EMCC European Monitoring Centre on Change

Luxembourg: Young people and temporary employment in Europe

  • Observatory: EMCC
  • Topic:
  • Published on: 08 December 2013



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In Luxembourg there has been an increase in the use of temporary contracts for young workers in the decade after 2000 and especially at the beginning of the crisis. The employment of young people on temporary contracts is an important issue of concern for the social partners in Luxembourg.

Introduction

Youth unemployment has been a persistent problem in many parts of Europe for many years. Over the past 3-4 years, however, since the onset of the financial crisis and the economic recession which followed, it has become an even greater and more widespread problem and one which, given the on-going depressed state of the European economies, is likely to remain for some time to come. The latest monthly figures (for September 2012) show the unemployment rate of those aged 15-24 averaging 22.8% in the EU – just over 1 percentage point higher than at the time a year earlier. In Spain, the figure was over 54% and in Greece, 57%, in both cases, much higher than a year earlier. In the worst affected countries, therefore, as in most Member States, there is very little sign of any easing of the youth unemployment problem. There are, however, a few exceptions. In Germany, in particular, youth unemployment has declined since the global recession hit in 2009 and now stands at only 8%, well below the level it was before the recession. In Norway too, the rate is only 8%, though this is slightly above the level in 2007 before the crisis. Germany, apart, there are two other countries in the EU with youth unemployment below 10% according to the latest monthly figures - the Netherlands (9.4%) and Austria (9.9%). As in Norway, in both cases, the rate is above the pre-crisis level.

Moreover, young people who do manage to find jobs often have to settle for a temporary one, defined as one with a fixed-term contract of employment. According to the European Labour Force Survey (LFS), in 2011, just under 43% of employees under 25 were in temporary jobs in the EU and well over half in Germany (56%), France (55%), Portugal, (57%), Sweden (57%), Spain (63%), Poland (66%) and Slovenia (75%). (In Norway, the figure was much lower than in most EU countries, at around 24%.) While around 40% of the young people concerned on average were in temporary jobs because they had a fixed-term training contract and another 9% were on probationary contracts, a substantial proportion (37% on average) were in temporary jobs because they were unable to find permanent ones. In the Czech Republic, Cyprus and Portugal, this figure was over 75% and in Spain and Slovakia, well over 80%.

Among young people making the transition from education or initial vocational training into employment, the proportion who take up temporary rather than permanent jobs is much higher than for the age group as a whole. In 2011, 57% of those aged 15-24 in employment who were in education the previous year were in temporary jobs in the EU and 86-87% in Spain, Portugal and Poland. For those moving from unemployment into employment, the proportion who take up temporary jobs is even higher on average in the EU (61%) as well as in Spain (90%).

The fact that a relatively large proportion of young people in employment are in temporary jobs may be a reason why they have been hit disproportionately hard by the crisis. In the economic downturn in 2009, many of the people who lost their jobs first were on fixed-term contracts since not renewing these contracts represented the easiest way for employers to reduce their work forces. In 2009, therefore, there was some decline across Europe in the proportion of young people in work employed in temporary jobs (see the Tables attached to the questionnaire). Since then, there has been some tendency for the proportion to increase again, in part perhaps because employers are reluctant to take on people on permanent - or standard – contracts given the uncertainty about future economic prospects.

Given the above, it is understandable that there is growing public interest, and some concern, over the nature of the jobs that young people are taking up. This concern is mirrored at EU-level where a ‘flexicurity’ approach to labour market policy has increasingly been advocated, which, in practice, means that while flexibility is an important objective, it needs to be accompanied by protection of workers’ interests if it is not to lead to a growth of precarious employment in low quality jobs. Accordingly, there is a need to obtain a better understanding of the terms and conditions applying to temporary jobs, the extent to which they are a stepping stone to permanent jobs and a working career in line with a person’s qualifications and capabilities, the access to social protection which comes with them and the measures in place to encourage employers to convert them into more stable jobs. These issues form the focus of the present study.

Definition of temporary jobs

The interest in the study is in all young people employed in temporary jobs of whatever kind, in the sense of all jobs that they are not subject to a standard contract of employment which is normally one of indeterminate length, or at least one for which no specific length is specified. Such temporary jobs can be for a period of training (i.e. traineeships or apprenticeships) or probation, intended to enable employers to check the suitability or aptitude of people for the jobs concerned. They might also be to replace someone on maternity leave or on a training programme or they might relate to a specific project of fixed duration.

All such jobs and others which are of fixed duration should be covered, whether they are part-time or full-time and irrespective of whether they are specifically for young people (such as perhaps in the case of traineeships or apprenticeships) or for people of all ages which young people happen to be doing. In some cases, it should be noted, it is relevant to include, in addition, to temporary employees, the ‘bogus’ self-employed – i.e. those people who have self-employment status but who are contracted to work for a single employer and who are effectively similar to employees who have a fixed-term contract of employment. (The cases in question relate to instances where employers use self-employment contracts as a means of employing young people without bearing the costs, and obligations, of a standard contract of employment.)

Outline of study

The study is divided in three sections. The first is concerned with the main types of job in which young people who are employed under temporary contracts work and the reasons why employers choose to use temporary contracts of employment instead of standard ones when they take on young people, as well as with the link, if any, with labour market conditions (i.e. with the extent to which the crisis has led to an increase in temporary employment). The starting point is the data summarised above, derived from the LFS, which indicate the relative number of young people employed on temporary contracts in the different European countries and the way that this has changed over the recent past (these data, as noted, are set out in the tables attached to the questionnaire). Correspondents are asked to check these data against any national data on temporary employment and to indicate where these show a different picture from the LFS data, perhaps because a different definition is adopted of temporary jobs.

Any description or commentary on national statistics should, however, remain brief, since the main task of the first section, is to review and summarise relevant sources of information on the different kinds of temporary contract under which young people are employed in each of the countries, the circumstances and areas (the types of job and the sectors of activity) in which they tend to be used and the main reasons why employers adopt them.

The second section is concerned with the access to social benefits which temporary jobs provide, distinguishing between the various kinds of benefit, and with the extent to which entitlement to benefit differs for young people employed in temporary jobs from that for those employed under standard contracts of employment. It should be emphasised that the concern is not only with the formal regulations which apply, which in many if not most countries do not make a formal distinction between temporary jobs and others, but also with de facto entitlement which stems from the nature of temporary employment. In particular, young people in temporary jobs may have difficulty in complying with the need to have a continuous period in employment, or a continuous record of paying social contributions, in order to be eligible for unemployment benefit.

The third section is concerned with the measures in place to regulate the use of temporary contracts of employment (such as specifying the number of times they can be renewed), with the attitudes of government and the social partners towards their use and with the incentives which exist to encourage the wider use of standard contracts of employment and the conversion of temporary jobs into permanent ones. A particular point of interest is the extent to which regulations and attitudes as regards temporary jobs have changed over the crisis period as the number of jobs available for young people to take up has diminished and as expanding these has become a policy priority.

A final point to note is that while it is customary to define youth employment (and unemployment) in terms of those aged 15-24, it is also the case that many of those aged 25-29 are also employed in temporary jobs, as indicated in the attached tables. Correspondents are therefore asked to extend the coverage of the study to this age group where relevant. It is recognised that in some countries the statistics available may not relate precisely to the age groups specified here, in which case correspondents should report on the age groups nearest to these.

Questionnaire

1. Importance of temporary employment for young people

1.1. Do the figures shown in the attached tables (on the number of temporary employed as a % of total employees based on Eurostat LFS data) give a reliable indication of the scale of temporary employment among the young in your country and the way that it has changed over recent years? Are there young people employed in temporary jobs who do not show up in the Eurostat figures? Are there national statistics which show a different picture from the Eurostat data? If so, please indicate what they show and give the source of the data.

In Luxembourg the share of temporary contacts as a share of total employees aged 15-24, 2004-2011 shows and increase from 24,1% in 2004 to 39,35% in 2009. However the trend is reversed and, in 2011, the share drops to 34,5%. Concerning the population aged 25-29 temporary employees as a share of total employees aged 25-29, 2004-2011 there is an initial increase (2004 - 2007), followed by relative stabilisation with small decreases/increases. This increase is related with the intensive use of the special contracts for young people in the second part of the decade of the 2000 and especially since the beginning of the crisis. However in 2011 this percentage decreases which could be explained by the reduced use of those special contracts.

1.2. Is there any evidence that other forms of employment are used as a substitute for temporary contracts, such as bogus self-employment where young people are contracted to provide services to a single work provider in a continuous manner so acting de facto as employees? If so, please give the source of the evidence and indicate the scale of the phenomenon in terms of the number of people concerned.

No. In Luxembourg there is no such evidence.

1.3. Please list (and give summary details, i.e. purpose and duration of the contract) the most common contract types or contractual arrangements under which young people are employed on a temporary basis (such as for traineeships, apprenticeships, probationary periods, replacement of workers on leave or projects of a fixed duration). What is the relative importance of each type of contract or arrangement in terms of the number of young people employed under them?

The normal form of employment in Luxembourg is the open-ended contract. However the legislation allows the conclusion of temporary contracts up to 24 months. According to a recent publication of STATEC in 2010 9,2% of the total wage earners in Luxembourg are on temporary contracts (see table below). Most of the temporary contracts are occupied by youth (up to 25 years) – according to STATEC in 2010 37% of those contracts are up to 25 years (ibid. p. 27).

Temporary work as a proportion of the total employed (%)
 

2006

2010

Fixed term contracts (except apprenticeship and temporary agency work)

3,9

4,8

Temporary agency work

2,4

3,5

Apprenticeship contracts

1,1

0,9

All fixed term-contracts

7,3

9,2

Source : STATEC –ESS 2010

Part of these contracts are developed under specific measures targeting youth unemployment. Already in 2009 the Luxembourg government adopted a number of measures to mitigate the effects of the economic crisis on youth unemployment (LU1001019I). In 2006 a number of measures were developed and targeted towards less qualified jobseekers (LU0707039I). Three temporary measures were implemented in order to mitigate the effects of the economic crisis on youth employment, and these are:

• Adaptation of the Employment initiation contract (Contrat d’initiation à l’emploi, CIE), - a public entity is subsidised to employ a youth and to ensure work and training for him;

• Adaptation of the Employment support contract (Contrat d’Appui-Emploi, CAE) and Enlargement of the Employment initiation contract (Contrat d’initiation à l’emploi ‘Expérience pratique’, CIE-EP) – the youth is employed by a private employer but the state co-funds the social security contributions and its salary, (see http://www.adem.public.lu/employeur/engagerjeune/index.html for more details)

These measures are aimed at young residents (less than 30 years of age), in Luxembourg, who are qualified or not, and who are leaving the education system, and candidates benefiting from these measures should register at the Employment Administration (ADEM). A special website has been created (http://www.anelo.lu/) to facilitate the registrations for the CIE-EP (in this case candidates may not register to ADEM). Young people who have signed these contracts receive an allowance paid by the employer and by the Employment fund. The amounts of the allowances vary, depending on the type of contract and can be as much as 150 per cent of the minimum social wage. In the year 2010 241 people had a CAE contract and 738 a CIE (of which 101 CIE-EP).

1.4. Please indicate the main reasons for the emergence and development of the different types of temporary contract which you have listed in response to question 1.3. To what extent are they linked to particular conditions in the labour market or employment protection legislation/regulation in your country? What is the main attraction of such contracts to employers? What effect has the crisis had on the use of such contracts?

Even before the crisis there was evidence that young people in Luxembourg are particularly disadvantaged in the labour market. Employment rates amongst younger (aged 18 to 24) and older (55 to 64) workers are significantly below the OECD average (OECD, 2010). This pattern can be explained in part by labour market institutions and social transfer policies, combined with the availability of a large pool of well–trained cross–border and migrant workers who are able to accept lower wages and often posses more appropriate skills than the resident population. Jobs requiring low or medium level qualifications are now extensively occupied by cross–border and migrant workers, who are sometimes over–qualified for the jobs they are willing to take (OECD, 2010). The crisis reinforced this negative impact. That is why the government adopted three key measures aimed at integrating young people into the labour market. Two of these measures were adaptations of existing initiatives, one of which is specifically targeted at young people with low qualifications. A third was a new measure targeted towards young people with higher qualifications. In sum these measures will supposed to actively cover about 25 per cent of all the unemployed and they have been given a positive evaluation. Initially the measures were intended to operate until the end of 2010, but they have recently been extended

1.5. To what extent are temporary contracts a ‘stepping stone’ to ‘permanent’ jobs (or those with standard contracts of employment of undefined duration)? Are apprentices and trainees typically taken on by the companies or other organisations concerned on standard permanent contracts once they complete their training? Has the situation changed over the crisis period? Please summarise any relevant studies which have been carried out in your country or other evidence at the national level which exists and give the reference to them.

There is a recent focus on evaluation of these measures. Researchers from CEPS/INSTEAD have carried out evaluations of the measures for the Ministry of Labour and Employment. However, this evaluation covered only the pre-crisis period, and suggests that for the period July 2007 to March 2008 the CIE was a very effective tool as it supported 86 per cent of the people on the programme to find a job within six months after the expiration of their contract compared to only 57 per cent not on the programme. But the evaluators have doubts about the general increase in the employability of the young if the partner company does not then hire them afterwards. The other measure, the CAE, was considered inefficient, in relation to the employability increase, according to the report of CEPS/INSTEAD. The CAE, with a shorter duration, could be very effective as 55 per cent of participants found a job afterwards, compared to 35 per cent of non-participants.

Further evaluations of these measures, and the new CIE-EP, are envisaged by the national administration. These results were presented at a conference in 2012. The authors of the analysis, CEPS/INSTEAD researchers Mireille Zanardelli et Jacques Brosius have argued that there is a need to compare the success rate of the measure and the percentage of youth that will find work without this measure. According to this evaluation the CIE has 25% of success rate. As a result of this evaluation some of the measures will be readjusted.

2. Access to social benefits

2.1. Does entitlement of young people to (contributory) unemployment insurance benefits and (non-contributory) unemployment assistance (i.e. benefits, usually means-tested, which provide a minimum level of income) differ if they are employed on temporary contracts as opposed to permanent ones? If so, please indicate briefly the differences in eligibility conditions and any differences between types of temporary contract (including those working as self-employed for a single employer). Have there been any changes over the period of the crisis?

According to OECD (OECD 2010) during the period of eligibility, the unemployment benefit scheme in Luxembourg is one of the most generous in the OECD: the replacement rate is up to 90% of the previous gross wage, and the ceiling on benefits is 2.5 times the minimum wage (falling to twice the minimum after six months). The unemployment insurance usually expires after 12 months, although workers over the age of 50 (or other cases examined later in the text) can qualify for insurance for up to 24 months. Young people are able to obtain unemployment benefits without a prior work history if they wait between 26 and 39 weeks after registering as unemployed. In addition to unemployment insurance, there is also a system of short–time work or partial unemployment benefits. Under this scheme, the insurance fund pays 80% of an individual’s salary at eligible firms wanting to temporarily reduce their labour use without permanently dismissing workers. In general the youth employed on temporary contracts have rights to receive unemployment benefits.

2.2. Does entitlement of young people to sickness benefits and maternity benefits differ if they are employed on temporary contracts as opposed to permanent ones? If so, please indicate briefly the differences in eligibility conditions and any differences between types of temporary contract (including those working as self-employed for a single employer). Have there been any changes over the period of the crisis?

No

2.3. Are there any differences in the entitlement of young people to old-age pensions between those employed in temporary jobs as opposed to permanent ones? If so, please indicate what these are. Have conditions of eligibility to pensions changed over the period of the crisis (including through pension reforms introduced as part of a long-term strategy to improve the financial sustainability of the system)?

No, there are no differences.

2.4. Are there any differences in entitlement of young people to health care between those employed in temporary jobs as opposed to permanent ones? If so, please indicate what these are. Have conditions of eligibility to health care changed over the period of the crisis?

No

3. Regulation of temporary contracts and policies to support transitions into permanent contracts

3.1. Please describe briefly the regulations applying to the main types of temporary contract in your country. Do restrictions exist on the maximum duration of the different types of temporary contract for young workers or the number of times they can be renewed? Do these regulations differ by age (i.e. between young people and older workers) and/or by type of temporary contract (as mentioned in question 1.3), by occupation, or by sector of activity? Do special regulations exist for those completing apprenticeships or traineeships? Have the regulations changed over the period of the crisis – i.e. has there been a tendency for them to have been tightened or relaxed?

The temporary contracts have the following respective length:

  1. Adaptation of the Employment initiation contract (Contrat d’initiation à l’emploi, CIE) – 12 months;
  2. The adaptation of the Employment support contract (Contrat d’Appui-Emploi, CAE) – between 3 and 12 months;
  3. The enlargement of the Employment initiation contract (Contrat d’initiation à l’emploi ‘Expérience pratique’, CIE-EP) – between 6 and 24 months.

3.2. Do incentives exists in your country to encourage employers to opt for standard rather than temporary contracts of employment, to convert temporary contracts into permanent ones or to make it easier for employees to move from temporary to permanent contracts? If so, please briefly describe the form that these incentives take. Do they apply equally to young people as well as to older workers? Are any incentives in place to encourage employers to take on young people who have completed an apprenticeship or traineeship on permanent contracts? Have there been any changes to incentives over the period of the crisis? Are any such changes being proposed or being actively discussed at present in your country?

The temporary contracts are tailored for specific situation in order to facilitate the transition of young workers to the labour market. However there are no specific incentive but some measures envisage the transformation of the temporary contract to a standard contract – for example CIE or CIE-EP. In the case of CIE the employer could receive a bonus of 30% or the total wage of the young employee if he engages him at an open-ended contract after the expiry of the 12 month CIE (http://www.adem.public.lu/employeur/engagerjeune/cie.html)

3.3. Is the employment of young people on temporary contracts an important issue of concern for the social partners? Are there strong differences in attitudes and policies between employers and trade unions towards the use of temporary contracts? Have any initiatives been taken by the social partners, either jointly or separately, to encourage the use of permanent rather than temporary contracts? Have any specific initiatives been taken in respect of young people completing apprenticeships or traineeships over the types of job they are offered when their temporary position comes to an end?

The employment of young people on temporary contracts is an important issue of concern for the social partners in Luxembourg. There were discussing the implementation and the evaluation of the adopted measures in the relevant tripartite structures.

Trade unions opposed the introduction of different forms of labour contracts targeted specifically at the young. Their argument is that they represent cheap labour, while there is no evidence that companies offer permanent contracts to those young workers who began their employment under these specific contracts.

There have been a number of specific initiatives by the union movement to improve the situation of young people. The LCGB youth section has used its network of contacts to find summer jobs in companies for young people. The LCGJ launched a public relations campaign called “A job for all” (“Un job pour tous”) in order to stress the fact that employment among young people is far from representing full employment. LCGB has also run campaigns to explain the specific measures for youth employment, not only to the young themselves but also to their members who have children in this age group.

Vassil Kirov, IR Share

Temporary employees as a share of total employees aged 15-24, 2004-2011

 

% total employees

% point change

 

2004

2007

2009

2011

2004-2007

2007-2009

2009-2011

2007-2011

EU27

37.6

41.3

40.4

42.5

3.7

-0.9

2.1

1.2

BE

28.6

31.6

33.2

34.3

3.0

1.6

1.1

2.7

BG

15.3

10.3

9.3

8.3

-5.0

-1.0

-1.0

-2.0

CZ

18.0

17.4

18.7

22.3

-0.6

1.3

3.6

4.9

DK

26.9

22.5

22.8

22.1

-4.4

0.3

-0.7

-0.4

DE

55.5

57.4

57.3

56.0

1.9

-0.1

-1.3

-1.4

EE

:

:

:

13.8

 

   

 

IE

11.2

20.5

25.0

34.2

9.3

4.5

9.2

13.7

EL

26.3

27.0

28.4

30.1

0.7

1.4

1.7

3.1

ES

64.8

62.8

55.9

61.4

-2.0

-6.9

5.5

-1.4

FR

46.7

53.5

52.4

55.1

6.8

-1.1

2.7

1.6

IT

34.4

42.3

44.4

49.9

7.9

2.1

5.5

7.6

CY

16.1

23.3

18.4

17.2

7.2

-4.9

-1.2

-6.1

LV

17.3

9.3

9.3

10.7

-8.0

0.0

1.4

1.4

LT

13.8

9.8

5.0

9.1

-4.0

-4.8

4.1

-0.7

LU

24.1

34.1

39.3

34.5

10.0

5.2

-4.8

0.4

HU

15.1

19.1

21.4

22.9

4.0

2.3

1.5

3.8

MT

9.2

11.0

11.3

17.7

1.8

0.3

6.4

6.7

NL

37.9

45.1

46.5

47.7

7.2

1.4

1.2

2.6

AT

32.4

34.9

35.6

37.2

2.5

0.7

1.6

2.3

PL

60.6

65.7

62.0

65.6

5.1

-3.7

3.6

-0.1

PT

47.4

52.6

53.5

57.2

5.2

0.9

3.7

4.6

RO

6.6

4.6

3.7

5.8

-2.0

-0.9

2.1

1.2

SI

63.1

68.3

66.6

74.5

5.2

-1.7

7.9

6.2

SK

9.9

13.7

12.5

18.6

3.8

-1.2

6.1

4.9

FI

49.8

42.4

39.0

43.4

-7.4

-3.4

4.4

1.0

SE

53.1

57.1

53.4

57.3

4.0

-3.7

3.9

0.2

UK

11.0

13.3

11.9

13.5

2.3

-1.4

1.6

0.2

NO

31.2

28.0

25.7

24.3

-3.2

-2.3

-1.4

-3.7

Source: Eurostat, Labour Force Survey

         
Temporary employees as a share of total employees aged 25-29, 2004-2011

 

% total employees

% point change

 

2004

2007

2009

2011

2004-2007

2007-2009

2009-2011

2007-2011

EU27

19.5

21.1

20.2

21.4

1.6

-1.0

1.2

0.2

BE

12.4

13.1

12.5

14.6

0.7

-0.5

2.0

1.5

BG

9.0

5.3

4.4

4.2

-3.8

-0.8

-0.2

-1.0

CZ

9.8

8.1

8.4

10.8

-1.7

0.2

2.5

2.7

DK

16.5

13.9

13.8

16.4

-2.6

-0.1

2.7

2.5

DE

17.2

21.2

21.2

22.0

4.0

0.0

0.8

0.8

EE

3.0

1.8

4.2

4.2

-1.2

2.4

0.0

2.3

IE

3.4

10.1

9.5

12.7

6.7

-0.6

3.2

2.6

EL

18.4

16.1

19.9

19.0

-2.3

3.8

-1.0

2.9

ES

44.0

41.2

37.5

39.8

-2.7

-3.7

2.3

-1.5

FR

18.3

20.8

20.2

22.0

2.5

-0.6

1.8

1.2

IT

17.2

22.7

23.5

26.7

5.5

0.8

3.2

4.0

CY

19.2

17.7

16.2

18.1

-1.5

-1.5

1.9

0.4

LV

11.8

3.2

4.2

5.5

-8.6

1.0

1.4

2.3

LT

5.3

4.2

2.5

3.6

-1.1

-1.7

1.1

-0.6

LU

7.6

12.5

11.2

12.7

4.9

-1.2

1.5

0.3

HU

8.1

8.9

11.3

11.0

0.8

2.5

-0.3

2.2

MT

1.1

5.6

5.0

6.3

4.6

-0.6

1.3

0.6

NL

16.8

22.9

24.2

25.8

6.1

1.2

1.7

2.9

AT

10.0

8.8

9.6

9.8

-1.1

0.8

0.2

1.0

PL

33.8

38.7

35.6

38.9

4.9

-3.1

3.3

0.2

PT

30.3

36.6

38.6

39.2

6.3

2.0

0.6

2.6

RO

3.4

2.1

1.2

2.1

-1.3

-0.9

0.9

0.0

SI

30.7

33.7

34.1

33.9

2.9

0.4

-0.2

0.3

SK

6.8

5.7

4.1

7.7

-1.2

-1.6

3.7

2.1

FI

28.7

24.5

25.5

26.0

-4.2

1.1

0.5

1.5

SE

24.0

27.4

24.0

25.0

3.4

-3.3

1.0

-2.4

UK

6.2

7.1

6.3

5.0

0.9

-0.8

-1.3

-2.1

Source: Eurostat, European Labour Force Survey

       
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