to have low levels of education (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 workforce. 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 age groups (lfsa_pganws, t2020_10, tsdde100)
- Breakdown by degree of urbanisation (lfst_r_ergau)
- Breakdown by level of education (tsdec430)
- Breakdown by citizenship (lfsa_ergan)
- Gender employment gap (lfsa_ergan)
- Old-age dependency ratio and projections (demo_pjan)
- Population age structure by major age groups (demo_pjan, )
- Population by single year age (demo_pjan, proj_13npms)
- Activity rates by age and gender (lfsa_pganws)
- Labour force and employment by educational attainment (Cedefop 2015 skills forecasts)
- 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)
- Job vacancy rate (jvs_q_nace2)
- Unemployment rate (une_rt_q)
- Breakdown by age group (lfsa_urgaed)
- Breakdown by level of education (lfsa_urgaed)
- Breakdown by citizenship (lfsa_urgan)
- Breakdown by degree of urbanisation (lfst_r_urgau)
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 workforce is shrinking as a result of demographic changes. A smaller number of workers are therefore supporting a growing number of dependent people. This is putting at risk the sustainability of Europe’s social model, welfare systems, economic growth and public finances. In addition, steady gains in economic growth and job creation over the past decade have been wiped out by the recent economic crisis, exposing 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 or 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, has placed 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 inclusive growth objective of the strategy. Moreover, boosting R&D capacity and innovation could improve competitiveness and thus contribute to job creation.
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.
- 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. 58).
- European Commission (Directorate-General for Justice), Age and Employment, Publications Office of the European Union, Luxembourg, 2011 (p. 50).
- 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).
- The reason for choosing this age group over the ‘usual’ working-age population 15 to 64 years old is explained in the section ‘What is meant by ‘labour force’, ‘activity’, ‘employment’ and ‘unemployment’?’ earlier in this article.
- Source: Eurostat (online data code: lfst_r_ergau).
- Source: Eurostat (online data code: tsdde420).
- Source: Eurostat (online data code: lfsa_ergan)
- 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_13npms).
- EUROPOP2013 main scenario; see. http://ec.europa.eu/eurostat/web/population-demography-migration-projections/population-projections-data
- Source: Eurostat (online data code: lfsa_igar)
- Source: Eurostat (online data code: lfsa_igar)
- Source: Eurostat (online data code: lfsa_igar)
- The Cedefop skills forecasts are available at http://www.cedefop.europa.eu/en/publications-and-resources/publications/8088
- See Statistical classification of economic activities in the European Community (NACE).
- Source: Eurostat (lfsa_etpgan).
- Source: Eurostat (lfsa_etpgan).
- Source: Eurostat (online data code: lfst_r_urgau).
- Source: Eurostat (online data code: lfst_r_urgau).
- 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: 8 http://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=lfsi_sup_a&lang=en lfsi_sup_a]).
- Source: Eurostat (online data code: lfsa_urgan).
- Data not available for Belgium and Germany.
- See: 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).