Since the eruption of the sovereign debt crisis in the Eurozone, substantial efforts have been made to create a new form of governance for the Eurozone that will make the monetary union more robust in absorbing future economic and financial shocks. Much of the drive to adapt the governance of the Eurozone has been influenced by the traditional theory of optimal currency areas (OCA), which stresses the need for flexibility in product and labour markets. As a result, the Eurozone countries have been pushed towards structural reforms that aim to reduce the structural rigidities in product and labour markets. In this paper we ask whether this movement towards structural reform as part of the push for new governance is really going in the right direction. We will argue that this is not the case. The main reason is that the nature of the shocks that have hit the Eurozone does not correspond to the pattern of asymmetric shocks that has been identified by the OCA theory to require more flexibility. We will argue that what is needed in the Eurozone is not more structural reforms but a better mechanism capable of dealing with the classical boom and bust dynamics that are inherent to capitalism.
Success in raising employment levels and living standards in Europe depends on effective support policies as well as positive macro-economic strategies. In this respect, this year’s Employment and Social Developments review addresses a range of issues.
It starts by looking at the contribution of entrepreneurship and self-employment to job creation and growth and the need to tackle the difficulties faced by the self-employed and notably micro and small companies. It then looks at the role of labour legislation in supporting more and better jobs and the need to strike the right balance between flexibility and protection. It then moves on to look at the best actions to avoid unemployment turning into long-term unemployment and inactivity. More broadly, given technology change, globalisation and population ageing, which translates into a reduction in the working-age population, the EU needs to increase employment and increase productivity. Mobility and migration can play an important role here. In relation to this, Europe needs to improve skills and better match skills with evolving demands. It also needs to promote labour market participation of older workers and women. Social policies, including pension policies and family policies (for example, child care and long-term care), can support longer working lives and increase employment of women. Promoting social dialogue and the involvement of social partners in the development of employment and social policies may help the implementation and effectiveness of such policies.
The review is available in printed and electronic format in English. All the graphs and tables can be downloaded both in gif and excel format by accessing the individual chapters.
The economic recovery is firming up and levels of employment and unemployment are gradually recovering but remain respectively lower and higher than they were in 2008. Long-term, very long-term and youth unemployment remain high in many Member States, notably in those hardest hit by the crisis. In some countries, inequalities and poverty have also increased significantly. The impact of the crisis has differed widely across Member States, and differences across countries are larger than in 2008. Such divergences reflect not only the uneven impact of the crisis, but also the uneven capacity of Member State economies and institutions to absorb the shocks and limit their impact. Improving the economic and employment situation and restoring convergence will depend on improving the resilience of the EU economies, notably the most vulnerable economies, through a combination of higher investment, the implementation of labour market and social policies and the strengthening of social dialogue to enable the social partners to make an essential contribution to the recovery.
Self-employment and entrepreneurship are important sources of job creation. One in six people in employment are self-employed and small and micro-enterprises provide a third of all jobs. Ongoing structural changes (e.g. technology change) create new ways of working in which flexibility and vision can provide new opportunities for smaller businesses. The challenge for Europe is to contribute to the development of the framework conditions that promote start-ups and their expansion and pay due regard to underrepresented groups such as women and youth. This includes investment in entrepreneurial education and financial literacy as well as conventional career guidance, skills development and access to finance.
This chapter looks at how labour law can support the creation of more and better jobs. Non-standard work contracts cover a wide range of situations that include part-time, fixed-term or seasonal work, as well as on-demand, on-call and agency work, project contracts, job-sharing, lending and pool arrangements, and crowdsourcing. This is associated with structural changes such as technological progress and globalisation which are changing the world of work. The increasing variety of contracts makes a case for re-evaluating existing labour legislation requirements to ensure a fair balance between flexibility and security. Indeed, while flexibility is needed, some contracts can bring about work uncertainty, spells of (uncovered) unemployment, fewer working hours, less social protection and less autonomy in work decisions. The chapter then focuses on two specific areas governed by labour law: employment protection legislation (EPL) and occupational safety and health (OSH). It analyses the relationship between the effectiveness of the civil justice system and EPL, and how these two combined may affect labour market outcomes. It concludes that labour market dynamics are significantly affected by the effectiveness of the justice system.
Levels of long-term and very long-term unemployment are at record highs, with the chances of finding a job being much lower (50% lower) than for the short-term unemployed. Nevertheless the labour market attachment of those without jobs has held up during the crisis, unlike in the US. The young, the low-skilled and third-country nationals have seen their long-term unemployment rates increase the most. However, the old and low-skilled, once in long-term unemployment, have the lowest chance of returning to work. An in-depth analysis shows that policy interventions are a key influence in helping the long-term unemployed back into work. Participating in training or education, being registered with the public employment services and receiving unemployment benefits are key positive factors even when controlling for macro-economic circumstances and personal characteristics.
Population ageing translates into a decline in the working-age population. To achieve higher growth, Europe needs to increase employment rates (including through mobility) and productivity growth and tap into migration. Mobile people in the EU tend to be young and highly educated and their employment rates are higher than those of the native population. Mobility has been increasing across the EU over the past two decades but remains low compared to other countries around the world. Moreover, mobile workers are under-represented in fast-growing sectors in the economy and work in jobs below their qualifications. Third-country migrant workers are a diverse pool but on average hold lower qualifications which can explain why on average they have lower employment rates. Highly qualified migrants instead have similar or higher chances than natives of being employed. This suggests that promoting skills can play an important role.
This chapter considers different dimensions of the functioning and effectiveness of social dialogue at national level, with a specific focus on membership of social partner organisations, collective bargaining, as well as trust, cooperation and conflict. Furthermore, the chapter considers the role of social partners in the design and implementation of policies and reforms, particularly in the framework of the European Semester. The chapter finds that in a challenging environment, social partners can play a key role in promoting a social market economy. More analysis on the critical success factors (including capacity building) would be useful.
Ensuring that adequate high-quality skills are available and well-employed in the labour market remains an ongoing challenge for European policymakers, particularly in the face of numerous demographic, economic and social pressures. This chapter examines the extent to which Europe experiences mismatches on both sides of the market. Improving outcomes requires effective forecasting, relevant training for young people, active support for older workers to retrain, and wider visibility and recognition of skills acquired informally or across borders. Employers, as well as government, have a role and responsibility in such measures.
This chapter looks at recent developments in relation to the effectiveness and efficiency of social protection systems in Europe over the life course. Its main focus is family policies and those that promote a longer working life. The first part of this chapter examines expenditure trends and the recent development of the effectiveness and efficiency of social protection systems. The second part looks at social protection in relation to childhood and late careers, which are two specific stages in the life cycle.
This working paper looks at poverty dynamics in Europe. Analysing poverty dynamics, i.e. incorporating time dimension to the analysis, helps to better understand the characteristics and various facets of poverty. In addition to looking at persistent poverty, it is important to look at the probability of exiting and entering poverty in different groups of the population and at poverty trajectories of the poor. This working paper presents empirical evidence on various issues related to poverty dynamics based on EU-SILC longitudinal data spanning from 2008 to 2012.
This note reviews the main drivers of inequality in the European Union and reflects on what can be done about it at EU level. It explains the distinction between inequalities of opportunities and inequalities of outcomes and discusses how inequality affects growth and the labour market.
This publications is available only in electronic version.
This analytical web-note provides an overview on the recent trends in poverty and social exclusion statistics, based on the indicator of at-risk-of poverty or social exclusion (AROPE) and its three components: at-risk of poverty, severe material deprivation and jobless households. It provides an update of the European Commission (2014) supplement on "Trends in Poverty and Social Exclusion".
Labour market outcomes have been improving against the background of a modest recovery. The unemployment rate in the EU appears unusually reactive to the weak recovery. Yet, it stood above pre-crisis levels, at around 9.5% in the EU and 11% in the euro area in May 2015. Labour market disparities have started to fall across the EU and the euro area.
This publication is available in English and online only.
This analytical web-note contains an extensive update of the main demographic trends for the EU and a labour-market supplement which outlines the potential consequences of the forthcoming demographic change (declining working-age population) on the EU's growth perspective. The Demography Report was jointly produced by DG Eurostat and DG Employment, Social Affairs and Inclusion of the European Commission.
This publication is only available in electronic format in English.
During the aftermath of the financial crisis, certain paradoxical trends have emerged in Europe. Firstly, despite the context of economic adjustment and restructuring, the employment rate of older workers has increased in most countries, and secondly, saving rates have remained remarkably resilient to the interest rate squeeze pursued by central banks as an economic stimulus. The question arises, whether lower interest rates effectively discourage or rather encourage saving among older workers, or even constitute an incentive to work longer, in case their saving strategy aims at maintaining a standard of living after retirement. The working paper adresses this issue through a model based approach.
The paper provides a comparative analysis on human resources trends and their implications for employment and economic growth at global scale. Taking stock of specific population characteristics, it focuses on the inescapable challenge of workforce shrinking and its policy implications. The analysis concludes that productivity growth will progressively become the only way to sustain economic growth not only in the EU and several other industrialised regions but also in some of the emerging economies. It also reveals a growing north-south imbalance in terms of labour reserves. While the 2013 publication looked at human resources constrains within the EU, this paper extends to the global context, comparing the EU to other global players.
This year’s ESDE report offers an in-depth and wide-ranging review of key labour market and social challenges facing the EU as it slowly emerges from recession. Where will Europe’s new jobs come from in an increasingly competitive global economy? Will active inclusion policies support help address rising levels of poverty among those of working age? Will the improvement in the position of women on the labour market during the crisis be sustained or slip away with the recovery? Is the divisive issue of undeclared work being effectively addressed? Will all Member States progress equally, or do the weakest risk falling further behind? Have national social security systems been effective and efficient in maintaining incomes during the recession and in addressing their longer-term goals? Do we need to adapt the ways we measure economic and social progress in order to take proper account of inequalities? The report will be available in printed and electronic format in English. All the graphs and tables can be downloaded both in gif and excel format by accessing the individual chapters.
There are signs of fragile economic recovery, but economic growth is unlikely to be sustained unless it is inclusive and job rich, especially while labour market and social conditions remain extremely challenging and divergence between countries is growing. The EU is struggling with many challenges such as high unemployment, labour mismatches, and increasing numbers of young people not in education, employment and training. Poverty and social exclusion has increased, especially for the working age population, and household incomes declined. Social expenditure, which had served to offset the effects of the recession in the first phase, was then reduced in the second phase, partly contributing to the weakening of the stabilisation effect of social transfers after 2011.
Divergences between countries have been growing, especially within the Euro Area, although all Member States get affected either directly through reduced aggregate demand, erosion of human capital and competitiveness and the undermining of confidence, or indirectly through trade. Persistent divergences between countries may weaken the economic fundamentals of the EU as a whole, and they are a sign that the core objectives of the EU, to benefit all its members and to improve the life of citizens, are not being reached.
The EU is a strong global economy but, as it emerges from recession, it faces many far-reaching challenges – increasingly specialised trade and production, rapidly evolving technologies, and ever increasing concerns about demographic and environmental challenges. This chapter considers the evidence of where Europe’s new jobs come from, what they will look like in terms of content and skills, and what kind of education, training and support will be required. It foresees growth in high quality jobs that exploit the EU’s comparative advantage, as well as new jobs in the health and care sectors.
Rising rates of unemployment during the crisis years have resulted in increased levels of poverty among the working age population. This chapter explores whether current safety nets protect those who are out of work from serious and persistent poverty, and whether obtaining a job is likely to be an effective form of escape, given the extent of in-work poverty. It finds that adequate social benefits, whether financial or in kind, need to be combined with appropriate active labour market policy support if a successful and lasting return to the labour market is to be achieved.
Women have historically faced unfavourable labour market and social outcomes compared to men. The crisis, somewhat unexpectedly, reduced some of the gender gaps given that the male-dominant sectors were hit worse by the crisis. However, fundamental disadvantages remain, with diminished career opportunities, lower pay and lower prospective pensions. Lifetime hours worked remain much lower than those of men, with few Member States succeeding in combining high female employment rates with a low gender gap in total hours worked. Overall, it remains to be seen whether the short-term improvements during the crisis will be sustained, or slip away with the recovery.
Undeclared work is seen as a divisive social and economic issue, but new survey data suggests that the incidence is little changed from pre-crisis levels. However there are major differences between Member States in terms of overall incidence, with the lack of regular employment and limited welfare support systems being seen as the main explanations in the regions that are most affected. In some countries, though, effective actions have been taken, not only to improve tax compliance, incentives, awareness and sanctions, but also to undertake reforms to regularise occasional and minor jobs.
Since the crisis, divergences between Member States have grown, especially within the euro area. The chapter shows how the seeds were sown in the early years of the euro, with accumulated debt fuelled by low interest rates, and divergences in productivity and human capital investment. Given the risk of continuing divergence, despite budgetary actions at national level, an enhanced surveillance of employment and social developments has been proposed by the Commission, together with an EMU-wide shock absorption function to complement existing policy coordination instruments in the longer term and after Treaty changes.
In the early phase of the crisis, social expenditures (unemployment benefits, but also others, notably pensions and health) played an important counter-cyclical role by stabilising household incomes in Europe. Since 2011 and more particularly in 2012, however, that stabilisation has weakened, in a more pronounced manner than during past recessions. The framework developed in this chapter also helps identify situations where the dynamics of different types of social expenditure may not be optimally balanced and investigates in particular whether national welfare systems were effective and efficient in addressing their key social and employment objectives in the crisis, highlighting sometimes major differences.
The ‘Beyond GDP’ debate has in recent years drawn attention to the need to complement measurement of GDP with indicators that encompass environmental and social aspects of progress. The limitations of GDP as a measure of key societal goals such as well-being and sustainable development are widely recognised, and alternative measurement concepts are being tested and increasingly used for policy making at regional, national and international level. Economic growth is a key component of well-being, via improvement in standards of living, but needs to be sustainable and ensure that the benefits are widely and fairly distributed across society i.e. it needs to be inclusive. To this end, this chapter has explored the kinds of measures that might be used to complement GDP in order to highlight the issue of inclusive growth.