COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 01.10.1997 
COM(97)497 final 
Commission Communication 
Proposal for Guidelines for Member States Employment Policies 1998 

1 October 1997 
Commission Communication 
Proposal for Guidelines for Member States Employment Policies 1998 
I. A new ambition 
The European Council in Amsterdam was a watershed for employment policies in the 
Union. With the adoption of the employment Title, the Heads of State and 
Government agreed that employment should be considered as a matter of common 
concern. Building on the existing procedure launched at Essen, the new Treaty 
reinforces the coordination of national employment policies and foresees the 
establishment of common guidelines which can in due course lead to 
recommendations to Member States. 
Following the Amsterdam agreement to anticipate the application of the new 
employment Title, the Commission now presents these guidelines as a framework for 
discussion at the extraordinary European Council on 20/21 November. The 
Commission will, on the basis of the Presidency's Conclusions from the Jobs 
Summit, present a final proposal for adoption by the Council. 
It is important to understand the essence of this exercise. The new Treaty has 
launched a process which enables the Member States to consider the employment 
situation each year and adopt guidelines for their national employment policies. The 
latter must, of course, be part of an overall integrated approach which also involves 
sound macroeconomic policies, a functioning Single Market and the taking of 
employment into account in all Community policies. 
A window of opportunity 
After a period of slow growth, the underlying conditions necessary for sustained 
growth in output and employment in the EU are now in place: inflation is at an 
historic low; public finances are in a much sounder position; business profitability has 
recovered strongly; exports are rising sharply and confidence levels are much 
improved. Continued macroeconomic stability and the realisation of EMU, as well as 
the completion of the Single Market in accordance with the Action Plan adopted by 
the Amsterdam European Council, will underpin and sustain this process. 
The current cyclical upturn and these improved prospects must not, however, lead to 
complacency. Tackling the present levels of unemployment in the EU requires a 
protracted period of strong growth, but growth alone cannot solve Europe's 
unemployment problems. These problems result from a continuing inability to create 
enough new jobs, inadequate workforce skills, failure to adapt to new patterns of 
work and inequality of opportunities. There is, therefore, a need for continued 
medium and long-term structural reforms. Experience shows that such reforms are 
best implemented in a climate of growth and rising demand. Governments should, 
therefore, consider the improved growth prospects as a window of opportunity for 
bold structural reforms of their employment systems. 
The present Guidelines do not call for increased expenditure but rather a restructuring 
of expenditure, a reform of benefit and taxation systems and a move from passive 
income support measures to proactive policies so as to maximise the return on 
existing budget outlays. In particular, policy changes are needed to enhance the 
capacity and willingness of enterprises to invest and to give individuals the 
opportunity to meet the ever-growing demand for new skills and versatility in the 
face of increasing technological change. 
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These guidelines are, therefore, aimed at ensuring that the economic recovery is 
accompanied both by a high level of job creation and a stable macroeconomic 
environment, and that this favourable combination is sustained. To achieve this 
objective the Commission believes that Member States will have to strengthen their 
focus on four main lines of action in their employment policies: 
• Entrepreneur ship; 
• Employ ability; 
• Adaptability, and 
• Equal opportunities 
These actions must form part of an integrated approach and be drawn together into a 
comprehensive strategy. This integrated approach offers the best conditions for 
achieving both the flexibility needed to adjust to changing market conditions and the 
security of good jobs needed by workers. 
Any real progress at the European level will require detailed action plans by Member 
States that reflect their own circumstances but which are drawn up and implemented 
within a common European framework of objectives and guidelines. This process 
must be interactive, involving both the Member States and the Union. The action 
plans will need to be updated and monitored on an annual basis. 
The main challenge 
The EU's longer term objective must be to move progressively towards an 
employment rate of over 70% in line with those of its main trading partners. In order 
to achieve this, Member States must in the medium term commit themselves to 
ambitious employment targets and policies while seizing the opportunities afforded 
by growth and macroeconomic stability. Considering the current favourable outlook 
for economic growth, the combined efforts of the Member States based on these 
guidelines, with EU support where appropriate, could result in an increase of the 
current employment rate of 60.4% to 65% within 5 years and a reduction of the 
unemployment rate to 7%. This will imply the creation of at least 12 million new 
jobs. 
In this paper, the Commission has sought to focus on actions which, drawing on 
Member States' experiences and best practices, can be expected to have a real 
impact and added-value.. Moreover, while recognising that the employment and 
labour market situation differs between Member States, these guidelines set out 
some ambitious targets in order to focus the attention of policy-makers at all levels. 
II. Create a new culture of entrepreneurship 
Stimulating entrepreneurship means creating a climate where companies can thrive 
and individuals are encouraged to exploit their creative energies and new ideas to the 
full, thereby creating new jobs. One third of the jobs in the private sector are in 
micro-enterprises of less than 10 people, while another third are in enterprises of less 
than 250 people. Most new jobs are created in these enterprises. If Europe is to 
succeed in meeting the jobs challenge, it has to create more jobs by stimulating the 
growth of these enterprises, particularly in the services sector. This requires a new 
entrepreneurial culture. 
The preconditions for this are already in place. Europe is not short of innovative 
ideas or talented individuals and it is more than capable of competing on the world 
stage. But Europe has yet to realise its full potential. There is an urgent need for co­
ordinated and sustained efforts by all Member States to create a better business 
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environment and a new entrepreneurial culture capable of transforming this potential 
into jobs. There is clear evidence that policies which take a comprehensive approach 
towards entreprensurship are most successful. 
However, the need for entrepreneurship and job creation extends further and 
experience has shown the significant potential for job creation at local level and 
within the social economy. These new sources of employment need to be exploited 
much more decisively, particularly as regards services to people and to local 
communities, and the not-for-profit sector. Local employment initiatives and 
Territorial Pacts bringing together all involved at local, regional and national levels, in 
a broad partnership approach have proved particularly effective. The lessons drawn 
from these successful experiences need to be promoted as part of a wider local 
development drive throughout Europe. 
Moreover, Europe must harness new technology and innovation for the creation and 
development of enterprises and the promotion of environmentally sustainable 
production and consumption patterns. Member States should develop strategies to 
promote access to the Information Society at all levels, thereby stimulating the use 
of new technology and the creation of jobs in new and expanding sectors. The 
Member States must also significantly boost RTD expenditure as a percentage of 
GDP, thereby raising the European average from 1.9% to 2.5%, so as to match its 
global competitors, while at the same time encouraging more effective sharing of 
innovation and new technologies through reinforced cooperation between large, 
medium and small enterprises. 
Further efforts are required, however, to promote a new culture of entrepreneurship 
in Europe: 
Make it easier to start-up and run businesses by providing a dear, stable and 
predictable set of rules. Member States should review and simplify the 
administrative burdens on SMEs, taking into account the new proposals to be 
developed by the Business Environment Simplification Task Force. 
•¥ particular attention should be given to reducing significantly the overhead 
costs for enterprises of hiring an additional worker. 
-^ the obstacles, especially those within existing social security regimes, to 
people moving from employment to self-employment and setting up micro-
enterprises need to be tackled and existing regulations must be adapted to 
facilitate easier transition to self-employment. 
Develop the markets for venture capital, thereby mobilising Europe's wealth 
behind entrepreneurs and innovators. Member States should examine the specific 
needs of SMEs as regards financing, principally in the form of equity or guarantee 
capital, building on EIB initiatives in this area. 
-> a pan-European secondary capital market should be established by the year 
2000. 
Make the taxation system more employment friendly. In order to encourage 
enterprises to create new jobs, Member States must exploit the current favourable 
macroeconomic climate to finally reverse the average long-term trend towards 
higher taxes and charges on iabour (which have increased from 35% in 1980 to 
over 42% in 1995). Each Member State should 
•^ set a target for reducing the tax burden on labour, whiie maintaining budget 
neutrality, with a view to achieving substantial progress by the year 2000. 
The Commission will support Member States in their efforts to give more attention to 
entrepreneurship in education and training systems, identify current obstacles and 
disseminate information on good practice and new initiatives, and will launch an 
Entrepreneurship in Europe Initiative to drive this process forward. 
III. Creating a new culture of Employability 
In its workforce, Europe has great potential for economic growth and prosperity. 
There are about 18 million unemployed and a further 8-9 million people who would 
like to work if they thought they could get a job. To turn this potential into reality, a 
new culture of employability has to be developed. Employability means the capacity 
for people to be employed : it relates not only to the adequacy of their skills but also 
incentives and opportunities offered to individuals to seek employment. 
The ageing of the Union's workforce and the fast pace of new technology means 
that Europe is facing an ever-increasing skills gap. Enterprises are looking for new 
and adequate skills, but most of the unemployed have old skills or no skills. 
Moreover, many young people leave school early, or without any qualification, while 
large parts of the labour force have very little access to adult education and training, 
in particular those with lower skills and non-standard work contracts. Less than 10 
per cent of the unemployed are offered training. 
But training alone is not enough. There is a clear need to make benefit and taxation 
systems more employment-friendly by promoting active measures that favour 
employment or encourage people of working age to acquire new skills and update 
existing skills. Member States are spending about ECU 200,000 million on their 
labour market policies but only one third of this is spent on active measures. All 
social transfers should be examined to see whether they could be used more 
effectively in promoting rehabilitation, reintegration, training or work experience. 
The capacity of Member States' employment services to help jobseekers should be 
reformed and strengthened in line with best practice, in particular by exploiting new 
information and communication technologies. Employment offices should also 
strengthen their role vis-à-vis employers by improving the level of market penetration 
in order to enable them to fulfill their double mission of providing employers with 
adequately skilled jobseekers and the job seekers with job opportunities. Passive 
unemployment support should be regarded as a last resort 
Tackle long-term and youth unemployment. Member States should adopt 
preventive and employability-oriented stratgegies built on early identification of 
individual needs and early action and ensure that 
•> every unemployed adult is offered a new start - in the form of a job, 
training, retraining, work practice or other employability measure - before 
reaching twelve months of unemployment. 
-* every unemployed young person is given such a new start before reaching 
six months of unemployment. 
The combined effect of preventive and reintegration measures can be expected to 
reduce the rates of long-term and youth unemployment in the Member States by 
half within 5 years. This will also improve the employment situation of the 
disabled, many of whom are long-term unemployed. 
Ease the transition from school to. work, Employment prospects are poor for the 
10% of young people who drop out of the school system early and many of the 
45% who do not complete upper secondary education. Member States must seek 
to 
-• reduce the numbers dropping out of the education system early by half 
within five years and reduce progressively the share who do not complete 
upper secondary level. 
•+ apprenticeship provides a particularly effective way of equipping young 
people with relevant skills and Member States should, where necessary, 
significantly increase participation in apprenticeship training in line with the 
best performing Member States and improve their systems accordingly. 
Move from passive to active measures Benefit and training systems should be 
reviewed and adapted to ensure that they actively support employability and 
provide clear incentives for the unemployed to seek and take up work or training 
opportunities. Each Member State should 
-> set a target for the number of people to be transferred from passive 
income support to active employability-related measures. 
•^ seek to increase the numbers of unemployed who are offered training from 
the current EU average of 10% towards the average of the three best 
performing Member States i.e. above 25%, within 5 years. 
-• consider how reducing the cost of hiring less skilled workers through 
measures such as targeted reductions in non-wage labour costs, can be better 
linked to measures designed to boost skill levels. 
Develop a partnership approach. Both enterprises and the social partners should 
be involved in joint efforts to invest Europe's wealth in its future by offering the 
necessary work experience/training positions. The Social Partners are urged to 
-> conclude as soon as possible a framework agreement to open workplaces 
across Europe for training, work practice, traineeships and other forms of 
employability measures and to agree on the terms and conditions. 
-> continue the impressive contribution which they have made over the past 
five years to the wage moderation which has contributed so much to the 
improved economic outlook and the improved prospects for new job creation. 
In so far as the Structural Funds are concerned, a significant level of investment 
already goes towards underpinning Member States' efforts to promote higher skills, 
the activation of labour market policies through targeted measures aimed at 
preventing long-term unemployment, and at the promotion of entrepreneurship and 
adaptability. In the next programming period, Member States should seek to further 
increase the level of structural funding allocated to their human resource 
development policies and activities. In the short term, Member States should avail of 
the current mid-term review to reinforce the employment content of their Structural 
Fund programmes. 
The Commission will support the Member States in developing their employment 
services by organising the exchange of knowledge and experience as well as 
developing benchmarks for the improvement of their performance. It is essential to 
remove the remaining obstacles to labour mobility while improving the flow of 
information on job opportunities and incentives to mobility, and the Commission will 
shortly present a package of measures to help achieve this objective. 
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IV. Promote and encourage adaptability 
In Europe, as elsewhere, enterprises are undergoing a period of fundamental 
restructuring brought on by new technologies and new market conditions. This is 
visible in the form of mergers and acquisitions, new products and services and 
greater competition, all of which are affecting individual enterprises and leading to 
new work patterns. Through this process a new economy is emerging with 
technologically more advanced enterprises and with a growing services sector, often 
in the form of new small firms. 
The capacity to adapt is decisive for the viability of enterprises, and their ability to 
seize new opportunities, as well as for employment and job security. However, 
workers often feel that they have not been adequately informed and consulted, and 
may see little prospect for a good job and a decent income after restructuring or 
downsizing. Member States should, therefore, make the adaptability of enterprises, 
and of those employed in enterprises, one of the main objectives of their employment 
policies. The Social Partners have a key role to play in this regard. 
• Modernise work organisation In order to promote the modernisation of work 
organisation and working patterns: 
Social Partners should 
•^ negotiate, at the appropriate levels, particularly in economic sectors 
undergoing major structural change, agreements on work organisation and 
flexible working arrangements, including where appropriate reductions in 
working time, with the aim of making enterprises productive and competitive, 
and achieving the required balance between flexibility and security. 
Member States should 
"^ put in place a framework for more adaptable forms of contract, taking into 
account that forms of employment are increasingly diverse. Those in non­
standard work should be given greater security and occupational status and 
those who opt to work reduced hours should not be penalised in terms of 
career progression or in terms of maintaining social security protection 
• Support adaptability in enterprises. In order to renew skill levels within 
enterprises, Member States should 
-> remove fiscal and other obstacles to the promotion of investment in 
human resources and offer tax incentives for the development of in-house 
training. Incentives to workers to avail of training opportunities should also be 
encouraged. 
-> re-focus their State Aid policies on upgrading the labour force, the 
creation of sustainable jobs and efficiently functioning labour markets, while 
respecting Community state aid provisions. 
The Commission will assist this process by promoting its policies for a new 
organisation of work, and information and consultation of workers in respect of 
decisions affecting them as well as bringing forward clear guidelines concerning 
training aid. 
V. Strengthen the policies foiLequaLopportunities 
There are sound economic and social reasons for a reinforcement of the efforts of 
Member States to promote equal opportunities in the labour market. While the 
employment situation of women has improved over recent decades, unemployment is 
higher for women than for men (12.6% as against 9.7%) and their rate of 
participation in work is lower (50.2% as against 70.4%). Within work, women are 
over-represented in some sectors and professions and under-represented in others. 
These labour market rigidities, which impede Europe's capacity for growth and job 
creation, must be tackled. 
As the Commission's Demography Reports have outlined, the working age population 
is now growing much slower than it did during the last 20 years and over the next 
decade it will start to decline. In the longer term, therefore, the growth in 
employment necessary to sustain our living standards and the European social model 
is critically dependent on an increase in the participation of women in the labour 
force. 
Tackle gender gaps: Member States should translate their commitment to equality 
of opportunity into increased employment rates for women and breaking down 
gender segregation, and 
-> make consistent efforts to reduce the gap in unemployment rates between 
women and men by actively supporting the increased employment of women. 
Reconcile work and family life: Policies on career breaks, parental leave and part-
time work are of particular importance to women. Implementation of the various 
Directives and social partner agreements in this area should be accelerated and 
monitored. There must be an adequate provision of good quality care for children 
and other dependents in order to support women's entry and continued 
participation in the labour market. Member States should 
-> seek to raise levels of care provision, using the standards of the best 
performing Member States as a benchmark. 
Facilitate return to work: Specific attention should be given to women considering 
a return to the paid workforce after an absence. They may face problems of poor 
employability due to outmoded skills and may have difficulty in accessing training 
opportunities if they have not been registered as "jobseekers". Moreover, taxation 
and benefit systems may interact to reduce financial incentives to seek work. 
Member States should address these and other obstacles. 
Above all, Member States should, in developing, implementing and reporting on these 
guidelines, take into account the particular labour market situation of women. 
Specific strategies to promote entrepreneurship among women, to improve their 
employability and adaptability should be developed. 
YLThe Implementation of the Guidelines 
Member States should, from 1998 onwards, report on the implementation of these 
guidelines; they should highlight their best practices and their impact on employment 
for examination by the Commission and the Council. The Commission will present a 
proposal to ensure an agreed comparable database in Member States, and agreed 
indicators, in order to monitor the implementation of these guidelines. 
In preparing the 1999 guidelines, the Commission will examine how each Member 
State has taken the current guidelines into account in implementing their employment 
policies and present its assessment in Autumn 1998 for adoption by the European 
Council at the end of 1998. 
ISSN 0254-1475 
COM(97) 497 final 
DOCUMENTS 
EN 04 05 
Catalogue number : CB-CO-97-514-EN-C 
ISBN 92-78-25649-8 
Office for Official Publications of the European Communities 
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