Employment and Social Developments in Europe 2013 (21/01/2014)
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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.