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

Data extracted in October 2021

Planned article update: January 2021

Highlights

In the EU, the unmet demand for employment reached 14.2% of the extended labour force in the fourth quarter of 2020, from which less than half, 6.9%, were unemployed.

In the fourth quarter of 2020, the EU labour market slack is 1.3 p.p higher compared to the fourth quarter of 2019, differences amounted to +4.1 p.p. in Estonia and +3.2 p.p. in Ireland.

In Italy, Ireland and the Netherlands, potential additional labour force and underemployed part-time workers together amounted to more than 60% of the total national slack, while unemployment stood at less than 40% in the fourth quarter of 2020.

An individual is considered unemployed if he/she fulfils the International Labour Organisation criteria that are precisely being without work, available to start working within two weeks and having actively sought employment. This means that only referring to unemployment might underestimate the entire unmet demand for employment, also called the labour market slack, especially during the health crisis. To better reflect this unmet demand, the labour market includes, 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.

This article is based on quarterly and seasonally adjusted Labour Force Survey (LFS) data. It investigates the labour market recovery with respect to the COVID-19 crisis on the overall labour market slack and provides an overview of its specific components. This article presents both the European and country approaches, demonstrating the impact of the COVID-19 crisis at a global EU level as well as at national level in the respective Member States as well as 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 alongside the articles Employment, Employed people and job starters by economic activity and occupation

Full article

Concept and EU overview

Labour market slack refers to the total sum of all unmet employment demands and includes four groups: (1) unemployed people as defined by the 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 it, and (4) people who are looking for work but are not available for it. 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 Q2 2021, for people aged 15-74, in order to better capture the concept and provide a first overview. In the second quarter of 2021, in the EU, the slack accounted for 14.5 % of the extended labour force, corresponding to 32.3 million persons. Unemployed people stood for a bit less than half of the slack, with 7.0 % of the extended labour force (15.6 million persons). The remaining part of the slack referred to persons available to work but not seeking it (3.8 %) that encompassed 8.5 million persons, underemployed part-time workers (2.9 %), 6.5 million persons, and persons seeking work but not immediately available (0.8 %) that corresponds to 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 Q2 2021. This share amounted 12.5 % for men at the same period. This difference of 4.3 p.p. between the share of women and men is mainly due to the difference in one component of the slack, precisely 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 but not seeking in the female extended labour force exceeded by 1.3 p.p. the same share among men. 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 but not available (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 among young people aged 15-24 and among the other age groups i.e. people aged 25-54 and people aged 55-74. In the second quarter of 2021, almost 1 in 3 young people aged 15-24 (32.4 % exactly) faced an unmet demand for employment. The slack amounted to 34.9 % for women aged 15-24 and 30.3 % for men aged 15-24. The gender gap among young people was 4.6 p.p. At the same period, 12.9 % of people aged 25-54 and 11.9 % of people aged 55-74 in the extended labour force reported an unmet need for work, which significantly lower than the share recorded among young people. As for the gender gap, the Labour market slack of women aged 25-54 was 5.0 p.p. above the Labour market slack recorded for men aged 25-54. A difference of 2.9 p.p. was also recorded between the slack of women and men aged 55-74 in Q2 2021.

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

The part of the Labour market slack in the extended labour force aged 15 to 74 varies significantly across the EU Member States. 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 of the Labour market slack by country might 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 %). By contrast, unemployment consisted in less than 40 % of the slack in the Netherlands, Ireland and Italy (37.5 %, 37.4 % and 30.7 %). Consistently, the share of people available but not seeking in the slack exceeded one third in Italy (48.6 %), Bulgaria (35.6 %), Slovenia (35.4 %) and Luxembourg (33.3 %). This share is cut by around half or more in Lithuania where this category corresponded to 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 the half of the total labour market slack (44.8 %) but this category is not prominent in the slack in Bulgaria and Slovakia where it only related to 4.4 % and 3.7 % of the total slack. Whith much lower percentages, the category of people seeking but not available 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 of 2 % or less in Italy and Romania (both with 1.4 %) and Greece (2.0 %).

Figure 2: Labour Market Slack by its components, people aged 15-74, by 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

Overall decrease in the Labour market slack between Q1 and Q2 2021

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 6.9 % of the extended labour force in the fourth quarter of 2020, specifically reaching 7.1 % for women and 6.7 % for men (see Figure 5).

In Greece and Spain, more than one in seven persons in the extended labour force was unemployed in the fourth quarter of 2020 (15.4 % in both countries). Moreover, Greece and Spain are among the countries for which the widest gap between men and women was found in the unemployment rate as it was also observed for the whole slack. In Greece, female unemployment accounted for 18.4 % and male unemployment for 12.9 % (difference of 5.5 p.p.). In Spain, unemployment stood at 17.2 % for women against 13.8 % for men (difference of 3.4 p.p.). Moreover, in the fourth quarter of 2020, the share of unemployed women in the extended labour force exceeded by 1.0 p.p. or more the share of unemployed men in Luxembourg and Czechia and reciprocally, the male unemployment rate exceeded the female unemployment rate by 1.0 p.p. or more in Lithuania, Germany and Latvia. In contrast, four EU Member States registered an unemployment rate of less than 4.0 % of the extended labour force: Czechia (2.9 %), Poland (3.1 %), Germany and the Netherlands (3.8 % each).

Figure 5: Unemployment (ILO) by sex and country, Q4 2020
(people aged 15-74, in % of the extended labour force)
Source: Eurostat (lfsi_sla_q)

Figure 6: Change in the unemployment (ILO) as % of the extended labour force by sex and country
(people aged 15-74, Q4 2020 compared with Q4 2019, in percentage points)
Source: Eurostat (lfsi_sla_q)

In the fourth quarter of 2020, the unemployment rate was higher than in Q4 2019 in the whole EU and in the vast majority of EU Member States (24 out 27 exactly). At EU level, it increased by 0.6 p.p. (6.9 % in Q4 2020 against 6.3 % in Q4 2019), see Figure 6 and the dynamic tool at the top of this article choosing "unemployment (ILO)". In 14 EU countries, however, the unemployment rate was 1.0 p.p. or higher in Q4 2020 when comparing the two quarters. Estonia, Lithuania and Spain recorded the most substantial increases compared to the last quarter of 2019 (+3.1 p.p., +2.5 p.p. and +2.0 p.p.). In contrast, the share of unemployed people in the extended labour force decreased in France (-0.1 p.p. in France metropolitan and -0.2 p.p.in France), in Italy (-0.5 p.p.) and in Greece (-0.8 p.p.). In this section on unemployment, it is important to remember that in order to be considered unemployed according to the ILO's criteria, a person must be unemployed during the reference week, be available to start working within the next two weeks (or have already found a job to start within the next three months), and have actively sought employment at some point in the previous four weeks. As previously mentioned, this indicator should be carefully considered when taken to report on the COVID-19 crisis. People's job search status may be affected by health measures, such as whether they start or stop looking for work based on the level of activity in their country, or their availability to work (e.g. people might be available or not depending on the school opening).

Focus on the potential additional labour force

Potential additional labour force larger in Q4 2020 than in Q4 2019 in 23 EU Member States

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. People who are available for work but do not seek it are one of these subgroups. In the fourth quarter of 2020, for the EU population aged 15-74, this category accounted for 3.7 % of the extended labour force (see Figure 7). The other subgroup is comprised of people who are looking for work but are not immediately available to begin working; this group accounted for 0.7 % of the extended labour force. In total, 4.4 % of the extended labour force is not employed but linked to employment by expressing a willingness or demand for work.

Except for Lithuania and Cyprus, all countries follow the same main pattern, which is clearly visible in Figure 7: people who are available to work but are not looking outnumber those who are looking but are not immediately available. 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 5.1 %, and the male potential additional labour force, as a percentage of the male extended labour force, at 3.7 % in the fourth quarter of 2020. The largest share of the potential additional labour force are found in Italy with 10.8 % of the extended labour force, Ireland (6.6%), Finland (6.1%) and Croatia (6.1% but for Croatia, it only refers to people available but not looking for a job). In Czechia, the potential additional labour force amounted to 0.9% of the extended labour force, which was the lowest share recorded.

Figure 7: Potential additional labour force by sex and country, Q4 2020
(people aged 15-74, in % of the extended labour force)
Source: Eurostat (lfsi_sla_q)

Figure 8: Change in the potential additional labour force as % of the extended labour force by sex and country
(aged 15-74, Q4 2020 compared with Q4 2019, in percentage points)
Source: Eurostat (lfsi_sla_q)

Note: due to low data reliability related to the category "people who are seeking but not immediately available", only persons available to work but not seeking are included in Figure 7 and 8 for Croatia, Malta and Romania.

In three of the 24 EU Member States where data is available for both categories of potential additional labour force, the share of potential additional labour force exceeded the share of unemployed people in the extended labour force in the fourth quarter of 2020: Italy (+2.7 p.p. compared to unemployment), Ireland (+0.9 p.p.), and the Netherlands (+0.2 p.p.).

Figure 8 shows the comparison of the potential additional labour force between the fourth quarter of 2019 and the fourth quarter of 2020. The share increased in the vast majority of EU countries for which data is available. The highest growths in Ireland, Greece, Germany and Austria where it went up by more than 1 p.p. At the same time, it remained at the same level as in Q4 2019 in Finland and Poland while falling slightly in Belgium (-0.1 p.p.) and Latvia (-0.2 p.p.).

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 around 5% in Spain and Cyprus.

In the fourth quarter of 2020, the highest shares of part-time workers wanting to work more were found in Spain (5.0 %), Cyprus (4.9 %), France (both France and France Metropolitan (4.1 %)), Ireland, Greece, the Netherlands, and Sweden (all four with 4.0 %) (see Figure 9). In contrast, less than 0.5 % of the extended labour force in Czechia and Bulgaria were underemployed part-time workers (0.3 % and 0.4 % respectively) making them a relatively small group within the extended labour force (see Figure 9).

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 double the share of men (1.9 %).

Figure 9: Underemployed part-time workers by sex and country, Q4 2020
(people aged 15-74, in % of the extended labour force)
Source: Eurostat (lfsi_sla_q)

Figure 10: Change in the underemployed part-time workers as % of the extended labour force by sex and country
(people aged 15-74, Q4 2020 compared with Q4 2019, in percentage points)
Source: Eurostat (lfsi_sla_q)

Comparing the fourth quarter of 2020 to the fourth quarter of 2019, the share of underemployed part-time workers, as a percentage of the extended labour force, remained relatively stable (+0.1 p.p. at EU level) (see Figure 10). However, five countries recorded an increase exceeding +0.5 p.p. between both quarters: the Netherlands and Sweden (+0.7 p.p.), Austria (+0.6 p.p.), Italy and Estonia (+0.5 p.p.). Lower shares of underemployed part-time workers in Q4 2020 compared with Q4 2019, with differences bigger than 0.3 p.p. were found in Greece and Malta (-0.8 p.p.) and Ireland (-0.4 p.p.).

Source data for tables and graphs

Q4 2020 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 EU-27 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 are 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 are 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 unemployment. 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 unemployment, employment and the two categories of inactive persons, those available but not seeking, and those seeking but not available. The total labour market slack is expressed in percent 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 lightened and re-enforced 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.