Commission issues 2002 Employment in Europe report

The 2002 Employment in Europe report was issued by the European Commission in September 2002. The report examines the progress of European labour markets over the past decade. It assesses the chances of meeting the employment rate targets set at the Lisbon and Stockholm European Councils in 2000 and 2001 and looks at the areas where improvements are needed in terms of labour market performance. The report also analyses at the challenges which EU enlargement will bring.

The European Commission published its annual Employment in Europe report for 2002 on 6 September 2002. This year, the report examines the performance of the European labour market in the context of a slowdown in economic performance, and the structural labour market improvements which have taken place over the past decade.

Economic context

The report outlines the slowdown in economic and employment growth which has taken place over the past year. GDP growth averaged 1.6% in the European Union over 2001 while employment growth slowed from 1.5% in the first half of 2001 to 1% in the second half of that year.

GDP growth was expected to be 1.5% in 2002, although there are signs that actual growth may be weaker than this. Employment growth is forecast to be 0.3% in 2002 and 1% in 2003.

The report notes that overall, employment rates have not been significantly affected by the recent economic slowdown and that progress continues towards the employment rate targets set at the Lisbon European Council in March 2000 (EU0004241F) and Stockholm Council in March 2001 (EU0104208F) continues. However, the Commission stresses that there remains some concern about reaching the targets for women (an employment rate of 60% by 2010) and older workers aged between 55 and 64 (an employment rate of 50% by 2010). Currently, the EU female employment rate is 54.9% and the employment rate for older workers is 38.6%, significantly below the target.

Structural labour market improvements

It is noted that there have been a range of structural improvements to the European labour market over the past decade, resulting in a decline in structural unemployment. The report highlights the fact that the European employment strategy (EES) has, since its introduction in 1997 (EU9711168F), accelerated this process and promoted strong employment creation.

The Commission cites a number of factors as having contributed to strong employment growth, including wage moderation and a range of 'employment-friendly' wage agreements concluded by the social partners.

Main challenges

The report highlights a number of challenges which need to be met if the Lisbon and Stockholm labour market goals are to be reached. Significant differences between EU Member States remain in terms of progress towards these goals, and attention therefore needs to be focused on those Member States with low employment and participation rates.

Active ageing

The Commission highlights 'active ageing' as a key challenge for the European labour market, as the employment rate for older workers increased between 1995 and 2000 by only 1.8 percentage points, compared with 3.3 percentage points for the whole working-age population. It notes that significant progress was made during 2001, when the employment rate for older workers increased by 0.8 percentage points over the year, but points out that this is not sufficient to enable the EU to reach the Stockholm target.

The report cites a number of areas in which improvements could be made, including: reforms to the tax, benefit and pension systems in the EU; a fundamental change in the attitudes of society; recruitment and training practices; and 'quality of work', including in particular work organisation and working conditions.

Investing in human capital

Improvements in the education and skills levels of the workforce are fundamental to good long-term employment performance, the report stresses. Although the share of low-skilled workers in the working-age population has fallen sharply since 1996, the report notes that it still amounts to almost 40% overall and more than 20% in the 25-30 age group.

More and better jobs

A significant section of the report is devoted to the issue of increasing productivity by improving the quality of work. It notes that quality in work and job satisfaction are found to be positively correlated with employment performance and labour market participation, particularly in the case of women. In many Member States, increases in the employment rate have been accompanied by improvements in job quality for all types of employee. Better job quality, job satisfaction and training may also lead to productivity increases.

However, the report also notes that there is a role for low-quality jobs, in that they may be able to ease the access of unemployed people into the labour market. Nevertheless, it also stresses that those in low-quality jobs are at higher risk of unemployment and inactivity than their counterparts in higher-quality jobs. Up to 25% of those in low-quality jobs become either unemployed or inactive within two years, five times the proportion of those in high-quality jobs. The report therefore states that those in low-quality jobs should be encouraged to move into higher-quality, stable jobs as quickly as possible.

The report also looks at the issue of temporary work, noting that while temporary contracts may provide flexibility, many people employed on temporary contracts suffer from a lack of security. The risk of a person on a temporary contract becoming unemployed is up to four times greater than for a person on a permanent contract.

Regional disparities

Significant disparities between EU regions remain, in terms of income, productivity levels and employment rates, exacerbated by varying regional performance between 1995 and 2000 in all these areas. The Commission notes that the wide disparities in terms of regional employment performance are partly explained by differences in the skills composition of the working-age population and by differences in sectoral specialisation.

The Commission believes that action needs to be taken in the area of life-long learning in order to close skills gaps. In particular, raising the participation rate of women is crucial and the difference in this area between the best- and worst-performing regions is some 20 percentage points.

Employment in the candidate countries

The report devotes a section to employment in the countries which are applying to join the EU. It notes that enlargement will reduce the overall EU employment rate by some 1.5 percentage points and create more structural employment challenges. In the candidate countries, there has been an increase in employment in the service sector, but this has not been able to compensate for job losses in agriculture and industry. Those countries which are particularly behind the EU average in terms of employment rates are Bulgaria, Slovakia, Poland and Lithuania.

On a positive note, the report notes that enlargement is likely to benefit the service sector in the candidate countries, creating demand for financial and business activities, hotels and restaurants and social services. It warns, however, that shifts away from agriculture and manufacturing towards the service sector are likely to affect some regions more intensely than others and may increase regional disparities in the medium term as work moves towards capital cities.

Conclusions

The report concludes by stating that the overall EU employment rate could reach 65% in 2003, which is within sight of the intermediate target of 67% by 2005. Nevertheless, it warns of slow progress in the coming years, due to the economic slowdown. The Commission cites the main challenges as: raising the employment rate of older workers; reducing a range of employment gaps relating to gender, skills, regions and nationality; ensuring access to the labour market for all; and improving quality in work.

Commentary

This latest annual report from the Commission is a comprehensive and clear examination of the European labour market. It paints a realistic yet optimistic picture, praising the genuine progress which has been made over the past decade, but being honest about the difficulties which lie ahead. It would appear that, on current performance, the employment targets set at Lisbon and Stockholm are achievable, as long as issues such as active ageing, female participation and quality of work can be adequately addressed.

The report is also clear that the enlargement of the EU will present challenges of a different kind, given the different nature of the labour markets in many of the candidate countries (TN0207104F). One of the key challenges here will be helping countries move away from an agriculture-based economy into one where the service sector is more developed. (Andrea Broughton, IRS)