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2015 Employment and Social Developments review: Investing in people is key to economic growth

21/01/2016 2015 Employment and Social Developments review: Investing in people is key to economic growth

The Employment and Social Developments in Europe (ESDE) 2015 review reveals further positive employment and social developments in the EU. However, despite recent improvements huge disparities still exist between Member States, in terms of economic growth, employment and other key social and labour market indicators. Many of these disparities are linked to an underutilisation of human capital on several fronts.

The 2015 ESDE report looks at ways of tackling these disparities, focusing in particular on job creation, labour market efficiency, social protection modernisation and investment in people.

Promoting job creation

The ESDE 2015 review highlights the potential of self-employment and entrepreneurship to create more jobs. Data suggest, however, that some groups may face stronger barriers to start their own business, such as young and old people, women, and ethnic minorities. In addition, the report indicates that a majority of people does not feel that they possess the necessary skills or knowledge to start a business. The ESDE review reveals that targeted policies can help: from easier access to financing or fiscal incentives, to entrepreneurship education or access to child and elderly care.

The ESDE review also reports an increase in the variety of employment contracts, which allows for flexible working arrangements and therefore increased labour market participation, but can also lead to labour market segmentation. While some new contracts offer a potential win-win situation, others bring about work uncertainty. Not only flexibility, but also security is needed – an issue that will also be addressed in the context of developing the European Pillar of Social Rights.

Improving labour market efficiency

The 2015 ESDE review reveals that the EU can make better use of its human resources through mobility. Although the number of mobile workers has increased over the past two decades, their share in the total work force remains limited: Only 4% of the EU's population aged 15 to 64 live in a Member State other than the one they were born in. Yet, mobile EU workers tend to have overall better employment prospects than the native population. In addition, their flows have reduced unemployment in some Member States hit hardest by the crisis and helped address staff shortages in receiving countries. The ESDE review therefore clearly underlines the economic potential of mobility.

The review also looks at long-term unemployment, which affects about 11 million people in the EU. Fighting long-term unemployment is crucial when striving to improve labour market efficiency, as the long-term unemployed have about half the chance of finding employment compared to the short-term unemployed. The analysis shows that being registered with the Public Employment Services and following training significantly increases the chances of moving to a sustainable job. The Recommendation on long-term unemployment adopted by the Council on 7 December 2015 is in line with these findings.

Finally, social dialogue will be crucial in promoting a sustainable and inclusive economic recovery. Social partners have been involved in the design and implementation of several major reforms and policies. For social dialogue to play this role effectively, social partners' capacity may need strengthening, particularly in those Member States where social dialogue is weak or has weakened due to the economic crisis.

Investing in people

Although the level of unemployment in the EU remains high, employers encounter difficulties to fill certain vacancies. In addition to genuine skills mismatches, employers' ability to fill vacancies is also limited by their inability to offer attractive pay or working conditions, as well as good training or career opportunities. The ESDE 2015 review also finds that there is a significant share of non-EU workers in occupations below their qualification level. The New Skills Agenda initiative that the Commission is preparing for this year will seek to address these challenges.  In addition, employment levels of women with children and older workers are still significantly low. Promoting greater labour market participation of these groups will be crucial in the context of an ageing population.

Background: The ESDE review

The ESDE review reports on the latest employment and social trends, and reflects on upcoming challenges and possible policy responses. Based on the latest data and literature available, the review underpins the Commission's initiatives in the employment and social policy field, feeding into the European Semester, the Mobility Package, the Skills Package and the development of the European Pillar of Social Rights.