An employment agenda for the year 2000:
Executive summary
European Union
Recent developments in jobs
and employability
The main questions for the
employment agenda
The way forward: an
employment agenda for the year 2000
The Employment in Europe report 1997 comes at a defining moment in the development of
the Union. The new Treaty, agreed at Amsterdam, makes employment a matter of common
concern and introduces employment as an explicit goal for the Union. This report
contributes to the preparations for the extraordinary European Council on employment and
unemployment and to the further development of the European employment strategy. It
presents the latest trends in employment and the labour market and looks forward to the
challenges of the 21st Century as the European Union prepares itself for this new phase in
its development with the completion of the Single Market, the third phase of EMU and the
preparations for the new wave of enlargement.
At 1.5%, economic growth was slow in 1996, the recovery not gathering momentum until
the end of the year. Inflation, at 2% continued to be low and wage developments were
moderate.
- employment rose by some 600 000 in 1996, not enough to make significant inroads into
making good the job losses of the recession or reducing unemployment;
- part-time jobs again accounted for all net job creation in 1996, as they have each year
since 1990;
- the rise in job opportunities led to a renewed rise in labour force participation.
Participation of women increased further, from 56#% to 57% and withdrawal of men from the
labour market slowed down;
- unemployment remains stubbornly high at 10.8% in mid-1997, and over 5% of the labour
force in the Union had been unemployed for a year or more in 1996;
- the unemployed had great difficulty in finding jobs: under a third of men, and a quarter
of women who were unemployed in 1995 had found a job by 1996.
- unemployment of women is still some 3% points higher than for men (12.7% compared with
9.4%)
- while youth unemployment has improved slightly, due to demographic factors and a higher
participation in education, the average rate in the Union remains at over 20%;
- job losses over the last 10 years have been concentrated in sectors which account for
less than a quarter of total employment in the Union;
- of the working age population is hampered by disabilities; nearly half of these are in
the 50-64 age group. The average employment rate of disabled people is 44%, nearly 17%
below the overall rate.
The challenges of the next decade raise serious questions about the ability of the
European labour market to respond to them. The single market and EMU focus attention on
mechanisms of economic adjustment and their effectiveness and on whether the European
labour market is sufficiently flexible to secure a balanced and sustainable development of
employment in the years to come.
The main problem is job creation
Whatever the relationship between employment and output growth, it is clear that the
major problem remains the creation of more jobs. The response in terms of increased labour
market participation to the relatively small improvement in job opportunities in the
period 1994-96 shows that there is a labour reserve in Europe which can be mobilised, over
and above those recorded as being unemployed. Compared with the employment rate in the US,
this reserve amounts to over 20 million people to be found jobs. A range of measures are
needed to unlock this growth potential and to make growth sustainable.
While in the short term, net job creation depends mainly on the rate of output growth,
in the longer term it also depends on institutional structures and societal choice on the
priority given to employment and how possible conflicts, between this and maintaining
productivity growth and competitiveness are reconciled.
Tax-benefit systems should continue to be made more employment-friendly to create an
environment that stimulates enterprise and the creation of jobs.
investment, particularly in Europe-wide infrastructure projects, can have a major
impact on employment, adding to capacity and productive potential, with less inflationary
risk than consumption, and promoting competitiveness and sustainable growth.
Job creation depends to a high degree on creating the right economic environment.
Product and services markets need to function in a more effective way in order to create
new opportunities which will generate additional demand for labour. Measures proposed
under the action plan for the Single Market should therefore be implemented without any
delay at national and Community level.
The skills gap - A major
structural problem
The ageing of the Union's labour force, allied with the increasing pace of new
technology means that we are facing an ever-expanding skills gap. Societies must maintain
their competitiveness with a shrinking number of young people with modern skills and a
large proportion of older workers who have been trained for technologies no longer used or
for jobs no longer needed. A triple-pronged strategy which aims to ensure that learning,
training and updating skills and competence is an on-going process throughout life is
therefore called for: first, to reorganise fundamentally initial education and training
systems to bridge the gap between school and work and to enable young people to be
adaptable in later working life by ensuring that they have the relevant skills and
competence. Second, to commit government and business to much more than the current token
efforts to upgrade and continuously train the whole of the adult labour force so that they
have the ability to meet the challenges brought about by new technologies and third, to
develop better programmes combining training, incentives and opportunities for unemployed
and displaced workers to equip them with the skills and abilities to enable them to
reintegrate into the mainstream of society. Bridging the skills gap is a key to a more
flexible and dynamic labour market.
At the same time, efforts to improve the skill levels of the work force must go hand in
hand with continued efforts to ensure sufficient flexibility in labour markets and that
labour costs are conducive to job creation so that employment opportunities are provided
for those whose skill levels are likely to remain limited irrespective of the kind and
extent of training received. This means that the overall cost of employment for the
latter, including the non-wage element, is at an appropriate level in relation to
productivity and that artificial barriers inhibiting job creation are removed. Such
measures will also help to increase confidence that policies for fostering labour demand
will not simply lead to increased inflation.
Flexibility in working patterns
Flexibility in goods and services markets, in the form, for example, of the relaxation
of restrictions on Sunday trading, is translated in the European labour market into
non-standard patterns of work and employment contracts. Part-time working and fixed-term
contracts have become the standard response to slow market growth and uncertainty. Such
patterns can also result from high levels of regulation, which alter the way in which
employers hire labour, as well as affecting the rate of net job creation. A new approach
is therefore required which neither condemns them outright nor promotes them
superficially. Carefully designed programmes of reform are required, preferably
negotiated through social dialogue between governments and social partners. Such
programmes should both end the discrimination against permanent work contracts due to
excessive regulation, and extend social protection, acquired and transferable rights, to
non-standard forms of work
Flexibility in wages and salaries
Differences in wage levels across Europe tend to be wider than in the US, not only
between Member States, which is to be expected, but also between regions within Member
States. Average labour costs vary at the extremes from ECU 5 per hour to over ECU 25 per
hour. Such differences largely reflect variations in labour productivity and there is
little sign of wages being excessive relative to the contribution of labour to
value-added. Analysis of labour cost differences between regions in Europe and the US
suggests that regional problems of inadequate infrastructure, low local labour force
skills and so on may be as important as wage flexibility in giving rise to unbalanced
rates of economic development and employment growth. Policy, therefore, needs to be
focused on correcting these problems, together with labour market rigidities which can
deter job creation.
Geographical mobility
The scale of migration into the Union is relatively small: less than 0.5% of the
working-age population in 1995. Inflows into the Union have slowed significantly since the
early 1990s; only half of immigrants are from third countries and many of the rest are
returning nationals. While the policies for labour migration must continue to give
priority to absorbing the excess labour supply in the EU, it must also recognise the value
of the contribution made by migrants to the economies of the Union and, in accordance with
the Treaties in force, promote their rights and equal treatment commensurate with that
contribution.
Within the Union, movements of labour between Member States are also small, much
smaller than movements between different parts of the US. Less than 2% of the working age
population in EU Member States are from other EU countries. However, movements between
regions within Member States are much larger than between countries and are comparable in
size to those between States in the US. In 1993-94, an average of just under 1.5% of the
population moved between NUTS 1 regions in Europe, which compares with just over 2.5% in
the US. In most instances, these movements are linked to employment or education and
training opportunities and are particularly important among younger age groups. Policy
should aim to provide people with a real choice between staying in the place where they
were brought up and moving elsewhere to live and work.
The scale of regional migration was slightly lower in 1994 than in 1990 both in Europe
and in the US, perhaps because economic activity was lower in the later year. This
suggests that the availability of jobs may be just as important in encouraging people to
move as job shortages. It may also reflect the constraints which exist, in both Europe and
the US, on someone who is unemployed moving from their home to another part of the country
to look for work. Policy should aim at alleviating these constraints.
Regional mobility is not confined to migration. Large-scale commuting occurs in many
parts of the Union and is potentially important in correcting labour market imbalances. Policies
should aim at improving the trade-off between such benefits and disadvantages which arise
in other policy areas in relation to the provision of social services, traffic and
environmental degradation.
Occupational mobility
Sectoral and occupational mobility are equally important aspects of labour market
flexibility and there is evidence that this is relatively high in most Member States. In
1995, job turnover was around 16% for men and 19% for women. Making it easier for
people to change jobs and ensuring access to the necessary retraining is important for
combating emerging skill shortages, narrowing productivity gaps and thereby promoting
growth and employment.
Adjusting to the capacities
of individuals
Flexible labour markets mean that employers also, adapt to the needs and capacities of
individuals and to capitalise on their potential so as to maximise the supply of skills.
Evidence of a lack of such adjustment is the low rate of training of workers and the low
employment rate of disabled people. While this varies between Member States, it tends to
be higher in countries where the overall employment rate is also high. Disability is often
the result of dangerous working conditions and poor safety standards. 10 million people
every year are stricken by occupational diseases, injuries or accidents. A decisive
implementation of agreed health and safety standards would substantially improve the
safety situation, reduce public expenditures and increase the employability of the work
force.
Dynamics of the labour market
An average of 30% of the unemployed find work within a year. This proportion tends to
rise slightly in periods of strong growth. In 1996, some 5 million people had been
unemployed for more than two years. In 1992, this figure was 3 million, suggesting that
even the hard-core long-term unemployed can be tackled with a period of sustained
employment growth. Structural unemployment reflects the nature of the economy, not the
individual. Policy needs to recognise that dealing with the unemployed is three-fold:
bringing about a sufficient, but sustainable rate of growth, tackling the employability of
the unemployed by enabling them continually to update their skills in line with labour
market needs and improving and simplifying the business environment.
The Amsterdam Resolution called for the improvement of the functioning of European
markets and enhanced coordination of economic policies. It also called for an immediate
implementation of the relevant provisions in the Employment Title in the new Treaty. The
key provision is the reference to employment as a common concern. That is why it provides
for the appropriate coordination of employment policies at EU level and the development of
a common employment strategy. The message of Amsterdam is that the completion of the
single market, monetary discipline and job creation have to be pursued in parallel. This
is the task for all those concerned.
The Commission Communication "Agenda 2000" presents the economic,
technological and social trends in European society in the years to come. This
communication is the basis for the Commission's contribution to the further development of
the European employment strategy. It indicates four directions for action in this respect:
setting the conditions for sustainable, employment-intensive growth; putting knowledge and
technology to the forefront; modernising employment systems; improving living conditions.
Certain priority programmes, with a high value-added from Community-level action are
highlighted. They include the trans-European networks, research, education and training,
the introduction of environmentally-friendly technologies and measures to support SMEs.
The European employment strategy is of fundamental importance in tackling the
employment problem, and will be even more important when Economic and Monetary Union is
implemented. While high employment and well functioning labour markets are priority
objectives in their own right, high employment is the best way to make EMU successful. The
existing employment strategy, based on a combination of macroeconomic stability and
structural reform to modernise labour markets, has been underway since December 1994.
There are experiences of good progress and performance both on a national scale and at
local and regional level.
The 1997 Demographic Report has focused on the underlying population changes which will
affect labour force trends in the first decades of the new century. These changes must be
taken into account in the development of the Employment strategy for the year 2000.
There is, however, a question of responsibility for action and how it should be shared.
Member States continue to have responsibility for employment policy and the provision
of sustainable growth and a favourable business environment.
Employers, above all, must maintain the competitiveness and job creating capacity of
their enterprises. Maintaining and developing the productive capacity and motivation of
their work force depends on the provision of on-going and relevant training and by
treating this as an investment rather than as a cost for the enterprise. Many job
opportunities are lost when businesses face complex and difficult administrative
requirements during their start up and early years, and when businesses are transferred.
Simplifying the business environment would help to overcome these difficulties faced by
employers.
Trade Unions have a major role to play in promoting equity in the labour market in
encouraging responsible wage determination which increases investment, productivity and
welfare and which helps insiders to keep their jobs and outsiders to gain access to them.
Local governments, within a coherent national strategy, must bring all relevant bodies
together in partnerships for local development, to tap local capacities and local markets
to identify sources of jobs. They must also act as agents for change, promoting
sustainable local restructuring.
Individuals have a claim on opportunities offered to them. But they must also combine
these opportunities with an individual responsibility: a willingness to adapt, to respond
to incentives and to seek and master new capacities and skills.
The European Institutions have an important contribution to make. In line with the
conclusions of the Amsterdam European Council, the Commission will present a proposal for
a Joint Employment Report and draft guidelines for Member States' employment policy to be
submitted to the Jobs Summit to be held at the end of 1997. These will be designed to
specify an agenda for employment for the year 2000 and beyond and provide the basis for
operational action to provide for more and better jobs in the Union.
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