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

Data extracted in September 2020

Planned article update: December 2020

Highlights

In the second quarter of 2020, the share of people facing a potential need for employment amounted to 14.6 % of the extended labour force, 1.7 percentage point higher compared with the last quarter of 2019.

Among young people aged 15-24 in the extended labour force in the second quarter of 2020, more than half sought a job, were available to work or were part-time workers wishing to work more in Spain, Italy and Greece (56.3 %, 51.3 % and 50.5 %).

In one third of the 24 EU Member States for which data is available, there were comparatively more people who were available to work but not seeking or seeking but not available than unemployed people in the extended labour force in the second quarter of 2020.

The health crisis due to the COVID-19 has become in the European Union, like in other parts of the world, an economic crisis. As expected, the outcomes of the economic storm have started impacting the EU-27 labour market significantly in the course of the second quarter 2020. More specifically, given the lock-down and the economic slowdown, some people may have lost their employment, have lost the opportunity to start a new job, or were obliged to work less hours than expected.

In addition, people who were previously considered as unemployed by fulfilling the ILO requirements of being available for work and searching for it, might have given up their search for a certain period of time due to the poor economic prospects or the shut-down of the enterprises' activity, which consequently moves them outside the labour force. Some other people might have become not available for work, as taking care of their children for example, leading them also outside the labour force, especially during the lock-down that occurred in many countries during the second quarter of 2020.

It is therefore assumed that beyond unemployment, more people either inside or outside the labour force may have an unmet need for employment. This whole potential demand for employment (the unemployed and the supplementary categories) constitutes the labour market slack.

More precisely, the groups constituting the labour market slack are the unemployed people (according to the ILO definition), the underemployed part-time workers (those part-time workers who wish to work more) and, people who might be associated to the labour force but who are not recorded as such because they do not fulfill one of the two ILO requirements of availability to work and work search. This last group of people is called the potential additional labour force.

This article is based on quarterly and seasonally adjusted LFS data and investigates the impacts of the crisis on the whole labour market slack. It also provides an overview on its specific components.

Both the European and the country approach are taken in this article. It aims to show the effects of the crisis at the global European level and at the national level, in the respective Member States, as well as in the United Kingdom, three EFTA countries (Iceland, Norway and Switzerland) and three candidate countries (North Macedonia, Serbia and Turkey).

The article is a part of the online publication Labour market in the light of the COVID 19 pandemic - quarterly statistics alongside namely with the articles Absences from work and Hours of work.

_{Note: This article uses the seasonal adjusted data from the second quarter of 2020, i.e. April-June 2020, which is compared in some sections to the last quarter of 2019.}

Full article

Labour market slack in the EU-27

The labour market slack refers to the total sum of all unmet demand for employment and includes four groups: (1) the unemployed people according to the ILO definition, (2) the underemployed part-time workers (i.e. part-time workers who wish to work more), (3) people who are available to work but not searching for it and, (4) people who are searching 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 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 denominator.

At the European level, people with an unmet need for employment accounted, during the second quarter of 2020, for 14.6 % of the extended labour force as shown in Figure 1. The slack was more pronounced for women, who stood at 16.9 % of the extended labour force, than for men (12.5 %).

Figure 1: Labour market slack by sex and country, people aged 15-74, 2020Q2
(in % of the extended labour force)
Source: Eurostat (lfsi_sla_q)

Figure 2: Change in the labour market slack as % of the extended labour force by sex and country, people aged 15-74, 2019Q4-2020Q2
(in percentage points)
Source: Eurostat (lfsi_sla_q)

Highest shares of people with unmet demand for employment in Spain, Greece and Italy, where it exceeds 20 % of the extended labour force

Among EU Member States, Spain, Greece and Italy recorded the highest slacks reaching almost one fourth of the extended labour force (more precisely 25.8 % for Spain, 24.7 % for Greece and 23.3 % for Italy). Those countries also recorded the biggest gender gaps observed in the slack: 28.9 % for women against 18.8 % for men in Italy, 30.3 % against 20.3 % in Greece and 30.7 % against 21.4 % in Spain.Only in three EU Member States, namely, Latvia, Lithuania and Romania, the labour market slack of men slightly exceeded the women's slack (by less than 2 percentage points (p.p.)). The lowest labour slacks in the EU-27 were observed in Malta, Poland and Czechia with less than 7 % of the extended labour force facing an unmet demand for employment, with slacks corresponding respectively to 6.9 %, 6.3 % and 3.5 % of the extended labour force.

Evolution over time of the labour market slack

Increase in the labour market slack in all EU Member States except France where it is stable, with the biggest increases in Austria, Spain, Ireland and Estonia

The development of the labour market slack from the last quarter of 2019 to the second quarter of 2020 reflect part of the consequences of the health crisis on the labour market. The labour market slack in the European Union increased by 1.7 p.p. between the last quarter of 2019 and the second quarter of 2020, from 12.9 % to 14.6 %. Since the first quarter of 2013, it has increased for the first time from 2019Q4 to 2020Q1 (+0.4p.p.) and registered a consecutive increase between 2020Q1 and 2020Q2 of 1.3p.p., as it can be seen from the dynamic tool at the top of the article.

The increase at the European level is also recorded by all EU countries except France where it remained stable. As it can be seen in Figure 2, Austria, Spain, Ireland and Estonia recorded the greatest increases among Member States between the last quarter of 2019 and the second quarter of 2020. In Austria, the labour market slack rose from 10.4 % to 13.9 % of the extended labour force (+3.5 p.p.), in Spain from 22.6 % to 25.8 % (+3.2 p.p), in Ireland from 13.6 % to 16.7 % (+3.1p.p) and in Estonia from 9.1 % to 12.2 % (+3.1 p.p). On the same time span, Malta, Czechia, Belgium and Poland reported increases lower than 0.5p.p. in the share of people addressing a potential demand of employment (0.4p.p. for Malta and Czechia, 0.3p.p. for Belgium and 0.2p.p. for Poland). France reported in the second quarter 2020 the same share as it did in the last quarter 2019 which were 15.9 %.

'Biggest gender differences in the evolution of the slack in Ireland, Romania, Denmark,

At European level, women registered, between the last quarter of 2019 and the second quarter of 2020, an increase of the slack which was slightly higher in comparison to men (as a percentage of the extended labour force: +1.7 p.p. for women and +1.5 p.p. for men) (see Figure 2).

However, the biggest gender-based difference in the Member States was observed in Ireland: the labour market slack went up from 15.1 % to 19.2 % (+4.1 p.p.) for women but increased from 12.3 % to 14.4 % for men (+2.1 p.p.). The same findings in a lesser extent can be found in Romania (+2.4 p.p. for women and -1.3 p.p. for men) and in Denmark (+1.7 p.p. for men and +0.6 p.p. for women). In contrast, Spain and Malta registered more substantial differences for men than for women: the slack rose in Malta from 5.4 % to 6.2 % for men (+0.8p.p.) and decreased from 8.1 % to 7.8 % for women (-0.3p.p.). In Spain, it increased from 17.6 % to 21.4 % for men (+3.8p.p.) and from 28.0 % to 30.7 % (+2.7p.p.) for women.

Labour market slack higher among young people

Based on the latest data, the population aged 15-24 registered higher labour market slack than the population aged 25-54 and 55-74 (see Figure 3). Moreover, the highest shares of labour market slack among young people in the first quarter of 2020 were observed in Spain, Italy and Greece, where somewhat more than half of the young people of the extended labour force is recorded in the slack (56.3 %, 51.3 % and 50.5 %). In contrast, the slack concerned less than 20 % of young people in the extended labour force in Germany, Poland, Malta, Czechia (respectively 18.0 %, 17.4 %, 15.4 % and 9.9 %). The two age categories 25-54 and 55-74 correspond to similar share of slack in the extended labour force and show smaller differences between countries.

Figure 3: Labour market slack by age group and country, 2020Q2
(in % of the extended labour force)
Source: Eurostat (lfsi_sla_q)

The development over time of the slack for young people is more pronounced than for older people (see Figure 4). From the last quarter of 2019 to the second quarter of 2020, the slack increased at the European level for all three age categories but to a different extent: from 27.0 % to 31.8 % (+4.8 p.p.) for people aged 15-24, from 11.8 % to 13.2 % (+1.4 p.p.) for people aged 25-54 and from 10.7 % to 11.6 % (+0.9 p.p.) for people aged 55-74.

Figure 4: Labour market slack by age group, EU-27, 2008Q1-2020Q2
(in % of the extended labour force)
Source: Eurostat (lfsi_sla_q)

Composition of the labour market slack

Share of unemployment in the labour market slack is at its lowest and potential additional labour force at its highest since 2008

The weight of unemployment in the total labour market slack in the EU-27 varies over time and across countries, leaving the other components (like the underemployed part-time workers, people available to work but not seeking it and those seeking work but not immediately available) more or less substantial depending on the country or the period.

In the second quarter of 2020, in the EU-27, less than half of the slack (43.3 %) consisted of unemployed people. The share of unemployment in the slack consequently reached its minimum since the beginning of the time series (the first quarter of 2008). In contrast, the share of the potential additional labour force was in the second quarter of 2020 at its highest level since 2008, reaching 37.1 % of the total labour market slack. Finally, the underemployed part-time workers accounted for 19.6 % of the total slack, this share decreasing very slightly along the last quarters.

Figure 5: Share of the components of the labour market slack, people aged 15-74, EU-27, 2008Q1-2020Q2
(in % of the total labour market slack)
Source: Eurostat (lfsi_sla_q)

In the second quarter of 2020, the structure of the labour market slack is considerably different among countries (see Figure 6). In Ireland, Italy, the Netherlands, Germany, Austria, Finland, Portugal and Belgium, unemployment stood at less than 40% of the total national slack, while the underemployed part-time workers and people in the additional labour force accounted together for more than 60 % of the slack. In contrast, unemployment accounted for more than two thirds of the total labour market slack in Lithuania and Slovakia.

Figure 6: Share of the components of the labour market slack, people aged 15-74, by country, 2020Q2
(in % of the labour market slack)
Source: Eurostat (lfsi_sla_q)

Focus on unemployment

Unemployment (ILO) is one component of the labour market slack. In the EU-27, it stood at 6.3 % of the extended labour force in the second quarter of 2020, specifically reaching 6.4 % for women and 6.2 % for men (see Figure 7).

In Greece and Spain, more than one in ten persons in the extended labour force was unemployed in the first quarter of 2020 (16.2 % and 14.1 % respectively). Moreover, Greece and Spain are part of the countries for which the biggest gap between men and women was found. Female unemployment in Greece accounted for 19.0 % and male unemployment for 13.9 % (difference of 5.1 p.p.). In Spain, unemployment stood at 15.1 % for women against 13.3 % for men (difference of 1.8 p.p.). Nevertheless, in the second quarter of 2020, the share of unemployed men in the extended labour force exceeded by 2p.p. or more the share of unemployed women in Lithuania and Latvia (respectively 2.3p.p. in Lithuania and 2p.p. in Latvia).

Figure 7: Unemployment (ILO) by sex and country, people aged 15-74, 2020Q2
(in % of the extended labour force)
Source: Eurostat (lfsi_sla_q)

Figure 8: Change in the unemployment (ILO) as % of the extended labour force by sex and country, aged 15-74, 2019Q4-2020Q2
(in percentage points)
Source: Eurostat (lfsi_sla_q)

In contrast, four EU Member States registered an unemployment rate lower than 4 % of the extended labour force: Czechia (2.3 %), Poland (3.0 %), Germany (3.4 %) and the Netherlands (3.6 %). All these countries moreover recorded a gender gap smaller than 0.7 p.p.

Also visible from the dynamic tool by choosing unemployment (ILO) and from Figure 8, the unemployment rate is stable at the European level between the last quarter of 2019 and the second quarter of 2020. However, behind this stability for the whole European Union, the rate fluctuated by more than 1.1.p.p. in nine countries. Estonia, Lithuania and Latvia, where the unemployment stood in the second quarter of 2020 at 6.7 %, 8.5 % and 7.9 % respectively, recorded the most substantial increases compared to the last quarter of 2019 (+2.7 p.p., +2.2 p.p. and +1.9 p.p.). In contrast, the share of unemployed people in the extended labour force decreased, from the last quarter of 2019 to the second quarter of 2020, in five countries: Italy (-1.7p.p.), Portugal (-0.9p.p.), France (-0.9p.p.) and France Metropolitan, (-0.8p.p.), Belgium and Ireland (-2p.p. for both countries). It might be useful that remind in this specific section on unemployment that in order to be considered unemployed according to the ILO's criteria, a person should be without work during the reference week, available to start working within the next two weeks (or has already found a job to start within the next three months) and be actively having sought employment at some time during the last four weeks. The lock-down and the temporary shutdown of some business activities and public sector experienced by some countries might explain the lower number of people fulfilling the criteria of job search or even availability.

Focus on the potential additional labour force

The share of the potential additional labour force in the extended labour force increased in all EU Member States apart from Latvia where it slightly decreased

As already mentioned, the potential additional labour force consists of two subgroups. One of the groups includes people who are available to work but do not seek it. At European level, in the second quarter of 2020, this category accounted for 8.2 % of the population outside the labour force (the common one, not the extended labour force) (see Figure 9). The other group is related to persons who seek work but are not immediately available to start working; this last group stood at 1.5 % of the population outside the (not extended) labour force. In total, 9.7 % of the population outside the (not extended) labour force are actually connected to employment by expressing a certain willingness or demand for work. All countries, apart from Lithuania and Cyprus, follow the same main pattern clearly visible in Figure 9: people available to work but not seeking outnumber those seeking work but not immediately available.

Figure 9: Share of the subcategories of the potential additional labour force, people aged 15-74, 2020Q2
(in % of the population outside the labour force)
Source: Eurostat (lfsi_sup_q)

The size of the potential additional labour force in proportion of the extended labour force is displayed in Figure 10. In Italy, in the second quarter of 2020, 12.9 % of people in the extended labour force were people available to work but not seeking or seeking but not immediately available. Italy was followed by Ireland, Finland and Spain that also recorded percentages higher than 7 % (precisely, 8.4 %, 7.5 % and 7.4 %). In contrast, in Czechia, Slovenia and Lithuania, less than two percent of the extended labour force consisted of people who are available to work and not seeking and people who are seeking but not immediately available. _{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 10 and 11 for Estonia, Malta and Romania. This is the reason for which they are not mentioned in the text.}

Gender differences can be found at the European level, the female potential additional labour force standing at 6.4 % of the extended labour force and the male potential additional labour force at 4.5 %

Figure 10: Potential additional labour force, people aged 15-74 by sex and country, 2020Q2
(in % of the extended labour force)
Source: Eurostat (lfsi_sla_q)

Figure 11: Change in the potential additional labour force as % of the extended labour force by sex and country, aged 15-74, 2019Q4-2020Q2
(in percentage points)
Source: Eurostat (lfsi_sla_q)

In eight out of the 24 EU Member States for which data is available for both categories of the potential additional labour force, in the second quarter of 2020, there were comparatively more people who were available to work but not seeking or seeking but not available (i.e. the potential additional labour force) than unemployed people in the extended labour force. This was easily noticeable in Italy (difference of 6.0 p.p between both indicators) and Ireland (4.0 p.p.). A difference lower than 1p.p. has been nevertheless reported by Portugal and the Netherlands (0.7p.p.), Finland and Austria (0.4p.p.), Croatia (0.2p.p.) and Germany (0.1p.p.).

Figure 11 shows that the potential additional labour force is the component of the labour market slack for which the change between both quarters is the most obvious and general. Indeed, the share of people seeking and not available together with those available but not seeking increased in all EU Member States apart from Latvia where it slightly decreased by 0.3p.p. The sharpest change in the extent of this category in the extended labour force was observed, between the last quarter of 2019 and the second quarter of 2020, in Ireland (+3.7 p.p.), followed by Spain (+3.4p.p.), Italy and Portugal (+2.8p.p.) and Austria (+2.0 p.p.). It is therefore assumed that the COVID-19 crisis implied that some people might have moved out from the classic labour force, because of the lack of search for work or the impossibility to take a new professional opportunity due to the closure or the downturn of many activities during the lock-down. These people might be stuck outside the classic labour force as they are neither employed or unemployed (if they are not actively seeking). However, they are clearly represented in the labour market slack as well as in the extended labour force. This assumption is backed up and supported by the evolution of the labour status of the total population as shown in Figure 14 and exhaustively described in the last section of this article.

Focus on underemployed part-time workers

Highest shares of underemployed part-time workers in Cyprus, Greece, Spain, France, the Netherlands and Ireland, very low shares in Czechia and Bulgaria

Inside the extended labour force, the highest shares of part-time workers wanting to work more were found in the second quarter of 2020 in Cyprus, Greece, Spain, France (both France and France Metropolitan), in the Netherlands and Ireland. In all these countries, 4 % or more of the extended labour force were underemployed part-time workers. More precisely, 4.7 % in Cyprus, 4.5 % in Greece, 4.2 % in Spain and in France but 4.1 % in France Metropolitan like in the Netherlands and 4.0 % in Ireland of people in the extended labour force had part-time jobs and wanted to work more hours. In contrast, less than 0.7 % of the extended labour force in Czechia and Bulgaria were underemployed part-time workers (0.3 % and 0.6 % respectively) making them a relatively small group within the extended labour force (see Figure 12).

At the European level, 2.9 % of the extended labour force were underemployed part-time workers. This share reached 4.1 % for the female population and stood at 1.8 % for the male population.

Compared to the last quarter of 2019 (see Figure 13), the share of underemployed part-time workers remained relatively stable as percentage of the extended labour force (+0.1p.p.). In the same way, only four countries recorded an increase or a decrease exceeding + 0.5 p.p. or -0.5 p.p. between both quarters which are Italy where the share of underemployed part-time workers increased by 1.1p.p. and accounting for 3.5% of the total extended labour force, the Netherlands where the share rose by 0.8p.p. reaching 4.1% in the second quarter of 2020. However, Malta and Spain reported lower shares of underemployed part-time workers in 2020Q2 compared with 2019Q4 which decreased by respectively 1.1p.p. and 0.9p.p.

Figure 12: Underemployed part-time workers by sex and country, people aged 15-74, 2020Q2
(in % of the extended labour force)
Source: Eurostat (lfsi_sla_q)

Figure 13: Change in the underemployed part-time workers as % of the extended labour force by sex and country, people aged 15-74, 2019Q4-2020Q2
(in percentage points)
Source: Eurostat (lfsi_sla_q)

Specific consequences of the health crisis on the labour status

Taking the whole population as reference at the European level as in Figure 14, it can be noticed that between the last quarter of 2019 and the second quarter of 2020, the share of employed people aged 15-74 (excluding underemployed part-time workers) decreased from 58.3% to 56.9% (-1.4p.p.). On the same time span, the share of unemployed people remained stable (at 4.2%) in the same way as the share of underemployed part-time workers and persons seeking work but not immediately available that stood respectively at 0.6% and 1.9% of the total population in both quarters. However, the decrease in employment is balanced out by an increase in the share of the population who reported that they were available but not seeking (+1p.p.) and by an increase in the share of the population outside the extended labour force (i.e. who reported that they were neither available to work nor seeking) which rose by 0.4p.p.

This finding can also be observed in some EU Member States like Ireland (see Figure 16 in the attached excel file). However, as it has been previously noticed under the section dedicated to unemployment, the unemployment rates in percentage of the extended labour force fluctuated significantly in some countries between the last quarter of 2019 and the second quarter of 2020. Based also on Figure 16 that reports the changes to the shares of people by labour status, it is clearly visible that in some countries, the decrease in the share of employed people is outweighed by raises in other categories than people available to work but not seeking. This is for example the case of Estonia where the increases in the share of unemployed people (+2.0p.p.) and the share of people outside the labour force who was neither available nor seeking (+1.5p.p.) almost offset the decrease in employment (-3.3p.p), the increase in people available to work but not seeking being quite low (+0.3p.p.).

In contrast, in Italy, Portugal or Belgium, the decrease in the share of employed people (respectively, -1.6p.p., -2.2p.p. and -0.4p.p.) appeared together with a decrease in the share of unemployed people (-1.1p.p., -0.6p.p. and -0.2p.p.). In parallel, these three countries registered a substantial increase in the share of people available to work but not seeking (+1.7p.p., +1.9p.p. and +0.6p.p.) and, in a lesser extent an increase in the share of people outside the extended labour force, those who were neither available nor seeking (+0.3p.p., +1.2p.p. and +0.2p.p.). Finally, the following situation was observed in France Metropolitan: like in Italy, Portugal and Belgium, both shares of employed and unemployed people decreased (-1p.p. and -0.6p.p.) but the share of people outside the extended labour force who was neither available nor seeking increased by 1p.p. and, in a smaller degree, the category of people available to work but not seeking rose by 0.8p.p. _{Note: Underemployed part-time workers and persons seeking work but not available are also included in Figure 15 but not commented due to their lower weights in the total population.
Figure 14 representing the structure of the population by labour status and country and Fig 15 reflecting the changes to these shares are available in the attached excel file.}

Figure 14: Share of people by labour force status and sex aged 15-74, EU-27, 2019Q4 and 2020Q2
(in % of the total population)
Source: Eurostat (lfsi_sla_q)

Source data for tables and graphs

Labour market slack 2020Q2: tables and figures

Data sources

All figures in this article are based on seasonally adjusted quarterly results from European 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. If data are unavailable for a country, the calculation of the corresponding aggregates takes into account the data for the same country for the most recent period available. Such cases are indicated.

Definitions: The concepts and definitions used in the labour force survey follow the guidelines of the International Labour Organisation.

Five different articles on detailed technical and methodological information are linked from the overview page of the online publication EU labour force survey.

Context

The COVID-19 virus hit Europe in January and February 2020, with the first cases confirmed in Spain, France and Italy. COVID-19 infections have now been diagnosed 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, most countries closed retail shops apart from supermarkets, pharmacies and banks. Bars, restaurants and hotels have also been closed. In Italy and Spain, non-essential production was stopped and several countries imposed regional or even national lockdown measures which further stifled the 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 50) were banned in most Member States.

The large majority of the prevention measures were taken during mid-March 2020 and most of the prevention measures and restrictions were kept for the whole of April and May 2020.

The first quarter of 2020 is consequently the first quarter in which the labour market across the EU has been affected by COVID-19 measures taken by the Member States.

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 this first phase of the crisis, active measures to contain employment losses led to absences from work rather than dismissals, and individuals could not search 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 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.