Labour market slack – annual statistics on unmet needs for employment


Data extracted in July 2021

Planned article update: July 2022

Highlights
In 2020, 32.4 million people in the EU faced an unmet demand for employment corresponding to 14.5% of the extended labour force.
At EU level, from 2019 to 2020, the labour market slack for young people (aged 15 to 24) increased by 3.8 p.p. against 1.0 p.p. for people aged 25 to 54 and 0.6 p.p. for people aged 55 to 74.
Almost one in four people in the EU extended labour force with a low level of education experienced an unmet demand for work (24.0%); this share exceeded 30% in Slovakia (39.6%) and Spain (30.8%).


Labour market in the EU
Persons aged 15-74, 2020
Source: Eurostat (lfsi_sup_a) and (une_rt_a)


The latest developments in the labour market have highlighted the relevance of looking further than unemployment to report on the unmet demand for employment. Indeed, to be unemployed according to the criteria of the International Labour Organisation (ILO), one has to fulfil several criteria specifically as regards his/her job search and availability to work. However, the year 2020, marked by the health crisis, recorded a significant slowdown in economic activity and social life, sometimes leading to the halt of businesses and public services. Jobless people, who would have looked for a job and be available to work in other circumstances, left the labour force without actually losing fully their attachment to the labour market, for example by stopping temporarily their job search or becoming no longer available due to caring responsibilities. Furthermore, some employed people working part-time might express their willingness to work more hours, which is another case of unmet demand for employment.

This article focuses on these people who have an unmet need for employment, so all those who are either unemployed (according to ILO criteria), or underemployed (i.e. those working part-time but who wish and are available to work more), or associated to the labour force because of their availability to work or their work search but who are not recorded as part of it (they meet some but not all ILO criteria for unemployment). The article concludes with the analysis of the socio-demographic characteristics of people facing an unmet demand for employment, such as gender, age and educational attainment level. It nicely complements the article on unemployment statistics.

The analyses cover the situation in the European Union (EU) and in the Member States as well as in three EFTA countries (Iceland, Norway, Switzerland) and four Candidate countries (Montenegro, North Macedonia, Serbia, Turkey).

Full article

Labour market slack: what's it all about?

Labour market slack refers to all unmet needs for employment, including unemployment according to the ILO definition as well as three supplementary indicators. The exact definitions of these three indicators are as follows:

  • Underemployed part-time workers are people 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.
  • Jobless persons seeking a job but not immediately available for work are the sum of people neither employed nor unemployed who: (a) were 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 in 3 months or less and are not available for work in the next 2 weeks; or (c) found a job to start in more than 3 months, or (d) were passively seeking work during the last 4 weeks and are available for work in the next 2 weeks.
  • Jobless persons available for work but not seeking it are people neither employed nor unemployed who want to work, are available for work in the next 2 weeks but are not actively seeking work.

The last two groups are jointly referred to as the potential additional labour force. All three groups together are referred to as supplementary indicators to unemployment. These three groups do not meet the full criteria of the ILO unemployment definition, i.e. being without work, actively seeking work, and being available for work. However, while not being captured through the unemployment rate, these groups might still represent a form of employment demand. 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 infographic above may help to better understand the different categories of the labour market slack and, globally, of the labour market.

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 people in the labour force (unemployment and employment) and in the potential additional labour force (two categories outside the labour force), i.e. those available but not seeking, and those seeking but not available. The total labour market slack is expressed in percentage of this extended labour force, and the relative size of each component of the labour market slack can be compared by using the extended labour force as denominator.

How many people face an unmet need for employment in the EU and its Member States?

At EU level, from 2009 to 2019, the development of the labour market slack of people aged 15 to 74 seemed to follow and emphasize the development of the unemployment (according to ILO) which is one of its components (see Figure 1). The other three components, even if they are also connected to the economic situation, were somewhat more stable overtime and affected the development of the labour market slack to a lesser extent. In 2009, 16.0 % of the extended labour force faced a potential demand for employment. The highest value of the labour market slack was found in 2013, with 19.3 %, before declining sustainably until 2019, when it reached 13.4 %. However, in 2020, the labour market slack significantly rose compared to 2019 and accounted for 14.5 % of the extended labour force, corresponding to 32.4 million people in the EU facing an unmet demand for employment.

In contrast with previous years, the change in the labour market slack which occurred in 2020 was mainly due to the increase in the number of people available to work but not seeking and not to unemployment as further described in this article. This might be explained by the length and the repetition of the lockdowns as well as other sanitary measures preventing people looking for a job to expect positive outcomes. Some people paused definitely their job search.

Based on the annual data, the components of the labour market slack in 2020 in the EU were as follows: the unemployment (ILO) stood for 6.7 % of the extended labour force (actually less than half of the value of the labour market slack), people available to work but not seeking stood for 4.0 %, underemployed part-time workers for 3.0 % and people seeking work but not immediately available for 0.9 %.

Figure 1: Labour Market Slack by its components, people aged 15-74, EU, 2009-2020
(% of extended labour force)
Source: Eurostat (lfsi_sla_a)

In 2020, the labour market slack was highest in Spain (25.2 %), followed by Greece (23.9 %), Italy (22.3 %), Finland (17.5 %), France (17.1 %), Ireland and Sweden (both 16.3 %), all reaching a labour market slack above 15 % of the extended labour force (see Figure 2). Including EFTA and Candidate countries, the highest labour market slack was actually found in Montenegro where 30.1 % of the extended labour force faced an unmet need for working. By contrast, Czechia (3.6 %), Poland (6.2 %) and Malta (6.9 %) registered the lowest labour market slacks.

The weight of unemployment in the total labour market slack varies from one country to another, leaving the other components (such as the underemployed people, people available for work but not seeking it, and those seeking work but not immediately available) relatively more substantial. In 2020, in the Netherlands, Ireland, Italy, Germany and Austria, unemployment consisted of less than 40 % of the total slack while the three supplementary indicators accounted for more than 60 %. In the EU, almost half of the slack, 46.4 %, consisted of unemployed people. On the opposite end, in Lithuania, Czechia and Slovakia, unemployment accounted for more than two thirds of the total labour market slack.

Figure 2: Labour Market Slack by its components, people aged 15-74, by country, 2020
(% of extended labour force)
Source: Eurostat (lfsi_sla_a)

From 2019 to 2020, the unmet demand for employment increased at EU level (+1.1 p.p.), as well as in all EU Member States, with the exception of Greece (-0.6 p.p.), Poland (-0.3 p.p.) and France (where it remained stable) This reflects the significant impact of the COVID-19 crisis on the demand for employment. Ireland, Estonia, Lithuania, Spain, Austria and Sweden registered the largest increases, ranking from 2.9 p.p. for Ireland to 2.2 p.p. for Sweden.

As shown in Figure 3, the increase in the labour market slack may have mainly been due to the increase in unemployment, or in people available but not seeking, or in a combination of the two (all indicators are expressed as a percentage of the extended labour force allowing the comparison). For example, in Ireland and Portugal, it is clearly visible that the increase in the slack (+2.9 p.p. and +1.3 p.p. respectively) is mainly explained by the increase in people available to work but not seeking (+2.4 p.p. and +1.1 p.p. respectively). By contrast, the increases in the labour market slack of 2.6 p.p. reported by Estonia and Lithuania were largely due to the increase in the share of unemployed people (+2.3 p.p. and +2.2 p.p. respectively) and much less to increases in the other categories of the slack. Moreover, Hungary, Denmark, Slovenia and the Netherlands registered similar increases in unemployment and people available to work but not seeking; differences between both increases for those countries do not exceed 0.1 p.p.

Figure 3: Change in the Labour Market Slack and its components by country, people aged 15-74
(2020 compared with 2019, in percentage points)
Source: Eurostat (lfsi_sup_a)

Does the labour market slack offset the change in employment?

As mentioned in the introduction of this article, the COVID-19 crisis emphasised the relevance of looking at the labour market slack in order to capture people who do not fulfil the unemployment criteria but are still attached to the labour market through their availability and willingness to work or through their job search. The health crisis has, in a way, questioned the recourse of unemployment as the most appropriate indicator of the demand for employment under specific circumstances. It also showed that during the crisis, in some EU Member States, the share of people available for work to work but who do not look for a job was quite significant. For further details, please refer to the following article on the Key figures on the impact of the COVID-19 crisis on the labour market under the section "Why is focusing solely on unemployment insufficient?".

Furthermore, considering the exceptional measures leading to the shutdown of businesses or schools during 2020, some people might have become unavailable, caring for children for example, and gave up their job search at the same time. These people therefore belong to the category of people outside the extended labour force, losing any attachment to the labour market. So, in order to have a complete overview of the changes on the labour market, it is relevant to look simultaneously at employment, labour market slack and people outside the extended labour force. These three categories together form the whole population.

From 2019 to 2020, as shown in Figure 4, losses in employment were almost exclusively offset by an increase in the labour market slack in Austria, Sweden, Cyprus, Romania, France, Estonia, the Netherlands and Croatia, the third category of people outside the extended labour force fluctuating by 0.1 p.p. or less. In other EU Member States, e.g. Bulgaria, Italy, Slovenia and Czechia, the decreases in employment were accompanied by a higher increase in people outside the extended labour force than in the labour market slack. This highlights why it is of interest to refer to the changes in all categories in order to better understand the consequences of the health crisis in 2020 on the labour market, as the labour market slack does not compensate the changes in employment in all countries .

Figure 4: Annual development by labour category and country, 2019 - 2020
(people aged 15-74, year-on-year comparison, in p.p.)
Source: Eurostat (lfsi_sup_a) and (une_rt_a)

Do more women than men have unmet demand for employment?

Looking at Figure 5, women and men show significant differences. In 2020, in the European Union, 16.9 % of women in the extended labour force expressed a potential demand for employment against 12.5 % of men, producing a gender gap of 4.4 p.p. Women were also more likely to face an unmet demand for employment in most EU Member States, only Lithuania, Latvia, Bulgaria and Romania recorded a higher labour market slack for men than women, although with differences lower than 1.5 p.p. Among EU Member States, the gender gap is around 10 p.p. in Greece (10.7 p.p.), Spain (10.0 p.p.) and Italy (9.3 p.p.). These three countries had in 2020 a much wider gender gap compared with all other EU Member States. France and Croatia follow at some distance, with a gap of 4.7 p.p. and 4.4 p.p. respectively. In contrast, Bulgaria, Romania and Estonia recorded minor differences between men and women in terms of labour market slack (less than 1 p.p.).

Figure 5: Labour Market Slack by gender and by country, 2020
(in % of the extended labour force)
Source: Eurostat (lfsi_sla_a)

Is labour market slack similar for young and older people?

Young people are considerably more affected by an unmet demand for employment than people aged 25 to 54 and 55 to 74

Figure 6 shows the evolution of the share of people with a potential demand for employment from 2008 to 2020 by age group, i.e. 15-24, 25-54 and 55-74. Since the beginning of the series in 2008, young people aged 15 to 24 have noticeably faced a higher unmet need for employment overtime. While the labour market slack in 2020 amounted to almost one third of the extended labour force among people aged 15 to 24 (31.1 %), it reached 13.1 % among people aged 25 to 54 and 11.5 % among people aged 55 to 74. The three age groups seem to fluctuate in parallel but the variations are more pronounced for young people than for the others.

From 2019 to 2020, in the European Union, the labour market slack increased by 3.8 p.p. among people in the extended labour force aged 15 to 24, by 1.0 p.p. among those aged 25 to 54 and by 0.6 p.p. among those aged 55 to 74. This finding, together with the change in the employment rate of young people (see article on Employment - annual statistics), supports the fact that people aged 15 to 24 were strongly hit by the economic crisis due to the COVID-19 pandemic, much more than older people.

Figure 6: Evolution of the Labour Market Slack by age group, EU, 2008-2020
(in % of the extended labour force)
Source: Eurostat (lfsa_sup_age)

Looking more closely at the components of the slack for each age group (see Figure 7), it is also visible that the share of unemployed people is quite similar for young people and people aged 25 to 54 (47.6 % and 48.5 % respectively) while it appears lower for people aged 55 to 74 (39.8 %). Moreover, more than one third (36.1 %) of people aged 55 to 74 facing an unmet demand for employment are available to work and want to work but are not looking for a job. This category accounted for 30.3 % of the labour market slack of young people and 24.3 % for people aged 25 to 54, showing a wide disparity between the three age groups. Another relevant difference is the share of the underemployed part-time workers in the slack, this share is larger for people aged 25 to 54 (21.9 %) and for people aged 55 to 74 (19.4 %) than for people aged 15 to 24 (14.4 %). With regard to people seeking work but not immediately available, they represent a higher share among young people facing an unmet need for employment (7.6 %) than among people aged 25 to 54 (5.3 %) and people aged 55 to 74 (4.8 %).

Figure 7: Labour Market Slack by its components and by age group, EU, 2020
(in % of the total Labour Market Slack)
Source: Eurostat (lfsa_sup_age)

At country level, slightly more than half of young people in the extended labour force face an unmet demand for employment in Spain (55.4 %) and Italy (51.1 %). Greece (49.2 %), Sweden (47.0 %), Luxembourg (43.2 %) and Finland (42.7 %) follow, all showing a labour market slack exceeding 40 % of the extended labour force (see Figure 8). By contrast, in Czechia, around one in 10 young persons in the extended labour force (10.5 %) expressed a potential demand for employment, which is the lowest share reported by an EU Member State. In Germany, Poland and Malta, the labour market slack of young people amounted to less than 20 % (18.2 %, 17.7 % and 16.5 %, respectively).

The two other age groups show closer labour market slack values across the countries and also between themselves. However, in Finland, Estonia and Ireland, the slack of people aged 55 to 74 exceeded in 2020 the slack of people aged 25 to 54 by more than 2.0 p.p. In Belgium, Greece and Italy, it was the opposite, with the slack of people aged 25 to 54 exceeding by more than 2.0 p.p. that of people aged 55 to 74.

Figure 8: Labour Market Slack by age group and by country, 2020
(in % of the extended labour force)
Source: Eurostat (lfsa_sup_age)

Does the education level affect the unmet demand for employment?

The level of educational attainment, according to the classification ISCED, is another classical background variable often used to explain labour market outcomes. In this paragraph, the "low" level refers to less than primary, primary and lower secondary education (ISCED levels 0-2), the "medium" level corresponds to upper secondary and post-secondary non-tertiary education (ISCED levels 3 and 4) and the "high" level to the tertiary education (ISCED levels 5-8). As can be seen in Figure 9, in all countries, the lower the educational attainment level, the higher the labour market slack with the single exception of Denmark where the slack of people with a medium level is slightly lower (difference of 0.7 p.p.) than the slack of people with a high level of education.

At EU level, almost one in four persons (24.0 %) aged 25-74 in the extended labour force with a low level of education faced a potential need for employment in 2020. Considering people with a medium level of education, this share declined by half, to 11.4 %, and by one third, to 8.8 %, for people with a high level of education. In Slovakia and Spain, more than three in 10 persons in the extended labour force with a low level of education reported a need for employment, wanting to work or to work more (39.6 % in Slovakia and 30.8 % in Spain). By contrast, in Malta, this is less than one in 10 persons in the extended labour force (8.7 %) with a low level of education.

Figure 9: Labour Market Slack by educational attainment level and by country, 2020
(in % of the extended labour force, people aged 25-74)
Source: Eurostat (lfsa_sup_edu)

In addition, by crossing the gender and the educational attainment level in the EU as displayed in Figure 10, it shows that the lower the educational attainment level, the wider the gender gap. The labour market slack of women with low educational attainment level reached 30.0 % of the extended labour force, while it affected 19.9 % of the men with low level of education (difference of 10.1 p.p.). The slack encompassed 14.3 % of women in the extended labour force with a medium level of education against 9.1 % for men (difference of 5.2 p.p.). As regards the tertiary level, the labour market slack was 10.3 % for women and 7.2 % for men (difference of 3.1 p.p.).

Figure 10: Labour Market Slack by educational attainment level and gender, EU, 2020
in % of the extended labour force, people aged 25-74)
Source: Eurostat (lfsa_sup_edu)

How large are the differences between people born in the reporting country, in the EU or outside the EU?

The country of birth appears to have a considerable influence with respect to the unmet demand for employment. For the whole European Union and taking as reference the extended labour force, 13.0 % of people who were born in the reporting country experienced an unmet demand for employment. This share reached 17.1 % for people who were born in an EU country (excluding the reporting country) and 26.0 % for those who were born neither in an EU country nor in the reporting country, so exactly the double of the share recorded by those who were born in the reporting country. This pattern is visible in the majority of the EU Member States (for which data is available for all three categories) except in France, Latvia, Italy, Portugal, Ireland, Malta and Croatia (for which the highest, medium or lowest category is different). The annual 2020 data are shown in Figure 11 in which the labour market slack is displayed by category of country of birth, from the widest to the narrowest gap between the categories. The largest intervals between the lowest and the highest category were reported by Sweden (21.4 p.p.), Greece (20.2 p.p.), Belgium (17.1 p.p.), Spain and Luxembourg (15 p.p. for both).

Figure 11: Labour Market Slack by country of birth and by country, 2020
(in % of the extended labour force, people aged 15-74, from the widest to the narrowest gap)
Source: Eurostat (lfsa_sup_cob)

Looking at the gender differences at EU level, the gender gap between the male and female labour market slack in percentage of the extended labour force is widest among people who were born outside the EU, amounting to 8.9 p.p., followed by those who were born in an EU country (excluding the reporting country)(7.6 p.p.) and by those who were born in the reporting country (3.6 p.p.)(see Figure 12).

Figure 12: Labour Market Slack by country of birth and by gender, EU, 2020
(in % of the extended labour force, people aged 15-74)
Source: Eurostat (lfsa_sup_edu)

Source data for tables and graphs

Data sources

All figures in this article are based on the 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 p.p.lations and uses the same definitions in all countries, which means that the results are comparable between countries.

Reference period: Yearly results are obtained as averages of the four quarters in the year.

Coverage: The results from the survey currently cover all European Union Member States, the United Kingdom, the EFTA Member States of Iceland, Norway, Switzerland, as well as the candidate countries Montenegro, North Macedonia, Serbia and Turkey. For Cyprus, the survey covers only the areas of Cyprus controlled by the Government of the Republic of Cyprus.

Country note: In Germany, since the first quarter of 2020, the Labour Force Survey (LFS) has been integrated into the newly designed German microcensus as a subsample. Unfortunately, for the LFS, technical issues and the COVID-19 crisis has had a large impact on the data collection processes, resulting in low response rates and a biased sample. Changes in the survey methodology also led to a break in the data series. The published German data are preliminary and may be revised in the future. For more information, see here.

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 survey follow the guidelines of the International Labour Organization (ILO):

  • People outside the labour force are those who are neither employed nor unemployed.
  • 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:

(1) not employed according to the definition of employment above; (2) 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; (3) 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.

  • Reason for being outside the labour force is the main reason why somebody is not searching for employment. The main reason may or may not be the only reason. Only the main one is retained for analysis in this article.
  • Level of education is defined according to the International standard classification of education, version 2011 (ISCED 2011). Eurostat’s online tables and databases present data on educational attainment for three aggregates: low level of education refers to ISCED levels 0-2 (less than primary, primary and lower secondary education), medium level refers to ISCD levels 3 and 4 (upper secondary and post-secondary non-tertiary education) and high level of education refers to ISCED levels 5-8 (tertiary education).

Different articles on detailed technical and methodological information are available through: EU labour force survey.

Context

Employment and unemployment as defined by the International Labour Organisation (ILO) are, in the particular situation of the COVID-19 health crisis, not sufficient to describe the developments taking place in the labour market. In 2020, 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 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.

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LFS main indicators (lfsi)
Unemployment - LFS adjusted series (une)
Supplementary indicators to unemployment - annual data (lfsi_sup_a)
Supplementary indicators to unemployment - quarterly data (lfsi_sup_q)
LFS series - Detailed annual survey results (lfsa)
Total unemployment - LFS series (lfsa_unemp)
Supplementary indicators to unemployment by sex and age (lfsa_sup_age)
Supplementary indicators to unemployment by sex and educational attainment level (lfsa_sup_edu)
Supplementary indicators to unemployment by sex and citizenship (lfsa_sup_nat)
LFS series - Detailed quarterly survey results (lfsq)
Total unemployment - LFS series (lfsq_unemp)
Supplementary indicators to unemployment by sex and age (lfsq_sup_age)
Supplementary indicators to unemployment by sex and educational attainment level (lfsq_sup_edu)