Convergence: Employment

07 Prosinec 2018

Convergence in employment is essential in order to ensure balanced growth and full participation of citizens in the EU. While employment and social policy have remained largely national competencies, participation in labour market is a central part of the European Pillar of Social Rights adopted in Gothenburg in November 2017. In this analysis, nine indicators of labour market participation, exclusion and dynamics have been investigated.

Dimension 1: Labour market participation

In terms of the activity rate indicator, there was upward convergence among Member States over the period 2000–2018. The process was, however, much more pronounced from 2008 onwards when the dispersion among countries started to decline at a faster pace. Limited volatility of this indicator revels that this trend of upward convergence was steady and robust.

Upward convergence is also recorded for the employment rate; however this trend was strongly affected by the business cycle. During the recession, the downward trend was mainly driven by Greece, Spain, Croatia, and to a lesser extent also by Ireland, where the employment rate dropped. Since 2013, the employment rate increased in most of the Member States.

Conversely, the average weekly hours worked steadily decreased (from 38.5 to 37.1). Because the variability between the countries also moderately decreased in the observed period, weak downward convergence took place.

Dimension 2: Labour market exclusion

For all labour market exclusion indicators, the correlation with the business cycle is very strong and affects their levels and volatility.

In terms of unemployment rate, upward convergence was recorded from 2002 and three main periods can be clearly identified: upward convergence in 2002–2008, and again from 2013 on; downward divergence for the sub-period 2009–2013. Similar trends were recorded for the NEET rate, with the same three period trends as the unemployment rate.

As regards the long-term unemployment rate, a pattern of upward convergence can be identified over the period 2004–2018, with a decrease in the rate from 4% to 2.8% (unweighted average, EU28) and a decrease in variability. However, this development is not clear cut. Sub-periods of upward convergence can also be identified (2004–2008 and 2014–2018) following the volatility of the business cycle.

Dimension 3: Labour market dynamics

Downward divergence characterised the trend in the indicators of this dimension. Downward divergence took place in terms of the involuntary temporary work and involuntary part-time work rates over the period 2002–2016, with only limited fluctuation due to the business cycle.

Labour transitions from temporary to permanent contracts decreased over the period 2011–2015, while its variability increased, particularly between 2012 and 2014. All together, these developments suggest that a process of downward divergence took place.

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