Archive:Labour market slack - unmet need for employment - quarterly statistics

This Statistics Explained article has been archived - for recent articles on labour market see here.

Data extracted in October 2021

Planned article update: February 2023

Highlights

In the EU, the unmet demand for employment, the labour market slack, amounted to 14.5% of the extended labour force (aged 15-74 years) in the 2nd quarter of 2021, of which less than half (7.0%) corresponded to unemployment.

In the 2nd quarter of 2021, the lowest levels of labour market slack were observed in Czechia (4.6%), Malta (5.8%) and Poland (6.2%).

_{Note: see Figure 2 for country notes}

According to the International Labour Organisation (ILO) criteria, a person is considered unemployed if he/she is not working, is available to start working within two weeks and is actively looking for a job. However, the latest developments in the labour market linked to the COVID-19 pandemic and its containment measures have highlighted the relevance of looking further than unemployment to report on the unmet demand for employment.

Indeed, to better reflect the unmet need for employment, one may consider, in addition to unemployed people, part-time workers who want to work more, people who are available to work but do not look for work, and people who are looking for work but are not immediately available. These population subgroups are gathered under the concept of labour market slack.

This article investigates the labour market recovery after the downturn due to the COVID-19 pandemic, looking at the overall labour market slack and its specific components. Using quarterly seasonally adjusted Labour Force Survey (LFS) data, it presents both the global EU level and the national level in the respective Member States, in three EFTA countries (Iceland, Norway and Switzerland) and three candidate countries (North Macedonia, Serbia and Turkey).

This article is part of the online publication Labour market in the light of the COVID 19 pandemic - quarterly statistics.

Full article

Concept and EU overview

Labour market slack refers to the sum of all unmet employment demands and includes four groups: (1) unemployed people as defined by the International Labour Organisation (ILO), (2) underemployed part-time workers (i.e. part-time workers who want to work more), (3) people who are available to work but are not looking for work and (4) people who are looking for work but are not available for work. While the first two groups are in the labour force, the last two, also referred to as the “potential additional labour force”, are both outside the labour force. For this reason, the “extended labour force”, composed of both the labour force and the potential additional labour force, is used in this analysis. The labour market slack is expressed as a percentage of this extended labour force, and the relative size of each component (each of the four groups) of the labour market slack can be compared by using the extended labour force as a denominator.

Figure 1 depicts the labour market slack and all of its components at EU level and by country in the second quarter of 2021, for people aged 15 to 74. For the EU as a whole, the slack accounted for 14.5 % of the extended labour force, corresponding to 32.3 million persons. Unemployed people represented slightly less than half of the slack, with 7.0 % of the extended labour force (15.6 million persons). The remainder of the slack encompassed the people available to work but not seeking work, which amounted to 3.8 % of the extended labour force (8.5 million persons), the underemployed part-time workers, which corresponded to 2.9 % of the extended labour force (6.5 million persons), and those persons seeking work but not immediately available with 0.8 % of the extended labour force (1.7 million persons).

In the EU, 16.8 % of women in the extended labour force aged 15 to 74 faced an unmet demand for employment in the second quarter of 2021. This share amounted to 12.5 % for men during the same period. The difference of 4.3 percentage points (p.p.) between the share of women and men is mainly due to the difference in the share of underemployed part-time workers in the extended labour force which was 4.1 % for women against 1.9 % for men (difference of 2.2 p.p.). Furthermore, the share of women available to work but not seeking work in the female extended labour force exceeded the same share among men by 1.3 p.p. The same pattern is observed for the share of unemployed women and men (7.3 % and 6.7 %) in their respective extended labour force as well as for the share of women and men seeking work but not available to work (0.9 % and 0.6 % respectively).

Figure 1: Labour market slack by its components, age group and gender, EU, Q2 2021
(in % of the extended labour force, seasonally adjusted data)
Source: Eurostat (lfsi_sla_q)

With respect to the age groups, Figure 1 also highlights the large differences between the labour market slack for young people aged 15 to 24 and for the other age groups, i.e. people aged 25 to 54 and people aged 55 to 74. In the second quarter of 2021, almost 1 in 3 young people aged 15 to 24 (32.4 %) faced an unmet demand for employment. The slack amounted to 34.9 % for women aged 15 to 24 and 30.3 % for men aged 15 to 24. The gender gap among young people was consequently equal to 4.6 p.p. In the same period, 12.9 % of people aged 25 to 54 and 11.9 % of people aged 55 to 74 in the extended labour force reported an unmet need for employment, which was significantly lower than the share recorded for young people. With regard to the gender gap, the labour market slack for women aged 25 to 54 was 5.0 p.p. above that for men of the same age whereas a difference of 2.9 p.p. was recorded between the slack for women and men aged 55 to 74.

In Spain, more than one in four people in the extended labour force expressed an unmet need for employment

The part of the labour market slack in the extended labour force for people aged 15 to 74 varied significantly across the EU Member States in the second quarter of 2021. More than 20 % of the extended labour force faced an unmet demand for employment in Spain (25.1 %), Italy (23.6 %) and Greece (23.2 %), while it affected less than 8 % of the extended labour force in Czechia (4.6 %), Malta (5.8 %), Poland (6.2 %) and Hungary (7.4 %).

Moreover, the weight of each component in the labour market slack may differ considerably from one country to another. Starting with unemployment, it constituted two thirds or more of the labour market slack in Slovakia (75.8 %), Lithuania (71.8 %), Czechia (69.8 %) and Greece (66.6 %). In contrast, unemployment consisted of less than 40 % of the slack in the Netherlands (30.7 %), Ireland (37.4 %) and Italy (37.5 %). Also, the share of people available to work but not seeking work in the slack exceeded one third in Italy (48.6 %), Bulgaria (35.6 %) and Slovenia (35.4 %). The lowest shares were recorded in Lithuania (10.7 % of the slack), in Denmark (14.0 %), in Cyprus (15.0 %), in Greece (15.7 %), in Spain (16.5 %) and in the Netherlands (16.7 %). In the Netherlands, underemployed part-time workers accounted for slightly less than half of the total labour market slack (44.8 %). By contrast, the category of underemployed part-time workers is not prominent in Bulgaria and Slovakia, where it only amounted to 3.7 % and 4.4 % of the slack. With much lower percentages, the category of people seeking work but not available for work consisted of more than 10 % of the labour market slack in Luxembourg (16.7 %), Finland (16.2 %), Austria (13.7 %) and Denmark (10.3 %), but only 2 % or less in Italy and Romania (both 1.4 %) and Greece (2.0 %).

Figure 2: Labour Market Slack by its components and country, Q2 2021
(in % of the extended labour force, people aged 15-74, seasonally adjusted data)
Source: Eurostat (lfsi_sla_q)

Quarterly development in Q2 2021

Decrease in the labour market slack between Q1 and Q2 2021 in most EU Member States

The labour market slack expressed as a percentage of the extended labour force aged 15 to 74 decreased by 1.0 p.p. from the first to the second quarter of 2021. The decrease in the potential additional labour force, i.e. those available but not seeking and those seeking but not available for work, accounted for more than half of the decrease in the labour market slack, decreasing by 0.6 p.p. In parallel, underemployed part-time workers recorded a decrease of 0.1 p.p. and unemployed people a decrease of 0.2 p.p.

Note: the sum of the aforementioned decreases does not exactly equal the decrease reported in the labour market slack due to rounding. Looking at the quarterly development by country, as displayed in Figure 3, all EU Member States registered a lower labour market slack in the second quarter of 2021 compared to Q1 2021; the only exceptions were Czechia and Croatia where it remained stable, and Cyprus which was the only country to record an increase (+0.4 p.p.). The sharpest declines in the labour market slack were reported in Luxembourg (-3.2 p.p.), Denmark and Slovenia (both -2.7 p.p.), Ireland, Greece and the Netherlands (each with -2.3 p.p.).

As for the potential labour force in the extended labour force, the largest decreases were registered in Greece (-2.6 p.p.) and Ireland (-2.2 p.p.). Latvia, together with Austria showed declines above 0.5 p.p. among underemployed part-time workers (-0.8 p.p. and -0.6 p.p respectively), corresponding to the sharpest declines for this category among EU countries. The share of unemployed people in the extended labour force also fell by 1 p.p. or more in Austria and Denmark (-1.1 p.p. and -1.0 respectively).

Figure 3: Change in the labour market slack and components(in % of the extended labour force)from Q1 to Q2 2021,by country
(in percentage points,age 15-74,seasonally adjusted data)
Source: Eurostat (lfsi_sla_q)

Focus on unemployment

Unemployment (ILO) is one component of the labour market slack. In the EU, it stood at 7.0 % of the extended labour force in the second quarter of 2021, specifically reaching 7.3 % for women and 6.7 % for men (see Figure 4).

In Greece and Spain, more than one in seven persons in the extended labour force was unemployed in the second quarter of 2021 (15.5 % and 14.7 % respectively). Moreover, Greece and Spain are among the countries for which the widest gap between men and women was found in the unemployment rate as was also observed for the whole slack. In Greece, female unemployment accounted for 19.2 % and male unemployment for 12.4 % (difference of 6.8 p.p.). In Spain, unemployment stood at 16.6 % for women against 13.0 % for men (difference of 3.6 p.p.). Furthermore, in the second quarter of 2021, the share of unemployed women in the extended labour force exceeded by 1.0 p.p. or more the share of unemployed men in Cyprus (difference of 2.2 p.p.), Slovenia (1.8 p.p.), Italy and Czechia (both with 1.5 p.p.). Conversely, the male unemployment rate exceeded the female unemployment rate by 1.0 p.p. or more in Latvia (difference of 2.6 p.p.), Finland (1.6 p.p.), Malta (1.2 p.p.) and Estonia (1.1 p.p.).

In contrast, five EU Member States registered an unemployment rate of 4.0 % or less of the extended labour force or less: Czechia (3.2 %), Malta (3.5 %), Germany and Poland (3.6 % each) and Hungary (4.0 %).

Figure 4: Share of unemployed people by country and gender, Q2 2021
(in % of the extended labour force, people aged 15-74, seasonally adjusted data)
Source: Eurostat (lfsi_sla_q)

In this section on unemployment, it is important to remember that in order to be considered unemployed according to the ILO criteria, a person should be: (1) not employed during the reference week, (2) available to start working within the next two weeks, and (3) actively seeking work (i.e. had taken specific steps in the previous four weeks to look for a job, or found a job to start within the next 3 months). As previously mentioned, this indicator should be carefully considered when taken to report on the COVID-19 crisis. People's job search status might still be affected to a certain extent by health measures, as the pandemic has not fully disappeared, this could include whether they start or stop looking for work based on the level of activity in their country, or their availability to work.

Focus on the potential additional labour force

Almost 15 % of women in the extended labour force in Italy are available for work, want to work but are not looking for a job

As previously stated, the potential additional labour force is divided into two subgroups that are both outside the labour force (due to people's unavailability to work or lack of job search) but within the extended labour force. They are precisely people who are available for work but do not seek work and people who are looking for work but are not immediately available to begin working. In total, 4.6 % of the extended labour force is not employed but linked to employment by expressing a willingness or demand for work (see Figure 5).

Gender differences can be found at EU level. Indeed, the female potential additional labour force, as a percentage of the female extended labour force, stood at 5.4 %, and the male potential additional labour force, as a percentage of the male extended labour force, at 3.8 % in the second quarter of 2021.

The largest shares of the potential additional labour force are found in Italy with 11.8 % of the extended labour force aged 15 to 74, Ireland (6.6 %) and Sweden (6.0 %). In Czechia, the potential additional labour force amounted to 1.1 % of the extended labour force, which was the lowest share recorded. Focusing only on the main category of the potential additional labour force which is those people available but not seeking work, Italy stood out with a share of 11.5 % of the extended labour force. Note that in Italy, this share for women (14.8 %) exceeded the share recorded for men by 6.0 p.p.

Figure 5: Share of potential additional labour force by category, country and gender, Q2 2021
(in % of the extended labour force, people aged 15-74, seasonally adjusted data)
Source: Eurostat (lfsi_sla_q)

Focus on underemployed part-time workers

Almost 3 % of the extended labour force consisted of part-time workers who want to work more hours in the EU, but more than 5 % in the Netherlands and Spain

In the second quarter of 2021, the highest shares of part-time workers wanting to work more were found in the Netherlands (6.0 %), Spain (5.5 %), Cyprus (4.7 %), Ireland and France (both 4.4 %). In contrast, less than 0.5 % of the extended labour force in Czechia and Bulgaria (both 0.3 %) and Slovakia (0.4 %) were underemployed part-time workers, making them a relatively small group within the extended labour force (see Figure 6).

At EU level, 2.9 % of the extended labour force were underemployed part-time workers. This share reached 4.1 % for women, which is more than twice the share for men (1.9 %).

Figure 6: Share of underemployed part-time workers by gender and country, Q2 2021
(in % of the extended labour force, people aged 15-74, seasonally adjusted data)
Source: Eurostat (lfsi_sla_q)

In 21 out of 23 countries for which data is available for both genders, the share of female underemployed part-time workers in the extended labour force exceeded the male rate for the same category, and in some cases with significant gaps as in Spain, France and the Netherlands where the difference between men and women was as large as around 4 p.p. or more. However, differences by gender of underemployed part-time workers can be directly related to the share of part-time workers in employment for each gender. Indeed, at EU level and in most EU Member States, women are more likely to work part-time. Focusing on the share of underemployed part-time workers among part-time workers shows that men would like relatively more often to work more hours than women.

Source data for tables and graphs

Q2 2021 Labour market slack: tables and figures

Data sources

All figures in this article are based on seasonally adjusted quarterly results from the European Union Labour Force Survey (EU-LFS).

Source: The European Union labour force survey (EU-LFS) is the largest European household sample survey providing quarterly and annual results on labour participation of people aged 15 and over as well as on persons outside the labour force. It covers residents in private households. Conscripts in military or community service are not included in the results. The EU-LFS is based on the same target populations and uses the same definitions in all countries, which means that the results are comparable between countries.

European aggregates: EU refers to the sum of 27 EU Member States.

Country notes:

In Germany, the whole microcensus has been used to estimate a restricted set of indicators from the first quarter of 2020 for the production of LFS Main Indicators. These estimates have been used for both the publication of German results and the calculation of EU and EA aggregates. By contrast, EU and EA aggregates published in the detailed quarterly results (showing more and different breakdowns than the LFS Main Indicators) have been computed using only available data from the LFS subsample. As a consequence, small differences in the EU and EA aggregates in tables from both collections may be observed. For more information, see here. In 2021 Q1 only, data of one federal region, Bremen, is not included in the estimates, but national estimates are reweighted to respect population margins.
Spain and France have assessed the attachment to the job and included in employment those who have an unknown duration of absence but expect to return to the same job once the COVID-19 measures in place are lifted.

Definitions: The concepts and definitions used in the Labour Force Survey follow the guidelines of the International Labour Organisation (ILO).

Employed people comprise: (a) persons who during the reference week worked for at least one hour for pay or profit or family gain; (b) persons who were not at work during the reference week but had a job or business from which they were temporarily absent.
Unemployed people comprise persons who were: (a) not employed according to the definition of employment above; (b) currently available for work, i.e. were available for paid employment or self-employment before the end of the two weeks following the reference week; (c) actively seeking work, i.e. had taken specific 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 later, i.e. within a period of at most three months from the end of the reference week.
Underemployed part-time workers are persons working part-time who wish to work additional hours and are available to do so. Part-time work is recorded as self-reported by individuals.
Persons seeking work but not immediately available is the sum of persons neither employed nor unemployed who: (a) are actively seeking work during the last 4 weeks but not available for work in the next 2 weeks; or (b) found a job to start within a period of at most 3 months and are not available for work in the next 2 weeks; or (c) found a job to start in more than 3 months but are not available for work in the next 2 weeks.
Persons available to work but not seeking is the sum of persons neither employed nor unemployed who want to work and (a) are available for work in the next 2 weeks but are not seeking work, or (b) were passively seeking work during the last 4 weeks and are available for work in the next 2 weeks or (c) found a job to start in more than 3 months and are available to work in the next 2 weeks.

The last two groups are jointly referred to as the potential additional labour force.

Persons, who fall within the three last categories above, fall outside the bandwidth of unemployment as persons are either employed with insufficient working time, immediately unavailable, or not seeking a job in a very specific time period. However, these persons may have an unmet need for employment. These three last categories together are referred to as supplementary indicators to the unemployment indicator. While underemployed part-time workers are part of the labour force, the two other groups (persons seeking work but not immediately available and persons available to work but not seeking) are part of the population outside the labour force. These supplementary indicators complement the unemployment and provide a more complete picture of the labour market.

The labour Market Slack is the total sum of all unmet need for employment, including unemployment according to the ILO definition as well as the three supplementary indicators. In order to allow comparisons between these four groups, which do not all belong to the labour force, the concept of the “extended labour force” is used. It includes employed people, unemployed people but also the two categories of people outside the labour force, i.e. those available but not seeking work, and those seeking but not available to work. The total labour market slack is expressed in a percentage of this extended labour force, and the relative sizes of each component of labour market slack can be compared by using this denominator.

Different articles on detailed technical and methodological information are linked from the overview page of the online publication EU Labour Force Survey.

Seasonally adjustment models: The methodological choices of Eurostat in terms of seasonal adjustment in the COVID period are summarised in the methodological paper: "Guidance on time series treatment in the context of the COVID-19 crisis". These choices assure the quality of the results and the optimal equilibrium between the risk of high revisions and the need for meaningful figures, as less as possible affected by random variability due to the COVID shock.

Context

The COVID-19 pandemic hit Europe in January and February 2020, with the first cases confirmed in Spain, France and Italy. COVID-19 infections have been diagnosed since then in all European Union (EU) Member States. To fight the pandemic, EU Member States have taken a wide variety of measures. From the second week of March 2020, most countries closed retail shops, with the exception of supermarkets, pharmacies and banks. Bars, restaurants and hotels were also closed. In Italy and Spain, non-essential production was stopped and several countries imposed regional or even national lock-down measures which further stifled economic activities in many areas. In addition, schools were closed, public events were cancelled and private gatherings (with numbers of persons varying from 2 to over 50) banned in most EU Member States.

The majority of the preventive measures were initially introduced during mid-March 2020. Consequently, the first quarter of 2020 was the first quarter in which the labour market across the EU was affected by COVID-19 measures taken by Member States.

In the following quarters of 2020, as well as 2021, the preventive measures against the pandemic were continuously reduced and reinforced in accordance with the number of new cases of the disease. New waves of the pandemic began to appear regularly (e.g. peaks in October-November 2020 and March-April 2021). Furthermore, new strains of the virus with increased transmissibility emerged in late 2020, which additionally alarmed the health authorities. Nonetheless, as massive vaccination campaigns started all around the world in 2021, people began to anticipate improvement of the situation regarding the COVID-19 pandemic.

Employment and unemployment as defined by the ILO concept are, in this particular situation, not sufficient to describe the developments taking place in the labour market. In the first phase of the crisis, active measures to contain employment losses led to absences from work rather than dismissals, and individuals could not look for work or were not available due to the containment measures, thus not counting as unemployed.

The three indicators supplementing the unemployment rate presented in this article provide an enhanced and richer picture than the traditional labour status framework, which classifies people as employed, unemployed or outside the labour force, i.e. in only three categories. The supplementary indicators create ‘halos’ around unemployment. This concept is further analysed in a Statistics in Focus publication titled "New measures of labour market attachment", which also explains the rationale of the indicators and provides additional insight as to how they should be interpreted. The supplementary indicators neither alter nor put in question the unemployment statistics standards used by Eurostat. Eurostat publishes unemployment statistics according to the ILO definition, the same definition as used by statistical offices all around the world. Eurostat continues publishing unemployment statistics using the ILO definition and they remain the benchmark and headline indicators.