COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 03.06.1998 
COM(1998) 354 final 
COMMUNICATION FROM THE COMMISSION 
Community policies in support of employment 

Community policies in support of employment 
Communication from the Commission 
Introduction 
The extraordinary European Council 
meeting on employment held in 
Luxembourg in November 1997 called for 
the harnessing in a more systematic, more 
deliberate way than hitherto of all 
Community policies in support of 
employment, both framework policies and 
support policies, to help unleash the 
potential for dynamism and enterprise to 
be found in Europe's economy. This is in 
line with article 127(2) of the Amsterdam 
Treaty which provides that the objective 
of a high level of employment shall be 
taken into consideration in the formulation 
and implementation of Community 
policies and activities. 
For many years the Commission has been 
drawing attention to the scope and 
potential of Community policies and 
initiatives to promote employment. The 
Communication of 5 June 1996 - Action 
for Employment in Europe: A Confidence 
Pact - and the Communication of 12 
November 1997 - Community Policies in 
Support of Employment - are notable in 
this respect. 
This Communication is intended to show 
how Community policies and EU-wide 
activity can help Member States to 
develop and implement employment 
policies which are consistent with both the 
Employment Guidelines and the Broad 
Economic Policy Guidelines. Taken 
together, these three documents, which 
will be on the table at the Cardiff Summit, 
provide the parameters for the coordinated 
strategy for employment embedded in the 
new Treaty. A framework for employment growth 
The European Union is becoming more and 
more an integrated economic entity. Trade 
and capital flows reveal that the Union is 
increasingly becoming - like the United 
States - a relatively integrated economy 
with a high level of interdependence 
between the economies of the Member 
States. EMU will further increase the 
opportunities for cross-border trade for 
European companies, including in 
particular SMEs. Imports of goods from 
outside the EU currently account for only 
8% of Community GDP. 
In the run-up to the final stage of EMU, this 
interdependence provides an opportunity, 
and a good reason, to strengthen economic 
and employment policies and to make 
optimal use of the possibilities offered by 
the launch of EMU on 1 January 1999. 
This will require effective policy 
coordination and full adherence to Single 
Market rules and standards. 
Single Market 
The Single Market Action Plan, agreed at 
the Amsterdam European Council, commits 
Member States to removing the remaining 
barriers by 1 January 1999. The second 
Single Market Scoreboard issued recently 
shows that significant progress has been 
achieved. Supply side reform is taking 
hold : in télécoms, energy, air transport for 
example. Nevertheless, with only six 
months to go before the end of year 
deadline, some delays and hesitations are 
becoming apparent and this is worrying. In 
particular, some Member States are behind 
in implementing Community legislation as 
the scoreboard shows. 
The Commission's report to the European 
Council Doing Less but Doing it Better : 
the Facts demonstrates that the volume of 
proposals for Community legislation has 
dropped and shows that it is indeed the 
Member States themselves who are largely 
responsible for additional legislation. 
Meanwhile, the work on simplification 
continues. The third phase of SLIM was 
launched in March 1998 and the fourth 
one should be launched in the coming 
weeks. However, there is a serious risk 
that new technical barriers to trade arise as 
Member States continue to adopt a vast 
array of technical regulations concerning 
products. This underlines the importance 
of the proposals which the Commission is 
preparing on mutual recognition and 
standards. They should contribute to 
boosting the job creation effect of the 
single market which has already led to the 
creation of several hundred thousands jobs 
according to the economic evaluation 
carried out by the Commission in 1996. 
Electronic Commerce 
Globalisation, the growth of information 
and communication technologies (ICTs) 
and the development of electronic 
commerce offer enormous opportunities 
for the EU to improve its competitiveness 
and create new jobs. In view of the 
potential impact of ICTs on training and 
employment, and in line with the mandate 
of the Luxembourg Jobs Summit, the 
Commission is currently preparing a 
report for the Vienna Summit on the 
results obtained to date and future 
prospects for electronic commerce, the 
development of open networks and the use 
of multi-media for education and training. 
Taxation and employment 
On several occasions, the last time in 
Luxembourg in November 1997, the 
European Council has stressed that 
taxation policy in the,EU should be geared 
to making tax systems more employment friendly. Among other things, this requires 
reversing the current trend in tax structures 
towards shifting the tax burden from capital 
to labour. An important step in this 
direction was made on 1 December 1997, 
when the ECOFIN Council agreed on a 
package to tackle harmful tax competition 
in the European Union This package, 
consisting of a code of conduct for business 
taxation and an agreement on elements for 
the taxation of income from savings and the 
taxation of interest and royalty payments 
between companies, respectively, will 
increase the room for manoeuvre for 
Member States to reduce the tax burden on 
labour. The Commission has in the 
meantime presented two draft directives 
based on the orientations agreed by the 
December 1997 ECOFIN Council. Another 
possibility for reducing the tax burden on 
labour is the Commission's proposal for an 
energy product tax which could contribute 
to job creation assuming that the revenues 
from taxation of natural resources would be 
used to reduce social security contributions. 
Making Europe more entrepreneurial 
A simple environment for business start­
ups and encouraging entrepreneurship are 
essential for creating new and better jobs. 
Action at the EU level is aimed at creating 
and sustaining a positive environment for 
all sectors of the economy in which new 
sources of jobs are identified and where the 
job creating potential of growth sectors and 
services is encouraged rather than hindered. 
- BEST Task Force 
The BEST Task Force has recently 
submitted its report on how to improve the 
business environment with a view to 
encouraging enterprise and removing or 
reducing obstacles and barriers, especially 
for SMEs. The Report, which contains 
recommendations which need to be 
addressed at the European level as well as 
by the Member States, has been forwarded 
to the Cardiff Summit. The Commission's 
response to the individual BEST 
recommendations will form an overall 
strategy for action before the end of 1998. 
In its recent Communication Fostering 
Entrepreneur ship the Commission has 
again underlined the importance of 
promoting an enterprise culture and a 
business - friendly environment, and the 
need for a concerted effort at Community, 
national and local levels to identify and 
implement measures in a coherent and 
consistent way. Priorities include 
promoting education and training, 
improving business support services, 
simplifying public administration, 
accessing new technologies and 
encouraging innovation and better access 
to finance. 
For its part, the Commission will promote 
a series of actions including a 
Communication on Training for SMEs 
and the setting up of a Business Education 
Network of Europe (BENE). 
- Access to Finance 
Lack of finance hinders the setting up of 
businesses or limits their growth potential, 
especially SMEs and those launching 
innovative products or services. Lack of 
financial flexibility due to over reliance on 
short term loans increases the risk of 
failure, especially in times of recession. 
The widespread practice of late payment 
further aggravates liquidity problems, 
especially for SMEs. 
In its Communication Risk Capital: A 
Key to Job Creation in the European 
Union, the Commission has analysed the 
damaging impact of an inadequate equity 
culture on the growth and employment 
capacities of fast growing, innovative 
companies. In addition to implementing 
the action plan aimed at opening European 
capital markets and strengthening the 
European equity culture for our European 
business, a series of other barriers 
(cultural, taxation, regulatory, bureaucratic 
fragmentation) need to be addressed -
mostly by Member States. The Union has 
to create an economic environment 
whereby new ideas can be developed swiftly and profitably inside the Union, for 
the global market place. 
The Commission will propose 
improvements to credit finance, especially 
in the stait-up phase through the Third 
Round Table of Bankers and SMEs, and 
study the possible setting up of an SME 
investment agency at EU level based on the 
successful Small Business Investment 
Corporation in the US. 
To ensure coherence in implementing the 
policy measures at all levels on fostering 
entrepreneurship, an annual report focusing 
on main priorities not covered by the 
National Action Plans will be prepared for 
the Council and the European Parliament. 
Culture and employment 
The various strands of the culture industry 
(heritage, literature, press, music, 
performing arts, visual and audio-visual 
media and socio-cultural activities) are a 
major economic and social force in the 
European Union with significant job 
creating potential. Recent studies suggest 
that in 1995 the number of jobs in this 
sector, including artistic crafts, exceeded 3 
million, or some 2% of EU employment 
Indeed the cultural sectors provide an 
interesting testing ground for new practices 
linking versatility, occupation and 
geographical mobility, and innovative new 
approaches which can create new jobs. 
Although multimedia groups operating on a 
global economy have emerged, small and 
self-employment continue to predominate 
in the sector. 
The possibilities offered by multimedia and 
on-line services in the information society 
are developing fast. However, public 
support may also be required to contribute 
to the development of the necessary 
infrastructures and to encourage 
entrepreneurship, including especially 
access to finance, as well as helping to fill 
the skills gaps with new training and re­
training facilities. 
A Strong Social Dimension Open to 
Change and Facing Up to New 
Challenges 
The Commission has adopted a new 
Social Action Programme 1998-2000 
which provides a framework for the 
continuing development of social policy at 
EU level. The Programme is structured 
around three interlinking objectives 
promoting jobs, skills and mobility; the 
changing world of work and an inclusive 
society. Employment is central to the 
approach set out in this programme 
because it is a Europe at work that will 
sustain the core values of the European 
social model. 
Within this framework, the Commission 
has launched debates on a number of 
issues such as modernising and improving 
social protection systems; the implications 
of demographic change for economic, 
social and employment policies and the 
need to bring undeclared work into the 
open. 
Improving Social Protection 
Increasing the employability of those 
excluded from the labour market is now a 
central aim of social protection policy, 
next to income maintenance and 
prevention of social exclusion. In line 
with the Commission Communication of 
12 March 1997 Modernising and 
Improving Social Protection in the EU, the 
Commission is currently examining how 
the social protection system can be made 
more employment-friendly. It is in this 
perspective that the Commission has 
studied, in its recent report Social 
Protection in Europe 1997, Member 
States initiatives to tighten eligibility for 
benefits, strengthen incentives to work, 
shift to activs measures to help those out 
of work find a job, extend job creation 
schemes, reduce reliance on benefits, help 
people with disabilities and reverse the 
trend towards early retirement while 
encouraging partial retirement. - Industrial Change 
The High Level Group on the economic 
and social implications of industrial change, 
which the Commission launched earlier this 
year in response to the Job Summit 
Conclusions, has prepared and submitted an 
interim report which has been forwarded to 
the Cardiff Summit. 
The Report emphasises that an effective 
social dialogue based on mutual trust and 
information is vitally important both in 
adjusting to change on a continuous basis 
and in handling difficulties arising from 
industrial restructuring. To this end, 
employers, workers and governments 
should share the responsibility for ensuring 
the employability of the workforce, with 
governments providing for adequate 
education and training programmes, 
employers continuing developing the skills 
of their workforces and the workers using 
every opportunity to upgrade their 
qualifications. 
The Report stresses the need to have a full 
understanding of the forces driving 
industrial change, and suggests that the 
economic forecasts and forward studies 
produced by professional organisations and 
private research bodies through the 
European Union be gathered together and 
disseminated by a European Observatory of 
Industrial Change. 
- Social Dialogue 
The Social Dialogue at EU level has an 
increasingly important role to play in the 
development of EU-level policy, 
particularly through information, 
consultation, employment partnerships and 
negotiation. The aim is to achieve greater 
co-operation and openness with, and 
between, the Social Partners and to 
encourage the further development of 
contractual relations both at cross-industry 
and sectoral levels. 
This dialogue needs to be adapted and 
strengthened in the context of the major 
policy challenges facing the EU, 
particularly in the field of employment, 
including work organisation, flexibility of 
working life and working time. 
Undeclaredwork* 
u» i m HI ntn/mmtimemmmm -
On 7 April 1998, the Commission adopted 
a Communication on Undeclared W0rk 
The Commission's intention is to launch a 
debate on the causes of undeclared work 
and the policy options available to br*i|| it 
into the open. It suggests that thetl is, 
firstly, a need to identify correctly the 
causes and extent of the problem, and, 
secondly, to regard combating undeclared 
work as part of the overall employment 
strategy. 
To the extent that is perceived as an issue 
of individuals and firms taking improper 
advantage of the system, public authorities 
must aim at a greater enforcement of the 
rules through enhanced control and 
through reducing the advantage of not 
declaring work. As far as undeclared 
work is related to slow adaptation of 
legislation to changes in working patterns, 
a preventive approach is required. It 
should cover the liberalisation of product 
and service markets, the adaptation of 
inappropriate legislation and regulations, 
the structuring of supply of services such 
as care or cleaning, a decrease in./the 
taxation of labour and a greater 
involvement of the social partners in 
information, enforcement and control. 
The Commission has issued a 
Communication Adapting and Promoting 
Social Dialogue with a view to 
strengthening it at European level and 
linking the work of the Social Partners 
more closely with the development and 
implementation of EU policies. The 
Communication is the result of a wide-
ranging consultation exercise launched in September 1996 and sets out a number of 
key actions with a view to achieving a more 
open social dialogue, more effective 
consultation and dialogue and the 
development of a collective bargaining 
process at European level. 
Complementing and supporting action 
by the Member States 
Reform of Structural Funds 
The proposals for new Regulations on the 
Structural and Cohesion Funds provide the 
legal framework for financial support in the 
next programming period 2000-2006, in 
line with the Agenda 2000 proposals. 
The Commission's intention is that the 
overall envelope for structural and cohesion 
policies should be maintained at the level of 
0.46% of GNP over the period 2000-2006, 
which amounts to almost EUR 287 billion 
(in 1999 prices). Of this amount about 
EUR 240 billion, including EUR 21 billion 
for the Cohesion Fund, will be available in 
the present Member States (compared with 
EUR 208 billion for 1993-99 on the same 
price basis). The remaining EUR 47 billion 
will be for structural assistance in new 
Member States and the candidate countries. 
This represents a further substantial 
commitment to the policy of promoting 
economic and social cohesion in Europe. 
The main aim of this Structural Fund 
assistance is to help establish the conditions 
for sustainable economic development 
through growth, competitiveness and 
employment. Only by ensuring that such 
conditions are in place can the aim of 
safeguarding employment and creating new 
jobs be fully realised. The main areas 
where assistance is provided are 
infrastructure, the development of human 
resources, the promotion of equal 
opportunities and support for the productive 
sector. The impact on employment is 
positive in both the short and long term: in 
the short term because assistance will 
stimulate demand for goods and services 
and in the long term by maximising the 
potential of both human and physical 
resources and improving linkage between 
the productive environment and the 
operation of the labour market. 
In the next period Structural Fund 
assistance, particularly from the European 
Social Fund, should also contribute to 
supporting the European Employment 
Strategy and the National Action Plans on 
Employment submitted by the Member 
States in accordance with the Luxembourg 
process. 
Local Development 
Co-ordinated efforts to promote job 
creation are increasingly undertaken at 
regional and local level. The Second 
Report on Local Development and 
Employment Initiatives, issued in January 
1998 indicate that these initiatives have a 
significant job-creation potential in the 
medium-term. The proposals to reform 
the European Social Fund and European 
Regional Development Fund put particular 
emphasis on developing this potential. In 
this context, the Commission is now 
providing support for the development of 
89 territorial pacts for employment 
covering some 10% of the population of 
the EU. A pilot scheme "Third system 
and employment" has been launched to 
explore and promote the employment 
potential of local initiatives in new types 
of services. 
Fifth RTD Framework Programme 
The improvement of the international 
competitiveness of EU industry, economic 
growth and job creation are some of the 
challenges which the EU research and 
technological development policy must 
help to meet. Following the opinion 
delivered by the European Parliament in 
December 1997, on the Commission's 
proposal, which had earmarked a budget 
of ECU 16.3 billion for the 5-year period, 
the Council adopted its Common Position on the 5th RTD Framework Programme 
(1998-2002) on 23 March 1998. The 
European Parliament and the Council have 
to reach agreement on this Framework 
before the end of this year. On 13 May 
1998, the Commission adopted proposals 
for 8 specific programmes to implement the 
5"' Framework Programme. 
The promotion of employment will be the 
major criterion for the selection of research 
programmes. Four of the eight 
programmes are directly relevant for the 
promotion of employment. They are 
focusing respectively on the creation of a 
user-friendly information society, the 
promotion of competitive and sustainable 
growth, innovation and the participation of 
small and medium-sized enterprises, and 
the improvement of human potential. 
Environment and Employment 
As stated in the Commission 
Communication Environment and 
Employment of 18 November 1997, 
building a sustainable Europe will require 
important modifications in industry, 
transport, energy and agriculture policies as 
well as consumption patterns. Achieving 
these modifications will require different 
policy instruments and the co-operation of 
all partners (public authorities, private 
sector, social partners and NGOs) at all 
levels. It will also require new technologies 
and new investment. 
Much of manufacturing industry's efforts to 
date to meet environmental requirements 
have focussed on implementing end-of-pipe 
solutions which do not usually result in 
efficiency or productivity gains, while 
opting for clean technology would improve 
process efficiency. The potential for job 
creation in energy conservation could be 
substantial while considerable 
environmental benefits can be realised, in 
particular in the field of climate change and 
acidification. Also, combined heat and 
power generation schemes contribute to the 
increased competitiveness of industrial and 
commercial sectors and at the same time 
generate jobs. In the agricultural sector 
and related downstream activities, the 
following areas have potential for job 
creation : 
(i) processing and marketing of 
agricultural and forestry products, mainly 
regional products, and organic production; 
(ii) diversification into non-food activities 
and renewable raw materials; 
(iii) actions related to environmental 
protection and maintenance of landscapes; 
(iv) diversification of on-farm activities 
such as tourism. 
The renewal of the urban environment 
offers important job creation opportunities 
through investments in waste and water 
treatments and also through construction 
activities. 
Consumption patterns are becoming more 
environmentally friendly, as 
environmental and resource costs become 
increasingly integrated in market prices. 
It has been shown that waste recycling is 
capable of creating a significant number of 
new jobs. 
Education, Training and Youth 
The Commission's recent proposals for 
three decisions in the domain of Education 
(Socrates), Training (Leonardo de Vinci) 
and Youth (Youth) extend and broaden the 
current Community action programmes in 
line with the emphasis set out in Agenda 
2000 on improving knowledge policies 
within the EU. The common central 
objective of these three proposals is to 
support, at all levels, the process of 
lifelong education and training. Together, 
they seek to promote the progressive 
construction of a European educational 
space oriented towards the development of 
competences, the enrichment of 
citizenship and the development of 
employability. All three have been designed to 
complement the European Employment 
Strategy: formal and informal education 
and training is not only an essential 
dimension of employability and 
adaptability, but can also support the 
development of an entrepreneurial culture 
and the promotion of equal opportunities. 
A budget of ECU 3 billion has been 
proposed by the Commission for the 5-year 
period 2000-2004. 
Trans-European Transport Network 
The Jobs Summit also emphasised the 
importance of the Trans-European 
Networks for long-term competitiveness, 
growth and employment. 
Following the Summit emphasis on the 
need for firm timetables and financing 
plans, the Commission, has in co-operation 
with the Member States reviewed progress 
and prospects in relation to the 14 priority 
projects identified at the Essen Summit in 
December 1994. 
The overall picture is one of significant 
progress : three projects are nearing 
completion, all are under construction or at 
an advanced stage of preparation and most 
will be completed by 2005. This may be 
slower than originally envisaged, but 
judged against the normal timescale for 
very large infrastructure projects - and all 
14 come into this category - this represents 
sound progress, and it is worth noting that it 
has been made at a time of budgetary 
rigour. 
Latest estimates confirm that the next 
financing period (2000-2006) will see a 
significant increase of expenditure on the 
14 priority projects, as many of them reach 
the peak construction phase. The progress 
already made in improving the 
sustainability of public finances opens up 
the possibility of increased infrastructure 
spending within tightly controlled overall 
national budgets. As far as Community 
funding is concerned, the ERDF and 
Cohesion Fund will continue to provide 
support and the Commission's proposed 
revision of the TEN Financial Regulation 
earmarks ECU 5 billion for this period. 
Completing the TEN network will, 
however, require a combination of public 
and private finance. This partnership 
approach can achieve more rapid project 
implementation and better value-for-
money. Firm commitment is needed from 
Member States if the private sector is to 
invest in development of suitable financial 
instruments and approaches 
With most of the projects underway, 
particular attention will need to be given 
to the Alpine tunnels, and to the other 
projects with continuing financing gaps. 
The revision of the TENs Guidelines in 
1999 will provide an opportunity to 
review priorities. A major effort is also 
required to prepare for the extension of the 
TENs to the accession countries, for which 
I SPA, provided for in the Commission's 
Agenda 2000 package, will be the main 
source of EU funding. 
Employment and Growth Initiative 
On April 21, the ECOFIN Council 
adopted the Employment and Growth 
Initiative, due to provide ECU 420 million 
over three years for innovative and job-
creating SME and to help them overcome 
some of the financial obstacles they 
encounter. To respond to various needs 
across regions and sectors, the means are 
divided between three complementary 
facilities: 
• A European Technology Facility Start­
up, (risk capital) managed by the 
European Investment Fund (EIF) 
through investment in relevant 
specialised investment funds. The 
scheme will target a segment of the 
venture capital market with a higher 
inherent risk, notably SMEs at the 
setting up and early stages. • A Joint European Venture action, 
(provision of financial contributions), 
under the management of the 
Commission for the establishment of 
trans-national JEV by SMEs within the 
European Union. 
• An SME Guarantee Facility, managed 
by the EIF to increase the availability of 
loans to small or newly established firm 
through risk sharing. 
Annual reports on the schemes will, in 
addition to assessing SMEs access to 
financing, look at the immediate effects on 
employment creation as well as the long 
term prospects. 
Conclusion 
The creation of new and better jobs and 
combating unemployment continues to be 
the Union's priority. The Member States 
have demonstrated their determination to 
make progress by preparing, adopting and 
submitting their National Action Plans for 
Employment within the tight timeframe set 
by the Luxembourg Jobs Summit. They 
have moved decisively from the guidelines 
phase to action. 
At EU level too, the Commission's 
proposals in relation to the Structural and 
Cohesion Funds, the 5th RTD Framework 
Programme, the Education, Training and 
Youth Programmes, as well as non-
spending proposals, have been refocused on 
the employment priority. This 
demonstrates its commitment, in 
accordance with the new Article 127(2) that 
a high level of employment be taken into 
account in the formulation and 
implementation of Community policies and 
activities. 
For this reason, the Commission has 
decided to report regularly in future to 
European Council meetings on the 
contribution of Community policies in 
support of employment. 

ISSN 0254-1475 
COM(98) 354 final 
DOCUMENTS 
EN 04 06 08 10 
Catalogue number : CB-CO-98-379-EN-C 
ISBN 92-78-37105-X 
Office for Official Publications of the European Communities 
L-2985 Luxembourg