Commission issues annual joint employment report

In mid-November 2002, the European Commission issued the draft of the year's joint Commission/Council employment report. The report looks at the labour market progress made by Member States over the past year, praising a number of achievements but also stating that structural weaknesses remain.

The European Commission issued its draft joint employment report 2002 on 13 November 2002. In its executive summary of the joint Commission/Council report - which, when finalised, will be endorsed by the European Council- the Commission states that after five years, the European employment strategy (EES) 'is at a crossroads'. When it was launched in 1997 (EU9711168F), the EES’s priority was the fight against unemployment. Now, however, its focus has shifted towards the wider 'Lisbon goals' (set out in the March 2001 Lisbon European Council meeting - EU0004241F) of more and better jobs in an inclusive society.

Progress made

In terms of progress towards the concrete employment goals set at Lisbon - an overall employment rate of 70%, a female employment rate of 60% and an employment rate of 55% for older workers (over the age of 55) by 2010 - the Commission notes that Member States are moving towards these targets. Indeed, some Member States have already reached some of these targets - see the table below. The Commission praises the progress achieved during 2001, despite 'a sharp deterioration in the economic climate'.

Average unemployment across the EU was 7.4% in 2001, compared with 8.2% in 2000 and 10.6% when the EES was launched in 1997. Unemployment rates in individual Member States varied considerably, however, ranging from 2% in Luxembourg and 2.4% in the Netherlands to 10.6% in Spain and 10.5% in Greece.

In terms of overall employment rates, the EU average was 63.9% in 2001, compared with 63.3% in 2000. The female employment rate was 54.9%. For further details, see the table below.

The Commission maintains that the structural improvements which have been made to EU labour markets over the past five years mean that the progress achieved is sustainable and not wholly reliant on cyclical movements.

The Commission also praises the social partners for making an important contribution to employment performance by pursuing 'employment-friendly' wage agreements.

Remaining weaknesses

Nevertheless, the Commission also notes that a range of challenges remain. These include issues such as youth unemployment, long-term unemployment, and the wide regional disparities across the EU in terms of labour market performance. It lists what it sees as the main remaining structural weaknesses as follows:

  • a persistent high level of unemployment and long-term unemployment. The employment position of disadvantaged people remains weak and needs to be tackled by means of tailored policies, a comprehensive approach involving both the supply and demand side and a close link with wider social inclusion policies;
  • slow progress in achieving the overall employment targets of the EES. It argues that sustained commitment will be needed to achieve these targets and highlights the target for the labour market participation of older workers as being a particular challenge;
  • a growing gap in productivity between the EU and the USA. It argues that this can be narrowed by a number of actions, including upgrading the skills of the labour force and exploiting the link between job quality and productivity. However, the Commission also notes that much remains to be done in terms of participation in training and reducing the gender gap in employment; and
  • regional differences in employment and unemployment, which are apparent in many Member States.
Key labour market indicators for EU Member States, 2001
Country Total employment rate (%) Female employment rate (%) Employment rate for older workers (55-64) (%) Unemployment rate (%) Long-term unemployment rate (%) Total employment growth
Austria 68.4 60.1 28.6 3.6 0.9 0.2
Belgium 59.9 50.5 24.1 6.6 3.0 1.2
Denmark 76.2 72.0 58.0 4.3 0.9 0.2
Finland 68.1 65.4 45.7 9.1 2.5 1.2
France 63.1 56.1 31.0 8.6 2.9 1.9
Germany 65.9 58.8 37.7 7.9 3.9 0.2
Greece 55.4 40.9 38.0 10.5 5.4 −0.1
Ireland 65.7 55.0 46.8 3.8 1.3 2.9
Italy 54.8 41.1 28.0 9.4 5.9 1.6
Luxembourg 62.9 50.9 24.4 2.0 0.5 5.6
Netherlands 74.1 65.2 39.6 2.4 0.8 2.1
Portugal 68.9 61.1 50.3 4.1 1.5 1.6
Spain* 56.3 41.9 38.9 10.6 5.1 2.5
Sweden 71.7 70.4 66.5 5.1 1.8 1.9
UK 71.7 65.1 52.3 5.0 1.3 0.8
EU average 63.9 54.9 38.5 7.4 3.3 1.2

* 2001 figures for Spain are provisional.

Source: European Commission.

Progress under individual pillars of the EES

The EES has always grouped its actions under four individual pillars. These are:

  • improving employability;
  • developing entrepreneurship;
  • encouraging adaptability; and
  • strengthening equal opportunities.

The draft 2002 joint employment report therefore charts the progress of EU Member States under each of these four pillars.

Employability

Considerable progress was made in terms of increasing employment across the EU over the course of 2001. All Member States (with the exception of the UK) have exceeded the target of achieving a minimum level of 20% of unemployed people benefiting from active labour market measures such as training and work experience. Nevertheless, the Commission notes that further emphasis is needed on the prevention of unemployment, by means such as early intervention in the case of job losses. This would ensure that people who are about to lose their jobs, or have just been made unemployed, are attended to quickly in order to minimise the time they spend unemployed.

The Commission also believes that monitoring of the effectiveness of active labour market measures needs to be improved.

This pillar also includes actions related to the employment of older workers. Here, the Commission notes that a more comprehensive approach to active ageing is needed. As well as the target of a 50% employment rate for older workers by 2010 (see above), there is an EU target of increasing the effective average exit age from the labour market by around five years by 2010. It notes that although the statutory retirement age has been increased in many countries, the average effective exit age from the labour market remains low and that more therefore needs to be done in this area.

The concept of developing lifelong learning has been given considerable attention by Member States in recent years. However, the Commission argues that greater emphasis needs to be given to workplace and other non-formal learning, disadvantaged groups, monitoring systems and better coordinated guidance services.

In view of labour market shortages and bottlenecks in some areas, the Commission also notes that vocational education and training of both employed and unemployed people would ease the situation.

Entrepreneurship

This pillar concentrates on developing the right conditions for job creation, largely by means such as reducing administrative burdens on companies and bureaucracy, both of which can stunt the creation of new jobs. However, the Commission notes that efforts to reduce administrative burdens on business have not been sufficiently developed across the EU in recent years. Instead, there has been a focus on simplification of business registration procedures.

Further, access to finance for entrepreneurs, which is a crucial factor in business start-ups, has, according to the Commission not received adequate attention in Member States.

One of the main factors in job creation under this pillar is self-employment. The Commission insists that more targeted support is needed to exploit the potential for self-employment in many Member States, particularly in light of the fact that the share of self-employment in terms of overall employment decreased from 14.9% in 1997 to 14% in 2001. In order to promote self-employment, the Commission suggests more promotion of entrepreneurship within the education system.

Further, the Commission believes that the job-creation potential of the services sector has still not been fully exploited. Although it states that employment in the service sector is increasing, it maintains that the rate of increase is still lower than the average increase in employment across the whole of the EU economy.

Other areas highlighted by the Commission as issues on which further work needs to be done under this pillar in Member States include combating undeclared work and reducing the tax burden on labour, although progress has been made in most Member States in this latter area.

Adaptability

This pillar aims mainly to increase the capacity of the labour market and all those involved in it to adapt to structural change. One of the key issues here is achieving a balance between the flexibility desired by employers and the security needed by employees.

There has been some progress in this area, notably in terms of an increase in the incidence of part-time work, from 17.7% in 1997 to 17.9% in 2001, and fixed-term contracts, from 12.2% in 1997 to 13.2% in 2001. In addition, many Member States have implemented more flexible working time patterns, such as working time 'corridors', extended reference periods for averaging out working time, the general reduction of working time and the reduction of overtime.

As a balance to this increased flexibility, many Member States have taken steps to ensure equal treatment of 'atypical' workers, largely based on relevant EU Directives, such as the part-time work Directive (97/91/EC) (EU9712175N) and the fixed-term work Directive (1999/70/EC) (EU9907181F).

Despite this, the Commission argues that a number of structural weaknesses remain. These include a lack of opportunity for all workers to achieve what the Commission terms 'information society literacy'. Although a greater proportion of the EU workforce now receives training in information and communications technology (ICT), the Commission notes that the vast majority of manual workers remain excluded from this. It therefore calls on Member States to intensify their efforts to ensure that the whole workforce has access to this type of training and opportunities to update existing skills.

Equal opportunities

This is the final pillar in the EES and one which seeks to ensure equal treatment for all workers. It appears to have had some degree of success, with the report showing that the gender gap in terms of employment and unemployment is decreasing, albeit slowly. The employment rate for women is now 54.9%, compared with 73% for men.

In terms of pay, women’s average gross hourly earnings in the EU are 83.8% of male earnings, according to the latest available figures from the EC statistical office, Eurostat, which relate to 1998 (EU0210207F).

However, gender segregation, by both sector and occupation, remains a problem, with the highest sectoral segregation in Finland, Sweden, Portugal, Ireland and Austria, and the highest occupational segregation in Finland, Sweden, Austria and Denmark.

Finally, parenthood continues to have a negative impact on employment for women, particularly in Germany, the UK and Spain.

The Commission notes that while there has been some progress towards the targets for female employment contained in the EES, more needs to be done in terms of increasing female employment levels, particularly in the case of older women. Areas such as reducing the gender pay gap also need to be tackled. Other areas which need to be addressed include the reduction of gender segregation, the improvement of childcare provision and the reconciliation of work with family life.

The future of the EES

As noted above, the Commission believes that the EES is now, after five years of operation, at something of a crossroads.

In practical terms, the machinery of the EES is being altered. In accordance with the proposals set out in a Commission Communication issued in September 2002 (EU0210206F), the timing of the EES’s annual cycle will change in order to coordinate it with other Community cycles, notably the Broad Economic Policy Guidelines.

Up until now, the EES’s annual joint employment report has been issued in the autumn of each year as part of an 'employment package', together with recommendations to Member States on how to improve their labour market performance and guidelines for future labour market performance (EU0109236F). From now on, the employment report will continue to be issued in the autumn, but the recommendations and guidelines will be issued separately in the spring of each year, after the annual spring European Council meeting focusing on economic and social issues.

In addition to these practical changes, the Commission also lists a number of key elements which it believes will shape the future of the EES:

  • the EES should focus on delivering the Lisbon objectives of more and better jobs and greater social cohesion;
  • the EES should be a medium-term strategy with a 2010 horizon and a mid-term review in 2006. There should be no changes in the employment guidelines in the intermediary years;
  • the employment guidelines should cover a broad employment policy agenda, with a focus on key priorities, underpinned by appropriate targets. They should also be more 'results-oriented';
  • an annual review of progress towards the agreed objectives should continue to take place, based on the Member States’ National Action Plans (NAPs) for employment ;
  • the different processes contributing to the implementation of the Lisbon agenda should be streamlined – essentially a synchronisation of the employment coordination process with the Broad Economic Policy Guidelines; and
  • the EES should be underpinned by improved governance.

Commentary

As the Commission states in its report, the EES does now appear to be at something of a turning point after five years of operation. The context in which it now operates is much changed, compared with the environment at its launch in 1997. Great strides have been made across the EU since then, not only in reducing unemployment across the board, but also in tackling what the Commission calls the 'structural' elements in the labour market, such as long-term unemployment, youth unemployment and how tax and benefit policies interact with labour market policy. Thus, the positive developments of the past five years are unlikely to be undone by cyclical economic downturns.

The key challenge for the future will, however, be to build on this progress and tackle a range of persistent problems, such as the employment of older workers - in particular how to stop people retiring early - and regional disparities, both between and within Member States. (Andrea Broughton, IRS)

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