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P'- -J-COMMISSION OF THE EUROPEAN COMMUNITIES 
C0M(93)3K final 
Brussels, 26.04.1994 
REPORT FROM THE COMMISSION 
Employment in 
EUROPE 
1993 
Foreword Foreword 
We are all aware that the Com­
munity — indeed much of the 
western world — is facing a major 
employment crisis with unemploy­
ment virtually back to its peak level 
of 1985. 
The Commission is playing its part 
in responding to this crisis. The 
Edinburgh summit in December 
1992 supported the Community's 
growth initiative. During May and 
June this year we have taken two 
new initiatives on unemployment. 
The Commission agreed a major 
new policy initiative at the end of 
May, aimed at pursuing a more 
employment-intensive pattern of 
production in the Community. We 
recognised that it is both economi­
cally rational and socially desirable 
to seek to increase the number of 
people employed at whatever rate of 
economic growth the Community 
can achieve. 
It is rational in the sense that un­
employed and inactive people 
represent a wasted economic re­
source. They, and any dependents, 
consume goods and services without 
being able to make a contribution to 
their production. 
It is socially desirable, not only in 
order to address the costs and suf­
fering of unemployment, but also in 
order to reflect wider social changes 
including changing lifestyles and 
working patterns, as well as the dif­
ficulties faced in maintaining 
comprehensive, collectively funded 
systems of social support. In June, President Jacques Delors 
carried that message forward to the 
European Summit in Copenhagen, 
when he spoke of our wider concerns 
about increasing the growth perfor­
mance and competitiveness of the 
Community. As a result, we now 
have a mandate from the European 
Council to produce a White Paper on 
growth, competitiveness and em­
ployment. 
This year's Employment in Europe 
Report contributes to that process of 
reviewing, reassessing and refor­
mulating policy. It does not make 
new policy. Rather its purpose is to 
explore different aspects, different 
dimensions of the employment 
problem, and to bring greater un­
derstanding to our analysis of 
employment and unemployment. 
The report underlines the complex­
ity of the task we face. It highlights 
the need for a serious, fundamental 
rethinking of the way we manage 
our economic, social and labour 
market affairs. 
We must guard against simplistic 
solutions. 
We must guard against those who 
seek to entice us down the road of 
protectionism. People who believe 
that should read the chapter on the 
Community in the World Economy, 
and reflect upon the importance of 
trade in building and maintaining 
Community prosperity. 
There are others who think that 
Europe's employment problems can be put down to inflexible labour 
markets. The chapter on Employ­
ment Regulation in this year's 
report shows that the variety of sys­
tems of regulation in our Member 
States cannot be blamed for all our 
difficulties. 
There are others who think that our 
problems are purely ones of wage 
costs. Again, such people should 
read the chapter which looks at 
variations in wage costs within the 
Community. That shows how it is 
the level of productivity which 
determines the level of real wages 
and not the other way round. 
We know that we need more econ­
omic growth and the Commission is 
pressing Member States on interest 
rates. On the other hand, we also 
recognise that economic growth 
is not enough. We will never, in 
the foreseeable future, bring un­
employment down to acceptable 
levels unless we develop a more em­
ployment-intensive system of 
production. 
How can we best provide access to 
employment for all those who want, 
and indeed need, to work? We need 
to address the issue of incentives — 
in particular the way taxation sys­
tems do, or do not, discourage firms 
from recruiting people or discour­
age people from seeking work. 
On these and other matters, this 
year's Report offers some penetrat­
ing insights. For example, it shows 
some significant differences be­
tween Member States in the way in 
Foreword 
which work is shared. These dif­
ferences are not just between the 
North and the South of the Com­
munity — although it is the case 
that the less developed regions of 
the Community have lower levels of 
employment and longer hours of 
work than the more developed. We 
also see that countries with a simi­
lar level of productivity or economic 
development can achieve very dif­
ferent mixes of jobs and working 
hours. 
The Report also shows major 
differences in levels of post-
compulsory education between 
Member States — largely, but not 
entirely, between the North and the 
South. 
As regards taxation systems, and in 
particular the effects of employers' 
social security contributions on 
their employment decisions, the 
Report shows a great deal of diver­
sity across the Community, with 
charges ranging from almost 0% to 
close to 30% of wage costs. 
There are many issues that we are 
going to have to address in the 
coming months. Few are easy. We 
need to discuss the effects of social 
security systems on the incentives 
to work. I do not myself believe 
that there are many people who 
enjoy being unemployed. Never­
theless, it is clear that we have to 
use our social security systems to 
provide the right positive incen­
tives — remembering that the 
availability of jobs is the best in­
centive of all. Education and 
training systems also need to pro­
vide the right support. 
We will also need to look at the 
quality of jobs. Is a bad job better 
than no job at all? Does it have to be 
a question of either/or? Are there 
ways out of this dilemma? We need to recognise that success 
will come only when we change our 
attitudes and our behaviour. Such 
changes will also need to be encour­
aged and reinforced, however, by 
changes in all the systems of incen­
tives — financial and legal — that 
act on the labour market. 
More public money alone will not 
solve the problem. Of course we 
need money in some policy areas. 
Indeed, we already spend a great 
deal on direct schemes to help com­
bat unemployment or help train the 
unemployed. Our calculations 
suggest that 45 billion ECU a year 
are spent on active manpower 
measures by the Member States, 
and the Community contributes 
13% of that total expenditure from 
the European Social Fund. 
What are the next steps in our pro­
gramme to tackle unemployment? 
We are already deep in discussion 
with the major parties at European 
level. The Community's Standing 
Employment Committee — which 
brings together Trade Union and 
Employer Representatives with 
Labour Ministers and their Repre­
sentatives — is working on a rolling 
programme of actions on employ­
ment. There will be a series of other 
meetings and debates, including at 
the Employment Week in Brussels 
in October when leading figures 
from all walks of life will debate 
key aspects of our employment 
problems. 
This is a process in which the Com­
mission plays an important role 
However, success will come from co­
operation from all concerned, and 
not just from action by ourselves. 
We can lead the way. We can be the 
catalyst. We can be the animator. 
But, at the end of the day, decisions 
have to be made by many people, 
individually and collectively at local, national and Community 
level. 
This Report, like its predecessors, 
contributes to that process. We 
must work to see that its lessons are 
heeded. We must succeed insetting 
the Community back onto the path 
of rising employment and living 
standards, fairly shared between all 
its citizens. 
-4 
Table of contents 
Foreword 
Summary 
Part I Employment prospects 
Chapter 1 Employment in the Community - trends and prospects 
Chapter 2 Short-term economic and employment outlook 
Part II The European labour market 
Chapter 3 The Community in the world economy 
Recent employment developments in 
Central and Eastern Europe 
Chapter 4 Towards an integrated European labour market? 
Chapter 5 Labour market developments in assisted regions 
Chapter 6 Women in employment 
Part III Employment policies 
Chapter 7 Employment protection and labour force adjustment in 
the Member States 
Chapter 8 The Community Employment Framework 
List of graphs 
List of maps 
Sources and methodology 
5-
Acknowledgements 
This report has been prepared with the collaboration of: 
Directorate-General II — Economic and Financial Affairs 
Eurostat — Statistical Office of the European Communities 
Summary Summary 
The employment and unemploy­
ment situation in the Community is 
one of the worst for many years. 
After a dramatic rise in employ­
ment in the latter half of the 1980s, 
when over 9 million new jobs were 
created, the Community labour 
market has now gone into sharp 
recession. Unemployment began to 
rise again in 1991, and an estimated 
one million jobs were lost in 1992. 
By the end of 1993, it is estimated 
that all the gains of the 1980s in 
terms of employment will have been 
lost, and unemployment will be 
back to its 1985 level. 
Furthermore, the prospects for 
economic growth and job creation 
over the short and medium term are 
sombre. No recovery in output is 
likely to materialise before Spring 
1994 at the earliest. Employment 
fell in 1992 and is set to continue to 
fall further in 1993. Unemployment 
is expected to continue rising, 
reaching 12% on average in the 
Community at the end of 1994. 
Longer term prospects seem more 
uncertain than for many years. The 
slowdown in growth which dates 
back to the beginning of 1991 may 
yet prove to be a transitory inter­
ruption to the period of improving 
labour market conditions of the sec­
ond half of the 1980s. It could also, 
however, be the beginning of a 
period of instability, inadequate 
economic performance and persist­ent employment problems. Whether 
the actual outcome is closer to the 
first or second of these possibilities 
will depend, in part, on world-wide 
developments, partly on the policies 
followed within the Community. 
Whatever the outcome in terms of 
output growth, it seems almost cer­
tain that unemployment will 
remain the major economic problem 
facing the Community throughout 
the 1990s and perhaps beyond. 
Even if the record rates of employ­
ment creation experienced in the 
second half of the 1980s could be 
repeated, this would still not 
provide enough jobs to reduce un­
employment to acceptable levels 
and to give work to significant num­
bers of people, particularly women, 
at present forced to accept inactivity 
because of lack of jobs. 
The completion of the 1992 single 
market programme and the remo­
val of most restrictions on 
competition and trade between 
Member States has helped lay the 
basis for a more efficient European 
economy. Yet while efficiency in 
production is important, in itself it 
does not ensure that higher levels 
of output and real income are ac­
tually realised or that they are 
adequately translated into employ­
ment creation. Still less does it 
ensure that the potential gains are 
equitably distributed both between different parts of the Community 
and between individuals and social 
groups. 
The achievement of these basic 
aims depends upon a range of fac­
tors, including the policies pursued 
by Member States — both individ­
ually and collectively — towards 
the macro-economy, the interna­
tional environment, the 
development of problem regions 
both inside and outside the Com­
munity, and existing disparities in 
access to jobs as well as towards 
employment generally. 
The focus of Employment in Europe 
is on labour market aspects of 
these problems and aspirations, 
including the main economic fac­
tors which affect labour market 
developments. 
It provides quantitative informa­
tion on these aspects — specifically 
on trends in employment and un­
employment over the past 10 years 
or so — examines their interrela­
tionship with other factors, and 
indicates the potential impli­
cations. Attention is drawn to both 
differences and similarities in ex­
perience across the Community. 
Because of the high degree of econ­
omic integration which has been 
achieved in the Community, it can 
be tempting to address it as a 
7-
Summary 
single economic entity. While this 
is true in many respects, there are 
nevertheless major differences in 
the way different parts have de­
veloped, and the way this is 
reflected in terms of employment. 
Even neighbouring countries with 
similar social and cultural tradi­
tions and with the same kind of 
institutional structure show very 
different patterns of development, 
especially with regard to employ­
ment and the distribution of jobs 
and income. 
From one perspective this diver­
sity can represent a potential 
obstacle to further integration. 
From another, and more positive, 
perspective, however, it provides a 
variety of approaches to policy 
problems, and a wealth of experi­
ences from pursuing different 
options, which can be used con­
structively to develop more 
effective measures and pro­
grammes of action. 
A main theme running through 
this report is the nature of the 
European labour market — its ca­
pacity for creating jobs in different 
areas, the scale and distribution of 
unused resources in the shape of 
people who are unable to find pro­
ductive employment, the extent of 
variations in the costs of employing 
labour and in the incomes received 
by those who are employed, and 
the differential access to jobs and 
income of different kinds of people 
— men and women, young and old 
— living in different places and in 
different circumstances. An ap­
preciation of all of these aspects is 
vital to an understanding of 
how the market operates across 
the Community and to the in­
formed development of effective 
policies. 
The main findings of this year's 
report are summarised below. Trends in 
employment 
The Community has for many years 
been less successful than other de­
veloped parts of the world in 
creating jobs. In 1992, only 60% of 
people of working age in the Com­
munity were in employment as 
against around 70% in the US and 
EFTA countries and almost 75% in 
Japan. As shown in Chapter 1, this 
disparity is reflected both in unem­
ployment being higher in the 
Community than elsewhere and, 
equally importantly, in the propor­
tion of people who are neither 
employed nor officially unemployed 
also being much greater. 
Many of these people are women 
who are deterred from entering the 
labour market because of a shortage 
of jobs. Increasingly, however, 
a large number are older people, es­
pecially men, who have given up 
work prematurely and taken early 
retirement. 
While the proportion of population 
of working-age in employment — 
the employment rate — has in­
creased in other countries over the 
past 20 years, in the Community it 
has fallen. The comparison with 
the US is especially striking. Its 
employment rate was much the 
same as that of the Community in 
the early 1970s, but since then the 
US has succeeded in increasing the 
numbers in employment by some 
30 million, three times as many as 
the Community, though many of 
these were in low paid, low produc­
tivity jobs. To close the present gap 
in the employment rate with the 
US would require the creation of 
well over 20 million new jobs in the 
Community. 
The clear message from experience 
in the Community and elsewhere over the past 20 years is that 
relatively high employment 
growth tends to be associated more 
with increases in labour force 
participation than with falling un­
employment. This was notably true 
ofthe Community in the second half 
ofthe 1980s, when a record number 
of jobs were created but when most 
of these — over 70% — were filled 
by new entrants to the labour mar­
ket rather than by the unemployed, 
who took only one-third of these 
new jobs. 
There are no obvious reasons to ex­
pect things to be different in 
the future. Even if higher rates 
of job creation can be restored, 
unemployment is likely to be slow 
to fall. 
Economic growth 
and employment 
For the Community, as for other 
countries, a close relationship is 
evident between economic growth 
and job creation. The job losses 
suffered in 1992 were a clear con­
sequence ofthe spread of recession 
to virtually all Member States. 
Equally, high rates of growth have 
usually been necessary to generate 
large increases in employment. 
The experience ofthe latter part of 
the 1980s, however, was unusual 
in producing high employment 
growth with a relatively modest 
rise in output, certainly as com­
pared with the 1950s and 1960s. 
On this experience, output growth 
of around 2% a year might be 
enough in the future to prevent 
employment from falling and any 
higher rate could give rise to in­
creases in the numbers in work. 
Nevertheless, even the Communi­
ty's performance in the latter part 
of the 1980s in creating jobs was 
significantly inferior to that of the 
Summary 
US. Its much higher employment 
growth, not only in this period but 
over much ofthe past 20 years, was 
achieved without a markedly 
higher growth in output, reflecting 
the fact that many of the jobs were 
in low-paid, low-productivity acti­
vities. Moreover the fall in GDP 
which occurred between 1990 and 
1992 in the US led to no major 
reduction in the numbers in 
employment. 
The fluctuations in economic 
growth in Member States have 
broadly coincided, reflecting the 
high degree of integration and, 
therefore, of interdependence. The 
only notable exception is Denmark 
Where growth was low between 
1985 and 1990 but picked up over 
the next two years. Variations in 
employment growth have also 
generally coincided. 
There are very few instances of 
Member States achieving rela­
tively high rates of job creation 
without similarly high rates of out­
put growth. The main exception 
is the Netherlands where a high 
proportion of the new jobs created 
over the past decade have been 
part-time. In terms of the volume 
of employment, the rise in the 
Netherlands has not been signifi­
cantly higher than in other parts of 
the Community. 
Nevertheless, even apart from the 
Netherlands, the relationship be­
tween the rate of output growth and 
the increase in employment has 
been far from uniform across the 
Community. France and Italy, for 
example, achieved above average 
growth of GDP between 1985 and 
1990, but only small rises in em­
ployment. Moreover, Ireland and 
Spain have proved consistently un­
able to translate high growth into 
new jobs despite their particularly 
acute need. Trends in 
working time 
Over the 1980s, average hours 
worked by those in employment in 
industry and services declined in all 
Member States, except the UK 
where they increased. Between 
1983 and 1991, the reduction in the 
normal working week was 4% 
across the Community as a whole. 
In the Netherlands, it was 13%. Far 
from there being any convergence in 
average hours worked m different 
parts of the Community over this 
period, the reverse was the case. 
The countries where hours fell by 
most were predominantly those 
where they were already compara­
tively low. 
Countries differed significantly in 
the extent to which the volume of 
work generated by growth was 
translated into jobs. In Denmark, 
France and Belgium, as well as the 
Netherlands, the number of jobs 
increased by three times the total 
amount of hours worked. In Ger­
many the numbers in employment 
went up by more than in the UK 
despite the volume of work increas­
ing by half as much. 
Many ofthe additional jobs created 
over the 1980s were part-time, espe-
cially in the countries where 
average hours worked declined, 
Denmark being an exception. There 
was, however, a major difference 
between the North and South ofthe 
Community. In Italy, Portugal, 
Spain and Greece, numbers of part-
time jobs declined over much of the 
1980s in contrast to experience else­
where, though in the former two 
countries there was some rise in 
numbers in the early 1990s. 
In 1991, the jobs lost were predomi­
nantly full-time whereas a high 
proportion of the jobs created in countries where employment rose 
— in Germany, Belgium and the 
Netherlands as well as Italy and 
Portugal — were part-time. 
Trends in 
self-employment 
Proportionately more people are 
self-employed in the Community 
than in other developed countries. 
Some of this is due to the relative 
importance of agriculture. More sig­
nificantly, however, in the EFTA 
countries and the US, only 7-8% of 
those employed in industry and ser­
vices in 1990 worked for themselves 
whereas, in the Community, the fig­
ure was 13%. This was 2% more 
than 10 years earlier. In the US, in 
contrast, the proportion hardly 
changed and in Japan it fell by 2%. 
Much of this difference is due to the 
importance of self-employment in 
Southern Member States. The num­
bers of self-employed in industry 
and services account for over 20% of 
the workforce in Italy and Greece 
and over 15% in Spain and Portu­
gal. In Northern countries, apart 
from the UK, Ireland and Belgium, 
the figure was well below 10%. 
Moreover in all these countries, the 
share rose over the 1980s by signi­
ficantly more than the Community 
average. Ofthe Northern countries, 
only the UK showed an increase of 
a comparable amount. 
The number of people becoming 
self-employed was much higher in 
the Netherlands and the UK over 
the 1980s than in other parts ofthe 
Community — in both cases new 
entrants adding 15-20% to the 
number of self-employed each year 
between 1983 and 1991, as opposed 
to under 5% in Greece, Belgium, 
Ireland and Denmark. However, 
the number of people losing their 
self-employment status — perhaps 
Summary 
because of business failure — was 
also much higher in the Nether­
lands and the UK than elsewhere 
(1 in 10 or more going out of busi­
ness each year). 
Sectoral trends 
Although the proportion of the 
workforce employed in services rose 
markedly — from 53% in 1980 to 
62% in 1991 — services remain 
much less important in the Com­
munity than in the US. The 
Member States with the highest 
share of employment in services 
tend to be the most developed and 
prosperous ones. Germany, how­
ever, is a major exception with a low 
service share and by far the highest 
proportion of employment in indus­
try in the Community. 
There was some convergence in the 
relative importance of services in 
the 1980s, the increase in share 
being particularly large in all the 
Southern Member States, as well as 
in Ireland, and small in Denmark. 
Germany again was an exception 
with an increase well below aver­
age. 
The rate of job creation in services 
in the Community in the latter part 
of the 1980s was almost as high as 
in the US while employment in in­
dustry also increased during this 
period. The rise in service employ­
ment, however, slowed appreciably 
in 1991, when it was accompanied 
by job losses in industry. Much the 
same was true of the US and the 
EFTA countries. 
In 1991, for the first time for many 
years, two Member States — the 
UK and Denmark — experienced a 
significant reduction in employ­
ment in services. Many of the jobs 
lost, moreover, were in service ac­
tivities like banking and insurance 
or health and education where job creation had been particularly 
high in the 1980s — activities 
which accounted for much of 
the growth of employment over the 
decade. 
Trends in 
unemployment 
Unemployment remains very un­
evenly distributed across the 
Community, both between regions 
and social groups. On the latest 
count, the rate ranged from over 
20% in parts of Spain, Ireland and 
Southern Italy to under 5% in areas 
of Southern Germany, the North of 
Italy and Northern Portugal, and to 
only 2% in Luxembourg. 
No country, and few regions, have 
escaped the employment effects of 
the present recession. In five Mem­
ber States — Denmark, France, 
Ireland, Italy and the UK — unem­
ployment has climbed to a higher 
level than in 1985, the previous 
peak. 
In all countries, apart from the UK, 
unemployment is significantly 
higher among women than men 
and, with the sole exception of Ger­
many, much higher among young 
people under 25 than among others. 
Since the mid-1980s, however, the 
gap between male and female un­
employment rates has narrowed 
significantly over much ofthe Com­
munity, though mainly in the more 
developed parts. In the less de­
veloped areas it has tended to 
widen. 
The rate of youth unemployment 
has also fallen relative to the rate 
for older age groups. This achieve­
ment, however, seems to have been 
due more to demographic trends — 
in the shape of fewer people coming 
of working age — than to the 
various measures introduced in many Member States to combat the 
problem. In only five countries — 
the four Southern Member States 
plus the Netherlands — was there 
any increase at all in the employ­
ment of young people under 25 
between 1985 and 1991. 
Nevertheless, unemployment 
among the young, and especially 
among young men, has risen once 
again during the present recession, 
if generally by less than the in­
crease among older age groups. 
Long-term unemployment, though 
declining in importance between 
1985 and 1991 (the latest year 
for which data are available), re­
mains a serious problem in the 
Community, especially in the less 
developed parts or in areas of 
industrial decline. In 1991, 45% of 
the unemployed had been out of 
work for a year or more. In Belgium 
and Ireland, however, the figure 
was over 60%, and in Italy over 65%. 
Although no comparable data are as 
yet available, it seems likely that 
long-term unemployment will rise 
during the present recession. 
The international 
environment 
The Community remains one of the 
richest parts of the world. While 
only 7% ofthe world's population of 
working age live in the Community, 
they generate almost 30% of global 
output, giving rise to a level of in­
come per head 10 times higher than 
in Africa as a whole, 4-5 times 
higher than in the neighbouring 
North African countries and at least 
2-3 times higher than in Central 
and Eastern Europe. 
The present recession has intensi­
fied concerns, however, about the 
Community's ability to compete in 
-10-
Summary 
world markets with high-tech pro­
ducers in Japan and the US, and 
with low-tech producers in develo­
ping countries. It has also drawn 
attention to the repercussions on 
the Community of downturns in 
economic activity in the rest of the 
world. At the same time, because of 
its importance in the global trading 
system, Community performance 
hâs a direct effect on the state ofthe 
world economy and on the persist­
ence of global recession. 
It has, in addition, served to high­
light the Community's geographic 
location in a region characterised, 
in areas to the South — in North 
Africa and the Middle East — by 
retarded economic development 
and an acute shortage of jobs com­
bined with rapid population growth. 
To the East — in Central and East­
ern Europe and the former Soviet 
Union — there are immense prob­
lems of economic restructuring and 
political instability. 
While output growth in the Com­
munity over the 1980s was lower 
than over any previous decade since 
the war, it was, nevertheless, signi­
ficantly higher than that achieved 
in many parts of the developing 
world. Indeed in many of the 
poorest countries, real income per 
head, as measured by GDP, actually 
declined between 1980 and 1990 — 
by 10% in sub-Saharan Africa and 
by 5% in Latin America as a whole. 
As a result, the gap between rich 
and poor widened. 
In the North African countries to 
the South of the Community — 
Maghreb and Machrek — GDP per 
head barely increased at all in the 
1980s and, over much ofthe region, 
there was little sign of progress in 
terms of economic development. 
The proportion of population of 
working-age in employment re­
mained small — only half or less — while the share of employment in 
industry — a reasonable indicator 
of the stage of development — 
hardly changed in most countries, 
though Morocco was an exception. 
During the 1980s, there was also 
little growth of income per head in 
countries to the East of the Com­
munity in Central and Eastern 
Europe :— in contrast to earlier de­
cades. Employment, however, was 
maintained at a high level through 
deliberate policies of preserving 
jobs. 
The early stages of transition were, 
however, accompanied by a collapse 
in output and a rapid rise in unem­
ployment throughout the region. 
Although there are now signs of im­
provement in the economic fortunes 
of the Central and Eastern Euro­
pean countries, apart from in 
Poland, output continued to fall 
markedly throughout the region in 
1992. The numbers in employment 
declined, despite the growth of pri­
vate firms, and unemployment rose 
to high levels in most parts. 
The prospects for significant econ­
omic recovery in the region in the 
near future seem bleak. The reor­
ganisation and restructuring of large 
state enterprises in the region — a 
process which is only just beginning 
— stands to cause further job losses 
on a substantial scale. Recession in 
the Community merely adds to the 
problems faced by governments 
trying to balance accelerated reform 
against mounting unemployment 
and social deprivation. 
Trade performance 
and employment 
The Community's high share of 
world income owes much to its lead­
ing position in international trade, 
particularly in trade in manufac­tures. This remains by far the lar­
gest component, three times larger 
than trade in services. Like other 
countries, the Community's share of 
trade varies markedly from one part 
of the world to another, largely re­
flecting geographical proximity and 
traditional links. 
Community producers are domi­
nant in the European market — 
accounting for two-thirds of both in­
ternal trade in manufactures and 
imports by EFTA countries — as 
well as in the African and Middle 
Eastern markets (accounting for 
60% of manufactured imports in the 
former case, 45% in the latter). 
Moreover, although a relatively low 
proportion of Central and Eastern 
European output is traded, a grow­
ing proportion is with Community 
countries. In all of these markets, 
the Community share has risen or 
remained broadly unchanged over 
the past 20 years. 
On the other hand, Community ex­
porters account for a much smaller 
share of markets outside the wider 
European area — for under 25% of 
US imports of manufactures and for 
only just over 15% of Asian imports. 
In these markets, the Community 
share of trade declined during the 
1980s. They were also the markets, 
however, which expanded by most 
over this period, whereas those 
where the Community share was 
much higher grew relatively slowly 
— partly reflecting slow growth in 
the Community itself. 
Community producers also hold a 
leading position in trade in services. 
Although their importance has de­
clined over the past 20 years, they 
still accounted for around 45% of 
total world exports in 1990. 
Despite the importance of trade 
for the Community, comparatively 
few people in Member States are 
11 
Summary 
employed in sectors where a major 
proportion of output is exported. 
For most services activities, inter­
national trade is either non-existent 
or of minor importance. Even in 
manufacturing, however, a rela­
tively small number of jobs depend 
directly on exports. Nevertheless, 
some 5% of the total numbers in 
employment in the Community in 
1990 worked in industries where 
more than 40% of output was ex­
ported and 15% in industries where 
more than 25% was exported. 
Moreover, although the majority of 
people employed in the Community 
work in jobs where international 
competitiveness is not a major fac­
tor, a great many jobs depend on the 
success of Community exporters — 
both in supplying industries and in 
activités supported by the income 
generated by export earnings — as 
well as on the ability of Community 
producers to compete effectively 
with importers. 
Labour market 
integration 
The efficient functioning of the Eu­
ropean labour market is a key 
condition for achieving the aims of 
economic unification. To ensure ef­
ficiency in production, labour needs 
to be available in the Community 
with the skills demanded by em­
ployers and at a price which ensures 
a reasonable rate of return. 
Equally, however, levels of pay and 
terms and conditions of employ­
ment need to be compatible with the 
social objectives which economic 
union is intended to secure. The ex­
tent of variation, on the one hand, 
in wages and labour costs between 
different parts of the Community 
and, on the other, in the educational 
qualifications of the labour force — 
and, therefore, its inherent produc­
tivity — are of concern. Differences in 
employment intensity 
Major differences exist between 
Member States in the level of em­
ployment they sustain, in the level 
of taxation and expenditure, in the 
way they finance it, and in their 
systems of labour market organisa­
tion. 
The number of people in employ­
ment in any part of the Community 
not only depends on economic fac­
tors like the level of GDP. It also 
depends on the trade-off between 
work and leisure, and the distribu­
tion of employment and income 
between individuals and social 
groups. Even m similar countries, 
such as between the Netherlands 
and Belgium or between Denmark 
and Germany, average hours 
worked and the number of people in 
employment differ significantly. 
To increase employment at any 
given level of output has implica­
tions for the distribution of both 
working-time and income. For coun­
tries where average earnings are 
relatively low, there are clear con­
straints on sharing the available 
work more evenly. Similarly where 
there are constraints on output 
growth, perhaps because of weak­
nesses in trade performance, it is 
difficult to generate the income 
required to support job creation. 
While Member States vary widely 
in terms of both the overall level and 
structure of taxation, these dif­
ferences largely reflect the scale of 
public spending and seem to have 
no clear and unambiguous effect on 
the employment intensity of pro­
duction. A high level of employment 
in Denmark goes along with a high 
level of taxes — and social expendi­
ture — relative to national income, 
while in Portugal high employment is associated with low taxes and low 
government spending. 
The extent of government interven­
tion in the labour market, and the 
role ofthe state more generally, also 
differ widely between Member 
States. Again, however, there is no 
clear relationship between this and 
the level of employment. Neverthe­
less, the scale and pace of structural 
change have progressively in­
creased the importance of 
adaptability and made it more diffi­
cult to maintain stability — and 
security — of employment and, 
therefore, pose problems for at­
tempts to regulate labour markets. 
Variations in 
labour costs 
As demonstrated in Chapter 4, 
there are large variations in wages 
and labour costs across the Com­
munity, as there are in the division 
of labour costs between the wages 
paid to employees and the non-wage 
element, comprising social con­
tributions, payments to pensions 
schemes and so on. In 1990, the 
non-wage element amounted to 
around 30% of total labour costs in 
manufacturing in France,.Belgium 
and Italy but only 13% in the UK 
and only 3% in Denmark. These two 
countries apart, this element in­
creased by more than wages in all 
Member States over the 1980s. 
This disparity, however, does not 
mean that labour costs are necess­
arily higher in the countries where 
the non-wage element is largest. In 
practice, differences in the size of 
this element largely reflect the fact 
that, in the countries concerned, the 
social welfare system is funded by 
contributions rather than from 
general taxation. As a result, the 
taxes which employees have to pay 
out of their earnings tend to be 
12 
Summary 
lower in these countries than in 
others and, therefore, the wage 
required to yield a given level of real 
income is also lower. High non-wage 
costs, in other words, tend to be 
compensated by low wage costs. 
Average labour costs in manufac­
turing were higher in Germany in 
1990 than anywhere else in 
the Community, 15% more than in 
Belgium, the next highest wage 
economy, and almost six times 
higher than in Portugal, the country 
with the lowest wages. Germany 
and the UK apart, labour costs in 
the more developed Member States 
were within 15% of each other. In 
the UK, labour costs — and average 
wage levels — were substantially 
(25-40%) less than in other 
Northern Community countries, os­
tensibly at a similar stage of 
economic development, and only 
marginally above those in Spain 
and Ireland. 
These differences in labour costs 
largely reflect equally large dif­
ferences in labour productivity. In 
terms of its contribution to value-
added, labour appears to be 
relatively cheap in the Netherlands 
and Luxembourg, despite their high 
wages, as well as in Portugal and 
Ireland, and relatively expensive in 
Germany and Denmark. 
Much the same was true, however, 
at the beginning of the 1980s. In­
deed, the relative pattern of labour 
costs seems to have changed com­
paratively little over this period. 
The gap between the highest and 
lowest wage countries seems to 
have been broadly maintained. 
Moreover, for most countries, the 
change in labour costs was more or 
less in line with the change in the 
productivity of labour, suggesting 
that wage increases did not adver­
sely affect profitability or 
competitiveness. The two main ex­ceptions seem to have been the UK 
and Greece, where labour costs 
relative to other Member States 
hardly changed but where produc­
tivity declined. 
For individual industries within 
manufacturing, both the pattern 
and scale of variation in labour costs 
between Member States are much 
the same as for manufacturing as a 
whole. For banking and insurance, 
however, two of the few service ac­
tivities for which labour cost data 
are available, there is much less 
difference in average labour costs 
between the more developed and 
less developed Member States. In 
Spain and Ireland in 1990, they 
were higher than in France or the 
Netherlands and considerably 
higher than in the UK, where they 
were even further below the Com­
munity average than in the case of 
manufacturing. 
In a number of Member States, 
there are large regional variations 
in labour costs which add signi­
ficantly to the extent of cost 
differences across the Community. 
Differences between regions in 
manufacturing were narrowest in 
Germany in 1988, the latest year for 
which data exist — possibly reflect­
ing the relative importance of 
nationwide sectoral pay agree­
ments. They were widest in Italy, 
reflecting the marked variation be­
tween costs in the prosperous North 
and less developed South of the 
country. 
In France, labour costs in manufac­
turing in Ile de France, around 
Paris, were higher than in any 
German region apart from Ham­
burg — and over half as high again 
as in Brittany. Equally, costs in 
the clothing and footwear indus­
try in the Northern Italy were 
higher than in all but four German 
regions. In the UK, where the regional vari­
ation in labour costs was less than 
in France or Italy, manufacturing 
costs in the high wage South-East 
were some 35% below the average 
in Germany in 1988 and at a similar 
level to those in Southern Italy. In 
Northern Ireland, they were around 
30% below those in the latter region 
and only slightly less than in Span­
ish regions outside of Madrid, 
where costs were much the same as 
the UK average. 
In Northern Portugal, where labour 
costs are lower than anywhere else 
in the Community, they were only 
just 11% of the average level in 
Hamburg, the highest cost region, 
in 1988. 
In principle, the regions with the 
highest labour costs in any Member 
State should also be expected to 
have the lowest rates of unemploy­
ment — otherwise labour costs 
should normally be lower to reflect 
labour market conditions. This is, 
however, by no means generally the 
case. In Germany, wages are higher 
in the North — where unemploy­
ment tends to be high — than in the 
South, where it is relatively low. 
Indeed wage variations seem to re­
flect the historical pattern of 
prosperity rather than the present 
pattern. This suggests that relative 
wages are slow to adapt to changing 
labour market conditions. 
In Italy and the UK, while the ex­
pected inverse relationship 
between labour costs and unem­
ployment is broadly evident 
between the North and South ofthe 
two countries, it is does not hold for 
individual regions. 
Over the 1980s, the extent of vari­
ation in labour costs narrowed 
slightly in Germany, but tended to 
widen in France, Italy and, espe­
cially, the UK. Apart from in the 
13 
Summary 
UK, the ordering of regions in terms 
of cost levels remained much the 
same. In the UK, average labour 
costs changed at markedly different 
rates over this period, broadly re­
flecting changing labour market 
conditions. 
Differences in 
educational levels 
The level of educational attainment 
of the workforce is likely to be as 
important to business success as the 
possession of specific skills, which, 
in a world of rapid technological 
change, can soon become redun­
dant. The ability to adapt to new 
production techniques, which de­
pends on education and training, is, 
therefore, a major determinant of 
productivity and competitiveness 
over the long-term. 
The Community Labour Force Sur­
vey for 1991 provides, for the first 
time, a reasonably reliable indica­
tion of the level of educational 
attainment of the labour force 
across the Community. As demon­
strated in Chapter 4, it shows 
marked differences between the 
Northern Member States and the 
less developed Southern countries. 
In Germany and Denmark, over 
70% of the workforce of 25 and over 
had completed post-compulsory 
education or training courses as 
compared with only 30% in Spain 
and 15% in Portugal. At the same 
time, the figures for Ireland and 
Greece, though below those for most 
ofthe more developed countries, are 
above those for the UK, where less 
than 40% of the workforce had 
post-compulsory education qualifi­
cations, and Luxembourg, where 
the proportion was less than 30%. 
Data on education for the younger 
members of the workforce suggest 
that disparities in education between the North and South have 
narrowed over the past 10-15 years. 
Variations in educational attain­
ment levels between regions in the 
same Member State are relatively 
small, at least in the Northern 
Member States. In Greece, Spain 
and Portugal, however, there are 
significant regional differences, 
particularly between the capital 
cities and the more rural areas. 
Although in all countries, apart 
from Italy and, more especially, 
Greece, the average educational 
level of those who are unemployed 
is lower than those in work, there 
are nevertheless substantial num­
bers of the unemployed throughout 
the Community with post-compul­
sory educational qualifications. 
Cross-border migration 
in the Community 
While there were substantial 
movements of labour in the Com­
munity in the 1950s and 1960s, 
especially from the less developed 
South to the North, the scale of 
migration ofthe workforce over the 
past decade has been smaller (see 
Chapter 4). In total, although only 
around 1 in a thousand people a 
year moved from one Member 
State to another over the period 
1987 to 1991, this nevertheless 
amounted to an annual movement 
of some 300 000 people. The pro­
portion of those of working age who 
moved was higher, 1 in 500 or so, 
though considerably smaller in net 
migration terms. Ireland was the 
main exception. Here some 1% of 
the potential workforce migrated 
to another Community country 
each year between 1987 and 1991 
— though this was partly offset by 
some 60% as many returning from 
abroad. Significant numbers of 
those emigrating went either to the UK, which historically had been 
the main destination for Irish la­
bour, or to Germany, which was 
the main destination for people 
from most other parts of the Com­
munity. Sizable numbers also went 
to the UK which, like Germany, 
experienced net immigration 
(partly because of British workers 
returning from periods of employ­
ment abroad). 
Over the Community as a whole, 
proportionately more of those who 
moved were young people aged 14 to 
24 than older people. Moreover, pro­
portionately more — twice as many 
on average — became unemployed 
in the country they moved to than 
went into employment. In most 
countries, however, the addition to 
the unemployment figures from this 
source was only around 0.3% or less 
and was largely offset by outward 
migration of labour. 
From the evidence of this period, 
movements of labour do not play a 
major role in reducing inter-country 
differences in unemployment across 
the Community. 
Labour market 
developments in 
assisted regions 
Achieving more balanced economic 
development is one of the major 
aims ofthe Community and sizable 
funds have been created over the 
past few years, especially since the 
entry of Spain and Portugal in 1986, 
to assist this process. As shown in 
Chapter 5, which reviews develop­
ments in key aspects of the labour 
market in assisted areas as com­
pared with others, there are some 
signs of convergence in economic 
performance in some of the disad­
vantaged regions since 1986. But 
the improvement by no means ap-
14 
Summary 
plies to all parts of the Community 
or to all aspects of economic perfor­
mance. 
42% of population of working-age in 
the Community live in assisted 
areas, half of them in less de­
veloped, or Objective 1, regions, 
75% of the rest live in regions of 
industrial decline, categorised as 
Objective 2 areas. Average income 
per head in Objective 1 regions was 
under 55% of the level in non-as­
sisted parts of the Community in 
1990. 
Between 1986 and 1990, however, 
growth of income per head was 
higher on average — 3V2% a year as 
against 3% — in the Objective 1 
regions than in non-assisted areas, 
implying some convergence over 
this period. On the other hand, this 
higher growth was very much con­
centrated in Spain, Portugal and 
Ireland, other Objective 1 regions 
experiencing lower growth than 
other parts of the Community. 
Unemployment in Objective 1 re­
gions averaged 14% in 1991 as 
compared with 6V2% in non-assisted 
regions. In Objective 2 areas the 
rate was just under 10%. In most 
countries the difference between 
rates in assisted and non-assisted 
parts was 2-3%. 
Between 1986 and 1991, unemploy­
ment fell by much less in Objective 
1 regions — from only 15% to 14% 
— than in non-assisted areas 
(where it fell from 11% to 8V2%). In 
Southern Italy and Greece, unem­
ployment rose over this period. In 
Objective 2 regions, over most parts 
of the Community, unemployment 
declined by more than in non-as­
sisted areas, though the difference 
was relatively small (less than 1%). 
The share of working-age popula­
tion in employment was lower in all assisted areas ofthe Community in 
1991 than in non-assisted parts, es­
pecially in Objective 1 regions, 
where the figure was only 51% as 
compared with 64% elsewhere. 
Two-thirds of this disparity is due to 
much lower activity rates, only one-
third to higher unemployment. 
Employment relative to working-
age population was also lower in 
Objective 2 than in non-assisted 
areas, but by only 3V2%. In this case, 
only one-third of the difference was 
due to lower activity. 
The lower rates of activity in as­
sisted areas imply that the potential 
labour supply in these places is 
much greater than that actually re­
corded. It is estimated that the 
hidden part — which might well 
reveal itself if sufficient jobs become 
available — amounted to just over 
20% of working-age population in 
Objective 1 regions in 1991 as com­
pared with under 12% elsewhere. 
With the numbers recorded as un­
employed, this means that almost 
30% of people of working-age in 
Objective 1 regions were either ac­
tively seeking work or would do so 
if enough jobs were to be created. 
Between 1986 and 1991, the extent 
of potential labour supply declined 
by less in Objective 1 regions than 
elsewhere, so that the disparity be­
tween these areas and the rest of 
the Community widened in both 
these terms and in terms of open 
unemployment. 
The scale of potential labour supply 
in Objective 1 regions is largely the 
result of low labour force participa­
tion among women. In 1991, under 
55% of women aged 25 to 44 were 
formally part of the workforce in 
these regions as opposed to over 
70% in unassisted areas. In the 
South of Italy and Corsica, the pro­
portion was less than 50%. In 
Objective 2 regions, there was only a small difference. Nevertheless, 
fewer women were economically 
active in such areas than in non-
assisted parts. 
Between 1986 and 1991, the activ­
ity rates of women in Objective 1 
regions increased significantly 
more than elsewhere in the Com­
munity, the rise being particularly 
marked in Spain and Ireland. In 
Objective 2 areas, the increase was 
less tharl in non-assisted parts, 
though only slightly so. 
The division of employment be­
tween sectors varies between 
assisted and non-assisted regions, 
largely reflecting the differing im­
portance of agriculture. In 1991, 
over 16% of all those employed in 
Objective 1 regions across the Com­
munity worked in agriculture as 
against under 5% in non-assisted 
areas. This marked difference, in 
combination with the continuing 
large-scale job losses in agriculture, 
has significant implications for em­
ployment. In essence it means that 
proportionately more jobs have to 
be created in industry and services 
in Objective 1 regions than else­
where to compensate for the 
agricultural jobs being lost. 
Between 1986 and 1991, the growth 
in employment in both industry and 
services in Objective 1 regions was 
higher than in unassisted areas. 
Nevertheless, because of the sub­
stantial job losses in agriculture, 
total employment rose by less in 
Objective 1 regions than elsewhere 
in the Community. 
In Objective 2 regions across the 
Community as a whole, the increase 
in employment over this period was 
higher than in non-assisted areas in 
industry and services as well as in 
total, though there were significant 
variations in experience between 
Member States. Only in France and 
15 
Summary 
the UK was the rise in industrial 
employment in assisted regions 
more than in other regions in the 
country, and only in Germany were 
proportionately more jobs created 
in services in assisted regions than 
in others. 
The location of high-tech, high 
growth industries across the 
Community is an important deter­
minant of the regional pattern of 
economic growth over the long-
term. In practice, these are very 
unevenly distributed between re­
gions. In 1989, the latest year for 
which data exist, they accounted for 
only 16% of manufacturing employ­
ment in Objective 1 areas as 
opposed to 27% in non-assisted 
parts. Only Ireland of the less de­
veloped areas had a higher 
proportion of manufacturing em­
ployment in high growth industries 
than the average for unassisted 
areas. 
Although the disparity was not so 
marked for Objective 2 regions, the 
share of manufacturing employ­
ment in these industries, at 23% 
was, nevertheless, some way below 
that in less disadvantaged areas. At 
the same time, there is evidence of 
a narrowing of the gap over the 
1980s. 
In contrast to high growth indus­
tries, low growth industries — such 
as iron and steel or clothing and 
footwear — are disproportionately 
located in problem regions. Indeed, 
their problems stem partly from 
this fact. In 1989, low growth indus­
tries accounted for over 36% of 
manufacturing employment in Ob­
jective 1 regions — and for as much 
as 45% in Portugal and over 50% in 
Greece — as compared with under 
25% in non-assisted areas. In Objec­
tive 2 regions, their share was 28%, 
and over 30% in the Netherlands, 
Belgium and Italy — though in the latter, this was not much different 
from the share in unassisted parts 
ofthe country, partly because ofthe 
importance of a dynamic clothing 
industry. 
For both Objective 1 and Objective 
2 regions, employment in low 
growth industries tended to fall by 
more than in non-assisted areas 
over the 1980s. 
Women in 
employment 
A dominant feature of the Com­
munity labour market in the 1980s, 
elaborated in Chapter 6, was the 
growth in importance of women, 
continuing a trend dating back to 
the 1960s. In 1960, only around 30% 
of women of working-age were econ­
omically active. By 1991, the figure 
had risen to over 40%. However, in 
th'e Southern Member States, in 
particular, though also in Ireland, 
the number of women in the labour 
force, while increasing rapidly, is 
still relatively small at only around 
35% ofthe total. 
The growth in importance of women 
is even more striking with respect 
to employment. Between 1965 and 
1991, while the number of women in 
employment in the Community in­
creased by over 13 million, the 
number of men fell by 1 million. 
Women were, in effect, entirely 
responsible for the growth in em­
ployment over this period. Though 
the employment of men increased 
during the 1980s, the growth of fe­
male employment was some seven 
times greater (7 million as opposed 
to 1 million). In no other developed 
part ofthe world was such a pattern 
evident. 
In contrast to the fall in activity 
rates for men in the older age 
groups, activity rates for women of 50 and over increased during the 
1980s in all countries except for 
Greece. The main growth in female 
activity in this period, however, was 
among women aged between 25 and 
49 — the age when, for a great many 
women, taking care of a family 
and/or running a home tends to con­
flict most with the pursuit of a 
working career. 
The growth in activity among this 
age group in a number of Member 
States has been evident for over 
30 years. At the beginning of the 
1960s, in all parts of the Com­
munity, the working careers of 
women tended to be interrupted 
when they got married and had 
children. Activity rates, therefore, 
were at a peak before this age and 
declined significantly and, in most 
countries, remained at a low level 
thereafter. Since 1960, activity 
rates for women of 25 and over have 
increased markedly throughout the 
Community, the process for the 
most part starting later in th South­
ern and less developed Member 
States than in the North. 
The increase has been especially 
pronounced in Denmark, Portugal 
and France, where the curve de­
scribing activity rates for women at 
different age groups resembles an 
inverted "U", with high activity for 
those in their 30s and 40s, in much 
the same way as for men. In the UK 
and Germany, though activity rates 
for women of child-bearing age have 
also risen significantly over the past 
30 years, the curve still tends to dip 
for women in their 30s, signifying 
some interruption in working 
careers because of family responsi­
bilities. 
In all other Member States, al­
though there have been substantial 
increases in activity, activity rates 
tend to decline from around the age 
of 30 onwards. In these countries, 
- 16 
Summary 
however, the evidence suggests that 
activity rates for women of 30 and 
over may well increase as younger 
generations grow older. 
One ofthe most striking features of 
the rise in activity for women in the 
1980s was that it occurred much 
more among women with children 
than for those without. For this 
group, the average rate of activity 
went up from 50% to 60% between 
1984 and 1991. Nevertheless, 
marked differences in labour force 
participation between women with 
family responsibilities and those 
without still exist in many parts of 
the Community. 
In 1991, 84% of single women aged 
25 to 49 in the Community were 
members of the labour force, 
whereas the figure for married 
women without children was only 
67%. In many parts of the South and 
in Ireland, the difference between 
the two was over 30%. In these 
countries, as well as in the Benelux 
countries, being married had a 
much greater effect on activity than 
having children, reflecting the in­
fluence of social and cultural factors 
as well as household responsi­
bilities. Only in Germany and the 
UK did the presence of a child re­
duce the activity rate of women by 
more than 10% — by as much as 
15% in the UK—though having two 
or more children depresses activity 
rates in virtually all Member 
States. 
Throughout the Community, activ­
ity rates of women tend to be higher 
the higher their level of educational 
attainment. In 1991, the average 
activity rate for women of 25 to 49 
who had completed higher educa­
tion or training was around 80% or 
more in all Member States, much 
the same or only marginally lower 
than for men. By contrast, for 
women with only basic education or less, the activity rate was less than 
60% in nine Member States and in 
two of these, Ireland and Greece, 
less than 40%. 
Many of the women who joined the 
labour force in the 1980s took up 
part-time jobs, which expanded 
rapidly over this period. In 1991, 
over 28% of women worked part-
time as compared with only 4% of 
men. Largely as a result, whereas 
women accounted for 40% of the 
numbers in employment in the 
Community in 1991, they accounted 
for under 35% ofthe total number of 
hours worked. 
Part-time working is most preval­
ent among older women — 50 years 
and over — rather than among 
women of child-bearing age. Never­
theless in many Member States 
significant proportions of women in 
the latter age group work part-time 
— 63% in the Netherlands, 45% in 
the UK, 40% in Germany and 32% 
in Denmark. In these countries, in 
particular, but also elsewhere, 
many more married women worked 
part-time in 1991 than single 
women, and more women with 
children than without. Part-time 
employment for women, therefore, 
in many countries, is associated 
with family responsibilities. 
More women than men in the Com­
munity are also employed in 
temporary rather than permanent 
jobs, many of these — 36% in 1991 
— being part-time. For the majority 
of women, working in temporary 
jobs was a matter of necessity 
rather than choice. 
The large influx of women into the 
labour market has not been accom­
panied by any major diversification 
as regards the jobs they do. The 
importance of part-time working, 
which is predominantly a feature of 
service activities, has reinforced the segregation of women in employ­
ment. Over 75% of women in work 
were employed in services in 1991 
as compared with under 50% of 
men. 55% of women worked in just 
two broad sectors — health, educa­
tion and other services and 
distribution and catering — a 
higher proportion than in the early 
1980s. 
At the occupational level, two 
trends are evident. Substantial 
numbers of women are becoming 
better educated, acquiring more 
qualifications and acceding to more 
senior positions. For these women, 
career patterns are becoming more 
like those of men. However, they 
tend to be concentrated in public 
sector or similar types of profes­
sional jobs. At the same time, there 
has been an even larger increase in 
women employed in lower level ac­
tivities, particularly clerical and 
service jobs. For these women, there 
is much less evidence of improve­
ment in employment opportunities. 
The division between men and 
women in employment is a major 
reason for the persistence of signifi­
cant disparities in wage levels. The 
application ofthe principle of "equal 
pay for equal work" has been of 
limited effectiveness in circum­
stances where jobs are unevenly 
distributed between men and 
women, and where different market 
values are placed on types of work 
which are similar>but which are 
done on the one hand by men and on 
the other by women. 
Employment 
protection and 
labour force 
adjustment 
Measures regulating the ability of 
employers to shed labour and to 
17 
Summary 
choose atypical forms of employ­
ment exist in all Member States, 
though with widely varying degrees 
of stringency, as described in Chap­
ter 7. In all countries, workers are 
protected against unfair dismissal 
and in most they receive monetary 
compensation when made redun­
dant. In all countries also, special 
regulations apply to collective 
redundancies, requiring prior noti­
fication and the implementation of 
a statutory procedure designed to 
avoid lay-offs where possible or to 
alleviate their effect. 
Mandatory periods of notice and 
severance payments impose signifi­
cant costs on firms in a number of 
Member States. The average cost in 
the Community as a whole amounts 
to the equivalent of some 22 weeks' 
pay, though in Greece, Spain and 
Italy, it is over 40 weeks. White 
collar workers, who receive an aver­
age of 26 weeks' pay, tend to be 
significantly better protected than 
blue-collar workers, for whom the 
average is 16 weeks. Entitlement to 
severance pay increases with age 
throughout the Community. 
Fixed-term contracts give firms the 
ability to engage workers on a tem­
porary basis and, therefore, the 
possibility of avoiding the intention 
of employment protection regula­
tions. Apart from Denmark, Ireland 
and the UK, where such regulations 
are relatively weak, all Member 
States have restrictions on the use 
of fixed-term contracts. In Belgium 
and the Netherlands, this is partly 
exercised through collective bar­
gaining procedures. 
The trend towards labour market 
deregulation in the 1980s had, in 
general, only a limited effect on em­
ployment protection regulations. In 
only three countries — France, Por­
tugal and the UK — were they 
significantly weakened, while in two countries — Italy and Spain — 
they were strengthened. In all five 
countries, however, regulations 
governing the use of fixed-term con­
tracts were liberalised. 
Surveys of employers' opinions con­
firm that protection regulations are 
perceived as being most severe in 
Italy and least severe in the UK. 
Over the second half of the 1980s, 
moreover, there was little change in 
these perceptions. 
Community Labour Force Survey 
data on involuntary job losses pro­
vide some evidence on how 
regulations affect actual behaviour. 
With some notable exceptions, 
there seems to be the expected ne­
gative relationship between the 
incidence of dismissal and the per­
ceived severity of employment 
regulations, in the sense that coun­
tries with the highest incidence — 
Denmark and Ireland — had rela­
tively weak regulations and 
countries with relatively low 
incidence — Italy and the Nether­
lands — had the most stringent 
regulations. On the other hand, the 
incidence of dismissals was also low 
in the UK and Portugal, both of 
which had relatively weak protec­
tion regimes. 
There is, in addition, some evidence 
that countries where restrictions on 
the use of fixed-term contracts were 
relaxed over the 1980s — Spain, 
France and Portugal — also experi­
enced some growth of temporary 
employment. In France, such con­
tracts may have become the main 
means of entry into employment. 
Employment protection regulations 
are supported by certain active la­
bour market policies in a number of 
countries, the aim being to help pre­
vent redundancies happening 
(through subsidising short-term 
working, for example) or to assist employment restructuring where 
job losses do occur. In large 
measure, expenditure on these 
policies serves to compensate for the 
constraints imposed on labour shed­
ding. This is particularly the case in 
France and Italy where significant 
funds are available for employment 
adjustment. 
Community-wide 
framework for 
employment 
Unemployment is the major econ­
omic and social challenge facing the 
Community in the 1990s. The prob­
lem is to provide employment 
opportunities not only for the mil­
lions now unemployed but also the 
equally large numbers of inactive 
people deterred from entering the 
labour market by the acute short­
age of jobs. This, in turn, means 
achieving a higher and more stable 
rate of economic growth, translat­
ing, this more effectively into jobs 
and securing an equitable distribu­
tion of work between regions and 
social groups. 
As described in Chapter 8, the 
Commission has adopted a com­
munication setting out a common 
framework for policy action in fa­
vour of employment creation which 
takes account ofthe need to accom­
modate local variations in the scale 
and nature of the problem. The 
heads of state or government, meet­
ing in Copenhagen, requested the 
Commission to prepare a White 
Paper on the issues of employment, 
growth and competitiveness. These 
two processes are complementary. 
The purpose of the framework is to 
put in place a strategic process for 
more concerted and collective action 
— by all the Community institu­
tions and the member States — 
18 
Summary 
towards more employment-intens­
ive growth. The aim is to focus on 
the employment problem, not just 
on the unemployment problem. An 
essential starting-point is a recogni­
tion of the major differences which 
exist between Member States in the 
level of employment they have suc­
ceeded in sustaining, in their level 
of public expenditure and the way 
they raise revenue to finance it and 
in their systems of labour market 
organisation. 
Many of these issues are inter-re­
lated and the programme of work in 
the Employment Framework, as 
well as the issues to be addressed in 
the White Paper, reflects this, by 
setting out a number of specific 
issues, or aspects of the overall 
problem which need to be addressed 
in greater depth. The analyses and 
proposals which will be prepared 
are designed to point us towards the 
main ways in which the fundamen­
tal changes required in order to 
achieve a more employment-intens­
ive pattern of growth can be 
effectively pursued across the Com­
munity. 
-19 
Summary 
20 
Employment prospects 
Part I Employment prospects 
Chapter 1 Employment in the Community - trends and prospects 
Chapter 2 Short-term economic and employment outlook 
-21-
Employment prospects 
22 
Chapter 1 Employment in the Community - trends and prospects 
Chapter 1 Employment in the Community -
trends and prospects 
The level of employment in the Community has been too 
low for some time. Some Member States have been more 
successful than others in translating growth into jobs. 
Job creation has been heavily concentrated in services, 
though these have not escaped the present recession 
For many years, the Member States 
of the Community, taken together, 
have been less successful than other 
developed countries in generating 
employment opportunities. This 
comparative failure has become 
more significant since the early 
1970s when the Community, in 
common with a number of other in­
dustrialised parts of the world, 
experienced a slowdown in econ­
omic growth. 
Since then, Community GDP has 
grown at little more than half the 
rate achieved in the two previous 
decades. As a result, the rate of job 
creation has been insufficient to 
provide employment for all those 
wanting to work. This has led, not 
only to high and rising unemploy­
ment over much ofthe period, but to 
large numbers of people being ob­
liged to remain, or to become, 
inactive. 
As examined in detail in Chapter 6, 
a large proportion ofthe people who 
are deprived of the opportunity of 
working are women. They also in­
clude, however, many older people 
who have had to accept premature 
retirement. There is no ideal way of measuring 
the performance of the Community 
in providing employment. One basic 
indicator is the numbers in work 
relative to the population of work­
ing age, here defined as all those aged 15 to 64. While not everyone in 
this age group would necessarily 
like to work given the opportunity, 
it is reasonable to assume that the 
proportion which does is unlikely 
to differ significantly between 
1 Employment rates in the Community and elsewhere, 
1970-1992 
75 % population (15-64) 
70 K 
65 h 
60 r 
55 75 
_J 70 
-\ 65 
A 60 
55 
1970 1972 1974 1976 1978 1930 1982 1984 1986 1988 1990 1992 
-23-
Chapter 1 Employment in the Community - trends and prospects 
countries at a similar stage of econ­
omic and social development. It is 
also reasonable to assume that 
long-term changes will affect all 
Community Member States in a 
similar way. 
In 1992, the total numbers em­
ployed in the Community amounted 
to 60% of the working-age popula­
tion (Graph 1). This compares with 
a figure of 70% in the US, slightly 
more than this in other parts of 
Western Europe — the EFTA coun­
tries — and almost 75% in Japan. 
To put this difference into perspec­
tive, it means that the Community 
would currently need to have 
around 23 million more jobs — more 
than the total number employed in 
France — to approach the employ­
ment level of these other countries. 
Moreover, whereas the employment 
rate — the numbers in work in rela­
tion to working-age population — in all these other countries was higher 
in 1992 than in the early 1970s, 
despite the deterioration in the in­
ternational economic environment 
they all faced, in the Community it 
was lower. Although the Com­
munity succeeded in increasing its 
employment rate during the favour-
able period of world recovery 
between 1985 and 1990, it failed to 
close the gap with other countries 
significantly. 
Since then the Community employ­
ment rate has fallen, though by less 
than in the EFTA countries. Only 
Japan seems to have succeeded in 
avoiding a fall in the rate over this 
period (though it should be noted 
that the figures for 1992 are still 
provisional). 
The decline in the employment rate 
in the Community, both between 
1990 and 1992 and from the early 
1970s to the mid-1980s, is reflected 
2 Unemployment rates in the Community and elsewhere, 
1970-1992 
% labour force 
12 r 
10 h 
8 r -i 12 
H 10 
H 8 
H 6 
H 4 
2 r 
Q I • I • I • I l J i 1 1 1 1 ,,,!,, i_ 1 1 1 1 1 1 P 0 
1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 in significant increases in unem­
ployment. This rose from under 3% 
in 1973 to almost 11% in 1985 and 
from just over 8% in 1990 to just 
under 10% in 1992 (Graph 2). In the 
earlier period — at least up to 1982 
— unemployment also rose mar­
kedly in the US, though both the 
EFTA countries and Japan man­
aged to keep unemployment down. 
In the later period, only Japan has 
avoided a sharp increase in the rate. 
A number of the EFTA countries 
experienced a rise to levels unpre­
cedented in recent history — in 
Finland, the rate in 1992 was close 
to 13%. 
Unemployment 
and activity rates 
Where the Community has failed 
over the past 20 years is not only in 
keeping unemployment down, but 
in providing opportunities for 
people even to join the labour mar­
ket. Rates of participation in the 
labour force have, therefore, not in­
creased in line with those in other 
developed countries. Participation 
rates of women in the Community 
have increased, if by less than in the 
US and other parts of Europe. This 
has been offset, however, by a de­
cline in the participation of men, 
especially in older age groups as 
early retirement has been much 
more common than in other coun­
tries. 
The comparison between the Com­
munity and the US is especially 
revealing. In the early 1970s, both 
had similar employment rates — of 
around 62-63% of working-age 
population — and similar rates of 
labour force participation — of 
around 65-66% of people in this age 
group. Between 1973 and 1985, 
however, the employment rate in 
the US increased to 67%, whereas 
in the Community it declined to 
24 
Chapter 1 Employment in the Community - trends and prospects 
57%. Over this period in the US, an 
additional 6% of working-age 
people were brought into the labour 
force; in the Community, the rate of 
participation declined slightly 
(Graph 3). In the Community, 90% 
of the fall in the employment rate 
over this period was due to in­
creased unemployment; in the US, 
more than all ofthe rise was caused 
by higher participation. 
The story for the EFTA countries is 
similar to that for the US, though 
on a smaller scale. Between 1973 
and 1985, these countries taken 
together succeeded in increasing 
their employment rate from just 
over 71% of the working-age popu­
lation to 73%, despite an increase of 
over 1% in the unemployment rate, 
by raising their participation rate 
by almost 3%. 
The only time the Community has 
succeeded in increasing the rate of 
labour participation significantly 
over the past 30 years or so was 
between 1985 and 1990. In those 
five years, the participation rate 
went up by 2% of the working-age 
population. The increase in the em­
ployment rate which occurred over 
this period, of just over 372%, was, 
therefore, mainly due to more 
people entering the labour market 
rather than a reduction in unem­
ployment. Indeed, only around 30% 
of the additional jobs created were 
filled by people who had previously 
been unemployed, the rest being 
taken by new entrants. 
During these five years, however, 
an even more rapid rate of job cre­
ation was achieved in the US. There 
the employment rate increased by 
4% and labour force participation 
went up by 3%. In the EFTA coun­
tries and Japan, the rise in the 
employment rate over this period, 
though more modest than in the 
Community, was also due much more to an increase in participation 
than to a fall in unemployment. 
Although the figures for 1992 are 
still provisional, it seems that the 
fall in the employment rate which 
occurred in all countries, apart from 
Japan, broadly matched the rise in 
unemployment. The increase in 
participation, which in the US and 
the EFTA countries had gone on for 
20 years, appears to have come to an 
abrupt halt or even to have gone 
into reverse. In the Community, 
while there may have been a slight 
rise in participation between 1990 
and 1992, it was much smaller than 
in the preceding five years — per­
haps because of the growing lack 
of jobs. In Japan, by contrast, the 
rise in participation seems to have 
accelerated. 
The clear message from the experi­
ence of the 20-year period, 1970 to 
1990, is that employment growth is related more to increased numbers 
entering the labour market than to 
falling unemployment. Moreover, 
what happened in the second half 
of the 1980s in the Community — 
when labour force participation 
rose by more than unemployment 
fell — is typical of wider interna­
tional experience. Given the 
Community's low level of partici­
pation, by international standards, 
there is no reason to believe that 
future periods of employment 
growth will bring different results. 
Even if historically high rates of 
job creation could be restored, un­
employment would be slow to fall 
unless fundamental changes take 
place in the workings of the Com­
munity's economies and labour 
markets. 
The relationship between econ­
omic growth and job creation is 
examined in more detail in the 
next section. 
3 Changes in the activity of the population in the 
Community and elsewhere, 1973-1992 
Average annual change (% working-age population) 
2 r -i 2 
J -1 
-2 
73/80 80/35 85/90 90/92 73/80 80/85 85/90 90/92 73/80 80/85 85/90 90/92 73/80 80/85 85/90 90/92 
EUR12 EFTA US Japan 
25 
Chapter 1 Employment in the Community - trends and prospects 
Growth and 
employment 
For the Community, as well as other 
countries, there is a close relation­
ship between economic growth and 
the raté of job creation. Periods of 
high growth of output have always 
been accompanied by relatively 
large increases in employment, 
whereas periods oflow growth have 
invariably been associated with 
little, if any, rise in the numbers in 
work. 
The 1980s demonstrate this vi­
vidly. With a short lag, of around 6 
months on average — though va­
rying somewhat over time — the 
numbers employed tended to 
change more or less in proportion 
to changes in output as employers 
adjusted their workforces to match 
production levels. As the growth of 
GDP gradually picked up from 
1981 to 1989 — with a small hic­
cough in 1987 — the extent of the 
fall in employment at first lessened 
and then became a rise after 1984 
(Graph 4, in which GDP is lagged 
by two quarters to allow approxi­
mately for the average delay in 
adjustment of employment to out­
put). By 1988, employment was 
rising at around 2% a year. 
After 1989, GDP growth in the Com­
munity slowed significantly. 
Although employment was slow to 
respond after a prolonged period of 
accelerating growth, the rate of in­
crease fell sharply in 1991 and 
became negative in 1992, when it 
became clear that the economic 
slowdown was unlikely to be quickly 
reversed. 
While the pattern of GDP growth 
since 1980 has differed somewhat in 
other countries, there is some broad 
similarity in the timing of booms 
and slumps — though in Japan the scale of fluctuation is much smaller 
— reflecting the highly interrelated 
nature of the global economic sys­
tem. In other developed countries, 
especially the EFTA countries and 
the US, the recovery in GDP 
growth, after the second oil price 
shock at the beginning ofthe 1980s, 
occurred a year or two sooner than 
in the Community. Up to 1989 in 
the US and 1990 in EFTA, GDP 
grew at around 3% a year or more. 
Since then it has declined sharply to 
zero or below (Graphs 5, 6 and 7). 
There is also some broad similarity 
in the pattern of employment 
changes. In all the other countries, 
there is the same kind of corre­
spondence between movements in 
output and the numbers in work as 
in the Community, though in the 
US especially the precise relation­
ship between the two has tended to 
vary over time. In all the countries, 
employment increased at a rela­
tively high rate over much of the 
1980s when output growth was also 
high. Since then, it has either de­
clined (in the EFTA countries), 
remained more or less unchanged 
(in the US) or risen more slowly (in 
Japan). 
To summarise the relationship 
more precisely, GDP in the Com­
munity grew on average at only just 
over 1% a year between 1980 and 
1985 and employment fell by almost 
V2% a year (Graph 8). From 1985 to 
1990, GDP growth averaged 3% a 
year and employment rose by over 
1V2% a year. Between 1990 and 
1992, GDP rose by only around 1V2% 
a year and employment fell slightly. 
From this, it would appear that 
GDP needs to grow by around 2% a 
year in the Community to generate 
an increase in employment. How­
ever, the experience of the 
1985-1990 period is unusual in 
producing such a high rate of em­
ployment growth relative to the rise in output — a much higher rate of 
output growth was needed in earlier 
periods. 
The relationship between GDP and 
employment growth in the EFTA 
countries seems to have changed 
over time, and now seems to be simi­
lar to that in the Community. Thus, 
between 1980 and 1985, output 
growth averaging 2% a year gener­
ated employment growth of only 
just under 1% a year, the same as in 
the next five years despite the 
higher GDP growth (Graph 8). 
From 1990 to 1992, the very small 
rise in output was accompanied by 
a fall in employment of over 1V2% a 
year. 
By contrast, in the US, a rate of 
output growth over the 1980s simi­
lar to that in the EFTA countries — 
and not a great deal higher than 
that in the Community — gener­
ated much larger increases in 
employment. Moreover, the small 
fall in GDP between 1990 and 1992 
led to no major reduction in the 
numbers in work. A relatively mod­
est upturn in GDP would, therefore, 
seem to be sufficient to raise em­
ployment. 
Finally Japan — with much smaller 
increases in employment than in 
the US — broadly matching the 
growth in its population of working 
age — has achieved significantly 
higher rates of GDP growth since 
1980. 
Growth and 
employment in 
Member States 
The growth of output in Member 
States since 1980 has tended to fol­
low a similar pattern to that for the 
Community as a whole, with a few 
notable exceptions. In particular, 
in Denmark, the average growth 
26 
Chapter 1 Employment in the Community - trends and prospects 
GDP and employment growth, 1980-1992 
4 The Community 
Annual change (%) 
7 r 
H 5 
4 3 5 EFTA countries 
Annua) change (%) 
4 3 
H 1 
1980 1982 1984 1986 1988 1990 1992 1980 1982 1984 1986 1988 1990 1992 
6 The United States 
Annual change (%) 
7 r 7 Japan 
Annual change (%) 
GOP (lagged 2 
quarters) 
4 5 
-3 
1980 1982 1984 1986 1988 1990 1992 1980 1982 1984 1986 1988 1990 1992 
27 
Chapter 1 Employment in the Community - trends and prospects 
rate in the period 1985 to 1990 was 
significantly lower than elsewhere, 
with the exception of Greece, and 
less than over the preceding five 
years. On the other hand, Danish 
growth between 1990 and 1992 was 
higher than the Community aver­
age (Graph 9). Growth in Germany 
over the latter period was also sig­
nificantly higher, on average, than 
in other countries, because of the 
boost to output from the substantial 
expenditure in the new Lander, 
while in the UK, GDP fell signifi­
cantly, reflecting the fact that the 
current recession started earlier 
than in other parts of Europe. These 
differences in the timing ofthe econ­
omic cycle will tend to affect the 
relationship between output growth 
and employment in individual 
Member States over the periods 
examined here. 
For most Member States, GDP 
growth in the first half of the 1980s 
averaged barely 1% a year, in­
creased to around 3% or more in the 
second half and has fallen to 2% or 
less since 1990 (Graphs 9, 10 and 
11, in each of which average growth 
of GDP is lagged two quarters). Em­
ployment growth varied in a similar 
way. 
Between 1980 and 1985, the only 
countries to achieve any significant 
growth in employment were Den­
mark, Portugal, the Netherlands 
and Greece. In both the former two, 
GDP growth was higher than else­
where at over 2% a year. In the 
Netherlands, there was a big in­
crease in part-time employment, as 
noted below, which effectively re­
sulted in available work being 
shared among more people. In 
Greece, the numbers in work in­
creased without any obvious 
explanation. In Ireland, there was a 
relatively high rate of GDP growth 
(over 2V2%) without a corresponding 
rise in employment. Between 1985 and 1990, employ­
ment rose in all Member States. 
Only in France, Italy, Belgium and 
Greece was the increase much 
below 1% a year, while in Spain, 
Portugal, the UK, Germany and 
the Netherlands, the rise was 
around 2% a year or more. In the 
former three countries, the rate of 
GDP growth was also well above 
the Community average. In the 
Netherlands, a high proportion of 
the additional jobs were taken 
by part-time workers — many of 
them working very few hours a 
week — as in the preceding period. 
(There is also a potential problem 
of discontinuity in the figures for 
employment caused by the major 
revision in the Dutch LFS in 1987.) 
Only Germany experienced a 
higher rate of employment cre­
ation than would have been 
expected given the growth of 
output. 
Although the relationship between 
GDP and employment growth as be­
tween countries was by no means 
uniform over this period — France 
and Italy, for example, both 
achieved a higher rate of GDP 
growth than the Community aver-
age but only a small rise in 
employment — in general, few 
countries succeeded in increasing 
the numbers in work significantly 
without having an equivalently 
high growth of output. 
Similarly, between 1990 and 1992, 
with the exception of Italy, the only 
countries to have experienced a sig­
nificant increase in the numbers 
employed were those achieving an 
above average rise in GDP — 
Germany, Portugal, Belgium, Lux­
embourg and the Netherlands. At 
the same time, a relatively high rate 
of GDP growth was not sufficient to 
prevent employment from falling in 
Spain, or not increasing at all in 
Ireland. The evidence of the period 1980 to 
1992 demonstrates that, while few 
countries have succeeded in raising 
employment significantly without 
relatively high increases in output, 
the rate of job creation which has 
accompanied a given rate of GDP 
growth has varied markedly be­
tween countries. Some, like the 
Netherlands, have managed to in­
crease the numbers in work more 
than others with higher rates of out­
put growth. Equally, high growth 
countries like Ireland and Spain 
have not consistently translated 
this into job creation, despite a par­
ticularly acute need for more jobs in 
both Member States. 
The role of increased part-time 
working and reductions in average 
hours of work in creating additional 
jobs is examined below. 
Growth of 
employment of 
men and women 
Most of the additional jobs created 
in the Community in the 1980s were 
taken by women. Whereas the num­
ber of men in employment in 1990 
was only around 1% higher than in 
1980 (an additional 1 million em­
ployed) the number of women in 
work increased by almost 16% over 
the decade, or by over 7 million. In 
no other developed part ofthe world 
was the divergence in rates of em­
ployment growth of men and 
women so great. 
This divergence was particularly 
pronounced in the Community in 
the two periods of slow growth — in 
the early part ofthe 1980s and after 
1990 — when total employment 
either fell or failed to increase. Be­
tween 1980 and 1985, the number 
of men in work declined by an aver­
age of V2% a year while the number 
28 
Chapter 1 Employment in the Community - trends and prospects 
GDP and employment growth, 
1980-1985,1985-1990,1990-1992 
8 The Community and elsewhere 
Average annual change (%) 9 Denmark, France, Germany and Luxembourg 
Average annual change (%) 
5 r i 5 
Denmark Germany France Luxembourg -3 
80«S 85/90 90/92 80/85 85fl0 90/92 80/85 85/90 90/92 8005 85/90 90/92 SOBS asoo 90/92 «o/ss saw 90/92 ao»85 ss/90 90/92 aoos 85/90 90/92 
10 UK, Italy, the Netherlands and Belgium 
Average annual change (%) 
5 r 1 i 5 
H 3 
^ -1 11 Spain, Ireland, Greece and Portugal 
Average annual change (%) 
• GDP 
80/85 85/90 90/92 80/85 85/90 90/92 8085 85/90 9002 8085 85/9090/92 I • Employment! 
i IIIU ill Lli 
Spain Ireland Greece Portugal 
80*5 85/90 90/92 80/85 85/90 90/92 60/85 85/90 90/92 90/85 85/9090/92 - 3 
29 
Chapter 1 Employment in the Community - trends and prospects 
of women employed rose (Graph 
12). In 1991 — there are no data as 
yet for 1992 — employment of men 
fell significantly and employment of 
women increased by around V2%, 
partly reflecting the concentration 
of job losses in industry, as shown 
below, where many more men than 
women work. In the intervening 
five years of high job creation, 
women accounted for 60% ofthe in­
crease in numbers employed, men 
for only 40%. 
In other developed countries, al­
though the number of women in 
employment has tended to rise by 
more than the number of men, in all 
cases there were significantly more 
men in work in 1990 than ten years 
previously. 
In the EFTA countries and the US, 
the proportionate rise in women's 
employment in the 1980s was simi­
lar to that in the Community with, in the former, around 70% of the 
increased numbers in work being 
women and, in the latter, over 60%. 
In Japan, on the other hand, the 
division of additional jobs between 
men and women was more even, 
with only just over 50% of the rise 
in employment between 1985 and 
1990 being accounted for by women. 
As in the Community, men bore the 
brunt of the job losses in 1991 in 
both the US and in EFTA countries, 
accounting for around 80% of the 
reduction in the numbers employed. 
Employment of 
men and women 
in Member States 
Women gained jobs relative to men 
throughout the 1980s in all Com­
munity countries. Between 1980 
and 1985, the number of men in 
work declined in 8 ofthe 10 Member 
12 Changes in employment by sex in the Community and 
elsewhere, 1980-1991 
Average annual change (%) 
• Total • Men ! 
1 r 
-1 h 
80/85 85/90 90/91 80/85 85/90 90/91 80/85 85/90 90/91 80/85 85/90 90/91 States for which data are available 
— and only increased significantly 
in Denmark. In all but Germany — 
where it remained unchanged — 
the employment of women in­
creased. 
Between 1985 and 1990, when the 
employment of both men and 
women rose everywhere except Bel-
gium, only in Germany, the 
Netherlands and the UK did the 
growth of men's jobs broadly match 
that of women's, and only in Luxem­
bourg was it more rapid. 
In 1991, in three of the four coun­
tries in which employment fell, the 
reduction was predominantly 
among men, the exception being 
Greece where almost all the jobs 
lost were held by women. 
The relative growth of women in 
employment is examined in more 
detail in Chapter 6. 
Changes 
in hours worked 
in Member States 
Part of the explanation for dif­
ferences between the growth in 
output and employment across the 
Community lies in the changes in 
average hours worked by the people 
employed in the different Member 
States. These changes in average 
hours reflect variations between 
countries in both the growth of part-
time jobs and the standard working 
week. 
Between 1983 (the earliest year for 
which comparable data are avail­
able) and 1991, the average hours 
worked per week by those em­
ployed in industry and services 
declined by 4% in the Community 
as a whole (Graph 13). Although all 
Member States (except for the UK, 
-30-
Chapter 1 Employment in the Community - trends and prospects 
where there was a small rise) re­
corded a decline over this period, 
the extent of the reduction varied 
between them. In the Netherlands, 
the drop in hours was 13% — or 
around 1% a year — which goes 
some way to explaining the rela­
tively high rise in numbers 
employed noted above. In Belgium, 
Denmark and Germany, the reduc­
tion was 5% or more. In the other 
countries, however, the decline in 
average hours was less than 2% 
over these 11 years (see Box, p. 33, 
for a description ofthe data referred 
to here). 
Since the countries which showed 
the largest reductions in hours be­
tween 1983 and 1991 also tended to 
be those with a relatively low aver­
age at the beginning of the period, 
there is no evidence of convergence 
over the 1980s. 
Because of these relative changes in 
hours worked, employment growth 
measured in terms of the numbers 
in work can give a highly mislead­
ing impression ofthe change in the 
amount of work performed. In 
terms of full-time equivalent 
workers, employment in Belgium, 
Denmark and France between 1983 
and 1991, rose by only around a 
third ofthe increase in numbers (3% 
as opposed to 9% in the former two, 
1% as against over 3% in the last) 
(Graph 14 and Box, p. 33). In the 
Netherlands, the rise was much less 
than half and in Germany only 
slightly more than half. In both 
Greece and Ireland, small increases 
in numbers employed were actually 
small decreases if measured in full-
time equivalent terms. 
An alternative way of looking at this 
is that these countries have man­
aged to convert a given rate of 
growth in the amount of work into 
significantly more jobs than others 
through a reduction in the average 13 Hours worked in industry and services in the Member 
States, 1983 and 1991 
Average hours per week per person employed 
50 r 
— 1983 • 1991 
E1987& 1991, P 1986 & 1991 
40 -1 50 
14 Changes in employment in the Member States, 1983-1991 
30 
25 
20 
15 
10 % change 
-i 30 
A 25 
-\ 20 
A 15 
H 10 
H 5 
-5 
NL E P D UK L DK B F GR IRL 
-31 
Chapter 1 Employment in the Community - trends and prospects 
hours worked per person. In Den­
mark, for example, over twice as 
many new jobs were generated over 
this period as in Italy, despite the 
fact that the amount of work per­
formed increased by less. Similarly, 
in Germany, the number of people 
employed went up by slightly more 
than in the UK, while the volume of 
work rose by only half as much. 
Part-time working 
The Member States where the num­
bers employed have risen most, 
relative to the volume of work, tend 
to be those in which part-time work­
ing has increased most. This is 
particularly true of the Nether­
lands, where two-thirds of the net 
addition to jobs in the 1980s were 
part-time rather than full-time 
(Graph 15). In Germany, France 
and Belgium, part-timers also ac­
counted for a significant proportion of the additional jobs over this 
period. 
On the other hand, in Greece — 
where there was also a marked rise 
in the numbers in work relative to 
full-time equivalent employment — 
part-time jobs actually declined 
while full-time jobs rose. In this 
case, the explanation for the rise in 
numbers employed lies in a reduc­
tion in hours worked by those 
employed full-time — resulting 
partly from the decline of agricul­
ture. In Spain, Portugal and Italy, 
as well as in Denmark, full-time 
employment rose over much of the 
period 1985 to 1990, while the num­
ber ofpart-timejobs either declined 
or remained unchanged. 
In 1991, the decline in numbers em­
ployed was predominantly among 
full-time workers — specifically in 
the UK and Ireland — while a high 
proportion of additional jobs cre-
15 Changes in full-time and part-time employment in the 
Member States, 1983-1991 
Average annual change (%) 
5 r -
4 h 
3 h 
2 r 
-1 r-
-2 
-3 
BDKDGBE F IRL I LNLPUK BOKOGfiE F W. I LNLPUK BDKDORE F H. I LNLPUK ated in those countries where em­
ployment rose — Belgium, 
Germany, Italy, the Netherlands 
and Portugal — were part-time. (It 
should be noted, however, that in 
Belgium, the increase in numbers 
employed in 1991 shown by the 
LFS, of around 272% or some 100 
thousand, was not matched by any 
significant fall in unemployment 
and was much greater than that 
shown by other sources.) By con­
trast, in Spain, the number of 
part-time jobs fell whereas full-time 
jobs rose (though Spanish LFS 
figures for the end of 1991 show a 
similar fall in both part-time and 
full-time employment). In Den­
mark, the reduction in employment 
was evenly split between the two. 
Self-employment 
A higher proportion of those in 
work in the Community are self-
employed than in other comparable 
countries. In part this is due to the 
greater importance of employment 
in agriculture in the Community. In 
most countries of the Community, 
around half or more of the people 
employed in the sector work for 
themselves. In 1990, 50% of the 
agricultural workforce was self-
employed in the Community, 
slightly more than in the US and 
Japan (43% and 47%, respectively), 
but less than in the EFTA countries 
(59%) (Graph 16). 
Nevertheless, self-employment is 
more important in industry and 
services in the Community than 
elsewhere, accounting for 13% of 
the numbers in work in 1990 as 
compared with under 12% in Japan 
and only around 7-8% in the EFTA 
countries and the US. Moreover, 
the proportion of self-employed in 
these two sectors taken together 
increased by more in the Com­
munity than in the other countries 
32 
Chapter 1 Employment in the Community - trends and prospects 
Data on hours worked and full-time equivalents 
The figures on average hours in the text, which are used to generate full-time equivalent figures, 
come from the Community Labour Force Survey and are for usual hours worked rather than for 
actual hours. In some ways, it would have been preferable to use the latter, since there is more 
reason to believe that respondents to the survey know how many hours they actually worked 
during the reference week than the number they usually work. Moreover the actual number of 
hours will in some degree tend to reflect the level of economic activity at the time — or the extent 
to which production is more or less than the normal level — and so, in principle, give a better 
indication ofthe relationship between the volume of employment and output. 
In practice, there are more problems with the actual hours data than with those for usual hours. 
Most importantly, the most frequently given reason for people working less than usual hours is 
holidays. Some 50% of those working fewer hours than usual — around 9% of the total number 
employed full-time — were on holiday for at least part of the reference week. This was the case 
for virtually all surveys carried out between 1983 and 1991, despite the fact that the reference 
week is supposed to be chosen so as to exclude periods when people are likely to be on holiday. 
Moreover, the distribution of people working less than normal hours, as well as of those who were 
on holiday, varies considerably across the Community. Around 40% of all those working less than 
usual hours and around a third of all those on holiday were in the UK in all survey years since 
1986, while before 1986 — and the inclusion of Spain and Portugal — the figures were over a half 
in both cases. Spain accounts for around 15% of all those working less than usual hours in the 
Community and for some 30% of those on holiday. 
In the UK, therefore, only around a half of respondents to the survey in 1991 worked normal hours 
during the reference week, which is also true of earlier years. Similar figures apply to Denmark 
and the Netherlands, holidays in both cases being the major reason for spells of absence. By 
contrast in all other countries apart from Spain and France, where the figures was around 
two-thirds, over 80% of respondents worked usual hours. 
Since it is unlikely to be the case that people in the UK.and Spain have significantly more time 
off for holiday in total than in other Member States — though it might be true of Denmark and 
the Netherlands — and since, with the information available, it is not possible to adjust the figures 
for this factor, the data for actual hours are liable to be misleading. 
The analysis in the text is, therefore, based on the data for usual hours. Although this is not an 
ideal solution, because of the possibility that people may have an inaccurate impression of the 
hours they usually work, some reassurance is gained from the fact that for most countries usual 
and actual hours are not significantly different, the exceptions being the countries noted above. 
In these countries, moreover, the difference between the two has remained reasonably stable over 
time. 
It is also the case that in every survey year only a very small proportion of respondents — around 
1% for the Community as a whole — worked fewer hours than usual during the reference week 
because of economic reasons. This proportion, furthermore, does not seem to vary with economic 
conditions — it was much the same in 1991, a year oflow growth in the Community, as in 1989, 
a year of high growth. This seems to suggest that variations in working time are not a common 
device for adjusting the volume of employment to the pressure of demand. Since, therefore, this 
effect is at most marginal, it is not a compelling reason for using actual hours data. 
Changes in full-time equivalent employment are estimated by multiplying the data for average 
usual hours worked per week by the numbers in employment. This, it should be noted, leaves out 
of account changes in the number of hours worked per year — for which no complete set of data 
exists — but it should give a reasonable indication of how the volume of employment changed over 
the period. 
-33 
Chapter 1 Employment in the Community - trends and prospects 
16 The importance of self-employment in the Community 
and elsewhere, 1980,1985 and 1990 
% total employed in sector 
70 r 
60 h 
50 
40 
30 
20 
10 1980 
1985 
1990 
EUR12 EFTA US Japan 
Agriculture IHII 
EUR12 EFTA US Japan 
Industry and services 70 
60 
50 
40 
30 
20 
10 
17 The importance of self-employment in the Member 
States, 1983 and 1991 
80 % total employed in sector 
60 h 
40 
20 -i 80 
A 60 
A 40 
20 
OK L ML ' D F UK IRL E12 B E P I GR DK L NL D F UK IRL E12 B E P I GR 
Agriculture Industry and services — by 2% of total employment. 
Indeed in the US, there was hardly 
any change over this period, while 
in Japan, the proportion fell by 2%. 
Self-employment 
in Member States 
Within the Community, the import­
ance of self-employment is greater 
in the Southern countries of Greece, 
Italy, Portugal and Spain than else­
where. This is due, however, to the 
relatively high numbers of self-
employed in industry and services 
in these countries rather than to 
more being employed in agricul­
ture. Indeed, in Italy and Spain, 
the proportion of self-employed 
working in agriculture was lower 
than the Community average in 
1991 — though Portugal along with 
Ireland had the highest proportion 
(Graph 17). 
In industry and services, self-
employed accounted for 28% of 
total employment in Greece in 
1991, 22% in Italy and for around 
17% in Spain and Portugal. Apart 
from these four, only in Belgium 
was the proportion higher than the 
Community average (13%), though 
in Ireland and the UK the figure 
was only marginally below. By con­
trast, the proportion in Germany 
and the Netherlands was only 
around 8% and in Denmark and 
Luxembourg 7%. 
Although the countries where self-
employment is most important in 
the Community tend predomi­
nantly to be the less developed, 
these nevertheless were also the 
ones which showed the largest rise 
in self-employment over the 1980s. 
In Greece, the share of self-
employed in total employment in 
industry and services increased 
by 8% between 1983 and 1991, in 
Ireland and Italy, it rose by some 
-34-
Chapter 1 Employment in the Community - trends and prospects 
4% and in Portugal by over 3% — 
as compared with a Community 
average increase over just over 2%. 
Only the UK ofthe more developed 
Northern countries experienced a 
rise of a comparable amount, 
though at the same time only 
Denmark showed a fall in the 
share. 
The importance of self-employ­
ment in agriculture also went up 
over this period, though by slightly 
less than in industry and services. 
In this case, however, no syste­
matic tendency is evident as 
regards the pattern of relative 
increases. The largest rises oc­
curred in France and the UK, as 
well as Luxembourg —of over 5% 
of employment in each case- — 
while four countries, the Nether­
lands, Belgium, Denmark and 
especially Portugal (where the fall 
was 9%) experienced a decline. 
Except in Portugal, the share of 
self-employment in all these coun­
tries was very similar (at around 
the Community average). 
Movements 
into and out of 
self-employment 
A number of Member States during 
the 1980s attempted to encourage 
the development of self-employ­
ment, and of small businesses, 
largely as a response to high unem­
ployment, but partly to increase the 
growth potential of the economy. 
The success or failure of this kind of 
policy is reflected in changes in the 
number of self-employed, but these 
show only the net change in those 
becoming self-employed relative to 
those who are no longer so. They 
reveal neither the scale of 
movement into and out of self-
employment nor what those 
becoming self-employed were doing 
beforehand. The Community Labour Force Sur­
vey gives an insight into both of 
these questions, insofar as respond­
ents were asked their employment 
status one year earlier. As always 
when the results depend on people's 
power of recall, they are inevitably 
surrounded with some uncertainty. 
Nevertheless they should give an 
indication ofthe numbers involved. 
(To increase the reliability of the 
data, given the small size of the 
effective sample, the responses to 
all the surveys between 1983 and 
1987 and between 1987 and 1991 
have been averaged and obviously 
rogue figures have been excluded.) 
The results show that movements 
into and out of self-employment 
over the period 1983 to 1991 varied 
considerably between Member 
States. For most countries, how­
ever, there was relatively little 
difference between the first and the 
second half of the period. In all countries, as would be expected, the 
great majority of those who were 
self-employed at the time ofthe sur­
vey were also self-employed one 
year previously. For the ten Com­
munity countries for which data are 
available (ie the 12 excluding Italy 
and Luxembourg), over 90% of those 
in self-employment had, on aver­
age, been self-employed for at least 
a year (Graph 18, in which those 
who were self-employed the pre­
vious year are all those who were 
not employed, unemployed or inac­
tive). 
People becoming self-employed, 
therefore, added less than 10% a 
year on average to the total num­
bers over this period. The number of 
new entrants each year, however, 
varied from 15-20% of total self-
employment in the UK and the 
Netherlands — a much higher rate 
of entry than anywhere else in the 
Community — to under 5% in 
18 Status of the self-employed one year earlier in the 
Member States, 1983-1991 
% total self-employed 
25 r 
20 h 
15 
10 h 
5 h -i 25 
A 20 
A 15 
A 10 
GR B IRL P DK E D F UK NL I 
1983-87 GR B IRL P DK E D F UK NL 
1987-91 
-35 
Chapter 1 Employment in the Community - trends and prospects 
Greece, Belgium, Ireland and Den­
mark. 
If the numbers of people becoming 
self-employed are compared with 
the rate of change in total numbers 
of self-employed, they indicate not 
only the rate of entry but also the 
rate of exit. For the ten Member 
States taken together, they imply 
that while new entrants added 
some 8-9% to self-employment each 
year over this period, around 7% of 
those who were self-employed one 
year were no longer so the next. 
This is at least twice the number 
which would be expected from 
people retiring. 
In the UK and the Netherlands, 
however, the implied rate of exit 
was significantly greater than the 
Community average. In the UK, an 
average of almost one in ten of the 
self-employed in any one year dur­
ing this period were no longer self-employed one year later, while 
in the Netherlands, the figure was 
around one in seven. In both cases, 
these figures are much higher than 
for other Community countries. In 
Germany, France and Spain, the 
figure for exits averaged around one 
in 15, in the other Member States, 
around one in 25 — not much higher 
than the rate of natural retirement. 
While many more people in the UK 
and the Netherlands, therefore, 
joined the ranks of the self-
employed between 1983 and 1991, 
the risk attached to being self-
employed was also significantly 
greater. 
Of those becoming self-employed, 
most were formerly working for 
someone else. For the ten Com­
munity countries, almost 60% of 
new entrants into self-employment 
over the period had previously 
been employees. Most of the 
other new entrants had previously 
19 Employment by broad sector in the Community and 
elsewhere, 1980,1985 and 1991 
% total employment • Agriculture H Industry M Services 
100 
80 
60 
40 
20 rj^TH • UU 
80 
60 
40 
20 
1980 1985 1991 
EUR12 1980 1985 1991 
EFTA 1980 1985 1991 
US 1980 1985 1991 
Japan been inactive, while only a very 
small proportion — only around 
15% of those becoming self-em­
ployed — had been unemployed. 
These relative proportions were 
much the same in most Member 
States, the main exceptions being 
the Netherlands where the great 
majority of new entrants — 80% or 
more — were previously inactive, 
many of them young people in edu­
cation. 
Sectoral trends 
in employment 
One of the most marked features of 
economic development is the tend­
ency for employment in services to 
increase as countries pass through 
the various stages of industrialisa­
tion. This tendency is common to all 
countries inside and outside the 
Community. 
In the Community as a whole, the 
proportion of those in work em­
ployed in services increased from 
53% in 1980 to 58% in 1985 and 62% 
in 1991. This still leaves the Com­
munity at a level significantly lower 
than in the US (72%), but only mar­
ginally lower than in the EFTA 
countries (63%) (Graph 19). 
The rate of increase in the share of 
services in the Community over the 
1980s was significantly greater 
than in the EFTA countries — 
where it rose by 7% — in the US — 
where the rise was 6% — and-Japan 
— where it went up by only 5%. This 
reflects differential changes in the 
share of employment in agriculture 
and industry, especially in the lat­
ter two countries. Thus in the US, 
the decline in the share of agricul­
ture — already very low — was 
much less than in the Community 
(V2% as opposed to 3V2%), while in 
Japan, the share of industry fell 
only slightly (by under 1% as com-
-36 
Chapter 1 Employment in the Community - trends and prospects 
pared with almost 6% in the Com­
munity). 
Sectoral trends 
in Member States 
Within the Community, the coun­
tries with the highest share of 
employment in services tend, for 
the most part, also to be the most 
developed economies with the hig­
hest levels of income per head. The 
service share, therefore, tends to 
vary inversely with the share of 
employment in agriculture. The 
Member States with the lowest 
numbers employed in agriculture 
relative to the total numbers in 
work — Belgium, the UK and Lux­
embourg — have service shares 
significantly above the Community 
average. On the other hand, 
those with the largest agricultural 
sectors — Portugal, Greece and 
Spain — have a relatively small 
proportion employed in services 
(Graph 20). 
There is one exception to this pat­
tern. Germany, with a share of 
employment in agriculture much 
less than the Community average 
and one of the highest levels of 
income per head of all, had propor­
tionately fewer people employed 
in services (just over 56%) than Ire­
land or Italy (57% and 59%, 
respectively) and only marginally 
more than Spain (56%). 
Over the 1980s, the share of em­
ployment in services increased in all 
Member States. Moreover there 
was a clear tendency for the in­
creases to be greater in the less 
developed parts of the Community 
than in the more developed. The 
numbers employed in services 
relative to the total numbers in 
work increased most between 1980 
and 1991 in Greece, Italy, Spain, 
Portugal and Ireland — by around 20 Employment by broad sector in the Member States, 
1980,1985 and 1991 
% total employment • Agriculture • Industry 
100 r, 
80 r Services 
60 
40 
20 -i 100 
A 80 
A 60 
40 
20 
P GR E D IRL I E12 F UK DK B L NL 
Left bar 1980, middle bar 1985, right bar 1991 
21 Contribution of services to total employment in the 
Member States, 1983 and 1991 
% total 
80 
70 h 
60 H 
50 h 
40 I 
30 
20 
10 1 1983 • 1991 
E 1987 & 1991, P 1986 & 1991 -i 80 
A 70 
•i •1 • 
•I Hi 60 
50 
40 
30 
20 
10 
P GR E D IRL I E12 F UK DK B L NL P GR E D IRL I E12 F UK DK B L NL 
Numbers employed Volume of employment (total hours worked) 
37-
Chapter 1 Employment in the Community - trends and prospects 
10% or more in each case. The rise 
in France, the UK and Luxembourg, 
however, was only marginally 
lower. 
The smallest increase in the service 
share — only 3% — was recorded by 
Denmark, while in Germany, the 
rise was only 6%, much less than 
the Community average and with 
no sign of any convergence towards 
that average. 
Although much of the explanation 
for the high and rising share of 
employment in services lies in the 
propensity of people to spend pro­
portionately more on services as 
their income increases, the em­
ployment figures tend to overstate 
the extent of the trend. This is 
partly because a relatively high 
proportion of those employed in 
services work part-time rather 
than full-time. This is especially the case in the more developed 
economies. Measuring employ­
ment in terms of hours worked 
instead of numbers, therefore, 
tends to reduce the difference in 
employment patterns between 
countries. 
This is particularly significant in 
the Netherlands and the UK. 
When measured in terms of hours, 
the share of services in employ­
ment is reduced in the former from 
70% to 66% and in the latter from 
66% to 62%, in both cases much 
closer to the Community average 
(Graph 21). The effect on the 
less developed countries is less 
marked. The one exception is Ire­
land, where changing the unit of 
measurement from numbers to 
hours reduces the service share 
from above Germany to below it, 
to a level only slightly above 
Greece. 
22 Changes in employment by broad sector in the 
Community and elsewhere, 1980-1991 
3 r 
2 r-
1 r Average annual change (%; 
A -1 
-2 
80/85 85/90 90/91 80/85 85/90 90/91 80/85 85/90 90/91 80/85 85/90 90/91 Employment growth 
by broad sector 
The contribution of the various 
sectors to employment growth 
was broadly similar over the 1980s 
in different parts of the econo­
mically developed world. In all 
countries, jobs were created pre­
dominantly in services and jobs 
were either lost or expanded by a 
relatively small amount in agricul­
ture and industry. 
In the first half of the 1980s, indus­
trial employment declined 
markedly in the Community, con­
tributing to an overall job loss of 
around 1% a year (Graph 22). The 
extent of the reduction was much 
greater than in the EFTA countries 
or the US, while in Japan, jobs were 
gained in this sector. The growth of 
service employment in the Com­
munity over this period — which 
was at a similar rate to that in 
Japan — was not enough to com­
pensate for the losses in other 
sectors. 
In the second half of the 1980s, the 
positions changed considerably. 
The growth of service employment 
accelerated in the Community, al­
most to match the increase in the 
US. At the same time, an increase 
in the number of jobs in industry 
more than offset the continued 
decline in agricultural employment. 
In 1991, although the number em­
ployed in services continued to rise 
in the Community, the rate of job 
creation slowed appreciably and 
was accompanied by a renewed fall 
in industrial employment. The ex­
tent of this fall, however, was much 
less than in the EFTA countries or 
the US, where it served to reduce 
employment in the economy as a 
whole by over 1%. Moreover, the 
growth in service jobs in these coun-
38 
Chapter 1 Employment in the Community - trends and prospects 
tries was also much lower than in 
earlier years. 
By contrast, in Japan, employment 
in both industry and services — the 
former in particular — seems to 
have continued to expand, as it did 
throughout the 1980s, thereby more 
than offsetting the continuing loss 
of jobs in agriculture (which has 
been on a similar scale to that in the 
Community). 
Employment growth 
by broad sector in 
Member States 
The sectoral pattern of employ­
ment growth which occurred in the 
Community as a whole over the 
period 1980 to 1991 was broadly 
repeated in each Member State. In 
virtually all Member States, the 
number employed in services grew 
almost continuously over the 
period, while the number em­
ployed in agriculture declined. 
Employment in industry increased 
in some years and fell in others. 
There are, however, important ex­
ceptions to this general pattern of 
change. 
In the period of slow growth be­
tween 1980 and 1985, the numbers 
employed in industry fell in all 
Member States, but especially in 
the UK, Belgium, Spain and Ire­
land. In each case the fall amounted 
to an overall loss of jobs in the econ­
omy as a whole of over 1% a year 
(Graph 23). At the same time, em­
ployment in services increased 
everywhere — by enough in five of 
the countries more than to compen­
sate for the decline in jobs in other 
sectors. 
Between 1985 and 1990, when em­
ployment grew throughout the 
Community, the increase in jobs oc­
curred mainly in services, though 23 Sectoral division of changes in employment in the 
Member States, 1980-1991 
Average annual change (%) 
5 r 
E12 B DK D GR 6 F IRL 
Loft bar 1980-85, middle bar 1985-90, right bar 1990-91 
24 Sectoral contribution to employment growth in the 
Community, 1983-1991 
Health, education, other 
Banking, business services 
Distribution, hotels 
Publfc administration 
Transport a communications 
Consttuction 
TenHes, clothing, other 
Minino, chemicals 
Energy «water 
Agriculture 
Health, education, other 
Banking, business services 
Distribution, hotels 
Public administration 
Transport 4 communications 
Metals, engineering 
Construction 
Textiles, doming, other 
Mining, chemicals 
Energy» water 
Agriculture 
Includes E&P 1986-91 2 3 4 5 
Change (% 1983 total) 
-39-
Chapter 1 Employment in the Community - trends and prospects 
25 Changes in employment in banking, finance and 
insurance in the Member States, 1983-1991 
16 
12 Average annual change (%) 
16 
A 12 
EUR12 . B DK D GR E F IRL I L NL P UK 
26 Changes in employment in other services in the 
Member States, 1983-1991 
Average annual change (%) 
16 r 
12 h 
4 I 16 
12 
EUR12 B DK D GR E F IRL I L NL P UK most countries also recorded a rise 
in industrial employment. Indeed 
this added significantly to jobs in 
Spain, Portugal and Germany. In 
the Netherlands and the UK, there 
was even a rise, albeit very small, 
in the numbers working in agricul­
ture. 
In 1991, although jobs losses were 
largely concentrated in agricul­
ture and industry, two countries 
experienced a decline in the num­
bers employed in services — the 
first time for many years. In 
Denmark, a reduction in service 
employment caused an overall loss 
of jobs of 1% in that year while in 
the UK, it served to reduce total 
employment by only slightly less. 
Nevertheless in the Benelux 
countries and Portugal, service em­
ployment increased strongly in 
1991, more so indeed than over the 
preceding five years. 
Employment growth 
by detailed sector 
Between 1983 and 1991, the 
"Other services" sector, which 
covers health and education as 
well as recreational services, pro­
vided almost half of the additional 
jobs created over this period in the 
Community as a whole. By itself, it 
was responsible for increasing the 
total numbers in employment by 
almost 5% during these 8 years 
(Graph 24). Banking, finance and 
insurance, the second main pro­
vider of jobs, is much smaller in 
terms ofthe numbers employed. It 
nevertheless was responsible for 
increasing total employment by 
some 3%, accounting for just under 
30% of the net addition to jobs, 
while distribution, hotels and 
catering accounted for just under 
25% — largely because of its size 
rather than a high rate of employ­
ment increase. 
40 
Chapter 1 Employment in the Community - trends and prospects 
These three sectors between them 
provided more than enough new 
jobs to offset the decline in employ­
ment in agriculture, which caused a 
loss of jobs in the Community econ­
omy of almost 2% over this period. 
Employment 
growth in services 
in Member States 
As noted above, two countries, Den­
mark and the UK, suffered a fall in 
employment in services in 1991. 
Since this was a novel experience 
for any Community country, it is of 
some interest to examine in which 
activities the job losses occurred. In 
both countries, employment fell not 
only in distribution and transport 
— areas of slow growth or decline in 
the past — but also in the sectors 
which had been most dynamic in the 
1980s. 
In the case of Denmark, the largest 
reductions in 1991 were in public 
administration (of over 4%) and in 
banking, insurance and business 
services (of over 3%), while in the 
UK, employment in health, educa­
tion and other services fell by 1% 
and in banking and insurance by 
2%. The job losses in banking, insur­
ance and business services are 
particularly significant so far as the 
prospects for job creation in the fu­
ture are concerned, since this was 
the sector which expanded by most 
in the 1980s. Indeed in the 7 years 
before 1991, employment increased 
in this sector almost continuously in 
all Member States (Graph 25). 
Similarly, in health, education and 
other services, the main area of job 
creation in the 1980s, employment 
reductions in Member States were 
rare events. Yet both Greece and 
Luxembourg, in addition to the UK, 
experienced job losses in this group 
of activities in 1991 (Graph 26). Unemployment in 
the Community 
Unemployment is very unevenly 
distributed across the Community, 
both between regions and social 
groups. 
With the slowdown in economic 
growth in 1991 and 1992, unem­
ployment at the latest count (May 
1993) rose above 10% of the work­
force in the Community as a whole 
(Graph 27). Unemployment levels 
ranged from close to 20% in Spain 
and Ireland to only just over 5% in 
Portugal and 2V2% in Luxembourg. 
In six of the 12 Member States — 
the UK, France, Italy and Den­
mark as well as Spain and Ireland 
— unemployment was above the 
Community average, while in 
Germany as well as in Luxembourg 
and Portugal, it was still below 6%. At the regional level, however, the 
variation is even more marked. 
Rates ranged from below 5% in 
parts of Southern Germany, 
Northern Italy and Northern Por­
tugal as well as in Luxembourg, 
to rates of over 20% in parts of 
Spain, Ireland and Southern Italy 
(Map 1). 
Although the impact has varied be­
tween regions, no country has 
escaped the employment effects of 
the present recession. In all Mem­
ber States, unemployment was 
higher in May 1993 than one year 
before. Moreover, in five countries 
— Denmark, France, Ireland, Italy 
and the UK — the rate of unem­
ployment had climbed to a similar 
or higher level than in 1985, the 
year when the rate in the Com­
munity as a whole was at its peak. 
In these countries, the progress 
made over the five years 1985 to 
27 Unemployment in the Member States, 1985,1990 and 
May 1993 
% labour force 
25 
20 r 
15 h 
10 h -i 25 
20 
15 
10 
L P D GR NL B EUR12 DK I F UK IRL 
GR June 91, P February 1993, NL April 1993 
41-
Chapter 1 Employment in the Community - trends and prospects 
Ml Unemployment rates, 1992 
28 Unemployment of men and women in the Member 
States, 1985 and May 1993 
% labour force " Men ^ Women 
30 
25 h 
20 h 
15 h 
10 h 
5 h -i 30 
25 
20 
15 
10 
L P D GR NL B E12 DK I F UK IRL E L P D GR NL B E12 DK I F UK IRL E 
1985 May 1993 1990 in reducing the numbers out 
of work towards more acceptable 
levels was completely reversed in 
just two years of recession. 
Unemployment of 
men and women 
The incidence of unemployment 
among women in the labour force in 
the Community is significantly 
higher than among men. In May 
1993, the unemployment rate 
for women averaged over 12% 
whereas for men it was around 9% 
(Graph 28). With the sole exception 
of the UK, this disparity in rates 
between men and women prevails 
in all Member States. 
In Belgium, Italy and Greece, the 
rate of unemployment for women at 
the last count (the average for 1992, 
in the case of Greece) was over twice 
the rate for men. In Portugal, Lux­
embourg and Spain, it was over 65% 
higher. In all these countries, ex­
cept for Spain where there was little 
difference between the two, there 
were more women unemployed 
than men — in the former three 
cases, substantially more — some­
thing which was also true of 
Denmark, France and the Nether­
lands. 
In only three countries in the Com­
munity, therefore — the UK, 
Ireland and Germany — were 
there more men than women out of 
work in May 1993, and in the 
case of Germany, if the Eastern 
Lander are included, the reverse is 
true. Nevertheless, the atypical 
situation in the UK, where consid­
erably more men than women are 
unemployed — over 75%, or almost 
1 million, more — is sufficient to 
ensure that, for the Community 
as a whole, fewer women than 
men are recorded as being out of 
work. 
42 
Chapter 1 Employment in the Community - trends and prospects 
Between 1985 — the previous peak 
— and May 1993, the disparity in 
unemployment rates between men 
and women showed some signs of 
narrowing over the Community as 
a whole (the gap was reduced from 
3.6% to 3.2%), though the relative 
movement in the two rates was 
by no means uniform as between 
countries. In five countries — 
Belgium, Germany, Portugal, Den­
mark and the Netherlands — the 
difference between the male and 
female rate narrowed significantly, 
while in another two countries — 
France and Italy — it narrowed 
slightly (Graph 28). Moreover, in 
the UK, unemployment among men 
rose considerably relative to the 
rate for women. 
On the other hand, two countries — 
Spain and Greece — showed a pro­
nounced widening ofthe difference, 
in the former case, of over 5%, while 
in Ireland and Luxembourg, there 
were much smaller increases. Over­
all, there has been some tendency 
for the unemployment of women to 
have risen over this period relative 
to that of men in the less developed 
parts of the Community, and to 
have fallen in the more developed 
parts. 
Youth 
unemployment 
With the sole exception of Germany, 
unemployment among young 
people aged under 25 is higher 
throughout the Community than 
for older people. This is especially 
the case in the less developed parts, 
though the difference is also sub­
stantial in many of the more 
developed areas. 
In Spain, the rate of youth unem­
ployment in May 1993 was over 
35%, while in Italy and Ireland it 
was over 25% and in Greece, in 29 Unemployment of young people (<25) in the Member 
States, 1985,1990 and May 1993 
% labour forcé 
50 r 
40 r 
30 h 
20 h 
10 h 1 50 
A 40 
30 
20 
10 
L P D GR NL B EUR12 DK 
GR June 91, P February 1993, NL April 1993 F UK IRL E 
M2 Youth unemployment rates, 1992 
43 
Chapter 1 Employment in the Community - trends and prospects 
1992, it was just under 25% (Graph 
29). At the same time, the rate in 
France was over 20%, and in the UK 
and Belgium, it was only slightly 
below this level. Only in Luxem­
bourg and Germany was the 
unemployment rate of young people 
less than 10%. 
At a regional level, youth unemploy­
ment tends to be concentrated 
particularly in the Southern areas 
of the Community where agricul­
ture remains important. This is the 
case over much of Spain, the South 
of Italy and Greece, as well as in the 
centre of Ireland — though it is not 
much lower in a number of indus­
trial areas in the North — in 
Belgium and Northern France, for 
example (Map 2). 
Nevertheless, up to 1990, the rate of 
youth unemployment fell relative to 
other age groups. From April 1984 to 
April 1990, the rate of unemploy­ment for both young men and women 
of under 25 fell almost continuously, 
in absolute terms as well as in rela­
tion to people of 25 and over (Graph 
30, which shows monthly unemploy­
ment rates for the two age groups). 
For both men and women, the fall in 
youth unemployment over this 
period was substantial — for men 
from 22.5% to 14.5% and for women 
from 26% to 19%. 
A number of countries achieved con­
siderable success over this period in 
reducing unemployment among 
young people. In Spain, the youth 
unemployment rate fell from 48% in 
1985 to 32% in 1990 (and to 31% in 
1991), in Portugal, from 20% to 
10V2% over the same period, in the 
Netherlands, from 18% (and from 
22% in 1983) to 1172% and in 
Germany, from 10% (12% in 1983) to 
4V2%. These reductions were made 
possible by a combination of special 
measures to combat the problem — 
30 Unemployment by sex and age in the Community, 
1983-May 1993 
% labour force 
30 r 
25 
20 
15 
10 -j 30 
25 
""V ^ 
\_ "-\ Women <25 
Men<25 ^' 
"*»'•>. -r — '' 
Total 
Men>25 
i i i i i i _i_j i i i_i i_ I I I I—I I i—J L 20 
15 
A 5 
1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 considered further below — and the 
favourable demographic trends 
which had the effect of reducing the 
number of people in the Community 
in the 15 to 24 age group by almost 
5% between 1985 and 1990 and, 
therefore, the number who entered 
the labour market. 
By contrast to the fall in youth un­
employment, the reduction in 
unemployment among the older age 
group from its peak level, reached 
much later — in June 1985 for men 
and in August 1987 for women — to 
the lowest point, reached in mid to 
late 1990, was relatively modest. In 
the case of men aged 25 and over, 
the rate fell from a high of only 6.5% 
to a low of 5% over this five year 
period. For women in the same age 
group, the decline over three years 
was from 10% to 8.5%?. 
Since 1990, the renewed increase in 
unemployment in the Community 
has hit young men especially. In the 
three years up to May 1993, the rate 
for this group rose from 14.5% to 
19%, with an increase of almost 2% 
in 1992 alone. By comparison, the 
rate for young women aged under 
25, went up by only just over 1% — 
to 20% — over the same period. 
This relative increase in unemploy-
ment among young men was 
common to a number of Member 
States. However, it was particularly 
pronounced in Spain (where the 
rate for men rose by 6% during the 
course of 1992, as opposed to 2% for 
women), the Netherlands and 
France (in both of which the male 
rate went up by 1.5% in 1992 and 
the female rate declined in the for­
mer case and remained unchanged 
in the latter), Belgium (where the 
rate for men rose by 2V2% in 1991 
and 1992 and the rate for women by 
only just over V2%) and the UK 
(where the rate for men increased 
by over 11% in the three years to 
-44-
Chapter 1 Employment in the Community - trends and prospects 
May 1993 and the rate for women 
by under 8%). 
Despite these increases, the rate of 
youth unemployment in May 1993 
in most countries was still below the 
peak level reached in the 1980s 
(Graph 29). Only in Ireland was the 
rate at a new high. (In Denmark and 
Greece, although the rate was 
higher in May 1993 than in 1985, it 
was nevertheless lower in both 
cases than the highest level reached 
during the decade.) 
For those aged 25 and over in the 
Community, the rise in unemploy­
ment during 1991 and 1992 was also 
greater for men than for women, 
though the difference was much less 
marked than for those under 25. In 
the case of men in the older age 
group, the average rate increased 
from 5% in mid-1990 to just over 7% 
in May 1993, and in the case of 
women from 8V2% to 10%. In both 
cases, however, the rate is above the 
peak level reached in the 1980s. 
Youth unemployment 
and the youth 
labour force 
Unemployment among young 
people, which reached substantial 
proportions in the recession of the 
early 1980s, was tackled in the 
Member States through a variety of 
special measures. These aimed not 
only at creating jobs for young 
people, but more especially at im­
proving their skills and, hence, 
their employability. Training provi-
sion was increased — with 
increased financial support from 
the European Social Fund — and 
young people were encouraged to 
stay longer in education. 
Whatever the merits of these pro­
grammes, they also had the effect in 
many countries of shifting people out of the unemployment figures 
into the inactivity figures, thereby 
reducing the apparent scale of the 
problem. Over the Community as a 
whole, the number of people aged 15 
to 24 who were recorded as being in 
the labour force declined by 9% be­
tween 1985 and 1991. In Belgium, 
however, the decline was as much 
as 23%, in France, it was over 20% 
and in Germany, over 16% (Graph 
31). In all of these countries 
together with another five, the fall 
was greater than the fall in po­
pulation. By contrast, in the 
Netherlands, the numbers in the 
labour force rose by almost 19% and 
in Italy and Greece by 2-3%, though 
in both these two countries the rise 
was much less than the growth of 
population. 
The success of Member States in 
reducing youth unemployment 
rates should, therefore, be con­
sidered in the light of these figures. In practice, only five Member States 
experienced an increase in employ­
ment of young people over this 
period — the four Southern Com­
munity countries, Spain (where the 
rise was over 15% between 1986 and 
1991, expressed in relation to active 
population in 1986, Italy, Portugal 
and Greece, plus the Netherlands 
(of over 23%) (Graph 31). In four 
countries, where youth unemploy­
ment also declined — Denmark, 
France, Ireland and Luxembourg, 
the fall of employment among the 
young was greater than the fall in 
population of this age and in an­
other, Belgium, it was about the 
same. 
Long-term 
unemployment 
Long-term unemployment is very 
high in the Community. Neverthe­
less, the share of the unemployed 
31 Changes in population, active population and employment 
of young people (15-24) in the Member States, 1985-1991 
% change 
25 r 
EUR12 B DK D GR E F IRL I L NL P UK 
E & P 1986-91 ; Employment change as % active population 1985 
45 
Chapter 1 Employment in the Community - trends and prospects 
32 Long-term unemployment (>1 year) in the Member 
States, 1985 and 1991 
% total unemployed 
70 r 
60 • 1985 • 1991 
50 
40 
30 
20 * 
10 Ï 70 
60 
50 
40 
30 
20 
10 
UK L DK F P NL D EUR12 GR E IRL B I 
M3 Long term unemployment rates, 1990 who have been out of work for a year 
or more did decline between 1985 
and 1991 from 52% to 45%, to about 
the same level as in 1983 (Graph 
32). In three countries, however, — 
Italy, Belgium and Ireland — the 
share remains around 60% or more 
(over 65% in Italy). In Spain and 
Greece, it is only slightly below 50%. 
Long-term unemployment is a par-
ticular problem of the less 
developed parts of the Community. 
Only Portugal ofthe less developed 
countries is below the Community 
average in terms of the relative 
numbers involved. Long-term 
unemployment is, therefore, 
concentrated in much the same 
areas as youth unemployment 
(Map 3). 
Moreover, in Italy and Greece — 
two countries where the overall rate 
of unemployment changed little be­
tween 1985 and 1991 — the share of 
the long-term unemployed in the 
total increased over this period. In 
Ireland, there was also little change 
in unemployment as a whole, and 
the share fell only slightly. In Bel­
gium and Spain, on the other hand, 
the long-term share declined by 
more than the Community average. 
In Portugal as well as the Nether­
lands, two countries with relatively 
high long-term unemployment in 
1985, the share was reduced by as 
much as 14-15%. All four of these 
countries, especially the latter two, 
experienced a significant reduction 
in overall unemployment over these 
six years. 
By contrast, in the UK, where total 
unemployment fell less sharply, 
the proportion of the unemployed 
out of work for a year or more also 
declined markedly — by 20%. In 
Germany the proportion hardly 
changed at all despite a greater 
than average fall in the overall 
rate. 
-46-
Chapter 1 Employment in the Community - trends and prospects 
The evidence of the past suggests 
that, in general, the relative import­
ance of long-term unemployment 
increases as the total numbers out 
of work increase. It is to be expected, 
therefore, that the problem will 
become more serious again during 
the present recession. Indeed, 
figures for the UK, the country 
where unemployment has risen by 
most since 1990, already indicate 
that the relative numbers of long-
term unemployed rose significantly 
in 1992. 
47-
Chapter 1 Employment in the Community - trends and prospects 
Key employment indicators in the Member States, 1985 
B DK D 
Total 
Total population 9805 5064 59859 
Population of working-age (15-64) 6610 3358 42002 
Total employment 3512 2539 26167 
Ratio of employment to working-age population (%) 53.1 75.6 62.3 
Total unemployment 449 215 1932 
Unemployment rate (%) 11.3 7.8 6.9 
Youth (<25) unemployment rate (%) 23.6 11.5 9.8 
Employment in agriculture 127 170 1349 
Employment in industry 1119 706 10728 
Employment in services 2266 1657 14090 
Share of employment in agriculture (%) 3.6 6.7 5.2 
Share of employment in industry (%) 31.9 27.9 41.0 
Share of employment in services (%) 64.5 65.4 53.8 
Men 
Total population 4779 2501 28430 
Population of working-age (15-64) 3301 1689 20672 
Total employment 2280 1400 15958 
Ratio of employment to working-age population (%) 69.1 82.9 77.2 
Total unemployment 181 95 987 
Unemployment rate (%) 7.4 6.4 5.8 
Youth (<25) unemployment rate (%) 17.7 10.0 9.0 
Employment in agriculture 89 131 711 
Employment in industry 914 526 8114 
Employment in services 1278 738 7133 
Share of employment in agriculture (%) 3.9 9.4 4.5 
Share of employment in industry (%) 40.1 37.2 50.8 
Share of employment in services (%) 56.1 52.9 44.7 
Women 
Total population 5026 2563 31429 
Population of working-age (15-64) 3309 1669 21330 
Total employment 1231 1139 10209 
Ratio of employment to working-age population (%) 37.2 68.3 47.9 
Total unemployment 267 119 945 
Unemployment rate (%) 17.8 9.5 8.5 
Youth (<25) unemployment rate (%) 29.8 13.2 10.7 
Employment in agriculture 38 39 639 
Employment in industry 205 180 2614 
Employment in services 988 918 6957 
Share of employment in agriculture (%) 3.1 3.4 6.3 
Share of employment in industry (%) 16.7 15.8 25.6 
Share of employment in services (%) 80.3 80.7 68.1 
Note : E 1986 Units : 1000s 
Unless otherwise specified 
GR E F 
9656 
6260 
3589 
57.3 
304 
7.8 
23.9 
1037 
921 
1629 
28.9 
25.7 
45.4 
4662 
3002 
2371 
79.0 
142 
5.7 
17.5 
576 
720 
1074 
24.3 
30.4 
45.3 
4994 
3257 
1218 
37.4 
162 
11.7 
31.7 
461 
201 
555 
37.8 
16.5 
45.6 37549 
24307 
10834 
44.6 
2925 
21.3 
46.5 
1752 
3445 
5619 
16.2 
31.9 
52.0 
18235 
11930 
7658 
64.2 
1866 
19.6 
44.2 
1314 
2913 
3422 
17.2 
38.1 
44.7 
19314 
12376 
3175 
25.7 
1059 
25.0 
49.6 
439 
532 
2197 
13.9 
16.8 
69.3 52930 
34825 
21297 
61.2 
2436 
10.3 
25.8 
1734 
6871 
12610 
8.2 
32.4 
59.4 
25556 
17088 
12439 
72.8 
1155 
8.5 
22.9 
1108 
5167 
6116 
8.9 
41.7 
49.2 
27373 
17736 
8858 
49.9 
1281 
12.6 
28.8 
626 
1704 
6495 
7.1 
19.3 
73.6 
-48-
Chapter 1 Employment in the Community - trends and prospects 
Key employment indicators in the Member States, 1991 
Total 
Total population 
Population of working-age (15-64) 
Total employment 
Ratio of employment to working-age population (%) 
Total unemployment 
Unemployment rate (%) 
Youth (<25) unemployment rate (%) 
Employment in agriculture 
Employment in industry 
Employment in services 
Share of employment in agriculture (%) 
Share of employment in industry (%) ' 
Share of employment in services (%) 
Men 
Total population 
Population of working-age (15-64) 
Total employment 
Ratio of employment to working-age population (%) 
Total unemployment 
Unemployment rate (%) 
Youth (<25) unemployment rate (%) 
Employment in agriculture 
Employment in industry 
Employment in services 
Share of employment in agriculture (%) 
Share of employment in industry (%) 
Share of employment in services (%) 
Women 
Total population 
Population of working-age (15-64) 
Total employment 
Ratio of employment to working-age population (%) 
Total unemployment 
Unemployment rate (%) 
Youth (<25) unemployment rate (%) 
Employment in agriculture 
Employment in industry 
Employment in services 
Share of employment in agriculture (%) 
Share of employment in industry (%) 
Share of employment in services (%) B 
9925 
6625 
3719 
56.1 
279 
7.0 
14.0 
101 
1135 
2483 
2.7 
30.5 
66.8 
4836 
3317 
2290 
69.1 
109 
4.6 
11.0 
69 
923 
1299 
3.0 
40.3 
56.7 
5089 
3308 
1428 
43.2 
170 
10.6 
17.1 
32 
212 
1185 
2.2 
14.8 
82.9 DK 
5127 
3461 
2635 
76.1 
264 
9.1 
11.5 
149 
723 
1746 
5.7 
27.6 
66.7 
2523 
1749 
1420 
81.2 
128 
8.3 
10.7 
112 
525 
776 
7.9 
37.2 
54.9 
2605 
1713 
1215 
70.9 
135 
10.0 
12.3 
37 
198 
971 
3.1 
16.4 
80.5 D Units : 1000s 
Unless otherwise specified 
GR E F 
62945 
43478 
29238 
67.2 
1250 
4.1 
3,7 
1026 
11719 
16493 
3.5 
40.1 
56.4 
30461 
21940 
17372 
79.2 
647 
3.6 
3.7 
586 
8737 
8050 
3.4 
50.3 
46.3 
32484 
21538 
11866 
55.1 
603 
4.8 
3.6 
440 
2982 
8443 
3.7 
25.1 
71.2 9919 
6638 
3632 
54.7 
303 
7.7 
24.6 
807 
933 
1892 
22.2 
25.7 
52.1 
4824 
3221 
2407 
74.7 
121 
4.8 
17.1 
479 
719 
1209 
19.9 
29.9 
50.2 
5095 
3417 
1226 
35.9 
181 
12.9 
33.5 
327 
215 
683 
26.7 
17.5 
55.8 38527 
25359 
12622 
49.8 
2391 
15.9 
30.5 
1376 
4171 
7076 
10.9 
33.0 
56.1 
18662 
12467 
8549 
68.6 
1161 
12.0 
25.2 
1002 
3493 
4055 
11.7 
40.9 
47.4 
19865 
12892 
4073 
31.6 
1231 
23.2 
37.1 
374 
678 
3021 
9.2 
16.6 
74.2 55180 
36304 
22115 
60.9 
2232 
9.2 
19.8 
1332 
6625 
14093 
6.0 
30.0 
63.9 
26687 
17868 
12585 
70.4 
975 
7.2 
17.0 
859 
4976 
6710 
6.8 
39.7 
53.5 
28492 
18436 
9530 
51.7 
1257 
11.7 
22.6 
473 
1648 
7383 
5.0 
17.3 
77.7 
-49-
Chapter 1 Employment in the Community - trends and prospects 
Key employment indicators in the Member States, 1985 
IRL I L 
Total 
Total population 3473 56267 356 
Population of working-age (15-64) 2079 38048 250 
Total employment 1068 20583 148 
Ratio of employment to working-age population (%) 51.4 54.1 59.2 
Total unemployment 234 2154 4 
Unemployment rate (%) 18.0 9.5 3.0 
Youth (<25) unemployment rate (%) 25.1 32.2 6.5 
Employment in agriculture 176 2258 7 
Employment in industry 318 6702 47 
Employment in services 569 11422 93 
Share of employment in agriculture (%) 16.6 11.0 4.7 
Share of employment in industry (%) 29.9 33.5 31.8 
Share of employment in services (%) 53.5 55.5 62.8 
Men 
Total population 1748 27267 175 
Population of working-age (15-64) 1053 18601 125 
Total employment 738 13955 97 
Ratio of employment to working-age population (%) 70.1 75.0 77.9 
Total unemployment 155 947 2 
Unemployment rate (%) 17.4 6.4 2.2 
Youth (<25) unemployment rate (%) 26.4 26.5 6.4 
Employment in agriculture 152 1496 - 5 
Employment in industry 255 5278 42 
Employment in services 327 7180 50 
Share of employment in agriculture (%) 20.7 10.7 5.2 
Share of employment in industry (%) 34.7 37.8 43.3 
Share of employment in services (%) 44.6 51.5 51.5 
Women 
Total population 1725 28999 181 
Population of working-age (15-64) 1026 19447 126 
Total employment 330 6631 50 
Ratio of employment to working-age population (%) 32.2 34.1 39.8 
Total unemployment 78 1207 2 
Unemployment rate (%) 19.1 15.4 4.3 
Youth (<25) unemployment rate (%) 23.4 39.3 6.5 
Employment in agriculture 23 762 2 
Employment in industry 63 1624 5 
Employment in services 242 4242 43 
Share of employment in agriculture (%) 7.0 11.5 4.0 
Share of employment in industry (%) 19.2 24.5 10.0 
Share of employment in services (%) 73.8 64.0 86.0 
Note : P1986 Units :1000s 
Unless otherwise specified 
NL P UK 
14103 
9744 
5124 
52.6 
601 
10.5 
17.7 
269 
1436 
3378 
5.3 
28.3 
66.3 
6989 
4907 
3375 
68.8 
353 
9.5 
18.7 
215 
1229 
1904 
6.4 
36.7 
56.9 
7114 
4837 
1749 
36.2 
247 
12.4 
16.7 
54 
206 
1473 
3.1 
11.9 
85.0 10167 
6562 
4225 
64.4 
408 
8.8 
20.3 
909 
1431 
1878 
21.5 
33.9 
44.4 
4879 
3152 
2541 
80.6 
186 
6.8 
16.5 
472 
1019 
1044 
18.6 
40.2 
41.2 
5288 
3410 
1684 
49.4 
11.7 
25.3 
436 
412 
834 
25.9 
24.5 
49.6 55769 
36706 
24282 
66.2 
3151 
11.5 
18.2 
563 
8273 
15040 
2.4 
34.6 
63.0 
27176 
18333 
14173 
77.3 
1903 
11.8 
19.6 
438 
6327 
7145 
3.1 
45.5 
51.4 
28593 
18372 
10110 
55.0 
1248 
11.0 
16.6 
125 
1946 
7895 
1.3 
19.5 
79.2 
50 
Chapter 1 Employment in the Community - trends and prospects 
Key employment indicators in the Member States, 1991 
Total 
Total population 
Population of working-age (15-64) 
Total employment 
Ratio of employment to working-age population (%) 
Total unemployment 
Unemployment rate (%) 
Youth (<25) unemployment rate (%) 
Employment in agriculture 
Employment in industry 
Employment in services 
Share of employment in agriculture (%) t 
Share of employment in industry (%) 
Share of employment in services (%) 
Men 
Total population 
Population of working-age (15-64) 
Total employment 
Ratio of employment to working-age population (%) 
Total unemployment 
Unemployment rate (%) 
Youth (<25) unemployment rate (%) 
Employment in agriculture 
Employment in industry 
Employment in services 
Share of employment in agriculture (%) 
Share of employment in industry (%) 
Share of employment in services (%) 
Women 
Total population 
Population of working-age (15-64) 
Total employment 
Ratio of employment to working-age population (%) 
Total unemployment 
Unemployment rate (%) 
Youth (<25) unemployment rate (%) 
Employment in agriculture 
Employment in industry 
Employment in services 
Share of employment in agriculture (%) 
Share of employment in industry (%) 
Share of employment in services (%) IRL 
3469 
2152 
1134 
52.7 
213 
15.8 
23.2 
158 
328 
644 
14.0 
29.0 
57.0 
1737 
1091 
751 
68.8 
136 
15.4 
24.8 
144 
258 
347 
19.2 
34.5 
46.3 
1733 
1061 
383 
36.1 
76 
16.6 
21.1 
15 
70 
297 
3.8 
18.4 
77.8 Units :1000s 
Unless otherwise specified 
NL P UK 
56866 
39088 
21520 
55.1 
2427 
10.1 
28.2 
1825 
6933 
12763 
8.5 
32.2 
59.3 
22989 
19282 
14041 
72.8 
1028 
6.8 
23.9 
1166 
5271 
7605 
8.3 
37.5 
54.2 
33624 
19806 
7479 
37.8 
1399 
15.8 
33.6 
659 
1663 
5158 
8.8 
22.2 
69.0 384 
266 
162 
61.1 
2 
1.5 
2.6 
6 
47 
110 
3.5 
28.9 
67.6 
188 
135 
105 
77.7 
1 
1.1 
0.0 
4 
41 
60 
3.8 
39.4 
56.9 
196 
131 
57 
44.0 
1 
2.0 
0.0 
2 
6 
50 
2.9 
9.9 
87.2 14716 
10234 
6420 
62.7 
507 
7.3 
11.3 
279 
1632 
4470 
4.4 
25.6 
70.1 
7287 
5169 
3957 
76.6 
235 
5.6 
10.4 
205 
1367 
2362 
5.2 
34.8 
60.0 
7429 
5065 
2463 
48.6 
272 
10.0 
12.2 
74 
265 
2109 
3.0 
10.8 
86.1 10311 
6814 
4839 
71.0 
199 
3.9 
8.7 
842 
1643 
2347 
17.4 
34.0 
48.6 
4941 
3270 
2758 
84.3 
74 
2.6 
6.2 
407 
1126 
1220 
14.8 
40.9 
44.3 
5370 
3544 
2082 
58.7 
125 
5.7 
11.8 
435 
518 
1127 
20.9 
24.9 
54.2 56705 
37033 
26207 
70.8 
2451 
8.6 
13.9 
593 
8107 
17263 
2.3 
31.2 
66.5 
27700 
18536 
14753 
79.6 
1536 
9.4 
15.9 
46 
6208 
7938 
3.2 
42.5 
54.3 
29005 
18498 
11454 
61.9 
915 
7.4 
11.4 
126 
1899 
9325 
1.1 
16.7 
82.2 
51-
Chapter 1 Employment in the Community - trends and prospects 
Key employment indicators in the Community Units : Millions 
Unless otherwise specified 
1965 1975 1985 1990 1991 1992 
Total 
Total population 293.2 312.4 321.9 328.0 328.7 330.0 
Population of working-age (15-64) 188.0 197.9 215.8 220.7 221.2 221.7 
Total employment 122.6 124.3 125.3 135.0 135.2 134.8 
Ratio of employment to working-age population (%) 65.2 62.8 58.1 61.2 61.1 60.8 
Total unemployment 2.6 5.3 14.9 12.2 12.8 14.1 
Unemployment rate (%). 2.1 4.1 10.8 8.3 8.7 9.5 
Youth (<25) unemployment rate (%) 23.3 16.8 17.6 18.5 
Employment in agriculture 20.1 13.9 10.4 8.6 8.2 8.0 
Employment in industry 49.5 48.3 41.1 42.9 42.3 41.5 
Employment in services 53.1 62.2 73.8 83.1 84.2 85.0 
Share of employment in agriculture (%) 16.4 11.2 8.3 6.4 6.2 5.9 
Share of employment in industry (%) 40.4 38.8 32.8 31.8 31.3 30.8 
Share of employment in services (%) 43.3 50.0 58.9 61.5 62.3 63.1 
Men 
Total population 142.3 152.0 156.5 159.8 160.3 161.5 
Total employment 83.0 81.9 78.7 82.1 81.8 80.9 
Total unemployment 3.3 8.0 5.8 . 6.3 7.2 
Unemployment rate (%) 3.9 9.4 6.6 7.2 8.1 
Youth (<25) unemployment rate (%) 21.4 14.7 16.1 17.4 
Employment in agriculture 13.3 9.1 6.8 5.6 5.4 5.2 
Employment in industry < 38.0 37.1 31.8 32.8 32.3 31.6 
Employment in services 31.6 35.7 40.1 43.7 44.1 44.0 
Share of employment in agriculture (%) 16.0 11.1 8.6 6.8 6.5 6.4 
Share of employment in industry (%) 45.8 45.3 40.4 39.8 39.4 39.1 
Share of employment in services (%) 38.0 43.6 51.6 53.2 53.8 54.4 
Women 
Total population 151.0 160.2 165.3 168.1 168.6 168.5 
Total employment 39.6 42.5 46.6 52.5 53.4 53.9 
Total unemployment 2.3 6.9 6.4 6.5 6.9 
Unemployment rate (%) 5.1 12.9 10.8 10.9 11.5 
Youth (<25) unemployment rate (%) 25.0 19.1 19.3 19.7 
Employment in agriculture 6.8 4.8 3.6 3.0 2.9 2.8 
Employment in industry 11.5 11.2 9.4 10.1 10.0 9.8 
Employment in services 21.5 26.5 33.4 39.4 40.3 41.0 
Share of employment in agriculture (%) 17.2 11.3 7.7 5.7 5.5 5.2 
Share of employment in industry (%) 29.0 26.4 20.2 19.2 18.8 18.2 
Share of employment in services (%) 54.2 62.4 71.7 74.8 75.5 76.1 
52 
Chapter 2 Short-term economic and employment outlook 
Chapter 2 Short-term economic and employment outlook 
The current short-term economic outlook for the 
Community is the most unfavourable since the mid-1970s. 
Unemployment is set to reach record levels in 1994. 
Instead of the hoped-for reco­
very, 1993 will bring a third year 
of slow growth. Recovery, if any, is 
unlikely to materialise before 
Spring 1994 at the earliest. In the 
presence of continued recession of 
the Community economy, employ­
ment fell in 1992 and is set to 
continue to fall further in 1993. 
The level of unemployment has 
risen sharply, approaching 10% at 
the end of 1992, and is expected to 
keep on rising throughout 1993 
and 1994, wiping out all the gains 
made during the previous boom 
period. 
In 1994, the expected recovery in 
the Community should be almost 
sufficient to halt the reduction in 
employment. Because of growth of 
the labour force, however, it will be 
insufficient to prevent the rate of 
unemployment from increasing 
further to almost 12%. 
The poor prospects 
for growth 
Given the recent trend in economic 
indicators, the policies being im­
plemented and the forces at work in 
the Community economy, GDP in 
the Community is expected to fall by 
72% in 1993 (Graph 33 — note that 
"EC" in this and subsequent graphs 
refers to the Community excluding 
the East German Lânder, "EC+" to the Community including these). 
An export and investment-led re­
covery, supported by a considerable 
easing of monetary conditions, 
could result in renewed growth of 
174% in 1994. These figures, how­
ever, imply that the current phase 
of weak growth is expected to con­
tinue for some time before output 
growth starts picking up. 
The outlook for continued sluggish­
ness followed by only slow and 
moderate recovery is essentially 
predicated upon the following fac­
tors: 
• business and consumer con­
fidence has fallen to a very low 
ebb, particularly in the wake of 
monetary and political uncer­
tainties in the Community 
since mid-1992; 
• the tight stance of monetary 
policy which was maintained in 
most parts of the Community 
up to the beginning of 1992 is 
likely to depress growth 
throughout most of 1993; 
• in the years ahead, budgetary 
policy is unlikely to lend much 
support to economic activity as 
the necessity of correcting struc­
tural budget deficits leads to a 
tightening of policy in many 
Member States, despite the 
gloomy prospects for growth; • growth of the world economy, 
while expected to pick up, is 
likely to remain modest. 
Slow growth is a feature of most 
parts ofthe Community. In 1993, the 
change in GDP in Member States is 
expected to range from a fall of 2V2% 
in West Germany to a rise of 2% in 
Ireland. Less variation is expected 
for 1994 with the rate of change 
ranging from zero in West Germany 
to 2V2% in the UK and Ireland. For 
most countries, little or no growth is 
expected over these two years. 
Because of its importance, current 
and prospective developments in 
Germany are likely to play a pivotal 
role in shaping economic activity in 
the Community in the short and 
33 GDP, 1991-1994 
Annual change (% 
1991 1992 1993 1994 
53 
Chapter 2 Short-term economic and employment outlook 
medium-term. Two years after uni­
fication, in the second half of 1992 
the German economy entered a 
period of recession and output is 
expected to decline up to the end of 
1993 if not longer. Over 1993 as a 
whole, GDP in West Germany is 
likely to show an average fall of 
around 272%, as noted above, as 
compared with the previous year. 
This decline in output reflects the 
combined effects of tight monetary 
policy, the strength of the Deutsch 
Mark and depressed exports. GDP 
is expected to remain unchanged in 
1994, though this is strongly contin­
gent on an upturn in the world 
economy. 
The depressed state of the German 
economy and its close trading links 
with other Member States is a major 
reason why output growth in the rest 
of the Community is expected to be 
depressed and why any recovery is 
likely to be slow in coming. GDP in 
France, Belgium and the Nether­
lands, is, therefore, expected to fall 
by between V2% and 1V4% in 1993. 
Denmark will also suffer from the 
recession in Germany, but relatively 
stable domestic demand, supported 
by fiscal expansion, is expected to 
prevent any fall in GDP. In these 
four countries, some improvement in 
34 Investment, 1991-1994 
Annual change(%) 
• EC • 
Actual Forecast 
1991 1992 1993 1994 output is forecast for 1994 in 
line with the unchanged level of 
GDP projected for Germany and the 
recovery in the world economy. 
Growth prospects in the UK, Italy 
and Spain, though adversely af­
fected by the German recession, are 
likely to be boosted by the signifi­
cant devaluations in their exchange 
rates which occurred in the wake of 
the turmoil on European foreign ex­
change markets in the Autumn of 
1992. Indeed, in Italy and Spain the 
contribution of net exports to GDP 
growth in 1993 is expected to be 
considerable — around 1V2%. This, 
however, is likely to be largely at 
the expense of other Community 
countries whose currencies have re­
mained within the narrow ERM 
band, where growth will be de­
pressed because of a sharp 
deterioration in net exports. 
As a result of this marked improve­
ment in net exports, the change in 
output in Spain and Italy, is 
expected to be equal to or above 
the Community average in 1993, 
despite a significant reduction in 
domestic demand. Nevertheless, in 
these two countries, this still im­
plies a marked deterioration as 
compared with 1992. In 1994, how­
ever, both countries are likely to 
experience a fall in the contribution 
of net exports to growth as the 
effects of devaluation unwind and 
as the structural weaknesses in 
their trade performance reassert 
themselves. Yet, thanks to mar­
kedly stronger growth of domestic 
demand, output should expand. 
Falling investment 
in 1992 and 1993 
Investment has been particularly af­
fected by the current phase of slow 
growth in the Community economy. 
Following a fall of almost 1% in 1992 (excluding the new German Lander), 
investment is expected to decline fur­
ther, by 2V2%, in 1993 under the 
combined effect of sluggish demand, 
a declining rate of capacity utilisa­
tion and tight monetary conditions 
(Graph 34). This is especially true of 
investment in equipment which is 
expected to decline by 4% in 1993. 
While investment in construction 
held up in 1992, it is also likely to 
contract in 1993, though by less than 
other investment. In the context of 
improving demand prospects and 
looser monetary conditions, both 
components of investment are likely 
to recover in 1994, growing by 1% or 
slightly more over the Community as 
a whole. Particularly large increases 
are expected in Greece, Portugal and 
the UK — over 372% in each case. 
Countries which are expected to ex­
perience significant deceleration in 
investment in 1993 — France, Spain, 
Italy and Germany — are likely to 
show relatively low growth or a fall 
in 1994. 
Weak recovery of 
consumption in 1994 
Private consumption is forecast to 
fall by V4% in 1993 as compared with 
the modest growth of under 1V2% in 
1992 (Graph 35). This slowdown, 
which is in spite of an assumed fall 
in household savings, is attributable 
to the expected stagnation in real 
disposable income, resulting from 
expected wage moderation and a fall 
in the numbers in employment. Real 
disposable income is projected to re­
main unchanged in 1994, due mainly 
to an expected fall in inflation. This, 
combined with a further reduction in 
savings, is expected to result in a 
modest upturn in private consump­
tion in 1994. At the same time, 
growth of public consumption, 
limited by budget constraints, is fore­
cast to increase by less than 1% in 
both 1993 and 1994. 
54-
Chapter 2 Short-term economic and employment outlook 
Inflation 
to fall in 1994 
As would be expected, inflationary 
pressures throughout the Com­
munity have diminished as 
economic activity has declined. 
However, any reduction in the rate 
of price increase resulting from de­
pressed demand is likely to be offset 
in 1993 by the upward pressure on 
prices caused by the exchange rate 
devaluations which have occurred 
in a number of Member States since 
the Autumn of 1992. Nevertheless, 
present indications are that price 
inflation can be expected to decline 
slightly from 4% in 1993 to 374% in 
1994 (Graph 36). 
Continued moderation in wages is 
likely to mean growth of compensa­
tion per employee falling to just 
over 4% in 1993. This compares 
with increases of 7% in 1991 and of 
just under 6% in 1992. No further 
fall in the growth rate is antici­
pated in 1994. 
Given that growth of labour pro­
ductivity is expected to remain at 
around 174% in both 1993 and 
1994, unit labour costs in the Com­
munity as a whole are expected to 
decline in line with wage rises, fall­
ing to below 3% in both years. 
Indirect tax increases which fed into 
price increases during 1991 and 
1992 will continue to do so in 1993, 
but their effect should be much less 
in 1994, unless Member govern­
ments introduce new tax measures. 
A positive feature ofthe outlook for 
inflation is that disparities in the 
rate of price increase between Mem­
ber States are expected to narrow in 
1993 and 1994. Closer convergence, 
however, could have occurred if re­
cent currency movements could 
have been avoided or had been less marked. Price stability still remains 
elusive in several Member States. 
Nevertheless, at the end of 1994, in 
5 Member States, including the UK 
despite substantial devaluation, in­
flation rates are forecast to be 
within 1Y2% of the three countries 
with the lowest rates — Denmark, 
France and the Netherlands. In 
Spain, Italy and Portugal, inflation 
is unlikely to be more than a further 
272% above the rates in these coun­
tries and only in Greece is the rate 
expected to be substantially more — 
at around 9V2%. 
Budget deficits 
to rise in 1993, 
but to fall in 1994 
The aggregate budget deficit of 
Member States, measured by 
general government net borrow­
ing, is projected to increase to 6V4% 
of GDP in 1993, up by 1V4% from 
the level in 1992. 
At the Community level, this 
expected increase in the budget 
deficit between these two years 
is entirely due to substantial cycli­
cal effects, which are depressing tax 
receipts and pushing up expendi­
ture. Indeed, because of budgetary 
35 Consumption, 1991-1994 
Annual change (%) consolidation in several Member 
States and lower interest rates, the 
increase in deficits which is forecast 
is significantly smaller than it 
would otherwise have been. Despite 
the very sluggish growth of output 
in 1993, government current re­
ceipts are projected to increase 
slightly more rapidly than GDP, so 
that the overall burden of taxation 
is likely to increase a little. 
If economic activity recovers and if 
policy remains unchanged, the ob­
served upward trend in budget 
deficits since 1990 is expected to be 
reversed and net general govern­
ment borrowing could fall slightly 
in relation to GDP in 1994. Based on 
current projections, only Luxem­
bourg is likely to have a budget 
deficit of less than 3% of GDP in 
1994. On the other hand, only five 
Member States — Italy, the UK, 
Greece, France and Belgium — are 
forecast to have budget deficits 
above 5% of GDP. 
External accounts 
to remain in small deficit 
The external position of the Com­
munity is likely to change little over 
the short-term, with the current 
36 Inflation, 1991-1994 
% IEC ^0+ 
6 r 16 
•0.5 [ 
1991 1992 1993 1994 1991 1992 1993 1994 
55-
Chapter 2 Short-term economic and employment outlook 
account continuing to show a deficit 
of about 1% of GDP or slightly more 
and with a small trade deficit in 
both 1993 and 1994. In contrast to 
historical experience, therefore, de­
pressed economic activity in the 
Community is expected to be accom­
panied by, at most, only a very 
modest improvement in the exter­
nal account, partly because of the 
depressed state of world markets 
(Graph 37). 
These forecast outturns are the re­
sult of two strongly opposing forces. 
After two years of marked improve­
ment (1V2% on average), the terms 
of trade on goods and services are 
set to deteriorate by 1V2% in 1993, 
as a result ofthe substantial depre­
ciation (6%) of Community 
currencies relative to the US dollar 
and Japanese yen. Any adverse ef­
fect of this deterioration on the 
trade balance is, however, expected 
to be compensated by a considerable 
increase in the value of exports 
relative to the value of imports. This 
is entirely the result of a sharp fall 
in the growth of imports in line with 
the near stagnation of domestic de­
mand in the Community in 1993. 
Exports, on the other hand, are ex­
pected to rise no faster than the 
growth of export markets. Falling employment 
leading to record 
unemployment 
As a consequence of the outlook for 
economic activity, labour market 
conditions are likely to continue to 
deteriorate in 1993 and for a large 
part of 1994. 
With the slowdown in economic 
growth in the Community in 1993, 
employment is projected to fall by 
174% following a fall of 74% in 1992. 
As the hoped-for recovery gathers 
momentum, employment is still 
likely to decline in 1994, but only 
slightly (Graph 38). If this forecast 
proves correct, employment in the 
Community would have declined by 
over V2% a year, in the four years 
1990 to 1994. This contrasts sharply 
with the period of strong job creation 
between 1986 and 1990 when the 
rate of growth averaged 1V2% a year. 
The further fall in employment 
which is forecast to occur in 1993 in 
the Community as a whole is largely 
attributable to particularly unfa­
vourable developments in Spain and 
Germany. Spain is forecast to show 
a fall in employment by 4V2% in 1993, 
the largest in the Community. In West Germany, in sharp contrast to 
the experience in 1992, when it was 
one ofthe few countries recording an 
increase, employment is expected to 
decline by over 2% in 1993. In France 
and Portugal, the decline in employ­
ment is expected to be around 1V2% 
and in Belgium and the UK, just over 
1%. Only Luxembourg and Ireland 
are forecast to record an increase in 
employment, the latter only a margi­
nal one at that. 
In all Member States, employment 
conditions are forecast to improve 
slightly in 1994. This is particularly 
true ofthe UK, which is projected to 
show an increase in employment of 
1% after three years of significant 
decline. Only four other Member 
States, however, are forecast to rec­
ord a rise in employment — Italy, if 
only marginally, Greece and Ireland 
as well as Luxembourg. 
The implication of this unfavourable 
outlook for employment in a context 
where the labour force in the Com­
munity is expected to continue 
expanding significantly—by around 
V2% a year in both 1993 and 1994 — 
is that unemployment will continue 
to rise over the short-term from a 
rate which was already unacceptably 
high, 10%, at the beginning of 1993 
37 Trade Balance, 1991-1994 
% GDP 38 Employment, 1991-1994 
Annual change (% 39 Unemployment, 1991-1994 
% labour force EC BEC+ 
10 
1991 1992 1993 1994 1991 1992 1993 1994 1991 1992 1993 1994 
56 
Chapter 2 Short-term economic and employment outlook 
(Graph 39). The increase is expected 
to be particularly pronounced during 
1993. As a result, the average rate of 
unemployment for the year is fore­
cast to be 11% for the Community, 
excluding the East German Lander, 
and 11V2% including them. 
A further rise is expected to occur in 
1994, taking the average rate to 
11V2% if the East German Lander 
are excluded and to almost 12% if 
they are included. On either basis, 
this means that unemployment is 
likely to surpass its previous peak 
rate of 10.8% reached in 1985 before 
the end of the year. The progress 
made over the period 1986 to 1990 
in reducing unemployment will 
therefore have been more than 
reversed. 
Apart from in Luxembourg, where 
little change is forecast, the rate of 
unemployment is expected to rise 
significantly in all Member States 
in 1993 and seems set to go on in­
creasing in most of them in 1994. 
The main exception is the UK, 
where on the basis ofthe growth in 
employment now projected, unem­
ployment is forecast to decline from 
11V2% to under 11%, taking it back 
to the level in 1992. In half the 
Member States — Belgium, Ger­
many, Spain, France, the 
Netherlands and Portugal — the 
rise in the unemployment rate be­
tween 1992 and 1994 is expected to 
be 2 percentage points or more. 
As a result, in 8 Member States, if 
Germany is defined to include the 
new Lander, unemployment in 1994 
is expected to be around 10% or 
more and in the two worst affected 
countries — Spain and Ireland — 
close to 20% or more. 
57 
Chapter 2 Short-term economic and employment outlook 
58-
The European labour market 
Part II The European labour market 
Chapter 3 The Community in the world economy 
Recent employment developments in 
Central and Eastern Europe 
Chapter 4 Towards an integrated European labour market? 
Chapter 5 Labour market developments in assisted regions 
Chapter 6 Women in employment 
59 
The European labour market 
60 
Chapter 3 The Community in the world economy 
Chapter 3 The Community in the world economy 
The Community is closely integrated into the world economy 
with a major share of trade, but located in a region with 
acute economic problems. Its long-term prospects for growth 
and employment depend not only on the competitiveness of 
its producers but on sustained development in key areas in 
the rest ofthe world. 
The Community is one of the most 
prosperous areas of the world. It 
accounts for a significant proportion 
of global income and an even 
greater share of manufacturing pro­
duction and international trade. Its 
people, because of the productivity 
ofthe labour force, enjoy one ofthe 
highest standards of living any­
where and, despite the present 
recession, have seen their real in­
come levels increase steadily year 
after year. 
Population and the 
potential labour force 
In terms of population, the Com­
munity is only a very small part of 
the world. Of the global population 
of around 5,500 million, only some 
672% — 345 million — live in the 
Community. Although it accounts 
for a slightly higher proportion of 
population of working age, around 
7% (with working age defined as 
15-64), the size of the potential la­
bour force which Member States 
have to draw upon is a very small 
fraction of that in the world as a 
whole (Map 4). It compares, for 
example, with China, which ac­
counts for just under 25% of world 
population of working age, with the rest of developing Asia contributing 
a further 30% or so. 
Nevertheless, the Community's 
potential labour force is over 40% 
larger than that ofthe US, and over 
2V2 times larger than that of Japan. 
In total, the Community accounts for over 40% of working-age popula­
tion in industrialised (OECD) 
countries. 
For some years, however, popula­
tion in the Community has been 
growing much more slowly than in 
most other parts of the world and 
M4 Distribution of working-age population, 1990 
2.7% 
8.3% 
1 dot = 0.02% world total 
61-
Chapter 3 The Community in the world economy 
projections suggest that over the 
next two decades, population will 
continue to expand but growth will 
remain relatively slow. While this 
fall in population growth has not yet 
been fully reflected in the growth of 
working-age population — or the 
potential labour force — the in­
crease in those aged 15-64 in the 
Community over the past 20 years 
has averaged under 1% a year 
(around 0.7%). Though above the 
rate in other parts of Western 
Europe — where it was only around 
V2% — it is below the rate in other 
developed countries outside Europe 
— the US, for example, experienced 
growth of 1V2% a year over this 
period, partly because of inward 
migration, and Japan 1% a year. 
It is even further below the growth 
rate in developing countries — 
which averaged 2-3% — where 
population rose particularly rapidly 
during this period, partly because of improvements in health care 
which have helped to reduce infant 
mortality. 
Growth ofthe potential labour force 
in neighbouring regions to the 
South of the Community, in the 
Maghreb and Machrek countries in 
North Africa, was particularly high 
even relative to other developing 
countries. Working-age population 
grew at a higher rate — at almost 
3V2% a year — in the Maghreb re­
gion than anywhere else in the 
world, while in the Machrek coun­
tries, it rose at over 2V2% a year. 
This means the potential labour 
force in North Africa as a whole is 
now around half the size of that in 
the Community as opposed to only 
a third just 20 years ago. More sig-
nificantly perhaps so far as 
potential migratory pressure is con­
cerned, over a third of working-age 
population in these countries is 
M5 Projected growth of working-age population, 1990-2010 
-0.2% aged between 15 and 24 — as 
against just over 20% in the Com­
munity — which means that in 
terms of numbers, at some 45 mil­
lion, the young people in this age 
group are only slightly fewer than 
in the Community. 
In countries to the East ofthe Com­
munity, in Central and Eastern 
Europe, growth of working-age 
population over the past 20 years 
has been similar to that in the 
Community, with Hungary and 
Bulgaria showing hardly any in­
crease at all. Although working-age 
population has risen more rapidly 
in the countries ofthe former Soviet 
Union, especially in the less de­
veloped areas in the South and 
East, growth, nevertheless, has 
averaged only 1% during this 
period. 
In terms of absolute numbers, the 
potential labour force in Central 
and Eastern Europe, at just over 
80 million, is some 35% of that in 
the Community, while that of the 
former Soviet Union republics 
taken together is around 80%. In 
aggregate, therefore, working-age 
population in these two regions is 
larger than in the Community and 
slightly larger than in Western 
Europe as a whole. 
Over the next 20 years — a period 
of time over which working-age 
population can be predicted fairly 
accurately since most of those com­
ing of age will already have been 
born — population of working age in 
the Community will probably grow 
more slowly than in the past. How­
ever, if immigration, which is at 
present running at around 1 million 
a year, does not fall much below 
750 thousand, it is unlikely that 
there will be any marked reduction 
in the present rate of growth (0.7% 
a year). Such low growth is common 
to most other developed parts ofthe 
62-
Chapter 3 The Community in the world economy 
world, with other countries in West­
ern Europe projected to show hardly 
any rise at all and the US a rate of 
increase well below 1% a year, while 
Japan is forecast to experience a 
decline in its potential labour force 
(Map 5). 
In developing countries, on the 
other hand, according to the latest 
United Nations projections, growth 
of working-age population is set to 
continue at a similar or even higher 
rate than over the past 20 years. 
This would mean that by the year 
2010, some 88% ofthe world's total 
potential labour force would be lo­
cated in countries which are now 
classified as developing, including 
the countries in transition in Cen­
tral and Eastern Europe and the 
former Soviet Union — as opposed 
to some 84% at present and 78% in 
1970 — and only 12% in the present 
industrialised countries. 
Over the next 20 years, only in Aus­
tralia and New Zealand among 
industrialised countries is working-
age population expected to grow by 
more than 1% a year, while only in 
China among developing countries 
is growth projected at below 2V2% a 
year. To illustrate the implications 
of these projections, an annual 
growth rate of 1% implies a dou­
bling of working-age population in 
around 70 years, while at a rate of 
2V2% a year this will happen in less 
than 30 years. 
By 2010 the potential labour force of 
the present Community of 12 Mem­
ber States would represent only 5% 
of the world total. Including the 
present EFTA countries would add 
only V2% to this figure and the pres­
ent Central and Eastern European 
countries, only another 2%. This 
reflects the likelihood that working-
age population growth in these 
latter countries will be only slightly 
greater than in the Community over the next 20 years — assuming that 
there is no marked rise in the rate 
of outward migration. This is also 
true of the former Soviet Union 
countries, where in aggregate popu­
lation of working-age is forecast to 
grow by 0.7% a year in this period 
in the absence of an acceleration in 
emigration. 
In neighbouring regions to the 
South of the Community, however, 
in the Maghreb and Machrek coun­
tries of North Africa as well as in the 
Arab countries in the Middle East, 
population growth in the 15-64 age 
group — which is only marginally 
affected by a possible reduction in 
the birth rate — is projected to aver­
age 3% a year over the next 20 
years. This would imply that by 
2010, the number would be ap­
proaching twice that in 1990. 
Although in the Maghreb and 
Machrek countries the increase is 
likely to be less, population in this 
age group is still forecast to expand 
by 75% during these years. 
These rates of increase would mean 
that by the year 2010, the working-
age population of Arab countries 
would be only slightly less than in 
the Community, as opposed to half 
the size in 1990, and that the num­
ber of young people aged 15-24, at 
around 75 million, would be 70% 
higher than in Member States. 
Employment 
The numbers of people of working 
age, while giving an indication of 
the potential size ofthe labour force, 
is not necessarily a good guide to the 
actual numbers who are produc­
tively employed. In the Community, 
around two-thirds (67%) of people 
aged 15-64 are active members of 
the labour force, though at present 
under 60% are actually in employ­
ment, the others being unable to find work. Both these figures are 
significantly lower than in most 
other developed countries, where 
active population tends to be 
around 75% of working-age popula­
tion and employment, as noted in 
Chapter 1, around 70%. 
These differences between the Com­
munity and other countries at a 
similar stage of economic develop­
ment, as elaborated elsewhere in 
this and other issues of Employment 
in Europe, arise from two main rea­
sons. The first is the relatively low 
participation of women in the la­
bour force in most parts of the 
Community, a feature which is 
gradually changing. The second is 
the high rate of unemployment in 
relation to most other comparable 
parts ofthe world. 
The figures for the Community, 
however, are not so different from 
those for Central and Eastern 
Europe, where countries used to 
employ a higher proportion of their 
potential labour force, but where ac­
tivity rates have declined since the 
process of transition from a control 
economy began. The decline in em­
ployment relative to working-age 
population has been even more pro-
nounced as unemployment, 
previously non-existent — at least 
in an open state — has risen 
sharply. 
Both active population and the 
numbers in employment in the 
Community, on the other hand, are 
markedly higher than in North 
Africa and the Middle East. In 
these countries, only a small pro­
portion of working-age population 
is recorded as being economically 
active and an even smaller propor­
tion as being employed. According 
to United Nations estimates, in 
most parts of the region, half or 
less ofthe potential labour force, is 
in employment. 
63 
Chapter 3 The Community in the world economy 
Special care, however, is needed 
when interpreting these estimates. 
There are significant difficulties 
over the measurement of employ­
ment in developing countries where 
no formal labour market as usually 
understood may exist. Particular 
problems concern those eking out a 
living for themselves on the land or 
working in small family units who 
may receive little or no pay as such 
and who may or may not be counted 
as employed depending on the pre­
cise definition adopted by the 
statistician concerned. The figures 
also make no allowance for under­
employment or the number of hours 
actually worked, nor are they 
necessarily on a consistent basis as 
between countries. They aie, there­
fore, at best broadly indicative of 
the situation. 
The low figures for employment in 
the region reflect two major charac­
teristics of the countries concerned. 
The first is the acute lack of avail­
able work in the formal economy 
because of the underdeveloped na­
ture of economic activity, and in 
particular the low importance of in­
dustry as a source either of income 
or jobs. In most of the countries, 
15% or less of the workforce is em­
ployed in industry as compared 
with around 30% in most developed 
countries. 
The second characteristic is the 
very small proportion of women 
counted as being employed. In 
many of the countries, women rep­
resent under 10% ofthe labour force 
as officially estimated. This is par­
ticularly true ofthe countries in the 
Middle East — in Saudi Arabia, for 
example, women make up only 7% 
of the labour force — but it is also 
true of Libya, where the figure is 9% 
and Algeria, where it is under 5%. 
While this does not necessarily 
mean that the great majority of 
women do not actually work — a large proportion of them are almost 
certainly working as unpaid family 
helpers — it does nevertheless re­
flect the strength of traditional 
religious and cultural attitudes 
against women being in paid em­
ployment. 
The low proportion ofthe workforce 
employed in industry is a feature of 
developing countries in general. 
Only in a few newly-industrialising 
countries is the share of employ­
ment in industry comparable with 
that in developed countries — in 
Hong Kong and South Korea, in 
particular, where the figure is just 
over 25%. In most developing coun­
tries, less than 15% of employment 
is in industry, and in the poorest 
countries, the figure drops to below 
10% and even, in some cases, espe­
cially in sub-Saharan Africa, to 
below 5%. 
In most developing countries, more­
over, there is little sign of any 
significant growth in the share of 
industry. Indeed, in many cases, the 
present share is the same or less 
than it was 25 years ago. This is also 
true ofthe developing countries clo­
sest to the Community, in North 
Africa and the Middle East, al­
though there are a few exceptions 
where industrialisation seems to be 
underway — Morocco, in particular, 
where the proportion of the work­
force employed in industry is over 
20%. 
Output and income 
Although only some 7% of the 
world's population of working age 
live in the Community, it neverthe­
less accounts for a significant share 
of global output of goods and ser­
vices and, accordingly, enjoys a 
disproportionate share of world in­
come. On the latest estimates, the 
Community produces around 30% of world GDP and generates about 
the same proportion of global in­
come, measured in US dollar terms. 
This is a higher share than the US 
(26%) and double the share of Japan 
(14%). 
Between them these three regions 
account for some 15% ofthe world's 
potential labour force and yet pro­
duce 70%) of world GDP. Although 
in terms ofthe actual labour force in 
productive employment, the propor­
tion is much higher in these three 
parts ofthe world, the juxtaposition 
of these two figures is, nevertheless, 
indicative of the scale of the gap in 
productivity between them and the 
developing world in which the vast 
majority of the world's population 
live and work. 
It is also indicative of the highly 
unequal distribution of global in­
come, with approximately 70% of it 
going to one in six ofthe population. 
At the other extreme, United Na­
tions estimates suggest that the 
poorest 50% of the people living in 
the world have to make do with 
under 5% of global income (Map 6 
which has the same total number of 
dots as Map 4 and which, therefore, 
when compared with the latter, 
illustrates the highly uneven 
distribution of GDP in relation to 
the people producing it). 
In terms of income per head, the 
disparity between the richest and 
the poorest countries is enormous. 
Even when measured in terms of 
purchasing power parities, to allow 
for differences in the pattern of con­
sumption as between countries (ie 
for the fact that someone living in a 
developing country can usually 
attain a given standard of consump­
tion with a much lower level of 
income than in a developed country) 
average real GDP per head is esti­
mated to be over 50 times higher in 
the US than in Ethiopia or Zaire. 
64 
Chapter 3 The Community in the world economy 
(These estimates are calculated by 
the United Nations International 
Comparison Programme (ICP), 
though inevitably they are subject 
to a wide margin of error so far as 
many less developed countries are 
concerned because of a lack of data.) 
Although average income per head 
in the Community is only around 
70% as high as in the US, it is over 
10 times higher than in Africa as a 
whole and 4-5 times higher than in 
the slightly more prosperous Magh­
reb countries (Map 7). While the 
oil-producing countries of North 
Africa and the Middle East have 
much higher levels of average in­
come per head than other countries 
in the region, and, in some cases, 
levels which are comparable with 
those in the Community, these 
averages conceal a highly unequal 
internal distribution of income, 
with the large majority ofthe people 
having significantly lower income 
levels. 
Income per head in the Community 
is also markedly higher than in 
Central and Eastern Europe and 
the former Soviet Union. Although 
estimates ofthe difference, as in the 
case of developing countries, are no­
toriously difficult to make — partly 
because official exchange rates 
until recently were highly mislead­
ing — the indications are that at 
present average levels are only 
around 30-40% of those in the 
Community. 
Growth of GDP and 
income per head 
While economic growth in the Com­
munity was slower in the 1980s 
than in any previous post-war de­
cade, it was nevertheless higher 
than in many developing parts of 
the world where increased produc­
tion to generate employment and M6 Distribution of world income, 1990 
1.7% -^ 
1 dot = 0.02% world GDP 
M7 Income per head compared to the Community, 1990 
65 
Chapter 3 The Community in the world economy 
higher real income levels was much 
more urgently needed. Thus, even 
in a period of relative stagnation in 
the industrialised world, the gap 
between rich and poor regions 
actually widened. In energy and 
other primary producing countries, 
the fall in oil and commodity prices, 
caused partly by the slow growth of 
output, and therefore demand, in 
industrial countries — especially 
during the first half of the 1980s — 
led, in many cases, to a significant 
reduction in export earnings and to 
very little growth in GDP. 
In the Middle East, GDP is esti­
mated to have grown on average 
by only 1% a year over the 1980s 
as a whole, while population in­
creased by over 3% a year. As a 
result, real income per head in the 
region fell by over 2% a year during 
this period and was 20% lower in 
1990 than 10 years earlier. This 
contrasts with the substantial growth experienced over the 1970s 
as oil prices increased (Map 8). 
In sub-Saharan Africa in the 1980s 
growth of population outstripped 
GDP growth and real income per 
head in the region fell, on average, 
by almost 10% over the decade. 
Many ofthe poorest countries in the 
world, therefore, became even 
poorer during these ten years. 
In Latin America also, income per 
head declined in real terms over this 
period, by an average of V2% a year, 
as the foreign debt accumulated 
during the 1970s in an attempt to 
maintain growth reached unsus­
tainable proportions and led to the 
universal adoption of stabilisation 
programmes designed to hold down 
expenditure. 
Only in Asia did developing coun­
tries succeed in maintaining growth 
during the 1980s at anywhere near 
M8 Growth of income per head, 1980-1990 
Annual 
change (%) 
| | decrease 
• 2-3 
• 3-4 
• >4 the rates attained in the 1970s, with 
some countries, like India and 
China (for which GDP growth is 
particularly difficult to estimate) 
achieving even higher rates. 
Apart from in Asia — which admit­
tedly accounts for over half the 
world's population — the huge gap 
in income per head between 
developed and developing countries 
widened in the 1980s instead of 
narrowing as it had done in the 
1970s. This was also true of the 
Community and the poorer coun­
tries on its Southern and Eastern 
borders. Although in the Maghreb 
and Machrek countries, GDP grew 
in real terms by an average of 
around 3% a year over the 1980s — 
significantly higher than in the 
Community — this was only margi­
nally higher than the rate of 
population growth. As a result, 
income per head barely increased 
at all, as compared with the 
Community where it grew by an 
average of just over 2% a year. 
Similarly, in Central and Eastern 
Europe, as well as in the former 
Soviet Union, growth of GDP over 
the 1980s averaged only around 1% 
a year, again much less than in the 
1970s, as the centrally planned 
economies ran into acute structural 
problems. Income per head, there­
fore, rose by very little. 
Since 1990, the collapse of the 
former Soviet Union market, the 
substantial reduction in intra-
regional trade and the 
implementation of restrictive mon­
etary and fiscal policies to contain 
inflationary pressure and govern­
ment borrowing have combined 
with the disruptive effects of the 
transition process itself to reduce 
GDP substantially. 
As described in the annex to this 
chapter, which reviews in more 
66 
Chapter 3 The Community in the world economy 
detail the economic and employ­
ment developments which have 
taken place in Central and Eastern 
Europe since the transition began, 
especially in 1992, this massive 
reduction in output in the region 
has been accompanied by consider­
able job losses and mounting 
unemployment. 
In sum, the Community is sur­
rounded by regions which, over 
recent years in particular, have ex­
perienced a decline or, at best, very 
little growth in income per head, 
and where as a consequence labour 
market problems have worsened. 
This should be of special concern to 
the Community not only because of 
the long-term importance of these 
regions as markets for its industrial 
products and services, but also be­
cause of the pressure for migration 
which will undoubtedly intensify as 
both income and employment op­
portunities remain inadequate and 
even shrink. — has been less than the growth in 
manufacturing trade (Graph 40). 
Partly because of the substantial 
scale of trade between Member 
States, increased even further by 
the completion of the Single Mar­
ket, Community countries between 
them account for almost 40% of total 
world trade and almost 45% of 
world exports of manufactures. 
Some 40% global trade in manufac­
tured goods takes place within the 
Community's internal market. 
Even excluding internal trade, 
Community producers occupy a 
leading position in world markets, 
accounting for around 30% of total 
exports of manufactures to the rest 
of the world. This is more than 
either the US or Japan which both 
have a share of around 11% of world 
markets. 
The Community's market share, 
however, like that of other countries varies markedly from one part of 
the world to another, depending 
to a significant extent on its 
geographical proximity as well as 
historical links. These non-
economic factors seem to be as much 
an influence on export shares as 
price competitiveness or product 
quality, though the latter are 
clearly likely to be important deter­
minants of changes in market share 
over time. 
Whereas the share of Community 
producers in the internal market for 
manufactures is around 65% and 
their share of the EFTA market 
even slightly higher (67%), their 
share of Japanese imports of manu­
factures is only around 25% and of 
US imports, only 23%) (Graph 41). 
Similarly, in developing countries, 
Community manufacturers hold a 
dominant position in the relatively 
close African market, accounting for 
60% of imports, and also have a 
Trade 40 Composition of international trade, 1970,1980 and 1990 
The Community's high share of 
world income owes much to its lead­
ing position in international trade 
and, in particular, in trade in manu­
factures, which remains both the 
largest and the fastest growing com­
ponent of total trade flows. 
In 1990, manufactures accounted 
for over 60% of the total value of 
trade in goods and services, around 
three times more than the value of 
service trade. Moreover over the 
past 20 years — contrary to wide­
spread belief — the share of 
manufactures in overall trade has 
risen rather than fallen. While 
trade in services expanded signifi­
cantly, the rise up to now — partly 
inhibited by the restrictions on 
trade which the Internal Market 
programme was designed to remove % total trade 
70 r 
60 h 
50 r 
40 h 
30 r 
20 r 
10 1 70 
A 60 
A 50 
A 40 
A 30 
20 
10 
Food/raw Energy Manuf- Services 
materials acturing. 
Intra-EC trade Food/raw Energy Manuf- Services Food/raw Energy Manuf- Services 
materials acturing materials acturing 
Extra-EC exports World excluding Intra-EC trade 
-67 
Chapter 3 The Community in the world economy 
41 Shares of world markets for manufactured goods, 1970, 
1980 and 1990 
100 
80 
60 
40 
20 % total imports 
• EC • US • Japan • Asia 
Bars show 1970,1980,1990 from left to right 100 
A 80 
A 60 
A 40 
20 
EC EFTA US Japan Eastern Asia Africa Middle Latin 
Europe East America 
42 World markets for manufactured goods, 1970,1980 and 
1990 
Imports (1000 miilion US$, 1990 prices) 
1000 r 
800 
600 h 
400 \-
200 A 1000 
A 800 
A 600 
400 
A 200 
EC EFTA US Japan Eastern Asia Africa Middle Latin 
Europe East America substantial share of the Middle 
Eastern market (45%), but are 
much less important in Latin 
America (with a share of 23%) and 
Asia (16%). 
The same factors also have a major 
influence on the market shares of 
other countries. US exporters hold 
only a very small share ofthe Euro­
pean market or of the markets in 
Africa and the Middle East, 
whereas they account for over 40% 
of Latin American imports of manu­
factures and for a significant share 
ofthe Pacific basin market (for 28% 
of Japanese industrial imports, for 
example). Japanese manufacturers 
also are much more important in 
Asia and the US than in Africa or 
Europe. 
This segmentation of the world 
market seems, if anything, to have 
become more rather than less 
pronounced over time. It is particu­
larly evident in the Pacific basin 
market where Asian producers 
have significantly increased their 
share of exports. While this is also 
true of other markets — Asian pro­
ducers being alone in expanding 
their market share throughout the 
world — it has been on a much 
larger scale here than elsewhere. 
Although the Community's overall 
share of total world trade in manu­
factures has declined over the past 
20 years, the fall has been relatively 
modest and less than that experi­
enced by US exporters. There has, 
however, been a marked difference 
in the performance of Community 
producers in different markets. In 
Europe and the surrounding re­
gions, Community manufacturers 
have either held onto their share or 
at worst experienced a marginal fall 
— in their own internal market, 
EFTA countries, Africa and the 
Middle East. Moreover in Central 
and Eastern Europe and the former 
68 
Chapter 3 The Community in the world economy 
Soviet Union, where there has been 
a big reduction in internal trade 
since 1989, they have increased 
their share significantly (Graph 41). 
Outside the wider European re­
gion, apart from in Japan, 
Community manufacturers lost 
market share over this 20-year 
period. Unfortunately, two of these 
broad regions — the US and Asia 
— are the largest markets for 
manufactured exports outside the 
Community and showed the fas­
test growth in the 1980s after 
Japan (which remains a relatively 
small importer of manufactured 
goods — under 30% of the size of 
the US, in terms of value) 
(Graph 42). 
By contrast, three ofthe Communi­
ty's most important markets, 
Africa, the Middle East and Central 
and Eastern Europe — in many 
ways, its natural trading partners 
— all showed a significant reduc­
tion in imports of manufactures 
during the 1980s, reflecting the con­
traction in GDP and real income 
noted above. 
As a result of these relative rates 
of market growth — which more 
than outweighed the fall in trade 
share — the US and developing 
Asia (as well as Japan) have come 
to account for a larger proportion 
of total Community exports of 
manufactures to the rest of the 
world since 1980 (Graph 43). In 
1990, over 30% of extra-EC manu­
factured exports of Community 
countries went to these two parts 
ofthe world as opposed to only just 
over 20% ten years earlier. 
In contrast, the proportion going to 
Africa and the Middle East, where 
European producers have a com­
parative advantage, fell from over 
25% to 15%. The relative import­
ance of exports to Central and Eastern Europe also declined as 
the effect of the opening of these 
markets to Community producers 
was more than offset by the fall in 
income. 
Nevertheless, for all Community 
countries, Western Europe repre­
sents by far the most important 
market for exports. In 1990, some 
72% of total exports of Member 
States went either to the 
Community itself or to EFTA coun­
tries, with the internal market 
alone accounting for over 60% of all 
visible exports (and just under 60% 
in the case of manufacturing trade). 
Moreover the importance of the in­
ternal EC market has increased 
progressively over time with closer 
economic integration, with the 
share of Community exports ac­
counted for by internal trade rising 
from under 41% in 1960 to 54% in 
1970, 56% in 1980 and 62% in 1991 
(Graph 44). Although Community producers 
have experienced only a small 
reduction in their share of manufac­
turing trade as a whole over the 
past 20 years, their performance in 
the more dynamic and technically-
advanced sectors has been less 
impressive than in more basic pro­
ducts. For machinery and transport 
equipment, for which the market 
has grown faster than for other 
goods, Community manufacturers 
account for a lower share of world 
exports than for other products — 
29% ofthe extra-EC total in 1990 as 
compared with 40% for chemicals — 
and have seen their share decline by 
more over the past 20 years than-in 
other areas (from around 37% in 
1970) (Graph 45). 
At the same time, the importance of 
machinery and transport equipment 
in total EC exports has hardly 
changed at all since 1970, despite the 
relatively rapid growth of the world 
43 Geographic distribution of extra-Community exports of 
manufactures, 1970,1980 and 1990 
% total 
30 r 
25 
20 M 
15 1 
10 » 
5 m 30 
A 25 
A 20 
15 
A 10 
EFTA US Japan Eastern Asia Africa Middle Latin 
Europe East America 
69 
Chapter 3 The Community in the world economy 
44 The growing importance of internal trade for the 
Community, 1970-1991 
% QQP H Extra-community exports I Intra-community exports 
45 Community share of trade in manufactures by product 
type, 1970,1980 and 1990 
% total 
80 r 
60 rf 
40 
20 H -i 80 
60 
40 
20 
Chemicals Machinery & Other 
transport manufactures 
Intra-EC trade Chemicals Machinery & Other 
transport manufactures 
World trade (excluding intra-EC) market for these products, the share 
remaining at just under 50% of the 
total (Graph 46). This contrasts vi­
vidly with the change shown by 
Japan, for which machinery and 
transport equipment have come to 
account for almost 75% of total 
manufactured exports as opposed to 
only 43% in 1970. Similarly, for the 
developing Asian economies, the 
share of these products in manufac­
tured exports rose from under 15% in 
1970 to almost 40% in 1990. 
Trade in services 
Community producers are as import­
ant in trade in services as they are in 
manufacturing trade. Although their 
share of global markets has declined 
over the past 20 years, and especially 
since 1980, it remains substantial. In 
1990, Community producers ac­
counted for around 45% of total 
world exports of services and over 
half of trade in "other services" — ie 
other than travel and transport — 
which includes various kinds of con­
sultancy and business services and 
which is the fastest growing area of 
trade (Graph 47). 
In contrast to trade in manufactures, 
over half of exports were to countries 
outside the Community, except ir. 
the case of travel — a major compo­
nent of which is tourism — where 
around 55% was between Member 
States. Like manufacturing, how­
ever, the importance of intra-
Community trade in services has in­
creased significantly over time 
relative to total trade, from under a 
third in 1970 to almost a half in 1990. 
Employment in 
export industries 
Clearly trade is much less important 
in services than in manufacturing 
and comparatively few people in the 
70 
Chapter 3 The Community in the world economy 
Community work in service acti­
vities where a significant part of 
output is exported. Even in manu­
facturing, however, the number 
of jobs which depend directly on 
exports is relatively small. 
In the Community as a whole, in­
dustries which exported over 40% of 
their output in 1990 — office ma­
chinery, mechanical engineering 
and transport equipment industries 
— accounted for some 5% of total 
employment (Graph 48, in which 
the share of gross output exported 
is calculated for NACE 2-digit in­
dustries in the 11 Member States 
taken together). Only in Germany 
was the proportion significantly 
above 5%, but still less than 10%. 
Taking, industries where exports 
represented over 25% of output 
yields a figure of 15% of employ­
ment, with just two countries, 
Germany and Italy having a larger 
share of their labour forces em­
ployed in such industries. 
Around half of the industrial work­
force in the Community in 1990 
was, therefore, employed in indus­
tries, such as food, paper and 
printing and metal products, which 
produced predominantly for the do­
mestic market. Given that exports 
represent only a small proportion of 
service output, the clear implication 
is that the great majority of people 
working in the Community are em­
ployed in activities where exporting 
is of minor importance. 
This, of course, does not mean that 
exporting is not vitally important 
for employment. A large number of 
jobs — in supplying industries and 
services, for example — depend in­
directly on exporting industries. 
Moreover the earnings generated 
by such industries are critical for 
sustaining economic growth and 
generating the income required for 
job creation. 46 Composition of manufactured exports from the Community, 
US, Japan and developing Asia, 1970,1980 and 1990 
• Chemicals I Machinery & H Other manufactures 
transport 
100 100 
80 
60 
40 
20 
1970 1980 1990 
EC 1970 1980 1990 
US 1970 1980 1990 
Japan 1970 1980 1990 
Developing Asia 
47 Community share of world trade in services, 1970,1980 
and 1990 
% world trade in services 
80 
60 r-
40 
20 80 
A 60 
40 
20 
1970 1980 1990 
Total services 1970 1980 1990 
Transport 1970 1980 1990 
Travel 1970 1980 1990 
Other private services 
-71-
Chapter 3 The Community in the world economy 
At the same time, many industries 
— and some services — in the Com­
munity are under pressure from 
imports. For those employed in such 
industries, the need to be interna­
tionally competitive is just as 
important as in exporting sectors. 
Nevertheless most people in the 
Community work in activities 
where international trade is of 
minor significance and not directly 
a major determinant of the scale 
of production and the level of 
employment. 
Policy implications 
Despite its prosperity and relative 
trade success, the growth of the 
Community economy has slowed 
appreciably over the past 20 years. 
For reasons which are not obvious, 
many millions of people have been 
unable to find work and its effi­
ciency in production, as well as its ability to adapt to a changing global 
environment, has been called into 
question. 
The present recession has quite 
naturally intensified concern about 
the performance of the Communi­
ty's economy and its capacity for 
sustaining long-term growth and 
adequate rates of employment cre­
ation. Low growth has drawn 
attention to the vulnerability of 
substantial numbers of jobs both to 
lower growth of exports and to the 
increasing penetration of the inter­
nal market by foreign-produced 
goods. It has also highlighted the 
extent to which the Community has 
become integrated into the global 
economy and, because of this, its 
exposure to problems in other parts 
ofthe system. 
This is most obvious in the sphere of 
trade: because the Community is by 
far the largest exporter on world 
48 Employment in export industries, 1990 
% total employment 
25 r 
20 25-40% output exported 
> 40% output exported 25 markets, any downturn in the 
growth of those markets inevitably 
has a significant effect on industry 
in the Community and, potentially, 
on the volume of employment it can 
sustain. Equally, however, the 
increasing importance of multina­
tional companies in production and 
as a channel for long-term capital 
flows means that any reduction 
in profits suffered in one part of 
the world is also liable to affect 
investment elsewhere. 
At the same time, the Community's 
geographic location seems to pose a 
serious obstacle to future growth in 
trade. The countries to the South — 
in North Africa and the Middle East 
— suffer from retarded economic 
development, acute poverty and job 
shortages. Those to the East — in 
Central and Eastern Europe and 
the former Soviet Union — face im­
mense problems of restructuring, 
high unemployment and political 
uncertainty. They are, however, to 
a large extent the Community's 
natural trading partners, not only 
because of their proximity but also 
because of historical ties, and it is in 
these markets where Community 
exporters have been most successful 
in the past. 
These countries have a potential for 
much more rapid economic growth 
than the Community itself if the 
obstacles can be overcome. They, 
therefore, offer the possibility of ac­
celerated job creation in the 
Community. However, if existing 
problems persist, the prospect is one 
of slow market growth and of an 
unstable economic and political en­
vironment. This may lead to an 
intensification of inward migratory 
pressure and increased labour mar­
ket and social problems. Which of 
these two alternatives actually ma­
terialises is not solely determined 
by the actions taken by the coun­
tries themselves. The policies 
72 
Chapter 3 The Community in the world economy 
adopted by the Community as well 
as the scale of financial and techni­
cal assistance offered, are likely to 
affect their ability to overcome 
structural problems and generate 
economic growth. Moreover, since 
for almost all of these countries the 
Community represents the major 
external market for their exports, 
the rate of growth it is able to sus­
tain has a major influence on their 
prospects for development. 
This also applies, if less so, to the 
rest ofthe world. The Community is 
such a major part ofthe global econ­
omy, in terms of the market it 
represents for both primary pro­
ducers and manufacturers, that its 
growth performance affects the 
pace of development elsewhere. 
Sustained recovery ofthe European 
economy would not only be of inter­
nal benefit but would contribute 
significantly to a resumption of 
growth in the world as a whole. 
73 
Chapter 3 The Community in the world economy 
-74 
Recent employment developments in Central and Eastern Europe 
Recent employment developments 
in Central and Eastern Europe 
Since the process of political and 
economic reform began, all coun­
tries in Central and Eastern Europe 
have been in the grip of deep re­
cession. This, caused in large 
measure by the collapse in trade 
both within the region and with the 
former Soviet Union — and exacer­
bated more recently by recession in 
the Community and other indus­
trialised parts of the world — has 
made it much more difficult for 
Governments in the region to imple­
ment programmes of reform. It has 
led them, in particular, to slow 
down the transition to full market 
economies for fears of causing even 
larger job losses and greater social 
unrest. 
After two years of sharply declining 
output throughout the region, how-
ever, there were signs of 
improvement in 1992 in the econ­
omic situation in Poland, the former 
Czechoslovakia and Hungary. In 
Bulgaria and Romania, however, 
production continued to decline un­
abated and in most parts of the 
region unemployment has climbed 
to levels comparable to those in the 
Community. 
Moreover, the process of economic 
restructuring is still in its early 
stages in most parts of the region 
and large-scale losses of unviable 
jobs remain in prospect. Output developments 
Output, as measured by GDP, de­
clined throughout Central and 
Eastern Europe in 1992, except in 
Poland where, according to the la­
test estimates, output grew by V2% 
(Graph 49). This, however, was 
after a two year period when GDP 
fell by almost 20%. In Hungary, 
GDP declined by 5% in 1992, while in Czechoslovakia, the fall was es­
timated to be slightly greater at 
around 7%. In both cases, however, 
this was less than the rate of de­
cline in 1991, when in the former 
case output fell by 11% and in the 
latter by 16%. (The reference here 
and elsewhere to Czechoslovakia 
relate to the country before the sep­
aration of the Czech and Slovak 
Republics at the beginning of 
1993.) 
49 Changes in GDP and employment in Central and 
Eastern Europe, 1991 and 1992 
% change 
-10 
-15 
-20 
-25 GDP (constant prices) H Employment -i 5 
-5 
-10 
A -15 
A -20 
-25 
Bulgaria Czech. Hungary Poland Romania 
1991 Bulgaria Czech. Hungary Poland Romania 
1992 
75 
Recent employment developments in Central and Eastern Europe 
On the other hand, output conti­
nued to decline steeply in Bulgaria 
and Romania — by 21% and 15%, 
respectively, by even more in other 
words than the substantial falls 
recorded in 1991. 
Trade developments 
Recession in the region and the vir­
tual collapse of the former Soviet 
Union economy has depressed 
traditional markets for exports 
since the reform process began. In 
the face of this, all the countries in 
the region have made great efforts, 
with some success, to shift their 
trade towards the Community and 
other market economies. As a re­
sult, 75% of Hungarian exports and 
63% of Czechoslovakian exports 
went to market economies in 1992, 
while for Bulgaria, the proportion of 
trade with OECD countries went up 
by 17%. 
Despite these achievements, how­
ever, trade with the industrialised 
world, and, in particular, the 
Community, has been severely af­
fected by the slow growth of these 
economies, especially in 1992. 
Moreover, there is evidence of a 
shift in the composition of exports 
away from more sophisticated, high 
value-added manufactures, such as 
machine tools, towards basic prod­
ucts, fuel and raw materials. 
Employment 
On the latest estimates, employ­
ment declined throughout the 
region in 1992, the falls ranging 
from 5% in Czechoslovakia and 
Romania and 4% in Hungary to only 
just over 1% in Poland (Graph 49). 
In Bulgaria, estimates of employ­
ment exist only for the state sector 
and these show a fall of 13% in 1992. While this fall was clearly offset by 
an expansion of employment in the 
private sector, from the figures on 
business creation, it was unlikely to 
have been, enough to prevent the 
total number of people in work from 
falling significantly. 
Whereas the decline in employment 
in Bulgaria was probably on a simi­
lar scale as in 1991 — the numbers 
in the state sector fell by the same 
amount in the two years — in Hun­
gary, Czechoslovakia and Poland, 
it was markedly less (in 1991, the 
fall was 8% in the former two, 6% 
in the latter). In Romania, on the 
other hand, the decline in 1992 was 
on a much larger scale than a year 
earlier when it was under 1%. 
As in Bulgaria, the decline in em­
ployment in 1992, as in 1991, was 
very much concentrated in the state 
and cooperative sector throughout 
the region. Although job creation 
in the private sector continued to 
increase at a rapid pace in all ofthe 
countries, it was not sufficient to 
compensate for large-scale job 
losses in the traditional part of the 
economy. The private firms estab­
lished were predominantly small 
businesses with few if any 
employees — other than the pro­
prietors themselves. 
In Czechoslovakia, for example, the 
1.7 million small businesses and 
sole proprietorships which had been 
created by the end of 1992 employed 
just 700 thousand workers (as well 
as 700 thousand self-employed for 
whom the business was their main 
occupation rather than an addi­
tional activity on top of another job), 
only some 400 thousand more than 
at the beginning of the year. 
Employment in agriculture rose in 
Romania in both 1991 and 1992, as 
a result ofthe privatisation of land. 
In the other countries apart from Poland, the numbers employed in 
agriculture have declined markedly 
— more so than in other sectors — 
since the reform process began. In 
both Hungary and Bulgaria, agri­
cultural employment is recorded as 
having fallen by around 20% in 
1992, following significant falls in 
1991 (of over 15% in Hungary). In 
Czechoslovakia, a decline of 13% is 
estimated for 1992, which would 
mean a fall of 30% since 1990. Al­
though these figures exaggerate 
the extent of reduction in the case 
of Czechoslovakia and Hungary 
because of a reclassification of some 
activities from agriculture to indus­
try or services — and the exclusion 
of some private farms in Czechoslo­
vakia — they are nevertheless 
indicative of a substantial decline 
in employment in this sector 
(Graph 50). 
Although employment in industry 
declined in all countries in 1992, 
apart from in Romania, the fall was 
smaller than in 1991. This was par­
ticularly the case in Bulgaria, 
where despite the apparent sub­
stantial fall in industrial output, 
employment in manufacturing fell 
by only 3% in 1992 following a fall 
of almost 20% in 1991. This was 
similar to the decline in Poland, 
where industrial output increased 
in 1992 and where, in contrast to 
Bulgaria, there seems to have been 
a significant reduction in the scale 
of overmanning, which all the evi­
dence suggests is substantial. 
In Czechoslovakia, on the other 
hand, employment in manufactur­
ing is estimated to have declined 
by around 6% in 1992 following a 
fall of 9% in 1991, much less than 
the fall in industrial production, 
while employment in other parts 
of industry seems to have changed 
by relatively little. In the light of 
this apparent increase in overman­
ning — or social employment — it is 
76 
Recent employment developments in Central and Eastern Europe 
relevant to note that while the first 
wave of the so-called large pri­
vatisation (ie relating to large 
enterprises) occurred in 1992, this 
really only meant that the owner­
ship of the enterprises included 
was transferred from the state to 
private individuals (through the 
distribution of coupons). The man­
agement ofthe enterprises affected 
remained largely the same and 
there was little change in the way 
they operated. 
In Hungary, estimates suggest that 
manufacturing employment fell by 
8%, only slightly less than the year 
before and on a similar scale to the 
decline in output. 
The largest fall in industrial em--
ployment in 1992 occurred in 
Romania, where it is estimated to 
have been as much as 15% in manu­
facturing, following a fall of 10% in 
1991. The scale ofthe decline, how­
ever, was still much less than the 
reduction in industrial output. 
Most of any new jobs created in 
1992, as in 1991, were in services 
where the growth of private busi­
ness has been largely concentrated. 
Precisely because of this, however, 
and because of the fact that, as 
noted above, these new businesses 
are predominantly small firms, the 
data on changes in employment in 
services are particularly unreliable. 
This is especially the case where 
survey methods of collecting infor­
mation on this sector — in Bulgaria 
and Romania more than the other 
three countries — are still very 
much in the process of being de­
veloped. 
The estimates which have been 
made suggest that employment in 
services in 1992 declined in Bulga­
ria and Romania — in the latter by 
only 1% — remained broadly un­
changed in Poland and increased in Czechoslovakia and Hungary. 
Within services, a major growth 
areas seems to have been distribu­
tion, hotels and restaurants, for 
which all countries apart from Bul-
garia show an expansion in 
employment even though the many 
very small businesses which 
increasingly are coming to charac­
terise these activities are almost 
certainly underrecorded. 
The other area which was signifi­
cantly underdeveloped under the 
former regime is banking, finance 
and related services. Although jobs 
in this sector are estimated to have 
risen in most countries in 1992 — 
Poland being an exception — they 
are still very small in number, ac­
counting for only around 1% or less 
of total employment. By contrast, 
employment in health and educa­
tion, a much larger sector, either 
remained unchanged — in Hungary 
and Romania — or declined in 1992. Unemployment 
The only figures for unemployment 
which existed in 1992 for three ofthe 
five countries are for those register­
ing at labour offices (the exceptions 
are Hungary and Poland where La­
bour Force Surveys have been 
established). As is well known, these 
are liable to give a misleading indi­
cation both of the rate at any one 
time (because significant numbers 
do not register and because some of 
those on the register will either be in 
work or not actively looking for a job) 
and of changes over time (because 
the regulations applying to re­
gistration are liable to change). 
Nevertheless the registration figures 
at least give an impression of the 
scale ofthe problem and the pace and 
direction of change. 
With the exception of Czechoslova­
kia, where the registered rate fell 
50 Changes in employment by sector in Central and 
Eastern Europe, 1990-1992 
% change 
15 r 
5 * Agriculture H industry Services 
-15 r. 
-25 T 15 
A 5 
A -5 
-15 
-25 
Bulgaria Czech. Hungary Poland Romania Bulgaria Czech. Hungary Poland Romanis 
-77 
Recent employment developments in Central and Eastern Europe 
51 Unemployment rates in Central and Eastern Europe, 
1991 and 1992 
% labour force 
20 r 
16 h 1991 
Dec-92 
12 
8 h 20 
16 
12 
Bulgaria Czechoslovakia Hungary Poland Romania during the year from 6.5% to 5%, 
unemployment continued to in­
crease significantly in 1992 
throughout the region. While there 
was sign of a slowdown in the rate 
of increase in Poland, where the 
rate rose to 13.6% at the end of 1992 
from 11.6% at the end of the pre­
vious year, this was much less the 
case in the other three countries 
(Graph 51). 
The rise was particularly steep in 
Hungary, where the registered rate 
increased from 7.7% at the end of 
1991 to 13.5% 12 months later (al­
though the figure from the LFS at 
the end of 1992 was significantly 
less at 10.4%). The increase was 
only slightly less pronounced in Ro­
mania, where unemployment was 
not officially recognised until the 
end of 1990 — later than elsewhere 
— the rate had reached 8.4% by 
December 1992, up from only 3% 
one year earlier. 
52 Unemployment rates of men and women in Central and 
Eastern Europe, 1991 and 1992 
% labour force 
20 r 
16 r 01991 • Dec-92 
12 r 
4 H -i 20 
A 16 
12 
Bulgaria Czech. Hungary Poland Romania Bulgaria Czech. Hungary Poland Romania 
Men Women Unemployment also continued to 
rise significantly in Bulgaria in 
1992 to over 15% at the end of the 
year as compared with an average 
rate of under 11% in 1991. In Bul­
garia, moreover, the results of 
the Census of Population suggested 
that the actual numbers of unem­
ployed, defined according to 
international conventions, was 
around 100 thousand — over 15% — 
more than the registered numbers. 
In all of the countries, except for 
Hungary, more women were regis­
tered as unemployed than men in 
1992 as in 1991. This was especially 
the case in Romania, where the rate 
was 10.5% for women at the end 
of 1992 as against 6.3% for men, 
and Poland, where it was 15.5% 
for women and 11.9% for men 
(Graph 52). 
The most marked features of unem­
ployment throughout the region 
-78 
Recent employment developments in Central and Eastern Europe 
are, first, that disproportionate 
numbers of those out of work are 
young people; second, that an in­
creasing proportion have been 
unemployed for a long time; and, 
third, that less skilled people are 
much more affected than more 
skilled, though in some countries, 
eg Poland, unemployment is also a 
significant problem among skilled 
workers. The first two features, as 
to some extent the third, are a re­
flection of the inadequate rate of 
new job creation, which is far too 
low to provide employment both for 
those entering the job market for 
the first time and for those who 
have been thrown out of work. 
In Poland, the rate of unemploy­
ment among those aged under 25 
was around 30% at the end of 1992, 
while in Hungary, it was approach­
ing 20% (both figures from LFS). In 
Romania, well over half of those reg­
istered as unemployed in December 
1992 were under 30, while in Bulga­
ria, the figure was around 45%. 
Although in Czechoslovakia, the 
rate of unemployment among the 
young is lower than for the other 
countries, it was still almost twice 
as high as the average rate for the 
workforce as a whole at the end of 
1992. Moreover, the fall in the rate 
was less than for other age groups 
during the year. 
The numbers of unemployed who 
had been out of work for more than a year increased markedly in 1992 
in all countries for which data are 
available. In Poland, some 44% of 
the unemployed fell into this ca­
tegory at the end of 1992, while 13% 
had been out of work for more than 
two years. In Hungary, where the 
steep rise in unemployment was 
more recent, in December 1992, 
30% of benefit recipients had been 
receiving benefits for more than a 
year. In Romania, where unemploy­
ment only manifested itself at the 
beginning of 1991, 26% ofthe total 
number registered had been out of 
work for more than nine months. 
In Czechoslovakia, despite the fall 
in unemployment during 1992, the 
long-term unemployed represented 
30% of the total by the end of the 
year. 
Future prospects 
While there were clear signs of an 
improvement in the economic situ­
ation in parts ofthe region in 1992, 
it remains unclear, whether this 
will be sustained and whether it will 
spread to other parts. 
In Poland, the government forecast 
is for growth of 2% in 1993, while in 
Hungary, there is hope that despite 
the restrictive measures im­
plemented in September 1992, 
there will be some recovery in 
the economy in 1993 or 1994. In 
Romania, it is hoped that unem­ployment can be kept within the 
range 9-12%, though this may be 
difficult if at the same time policy is 
aimed at reducing inflation from 
200% to 70-80% while subsidies on 
consumer goods are withdrawn 
(as from the 1st May 1993) and 
remaining price controls are grad­
ually relaxed. 
In all the countries, the prospects 
for employment in the short and 
medium-term are greatly affected 
by the future pace of the reform 
programme — in particular, not so 
much the speed with which the 
larger state enterprises are pri­
vatised but more especially the time 
horizon over which the criteria by 
which they are managed are 
changed to emphasise market as op­
posed to social objectives, such as 
job preservation. Throughout the 
region, large-scale job losses are an 
inevitable result of this process. 
It remains to be seen whether econ­
omic growth can be achieved at a 
rate high enough to create suffi­
cient employment in other sectors 
to compensate for these losses. 
This will depend not only on the 
policies pursued within each ofthe 
countries, but also on their collec­
tive success in securing economic 
expansion as well as on growth in 
the Community and other parts of 
the world, both of which are essen­
tial to provide the growth in trade 
which is critical for restructuring 
and development. 
79-
Recent employment developments in Central and Eastern Europe 
80 
Chapter 4 Towards an integrated European labour market? 
Chapter 4 Towards an integrated 
European labour market? 
There are extreme variations in wages and labour costs 
across the Community which reflect major differences in 
productivity. Variations in the educational attainment levels 
ofthe workforce are equally wide. There is, however, very 
little movement of labour between Member States. 
Progress in establishing economic 
union in the Community, with the 
dismantling of barriers to competi­
tion in the supply of goods and 
services in Member States, has fo­
cused attention on the operation of 
European labour markets. This in­
terest is of varying kinds. There is a 
concern that labour markets should 
function in a way which is conducive 
to increasing economic efficiency 
and the competitiveness of Euro­
pean producers — major aims of 
economic union. Labour should be 
available in sufficient quantities 
with the skills and qualifications 
demanded and at a price which en­
sures that production is profitable. 
Equally, there is a concern that pay 
levels, and the terms and conditions 
of employment prevailing in these 
markets, should be compatible with 
the achievement of the social wel­
fare objectives which economic 
union is intended to facilitate. In 
particular, the pursuit of greater 
economic and social cohesion, in the 
form of a narrowing of disparities in 
income per head and an improved 
balance of employment opportuni­
ties across the Community — which 
at present vary widely (Map 9) — 
is a key commitment in the 
Maastricht Treaty. There can be some difficulties in 
striking the balance between econ­
omic and social objectives. While 
wage levels may need to be low 
in relation to labour productivity in 
areas with excess labour supply — 
and high unemployment — in order 
to attract businesses to invest and create jobs, they should not be so 
low as to jeopardise social cohesion. 
Similarly, while it is desirable, and 
legitimate, to raise standards of 
health and safety at work and im­
prove working conditions generally 
in many parts of the Community, 
this must be weighed against the 
M9 Working-age population in employment, 1991 
% working-age 
population 
• <5° WE 50 - 60 
81 
Chapter 4 Towards an integrated European labour market? 
cost involved to businesses con­
cerned and the possible adverse 
effects on employment creation. 
The theory of labour 
market integration 
The movement towards a more inte­
grated European labour market 
has, in practice, taken two forms. In 
the first place, the implementation 
ofthe single market programme has 
made it possible in many sectors of 
economic activity for businesses to 
locate production in whichever part 
of the Community is best for them 
and, therefore, potentially to create 
employment in areas where jobs 
were scarce. This has been accom­
panied by the removal of controls on 
financial flows to enable capital to 
exploit investment opportunities in 
places in which capital formation 
was previously inadequate. 
In the second place, it has become 
increasingly possible for people to 
move from one Member State to 
another in order to take up em­
ployment by eliminating legal 
restrictions on labour mobility and 
by promoting a common recognition 
of qualifications. 
This can help people living in areas 
where jobs are scarce — especially 
in relation to the skills they 
possess — to move to areas where 
there are labour shortages, and to 
allow firms to recruit labour from 
across the Community. The effect 
should, therefore, be to even out 
variations in supply and demand 
conditions in local labour markets 
and to reduce the incidence of skill 
shortages — and, accordingly, the 
potential constraints on produc­
tion and efficiency to which they 
give rise. 
To the extent that such movements 
take place — and to the extent that supply and demand conditions do 
affect pay levels — a further effect 
should be to reduce variations in 
wages between one part of the 
Community and another. These ef­
fects should also tend to result 
from the increased mobility of busi­
ness and finance. In other words, 
insofar as there is a tendency for 
capital to move to areas where la­
bour is relatively abundant, where 
wages are relatively low and where 
investment opportunities remain 
to be exploited, this should also 
support convergence in labour 
market conditions. 
Indeed, in principle — under cer­
tain simplifying assumptions — 
both wages and labour market con­
ditions across the Community 
would fully converge over time 
even if there were no movement of 
labour at all so long as capital was 
perfectly mobile. Under the same 
assumptions, convergence would 
also follow if labour were perfectly 
mobile and capital did not move. 
In practice, Community policy 
is based on capital flows being 
the primary means towards con­
vergence rather than labour 
movements. Mobility is viewed 
more as a means of widening the 
career opportunities for individ­
uals, wherever they happen to live, 
rather than as a mechanism of la­
bour market adjustment. Indeed, 
there are compelling reasons why 
substantial movement of labour 
from depressed to prosperous re­
gions is likely to prove undesirable, 
not least because ofthe cumulative 
loss of incomes in the former re­
gion and the additional pressure 
on social and physical infrastruc­
ture in the latter which tends to 
result. 
Nevertheless, interregional migra­
tion of labour in a number of 
countries has, historically, been an important means for people living 
in areas of high unemployment to 
find work. At the margin, there­
fore, it could still have a role to play 
in the future in helping to equalise 
employment opportunities across 
the Community. Increased flows 
of capital on the scale required to 
narrow the gap in economic per­
formance and prosperity between 
rich and poor regions across the 
Community depend, in large 
measure, on there being profitable 
opportunities to exploit in the 
poorer areas. While this depends 
partly on labour being available in 
these areas at relatively low cost, 
wage levels — and costs of produc­
tion more generally — are only 
one element in the profitability 
equation. 
In particular, a suitably qualified 
and educated workforce, with the 
requisite skills and experience, 
may be equally important since 
this can be a key determinant of 
productivity and, therefore, of unit 
labour costs. In addition, low 
wages do not necessarily ensure 
high levels of product design, 
quality, innovation and after-sales 
support, which studies and inter­
views with companies indicate are 
critical factors behind long-term 
competitive success. 
External factors which are outside 
the control of individual firms, 
such as the efficiency of communi­
cations and the support services 
available, also have a major in­
fluence on business efficiency and 
profitability. Indeed, the existence 
of a minimum standard of econ­
omic and social infrastructure is 
likely to be a prerequisite for any 
substantial inflow of private ca­
pital — hence, the importance of 
public investment in less de­
veloped regions, and the reason for 
Community support through the 
Structural Funds. 
82-
Chapter 4 Towards an integrated European labour market? 
Issues addressed 
The concern of this chapter is 
to examine four major features of 
the European labour market and 
the way they vary across the Com­
munity. 
It. begins, first, by considering the 
disparities which exist in income 
per head across the Community. 
This is an important indicator of 
cohesion. However, in itself it is not 
sufficient for judging the extent of 
convergence in economic perform­
ance and social conditions. Equally 
significant is the employment 
generated by a given level of GDP 
and the way that this is distributed 
between individuals and social 
groups. The chapter, therefore, con­
siders the differing combinations of 
labour productivity > numbers in em­
ployment and hours worked which 
exist in labour markets across the 
Community. 
It goes on to examine differences in 
average wages and labour costs 
which underlie disparities in in­
come per head and which are both a 
reflection and a determinant of 
variations in economic perform­
ance. It identifies the extent of the 
difference which exists between 
Member States and regions as 
regards labour costs in 
manufacturing and particular in­
dustries and the division between 
wage and non-wage costs. It also 
reviews the changes in relative la­
bour costs which occurred over the 
1980s — at both the national and 
regional level — and relates these 
to changes in both productivity and 
unemployment in order to assess 
the effect on costs of changing 
labour market conditions. 
The third group of issues examined 
concerns access to education and 
training of young people in different parts of the Community and vari­
ations in the average level of 
educational attainment of the la­
bour force from one area to another. 
This is a key factor underlying vari­
ations in productivity and economic 
performance insofar as it deter­
mines both the skills which 
employers are able to draw upon 
and the ability of workers to adapt 
to changing technology — and 
changing skill requirements. 
Finally, it examines the issue of la­
bour mobility and, specifically, the 
scale of labour movement within the 
Community between Member 
States. Important questions in this 
regard concern, not only the extent 
of labour migration and how this 
compares with overall migration 
flows and the size ofthe indigenous 
workforce, but also the typical age 
of those workers who move. 
The employment 
intensity of 
economic activity 
In order to assess variations across 
the Community in the performance 
of Member States — or their labour 
markets — in providing employ­
ment for the people who live there, 
it is instructive to examine the rela­
tionship between the potential 
workforce they have available and 
the level of income which is gener-
ated. This can be done by 
decomposing GDP per head of popu­
lation of each Member State, which 
is a measure of its relative pros­
perity, into three constituent parts: 
• the productivity of its work­
force, measured by the GDP 
produced per hour worked; 
• the average number of hours 
worked by each member of the 
workforce; • the proportion of the population 
which is in work and therefore 
contributes to GDP. 
These three together determine the 
level of GDP per head by identity 
(Y/N = Y/H x H/E x E/N, where 
Y=GDP, N=population, H=total 
hours worked and E=numbers in 
employment). This shows the way 
in which productivity, working 
hours and the participation of 
people in the labour force are com­
bined in each country to produce a 
given level of GDP. 
The interest is not only to see how 
this varies between Member States 
at different stages of economic de­
velopment and prosperity, but also 
how this varies between Member 
States at similar levels of develop­
ment. 
Income per head 
There are wide variations in pros­
perity across the Community. In 
1991, Greece, the poorest Member 
State, had a level of income per 
head, measured in terms of pur­
chasing power standards (ie in 
terms of the goods and services 
which it is capable of buying), of just 
38% ofthe level in Luxembourg, the 
richest country (Graph 53). 
While there are marked differences 
between the relative prosperity of 
the poorer countries — income per 
head in Spain was* over 60% higher 
than in Greece — the major divide 
is between the four less developed 
Member States — Portugal, Ireland 
and Spain as well as Greece — and 
the others. In 1991, Spain, the ninth 
most prosperous country of the 12, 
had a level of income per head al­
most 25% below the UK, the eighth 
richest — about the same gap as 
between the UK and Germany (ex­
cluding the new East German 
Lander). 
-83-
Chapter 4 Towards an integrated European labour market? 
53 GDP per head in the Member States, US and Japan, 1991 
-i 25 
20 
1 15 
10 
• 5 
GR P IRL E UK E12 NL B I F L D DK US J GR P IRL E UK E12 NL B I F L D DK US J 
54 GDP per head and productivity in the Member States, US 
and Japan, 1991 
1000 ECUs 
30 r 
25 h 
20 
15 
10 h • GDP per head 
H GDP per hour worked 
n -I 30 
25 
A 20 
1 15 
10 
I 5 
GR P IRL E UK E12 NL B I F L D DK US J GR P IRL E UK E12 NL B I F L D DK US J In comparison with Community 
countries, the US in 1991 had an 
average level of income per head 
(measured on the same basis) some 
6% higher than that of Luxem­
bourg. The level in Japan was 
slightly lower than in Germany but 
higher than in France, the second 
and third most prosperous coun­
tries in the Community. 
Variations in income per head be­
tween Member States measured in 
terms of purchasing power stand­
ards (PPS) generally reflect 
differences in GDP per head in 
terms of ECU and, for most coun­
tries, the adjustment has only a 
small effect on relative income 
levels. 
The main effect is at the two ex­
tremes. The level of GDP in 
Denmark is reduced by almost 25% 
in 1991 once its effective purchasing 
power is taken into account, and the 
levels in Greece and Portugal are 
increased by over 30% and 50%, re­
spectively (Graph 53). For other 
countries, PPS adjustments change 
GDP by less than 10%. 
The adjustment to PPS terms also 
makes a substantial difference to 
the comparison with the US and 
Japan. In ECU terms, Japan has a 
level of GDP per head in 1991 over 
20% higher than that of the US — 
over 7% higher than that of Den­
mark or Germany — whereas it has 
a level almost 15% lower when 
compared in terms of PPS. 
In contrast to Japan, GDP per head 
in ECU terms in the US was some 
10% lower than in the latter two 
Community countries, but in terms 
of PPS it was over 10% higher. (It 
should be emphasised that this 
comparison is heavily influenced by 
the exchange rate between the US 
dollar — or indeed the yen — and 
the ECU prevailing at the time, 
-84-
Chapter 4 Towards an integrated European labour market? 
which is a reason for using PPS 
figures for comparative purposes.) 
Productivity 
Although productivity, as measured 
by GDP per hour worked, varies 
between Member States in a similar 
way to GDP per head of population 
— in the sense that richer countries 
have higher levels of productivity 
than poorer — the relationship is by 
no means uniform. 
Among the more prosperous 
countries — those with GDP per 
head above the Community average 
— the extent of variation in produc­
tivity in 1991 was much smaller 
than the variation in per capita in­
come (8% between the highest and 
lowest as opposed to over 30%). 
This indicates that countries differ 
significantly in the income they 
generate from a given level of labour 
efficiency (Graph 54). 
In Denmark, for example, produc­
tivity was little higher than in the 
Netherlands. However, because of 
differences in average hours worked 
and in the relative numbers of 
people in employment, Denmark's 
income per head was over 30% 
higher than in the Netherlands. 
Similarly, Germany — with much 
the same level of GDP per hour 
worked as Belgium — succeeded in 
generating almost 25% more in­
come per head, because it has a 
higher proportion of its population 
in employment. 
Among the less prosperous Member 
States, the UK has a much lower 
level of productivity than other 
Northern countries, with the 
exception of Ireland. In 1991, pro­
ductivity was over 25% lower than 
in the Netherlands, for example, 
and slightly lower than in Spain. However, the UK compensated for 
its low productivity by having more 
people in work. This pushed up 
its per capita income above that 
of Spain and closer to levels in other 
Northern countries (its GDP per 
head in ECU terms was 30% higher 
than in Spain and less than 10% 
lower than in the Netherlands). 
Much the same is true of Portugal. 
In 1991, productivity was almost 
15% lower than in Greece. However, 
by having a much higher proportion 
of its population in work, GDP per 
head in Portugal (in ECU terms) 
was 5% higher than in Greece. 
Average GDP per hour worked in 
the US in 1991 was similar to the 
level in Germany. In Japan, how­
ever, productivity measured in 
these terms was considerably less 
than in Germany — over 20% lower. 
Indeed it was lower than in many 
other Community countries, being 
less than 10% above the level in the 
UK or Spain. 
This may seem surprising in view of 
Japan's reputation for high effi­
ciency. While this is certainly the 
case for manufacturing — and, even 
more so, for high tech sectors within 
manufacturing — it is not true so 
far as the service sector is con­
cerned. In effect, high levels of 
employment relative to output in 
services more than offset high pro­
ductivity in industry. This has had 
the effect of making Japan a 
country with comparatively low 
overall productivity and a high level 
of employment. 
Much the same, though to a lesser 
degree, can be said of a number of 
Community countries. Denmark 
has a high level of income per head, 
especially when measured in ECU 
terms, but its relative prosperity is 
based on providing jobs for more of 
its people than other Member States with a similar level of pro­
ductivity. 
The UK and Portugal have a higher 
proportion of their people in em­
ployment than would be expected 
given their relatively low levels of 
real income per head. 
Average hours worked 
Countries with relatively low le­
vels of productivity have tended to 
compensate for this by working 
longer hours — the exceptions 
being the UK and Portugal which 
compensate by having more people 
in work. Although average hours 
worked by each person employed 
vary much less than productivity, 
there are, nevertheless, significant 
differences between Member 
States. 
In 1991, those in employment 
worked an average of almost 
44 hours a week in Greece as com­
pared with less than 33 hours a 
week in the Netherlands — in other 
words, around a third more hours 
(Graph 55). Except for the UK, all 
the countries with productivity — 
and income per head — below the 
Community average worked more 
than 41 hours a week on average. 
All those with above average levels 
of productivity worked less than 
40 hours a week. 
To some extent, differences in work­
ing time reflect differences in the 
importance of agriculture (where 
hours of work are uniformly higher 
than in other sectors). Mainly, how­
ever, it arises from the fact that 
people employed in four of the five 
low productivity countries — 
Greece, Portugal, Spain and Ireland 
— work longer hours in industry 
and services than in other coun­
tries. This reflects both the longer 
hours worked by those who are em­
ployed on a full-time basis and the 
85 
Chapter 4 Towards an integrated European labour market? 
limited use of part-time work 
(Graph 56). 
Variations in hours worked across 
the Community are broadly consist­
ent with the view that people choose 
to work fewer hours as income per 
head rises. This is confirmed by the 
changes which occurred over the 
1980s. For example, between 1983 
and 1991, the normal working week 
of those employed full-time in in­
dustry and services declined in all 
countries where GDP per head was 
above the Community average, ex­
cept for France where it remained 
unchanged. In all countries where it 
was below the Community average, 
except for Greece, it increased 
(Graph 56). 
The relationship between hours 
worked by full-time employees and 
the importance of part-time 
working is also interesting. The 
Netherlands and Denmark, where full-time workers have shorter 
hours than anywhere else in the 
Community, also have higher pro­
portions of people working 
part-time. Similarly, in Greece, Por­
tugal, Spain and Ireland, where 
average hours worked were rela­
tively high, comparatively few 
people worked part-time — under 
5% in the three Southern countries 
in 1991, under 10% in Ireland. In 
these countries, therefore, the two 
elements were working in the same 
direction. In the Netherlands and 
Denmark it was to reduce average 
hours worked and raise the num­
bers in employment. In the other 
four countries it was to increase 
average hours. 
By contrast, the two elements were 
working in opposite directions in 
the UK and Italy. In Italy, the pro­
portion of people working part-time 
is well below the Community aver­
age and similar to that in other 
55 Working time and employment rates in the Member 
States, US and Japan, 1991 
Hours per week 
60 r 
50 
40 
30 
20 
10 % population 
-i 60 
Working time • Employment 
0 • 50 
40 
I 30 
20 
10 
GR P IRL E UK E12 NL B I F L D DK US J GR P IRL E UK E12 NL B I F L D DK US J Southern Member States, even 
though full-timers work relatively 
short hours. The comparative ab­
sence of part-time working may, 
therefore, in this case reflect cultu­
ral and social differences between 
the North and South of the Com­
munity, especially as regards the 
employment of women who repre­
sent the vast majority of part-time 
workers. They also reflect, as noted 
in Chapter 6, differences in regula­
tions surrounding employment and 
the constraints imposed by both 
legislation and collective agree­
ments. 
In the UK, the reverse is the case, 
with full-timers working long hours 
but part-time employment being, 
nevertheless, much more prevalent 
than in most other parts ofthe Com­
munity. The explanation perhaps 
lies partly in the relatively low rates 
of pay and productivity in the UK 
which may deter people from reduc­
ing their hours of work and may also 
encourage women to work in order 
to boost household income. 
In comparison with the Com­
munity, average hours worked are 
relatively low in the US and high in 
Japan. Indeed in Japan, even 
though average hours have fallen 
significantly over the recent past, 
the average person employed in 
1991 worked longer hours — almost 
4% more hours — than in Greece, 
which is one factor producing the 
high level of Japanese income per 
head. 
Employment relative 
to population 
While average hours worked tend to 
fall as income per head rises, the 
proportion of the population that is 
employed tends to increase. In 
1991, Denmark and Germany, with 
the highest levels of per capita GDP 
-86 
Chapter 4 Towards an integrated European labour market? 
in the Community, had many more 
of their people in work (51% and 
4672%) than Spain, Ireland and 
Greece, three of the four lowest in­
come countries (33-37%) (Graph 
55). As noted above, however, the 
UK and Portugal are exceptions, 
with below average income per head 
and a much higher proportion of 
their population in employment 
than the Community average 
(46-47%, about the same as in Ger­
many). 
Nevertheless, the general tendency 
seems to be for countries to increase 
the numbers in employment as in­
come per head rises. Growth of 
income — and productivity — can be 
seen, in other words, as providing the 
opportunity for the available work to 
be shared among a larger proportion 
of the population. In both Denmark 
and the Netherlands, in particular, 
this has been reinforced by reduc­
tions in average hours worked. 
From this perspective, both the UK 
and Portugal have succeeded in 
achieving a high level of participa­
tion in employment despite low 
levels of productivity, and, there­
fore, wages. In Portugal, this seems 
to have been achieved through ex­
panding labour-intensive, low wage 
activities. In the UK, it has been 
achieved to a large extent by a high 
level of part-time working, which 
unlike in the Netherlands and Den­
mark, has not been accompanied by 
a reduction in average hours 
worked by full-timers. Indeed, in 
the UK, a high proportion of men 
work relatively long hours — for 
relatively low rates of pay — and a 
high proportion of women work 
part-time (44% as against a Com­
munity average of 28%) — again for 
relatively low rates of pay. 
Both the US and Japan had higher 
levels of employment relative to 
total population in 1991 than the Community as a whole. In the US 
the level was only just above the 
Community average — reflecting 
the smaller share of people of work­
ing age in total population. In Japan 
it was over 30% higher than the 
Community average. In this case, it 
reflects high participation not 
among women but among older 
people who are a much larger el­
ement of the workforce than in the 
Community. 
Productivity, 
work intensity 
and participation 
The above analysis shows that the 
variations in income per head 
which exist across the Community 
conceal marked differences in the 
way in which productivity, hours of 
work and participation in employ­
ment are combined. In other words, 
it demonstrates that the way in which labour markets in different 
Member States serve to distribute 
available work, and by implication 
income, can differ considerably be­
tween countries with similar levels 
of prosperity. 
In some countries, like Denmark or 
the Netherlands, a relatively high 
proportion of the population is en­
gaged in work, with each person 
working a relatively small number 
of hours. (This is also the case 
in other Scandinavian countries, 
like Sweden or Norway, which 
have given higher priority to the 
maintenance of high levels of em­
ployment.) In other countries in the 
Community, like Belgium or Italy, 
levels of productivity and income 
per head are similar to those in the 
Netherlands, but a much smaller 
proportion of the population is in­
volved in production and their 
average hours worked are signifi­
cantly higher. 
56 Full-time hours and numbers working part-time in 
industry and services in the Member States, 1983 and 1991 
% total employed 
50 r 
40 Hours per week 
Working time of full-time workers 
30 
20 
10 -T 35 
A 30 
A 25 
20 
15 
10 
DK B NL I L F D E E12IRL P GR UK DK B NL I L F D E E12 IRL P GR UK 
87 
Chapter 4 Towards an integrated European labour market? 
Such differences have important 
implications not only for access to 
employment and income but also for 
unemployment. Some simple calcu­
lations are illustrative. If, for 
example, average hours worked in 
Belgium were the same as in the 
Netherlands, and productivity re­
mained unaffected, some 15% more 
people could be in work — twice as 
many as were recorded as unem­
ployed in 1991. If hours worked 
were the same in Italy or France 
as in the Netherlands, some 20% 
more people could be in work — 
again more than the numbers 
unemployed. 
The possibilities of actually bring­
ing about such an increase in 
employment are constrained in part 
by the degree of internal cohesion 
which exists in the country in ques­
tion — for example the structural 
imbalance in Italy between the 
North and the South — and the 
extent of consensus in favour of 
policies of redistribution. 
In countries where productivity — 
and wages — are relatively low, the 
scope for a wider distribution ofthe 
available work is clearly more 
limited. Although both the UK and 
Portugal have achieved relatively 
high levels of employment, further 
moves in this direction are likely to 
encounter resistance from existing 
workers already earning relatively 
low levels of income. In such coun­
tries, the key issue is more likely to 
be how to raise productivity. 
Japan provides an interesting les­
son for the Community. Whereas 
the US is similar to the Nether­
lands or Denmark in combining 
high productivity and low average 
hours worked, in Japan, low produc-
tivity is combined with high 
average hours worked to produce 
both a relatively high level of in­
come per head and a high proportion of people in employment. 
The means of achieving this is 
through high productivity, and a 
high degree of competitiveness, in 
manufacturing — or essentially the 
traded goods sector. This effectively 
serves to alleviate any constraint on 
the overall level of GDP and pro-
vides the income to support 
employment in services and, there­
fore, high employment in the 
economy as a whole. At the same 
time, average earnings in high pro­
ductivity industries are not 
significantly higher than in low pro­
ductivity sectors, so that income as 
well as work is shared in a relatively 
equitable way. 
The co-existence of a high produc­
tivity traded goods sector and a 
low productivity non-traded goods 
sector, combined with the appropri­
ate distribution of income, offers 
one way of potentially addressing 
Europe's unemployment problem. 
Wages and 
labour costs 
For most people in the Community, 
the level of income they enjoy is 
primarily determined by the wages 
they earn for the work they do. 
Growth of income per head, there­
fore, depends in large measure on 
real wages increasing. Equally a 
narrowing of disparities in per 
capita income between countries 
probably requires that real wages in 
the poorer Member States rise 
relative to those elsewhere — 
though it would also result if 
there were a relative increase in the 
numbers employed in relation to 
population in the poorer countries. 
At the same time, increased pros­
perity depends on growth of GDP, 
which can only be sustained 
if producers in the country con­
cerned remain competitive in both Community markets and those out­
side. Since wages are a major 
component ofthe cost of production, 
their relative level at any point in 
time has to be compatible with the 
maintenance of competitiveness 
and profitability. 
This will only be the case if wage 
increases reflect increases in pro­
ductivity, in the broad sense of 
being in line with the growth of 
value-added per unit of labour 
input. In other words, improve­
ments in either the efficiency with 
which labour is used or in the mar­
ketability of the product produced 
— stemming from, for example, bet­
ter quality or design — mean that 
wages can rise without damaging 
competitiveness and are, therefore, 
a means of securing increases in 
real income per head in a long-term 
perspective. 
Difficulties arise, however, when 
relative levels of productivity in the 
broad sense used above change sig­
nificantly — which can occur 
in particular sectors with, for 
example, the entry of new producers 
from other countries into the mar­
ket, the introduction of new 
products or processes, or changes in 
government policy (eg towards the 
exchange rate or the growth of 
demand). This may mean that 
relative wages need to change 
equally significantly to maintain 
competitiveness — at least in the 
short-term before new processes or 
products are introduced — which 
may be incompatible with other, 
non-economic, objectives, such as 
the maintenance of acceptable 
standards of living, an equitable 
distribution of income or stable 
wage relativities. 
Nevertheless irrespective of these 
potential complications, the import­
ant point to emphasise is that 
relative levels of wages across the 
Chapter 4 Towards an integrated European labour market? 
Community, or between the Com­
munity and other countries, can 
only be meaningfully interpreted in 
relation to differences in pro­
ductivity. Ultimately, whatever 
measures are introduced to over­
come the need for unacceptably 
large reductions in real wages, the 
level of labour costs in any sector 
must be consistent with the ability 
of producers to earn a reasonable 
rate of return. 
This does not mean, of course, that 
wages must eventually fall to the 
point where production is profit­
able, given the competition from 
other countries — indeed rates of 
pay might be so low in other coun­
tries that such a policy would be 
futile. It does mean that costs per 
unit of value-added cannot be too 
far out of line with those in other 
countries, but this can be achieved 
in many different ways — such as 
improving productive efficiency 
or product quality, and therefore 
the price which the market will 
pay — other than by reducing 
wages. 
Wage and 
non-wage 
labour costs 
Labour costs do not only consist of 
the wages paid to workers. They 
also include so-called indirect, or 
non-wage, costs which businesses 
have to pay for every person em­
ployed. These consist mainly of 
social security contributions paid to 
government or payments made to 
pension or health schemes, both 
public and private. Since they are a 
substantial element of labour costs 
in a number of countries, they have 
to be included along with wages in 
order not to distort inter-country 
comparisons. Moreover, as ex­
plained below, they also need to be 
included in any comparison of real wage levels if this is not to be dis­
torted too. 
Non-wage labour costs vary mar­
kedly across the Community, 
bearing little relationship to the 
level of economic development or 
the generosity ofthe social security 
and social welfare systems. In 
1990, they represented over 30% of 
total labour costs, on average, in 
France and just under 30% in both 
Italy and Belgium (Graph 57). In 
the UK, on the other hand, indirect 
costs amounted to only 13%, 
while in Denmark the figure was 
only just over 3%. For the other 
Member States, their weight 
ranged from 17% in Luxembourg 
and 18% in Ireland to 25% in Por­
tugal and 26% in Spain and the 
Netherlands. 
In all the Member States, apart 
from the UK and Denmark non-
wage labour costs increased by more than wages per se over the 
1980s. This was particularly the 
case in Belgium, where non-wage 
labour costs as a proportion of the 
total rose from 23% to 29% between 
1981 and 1990, and in Italy, where 
they went from 25% to 29%. In 
Denmark, on the other hand, they 
declined from 5V2% to 372% of the 
total, while in the UK they fell from 
18% to 13% (Graph 57, in which 
labour costs in 1981 have been ad­
justed to 1990 ECU values on the 
basis of the increase in price of 
manufactures over the Community 
as a whole between the two years; 
it therefore shows the change in 
labour costs in each country in 
relation to this general index). 
From these figures it is clear that 
in some countries employers have 
to pay a substantial, and increas­
ing, cost in addition to wages when 
taking on labour. In France, Italy 
and Belgium, this extra cost 
57 Average hourly labour costs in manufacturing in the 
Member States, 1981 and 1990 
ECU/worker (1990 values) 
25 -
H Wage costs 13 Non-wage costs 
F, I, GR, L 1990 estimated from 1988 data 
20 
15 
10 h 
5 h 25 
PS 20 
15 
10 
0 '—™ ———— ^^""MM™MMMI 0 
P GR IRL E UK I L DK F NL B D P GR IRL E UK I L DK F NL B D 
1981 1990 
-89 
Chapter 4 Towards an integrated European labour market? 
amounts, on average, to almost 
45% of gross wages, and often 
significantly more for higher 
paid employees (in France, for 
example, indirect costs in banking, 
where pay levels are relatively 
high, represent a 60% addition to 
gross wages). This may mean 
that when both taxes on wages 
and employees' social contribu­
tions are taken into account, the 
actual net wages received by em­
ployees are less than half the cost 
which employers pay for their 
labour. 
On account of this, the cost of 
labour would, therefore, seem to be 
considerably higher in these three 
countries than in the UK or Den­
mark, so putting businesses at a 
serious cost disadvantage when 
competing with producers from 
the latter two countries. This, 
however, is much too simplistic a 
view. 
In reality, the main reason why 
non-wage labour costs vary so sub­
stantially between Member States 
is to do with the choice which each 
has made over both the scale of 
expenditure on social security 
systems, the health service, retire­
ment pensions and so on and the 
way it is funded. 
If, for example, social systems are 
funded from general taxation, 
whether through taxes on income 
or expenditure, the net wages of 
employees in terms of purchasing 
power will correspondingly be re­
duced and they will accordingly 
need to earn a higher gross wage in 
order to achieve a given level of 
real income. Businesses in such 
countries, therefore, will tend to 
end up paying more in wages — ie 
more in direct labour costs — than 
in countries where employers' con­
tributions are a larger funding 
source. Similarly, if governments decide to 
reduce social security coverage or 
the level of service, benefit or pen­
sion provided and indirect labour 
costs are reduced as a result, busi­
nesses will not necessarily gain any 
advantage. Insofar as employees 
seek to compensate for this reduc­
tion in what they receive from the 
state by increasing their take-home 
pay to spend more on private 
schemes, there will be upward 
pressure on wages and in the end 
total labour costs may change by 
very little. 
These examples illustrate the 
general point that the initial 
incidence of taxation does not 
necessarily correspond with the 
ultimate incidence, after taxes have 
been passed on to consumers or 
back to suppliers (of labour as well 
as of goods and services). They also 
indicate that governments may not 
be able to change the overall level of 
labour costs significantly merely by 
altering the structure of taxation 
and the way in which social welfare 
schemes are funded — except if 
there is an element of illusion or 
perhaps in the short-term during 
the process of adjustment to the 
new situation and except perhaps to 
the extent that different ways of 
funding social welfare affect the ef­
ficiency of the system. This should 
not be too surprising. If the reverse 
were the case it would imply that 
governments, through manipu­
lating the tax structure, could 
permanently affect the division of 
value-added between profits and la­
bour. 
It is, therefore, difficult to demon­
strate that the level of taxation and 
its broad structure have a major 
effect on the overall level of employ­
ment, at least insofar as taxes are 
matched by comparable levels of 
public spending. This tends to be 
borne out by the evidence. Fiscal systems 
and employment 
The overall burden of taxation, in­
cluding social contributions, in 
1990 varied from around 35% of 
GDP in Portugal and the UK to 
43-44% in France, the Nether­
lands and Belgium and 48% in 
Denmark (Graph 58). These dif­
ferences largely reflect the scale of 
public expenditure in the respec­
tive countries — which in turn 
reflects the extent to which coun­
tries choose to provide certain 
services collectively rather than 
rely on supply through the market. 
Apart from the Southern countries, 
which have generally shown a 
larger rise than elsewhere, the dif­
ferences have also remained 
relatively stable over time. 
The high tax burden in Denmark, 
on the one hand, and the low 
burden in the UK, on the other, 
coincide with relatively high levels 
of employment in both countries — 
although slightly higher in Den­
mark than in the UK. Equally, 
Belgium and the Netherlands have 
similar levels of taxation relative 
to GDP but significant differences 
in the proportions of their popula­
tion in employment. 
The division of revenue between 
taxes and social contributions, as 
well as between direct and indirect 
taxes, also varies significantly 
across the Community, giving rise 
to the differing importance of 
non-wage costs noted above. Em­
ployers' contributions in 1990 
ranged from 12% of GDP in 
France and 9% in Italy and Bel­
gium to 4% in the UK and the 
Netherlands and virtually zero 
in Denmark. In the former three 
countries, therefore, much more of 
the finance required for social 
benefits is raised from levies on 
90 
Chapter 4 Towards an integrated European labour market? 
employers, in Denmark and the 
UK, much more from general 
taxation. This means that though 
employers pay less in contribu­
tions in the latter two countries, 
they are likely to pay more in other 
ways, either directly or indirectly. 
Although there is a broad, inverse 
relationship between the level of 
employers' contributions and the 
level of employment, it is not par-
ticularly close. Employment 
relative to population is higher in 
France than the Netherlands, for 
example, while Portugal has a 
similar level of contributions to 
Greece, but a much higher propor­
tion of its people in work. 
With only a few exceptions — the 
Netherlands, in particular — both 
the scale of social contributions 
and the broad structure of taxation 
in individual countries changed 
very little during the 1980s. labour costs add to the problem of 
setting pay scales in the growing 
number of transnational com­
panies in the Community and may 
distort decisions on where to locate 
labour and, therefore, production. 
Finally it should be emphasised 
that although the broad structure 
of taxation may not affect employ­
ment, variations in the effective 
incidence of tax between sectors of 
activity might clearly do so. If 
there are differences in the rate of 
tax levied on particular products or 
services relative to others, then 
this will tend to affect relative 
costs of production and therefore 
the pattern of economic activity 
and employment. Since the em­
ployment intensity of production 
differs between sectors, such vari­
ations might also affect the total 
number of people in employment at 
a given level of output. Labour costs in 
manufacturing 
Average labour costs differ mar­
kedly across the Community. In 
1990, the last year for which reason­
ably comparable data are available 
for most countries, average hourly 
labour costs in manufacturing 
ranged from over 20 ECU in Ger­
many to 372 ECU in Portugal — a 
difference of almost six times 
(Graph 57). Moreover the average 
level of costs in Germany was 15% 
higher than in Belgium, the country 
with the next highest level of costs 
(Graph 59, which shows labour 
costs in each Member State in rela­
tion to the Community average). 
Nevertheless for five Member 
States — the Netherlands, Bel­
gium, France, Denmark and 
Luxembourg — average hourly 
While the level of employers' con­
tributions has an uncertain effect 
on employment, it is also the case 
that high levies on employers may 
tend to increase the incentive for 
avoidance — giving rise, for 
example, to more people working 
as self-employed if contributions 
can thereby be reduced — or to 
evasion, with producers employing 
people under informal arrange­
ments and operating in the black, 
or grey, economy. Wriile evasion is 
a general problem with any form of 
taxation, it is likely to be especially 
prevalent when the tax or levy in 
question is regarded as an unjust 
burden or when it is difficult to 
police. High employers' contribu­
tions in some countries may have 
both of these characteristics. 
Moreover, by increasing the diffi­
culty of comparing rates of pay 
between countries, large dif­
ferences in the size of non-wage 58 Taxes and social contributions in the Member States, 
1980 and 1990 
• Employers social 
50 r contributions 
40 h I Employees social 
contributions & 
income tax Taxes on profits, 
indirect taxes, capital 
taxes % GDP 
30 r 
20 
10 50 
40 
30 
20 
10 
GR I E P UK IRLE12 D F NL B L DK GR I E P UK IRL E12 D F NL B L DK 
Data L1987 1980 1990 
91 
Chapter 4 Towards an integrated European labour market? 
labour costs in manufacturing were 
within 10% of each other in 1990, 
with Italy only another 5% or so 
below and around the Community 
average. The UK which has a simi­
lar level of income per head to Italy, 
but lower productivity and many 
more people in work to produce this 
income, had a level of labour costs 
over 25% less than that in Italy — 
and indeed the Community average 
— and only just over 5% above the 
average level in Ireland and Spain 
(which was virtually the same). 
This, in turn, was over twice the 
level in Greece, where labour costs 
were still almost 50% above the Por­
tuguese level. 
The important factor for employers, 
however, is not the level of labour 
costs as such (still less any individ­
ual element such as social 
contributions), but their relation­
ship to the value-added generated 
by the labour they employ. What­ever the level of labour costs, if the 
contribution of a worker to value-
added is sufficiently high, then it 
will be profitable to employ him or 
her. The large differences in labour 
costs which exist are, in practice, 
closely related to equally large vari­
ations in value-added per hour 
worked in manufacturing, or pro­
ductivity (see Box, p 93 for a 
description of how the estimates for 
this are derived). Although the rela­
tionship between the two is not 
precise, there was, nevertheless, a 
clear tendency in 1990 for those 
Member States with relatively high 
labour costs also to have above aver­
age levels of productivity (Graph 
59). In terms of labour costs per unit 
of output, therefore, which is the 
key determinant of employment, 
there was considerably less vari­
ation across the Community. 
In only two countries — Germany 
and Denmark — was the relative 
59 Average hourly labour costs and productivity in 
manufacturing in the Member States, 1981 and 1990 
H Productivity I Labour costs 
F, I, GR, L 1990 estimated from 1988 data Ratio (EC average =1) 
1.5 r 
1.25 h 
1 r 
0.75 h 
0.5 h 
0.25 h 1.5 
1.25 
0.75 
0.5 
0.25 
P GRIRL E UK I L DK F NL B D P GR IRL E UK I L DK F NL B D 
1981 1990 level of productivity in 1990 signifi­
cantly (more than 10%) below the 
relative level of labour costs, im­
plying that in these two cases 
labour was more expensive than 
elsewhere in relation to its contribu­
tion to production — or profits (je 
unit labour costs were relatively 
high). On the other hand, in both 
cases, productivity as measured 
here could well be understated be­
cause it only partially takes account 
of differences in the number of 
hours worked per year (see Box, 
p. 93). 
For four countries — the Nether­
lands, Luxembourg, Ireland and 
Portugal — average labour costs 
were significantly below the 
relative level of productivity in 
1990, implying that unit labour 
costs were comparatively low in 
these cases. Although there may be 
some overstatement of productivity 
for the latter two countries espe­
cially, these four countries, by 
virtue of their low labour costs, 
seem to have represented a parti­
cularly profitable location for 
manufacturing. 
Labour costs and 
business location 
Although labour costs, as empha­
sised above, cannot be considered 
separately from the productivity of 
labour and while the latter is 
clearly an important determinant 
of the former, it does not follow 
that the potential returns of locat­
ing in a particular country can be 
assessed simply by comparing the 
level of labour costs with the level 
of apparent productivity — ie by 
comparing unit labour costs. This 
is because the latter does not 
necessarily reflect the productivity 
which would be achieved in the 
business locating in the country in 
question. 
92-
Chapter 4 Towards an integrated European labour market? 
Insofar as companies can transport 
processes of production into the new 
location, the productivity achieved 
might be significantly higher than 
in existing businesses in the 
country, and the unit labour costs 
correspondingly lower. The ability 
to do this will clearly depend in 
large measure on the capacity ofthe 
workforce to operate these pro­
cesses, which in turn will depend 
not only on their existing skills but 
also on their adaptability and recep-
tiveness to new ways of working. As 
argued below, their level of general 
education is likely to be a major 
determinant of this. 
Changes in 
labour costs in 
manufacturing, 
1981 to 1990 
The relative pattern of labour costs 
between Member States was 
broadly the same in 1990 as nine 
years earlier in 1981. The ranking 
of countries in terms of labour costs 
and the extent of differences in 
average levels seem to have 
changed little between the two 
years (Graph 59). This is true both 
for the gap between the highest and 
lowest labour costs — the lowest in 
this case being Greece, data for Por­
tugal not being available for 1981 — 
which was the same in 1990 as 
in 1981 and for the differences 
between the more prosperous coun­
tries. 
On the other hand, labour costs in 
Italy and Ireland, two countries 
where the level was relatively low 
in 1981, increased closer to the 
Community average over this 
period. Both these countries also ex­
perienced a marked rise in the 
relative level of productivity in 
manufacturing, so in these terms 
the increase was justifiable and had Average labour costs and value-
added per hour worked 
The data on labour costs used in this chapter come 
from the Survey of labour costs organised by the 
Statistical Office every four years and updated in 
the years in between from estimates supplied by 
national statistical offices. The last year when a 
complete survey was conducted was 1988 and 1990 
is the latest year for which estimates exist for most 
Member States. For the four countries for which no 
estimates are available for 1990 — France, Italy, 
Greece and Luxembourg — the 1988 figures have 
been used instead. These have been updated to 1990 
value terms by assuming that the relationship be­
tween labour costs in each of these countries and the 
Community average was the same as in 1988. 
The Community average which is the basis for the 
comparisons shown in the graphs is calculated by 
weighting the figures for labour costs by NACE 
industry in each Member State by the number of 
employees in that industry in the country concerned 
(the employment data used being those collected 
during the course of the labour cost survey). 
The estimates of value-added per hour worked are 
derived from National Accounts data. These show 
value-added and persons employed for NACE-CLIO 
industries, and in each case the nearest NACE-
CLIO industry to the NACE 2-digit industry for 
which the labour cost data are available is used. The 
labour cost figures for textiles and clothing and 
footwear are aggregated by using the data for em­
ployment as weights, as are the figures for banking 
and insurance, though for the latter, value-added — 
and productivity — comparisons are not very 
meaningful. 
To derive estimates for the number of hours worked, 
LFS figures for average hours usually worked per 
week in the nearest NACE 1-digit sector are used 
and applied to the National Accounts Employment 
Data (see Chapter 1, Box, p. 33 for an explanation of 
why usual rather than actual hours are used). Since 
there is no complete and consistent set of data for 
the number of weeks (or hours) worked per year, the 
figures for each country are simply multiplied by 48 
to give an estimate of annual hours worked. Because 
this does not take account of variations between 
Member States in the average number of weeks 
worked per year, it is, therefore, likely to overstate 
the hours worked in the more prosperous countries 
relative to the less prosperous and understate the 
extent of differences in hourly productivity. 
93-
Chapter 4 Towards an integrated European labour market? 
little impact on the costs of produc-
tion per unit of output and, 
therefore, their apparent level of 
competitiveness. 
For most other countries as well, 
labour costs seem to have changed 
broadly in line with productivity be­
tween these two years. The main 
exceptions are Belgium, the Nether-
lands, Greece and the UK. In 
Belgium, labour costs fell in relation 
to the Community average while 
productivity rose, implying that the 
increase in wages did not match the 
growth in value-added, giving rise 
to a fall in unit labour costs and a 
marked increase in profitability. 
The same was true in the Nether­
lands, where although labour costs 
did not change much relative to 
elsewhere in the Community, pro­
ductivity went up sharply. 
In Greece and the UK, on the other 
hand, there was also little change in labour costs relative to the Com­
munity average, but in these two 
cases productivity fell, implying 
some rise in unit labour costs and a 
reduction in profitability in manu­
facturing as compared with other 
Member States. 
Since the structure of manufactur­
ing differs markedly across the 
Community, any analysis of vari­
ations in labour costs needs to take 
account of the possibility that such 
structural differences affect the ag­
gregate figures and give rise to a 
misleading impression of the 
relative costs of producing in differ­
ent locations. Ideally, the 
comparison should be conducted in 
terms of narrowly defined products, 
but no suitable data exist at this 
level. The most disaggregated 
figures available are for NACE 2-
digit industries — 19 of which make 
up total manufacturing — each of 
which includes widely differing 
60 Average hourly labour costs and productivity in mechanical 
engineering in the Member States, 1981 and 1990 
1.5 
1.25 Ratio (EC average =1] 
0.75 r 
0.5 r 
0.25 h Productivity • Labour costs 
F, I, GR, 1990 estimated from 1988 data; 
data for L unreliable -, 1.5 
A 1.25 
0.75 
0.5 
0.25 
P GRIRL E UK I DK F NL B D P GR IRL E UK I DK F NL B D 
1981 1990 types of product. Nevertheless, 
these figures should at least give 
some indication of how repre­
sentative the aggregate data for 
manufacturing are. 
Two industries have been chosen 
for analysis here, mechanical en­
gineering and textiles, clothing and 
footwear (which are, in fact, two 
NACE 2-digit industries as ex­
plained below). A service sector — 
banking and insurance — is also 
examined to see how far labour 
costs in services, which are only par­
tially covered by the survey, differ 
from those in manufacturing. 
Labour costs 
in engineering 
The pattern of variation in labour 
costs in mechanical engineering is 
very similar to that for total manu­
facturing. In 1990, average hourly 
costs were some 18% higher in Ger­
many than in other Member State 
and almost six times more than in 
Portugal (Graph 60). The average 
level in Belgium, the Netherlands, 
Denmark and France were within 
6% of each other, while in Italy they 
were another 6% or so further 
below. As for total manufacturing, 
average costs in the UK are much 
lower still — in this case, almost 
30% below the level in Italy and 
over 10% less than the level in 
Spain. 
These variations are again very 
much in line with differences in 
value-added per hour worked 
(which, as for manufacturing are 
derived from national accounts stat­
istics, see Box, p 93). Moreover the 
relationship between the two in 
1990 was much the same as for 
manufacturing, relative labour 
costs in engineering being low in 
comparison with productivity in 
Belgium, the Netherlands, France, 
94 
Chapter 4 Towards an integrated European labour market? 
Italy and Portugal — giving rise to 
low unit labour costs — and high in 
Germany, Denmark and the UK. 
The only significant difference from 
the picture for manufacturing is for 
Ireland, where labour costs in en­
gineering were very high in relation 
to productivity — which raises a 
questionmark over the figure for the 
latter (which in the national ac­
counts is estimated). 
The changes in relative labour costs 
which occurred in engineering be­
tween 1981 and 1990 are also very 
similar to those for manufacturing 
as a whole and broadly consistent 
with the change in productivity, im­
plying little change in unit labour 
costs. 
Labour costs in 
textiles and clothing countries in terms of their cost 
levels. In particular, the highest 
hourly labour costs were found 
in the Netherlands and Denmark 
in 1990 rather than in Germany — 
where, however, the average level 
was under 4% lower — and these 
were some 13-14% higher than 
in Belgium or France. Moreover, 
costs in Italy in this sector were 
less than 4% below those in these 
latter two countries and over 60% 
higher than in the UK, whereas 
in engineering the average level 
was over 10% lower than in Spain 
and much the same as in Ireland. 
As before, the differences in labour 
costs are consistent with the vari­
ations in value-added per hour of 
labour input. Moreover, the pat­
tern of relative costs in 1990 was 
not very different from that which 
prevailed nine years earlier. Labour costs in 
banking and 
insurance 
The inter-country pattern of aver­
age labour costs in banking and 
insurance — two of the few service 
sectors covered by the survey — dif­
fers markedly from that which 
seems common to manufacturing 
industries. Most significantly, there 
is much less difference in cost levels 
between the more developed and 
prosperous countries in the North of 
the Community — the UK apart — 
and the less developed, poorer coun­
tries mainly in the South. 
In 1990, labour costs in these two 
sectors taken together — in this 
case monthly costs rather than 
hourly — were much the same in 
Although the average level of labour 
costs in all Member States is less in 
textiles, clothing and footwear — 
especially in the latter two indus­
tries — than in total manufacturing 
or engineering, both the pattern 
and extent of variation across the 
Community is similar (Graph 61). 
(Textiles, clothing and footwear are, 
in fact, two NACE 2-digit industries 
which have been aggregated here in 
order to be able to compare with 
value-added per hour worked. The 
relationship between labour costs in 
the two industries is fairly uniform 
across the Community, the average 
level in textiles being some 15-20% 
higher than in clothing and foot­
wear, except in the case of Ireland, 
where the difference was around 
45% in 1990, the Netherlands, 
where it was 35% — though much 
less in earlier years — and Greece, 
where it was just over 25%.) 
Nevertheless, there are some 
differences in the ordering of 61 Average hourly labour costs and productivity in textiles 
and clothing in the Member States, 1981 and 1990 
Ratio (EC average =1 
1.75 r 
1.5 r 
1.25 
0.75 h 
0.5 h 
0.25 h i 1.75 
A 1-5 
1.25 
0.75 
0.5 
0.25 
P GRIRL E UK I DK F NL B D P GR IRL E UK I DK F NL B D 
1981 1990 
95-
Chapter 4 Towards an integrated European labour market? 
Spain and Ireland as in France 
and the Netherlands and only 
some 20-25% below the level in 
Belgium and Italy, the countries 
with the highest costs (Graph 62). 
Indeed the level in both the former 
two countries was above the Com­
munity average, as was that in all 
other countries apart from the UK, 
Greece and Portugal. 
This essentially reflects the low 
level of labour costs in the UK, 
which was over 35% below that in 
France and over 45% below that in 
Italy, which given the large num­
bers of people employed in this 
sector in the UK — almost 30% 
of the total in the Community — 
effectively pulls down the Com­
munity average. For the UK, 
therefore, the difference between 
its average labour costs and those 
in Member States with similar le­
vels of income per head was greater 
for banking and insurance in 1990 than for manufacturing — which, 
as noted, above was substantial. 
This contrasts with the much smal­
ler difference in labour costs in this 
sector between other low wage 
countries and the rest of the Com­
munity. The reason for the 
disparity is by no means clear, but 
it could partly reflect a different 
structure of employment in bank­
ing and insurance in the UK — a 
higher proportion of young people 
and women whose rates of pay tend 
to be relatively low — as compared 
with other countries. 
The gap between labour costs in 
this sector in the UK and those in 
other Member States, moreover, 
widened rather than narrowed 
over the 1980s. Indeed the level of 
costs relative to the Community 
average fell by around 15% be­
tween 1981 and 1990, while, partly 
as a reflection of this, the level 
62 Average monthly labour costs in banking and 
insurance in the Member States, 1981 and 1990 
Ratio (EC average =1) 
1.5 r 
1.25 h 
0.75 h 
0.5 h 
0.25 1981 • 1990 
F, I, GR, L 1990 estimated from 1988 data -, 1.5 
1.25 
0.75 
0.5 
0.25 
P GR IRL E UK I L DK F NL B D increased in most other Member 
States (Graph 62). 
In contrast to manufacturing, 
therefore, there were some marked 
changes in the pattern of relati­
vities in banking and insurance 
over this period, Ireland, for 
example, where labour costs were 
below the UK in 1981 moving well 
above the Community average in 
1990. 
Regional 
variations in 
labour costs 
Just as labour costs differ between 
Member States, so too do they vary 
between different regions in the 
same country. In a number of cases, 
such variations are substantial and 
add significantly to the extent of 
cost differences across the Com­
munity as a whole. Unfortunately, 
the absence of value-added data for 
regions makes it impossible to 
examine labour costs in relation to 
productivity at this level and, there­
fore, to distinguish variations in 
unit labour costs. 
Unfortunately also, the latest la­
bour cost data available at the 
regional level are for 1988 (for re­
gions, the data are not updated 
between one four-year survey and 
the next) and relate to broad re­
gional aggregations (NUTS level 1 
—11 per country for Germany, Italy 
and the UK) rather than narrow 
ones. These, however, give an indi­
cation of the scale and nature of 
variation in cost levels. They show, 
in particular, that Community 
countries differ markedly in the ex­
tent of regional differences, possibly 
reflecting the varying importance of 
national level sectoral agreements 
on pay scales in relation to local 
agreements. 
96-
Chapter 4 Towards an integrated European labour market? 
It should be recognised, however, 
that the variation might also reflect 
the way regional boundaries are 
drawn. In particular, if a region con­
sists predominantly of a large city 
then this is likely to increase its 
relative wage level, whereas if it is 
defined to include a number of smal­
ler towns and rural areas, this will 
tend to push down the average 
level. 
Regional differences were smal­
lest in Germany, though still 
significant. In 1988, the difference 
between average labour costs in 
manufacturing in regions where 
these were highest — Hamburg in 
the North — and the region where 
they were lowest — Saarland in the 
South — was 27% (Graph 63). In 
mechanical engineering, the dif­
ference was only 18% and in textiles 
just 15%, whereas in clothing and 
footwear, it was over 46%. More­
over, apart from the latter industry, 
there was very little relationship 
between relative labour costs in one 
area of production and those in an­
other. The Rheinland-Pfalz region 
in the South-East ofthe country, for 
example, had the lowest level of 
average labour costs in mechanical 
engineering but the highest in tex­
tiles in 1988, while Berlin was 
almost the exact reverse. 
In France, on the other hand, re­
gional differences in labour costs 
are at their widest, though largely 
because of the high level of costs in 
one region, Ile de France around 
Paris. In 1988, the average level in 
manufacturing in this region was 
56% above that in Brittany (the 
Ouest region) and 27% above the 
level in the next most costly region, 
the Mediterranean. The level was 
also higher than in any region of 
Germany, apart from Hamburg, 
and in textiles, clothing and foot­
wear, it was higher even than there. 
With the exception of the latter in­dustry, where labour costs in many 
cases were on a par with those in 
Germany, costs in French regions, 
other than the Ile de France, were 
significantly below those in German 
regions — by around 25% or so on 
average. 
In contrast to Germany, the relative 
level of labour costs in different in­
dustries, with the exception of 
textiles, showed much the same pat­
tern of variation between regions, 
though the range of difference was 
narrower in mechanical engineer­
ing — 30% between the highest and 
lowest costs — than in other areas 
(68%. in textiles). 
Variations in labour costs between 
Italian regions were on a similar 
scale in 1988 to those in France in 
individual industries, though smal­
ler for manufacturing as a whole. 
Between the highest cost region — 
North-West — and the lowest — 
Abruzzi-Molise in the South — 
average labour costs in manufactur­
ing differed by 40%, but by 55% in 
mechanical engineering (for the 
same regions) and by over 70% in 
clothing and footwear (the lowest 
cost regions in this case being in the 
far South). 
In general, regions in the South of 
Italy had lower labour costs than 
those in the North in 1988, the aver­
age difference in manufacturing 
being around 15%. In individual in­
dustries, however, the difference 
was larger. In mechanical engineer­
ing, it was around 20% and in 
clothing and footwear over 40%. At 
the same time, differences are by no 
means uniform as between different 
parts of the North and South, but 
vary markedly from region to re­
gion. In Sicily and Sardinia, in 
particular, average labour costs in 
manufacturing were similar to 
those in the North-East and Central 
regions in 1988 and some 20% above those in Abruzzi-Molise. In clothing 
and footwear, however, in contrast 
to other industries, labour costs 
were some 30% lower in Sicily than 
in either of these two Northern re­
gions. 
Although average labour costs in 
Italy as a whole were some 10% 
lower than in France in 1988, the 
level in the North ofthe country was 
very similar to that in French re­
gions outside Ile de France, though 
some 20-25% below those in the 
lowest cost German region. In the 
North-West, for example, average 
costs in manufacturing were higher 
than in all French regions except for 
Ile de France and the Mediter­
ranean region, and in clothing and 
footwear were virtually the same as 
in the latter. Indeed in this indus­
try, costs in the North of Italy were 
at a similar level to those in many 
German regions, and in the North-
West, higher than in all but four. 
In the UK, regional variations in 
costs were smaller than in either 
France or Italy, though larger than 
in Germany. For manufacturing as 
a whole, average labour costs were 
over 30% higher in the South-East 
around London in 1988 than in 
Northern Ireland, while for clothing 
and footwear, the difference be­
tween the highest and lowest cost 
region was over 50% (in this case, 
between East Anglia and Wales). 
As for Germany, the pattern of re­
gional variation in costs is far from 
uniform between individual indus­
tries. Although levels tended to be 
higher than average in the South-
East and South-West in most 
industries and lower in Northern 
Ireland, for other regions there 
were marked differences. East Ang­
lia and Scotland, for example, both 
had a level of labour costs below the 
national average in 1988 for manu­
facturing as a whole, but the former 
97 
Chapter 4 Towards an integrated European labour market? 
63 Labour costs in manufacturing and unemployment rates across the 
Community, 1988 
Hamburg 
Hessen 
Baden-Wurttemberg 
Nordrhein-Westfalen 
Bremen 
Berlin 
Rheinland-Pfalz 
Niedersachsen 
Bayern 
Schleswig-Holstein 
Saarland 
Bruxelles-Brussel 
Région Wallonne 
Vlaams Gewest 
West-Nederland 
Zuid-Nederland 
Noord-Nederland 
Oost-Nederland 
Ile de France 
Méditerranée 
Centre-Est 
Sud-Ouest 
Est 
Nord-Pas-de-Calais 
Bassin Parisien 
Ouest 
Luxembourg 
Nord Ovest 
Lombard ia 
Lazio 
Emilia- Romagna 
Sardegna 
Nord Est 
Centra 
Sicilia 
Sud 
Campania 
Abruzzi-Molise 
South East 
West Midlands 
North 
South West 
North West 
Wales 
East Anglia 
Scotland 
Yorkshire and Humberside 
East Midlands 
Northern Ireland 
Madrid 
Noreste 
Noroeste 
Este 
Sur 
Centra 
Canarias 
Ireland 
Kentriki Ellada 
Attiki 
Nisia Aigaiou, Kriti 
Voreia Ellada 
Lisboa e Vale do Tejo 
Alentejo 
Centra 
Madeira 
Algarve 
Açores 
Norte 
30 20 10 
% labour force 20 40 60 80 
Index (D=100) 100 120 
98-
Chapter 4 Towards an integrated European labour market? 
had the highest level in clothing and 
footwear and the latter in mechan­
ical engineering. 
Despite these internal variations, 
average labour costs in manufactur­
ing in the highest cost UK region, 
the South-East, were still some 35% 
below the average level in Germany 
in 1988 and around 15% below the 
level in Northern Italy or France, 
outside Paris. This means that the 
level was similar to that in the 
South of Italy. Labour costs in most 
other parts ofthe UK were therefore 
significantly lower than in the 
Southern Italian regions — in 
Northern Ireland, some 30% lower. 
In Spain, where average labour 
costs in manufacturing were around 
15% lower in 1988 than in the UK 
— a gap which had been closed for 
the most part by 1990 — the vari­
ation in the levels between regions 
was of a similar size. In Madrid, the 
highest cost region for both manu­
facturing as a whole and most 
individual industries, costs in 
manufacturing were almost 35% 
above those in the Centro region 
and in clothing and footwear over 
75% above. Labour costs in manu­
facturing in the other industrial 
regions — the North-East and the 
East, around Barcelona — were 
some 5% lower than the average for 
Madrid in the former case and al­
most 25% lower in the latter, with 
similar disparities in most individ­
ual industries. 
With the exception of Madrid — 
where cost levels were similar to the 
average for the UK in manufactur­
ing and higher than in any British 
region in mechanical engineering 
and clothing and footwear — labour 
costs in Spanish regions in 1988 
were slightly lower than in the lo­
west cost UK regions. In clothing 
and footwear, however, levels were 
much the same. For the smaller Community coun­
tries, regional variations in labour 
costs tend to be much smaller as 
would be expected. Portugal, how­
ever, is an exception. Here, average 
levels in manufacturing in Lisbon 
and the surrounding region were 
almost 60% higher in 1988 than in 
the Northern region, though the 
differences were somewhat smaller 
for individual industries (45% for 
mechanical engineering and tex­
tiles, 30% for clothing and 
footwear), reflecting variations in 
the structure of manufacturing. 
Nevertheless, average labour costs 
in Lisbon were significantly below 
any other part ofthe Community in 
1988 — over 15% lower than in the 
lowest cost Greek region. In the 
Northern region, where costs are 
the lowest in Portugal, the average 
level in manufacturing was just 
11% ofthe average in Hamburg, the 
highest cost German region. 
Although regional variations in la­
bour costs are less in Belgium and 
the Netherlands than in the larger 
Member States, they are not insig­
nificant. In 1988, the average level 
in manufacturing in the Brussels 
region of Belgium was almost the 
same as the average for Germany 
and higher than in six German 
regions, while in the West Nether­
lands region around Amsterdam, it 
was higher than in three German 
regions. Moreover in textiles in both 
West and South Netherlands and in 
clothing and footwear in Brussels, 
average costs were higher than in 
all but one German region. 
Labour costs and 
unemployment 
The details on regional labour costs 
provide an opportunity for examin­
ing how far relative levels are 
related to differences in labour mar­ket conditions as reflected in rates 
of unemployment. By and large, in­
sofar as the demand for labour in 
relation to supply affects wages, re­
gions with relatively high levels of 
labour costs should also have rela­
tively low rates of unemployment. 
The expected relationship is not 
quite so simple, however. In par­
ticular, the position at a given 
moment in time does not reveal how 
the two variables are changing 
relative to each other and, there­
fore, may give a misleading 
impression of whether markets 
forces are operating effectively to 
reduce regional imbalances. In 
other words, the static position can­
not indicate, for example, whether 
an excess supply of labour at low 
cost is tending to attract inward in­
vestment and is therefore tending 
to reduce unemployment or 
whether high wage levels some­
where else are tending to choke off 
demand for labour and serving to 
push up unemployment. 
Moreover the relationship is likely 
to be affected by the characteristics 
of different regions — whether they 
consist predominantly of a large 
city, for example — and by the ex­
tent of interregional commuting. In 
addition, it should be noted that the 
labour cost data analysed here re­
late only to part of the economy 
rather than to all of it. 
Nevertheless the relationship be­
tween regional labour costs and 
unemployment rates is of some in­
terest. In Germany, labour costs in 
manufacturing are slightly higher 
on average in the North than the 
South, though there are a number 
of exceptions. Unemployment rates, 
with fewer exceptions — Saarland 
being the main one — are also 
higher in the North than the South, 
which is the reverse of what might 
be expected from a simple model 
-99 
Chapter 4 Towards an integrated European labour market? 
(Graph 63). This is particularly true 
of Hamburg which had the second 
highest unemployment rate in Ger­
many in 1988, but by far the highest 
level of labour costs, partly reflect­
ing its city status. In Bremen, which 
had the highest unemployment, la­
bour costs were also above the 
German average. By contrast, 
Bayern with one of the lowest rates 
of unemployment had a level of la­
bour costs 5% below the national 
average. Indeed, the average rate of 
unemployment in 1988 in regions 
with below average labour costs in 
manufacturing was slightly less 
than the average rate in the higher 
cost regions (by around V2%). 
Part of the explanation for this 
seemingly perverse relationship 
might lie in time lags in the adjust­
ment of relative wages to changes in 
labour market conditions. High la­
bour costs in the North of Germany, 
in other words, tend to reflect la­
bour market conditions in the past 
when this was the most prosperous 
and dynamic part of the country. 
The unemployment rate in 1981, for 
example, was only 3% in Hamburg, 
below the national average. Insofar 
as this is part of the explanation, 
however, it would imply that such 
time lags are of long duration and 
that the wage adjustment process 
works only very slowly — at least in 
Germany. 
For France, there is only slightly 
more evidence of an inverse rela­
tionship between labour costs and 
unemployment. Whereas Ile de 
France with by far the highest la­
bour costs in manufacturing also 
had the lowest rate of unem­
ployment in 1988, as indeed 
throughout the 1980s, the Mediter­
ranean region, with the next 
highest level of costs, had one ofthe 
highest unemployment rates both 
in 1988 and earlier years. Similarly, 
while labour costs were relatively low in Nord Pas de Calais where 
unemployment was at its highest, 
they were similarly low in the East 
region where unemployment was 
not much higher than in Ile de 
France. Moreover Brittany, where 
labour costs were lowest in 1988, 
had unemployment around the 
national average. 
For Italy, on the other hand, the 
relationship is much clearer, but 
only so far as the comparison be­
tween the low unemployment North 
and the high unemployment South 
is concerned. Between regions 
within both areas, there is little sign 
of any inverse association between 
labour costs and unemployment. 
For example, Abruzzi-Molise in the 
South with the lowest labour costs 
in the country had an unemploy­
ment rate in the 1980s which was 
below that in Lazio and only slightly 
above that in the North West, two of 
the three highest cost regions. 
For the UK, an inverse relationship 
is also evident in broad terms, with 
the South-East, the highest cost re­
gion, having the second lowest 
unemployment rate in 1988 and 
Northern Ireland, the lowest cost 
region, the highest rate. Oh the 
other hand, in the North labour 
costs were above the national aver­
age but the unemployment rate was 
the second highest and in East Ang­
lia, where the rate was the lowest of 
all, labour costs were below aver­
age. Similarly, the East Midlands 
had labour costs which were almost 
15% lower than the UK average in 
1988 and an unemployment rate 
also significantly below average 
throughout the 1980s. 
For Spain, the relationship between 
labour costs and unemployment re­
sembles that in Italy, in that 
Madrid and the Northern regions 
where labour costs are relatively 
high had below average rates of un­employment in 1988, while the low 
cost regions in the South, together 
with the Canaries, had compara­
tively high rates. 
Changes in 
regional labour 
costs, 1981 to 1988 
Over the 1980s, the extent of re­
gional variation in labour costs 
narrowed slightly in the case of Ger­
many but widened in the case of 
France, the UK and Italy (no com­
parable data exist for Spain and 
Portugal before 1988). Apart from 
in the UK, the ordering of regions in 
terms of cost levels remained much 
the same over the period. 
In Germany, between 1981 and 
1988 the difference between aver­
age labour costs in manufacturing 
in the highest cost region — Ham­
burg in both years — and the lowest 
cost region — Schleswig-Holstein ir 
1981, which was marginally above 
Saarland in 1988 — declined from 
30% to 27%. 
In general, labour costs rose by 
more in the South than in the North 
over this period. This is broadly in 
line with relative movements in un­
employment, which rose by less in 
the Southern regions than in the 
North ofthe country. Indeed the two 
regions which experienced the hig­
hest increase in unemployment 
rates between 1981 and 1988 — 
Hamburg and Bremen — also 
showed the largest fall in relative 
labour costs, Saarland apart. The 
latter region is the major exception 
to the general tendency, having one 
ofthe lowest rises in unemployment 
but the biggest fall in labour costs 
relative to the German average. 
In France, on the other hand, the 
cost difference widened over this 
period from 46% to 56%; as the level 
100-
Chapter 4 Towards an integrated European labour market? 
in Ile de France rose in relation to 
the national average (from 27% 
above to 32% above) and the level in 
Brittany fell (from 87% to 84% ofthe 
French average). Apart from the 
East region, where relative costs fell 
significantly, and the South-West, 
where they rose, regional relativi­
ties remained largely unchanged. 
In a number of individual in­
dustries, however, labour cost 
differences between regions nar­
rowed as levels rose in the lowest 
cost areas relative to other parts of 
the country. In mechanical engin­
eering, for example, average costs in 
the South-West increased by almost 
10% relative to the French average, 
while in textiles, they rose by over 
15%. 
The relationship between these 
relative labour cost changes and the 
movement in unemployment be­
tween 1981 and 1988 is much less 
clear for France than for Germany. 
Although Ile de France, which ex­
perienced among the lowest 
increases in the rate of unemploy­
ment over this period, had by far the 
largest rise in labour costs, the East 
region, where unemployment also 
rose by comparatively little, had the 
largest fall in costs. Similarly, Nord 
Pas de Calais suffered the biggest 
rise in unemployment, but its aver­
age labour costs went up by only 
slightly less than the national aver­
age — and less than in Brittany, 
where the rise in unemployment 
was much the same as in France as 
a whole. 
In Italy, the difference between the 
highest and lowest cost regions wid-
ened only marginally for 
manufacturing as a whole, but 
much more significantly for individ­
ual industries. In clothing and 
footwear, in particular, average la­
bour costs in the North West, the 
highest cost region, rose by almost 
10% relative to the national average between 1981 and 1988, while 
relative costs in the South region, 
the lowest cost area, fell by 15%. As 
a result, the level of labour costs in 
this industry in the North West in­
creased from over 17% below the 
average for Germany to 2% above 
over this period, while in the South 
the gap remained more or less the 
same. 
These differences between the 
movement in costs in individual in­
dustries and in manufacturing as a 
whole make it difficult to interpret 
the relationship between changes in 
labour costs and unemployment 
over the 1980s in Italy. Since unem­
ployment rates increased by 
considerably more in the Southern 
regions, Abruzzi-Molise apart, than 
in the North (by around 7% on aver­
age as opposed to 1%), labour costs 
should have risen by much less in 
the former than the latter insofar as 
they are affected by the supply and 
demand for labour. While this is 
true for clothing and footwear, it is 
much less the case for other indus-
tries and not at all true for 
manufacturing as a whole, where if 
anything labour costs went up by 
more in the South than the North. 
In the UK, regional differences in 
labour costs widened significantly 
both for manufacturing as a whole 
and for individual industries. For 
manufacturing, the gap between 
the highest and lowest cost region 
was only 22% in 1981, much less 
than in the other three major coun­
tries. By 1988, it had widened to 
31%. 
Relative cost levels in individual 
regions also changed significantly, 
by far more than in the other coun­
tries. In Wales, for example, labour 
costs in manufacturing which were 
almost 6% above the UK average in 
1981 had declined to over 2% below 
by 1988, with falls in relative levels of over 10% in mechanical engin­
eering, textiles, clothing and 
footwear. In the West Midlands, on 
the other hand, a region severely 
affected by job losses in manufac­
turing in the early 1980s, labour 
costs rose from 4% below the na­
tional average to 5% above over the 
same period. 
These relative changes in labour 
costs are broadly in line with 
changes in labour market condi­
tions. The West Midlands 
experienced the largest fall in un­
employment rates (by 4%) and the 
biggest rise in labour costs, York­
shire and Humberside, the biggest 
increase in unemployment (1V2%) 
and the largest decline in labour 
costs relative to the national aver­
age (by over 8%). 
On the other hand, there were a 
number of exceptions to the general 
tendency. The North was the only 
other region to experience a rise in 
the rate of unemployment over this 
period (by 1%) but showed only a 
small fall in relative labour costs 
(also by 1%). Similarly, in Northern 
Ireland, unemployment fell by more 
than the national average, but 
relative labour costs also fell (by 7%) 
and in Wales, the reduction in un­
employment was only slightly less 
than in the rest of the country, but 
relative labour costs declined 
sharply (by 8%). 
Education levels 
of the workforce 
A high level of education and train­
ing is clearly important in many 
areas of economic activity. Most ob­
viously, the development of new 
products and of new techniques of 
production depends to a large ex­
tent on harnessing the skills of 
highly trained scientists and en­
gineers. Equally the introduction 
101 
Chapter 4 Towards an integrated European labour market? 
Educational attainment levels 
All respondents of 15 and over are asked in the Community Labour 
Force Survey about the highest level of general education completed. 
The classification of levels is based on the International Standard 
Classification of Education (ISCED). The analysis in the text relates 
to those people who have completed the second stage of second level 
education, referred to in the text and graphs as post-compulsory 
education, and/or third level education, referred to in the text as 
university or equivalent education. 
The former covers courses undertaken generally after basic schooling, 
such as basic vocational training or preparatory courses for university. 
The latter covers specialist professional courses and university degree 
and postgraduate courses. (It should be noted that the data relate to 
initial training and do not include continuing "in-firm" or "on-the-job" 
training, which clearly might be an important determinant of skill 
levels. At the same time, the ability of the workforce to pick up new 
skills and enhance existing ones is likely to be related to the level of 
education and basic training received.) 
While the figures for different countries are broadly comparable, there 
seem to be a few differences in the way certain levels of education are 
defined. In most countries, the completion of second stage, secondary 
level education is defined in terms of passing an examination or 
completing a training course. Clearly, however, the severity of the 
examination or standard of training might vary between countries. 
Equally the content or structure of courses of education and training, 
which cannot be taken into account here, might differ significantly 
between Member States and be more relevant in some than others as 
a preparation for employment. 
The results of the LFS have been checked against OECD data on 
educational attainment and in most cases they are comparable. For 
the UK and France, however, significant differences exist. For France, 
where the LFS data seems to show much lower proportions of the 
workforce with post-compulsory education qualifications, the reasons 
for the difference have not so far been clarified. As a result France is 
excluded from the analysis. 
For the UK, there is a large difference so far as the numbers classified to 
the second stage of secondary level education are concerned. This arises 
from a difference in the treatment of those who have obtained Ordinary 
Level qualifications ("O" level). These are awarded on the basis of 
examinations usually taken at the age of 16 at the end of compulsory 
schooling. In the OECD statistics, anyone with one "O" level is classified 
to second stage level two — ie is classified the same as someone who has 
passed Advanced level exams ("A" level) usually taken after two years 
further study at the age of 18. In the Community LFS, "O" levels are 
classified as first stage secondary level education, which is much more in 
line with the treatment of similar exams in other countries. 
It would, therefore, seem that the OECD figures for the UK substan­
tially overstate those completing what is termed post-compulsory 
education here. of more efficient methods of work­
ing hinges on the ideas of people 
with organisational expertise as 
well as, increasingly, on the appli­
cation of computerised information 
systems. 
To remain competitive, given the 
increasingly rapid international dif­
fusion of information, businesses do 
not necessarily have to develop all 
innovations in-house. They do need, 
however, to have personnel capable 
of implementing them at all levels 
of operation. Just as importantly, 
they also need to have a labour force 
with the capacity to change the way 
they work in line with the innova­
tions introduced. 
There is increasing evidence that 
how well they are educated is a key 
determinant of the ability of 
workers to acquire new skills and 
to adapt to changes in technology 
and methods of working. For busi­
nesses deciding on the location of 
production, therefore, a labour 
force with a high average level of 
education may be as important as 
the possession of specific skills or 
expertise which in a rapidly chang­
ing world might soon become 
redundant. 
The Community Labour Force Sur­
vey for 1991 for the first time 
collected reasonably reliable 
information on educational attain­
ment. Despite the differences 
which exist in education systems 
between Member States, these 
data seem sufficiently comparable 
to provide an indication of vari­
ations in levels of education and 
basic vocational training of the 
workforce across the Community 
— though, it should be noted, no 
comparable data exist for France 
(see Box, for a description of the 
data and a definition of the terms 
used below to denote different 
levels of educational attainment). 
102-
Chapter 4 Towards an integrated European labour market? 
As would be expected, the average 
level of educational attainment is in 
general much higher in the North of 
the Community than in the less de­
veloped, and less prosperous, 
Southern Member States. In Ger­
many, Denmark and the Benelux 
countries, over 20% of those aged 25 
and over in the labour force in 1991 
had completed a university degree 
or equivalent education course 
(Graph 64). By contrast, the propor­
tion in Portugal and Italy was less 
than 10% ofthe workforce, while in 
Spain, it was under 15%. Although 
the figure was higher in Greece and 
Ireland, it was still below 20% and 
less than the figure in the more 
prosperous Northern countries, ex­
cept for the UK and Luxembourg, 
where the proportion was also less 
than 20%. 
The difference between Member 
States is even more marked if all 
post-compulsory education beyond 
basic schooling is taken into ac­
count. In Germany over 80% and in 
Denmark over 70% of the labour 
force of 25 and over in 1991 had 
completed a post-compulsory edu­
cation or a vocational training 
course, while in the Netherlands, 
around 65% had done so. In Spain 
and Luxembourg, on the other 
hand, the figure was less than 30% 
and in Portugal only around 15%. 
Levels of educational attainment 
are particularly significant for 
younger members ofthe workforce. 
Not only are these the people who 
represent the future so far as any 
country or region is concerned, but 
their levels of education relative to 
those of older age groups are indica­
tive of the changes which are 
occurring over time in the extent of 
participation in various stages of 
education. 
In most Member States in 1991, the 
proportion of the labour force aged 64 Educational attainment of the labour force (25+) in the 
Member States, 1991 
20 40 60 80 100 
80 100 
% labour force 
65 Educational attainment of the labour force (25-34) in 
the Member States, 1991 
20 40 60 80 100 
20 40 60 80 100 
% labour force 
-103 
Chapter 4 Towards an integrated European labour market? 
25 to 34 who had completed univer-
sity degree courses or their 
equivalent was greater than for the 
labour force as a whole, reflecting a 
long-term tendency for increasing 
numbers of young people to stay 
longer in education. This was espe­
cially true for Greece and Spain, 
where the figure for the 25-34 age 
group was markedly higher than for 
those aged 25 and over (8% and 6% 
higher, respectively) (Graph 65). In­
deed the proportion of 25 to 34 year 
olds completing university or equi­
valent education in Greece was the 
highest in the Community apart 
from Belgium. 
In both Germany and Italy, how­
ever, the proportion for those aged 
between 25 and 34 was smaller than 
for older age groups. Nevertheless, 
for both countries, the relative num­
bers in the younger age group who 
had undertaken post-compulsory 
education without completing a degree course or equivalent were 
substantially greater in 1991 than 
for the labour force as a whole (67% 
as against 60% in Germany, 37% as 
against 27% in Italy). 
This is also true for the other 
Member States, particularly Greece 
and Spain, where the difference was 
just as marked as for Germany and 
Italy. In Portugal, on the other 
hand, though the proportion of the 
labour force completing a post-
compulsory course of education was 
greater for the younger age group 
than for others, the difference was 
less than in most other countries. 
Overall, the disparities in levels of 
educational attainment across the 
Community are only slightly re­
duced if the labour force aged 
between 25 and 34 is used as the 
basis of comparison rather the 
labour force as a whole. This sug­
gests a slow, but not universal, 
66 Educational attainment of the work-force (25+) by 
sector in the Community, 1991 
20 40 60 80 
Banking, finance, insurance 
Other services 
Public administration 
Energy & water 
Metal manufacture 
Mineral extraction, chemicals 
Transport & communications 
Distribution, hotels 
Building & civil engineering 
Other manufacturing 
Agriculture • University education 
IS Post-compulsory 
education 
20 40 60 80 
% employed in sector convergence in average levels over 
the past 10-15 years. 
Educational 
attainment by sector 
The importance of a high level of 
education is increasing all the 
time. The evidence for this is not 
just anecdotal. The sectors in 
which the rate of job creation has 
been most rapid over the past ten 
years — banking, insurance and 
business services, health and edu­
cation — are also the sectors where 
the average level of educational at­
tainment ofthe people employed is 
highest. Equally, the sectors in 
which employment has declined by 
most are also those where educa­
tional requirements are at their 
lowest — agriculture and construc­
tion. 
In 1991, therefore, over 70% of those 
employed in banking, insurance 
and business services in the Com­
munity as a whole had completed a 
post-compulsory education or voca­
tional training course and in the 
other services sector, which in­
cludes health and education, the 
figure was over 65% (Graph 66). In 
the former sector, around 30% ofthe 
workforce had university degrees or 
equivalent qualifications and in the 
latter, almost 40%. Indeed these 
two sectors plus public administra­
tion employed two-thirds of all 
people with such qualifications in 
the Community in 1991, although 
they accounted for only just over one 
third of total employment. 
By contrast, only just over 17% of 
the agricultural workforce had 
been through post-compulsory 
education of any kind, while in con­
struction and other manufacturing 
— which includes low-growth, 
labour-intensive industries such 
as clothing and footwear — the 
104 
Chapter 4 Towards an integrated European labour market? 
proportion was less than 40%. The 
majority of the people working in 
these two sectors in 1991, as well 
as those employed in distribution, 
hotels and catering and transport 
and communications, therefore, 
had no formal education or voca­
tional training after compulsory 
schooling. 
The same kind of differences in le­
vels of educational attainment 
between sectors are evident in all 
Member States. A high proportion 
of the workforce in banking, insur­
ance and business services in 1991 
had post-compulsory education or 
vocational training qualifications 
throughout the Community, as did 
those employed in health, educa­
tion and public administration. 
Although the proportion varies be­
tween Member States, in each case 
the extent of the variation is rela­
tively small except for one or two 
countries. Moreover, while the 
variation which exists broadly re­
flects differences in the proportion 
of people with these qualifications 
in the labour force as a whole, the 
evidence indicates that certain ac­
tivities require that most of the 
workforce has a high level of edu­
cation and training. 
In banking, insurance and busi­
ness services, in particular, the 
proportion of those employed with 
post-compulsory education qualifi­
cations was 70% or more in all 
countries apart from the UK, Lux­
embourg and Portugal (Graph 67). 
Since in Portugal and Luxem­
bourg, the proportion, though 
small, was still much greater than 
for the economy as a whole — in the 
former, three times greater, in the 
latter, twice as great — it is the UK 
which is the major exception to the 
tendency elsewhere. Here half the 
workforce in the sector had only 
general education. Similarly in health, education and 
other services, the figure was 
around 65% or more in all countries, 
apart from the three noted above 
together with Spain — where it was 
over 50%. 
It is noteworthy that these are the 
two sectors with the highest rates of 
employment growth in the Com­
munity — indeed in some countries, 
they are the only sectors to have 
generated significant numbers of 
additional jobs over the past decade. 
Their growth would, therefore, 
seem to imply, in most Member 
States, an increased need for a more 
highly educated workforce to fill the 
jobs being created. 
In public administration, on the 
other hand, there was a wider vari­
ation in 1991 between countries in 
the average level of educational at­
tainment ofthe workforce. Whereas 
the proportion of those employed who had completed a post-
compulsory education course of 
some kind was almost 90% in 
Germany and over 80% in Denmark 
and the Netherlands, it was under 
60% in Belgium, under 55% in 
Spain and Italy and under 50% in 
the UK, while in Portugal, it was as 
low as 25%. 
The variation between countries 
in levels of educational attainment 
of the workforce is even wider 
in manufacturing and basic ser­
vices, and it is here that national 
disparities in education levels are 
most clearly reflected. In engineer­
ing, the numbers of workers with 
post-compulsory education or voca­
tional training qualifications 
in 1991 ranged from over 80% 
of the total in Germany and 
over 70% in Denmark to under 30% 
in Spain, under 25% in Italy and 
only around 10% in Portugal 
(Graph 68). 
67 Educational attainment of the work-force (25+) in 
selected sectors in the Member States, 1991 
100 
80 
60 
40 
20 % employed in sector 
University education -i 100 
A 80 
A 60 
40 
20 
0 M^—__—^^^U_ 0 
B DK D GR E IRL I L NL P UK B DK D GR E IRL I L NL P UK B DK D GR E IRL I L NL P UK 
Banking, finance, insurance Other services (health/education) Public administration 
105 
Chapter 4 Towards an integrated European labour market? 
A similar kind of variation is also 
evident in textiles, clothing and 
other manufacturing and in dis­
tribution and hotels — where the 
figure for Germany in 1991 was still 
close to 80% in each case, while in 
Portugal, it was 10%. 
Educational levels 
by region 
The fact that education systems in 
the Community are national in 
scope means that differences in le­
vels of attainment between Member 
States tend to be much more pro­
nounced than variations between 
regions within countries. 
In Germany, in particular, the pro­
portion of the labour force which 
had completed a course of post-com­
pulsory education or training 
differed only slightly — by a maxi­
mum of 5% — from one region to another in 1991 (at least at the 
NUTS 1 level of regional disaggre­
gation). The same was true in the 
Netherlands. Although in the other 
countries, regional differences were 
wider, except in a few instances 
they were still relatively small. 
The most significant variations are 
evident in the less developed 
Southern Member States. In 
Greece, the proportion with 
post-compulsory educational 
qualifications ranged from almost 
60% in Attiki, where Athens is lo­
cated, to under 30% in Kentriki 
Ellada in the South of the main­
land. In Spain, the proportion 
varied from over 40% in Madrid to 
under 25% in the South, while in 
Portugal, the variation was be­
tween over 15% on the mainland 
and under 10% in Madeira. 
In Italy, on the other hand, with 
the exception of Lazio, around 
68 Educational attainment of the work-force (25+) in 
selected sectors in the Member States, 1991 
0Q % employed in sector 
80 h 
60 Post-compulsory 
education • University education 
L no data for metal manufacture, engineering 
40 
20 -i 100 
80 
A 60 
40 
20 
B DK D GR E IRL I L NL P UK 
Metal manufacture, engineering DK D GA E IRL I L Ki P UK 
Distribution, hotels B DK D GR E IRL I L NL P UK 
Other manufacturing (textiles/clothing) Rome — where the proportion was 
over 45% — and Sardinia — where 
it was under 30% — the extent of 
variation in 1991 was small, rang­
ing from just over 30% in the 
North-East to 37% in Sicily. More­
over a feature ofthe Italian figures 
is that, Sardinia apart, they tend 
to be slightly higher in the South 
than in the North. In Lombardy, 
for example, which is one of the 
most highly developed and pros­
perous regions in the Community, 
35% of the workforce had com­
pleted a course of post-compulsory 
education, whereas in Campania 
in the South, the proportion was 
36%. 
This suggests that though the 
average level of educational attain­
ment of the labour force may be 
important to the competitiveness 
of a particular locality, the effect in 
a number of cases tends to be 
masked by other factors. Moreover 
the level of attainment in itself re­
veals nothing about the areas of 
study or training and their relev­
ance to the employment available 
in the region. 
Educational levels 
of the employed 
and unemployed 
Just as there are marked dif­
ferences in levels of educational 
attainment between people work­
ing in different sectors of the 
economy, so too in most Member 
States there are perceptible 
differences between those in em­
ployment and those unemployed. 
This suggests that a lack of adequ­
ate education and training is one 
factor underlying the difficulty of 
the unemployed to find work and, 
therefore, possibly a factor contri­
buting to relatively high rates of 
unemployment in certain parts of 
the Community. 
106 
Chapter 4 Towards an integrated European labour market? 
At the same time, the evidence also 
suggests that this is by no means 
the only, or even the most import­
ant, reason for unemployment. In 
most countries, there are signifi­
cant numbers of people among the 
unemployed who have post-compul­
sory education qualifications or who 
have completed vocational training 
courses. Indeed in two Community 
countries, there were proportion­
ately more of these among the 
unemployed than among those in 
work in 1991. 
In most Member States, in 1991 a 
much higher proportion of those 
in employment had received 
post-compulsory education or voca-
tional training than of those 
unable to find work. In Greece and 
Italy, the reverse was the case — 
though in the latter, only margi­
nally so — while in Spain, the 
difference was relatively small 
(Graph 69). longer a person stays in education 
or training. In the four Southern 
Community countries, however, 
people staying in education after 
finishing compulsory schooling 
have no better chance of finding em­
ployment than those who leave 
school, unless they go on to complete 
a university education course or its 
equivalent. Moreover in Greece, the 
chances of finding employment 
deteriorate with the level of educa­
tional attainment. The rate of 
unemployment for those of 25 and 
over was, therefore, 6% for those 
with post-compulsory education 
qualifications in 1991 as opposed to 
only 4% for those with only basic 
schooling or less. 
The evidence implies at the same 
time that employers in these coun­
tries are unable to make use ofthe 
educational qualifications which 
people are obtaining. This may because those qualifications are in­
appropriate, in that they are not 
geared towards the jobs on offer and 
there is accordingly a mismatch be­
tween the skills of the workforce 
and those being demanded. Alter­
natively, it may simply be because 
there are insufficient jobs being cre­
ated for an educated and trained 
labour force. 
Equally, however, the evidence 
also shows that there is a similar, 
if less acute, problem in Northern 
Member States, insofar as there 
are substantial numbers of the 
workforce with post-compulsory 
educational qualifications who are 
unable to find employment. In both 
Germany and Denmark, such 
people represented around 80% 
and 60% respectivly of the unem­
ployed in 1991, while in the 
Netherlands, the figure was just 
under 50%. 
Apart from in Greece and, to a lesser 
extent the Netherlands, however, 
the main difference between the 
employed and unemployed is at the 
university or equivalent level. In 
five ofthe countries, the proportion 
of the unemployed with post-com­
pulsory education or vocational 
training qualifications of some kind 
was much the same or greater than 
for those in employment. All four of 
the Southern European countries — 
Greece, Italy, Spain and Portugal — 
were among this group of five, 
Denmark being the only country in 
the North of the Community. 
Much the same pattern of difference 
in levels of education emerges if the 
comparison is restricted to the 
younger members of the workforce 
aged 25 to 34. 
This suggests that throughout the 
Community, apart from in Greece, 
employment prospects improve the Educational attainment ofthe employed and 
unemployed (25+) in the Member States, 1991 
20 4® 60 80 100 
0 Post-compulsory education 
(employed) 
H Post-compulsory education 
(unemployed) 
20 40 60 80 100 
% total employed/unemployed 
-107 
Chapter 4 Towards an integrated European labour market? 
Intra-Community 
migration 
Although movement of labour from 
one part of the Community to an­
other is the most direct means 
of helping to correct labour mar­
ket imbalance, this has never been 
regarded as a major way of equali­
sing the very uneven distribution of 
jobs and unemployment. The pres­
ent policy of the Community is 
directed much more towards 
strengthening regional and local 
economies where there are acute job 
shortages, rather than encouraging 
people to move to areas where there 
is greater demand for'labour. 
While great efforts have been made 
in recent years to remove remaining 
restrictions on people being able to 
move from one Member State to an­
other in order to find work, the 
motivation was not really to have a major effect on the often large gap 
between overall supply and demand 
in local labour markets. Rather it 
was to widen the employment op­
portunities open to people across 
the Community and to help tackle 
problems of skill shortages in par­
ticular places. 
In practice, the scale of cross-border 
migration in the Community over 
the past decade or more has been 
very small — especially in relation 
to the large-scale movements which 
occurred from many parts of South­
ern Europe — from Portugal, 
Greece and the South of Italy, for 
example — to the North in the 
1950s and 1960s. 
These limited migration flows are 
reflected in the relatively small 
numbers of people living in one 
Member State who are nationals of 
another. In the Community as a 
whole, under 2% of people fell into 
70 Share of total population who are nationals of other 
Member States, 1991 
% total population 
5 r 
4 h 
3 h 
2 h 
1 r 
P E DK NL EUR11 UK IRL 
I no data, GR figures close to zero, L 29%, 30%, 13% this category in 1991 (Graph 70). 
Excluding Luxembourg, a special 
case, then apart from Belgium — 
where the figure was around 5% — 
in no Member State did the propor­
tion of nationals from another 
Community country exceed 3% of 
the working-age population, and 
only in Germany, France and Ire­
land was the proportion over 2%. In 
Spain and Portugal, the figure was 
considerably less than 1%. 
This, of course, does not necessarily 
reveal the true extent of intra-Com-
munity migration which has 
occurred in the past. It is possible 
that many of the people who mi­
grated in the past have since taken 
up citizenship of the country in 
which they are now living and so are 
no longer counted as non-nationals. 
Unfortunately, however, there is no 
complete set of comparable data on 
such people. 
Movement of 
people between 
Member States 
Nevertheless, information collected 
from the Community Labour Force 
Survey potentially gives some indi­
cation of both the scale and 
direction of labour movements. Spe­
cifically, responses to questions 
about where people were one year 
previously and about their employ­
ment situation provide a means of 
monitoring movements of people of 
working age from one Member 
State to another. (They can also in­
dicate movements between regions, 
though analysis of these data is not 
attempted here.) 
Although the responses given are 
not always reliable, insofar as 
people sometimes have difficulty re­
membering where they were one 
year before, and although the power 
of recall seems to vary from one 
-108 
Chapter 4 Towards an integrated European labour market? 
Member State to another — for 
Italy, no data at all are available — 
in a situation where checks on cross-
border movements are rapidly 
disappearing, such surveys are one 
of the main sources of information 
on migration. (The other major 
source, population registers, pro­
vide possibly more reliable details of 
the demographic characteristics of 
the population and ofthe movement 
between countries — insofar as they 
cover everyone and are not based 
just on a small sample — but not all 
countries have such systems.) 
It should also be made clear that the 
LFS results are based on a rela­
tively small sample, which may not 
be representative in all cases, and 
only indicate inter-country move­
ment between two points in time 
one year apart and reveal nothing 
about shorter-term movements 
within the period. Nevertheless the 
results of the survey broadly con­
firm that the scale of migration has 
been very small in recent years. 
Over the five years 1987 to 1991, 
some 1.5 million people moved from 
one Member State to another, an 
average of some 300 thousand a 
year — equivalent to not much more 
than 0.1% ofthe total Community 
population (Graph 71 — note that 
the figures understate the actual 
movement as they exclude people 
moving into Italy for which no de­
tails are available and which is the 
main reason for the total number of 
emigrants exceeding total immi­
grants). 
Of the people moving, a relatively 
high proportion were aged between 
14 and 54 — and, therefore, poten­
tially looking for work — and a 
significant proportion of these were 
between 14 and 24, and, therefore, 
possibly looking for their first job or 
perhaps looking to gain work ex­
perience in another country. 
Whatever the motivation, the figures show clearly, as might be 
expected, that younger people are 
more likely to move between Mem­
ber States than older people. 
Nevertheless, the total number of 
young people who moved from one 
country to another in this five-year 
period represented under 1% ofthe 
total Community population in this 
age group. 
In terms of numbers, more people 
moved into Germany over this 
period — over 500 thousand over 
the five years — than into any other 
Member State. Of these, some 420 
thousand were aged between 14 and 
54 and therefore potential additions 
to the labour force. Nevertheless, 
the total increase in working age 
population from immigration was 
only 1V2% over this five-year period. 
At the same time, moreover, just 
under 350 thousand people — 250 
thousand aged between 14 and 54 — moved out of Germany to some­
where else in the Community. The 
net increase in the working-age 
population of Germany from migra­
tion was, therefore, less than 200 
thousand over this period. 
The movement of people into the 
UK over these years was only 
slightly less than into Germany, at 
just over 450 thousand in total, of 
which around 370 thousand were 
aged 14 to 54. As in the case of 
Germany, this was just under 200 
thousand more than the number of 
people who moved out of the UK. 
Some of the people moving into the 
UK — as indeed into Germany — 
were, however, British — or Ger­
man — citizens returning after a 
period abroad. 
Together Germany and the UK 
were the countries of destination for 
around 70% of people moving be­
tween Member States — Italy apart 
71 Population movements within the Community, 1987-
1991 
-350 -250 -150 -50 50 150 250 350 450 550 
-350 -250 -150 
Emigrants (1000s) -50 50 150 250 350 450 550 
Immigrants (1000s) 
-109 
Chapter 4 Towards an integrated European labour market? 
— over this period. France ac­
counted for another 15% or so, 
inflows of people of working age 
over this period amounting to 
significantly less than 1% of resi­
dent population in this age group. 
Much the same is true of other coun­
tries. 
The main exception is Ireland, 
where the influx of people of work­
ing age during these five years 
represented around 3% of resident 
population. Many of these were 
Irish nationals returning after 
working abroad. These went some 
way to offsetting the 125 thousand 
people of working age — over 6% of 
the 14 to 54 age group — who left 
Ireland over this period to go to an­
other Member State. There was also 
a net outflow of people, though on a 
much smaller scale, from Spain and 
Greece, two other of the less pros­
perous countries in the Community. 
At the same time, however, move­ments out of Belgium and Denmark 
were also significantly greater than 
movements in over this period. 
Overall, some association can be 
discerned between the state of the 
labour market and labour move­
ments over this period. Both 
Germany and the UK showed rela­
tively high rates of employment 
growth, at least up to 1990, Belgium 
and Denmark relatively low rates, 
while Ireland and Spain have high 
levels of unemployment. However, 
it is clearly not simply à question of 
people moving from areas of high 
unemployment to areas where jobs 
are more plentiful. 
Movement of 
labour between 
Member States 
Ofthe people moving from one Com­
munity country to another, around 
72 Status of migrants within the Community, 1987-1991 
100 
80 
60 
40 
20 • Employed • Unemployed • Inactive 
I no data, L emigration too small 
100 
80 
60 
40 
20 
B DK D GR E F IRL L NL P UK B DK D GR E F IRL L NL P UK 
Immigrants Emigrants 60% or so on average were members 
of the labour force in the country 
they moved to (Graph 72). The 
figures, however, vary greatly from 
country to country, partly reflecting 
the rate of labour force participation 
in the country concerned, partly the 
age structure of those moving. 
In particular, only around 45% of 
those moving into Greece and Spain 
were either employed or actively 
looking for work when they were 
surveyed, whereas 55-60% of those 
who had left these two countries 
were members of the workforce in 
the country they had moved to. 
Similarly, 70% of those who had 
moved from Ireland to another 
Member State were working or 
classified as unemployed, while 
only 55% of those moving into Ire­
land were economically active. In all 
three cases, the people who had 
emigrated tended to be younger 
than those immigrating (Graph 71). 
Much the same kind of difference is 
evident for the Netherlands and 
Portugal. For these five countries, 
therefore, it would appear that a 
significantly higher proportion of 
the people leaving were doing so in 
search of work than those moving in 
or returning. In two of the other 
countries — Denmark and Ger­
many — the reverse was true, in 
that the people leaving were less 
likely to be looking for work, per­
haps because they were returning 
somewhere else after working in 
these countries. 
The evidence also shows that, over 
this period, the people moving who 
were economically active were 
much more likely to be unemployed 
in the country they moved to than 
in employment. This was especially 
true for Ireland, where immigrants 
added 1V2% to the unemployment 
figures every year between 1987 
and 1991 (Graph 73), whereas they 
110 
Chapter 4 Towards an integrated European labour market? 
added less than V2% to the numbers 
employed (Graph 74). A similar dis­
parity is evident for Portugal, where 
immigrants increased unemploy­
ment by 0.4% but employment by 
only just over 0.1%, and for Greece, 
where the addition to unemploy­
ment was also over 3 times the 
addition to employment. 
The same kind of difference exists 
for the more developed countries, 
though the extent of the difference 
was smaller in each case, immi­
grants adding around twice as 
much to unemployment as to the 
numbers in work, except in Ger­
many and Belgium where the 
difference was 50% or less. 
Movements of 
men and women 
As might be expected, more men 
than women move from one Member 
State to take up employment in an­
other. Over the period 1987 to 1991, 
on average around 60% of all those 
who had moved between countries 
and who were working when sur­
veyed were men, only 40% women 
(Graph 74). These figures are much 
the same as the overall proportions 
of men and women in employment. 
They vary, however, between Mem­
ber States, with women accounting 
for around 45% of immigrants in em­
ployment in France and the UK and 
30% or less in Belgium, the Nether­
lands and Spain. 
On the evidence of this period, how­
ever, significantly more women 
than men who move between Mem­
ber States are likely to be 
unemployed rather than in work. 
Around half of the immigrant un­
employed were women over these 
five years. Indeed in Germany, 
France, Greece and the Nether­
lands, 60% or more were women. In 
Ireland, Portugal, Denmark and 73 Contribution of Community migrants to unemployment 
in the Member States, average 1987-1991 
1.6 
1.4 
1.2 
0.8 
0,6 
0.4 
0.2 % total unemployed 
IRL P UK D EUR11 F NL GR DK B E 
I no data; L men 2.6%, women 2.5% 
74 Contribution of Community migrants to employment in 
the Member States, average 198^-1991 
0.5 
0.4 
0.3 
0.2 
0.1 % total employment 
0.5 
Women 
Men -j 0.4 
- 0.3 
- 0.2 
0.1 
0 | . | ^—! Q 
IRL D UK EUR11 P B DK NL F GR E 
I no data; L men 1.6%, women 0.9% 
111 
Chapter 4 Towards an integrated European labour market? 
Belgium, only around a third or 
less. 
The direction of 
labour movement 
The responses to the Labour Force 
Survey also indicate the scale ofthe 
movement of labour between spe­
cific countries. The results for the 
three major countries for which 
data are available show that, be­
tween 1987 and 1991, around half 
of the labour moving out of Ger­
many went to the UK, some 15% to 
France and under 10% to the Bene­
lux countries (Graph 75). While the 
high figure for people moving to the 
UK seems surprising, many of them 
were people returning after work­
ing in Germany for a time and many 
others were, possibly, employees of 
German transnational companies 
going to work in group offices in the 
UK. Over recent years more workers 
have moved to Germany than to any 
other country in the Community. 
For most countries, including Italy, 
France and the UK, Germany was 
the most important destination for 
migrant labour in the period 1987 to 
1991. In terms of their population 
sizes, the migration flows from 
Greece, Denmark and Ireland were 
particularly significant. About 70% 
of Greek and Danish workers 
moving to another Community 
country during these five years 
went to Germany, while over a third 
of Irish emigrants did so. 
In the case of the UK, where in­
flows of labour also exceeded 
outflows, the largest number of 
people moving in, either to take up 
or to look for work, came from Ger­
many — over 90 thousand between 
1987 and 1991 — while almost 55 
thousand came from Ireland — 
over 40% of total Irish workers mi-
75 Labour force movements in and out of Germany, 1987-1991 
-100 -80 -60 -40 -20 20 40 60 
Other EC 
-100 -80 -60 
Excludes emigration to Italy -40 -20 20 40 60 
1000s grating within the Community 
(Graph 76). 
The flow of migrant workers from 
the UK to Germany was also larger 
than to any other Member State, 
accounting for just under 25% of all 
those leaving the UK to work else­
where in the Community. Workers 
moving or returning to Ireland rep­
resented the second largest outflow, 
though they amounted to only 
5 thousand a year. 
In the case of France, for which 
migration flows seem to be much 
smaller, almost 60% of people 
going to work elsewhere in the 
Community went either to Ger­
many or the UK between 1987 and 
1991, while just over 10% went — 
or probably returned — to Portugal 
(Graph 77). Those moving to 
France to work came from many 
different parts of the Community, 
with no one country predominating 
— though slightly more came from 
Germany, the UK and, especially, 
Portugal than would be expected 
given the relative populations of 
these countries. 
Overall, however, both for these 
three major countries and other 
Member States, the most striking 
feature of the data on migration is 
the relatively small numbers of 
workers who have moved from one 
Community country to another in 
recent years. Apart from Ireland — 
where workers moving abroad ef­
fectively reduced the labour force 
by around 1% a year over the past 
five years and those moving in in­
creased it by slightly less — the 
scale of labour movement experi­
enced by all Member States is low. 
Even in the case of Germany, 
which was the most attractive des­
tination, immigrant workers from 
other parts of the Community 
added only marginally to employ­
ment. 
112-
Chapter 4 Towards an integrated European labour market? 
Nevertheless, the potential effect on 
differential rates of unemployment 
of this scale of labour movement is 
not insignificant. Even leaving 
aside Ireland, where emigration di­
rectly reduced the number of people 
looking for jobs by some 5% between 
1987 and 1991 — though this was 
largely offset by people returning — 
movements of workers of the size 
experienced in the Community in 
recent years, if in the right direc­
tion, could potentially narrow 
differences in unemployment by 
1-2% over a five-year period. 76 Labour force movements in and out of the UK, 1987-1991 
-50 -25 25 50 75 100 
DK 
IRL 
Other EC 
-50 -25 0 
Excludes emigration to Italy 25 50 75 100 
1000s 
77 Labour force movements in and out of France, 1987-1991 
-50 -25 25 50 75 100 
UK 
Other EC 
-50 -25 0 
Excludes emigration to Italy 25 50 75 100 
1000s 
113 
Chapter 4 Towards an integrated European labour market? 
-114 
Chapter 5 Labour market developments in assisted regions 
Chapter 5 Labour market developments in assisted regions 
There are signs of some convergence in income levels between 
the less developed parts ofthe Community and other areas 
since 1986. In terms of employment and unemployment, 
however, major disparities exist and have shown less 
tendency to narrow. 
Balanced economic development 
is one of the central objectives of 
the Community. Assistance to 
depressed and backward regions 
has been progressively expanded 
over the years, starting with the 
European Social Fund in 1960, 
soon after the Community was 
formed, and strengthened by the 
creation of the European Regional 
Development Fund in 1975. The 
accession of Spain and Portugal 
in 1986 added new impetus by 
bringing a widening of regional 
inequalities and doubling the 
population of the Community 
living in regions with average 
income per head of less than half 
the Community average. The 
Single European Act, adopted the 
following year, committed Member 
States not only to establishing a 
single market but to strengthening 
the Community's economic and so­
cial cohesion by reducing regional 
disparities. 
In 1988, the operation ofthe Struc­
tural Funds — the Community's 
various instruments of regional aid 
— were reformed arid their scale 
greatly expanded. Between 1988 
and 1993, the finance available for 
regional support was virtually doubled in real terms to 14 billion 
ECU at 1988 prices, 25% of the 
Community Budget. At the same 
time, they were targeted explicitly 
at achieving particular objectives 
in specifically defined problem 
regions. In Objective 1 areas, defined as the 
less favoured regions in terms of 
income per head (measured by 
GDP), the aim was to promote econ­
omic development and structural 
adjustment. In Objective 2 areas, 
those with severe labour market 
M10 Eligibility of the population for Structural 
Funds assistance, 1989-1993 
H > 10% in Objective 2 & 5b 
WE > 30% Objective 5b 
|~~] < 30% Objective 5b 
| | Unassisted 
| [ < 30% Objective 2 
> 30% Objective 2 
Objective 1 
-115 
Chapter 5 Labour market developments in assisted regions 
imbalances linked to the decline in 
their industrial base, the aim was to 
strengthen and assist the re-adjust­
ment of the local economy. In 
Objective 5b areas, those either ag­
ricultural or rural in character, the 
aim was similar to that in Objective 
1 areas of assisting adjustment and 
promoting development. 
Three additional objectives without 
an explicit regional dimension were 
specified — combating long-term 
unemployment and helping young 
people to find work, Objectives 3 
and 4, and promoting structural im­
provement in the agricultural 
sector, Objective 5a. In practice, sig­
nificant shares of the funds aimed 
at the former two objectives have 
also been allocated to Objective 1 
regions in line with overall objec­
tives. 
In December 1992, at the Edin­
burgh Summit, Member States 
agreed to further increases of re­
gional aid between 1993 and 1999, 
in the form of an expansion of the 
existing Structural Funds (from 
21.3 billion ECU in 1993 to 30 bil­
lion ECU in 1999) and the creation 
of a new financial instrument, 
the Cohesion Fund (amounting to 
1.5 billion ECU in 1993, rising to 
2.6 billion ECU by 1999). This ex­
tension of support reflected the 
reiteration of the importance of 
economic and social cohesion in the 
Maastricht Treaty as well as con­
cern about possible adverse effects 
on problem regions of the move to­
wards monetary unification — a 
concern heightened by the likely 
consequences of the budgetary con­
solidation called for as a condition 
of membership of the monetary 
union. Indeed, eligibility for Cohe­
sion Fund assistance, which is 
aimed at Member States (rather 
than regions) having GNP per head 
less than 90% of the Community 
average and, therefore, restricted to Greece, Portugal, Ireland and 
Spain, is itself conditional on the 
country concerned taking measures 
to bring public debt and govern­
ment deficits to the benchmark 
levels specified in the Maastricht 
Treaty. 
The issues examined 
This chapter examines labour mar­
ket developments since 1986, when 
Spain and Portugal joined the Com­
munity, in the regions receiving 
Structural Funds assistance. It is 
intended to provide some indication 
ofthe relative performance of these 
regions as compared with that of 
other areas of the Community. It 
examines the extent to which the 
aim of reducing regional disparities 
in key aspects such as access to em­
ployment is being achieved. 
It should be emphasised that the 
purpose of this exercise is not to 
evaluate the effectiveness of the 
Structural Funds, which in their 
present form have existed only since 
1989. Moreover, the experience of 
assisted regions is determined by a 
much wider range of factors than 
the scale of external financial sup­
port and no attempt is made here to 
distinguish between the effect of 
this and such other factors. It is also 
the case that the programmes co-
financed by the Community, which 
emphasise investment in infra­
structure, people and productive 
activity can only be expected to have 
their full effects over the medium to 
longer-term. 
Nevertheless, an overall compari­
son provides a useful background to 
the detailed evaluation of specific 
programmes which are carried out 
in order to monitor the effectiveness 
of the Funds. Indeed, examination 
of changes in key labour market in­
dicators is essential for monitoring progress in increasing economic and 
social cohesion across the Com­
munity. It also indicates the scale 
and nature of the task which the 
extended policy measures agreed at 
the end of 1992 need to tackle. 
The issues examined are: 
• the extent of differences in levels 
of income per head between re­
gions eligible for Structural Fund 
support and other areas; 
• variations in GDP growth over 
the latter part ofthe 1980s; 
• the difficulty of finding work in 
regions receiving assistance as 
compared with other parts of 
the Community; 
• the rate of job creation in as­
sisted areas in relation to 
elsewhere; 
• the kind of jobs created in these 
areas in comparison with other 
regions of the Community; 
• how far levels of open, and dis­
guised, unemployment differ 
between assisted areas and the 
rest of the Community and the 
extent to which the gap has 
closed since 1986. 
Since both the nature of the prob­
lem and the scale of support 
received varies between assisted 
areas, the areas are divided into 
three groups — those classified for 
Structural Funds purposes as 
Objective 1 areas (ie the least de­
veloped regions ofthe Community), 
those classified as Objective 2 areas 
(ie regions suffering industrial de­
cline) and those as Objective 5b 
(rural areas). In addition, since 
their labour market characteristics 
and development are affected by 
where they happen to be located, 
the analysis also divides the regions 
-116 
Chapter 5 Labour market developments in assisted regions 
by country. (It should be noted that 
this classification of regions refers 
to the period 1989 to 1993. Eligi­
bility of regions for Structural 
Funds support in the period after 
1993 is, at the time of writing, still 
to be determined.) 
All of the aspects noted above are 
important for an assessment of la­
bour market developments, which 
is the aim here. It should be empha­
sised, however, that since regional 
assistance is specifically directed at 
the particular objectives, only some 
of the aspects covered are relevant 
for an evaluation of the perfor­
mance of the Structural Funds as 
such (which, as noted above, were 
only introduced in their present 
form in 1989). For example, since 
GDP per head is not one ofthe crite­
ria for deciding the eligibility of a 
region for assistance under Objec­
tive 2, which is concerned explicitly 
with helping to correct labour mar­
ket imbalance, its behaviour, 
though interesting, is not directly 
relevant to judging the success or 
failure of this policy. 
A particular problem in the ana­
lysis is that, outside Objective 1 
regions, areas defined as eligible 
for Structural Funds assistance do 
not in all cases coincide with stand­
ard Community (NUTS level 2 or 
3) regions, for which data are pub­
lished. In such cases, data are not 
available specifically for the areas 
receiving assistance. This means 
that assumptions have to be made 
about the characteristics of as­
sisted areas in relation to those of 
the standard regions in which they 
are located. 
The approach adopted here is to 
take all regions which contain as­
sisted areas and to estimate the 
key labour market variables in the 
assisted parts (see Box, for a fuller 
description ofthe methodology). Objective 2 and Objective 5b 
areas: data problems 
The main problem of trying to distinguish be­
tween developments in Objective 2 and 5b 
areas and those in the rest of the Community 
is that, though based on the official Com­
munity NUTS regional classification, unlike 
Objective 1 areas, they are smaller in most 
cases than NUTS level 2 or level 3 regions for 
which comparable data are published. In both 
cases, this limits the analysis which it is 
possible to carry out on the basis ofthe Euros­
tat data. 
Since there at present these are the only data 
available, the question is how they can be used 
to throw light on comparative developments. 
The most defensible approach is to divide 
NUTS regions according to the importance of 
assisted areas within their borders — to focus 
on those regions where assisted areas account 
for a high proportion of the population or la­
bour force and where accordingly it is more 
likely that the characteristics of the region as 
a whole reasonably reflect those of the as­
sisted area. 
This, in practice, is much easier to do in re­
spect of NUTS level 3 regions which are 
subsets of NUTS level 2 regions. 
The only relevant data generally available at 
this level of spatial disaggregation are unem­
ployment rates. Although these are important 
indicators of comparative labour market de­
velopments in assisted areas, it is equally 
important to examine other aspects — the 
scale and nature of employment creation in 
particular. Unfortunately, full and reliable 
data on these are only available for NUTS 
level 2 regions, of which assisted areas in 
many cases — and in virtually all cases in 
respect of Objective 5b areas — only represent 
a small part. 
It is possible to group NUTS level 2 regions 
according to the proportion of population liv­
ing in assisted areas and to base the analysis 
only on those regions where this is suitably 
high — significantly more than 50%. Unfortu­
nately only a small number of regions falls 
into this category. This is a particular diffi­
culty if the aim — as here — is to compare 
-117 
Chapter 5 Labour market developments in assisted regions 
developments in assisted and non-assisted areas 
at the country level as well as Community level. 
Because of this, the analysis in this chapter 
takes all NUTS 2 regions in which assisted 
areas are located as the basis of comparison. 
This essentially assumes that the charac­
teristics of such areas are similar to the 
surrounding NUTS 2 region, which in practice 
is unlikely to be correct. The very fact that 
assisted area status has been granted to only a 
part of a region rather than to the region as a 
whole would generally imply that the charac­
teristics in terms of key variables — such as the 
level of unemployment, the rate of industrial 
decline or the degree of economic development 
which are have been taken as the criteria for 
the eligibility ofthe area for support — are not 
uniform across the region as a whole. 
To reduce the importance of this factor, NUTS 
2 regions are aggregated together by using the 
proportion of population in assisted areas as 
weights. In this way, the larger the relative size 
ofthe assisted area in terms ofthe people living 
there, the more it counts towards the total (ie 
if 75% of the population of one NUTS 2 region 
live in assisted areas and 25% of another, la­
bour market variables such as employment 
growth or unemployment rates are averaged by 
applying a weight of 0.75 to the figures for the 
first region and one of 0.25 to those for the 
latter). 
To ensure complete coverage of each of the 
Member States, regions containing assisted 
areas are also included in the totals for non-as­
sisted areas, so long as assisted areas do not 
account for the whole ofthe population. As with 
the aggregation of assisted areas, non-assisted 
regions are summed together by using the pro­
portion of people living in unassisted areas as 
weights. This means, for example, that figures 
for non-assisted areas are generated for Spain 
even though there are no NUTS 2 regions in 
Spain which do not contain an assisted area. 
Similarly for Denmark, because ofthe location 
of Objective 2 areas, the figures calculated are, 
the same for assisted and non-assisted regions 
at the NUTS 2 level. 
For a test ofthe validity ofthe analysis, see Box, 
p. 123 below, in which unemployment rates in 
Objective 2 areas are compared with those in 
non-assisted areas at a NUTS 3 level of regional 
disaggregation. Given these difficulties, the results 
for what are termed Objective 2 
and Objective 5b regions should be 
regarded as only indicative of the 
developments in the more nar­
rowly-defined areas actually 
receiving assistance and certainly 
not definitive. This should very 
much be borne in mind throug­
hout the succeeding analysis. It 
should also be borne in mind that 
non-assisted areas with which 
comparisons are made below vary 
significantly in terms of prosperity 
and labour market characteristics. 
Because a region is not eligible for 
Structural Fund support does not 
necessarily mean that it is free 
from economic and employment 
problems or that convergence is 
only to be measured in terms of 
differences between assisted and 
non-assisted areas, merely that as­
sisted regions have been identified 
as having the most acute structu­
ral weaknesses. 
The importance 
of assisted areas 
in the Community 
All member countries of the Com­
munity have some assisted areas 
within their borders at the time of 
writing — though this may change 
after 1993 when the allocation of 
the Structural Funds is reassessed 
(Map 10). In three countries, 
Greece, Portugal and Ireland, all 
regions have Objective 1 area 
status. Most regions of Spain are 
similarly classified and nearly all 
those which are not — located in the 
North East of the country and 
around Madrid — contain areas 
which are eligible for Objective 2 
and/or Objective 5b assistance. Out­
side these four countries, within 
Europe, only Southern Italy, Cor­
sica and Northern Ireland are 
classified as Objective 1 regions (the 
118 
Chapter 5 Labour market developments in assisted regions 
French Overseas Departments out­
side Europe are also so classified). 
Outside Spain, Objective 2 areas, in 
terms of both population and land 
mass, are most important in North­
ern France, including Brittany and 
the North-East, and in the UK, 
north of a line crossing the country 
diagonally from the Severn to the 
Wash. Objective 5b regions, in 
population terms, are most import­
ant in Southern France and the 
South-East and North-West of Ger­
many. 
In the Community as a whole, 42% 
of the working-age population 
(those aged 15-64) lived in assisted 
areas in 1989 — about the same 
proportion as for total population, 
which was the point of reference 
when eligibility for Structural 
Funds support was determined in 
1989. Half of these lived in Objec­
tive 1 regions, which, between 
them, currently receive over 60% of 
the total aid available from the 
Structural Funds and around 75% 
of that which is allocated purely on 
a regional basis (ie excluding Objec­
tives 3 and 4 payments). Ofthe rest 
of the population of working age in 
assisted areas, over 75% were in 
Objective 2 areas (16% ofthe work­
ing-age population in the 
Community), which together re­
ceive some 20% of regionally 
allocated funds, and under 25% (5% 
of Community working-age popula­
tion) in Objective 5b. 
Of those living in Objective 1 re­
gions, almost a third are Spanish 
and another 30% are Italian. In 
Spain, 58% of the population of 
working age lived in Objective 1 re­
gions in 1989, another 23% in 
Objective 2 areas and 3% in Objec­
tive 5b (Graph 78). In Italy, 36% of 
working-age population were in Ob­
jective 1 regions in the same year, 
while a further 12% lived in other assisted areas. Outside these two 
countries, and outside Greece, Por­
tugal and Ireland, where all the 
population is covered, Structural 
Funds support was most important 
in the UK, where 40% of working-
age population lived in assisted 
areas — most of them in Objective 
2 regions. 
In the case of the other Member 
States, under 30% ofthe population 
of working age lived in assisted 
areas in France and Belgium, under 
20% in Germany and the Nether­
lands and under 10% in Denmark. 
Income per head 
in assisted areas 
The proportion of the working-age 
population living in assisted areas 
in Member States bears an inverse 
relationship to income per head — 
in the sense that the poorest countries receive the most aid. In­
deed eligibility for Objective 1 
status depends, for the most part, 
on having an average per capita in­
come (or more precisely GDP) of 
under 75% ofthe Community aver­
age. On average, the level of income 
of Objective 1 regions — measured 
in terms of purchasing power stand­
ards (PPS) to correct for differences 
in what a given level of income is 
capable of buying — was under 55% 
of that in non-assisted regions in 
1990 (Graph 79). 
Relative levels of income per head 
differ between Objective 1 regions. 
In 1991, average income per head in 
Corsica and Northern Ireland was 
around 65% of the average in non-
assisted areas in the rest of the 
Community, whereas in Ireland 
and Southern Italy it was around 
60%, in Objective 1 regions in Spain 
55%, in Portugal 46% and in Greece 
as low as 42% (Graph 80). 
78 Working-age population assisted by the Structural 
Funds in the Member States, 1989 
100 
80 
60 
40 
20 % working-age population (15-64) 
Objective 5b 
Objective 2 
Objective 1 100 
80 
A 60 
40 
20 
GR • IRL P El E12 UK 
Excludes ex-DDR and French DOM NL DK 
119-
Chapter 5 Labour market developments in assisted regions 
79 Income per head by Structural Funds status in the 
Community, 1986 and 1990 
20 1000 PPS per head 
15 r 
10 r 
5 h 20 
A 15 
10 
A 5 
Total Objective 1 Objective 2 Objective 5b Unassisted 
80 Income per head in Objective 1 and unassisted regions, 
1986 and 1990 
20 1000 PPS per head 
15 h 
10 r -i 20 
15 
10 
GR E F IRL I P UK EUR12 Growth of GDP 
Between 1986 and 1990, GDP 
increased by around 15% — al­
most 4% a year — in Objective 1 
regions in the Community as a 
whole. This was some 1V2% more 
than in non-assisted areas 
(Graph 81). Growth was particu­
larly high in Spain, Ireland and 
Portugal, at close to 20% or more, 
whereas in Greece, it was only 7%, 
half the rate in the rest ofthe Com­
munity. However, in Spain as well 
as in France and the UK, growth in 
the Objective 1 regions of the 
country was significantly lower 
than in the non-assisted areas, 
while in Italy, there was little dif­
ference between the North and 
South. 
In Objective 2 regions, growth of 
GDP also averaged more than 
in non-assisted areas over these 
four years, though the difference 
was much smaller than for Objec­
tive 1 regions (Graph 82). In this 
case, although growth in Objective 
2 regions within each Member 
State, apart from Belgium, was 
lower than in non-assisted areas, 
the difference was marginal in all 
countries except Spain and the 
Netherlands. 
Growth of 
income per head 
The relatively high growth of GDP 
in Objective 1 regions between 
1986 and 1990 led to some conver­
gence in levels of income per head 
(measured in terms of PPS) 
between the least developed and 
the most prosperous parts of the 
Community (Graph 79). In Objec­
tive 1 regions, GDP per head in 
real terms increased by an average 
of 3.5% a year over this period, 
compared with 3% in unassisted 
regions. 
- 120 -
Chapter 5 Labour market developments in assisted regions 
The experience of these four years 
represents a marked improvement 
on the previous 10 years when 
disparities in income per head wid­
ened. The reasons for this are 
difficult to disentangle. Apart from 
the effect of Structural Fund expen­
diture, it is also the case that, 
during most periods of economic 
growth in the Community, such as 
between 1986 and 1990, the less 
developed, less prosperous and 
largely peripheral regions have 
tended to perform better than other 
parts. Conversely, recession seems 
to affect them more severely. 
This may reflect the fact that pe­
ripheral regions, like many 
Objective 1 areas, tend to be rela­
tively dependent on investment 
from outside. This may be reduced 
more than in central parts when 
economic activity — and income — 
is depressed. 81 GDP growth in Objective 1 and unassisted regions, 
1986-1990 
Change (%) 
25 r 
20 r 
15 h 
10 h -i 25 
A 20 
A 15 
10 
GR E F IRL I UK EUR12 
The developments over this period 
in the Community as a whole, how­
ever, conceal marked differences 
within Member States reflecting 
the large variations in GDP growth. 
Whereas there was some conver­
gence in income per head between 
Spain, Portugal and Ireland and the 
rest ofthe Community, in other Ob­
jective 1 regions the gap widened 
rather than narrowed (Graph 80 — 
it should be noted that the reference 
to "1986 Objective 1" in this and 
later graphs relates to the position 
in 1986 of regions which were classi­
fied as Objective 1 in 1989; the same 
applies to Objective 2 and Objective 
5b regions in later graphs). This was 
particularly the case in Greece, Cor­
sica and Northern Ireland, where 
average growth was 2% a year or 
less over this period — in the latter 
two cases, much lower than in main­
land France and Britain. In Italy 
too, the rise in income per head in 
the assisted regions of the South 
during these five years was over V2% 82 GDP growth in Objective 2 and unassisted regions, 
1986-1990 
Change(%) 
25 r 
121 
Chapter 5 Labour market developments in assisted regions 
a year less than in the non-assisted 
areas ofthe North. 
Unemployment in 
problem regions 
Unemployment is a key indicator in 
Objective 2 areas. The vast majority 
of areas qualifying for assistance 
had an average rate of unemploy-
ment above the Community 
average over the preceding three 
years, in addition to having a higher 
than average share of employment 
in industry and to having suffered a 
decline in industrial jobs. 
Average unemployment in Objec­
tive 2 regions in 199.1, though 
higher than in unassisted parts of 
the Community, was nevertheless 
considerably lower than in Objec­
tive 1 regions. While the latter had 
an average rate of 14%, the rate in 
Objective 2 regions was under 10% (9V2%). This compares with a rate of 
6V2% in unassisted areas — only a 
little below the average rate in Ob­
jective 5b regions of 7% (Graph 83). 
Conducting the analysis at the 
NUTS 3 rather than NUTS 2 re­
gional level reduces the average 
unemployment rate in both Objec­
tive 2 and unassisted areas in 1991 
— by V2% for the former and 1% in 
the latter. This also, therefore, 
serves to widen the measured gap 
slightly between the two (Graph 84 
and Box, p. 123). 
At Member State level, unemploy­
ment is also higher in Objective 1 
and Objective 2 assisted areas. 
In the case of Objective 1 regions, 
the difference in the rate in 1991 for 
all countries with both assisted and 
non-assisted areas was substantial 
— the minimum being 4% in the UK 
with as much as 14% in Italy (Graph 
83 Unemployment rates in the Community by Structural 
Funds status, 1986 and 1991 
% labour force 
16 r 
12 r 
8 H 
4 r 16 
12 
A 8 
A 4 
0 - » •••• " """•l- 0 
EUR12total Objective 1 Objective 2 Objective 5b Unassisted 85). In Ireland and Greece — which 
are entirely classified as Objective 1 
— unemployment was also higher 
than in unassisted parts ofthe Com­
munity. In Portugal, however, the 
rate was significantly below that 
elsewhere. 
In the case of Objective 2 regions, 
the difference is much less marked. 
Only in Belgium did the average 
rate of unemployment in 1991 in 
assisted regions exceed that in un­
assisted areas by more than 3% 
(Graph 86). In Spain, Italy, the 
Netherlands and the UK, the dif­
ference was less than 2%. 
At the NUTS 3 level of regional dis­
aggregation, however, the average 
rate in Objective 2 areas was more 
than 3% greater than in non-as­
sisted parts, in Germany as well as 
Belgium. In all the other countries, 
except in France and Spain (where 
the analysis is not possible), it was 
more than 2% (Graph 84 and Box, 
p. 123). 
In the case of Objective 5b regions, 
the difference in unemployment 
rates tend to be much lower than for 
other assisted areas. Indeed, in Ger­
many, the average unemployment 
rate in 1991 was actually below that 
in unassisted areas (Graph 87). For 
the other countries, only in the 
Netherlands and Italy — and then 
only marginally — was unemploy­
ment more than 1% higher than in 
unassisted regions. 
Changes in 
unemployment, 
1986 to 1991 
Despite the comparatively high rate 
of GDP growth experienced by Ob­
jective 1 regions in the five years up 
to 1991, unemployment fell by much 
less in these areas than it did in 
other parts of the Community. 
122 
Chapter 5 Labour market developments in assisted regions 
Whereas the average rate of unem­
ployment in unassisted regions 
declined from just under 11% to 
8V2% — it fell by only 1% in Objec­
tive 1 regions — from 15% to 14% 
(Graph 83). 
This difference in overall Com­
munity experience is largely the 
result ofthe relative changes in un­
employment which occurred in 
Spain and Italy — which together 
account for 60% of the labour force 
living in Objective 1 regions — as 
well as in Greece. Between 1986 
and 1991, the average rate of unem­
ployment in the less developed 
regions of Spain fell by 3% as com­
pared with a fall of almost 9% in 
unassisted areas (and of 8% in Ob­
jective 2 areas) (Graph 84). In Italy, 
the average unemployment rate in 
Objective 1 regions actually in­
creased over these five years by over 
3%, while it fell by almost the same 
amount in unassisted regions. In 
Greece, unemployment also rose 
over this period, if only slightly. 
In other countries with Objective 1 
regions, the record on reducing un­
employment was about the same in 
Ireland as in the unassisted parts of 
the Community and better in the 
UK and Portugal. 
In contrast to the experience of Ob­
jective 1 areas, unemployment in 
the Objective 2 regions as a whole 
declined by almost twice as much as 
it did in unassisted areas between 
1986 and 1991 — from over 13%) to 
9V2%. This aggregate result is, how­
ever, largely a consequence of 
events in the UK, which accounts 
for over 40% of the labour force in 
Objective 2 regions in the Com­
munity as a whole. There the 
average unemployment rate in 
Objective 2 regions fell by 4% 
as against a reduction of just over 
2% elsewhere in the country 
(Graph 86). Unemployment in NUTS 3 
regions: Objective 2 and 
non-assisted areas 
To check the difference it makes to the 
results for Objective 2 regions, an ana­
lysis has been carried out of 
unemployment rates at the NUTS 3 
rather than the NUTS 2 level of regional 
disaggregation. Comparing average 
rates in NUTS 3 regions containing Ob­
jective 2 areas with those which do not 
contain Objective 2 areas shows, in prac­
tice, little difference from the results for 
NUTS 2 regions. 
For both the Community as a whole and 
for most countries, the average rate of 
unemployment calculated for both 1986 
and 1991 is similar if NUTS 3 rather 
than NUTS 2 regions are used as the 
basis. For 1991, the average rate for Ob­
jective 2 NUTS 3 regions over the 
Community as a whole was 9%, whereas 
for NUTS 2 regions it was 9.5% (Graphs 
84 and 86). For unassisted regions, it was 
5.5% as against 6.5%. In other words, a 
slightly larger difference in unemploy­
ment between assisted and non-assisted 
areas results if a finer level of regional 
disaggregation is used (3V2% as com­
pared with 3%). 
At the country level, the difference be­
tween average unemployment rates 
calculated for NUTS 2 and NUTS 3 Objec­
tive 2 regions is greater than 1% for 1991 
only in Germany and Denmark. For four 
countries, however,—Germany, Italy, the 
Netherlands and Denmark — a finer level 
of disaggregation widens the gap between 
unemployment in assisted and non-as­
sisted areas by more than 1% (though for 
the former three countries, by less than 
2%). 
So far as changes between 1986 and 1991 
are concerned, in five of the countries, 
the reduction in unemployment was 
greater in Objective 2 areas than else­
where — the exceptions being Italy, 
where the reverse was the case, and Den­
mark, where unemployment rose by 
about the same amount in the two. Only 
in the case of the UK and Belgium, how­
ever, was the difference greater than 1%. 
123 
Chapter 5 Labour market developments in assisted regions 
Unemployment rates in assisted and 
non-assisted regions, 1986 and 1991 
84 Objective 2 (NUTS 3) 
% labour force 
B DK D F 
Excludes Spain (no unassisted regions) U 1986 -Objective 2 
• l991 -Objective2 
• 1986-unassisted 
B 1991 - unassisted 24 
20 
16 
12 
NL UK EUR12 85 Objective 1 
% labour force 
B 1986 Objective 1 
• 1991 Objective 1 
• 1986 unassisted 
H 1991 unassisted 24 
20 
16 
H 12 
GR E F IRL I 
F - no data for Objective 1 regions (Corsica), 1986 UK E12 
86 Objective 2 (NUTS 2) 
% labour force 
1986 Objective 2 
• 1991 Objective 2 
• 1986 unassisted 
B 1991 unassisted 24 
20 
4 16 
12 87 Objective 5b 
% labour force 
1 1986 Objective 5b 
B 1991 Objective 5b 
tH 1986 unassisted 
1991 unassisted 24 
H 20 
16 
12 
B DK D E F I NL UK E12 B DK D NL UK E12 
124-
Chapter 5 Labour market developments in assisted regions 
In the Netherlands also, average 
unemployment in Objective 2 re­
gions fell by more than in 
unassisted areas — though the dif­
ference was only around 1%. 
However, in three of the other five 
countries where such regions can be 
separated from the rest — Italy, 
Spain and France — the average 
fall was less than in non-assisted 
parts and, in Belgium and Ger­
many, it was broadly the same. 
When the analysis is carried out at 
a finer level of regional disaggrega­
tion — at the NUTS 3 rather than 
the NUTS 2 level — in order to 
distinguish Objective 2 areas more 
precisely, five of the countries 
showed a larger fall in unemploy­
ment in assisted areas than in 
non-assisted. These were Belgium, 
Germany and France as well as the 
Netherlands and the UK. Only in 
the case of the UK and Belgium, 
however, does the difference in thf 
reduction become greater than 1% 
(see Graph 84 and Box, p. 123). 
In the case of Objective 5b regions 
as a whole, the average rate of un­
employment declined by the same 
amount as it did in unassisted areas 
— by just over 2%. Again, however, 
aggregate experience conceals dif­
ferences between countries. In 
three of the countries where it is 
possible to distinguish develop­
ments in Objective 5b regions — the 
UK, the Netherlands and Germany 
— unemployment fell by more than 
in unassisted areas. In the other 
four countries, it fell by less (Graph 
87). 
As regards unemployment, there­
fore, the experience of the various 
types of assisted areas was mixed 
over this five-year period. Over the 
Community as a whole, there was 
no tendency for unemployment to 
fall by more than in unassisted 
areas. Unemployment 
in Objective 2 and 
neighbouring areas 
As a further examination ofthe 
difference in experience be­
tween regions eligible for 
assistance as Objective 2 areas 
and those which are not, unem­
ployment rates in NUTS 3 
regions containing eligible 
areas have been compared with 
those in neighbouring non-
eligible regions in the same 
NUTS 2 region (note that all 
other regions are excluded 
from the analysis). 
Over the Community as a 
whole, unemployment in as­
sisted NUTS 3 regions was just 
under 2% higher in 1991 than 
in neighbouring regions not 
eligible for assistance (Graph 
88). This was only marginally 
less than in 1986 or 1989. 
Both the difference in rates and 
the relative performance over 
this period, however, differs 
widely between countries. 
Whereas in Denmark, the dif­
ference in average rate 
between the two types of region 
was over 3% in 1991, in France 
it was only 1% and in the UK 
less than V2%. 
In only two of the 8 countries, 
did the difference in unemploy­
ment between assisted and 
non-assisted regions narrow 
significantly between 1986 and 
1991, in Spain — by over 4% — 
and in Belgium — by 1V2%. Al­
though the difference was 
reduced in another four coun­
tries over this period, the 
reduction was less than V2% in 
three of these — Germany, 
France and the Netherlands. 
In Italy and Denmark (where 
unemployment went up), the 
difference widened. 
125 
Chapter 5 Labour market developments in assisted regions 
However, this was not the case in 
every Member State. In the UK, for 
example, average unemployment in 
all the assisted areas — irrespective 
ofthe Objective under which they are 
classified—declined by more than in 
non-assisted regions between 1986 
and 1991. In Italy, on the other hand, 
the reverse was the case. 
Employment rates 
The rate of unemployment is an im­
portant indicator of the inability of 
people living in different parts of 
the Community to find work. How­
ever, although it is intended to 
encompass all those actively look­
ing for a job and unable to find one, 
it tends to leave out of account those 
who are deterred by the poor pros­
pects of obtaining work from even 
entering the job market. An addi­
tional indicator is the proportion of 
working-age population — defined here as those aged 15 to 64 — who 
are in work, the employment rate. 
(In practice, because of data prob­
lems, total employment, rather 
than only those aged 15 to 64, is 
here related to the working-age 
population numbers; since few 
people of 65 and over are employed 
in the Community, this is not a sig­
nificant distortion.) 
In 1991, the share of the working-
age population which was in 
employment was lower in all as­
sisted regions than in other areas. 
This was particularly the case with 
Objective 1 regions — where the 
average employment rate was only 
51% as against 64% in non-assisted 
parts ofthe Community (Graph 89). 
This difference is considerably 
greater than would be implied by 
the difference in unemployment 
rates noted above (7V2% of the la­
bour force, equivalent to 4V2% of 
working-age population). Almost 
88 Unemployment rates in Objective 2 and neighbouring 
regions, 1986,1989 and 1991 
6 r 
5 r Average difference in rate : Objective 2 - others (% labour force) 
A 5 
A 4 
A 3 
A 2 
1 » 
B DK D E F I NL UK EUR12 
"Neighbouring regions" are NUTS 3 regions within a NUTS 2 region two thirds of the difference in em­
ployment rates between Objective 1 
and non-assisted regions is ex­
plained by differences in levels of 
inactivity among people of working-
age rather than open — ie recorded 
— unemployment. 
Such differences are common to all 
but one country with Objective 1 
regions. The exception is Portugal, 
where unemployment is lower and 
activity higher than in the rest of 
the Community. In all countries 
employment rates in Objective 1 
areas were less than in non-assisted 
regions in 1991. In Italy, in particu­
lar, the difference between the two 
was almost 14%, only just over half 
of which (around 8%) is attributable 
to the difference in unemployment 
(Graph 90). In the UK, not only was 
the employment rate in the Objec­
tive 1 area of Northern Ireland 
substantially below that in unas­
sisted parts ofthe country (over 11% 
below, less than a third of which is 
explained by the unemployment dif­
ference) but it was also lower than 
in other parts of the Community. 
In Objective 2 regions, the average 
employment rate in 1991 was 3V2% 
lower than that in unassisted areas 
in the Community as a whole 
(Graph 89). In this case, differences 
in unemployment explain two-
thirds ofthe deficiency, with a lower 
rate of activity accounting for the 
remaining third. 
This is also generally true at the 
country level, with two notable ex­
ceptions. For both Spain and Italy, 
though the employment rates in Ob­
jective 2 regions were marginally 
below those in unassisted areas, the 
differences were less than the dif­
ferences in unemployment rates. 
This means that rates of activity 
among working-age people in these 
regions were higher than they were 
in non-assisted areas. 
-126 
Chapter 5 Labour market developments in assisted regions 
In Objective 5b regions, average 
employment rates were 2% below 
those in unassisted areas, signi­
ficantly more than the gap in 
unemployment rates. In these rural 
areas, therefore, almost all of this 
difference is attributable to the fact 
that a higher proportion of people of 
working age were outside the labour 
force as measured. 
Changes in employment 
rates, 1986-1991 
In all parts of the Community, em­
ployment rose relative to 
working-age population by more 
than the fall in unemployment. In 
other words, part of the growth in 
employment resulted from 
increased participation of working-
age people in the labour force force 
as well as from people moving out of 
unemployment. In the unassisted 
areas in the Community taken 
together, the increase in the aver­
age employment rate from 61% to 
64% between 1986 and 1991 was 
attributable more or less equally to 
the reduction in unemployment and 
to an increase in activity (Graph 
89). 
In Objective 1 regions, however, 
a rise in activity was a more im­
portant source of job growth, 
accounting for over 60% of the in­
crease in employment relative to 
working-age population over this 
period, though there were dif­
ferences between countries — in 
Greece, in particular, activity fell. 
Nevertheless, it was still the case 
that the rise in activity in Objective 
1 regions was lower on average 
than in non-assisted areas (1% as 
against 1V2%). 
In Objective 2 regions, the employ­
ment rate rose on average by 4% 
between 1986 and 1991, as against 
the 3% increase in unassisted areas 89 Employment rates in the Community by Structural 
Funds status, 1986 and 1991 
% working-age population (15-64) 
70 r 
60 h 
50 h 
40 r 
30 
20 h 
10 h 
50 
40 
30 
20 
10 70 
A 60 
A 50 
A 40 
A 30 
A 20 
10 
Total Objective 1 Objective 2 Objective 5b Unassisted 
90 Employment rates in Objective 1 and unassisted 
regions, 1986 and 1991 
% working-age population (15-64) 
80 r 
70 r 
60 r 1986 Objective 1 • 1991 Objective 1 Q 1986 unassisted 
1991 unassisted 
GR E F IRL 
F - no data for Objective 1 regions (Corsica), 1986 UK EUR12 
127 
Chapter 5 Labour market developments in assisted regions 
91 Employment rates in Objective 2 and unassisted 
regions, 1986 and 1991 
80 % working-age population (15-64) 
70 r 
60 r 
50 k 
40 
30 
20 
10 1986 Objective 2 • 1991 Objective 2 • 1986 unassisted 
1991 unassisted -l 80 
70 
60 
50 
40 
30 
20 
10 
B DK D NL UK EUR12 (Graph 91). Around two-thirds of 
this rise can be attributed to the fall 
in unemployment which occurred 
and a third to a rise in labour force 
participation. Again there were dif­
ferences between countries, with 
France recording a fall in the em­
ployment rate in Objective 2 regions 
between 1986 and 1991 and a fall in 
activity (of some 272%). (This is 
partly attributable to a substantial 
decline in activity among young 
people, those under 25, for whom 
the rate was 10% lower in 1991 than 
in 1986.) 
In Objective 5b regions, the employ­
ment rate rose by slightly less than 
in non-assisted regions over this 
period, half because of lower unem­
ployment, half because of higher 
activity. 
Hidden labour supply 
92 Estimates of hidden labour supply in the Conununity 
by Structural Funds status, 1986 and 1991 
30 % working-age population (15-64) 
25 h 
20 h 
15 r 
10 h 
5 h 30 
A 25 
20 
15 
10 
A 5 
0 i-^—^—^—^—-^^HJ 0 
Total Objective 1 Objective 2 Objective 5b Unassisted The differences in the extent of ac­
tivity among people of working age 
imply that the potential labour sup­
ply in assisted regions, especially 
in Objective 1 regions but also to 
a lesser degree in Objective 2 
areas, may be greater than actually 
recorded. In time, the further devel­
opment of labour markets in the 
less developed regions and the li­
kelihood of more women working 
should lead to a convergence in 
rates of labour force participation, 
so long as economic conditions also 
converge. 
If economic conditions were to im­
prove in less developed regions and 
if the chances of finding employ­
ment were to increase — if, in other 
words, the cohesion policies now 
being pursued were to be success­
ful — rates of activity should tend 
to rise. As a consequence, the rate 
of job creation required to absorb 
the new entrants to the labour 
market would be even greater than 
128 
Chapter 5 Labour market developments in assisted regions 
that implied by the current unem­
ployment statistics. 
An estimate of the scale of this 
potential, dormant problem of 
hidden labour supply in these 
regions, can be obtained on the 
basis of levels of activity which now 
prevail in some advanced areas of 
the Community where labour mar­
ket conditions, social attitudes 
and social infrastructure are con­
ducive to high participation. Even 
on the most favourable assump­
tions, it is likely that a "hardcore" 
of inactivity would remain — for 
whatever reasons — of the order of 
20% of the working-age popula­
tion. This level is equivalent to 
that in the South-East of England 
and somewhat higher than the 
17% which now prevails overall in 
Denmark. 
On this assumption, the hidden la­
bour supply in Objective 1 regions 
amounted to just over 20% of the 
working-age population in 1991 
(Graph 92). This compares with a 
figure of under 12% in unassisted 
parts of the Community. Added to 
the numbers unemployed, which 
represented over 8% of working-
age population in 1991, almost 
30% of people of working-age in 
Objective 1 regions could be viewed 
as either actual or potential job-
seekers in the long run — almost 
twice as many as in unassisted 
areas. 
At the country level, hidden labour 
supply was of similar magnitude 
in the less developed areas of 
Italy, Spain and Greece in 1991, 
at between 22 and 24% of the 
working-age population, while in 
Corsica, it was slightly higher at 
25%. In Portugal, on the other 
hand, it was only around 8% 
(Graph 93). In all countries with 
both assisted and non-assisted 
areas, apart from Spain, the figure was significantly higher in the for­
mer than the latter, the difference 
ranging from 12% in France to 7% 
in Italy. 
In both Objective 2 and Objective 5b 
regions, the extent of hidden labour 
supply was only marginally greater 
than in non-assisted parts of the 
Community, at 13% of working-age 
population in 1991. At a country 
level, however, the proportion in 
Objective 2 regions varied from 
21-22% in Belgium and Spain — 
about the same as in Objective 1 
regions — and 17-18% in France, 
Italy and the Netherlands to 13% in 
Germany and only 5% in the UK 
(Graph 94). 
In all cases (apart from Spain, 
where there were relatively few 
non-assisted areas), the extent of 
hidden labour supply was greater 
in the Objective 2 regions than else­
where in the country. This was especially so in France, the 
Netherlands and the UK, where 
the difference amounted to around 
3-4% of working-age population — 
the equivalent of a difference in the 
rate of unemployment, as usually 
measured, of 5-6%. 
Changes in hidden 
labour supply 
Between 1986 and 1991, the extent 
of hidden labour supply was re­
duced in most parts of the 
Community as activity rates in­
creased. The reduction was, 
however, less in Objective 1 regions 
taken together than in other areas 
— 1% of working-age population as 
against 2%. The disparity between 
the less developed regions and the 
rest, therefore, widened over this 
period in respect of both unemploy­
ment — as noted above — and 
hidden labour supply. 
93 Estimates of hidden labour supply in Objective 1 and 
unassisted regions, 1986 and 1991 
% working-age population (15-64) 
35 r 
30 h • 1986 Objective 1 
• 1991 Objective 1 
• 1986 unassisted 
1991 unassisted 
25 r 
20 k 
15 
10 35 
A 30 
A 25 
A 20 
A 15 
10 
GR E F IRL 
F - no data for Objective 1 regions (Corsica), 1986 UK EUR12 
129 
Chapter 5 Labour market developments in assisted regions 
94 Estimates of hidden labour supply in Objective 2 and 
unassisted regions, 1986 and 1991 
% working-age population (15-64) 
30 r 
25 r 1986 Objective 2 n 30 
• 1991 Objective 2 
• 1986 unassisted 
1991 unassisted 
20 
15 
10 - 25 
20 
A 15 
10 
B DK D E F 
DK = zero NL UK EUR12 
95 Activity rates of women aged 25-44 in the Community 
by Structural Fund status, 1986 and 1991 
80 
70 h 
60 F 
50 h 
40 h 
30 h 
20 h 
10 r -1 80 
70 
A 60 
A 50 
A 40 
A 30 
A 20 
10 
Total Objective 1 Objective 2 Objective 5b Unassisted At a country level, the reduction in 
hidden labour supply in Objective 1 
regions was particularly marked 
over these five years in Portugal 
and Spain where it fell by around 
3% of working-age population (equi­
valent to a fall in unemployment of 
around 5%) (Graph 93). In Italy and 
Ireland, however, the fall was much 
less than 1%, while in Greece, the 
extent of hidden labour supply went 
up significantly. 
In Objective 2 and Objective 5b 
areas, hidden labour supply de­
clined by much the same over this 
period as in non-assisted parts of 
the Community. For Objective 2 re­
gions, however, the extent ofthe fall 
varied markedly between countries, 
ranging from 5% of working-age 
population in the Netherlands 
(though in the latter case this was 
less than in non-assisted parts of 
the country) to 1% or less in Italy 
and Belgium (more than in non-as­
sisted parts). 
In France, hidden labour supply in-
creased by 2% of working-age 
population in assisted regions (and 
by 1% elsewhere). (As noted above, 
this was largely due to a rise in 
inactivity among young people of 
under 25. Insofar as this reflects 
more people staying in education, 
what appears as a rise in hidden 
labour supply may in effect be a 
precursor to a more qualified and 
adaptable workforce in the future.) 
Activity rates 
of women 
Differences in the extent of hidden 
labour supply largely reflect dif­
ferences in the participation of 
women in the labour force. In the 
case of men, except in the youngest 
and oldest age groups (under 25 and 
over 54), almost all those of working 
age tend to be either employed or 
130 
Chapter 5 Labour market developments in assisted regions 
actively looking for work. In the 
case of women, however, as con­
sidered in more detail in Chapter 6 
below, family responsibilities or so­
cial attitudes have tended to 
prevent large numbers joining the 
labour force in many parts of the 
Community. 
Taking women aged 25 to 44 (data 
at the regional level are not readily 
available for the 25-49 age group 
analysed in Chapter 6), the rate of 
activity — or labour force participa-
tion — in the less developed 
Objective 1 regions is generally 
much lower than elsewhere in the 
Community. In 1991, under 55% of 
women in this age group were for­
mally part of the workforce in 
Objective 1 regions as a whole, 
compared with 71% in non-assisted 
areas ofthe Community (Graph 95). 
In all the Mediterranean regions, as 
well as in Ireland, the rate in Objec­
tive 1 areas was 54% or less in 1991. 
In Southern Italy and Corsica, it 
was below 50% — in both cases very 
much lower than the rate in North­
ern Italy and mainland France 
(Graph 96). In Portugal, in contrast, 
a higher proportion of 25-44 year 
old women (77%) were economically 
active than in other parts of the 
Community. 
In other assisted regions •— Objec­
tive 2 and Objective 5b — rates of 
female activity are much more simi­
lar to those in unassisted areas. 
Nevertheless in Objective 2 regions 
they were still on average over 2% 
less than in the latter in 1991. In 
Northern countries, as well as in the 
North of Italy, the rate in Objective 
2 regions was generally within 5% 
of the Community average of 
around 70% (Graph 97). The excep­
tions are Denmark, where the rate 
was markedly higher, and the 
Netherlands, where it was much 
lower at just over 60% — similar to 96 Activity rates of women aged 25-44 in Objective 1 and 
unassisted regions, 1986 and 1991 
B 1986 Objective 1 H 1991 Objective 1 • 1986 unassisted 
• 1991 unassisted -i 80 
70 
60 
50 
40 
30 
20 
10 
-™ 0 
GR E F IRL 
F - no data tor Objective t regions (Corsica), 1986 UK EUR12 
97 Activity rates of women aged 25-44 in Objective 2 and 
unassisted regions, 1986 and 1991 
% 
90 r 1986 Objective 2 • 1991 Objective 2 D 1986 unassisted 
1991 unassisted 
DK NL UK EUR12 
131 
Chapter 5 Labour market developments in assisted regions 
the rate in industrial regions in 
Spain. In all the countries, apart 
from France, where it was over 5% 
lower, the rate of women's activity 
was not much different — though 
generally lower — in Objective 2 
areas to that in other parts. 
Changes in 
women's activity 
Unlike other indicators of labour 
market performance, there is evi­
dence of reduced regional 
disparities as regards women's par­
ticipation in the labour force over 
recent years. Between 1986 and 
1991, the average rate of activity of 
women aged 25 to 44, increased sig­
nificantly more in Objective 1 
regions than in non-assisted parts 
of the Community — by 8% as op-
posed to 572% (Graph 95). In 
Objective 2 regions, the average 
rate also rose by more than it did in the more prosperous areas, though 
the difference was much smaller 
(6% as against 572%). 
The rise in women's activity in Ob­
jective 1 regions was common to all 
countries, though it was particu­
larly marked in Spain and Ireland. 
There the rate for the 25-44 age 
group increased by over 10% in just 
five years (Graph 96). In Portugal, 
moreover, the rate went up by just 
under 10% from what was already a 
higher than average level. In 
Greece and Southern Italy, on the 
other hand, female activity rose by 
less than 5% — less than elsewhere 
in the Community. 
In Objective 2 regions, the propor­
tion of 25-44 years old women in the 
labour force also increased in all 
countries over these five years, but 
generally by less than in non-as­
sisted areas. The rise was especially 
pronounced in Spain, where the 
98 Activity rates of older people aged 55-64 in the 
Community by Structural Funds status, 1986 and 1991 
-i 60 
A 50 
A 40 
A 30 
20 
A 10 
Total Objective 1 Objective 2 Objective 5b Unassisted rate went up from only 44% in 1986 
to 60% in 1991. However, it was also 
higher than average in the Nether­
lands, where it was almost 11% 
(though still only marginally more 
than in unassisted parts) (Graph 
97). By contrast, in France and 
Belgium, the rate increased by com­
paratively little (by only 2-3%). 
In all countries apart from Spain 
and the Netherlands, the average 
activity rate of women in this age 
group went up by less in Objective 
2 areas than elsewhere. 
Activity rates 
of older people 
Unlike female activity rates, par­
ticipation of older people in the 
labour force, those aged 55 and over, 
varies little between assisted areas 
and other parts of the Community. 
In 1991, the activity rate for this age 
group averaged just over 40% in 
Objective 1 regions, marginally 
more than in non-assisted areas 
(Graph 98). In Objective 2 and Ob­
jective 5b regions, the average was 
just under 40%. 
At the country level, the rate in Ob­
jective 1 regions was close to 40% in 
four of the countries — Ireland, 
Spain, Greece and Italy, while in 
Portugal and the UK (Northern Ire-
land), it was around 50%. In 
Corsica, however, the rate was 
below 30% (Graph 99). 
In Objective 2 regions, there is a 
much wider variation in the activ­
ity rate of older people between 
Member States. In 1991, the rate 
ranged from 57% in Denmark and 
48% in the UK to 27-28% in France 
and the Netherlands and only 19% 
in Belgium (Graph 100). Signifi­
cantly, the rate in all countries in 
Objective 2 regions was lower than 
that in non-assisted areas, the 
132 
Chapter 5 Labour market developments in assisted regions 
difference being over 6% in France 
and the UK, and around 5% in Ger­
many. This suggests that as well as 
experiencing higher rates of 
unemployment, people living in 
Objective 2 regions in these coun­
tries also have a greater likelihood 
of ending up taking early retire­
ment. 
Changes in activity 
of older people 
Activity rates of people in the 55-64 
age group declined in all assisted 
areas in the five years prior to 1991. 
While the fall was marginal in Ob­
jective 2 and Objective 5b regions, it 
was around 1V2% in Objective 1 
areas (Graph 98). This contrasts 
with a small rise in activity for this 
age group in non-assisted parts of 
the Community. 
The reduction in activity of older 
people was a common feature of Ob­
jective 1 regions in all Member 
States, apart from Portugal where 
the rate went up from an already 
high 46% to over 50% (Graph 99). In 
both Italy and the UK, where it is 
possible to compare developments 
in assisted and non-assisted areas, 
the fall in activity in the former was 
accompanied by a rise in activity in 
the latter. 
In Objective 2 regions, the activity 
rate of older people declined in all 
countries, apart from in Germany, 
where it rose, and in Spain and the 
UK, where it hardly changed 
(Graph 100). The fall was particu­
larly significant in Belgium and 
France, where, in each case, the 
rate was already below the Com­
munity average and below the rate 
in the rest of the country. In both 
cases, the fall was greater than in 
non-assisted areas, if only slightly. 
In the UK, a virtually unchanged 
rate in the assisted areas contrasted 99 Activity rates of older people aged 55-64 in Objective 1 
and unassisted regions, 1986 and 1991 
60 
50 
40 
30 H 
20 
10 1986 Objective 1 • 1991 Objective 1 D 1986 unassisted 
1991 unassisted -i 60 
A 50 
40 
30 
20 
10 
GR E F IRL 
F - no data for Objective 1 regions (Corsica), 1986 UK EUR12 
100 Activity rates of older people aged 55-64 in Objective 2 
and unassisted regions, 1986 and 1991 
°/c 
60 r 
50 h 
40 h 
30 h 
20 » 
10 1 1986 Objective 2 • 1991 Objective 2 D 1986 unassisted 
B 1991 unassisted 60 
A 50 
40 
30 
ï 20 
10 
B DK D I NL UK EUR12 
133 
Chapter 5 Labour market developments in assisted regions 
101 Sectoral distribution of employment in the Community 
by Structural Funds status, 1986 and 1991 
10 20 30 40 50 60 70 
Total 
Objective 1 
Objective 2 
Objective 5b 
Unassisted 
Total 
Objective 1 
Objective 2 
Objective 5b 
Unassisted 
Total 
Objective 1 
Objective 2 
Objective 5b 
Unassisted 
10 20 30 40 50 60 70 
% total employment 
102 Agricultural employment in Objective 1 and unassisted 
regions, 1986 and 1991 
30 
25 
20 
15 
10 % total employment 
1986 Objective 1 • 1991 Objective 1 • 1986 unassisted 
H 1991 unassisted 30 
25 
20 
15 
10 
GR E F IRL 
F - no data for Objective 1 regions (Corsica), 1986 P UK EUR12 with a rise in other parts of the 
country. 
Structure of 
employment 
Given the problems of the regions 
eligible for Structural Fund assist­
ance, it is only to be expected that 
the distribution of employment be­
tween different sectors of activity 
will differ between these priority re­
gions and other areas. However, 
except in respect of employment in 
agriculture in Objective 1 regions, 
the differences are not as pro­
nounced as might be expected. 
In 1991, over 16% of those employed 
in Objective 1 regions across the 
Community worked in agriculture 
— accounting for nearly half of all 
those employed in the sector in the 
Community as a whole — as com­
pared with under 5% of those 
employed in non-assisted areas 
(Graph 101). In the Objective 1 re­
gions, 28% were employed in 
industry and 55% in services, in 
both cases less than in non-assisted 
areas — where the rates are 33% 
and 63%, respectively. 
In Objective 2 areas taken together, 
however, the sectoral division of 
employment differs little from that 
in unassisted parts. The proportion 
working in agriculture was much 
the same in 1991, while the propor­
tion in industry was only slightly 
higher (35% as against 33%) and 
that in services only slightly lower 
(61% as against 63%). 
Objective 5b regions taken 
together combine the sectoral fea­
tures of Objective 1 and Objective 
2 areas, in that they have propor­
tionately more people employed in 
both agriculture — around 8% in 
1991 — and industry — 34% — 
than non-assisted areas. The 
134 
Chapter 5 Labour market developments in assisted regions 
sectoral pattern of employment in 
Objective 1 regions is broadly simi­
lar in the different Member States, 
with a few exceptions. In 1991, ag­
riculture accounted for around 
15% or more of total employment 
in Portugal, Ireland and Greece 
(where the figure was over 20%), as 
well as in the Objective 1 areas of 
Spain and Italy (Graph 102). In 
Corsica, however, the proportion 
was under 8% and in Northern Ire­
land, under 5%. Nevertheless, in 
both cases, the agricultural share 
was higher than in the non-as­
sisted parts of mainland France 
and the UK. The same was also 
true, and to a much greater extent, 
for Italy and Spain. 
Industry accounted for under 30% 
of employment in Objective 1 re­
gions in 1991 in all countries except 
for Portugal, where the figure was 
34% — above the average in non-as­
sisted parts of the Community 
(Graph 103). In Southern Italy and 
Corsica, the share of industry was 
less than 25%, substantially below 
that in unassisted areas in North­
ern Italy (36%) and mainland 
France (29%). 
The service share of employment 
in the less developed regions is, 
however, less uniform between 
countries. In 1991, the proportion 
employed in services in three ofthe 
countries, Greece, Spain and Por­
tugal, was less than 55% (under 
50% in Portugal) and in Ireland, it 
was only slightly above (57%) — in 
all cases well below the average 
figure in unassisted areas (Graph 
104). On the other hand, in North­
ern Ireland, the South of Italy 
and Corsica, the share of services 
was close to or above that in non-
assisted parts of the Community, 
and in the latter two cases, signifi­
cantly higher than in Northern 
Italy and mainland France respec­
tively. 103 Industrial employment in Objective 1 and unassisted 
regions, 1986 and 1991 
% total employment 
45 r 
GR E F IRL 
F - no data for Objective 1 regions (Corsica), 1986 UK EUR12 
104 Service employment in Objective 1 and unassisted 
regions, 1986 and 1991 
80 % total employment 
1986 Objective 1 I 1991 Objective 1 D 1986 unassisted QQ 
1991 unassisted 
70 h 
60 h 
50 
40 
30 
20 
10 
GR E F IRL 
F - no data for Objective 1 regions (Corsica), 1986 UK EUR12 
135 
Chapter 5 Labour market developments in assisted regions 
The composition of services differs, 
however, in these latter three 
regions. Whereas in Corsica, a 
large part of those employed in ser­
vices work in the tourist industry, 
in both Southern Italy and North­
ern Ireland, disproportionate 
numbers are employed in the public 
sector. 
In the case of Objective 2 regions, 
employment in industry in 1991 ex­
ceeded the 33% average in 
non-assisted parts of the Com­
munity in all countries except the 
Netherlands and Denmark (where 
it is below 30%, though the data 
used may not be sufficiently disag­
gregated by region to distinguish 
between Objective 2 and other 
areas) (Graph 105). In Spain, the 
proportion was over 40% and in 
Germany and Italy, over 35%. In the 
latter two countries, however, the 
share of industry in employment in 
Objective 2 areas was in each case lower than in non-assisted areas of 
the country — especially in Ger­
many, where the difference in share 
was almost 3%. 
As a reflection of this, in these two 
countries, the share of services in 
employment was also higher in Ob­
jective 2 regions in 1991 than in 
non-assisted parts (Graph 106). In 
all other Member States, services 
accounted for a much smaller pro­
portion of employment in these 
regions than elsewhere, the dif­
ference being 5% or more in Spain, 
France, the Netherlands and the 
UK. 
Sectoral changes 
in employment 
Over the five years preceding 1991, 
although all classes of region distin­
guished here experienced similar 
changes in the sectoral pattern of employment, the Objective 1 re­
gions showed one significant 
difference — an increase in the 
share of industry as opposed to the 
decline registered in other areas. 
There was, however, some dif­
ference between regions in the scale 
of change which occurred, the effect 
being in general to reduce interre­
gional differences in the sectoral 
distribution of employment (Graph 
101). 
This was especially the case in Ob­
jective 1 areas where the share of 
agriculture, on average, declined by 
some 5% between 1986 and 1991, as 
against a fall of only around 1% in 
unassisted parts. At the same time, 
the share of employment in services 
increased by 4%, almost twice as 
much as elsewhere. 
In Objective 2 regions, on the other 
hand, the sectoral changes which 
occurred over this period were simi­
lar both in nature and scale to those 
in unassisted areas. 
% total employment 105 Industrial employment in Objective 2 and unassisted 
regions, 1986 and 1991 
1986 Objective 2 • 1991 Objective 2 • 1986 unassisted 
1991 unassisted 45 
- 40 
- 35 
30 
25 
20 
15 
10 
5 
0 
DK NL UK EUR12 At the country level, the fall in the 
proportion employed in agriculture 
in Objective 1 regions was espe­
cially pronounced over these five 
years in the two countries where the 
share in 1986 was the highest, 
namely Spain and Greece. There 
the fall exceeded 6% in each case 
(Graph 102). Moreover in Portugal, 
where the agricultural share was 
also high, it also declined signifi­
cantly (by 4%). 
Despite the aggregate change, the 
share of employment in industry in 
Objective 1 regions only increased 
in two countries, Spain and Portu­
gal — in the latter case only very 
marginally. This was nevertheless 
sufficient to produce an overall rise 
in the share in these regions over 
the Community as a whole (Graph 
103). In all other countries, the pro­
portion employed in industry fell 
- 136-
Chapter 5 Labour market developments in assisted regions 
between 1986 and 1991, though in 
all cases, by less than the decline in 
non-assisted regions. 
By contrast, the service share of em­
ployment in Objective 1 areas 
increased throughout the Com­
munity over this period. The rise 
was particularly large in Greece, 
Spain and Portugal where the share 
was relatively low initially, and 
where it went up by between 4 and 
7% (Graph 104). These changes 
partly reflected the big fall in agri­
cultural employment. 
In Objective 2 areas, the fall in the 
proportion employed in industry 
was common to all countries, 
though in Spain and France, the 
decline was small (Graph 105). The 
scale of the fall, however, varied 
between countries, especially in re­
lation to that experienced in 
non-assisted regions. In three ofthe 
countries, France, Italy and the UK, 
the proportion declined by less than 
in other areas, while in the Nether­
lands, the fall was much the same. 
In Belgium and particularly in Ger­
many, however, the industry share 
fell by more than elsewhere. 
The experience as regards changes 
in the share of employment in ser­
vices adds further evidence. This 
shows that in Objective 2 regions, 
only two countries — Germany and 
Spain — registered a greater rise in 
the proportion employed in services 
than non-assisted areas between 
1986 and 1991 (Graph 106). In the 
former case, this served to raise the 
service share in such regions even 
higher than in the rest of the 
country. In other countries, the in­
crease in share was either much the 
same as, or smaller than, the rise in 
other regions. In Objective 2 re­
gions, therefore, no general 
tendency towards convergence in 
the sectoral division of employment 
could be observed over this period. Employment growth 
The significant differences in the 
sectoral division of employment 
between regions examined above 
have important implications for fu­
ture employment growth. This 
applies especially to Objective 1 re­
gions where, despite the large 
reduction which occurred over the 
1980s, the share of employment in 
agriculture is still substantially 
higher — around three times higher 
— than that in other parts of the 
Community. 
The implication is, if the numbers 
employed in agriculture were to fall 
by the same percentage in these re­
gions as elsewhere, the number of 
people thrown out of work would be 
three times greater in relative 
terms — ie relative to the total num­
ber employed — in the former than 
in other areas. In consequence, the relative number of jobs which would 
need to be created in these regions 
in order to absorb these people is 
correspondingly greater than else­
where. This is one important aspect 
of the challenge facing Objective 1 
areas. 
Despite the relatively high growth 
of GDP in Objective 1 regions be­
tween 1986 and 1991 — as noted 
earlier — employment in these 
areas failed to grow faster than in 
non-assisted parts of the Com­
munity. Indeed, over this period, 
the numbers employed rose by just 
under 7V2% in Objective 1 regions 
— an average of 1V2% a year, while, 
in non-assisted areas, they in­
creased by just over 7V2% (Graph 
107): 
In both industry and services, how­
ever, employment in Objective 1 
regions did grow at a significantly 
higher rate than elsewhere over 
106 Service employment in Objective 2 and unassisted 
regions, 1986 and 1991 
80 
70 
60 
50 
40 
30 
20 
10 % total employment 
M 1986 Objective 2 • 1991 Objective 2 • 1986 unassisted 
• 1991 unassisted 
n ji _n 80 
70 
II 60 
50 
40 
30 
20 
10 
B DK D I NL UK EUR12 
137 
Chapter 5 Labour market developments in assisted regions 
107 Sectoral changes in employment by Structural Funds 
status in the Community, 1986-1991 
Change (% total employment 1986) 
Total Objective 1 Objective 2 Objective 5b Unassisted this period. In industry, the in­
crease in numbers employed was 
almost twice that in non-assisted 
areas — 972% as opposed to 5V2% — 
while in services it was around 40% 
greater — 16V2% as against 12%. In 
these two sectors together, the rise 
in employment over these five years 
was 4% higher in Objective 1 re­
gions than in non-assisted areas — 
equivalent to a differential growth 
rate of almost 1% a year. As a result, 
the total number of jobs in the for­
mer were increased by almost 3% 
more than in the latter. 
Unfortunately, this was not suffi­
cient to compensate for the decline 
of employment in agriculture. In 
non-assisted areas, the fall in agri­
cultural employment was only 
slightly less than in Objective 1 re­
gions over this period — 14% as 
opposed to 17%. Yet whereas in the 
former this had the effect of reduc­
ing total employment by only just 
over V2%, in Objective 1 regions, it 
reduced it by over 3V2%. 
108 Sectoral changes in employment in Objective 1 regions, 
1986-1991 
Change (% total employment 1986) 
20 r 
16 H 
12 
8 r 
4 h 
-4 h 20 
16 
12 
A 4 
-4 
GR E IRL I 
No data for France (Corsica) UK EUR12 In Objective 2 regions, by contrast, 
because the sectoral division of em­
ployment is more similar to that in 
non-assisted areas, the higher 
growth of both industry and service 
employment — around V2% more in 
each case — led to a similarly higher 
growth in total employment over 
these five years — 8V2% as opposed 
to 7V2% in non-assisted areas. Des­
pite a slightly lower rise in GDP, 
therefore, the rate of job creation in 
Objective 2 areas outpaced that in 
other regions. 
In Objective 5b regions, employ­
ment rose by slightly less over this 
period than in non-assisted areas 
despite the higher growth of both 
industry and service jobs. As with 
Objective 1 regions, this reflects the 
effect of the decline in agriculture 
on these regions, which in this case 
caused total employment to fall by 
138 
Chapter 5 Labour market developments in assisted regions 
almost 2% — over 1% more than in 
non-assisted areas. 
The growth of employment in Objec­
tive 1 regions between 1986 and 
1991 recorded for the Community 
as a whole was concentrated pre­
dominantly in Spain and Portugal 
(Graph 108). In both cases, the rate 
of total job creation was around 
twice that in non-assisted areas of 
the Community. In industry, the 
growth of employment in these two 
countries was particularly marked 
over this period. The number of in­
dustrial jobs increased by 24% in 
Objective 1 regions in Spain and by 
15% in Portugal, as compared with 
a rise of under 4% in unassisted 
parts of the Community (Graph 
109). In services, employment rose 
by over 25% in both Spain and Por­
tugal as against a rise of 12% 
elsewhere. 
Nevertheless, in Spain in particu­
lar, the overall rate of job creation 
was depressed significantly by the 
decline of agriculture, which in this 
country served to reduce total em­
ployment by almost 5% over these 
five years. 
In Objective 1 regions in other parts 
ofthe Community, the record on job 
creation between 1986 and 1991 
was less impressive. In all coun­
tries, apart from the UK (Northern 
Ireland), the total numbers in work 
rose by much less in these regions 
than they did in non-assisted areas 
and, in Italy, they actually fell 
slightly. 
Greece, especially, suffered from 
the large numbers employed in ag­
riculture (at over 22% of total 
employment in 1991) as well as 
from the relatively large reduction 
in jobs in this sector (a fall of 21% 
over this period as against 14% in 
non-assisted areas). The decline in 
agriculture effectively reduced 109 Sectoral changes in employment in unassisted regions, 
1986-1991 
Change (% total employment 1986) 
22 r .. P Total I Agriculture I Industry B Services "J 22 
18 h 
14 r-
10 r 
2 H 18 
14 
A 10 
H 6 
B DK D I NL UK EUR12 
110 Sectoral changes in employment in Objective 2 regions, 
1986-1991 
Change (% total employment 1986) 
24 r i 24 
20 h 
16 r 
12 r 
8 r 
4 H A 20 
A 16 
A 12 
H 8 
H 4 
B DK D I NL UK EUR12 
139 
Chapter 5 Labour market developments in assisted regions 
High and low 
growth industries 
Industries, defined at the 
NACE 2-digit level, are 
divided into groups accord­
ing to the change in their 
employment across the 
Community as a whole be­
tween 1981 and 1989. The 
high growth group, in which 
employment over this 
period did not fall signifi­
cantly, consists of five 
NACE industries: 
Office and data 
processing machinery 
Electrical engineering 
Instrument 
engineering 
Paper, paper 
products, printing 
and publishing 
Rubber and plastics 
The low growth group, in 
which employment fell over 
this period by more than 
20%, consists of six NACE 
industries: 
Iron and steel 
Chemicals and 
man-made fibres 
Manufacture of 
means of transport 
other than motor 
vehicles 
Textiles 
Leather and leather 
goods 
Clothing and footwear Greek employment by over 6% in 
these five years, which, combined 
with a small fall in industrial em­
ployment, made it difficult to 
achieve a significant rate of job cre­
ation overall. Despite a higher than 
average increase in service employ­
ment — by 16% — therefore, the 
total numbers in work went up by 
only 1% over the period. 
In .the case of Objective 2 regions, 
the same kind of difference as re­
gards job creation is evident as 
between countries. In four of the 
Member States containing Objec­
tive 2 regions — Belgium, France, 
Denmark and Italy — the growth in 
employment between 1986 and 
1991 was less than in non-assisted 
areas in the Community as a whole 
and in four countries — Spain, 
France, Italy and the Netherlands 
— it was less than in non-assisted 
parts ofthe country (Graph 110). 
Only in France and the UK was the 
performance in creating industrial 
jobs significantly better in assisted 
areas than in other regions, and 
only in Germany did the growth of 
services add proportionately more 
jobs in assisted areas than else­
where. 
Structure 
of industry 
The capacity for self-sustaining 
growth and job creation of problem 
regions in the Community depends 
over the long-term not only on the 
number of jobs being created but 
also on the sectors in which they are 
located. The growth of production of 
traded goods and services is par­
ticularly important since this 
generates the income to support the 
development of the local economy 
and the creation of employment in a 
range of other activities. Indeed, it 
is the lack of such growth in the past in many parts of the Community 
which is a major cause of current 
regional disparities. 
While the tradeability of services is 
increasing all the time, with the 
development of information 
technology and new means of 
communication, manufacturing, 
nevertheless, remains of critical im­
portance for many areas as a source 
of income and employment growth. 
Where new dynamic industries 
locate and develop will continue to 
be a key determinant ofthe regional 
pattern of long-term growth. Con­
versely, regions where old, 
declining industries are located will 
remain vulnerable to slow economic 
growth and job losses. 
In order to examine the differential 
potential for industrial growth and 
job creation in different regions, in­
dustries have been divided into high 
and low growth groups according to 
the change in employment shown 
over the 1980s in the Community as 
a whole. The high growth group 
consists of six (NACE 2-digit) in­
dustries, including, as might be 
expected, high-tech, high value-
added sectors such as data 
processing machinery, instrument 
engineering or electrical engineer­
ing (see Box). These all experienced 
an increase in jobs between 1981 
and 1989 and together account for 
just over 25% of employment in 
manufacturing in the Community. 
By contrast, the low growth group 
consists predominantly of basic, la­
bour-intensive industries, such as 
textiles, clothing and footwear, or 
heavy industries, such as iron and 
steel or shipbuilding, in which em­
ployment fell significantly in the 
Community over this period. 
So far as high growth industries are 
concerned, these are disproportion­
ately located in the more developed 
and prosperous areas of the 
140 
Chapter 5 Labour market developments in assisted regions 
Community. Whereas they ac­
counted for under 16% of the total 
numbers employed in manufactur­
ing in Objective 1 regions in 1989, 
their share of employment in non-
assisted areas was over 27% (Graph 
111). Although high growth indus­
tries were more important in 
Objective 2 regions than in the less 
developed areas, their share of 
manufacturing jobs, at 23%, was 
still less than in other parts of the 
Community. On the other hand, the 
share in Objective 5b regions was 
only marginally lower than in unas­
sisted areas. 
In only one Member State — Ire­
land — was the proportion of 
employment in high growth indus­
tries in Objective 1 regions above 
the average in non-assisted parts of 
the Community in 1989, at some 
30%) (Graph 112). (This excludes 
Corsica, where the proportion was 
over 35%, but where only a few hun­
dred jobs were involved.) In all 
other Member States, apart from 
the UK (Northern Ireland) where it 
was slightly above, the proportion 
was less than 20%. Indeed in Spain 
it was only 10%, in Greece 13% and 
in Portugal only just over 15%. 
While the figure was higher in the 
South of Italy, it was still only 
around 19%, much less than the 
proportion in non-assisted parts of 
the country. 
Similarly, in only two countries, 
Denmark and Germany, did the 
share of employment in high growth 
industries in Objective 2 regions ex­
ceed 25% in 1989 (Graph 113). In 
three countries, however — Bel­
gium, Spain and the Netherlands — 
the share was higher than in other 
parts of the country, and in Ger­
many and Italy, the difference in 
the share was small. Only in France 
and the UK, was the share mar­
kedly lower in assisted than in 
non-assisted areas (by 7% of 111 Employment in high growth industries by Structural 
Funds status in the Community, 1981 and 1989 
% total manufacturing employment 
30 r 
24 
18 
12 1981 • 1989 30 
A 24 
A 18 
A 12 
A 6 
Total Objective 1 Objective 2 Objective 5b Unassisted 
Note: 1981 excludes GR, NL, P, E & DK 
112 Employment in high growth industries in Objective 1 
and unassisted regions, 1981 and 1989 
% manufacturing employment 
35 r 
30 h 
25 h 
20 h 
15 r 
10 h 
5 h -i 35 
A 30 
25 
20 
15 
10 
GR E IRL 
No data for GR, E & P 1981, F data too small P UK EUR11 
141-
Chapter 5 Labour market developments in assisted regions 
113 Employment in high growth industries in Objective 2 
and unassisted regions, 1981 and 1989 
% manufacturing employment 
35 r 
30 r 
25 h 
20 h 
15 
10 H 1981 Objective 2 • 1989 Objective 2 D 1981 unassisted 
• 1989 unassisted A 30 
25 35 
20 
15 
10 
B DK D 
Note: 1981 excludes DK, E, & NL NL UK EUR11 
114 Employment in low growth industries by Structural 
Funds status in the Community, 1981 and 1989 
40 r 
30 r 
20 h 
10 h % manufacturing employment 
• 1981 
1989 40 
30 
20 
10 
Total Objective 1 Objective 2 Objective 5b Unassisted 
1981 excludes GR, P& E manufacturing employment or 
more), these two countries being 
mainly responsible for the dif­
ference in share which exists at the 
Community level. 
There is some evidence over the 
1980s of higher increase in employ­
ment in high growth industries in 
assisted regions than in other parts 
of the Community — though the 
lack of data for earlier years for 
Spain, Portugal and Greece limits 
the analysis which can be carried 
out for Objective 1 regions. In both 
Objective 2 and Objective 5b re­
gions, the share of high growth 
industries in manufacturing em­
ployment rose by slightly more than 
in non-assisted areas — by 272% 
and 3%, respectively, as opposed to 
2% (Graph 111). 
For Objective 1 regions where data 
are available for the early 1980s — 
for Ireland, Italy and the UK — the 
proportion employed in high growth 
industries between 1981 and 1989 
increased. In Ireland, the rise in the 
share of such industries was sub­
stantial — from 24% of employment 
in manufacturing to 30% — and 
much more than in non-assisted 
parts of the Community. In Italy 
and the UK, the rise was less than 
in unassisted areas. Although the 
difference was small for the South 
of Italy in relation to the North, for 
the UK, the increase in the share for 
Northern Ireland was only half the 
rise for the UK mainland (Graph 
112). 
By contrast, with the exception of 
the UK, the share of high growth 
industries in total manufacturing 
employment in Objective 2 regions 
in all Member States increased 
by more over this period than in 
non-assisted areas. This was par­
ticularly the case in Belgium, where 
the share rose in Objective 2 regions 
but fell elsewhere in the country, 
142 
Chapter 5 Labour market developments in assisted regions 
and in Germany, where the rise in 
share in assisted regions was 
around twice as much as in other 
parts (Graph 113). In the UK, on the 
other hand, the increase in share in 
Objective 2 regions was only 
slightly more than half the rise in 
non-assisted areas. 
The pattern of location of low 
growth industries is almost the mir­
ror image of that of high growth 
industries. In 1989, they accounted 
for over 36% of the numbers em­
ployed in manufacturing in 
Objective 1 regions and for 28% in 
Objective 2 regions as compared 
with less than 25% in non-assisted 
areas (Graph 114). 
High employment of the industrial 
workforce in low growth industries 
is a feature of most of the less de­
veloped areas of the Community. 
Apart from in Corsica — where only 
a few hundred people work in 
manufacturing — and Ireland, the 
share of manufacturing employ­
ment in such industries in 1989 was 
over 25% (ie more than in unas­
sisted areas) in Objective 1 areas in 
all Member States, and apart from 
these two plus Spain, over 35% 
(Graph 115). In Portugal, the share 
was around 45%, in Greece over 
50% and in Italy and the UK 
35-40%, in each case much higher 
than in the non-assisted parts ofthe 
country. 
In the case of Objective 2 areas, the 
picture is more mixed, though in 
most countries low growth in­
dustries were a more important 
employer in such regions than in 
other areas. In the Netherlands, 
Italy and Belgium, the share of the 
manufacturing workforce employed 
in low growth industries in Objec­
tive 2 areas was over 30% in 1989, 
while in the UK and France, it was 
only just below (Graph 116). How­
ever, whereas in the latter cases, 115 Employment in low growth industries in Objective 1 and 
unassisted regions, 1981 and 1989 
% manufacturing employment 
50 r -i 50 
1981 Objective 1 • 1989 Objective 1 D 1981 unassisted 
40 r 
30 r* 
20 
10 r A 40 
30 
20 
10 
E F GR 
Note: 1981 No data for GR, E & P IRL UK EUR11 
116 Employment in low growth industries in Objective 2 
and unassisted regions, 1981 and 1989 
% manufacturing employment 
50 r 
40 
30 
20 
10 1981 Objective 2 • 1989 Objective 2 D 1981 unassisted 
1989 unassisted 50 
40 
A 30 
20 
10 
B DK D 
Note: 1981 excludes DK, E & NL NL UK EUR11 
-143 
Chapter 5 Labour market developments in assisted regions 
the share was higher than in the 
unassisted areas of both countries 
— as it was in Germany — in Bel­
gium and Italy, the share was very 
similar. 
Over the 1980s, there were some 
signs of a larger fall of employment 
in low growth industries in Objec­
tive 2 regions than elsewhere. Over 
the Community as a whole, the 
proportion of manufacturing em­
ployment in these industries 
declined by over 3% in deindustria-
lising regions between 1981 and 
1989, whereas in non-assisted areas 
it fell by 2% (Graph 114). In three of 
the five Member States where data 
are available for the early 1980s — 
Germany, France and Italy — the 
decline in share in Objective 2 re­
gions was significantly greater than 
in unassisted areas over this period, 
while in the UK it was much the 
same. Only in Belgium did the 
relative position of Objective 2 re­
gions in terms of the share of low 
growth industries in manufacturing 
employment worsen between these 
two years — the share in this case 
increasing by much more in these 
areas than elsewhere in the 
country. 
In the case of Objective 1 regions, 
data for the early 1980s are only available for Ireland, Italy and the 
UK. In Ireland, the decline in the 
proportion of the manufacturing 
workforce employed in low growth 
industries between 1981 and 1989 
was much greater than in non-
assisted parts ofthe Community (3% 
as opposed to 1%) — in line with the 
relative expansion of high growth 
sectors (Graph 115). In Objective 1 
regions of Southern Italy, the fall 
was on a similar scale and greater 
than in unassisted parts ofthe North 
ofthe country. In the case ofthe UK, 
however, the employment share of 
low growth industries fell only 
slightly in Northern Ireland, though 
this was also true of non-assisted 
areas in mainland Britain. 
Overall, taking high and low growth 
industries together, it would seem 
that there was some, albeit small, 
improvement over the 1980s in the 
structure of industrial employment 
in assisted regions relative to non-
assisted areas in most Community 
countries. This is particularly true 
of Objective 2 regions, though lack 
of data makes it difficult to review 
structural developments over this 
period in most Objective 1 regions. 
Nevertheless significant regional 
disparities in the relative import­
ance of high and low growth 
industries remain. 
144 
Chapter 6 Women in employment 
Chapter 6 Women in employment 
Women are an increasingly important part of 
the Community labour force, though participation 
in employment is still low in a number of 
Member States and in most places women are 
concentrated in a narrow range of service jobs. 
The Community labour market in 
the 1980s was marked by one domi­
nant trend: the growth in the 
importance of women. Over this 
period, their contribution to em­
ployment and unemployment 
increased markedly, while at the 
same time, they were also asso­
ciated with higher levels of 
underemployment and of job inse­
curity. 
A second notable feature of the 
period is the fact that there was 
relatively little diversification of 
women's employment. At the begin­
ning of the 1990s, women are still 
concentrated in a narrow range of 
jobs and activities. 
The result of the past decade is a 
kind of paradox: in all 12 Com­
munity countries, at a time when 
the extent of men's and women's 
involvement in the labour market 
has become more similar, ine­
qualities in employment still linger 
on. They show themselves in the 
maintenance of a marked segrega­
tion in the kind of work done as well 
as by an expansion of jobs per­
formed predominantly by women. 
In other words, the position of 
women in employment is by no 
means as elevated as their weight in active population and their part 
in the growth ofthe labour force. 
Part of this difference is due to 
the fact that women, far more than 
men, face the problem of having 
to reconcile the pursuit of a working 
career with family responsibilities, including not only caring for 
children but also taking care of the 
household and undertaking domes­
tic chores. Partly as a result of this, 
many women take up part-time 
work, which tends to restrict the 
kind of jobs which are open to them 
and, therefore, makes it difficult, 
117 Women in the labour force in the Member States, 1983 
and 1991 
% labour force 
145 
Chapter 6 Women in employment 
if not impossible, for them to attain 
senior positions. 
For many women in the Com­
munity, part-time employment is 
the only viable alternative to not 
working at all and, in a number of 
Member States, the development of 
part-time jobs is one ofthe reasons 
why the participation of women in 
the labour force has risen signifi­
cantly over the recent past. 
In other Member States, however, 
especially in the South of the Com-
munity, the development of 
part-time working has been 
restricted by legislation or by collec­
tive agreements. Here, in many 
cases, childcare and other support 
is provided within the extended 
family — rather than by the state or 
employers — to allow women to 
take up employment. Nevertheless, 
though it increased significantly 
over the 1980s, the participation of women in the labour force in most 
parts of the South — Portugal is a 
striking exception — remains low. 
The growth of 
women in the 
labour market 
The increasing participation of 
women is the key element under­
lying the growth of active 
population in the Community. In 
recent years, it is women who have 
been almost entirely responsible for 
the expansion of the labour force 
which has occurred. They have, 
moreover, transformed its social 
characteristics. 
In the 1960s, women represented 
less than 30% of the total working 
population in Community coun­
tries. By 1991, this figure had risen 
to over 40% (Graph 117). The 
118 Share of women in the labour force in the Community 
and elsewhere, 1970,1980 and 1991 
% labour force 
50 r 
40 f 
30 r 
20 r 
10 r 50 
40 
A 30 
A 20 
A 10 
EUR12 EFTA US Japan upward trend in the share of women 
is not recent; it dates back at least 
30 years to the beginning of the 
1960s and has continued at a simi­
lar pace throughout this period, 
even during times of relatively little 
growth, or even decline, in employ­
ment. 
Although in 1991, on average four 
out of every ten members of the 
workforce were women across the 
Community as a whole, there were 
significant differences between 
Member States, with the share of 
women ranging from only a third to 
almost a half of active population. 
The countries can broadly be 
divided into three groups from this 
perspective: 
• the countries where the number 
of women in the labour force is 
above the Community average, 
varying between 43% and 
47% in 1991, which are Den­
mark, France, Portugal and the 
UK; 
• the countries where the share 
of women in the workforce is 
around the Community aver­
age, varying between 39% and 
41%, which are Germany, Bel­
gium and the Netherlands; 
• the countries where women 
accounted for a much lower 
proportion of active population 
than in the rest of the Com­
munity, with the share varying 
between 34% and 37%, which 
are Luxembourg, Italy, Ireland, 
Greece and Spain. 
In spite of these differences in the 
relative importance of women, their 
share of the workforce increased 
almost continuously in all Member 
States between 1983 and 1991 
(the period over which consistent 
data are available from the Com­
munity Labour Force Survey), with 
146 
Chapter 6 Women in employment 
countries having the lowest shares 
initially tending to experience the 
highest rates of increase and, there­
fore, converging towards the 
Community average. 
This was particularly evident in the 
case of the Netherlands, where the 
share of women rose from 34% to 
almost 40% over this period, and of 
Spain, where in the five years be­
tween 1986 and 1991, the share 
went up from 31% to 35%. In Bel­
gium, Ireland and Italy, moreover, 
the share increased by 3% between 
1983 and 1991. 
At the same time, while the share of 
women in the labour force in the 
other countries, where it was in­
itially higher, tended to increase by 
slightly less over this period, the 
rise was nevertheless significant in 
each case. In Denmark, which had 
the highest share, it rose from just 
over 45% to just under 47%, in 
France, from 42% to 44% and in the 
UK, from 40% to 43%. In Portugal, 
moreover, the share went up from 
41% to 44% between 1986 and 1991. 
In spite of this growth, it should be 
noted that the proportion of women 
in the labour force in the Com­
munity is still less than in the US 
and in the EFTA countries — 40% 
in 1991 as against 44-45% — al­
though the gap narrowed in the 
1980s (Graph 118). 
The growth 
of women in 
employment 
The growth of importance of women 
in the labour market is equally re­
flected in their increasing weight in 
employment, a trend which, like the 
rise in activity, dates back to the 
1960s and as yet shows little sign of 
slowing down. Between 1965 and 119 Working women who are employees in the Member 
States, 1983 and 1991 
% total employment 
100 r 
120 Working men who are employees in the Member States, 
1983 and 1991 
100 % total employment 
i 100 
147 
Chapter 6 Women in employment 
Historical data on activity rates of women 
The activity rates for women of different age groups over the 
30-year period examined here have been adjusted to be broadly 
comparable as described below, taking the Community Labour 
Force Survey — which ought to ensure comparability between 
Member States — as the basis for comparison. 
The primary source of data on activity rates for 1960, 1970 and 
1981 are the Censuses of Population carried out in most countries 
at approximately ten-year intervals and intended to cover all of 
the resident population. These figures are published in the ILO 
Retrospective Year Book of Labour Statistics, 1945-89. 
Although the Censuses were conducted at around the same time 
in each ofthe countries, they do not all relate to precisely the same 
year. In the case of Greece, Italy, Ireland and the UK, the first 
two Census years for which rates are examined here were 1961 
and 1971, and for Germany 1961 and 1970, and the data described 
in the text and presented in the graphs are for these years instead 
of 1960 and 1970 as for the other countries. In the case of France, 
the Census years were 1962 and 1968, so that changes in activity 
rates, therefore, relate to a much shorter period than for the other 
countries and would accordingly not be expected to be as large. 
All countries except France and Germany carried out a Census 
in 1981. For France, the Census year was 1982, for Germany 
1980. Apart from France over the 1960s, these differences in 
timing should affect the comparisons only marginally. 
The figures for activity rates in 1991 are taken from the Com­
munity Labour Force Survey for that year. These are on a slightly 
different basis than the Census figures in that they relate only to 
people living in private households and exclude those — such as 
some students, people in hospital and the armed forces — living 
in institutional accommodation. They are also derived from a 
sample of households rather than a full coverage of the popula­
tion. 
A comparison of the LFS with the Census figures for near ad­
jacent years (comparing the 1983 LFS with the 1981 Census — 
1982 in the case of France, 1980 in the case of Germany) shows 
that for most age groups they are quite close and, therefore, 
reasonably consistent. The main exceptions are: 
• France, where in the youngest age groups the Census figures 
are significantly lower than the LFS figures, either reflecting 
problems of small sample size or the exclusion of the those 
living in collective households (who for the most part may not 
be economically active); 
• Ireland, where the activity rates for women of middle age 
(30-54) shown by the Community LFS are significantly higher 
than the Census figures; 1991, the number of women in em­
ployment rose from just under 
40 million to just over 53 million. 
During the same period, the num­
ber of men employed fell slightly 
from 83 million to 82 million. 
Women are, therefore, entirely 
responsible for the growth of em­
ployment in the Community since 
the 1960s. 
There is little indication that the 
reduction in employment in many 
parts ofthe Community in 1991 and 
1992 has depressed the increasing 
tendency for women to enter the 
labour market. This may owe some­
thing to the fact that jobs in 
services, in which women's employ­
ment is largely concentrated, have 
so far been protected against the 
effects of recession — though, as 
noted in Chapter 1, this appears to 
be changing in a few countries (in 
Denmark and the UK, employment 
in services declined in 1991). 
Most ofthe women coming into em­
ployment have taken jobs as 
employees rather than becoming 
self-employed — 85% of all women 
in work are employees as opposed to 
79% of men (Graphs 119 and 120). 
As in the case of employment as 
a whole, the number of female 
employees in the Community in­
creased much more strongly in the 
1980s than the number of men. 
Three countries, however, are ex­
ceptions to this. In the Netherlands, 
the number of women employees 
remained more or less unchanged in 
relation to total employment be­
tween 1983 and 1991 while the 
relative number of male employees 
rose slightly. In the UK, the relative 
numbers of both men and women 
employees fell over this period, 
though the decline was much more 
marked for men (from 87% of the 
total in 1983 to 81% in 1991 as 
against a fall from 94% to 92% for 
148 
Chapter 6 Women in employment 
women). In both cases, the decline 
reflects the growth in importance of 
self-employment. In Denmark, the 
relative number of male employees 
increased by more (from 82% to 86% 
of total in employment) than the 
relative number of women em­
ployees (from 90% to 93%). 
Nevertheless, in these and other 
countries, the proportion of women 
working as employees remains 
higher than that of men and the 
proportion working as self-em­
ployed significantly lower. 
The growth of women working as 
paid employees was particularly 
pronounced in the Southern Mem­
ber States, as family working 
declined in importance. In Greece, 
the number of female employees in­
creased by 10% in relation to the 
number of women in employment 
between 1983 and 1991 — as 
against a rise of only 2% in the case 
of men — while in Spain, it rose by 
8% in the four years 1987 to 1991 
alone — double the rise for men. 
Activity rates of 
men and women 
The increase in the share of women 
in employment is the result not only 
of their increased participation in 
the labour force but also of the fall 
in activity rates of men, especially 
in the older age groups. Whereas 
activity rates of both men and 
women under the age of 25 have 
fallen in most Member States — 
except in Denmark, the UK and, to 
a lesser extent, in Germany — for 
those of 25 and over, the trends 
have been very different. 
For women of prime working age, 25 
to 49, activity rates rose signifi­
cantly in all countries between 1983 
and 1991, while the rates for men 
changed very little. For those over 
49, the activity of men fell in all • Italy, where the Census rate for the very oldest age group 
(65 and over) is higher than the LFS rate. 
To improve comparability, the ILO estimates of activity rates 
for various years during the 1980s, derived from national 
Labour Force Surveys — and published in the ILO Year Book 
of Labour Statistics, various years — which are more consist­
ent with the Census data (ie they do not show the significant 
differences noted above) have been used to adjust the Census 
figures to a Community LFS basis. Specifically, the rates from 
the Community LFS have been related to the ILO rates for a 
year in the mid-1980s — either 1985 or 1986 — for which both 
sets of figures exist for the country in question and the ratio 
of the former to the latter for each five-year age group has 
been applied to the Census data to adjust these to a Com­
munity LFS basis. In virtually all cases, apart from those 
noted, the adjustment factors change the Census figures by 
only around 1-2%. 
For Belgium, no detailed breakdown of activity rates by age 
is published by ILO after 1981 and, therefore, there is no basis 
for making an adjustment to the Census figures which accord­
ingly have not been altered. Since a comparison of the 1983 
Community LFS figures with the 1981 Census figures shows 
little significant difference either in the level of rates or in the 
pattern of variation between age groups, the unadjusted 
Census figures ought to be reasonably consistent with the 
1991 LFS rates. 
In the case of Spain, Ireland and the UK for 1960/61, Belgium 
and the Netherlands for 1960 and 1970 and Germany for 
1980, the ILO does not give activity rates for each five-year 
age group but in a few cases only for more aggregated groups. 
In the first two cases, where two five-year age groups have 
been aggregated, the same rate can be applied to each sub­
group without affecting the comparisons more than 
marginally. For the other countries, where three, four and 
even, for the UK in 1961, six five-year age groups are aggre­
gated, United Nations figures have been used to estimate the 
rates for more disaggregated groups within the age span. In 
none ofthe cases where detailed activity rates are missing are 
the results likely to be greatly affected by this estimation 
procedure. 
Although the rates for the different years examined ought to 
be broadly comparable, it should be recognised that some 
changes in definitions may have occurred in some countries 
over the period being examined. In particular, the definition 
of activity — and specifically the amount of time which a 
person needs to work during a given period in order to be 
treated as employed and, therefore, as active — may have 
changed between the Census years. Similarly the treatment 
of atypical cases, such as students, part-time workers and the 
armed forces, may also have changed. Unfortunately, there is 
no way of knowing how important such definitional changes 
are and, therefore, no way of making any adjustment for 
them. 
149 
Chapter 6 Women in employment 
121 Activity rates of men aged 50-64 in the Member States, 
1983 and 1991 
-i 100 
122 Activity rates of women aged 50-64 in the Member 
States, 1983 and 1991 
-i 100 
A 80 
.i 60 
40 
20 
B L E I IRL NL GR EUR12 F D P UK DK countries apart from Denmark, re­
flecting the trend towards earlier 
retirement, while that of women 
rose in all countries apart from 
Greece, though by much less than in 
the younger age group (Graphs 121 
and 122). 
It was, therefore, the increase in 
activity among women aged 25 to 49 
which was the primary cause ofthe 
growth of the Community's labour 
force in the 1980s. 
Changes in the 
activity of women, 
1960 to 1991 
Behind the growth of activity rates 
lies a significant change in the be­
haviour of women towards 
participation in the labour force. 
The experience ofthe period 1983 to 
1991 merely confirms a long-term 
tendency which began in the 1960s 
and which can now be seen as a real 
change in social attitudes and beha­
viour towards employment so far as 
women in the 25 to 49 age group are 
concerned — in other words, women 
of child-bearing, and child-caring, 
age. 
The effects of this change can be 
seen in the movement of activity 
curves, tracing the participation of 
women in the labour force at differ­
ent ages, which indicate the nature, 
timing and scale of the growth in 
activity over the past 30 years in 
each of the Community countries 
(see Box, p. 148). 
Traditionally, three types of activ­
ity curve can be distinguished for 
women: 
• a curve with a single peak, with 
only women in the 20-25 age 
group, for the most part single, 
having high activity rates and 
150 
Chapter 6 Women in employment 
Activity rates of women in 
Denmark, France, the UK and Germany, 1960-1991 
123 Denmark 124 France 
100 
15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+ 
Age group 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+ 
Age group 
125 United Kingdom 126 Germany 
100 
15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+ 
Age group 100 100 
15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+ 
Age group 
-151-
Chapter 6 Women in employment 
the rest having low rates: after 
marriage and children, most 
women stop working; 
• a curve with twin peaks (ie an 
M-shape), with most women 
stopping work between the ages 
of 25 and 40 when they are 
bringing up children and then 
beginning again once the child­
ren have grown up; 
• a curve with an inverted U-
shape with continuously high 
levels of activity and with 
women combining working with 
family responsibilities, most of 
them continuing in employment 
while they have children; this 
curve is similar to that for men 
and reflects a convergence in 
the behaviour of women to­
wards that of men. 
At the beginning of the 1960s, in 
none of the Community countries 
did the participation of women in 
the labour force conform to the third 
of these three curves. At that time, 
four Member States had similar 
curves. For Denmark, France, the 
UK and Germany, the activity 
curve for women was M-shaped, 
with rates for women between 25 
and 40 falling from around 60% or 
above to around 40% or below and 
then rising slightly for older age 
groups. A discontinuity in working 
life was, therefore, the norm 
(Graphs 123, 124, 125 and 126). 
Thirty years later, the curves for all 
four countries had become more like 
an inverted U-shape. This was par­
ticularly the case for Denmark, 
where the curve in 1991 reflected 
continuous participation of women 
in the labour force at a high rate — 
well over 80% — and where activity 
rates for most age groups had in­
creased consistently since 1960. To 
a slightly lesser extent, it was also 
true of France, where activity rates for women between the ages of 30 
and 44 were around 75% and only 
marginally below the rate for those 
aged 25 to 29, where activity was at 
its peak. 
In the other two countries, Ger­
many and the UK, although the 
M-shape of the curve had become 
much less pronounced by 1991, 
there were still traces of interrup­
tion to women's working careers 
between 25 and 40. In the UK, how­
ever, unlike in Germany — or 
indeed in France — the activity rate 
reached its peak, at just under 80%, 
for women aged 40 to 44, signifi­
cantly above the rate for women in 
their late 20s and early 30s, the age 
when most women have children. 
Whereas in the UK, much of the 
increase in rates, especially for 
older age groups, occurred in the 
1960s, in France, most ofthe change 
took place in the 1970s between 
1968 and 1982 and in Germany, it 
was delayed until the 1980s. 
The Southern Member States of 
Italy, Spain, Greece and Portugal, 
had similarly low rates of female 
activity in the 1960s, of not much 
more than 20% for most age groups, 
and activity curves which were vir­
tually linear from the age of 25 on. 
Between 1960 and 1991, however, 
there were radically different devel­
opments in the four countries, so 
much so that there is no longer 
much uniformity in the pattern of 
activity rates in the South of the 
Community (Graphs 127, 128, 129 
and 130). 
In Italy and Spain, over this period, 
rates increased for younger women 
much more than for older women, 
especially in Spain, and the curve in 
1991 declined continuously from 
around the age of 30 onwards, with 
peak activity occurring between 25 
and 29. In these two countries, therefore, many more women have 
joined the labour force but a signifi­
cant proportion still do not work in 
their 30s and even more in their 40s 
and 50s. 
From the shape ofthe curve and its 
movement over time, it would seem 
that this is a generational effect: as 
the younger generation grows older, 
activity rates in the older age 
groups can, therefore, be expected 
to increase. This contrasts with the 
changes in the activity curves for 
the four Northern Member States 
described above where relatively 
little of the increase over time 
seems due to generational effects, in 
the sense that activity rates rose for 
women in most age groups by simi­
lar amounts. 
Developments in Greece, on the 
other hand, differed from those in 
all other parts ofthe Community: it 
was the only country where there 
was a fall in activity rates of women 
between 1960 and 1980. The sub­
sequent increases in the 1980s, 
however, have produced a curve 
which is similar to that in Italy, 
though rates remain lower. 
In Portugal, the activity curve, 
which was almost constant after 
the age of 25, with rates as low as 
20% as in the other three coun­
tries, has become similar to that in 
Denmark. In 1991, female activity 
rates were high for all age groups, 
after a rise over the preceding 30 
years — and in the 1970s and 
1980s, especially — more pro­
nounced than in any other part of 
the Community. Over this period, 
women in Portugal changed from 
being mostly inactive to participat­
ing in the labour market virtually 
throughout their working lives. 
Whereas in 1960, less than 20% of 
women aged 25 to 49 were active, 
in 1991, almost 75% were part of 
the workforce. 
152 
Chapter 6 Women in employment 
Activity rates of women in 
Italy, Spain, Greece and Portugal, 1960-1991 
127 Italy 128 Spain 
100 
15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+ 
Age group 100 -i 100 
15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+ 
Age group 
129 Greece 130 Portugal 
i 100 
1 80 
15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+ 
Age group 100 
15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+ 
Age group 
-153-
Chapter 6 Women in employment 
In the other four countries of the 
Community, Ireland and Luxem­
bourg were similar in having 
activity curves in 1960 which, as in 
the Southern Member States, were 
broadly flat from the age of 25 on 
with rates of around 20%. In 1991, 
the curve had a single peak at 
around 25 with rates then falling 
almost continuously for women in 
older age groups. As in Italy, Spain 
and Greece, the younger generation 
of women have significantly higher 
activity rates than the older gener­
ation, which may, therefore, mean 
that the rates for the women in the 
older age groups will increase as 
younger women grow older (Graphs 
131 and 132). 
In the Netherlands and Belgium, in 
I960 activity rates for women over 
25 were also around 20%. 30 years 
later, the activity curve for the 
Netherlands had become one with 
two peaks, similar to the UK or Ger,-
many, reflecting interrupted 
working among women with child­
ren. In Belgium, on the other hand, 
the curve continued to have a single 
peak in activity rates at around 25, 
with rates for older women tending 
to decline, though progressively 
more slowly. In this case, activity 
rates for most age groups have risen 
significantly and many women have 
come to have continuous working 
careers, although a substantial 
number as yet are still inactive 
(Graphs 133 and 134). 
The most marked feature of the 
three decades between 1960 and 
1991 is the general tendency for 
participation of women over the age 
of 25 to increase. This is true for 
almost all countries up to the age of 
retirement. For a number of coun­
tries, however — Germany, the UK 
and the Netherlands, in particular 
— traces of an M-shaped activity 
curve remain, indicating that for 
many women their working career is interrupted in their late 20s or 
early 30s. In a number of other 
countries — especially in the South 
ofthe Community, but also a few in 
the North, such as Belgium and 
Luxembourg — rates of older 
women rose by less, so that the ac­
tivity curve of women tends to 
decline from the late 20s onwards. 
In both cases, however, there are 
clear signs that changes in activity 
are still going on. As younger 
women accustomed to working 
grow older, it is possible that the 
curves will tend more towards an 
inverted U-shape as in Denmark or 
Portugal. 
Activity rates of 
women of prime 
working age 
The growth in activity has been par­
ticularly pronounced among women 
aged between 25 and 49. Indeed in 
all 12 Member States, the rise in 
participation of women in this age 
group shows no sign of coming to an 
end and, in a number of cases, rates 
have come to exceed those for other 
age groups — as in Denmark or 
Portugal. In more and more coun­
tries, the working careers of 
increasing numbers of women are 
coming to resemble those of men, 
with no interruption, as before, to 
bring up children. 
After the changes in activity which 
have occurred over the past 30 
years, the Community countries 
divide into four groups (Graph 135): 
• Ireland, Spain, Greece, Luxem­
bourg and Italy, where half of 
women between the age of 25 
and 49 are active; 
• the Netherlands, Germany and 
Belgium, where the activity 
rate for this age group is around the Community average 
of 65%; 
• the UK, Portugal and France, 
where 75% of the group are ac­
tive; 
• Denmark, where 9 out of 10 
women in this age group par­
ticipate in the labour force. 
In some sense, therefore, it is 
women of child-caring age who have 
been primarily responsible for the 
growth of the Community work­
force over this period. Indeed, 
within the 25 to 49 age group, activ­
ity rates of mothers increased by 
most in the 1980s. Between 1984 
and 1991, the average rate of activ­
ity of women with children went up 
from just over 50% to just over 60% 
in the ten countries of the Com­
munity excluding Spain and 
Portugal. For women with no child­
ren, the rate increased from 71% to 
75% over this period. Moreover in 
Spain and Portugal, activity rates 
for women with children rose by 
around twice as much as for women 
without between 1987 and 1991. 
Nevertheless, significant differences 
in labour force participation be­
tween women with and without 
children remain in many Member 
States, as too do differences be­
tween single and married women. 
Activity rates of 
women and family 
responsibilities 
In 1991, over the Community as a 
whole, 84% of single women aged 25 
to 49 without children were mem­
bers ofthe labour force, in the sense 
that they were either employed or 
actively looking for work. By con­
trast, the figure for married women 
in the same age group without 
children was only 67% (Graph 136). 
154 
Chapter 6 Women in employment 
Activity rates of women in 
Ireland, Luxembourg, the Netherlands and Belgium, 1960-1991 
131 Ireland 132 Luxembourg 
15-19 20-24 25-29 30-34 35-39 40-44 45r49 50-54 55-59 60-64 65+ 
Age group -i 100 
15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+ 
Age group 
133 Netherlands 134 Belgium 
-, 100 
15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+ 
Age group 100 
15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+ 
Age group 
155 
Chapter 6 Women in employment 
135 Activity rates of women aged 25-49 in Member States, 
1983 and 1991 
136 Activity rates of women aged 25-49 without children, 
1991 
100 
80 
60 
40 
20 Single B Married -i 100 
80 
I 60 
40 
• 20 
E GR L I IRL B NL E12 P D F UK DK E GR L I IRL B NL E12 P D F UK DK The difference, however, is far from 
uniform between Member States. 
Whereas in Denmark, the activity 
rate was higher for married women 
than for single women and in the 
UK, only marginally lower, in 
Spain, Greece, Ireland and Luxem­
bourg, it was as much as 30-35% 
lower. Indeed, Portugal apart, in all 
Southern Member States together 
with Ireland and the Benelux coun-
tries, the difference between 
activity rates for single and married 
women was substantial — around 
20% or more. 
For all of these countries, moreover, 
the fact of being married rather 
than single has a much greater ef­
fect on the activity rates of women 
than having children. In 1991, in 
Spain, Greece and Belgium as well 
as in Portugal and France, the aver­
age activity rate of women aged 
25 to 49 was actually higher if they 
had a child than if they were mar­
ried with no children (Graph 137). 
In Italy, Ireland, the Netherlands 
and Luxembourg, as well as in 
Denmark, though activity rates 
were lower for women with child­
ren, the difference was less than 
10%. 
Only in the UK and Germany did 
the presence of a child reduce the 
activity rate for women by more 
than 10% — in the UK, by as much 
as 15%. This may reflect differential 
incentives in these two countries for 
women with children to join the la­
bour force or a lack of childcare 
facilities, though the latter problem 
is by no means confined to these two 
countries. 
There are various reasons for this 
difference in labour force participa­
tion between single and married 
women over much of the Com­
munity. As well as cultural and 
social factors, they include the fact 
that family responsibilities are not 
156 
Chapter 6 Women in employment 
confined to bringing up children but 
extend to caring for a household and 
carrying out the domestic chores 
which this entails. It may also be 
the case that although the compari­
son relates to married women 
without children of 15 and under, a 
proportion of these will have child­
ren who are now older than this, 
who may have been a reason for 
such women giving up work in the 
past. The low activity rate, in other 
words, may partly reflect the diffi­
culty which these women have in 
returning to the labour market 
after a period of absence. 
Although having5 one child seems in 
general to have a relatively minor 
effect on the participation of women 
in the labour force, the responsi­
bility of taking care of more than 
one child, however, does reduce ac* 
tivity rates in most parts of the 
Community. While in Denmark, 
Portugal and Belgium, the average 
rate for women with two children 
was around the same level as that 
for women with one child, in all 
other countries it was lower — espe­
cially in Germany and Luxembourg 
where the difference was 10-15% 
(Graph 137). 
For women with more than two 
children, as might be expected, ac­
tivity rates are lower throughout 
the Community than for other 
women. The difference in 1991 was 
most pronounced in France and the 
UK, where women with three or 
more children had average rates of 
25-30% lower than for women with 
two children. 
Women's activity 
rates and education 
Throughout the Community, the 
probability of women participating 
in the labour force increases with 
education. In all Member States, 137 Activity rates of women aged 25-49 with children in the 
Member States, 1991 
% 
100 r Number of children aged <15 
-i 100 
138 Activity rates of women aged 25-49 by level of 
educational attainment in the Member States, 1991 
100 r -i 100 
-157 
Chapter 6 Women in employment 
activity rates of women aged 25 to 
49 are higher for those who have 
completed university education or 
the equivalent than for other 
women, in most countries, consider­
ably so. In 1991, the only countries 
where the activity rate for women in 
this age group with university or 
closely equivalent qualifications 
was less than 80% were Ireland, 
Germany and Luxembourg, where 
it was only slightly below (Graph 
138). In Denmark and Portugal, it 
was over 95%. 
Over much of the Community, 
therefore, activity rates for highly 
educated women of prime working 
age are not much lower — in some 
cases, no lower at all — than for 
men. 
Similarly, in all countries apart 
from Portugal where the difference 
was very small, women who have completed post-compulsory educa­
tion are more likely to be active 
than women who have not. In 1991, 
the difference in the average rate 
for these two groups of women was 
25% in Italy and 15% or more in 
Belgium, the Netherlands, Spain 
and Ireland. 
These disparities in activities rates 
reflect a number of differences in 
the position of women with differ-
ent levels of educational 
attainment. In the first place, more 
highly educated women have more 
— and more highly paid —job op­
portunities open to them than 
other women. Secondly, because of 
their greater earning capacity, 
making suitable childcare ar­
rangements where necessary and 
paying for the costs involved are 
likely to represent less of a 
problem. Thirdly, any break in em­
ployment to bring up children may 
139 Employment and hours worked by women in the 
Member States, 1991 
50 % total employed 
Numbers employed 
Hours worked % total hours 
40 \-
30 
20 
10 -i 50 
I 40 
30 
20 
10 
E GR IRL I L NL B E12 D P F UK DK E GR IRL I L NL B E12 D P F UK DK tend to be more costly in terms of 
the effect on their future careers. 
In economic terms, therefore, the 
opportunity cost of not working is 
likely to be much higher for better 
educated women than for others. 
Significantly, however, in Ireland, 
Germany and the Netherlands, 
where having children has the grea­
test effect on activity rates, the 
rates of women with post-compul­
sory education qualifications are 
lower than in other countries, 
Greece apart. The lack of suitable 
childcare facilities, or perhaps the 
difference in attitude towards 
women with children working, 
therefore, seems to depress activity 
rates even for the better educated 
women. 
Part-time working 
among women 
The rise in the participation of 
women in the labour force and 
their contribution to the growth of 
employment are both reduced 
somewhat if hours of work are used 
as the measure of employment 
rather than the numbers in work. 
Whereas women represented just 
over 40% ofthe Community labour 
force in terms of numbers in 1991, 
they accounted for under 35% of 
the total hours worked (Graph 
139). There are two main reasons 
for this disparity: first, women 
tend to work less overtime than 
men and, therefore, usually work 
fewer hours when in full-time jobs; 
secondly, many more women than 
men work part-time rather than 
full-time. 
Part-time employment expanded 
markedly over the 1980s and a sig­
nificant number of the women 
joining the labour force over this 
period, who were responsible for the 
growth in activity rates, went into 
158-
Chapter 6 Women in employment 
this kind of employment. (It should 
be noted that part-time working is 
defined here as in the Community 
LFS, which means that in some 
countries it relates to employment 
for less than a specific number of 
hours a week, in others, to employ­
ment which respondents regard as 
being part-time.) In a decade when 
there was a clear tendency for the 
activity rates of women to converge 
with those of men, the development 
of part-time working was an ele­
ment distinguishing the areas in 
which women took up work — and 
the kind of jobs which they did — 
from the employment of men. In 
1991, over 28% of women in employ­
ment in the Community worked 
part-time as compared with only 4% 
of men. In the 12 Member States, 
women accounted for between 76% 
and 90% of all part-time employ­
ment. 
Although part-time working is pre­
dominantly a female preserve 
throughout the Community, its im­
portance varies significantly from 
one part to another, especially be­
tween North and South. In three 
Northern Member States, around 
40% or more of women worked part-
time in 1991 (the Netherlands, 
where the figure was as high as 
60%, the UK and Denmark), while 
in a fourth (Germany), over a third 
were so employed. By contrast, in 
Greece, Spain, Italy and Portugal, 
only around 10% of women were in 
part-time rather than full-time 
jobs. Between these two extremes, 
the proportion in France and Bel­
gium was around 25% and in 
Ireland and Luxembourg, just 
under 20%. 
In large measure, this difference re­
flects differences between countries 
in the extent to which part-time 
working is permitted and hours of 
work are regulated either by legis­
lation or by collective agreement. The growth in part-time working 
also differed between countries over 
the 1980s. Whereas in the Nether­
lands and Belgium, the share of 
employment accounted for by part-
time working rose by around 10% 
between 1983 and 1991, it in­
creased by only some 2% in the UK 
and Ireland, and in Luxembourg 
hardly at all. Moreover, in three 
Member States, Denmark, Greece 
and Spain, the share fell over this 
period. 
In the countries where part-time 
working increased significantly 
over the 1980s — notably, the 
Netherlands, Germany, France and 
Belgium — the contribution of 
women to the growth of employ­
ment, measured in terms of the 
volume of work rather than the 
number of people, tends to be over­
stated to this extent. Part-time working and 
family responsibilities 
It is significant that part-time 
working is most prevalent in all 
Member States except for Belgium, 
not among women of child-bearing 
age between 25 and 49, but among 
older women of 50 and over. In 
1991, just under 36% of women in 
employment aged between 50 and 
64 worked part-time in the Com­
munity as a whole (Graph 140), 
while for those over 64, the figure 
was 52%. By contrast, only 29% of 
women aged 25 to 49 were employed 
part-time. Indeed in a number of 
countries — Denmark, France, 
Italy and Greece — the lowest pro-
portion of women working 
part-time was in this age group. 
This fact is not wholly consistent 
with the frequent argument that 
140 Women in part-time employment by age group in the 
Member States, 1991 
% total employment 
80 r 
64 h 
48 h 
32 
16 h 80 
64 
48 
32 
16 
B Eli 0 OK UK NL on j E p IRL F B EI2 O DK UK NL F B EU O DK I* 
-159-
Chapter 6 Women in employment 
the major reason for women work­
ing part-time is to enable them to 
reconcile employment with family 
responsibilities. Since the con­
straints imposed by such 
responsibilities are likely to have 
diminished considerably once a 
woman has reached the age of 50, 
they can hardly explain why part-
time working is more prevalent 
among women above this age than 
below. 
Nevertheless, this does not mean 
that family responsibilities are not 
a factor underlying the importance 
of part-time working among 
women, only that they are not 
the only factor. Despite the high 
incidence of part-time working 
among older women, it is still the 
case that in a number of Member 
States, significant proportions of 
younger women in the 25 to 49 age 
group work part-time. In 1991, the 
figure was as high as 63% in the Netherlands, 45% in the UK and 
almost 40% in Germany, while in 
Denmark, it was almost a third. For 
these countries in particular, a clear 
relationship emerges between 
being married and/or having family 
responsibilities and part-time 
working. 
In all four of these countries, the 
proportion of married women work­
ing part-time is significantly 
greater than the proportion of 
single women, as indeed it is in the 
Community as a whole. Children, 
moreover, are only part ofthe expla­
nation for this. In 1991, 30% of 
married women without children 
(under 15 years old) in the Com­
munity worked part-time as 
opposed to only 16% of single 
women aged over 25 without 
children (Graph 141). In the 
Netherlands, the proportion of mar­
ried women with no childcare 
responsibilities working part-time 
141 Women in part-time employment by family status in the 
Member States, 1991 
90 % total employed 
80 
70 -
60 -
50 -
40 -
30 
20 
10 
0 -i 90 
9 Single (25+) without 
children 
Married without children 
Women with children was as high as 66%, as compared 
with only 36% of single women 
without children. In Germany and 
Denmark, over 40% of married 
women without children worked 
part-time, in each case around twice 
the proportion of single women 
without children. Similar dif­
ferences on a smaller scale are also 
evident for other countries, the only 
exception being Greece where the 
figures for married and single 
women without children are almost 
identical. 
This difference in behaviour may 
reflect a number of factors, similar 
to those underlying the differences 
in activity rates, such as a different 
attitude among single and mar­
ried women — and husbands — 
towards work, domestic responsi­
bilities and a lower need for 
married women to earn income. It 
may also reflect the greater likeli­
hood that married women have 
had breaks in their working 
careers in the past to bring up 
children, even though at the time 
of the survey they had no children 
under the age of 16. Such breaks 
may have made it more difficult to 
find full-time employment. 
Childcare responsibilities tend to 
increase the numbers of women 
working part-time even further. 
Across the Community as a whole, 
40% of women (both married and 
single) with children worked part-
time in 1991 as compared with 
30% of married women without 
children (Graph 141). In the 
Netherlands, the proportion 
reached 85% and in the UK, 65% 
while in Germany, it was only 
slightly lower at 59%. Ofthe other 
countries, however, only in Bel­
gium and Ireland was the 
proportion of women with children 
in part-time work significantly 
higher than the figure for married 
women without children (around 
160 
Chapter 6 Women in employment 
10% higher in both cases — the 
same as in Luxembourg where, 
however, the figures may well be 
distorted by sampling errors). 
In Denmark, Portugal and Greece, 
proportionately fewer women with 
children worked part-time than 
married women without children. 
In Italy and Spain, the difference 
between the two figures was only 
around 1-2%. 
In these countries — ie throughout 
the Southern part of the Com­
munity plus Denmark in the North 
— childcare responsibilities do not, 
therefore, appear to be a major rea­
son for women working part-time. 
In most ofthe Northern parts ofthe 
Community, however, but most es­
pecially in the UK, Germany and 
the Netherlands, the need to bal­
ance looking after children with 
doing a job of work seems to be an 
important reason for women to 
work part-time rather than full-
time. 142 Women in temporary jobs in the Member States, 1983 
and 1991 
% total employed 
30 r 
20 h 
10 h -i 30 
20 
10 
L I UK B GR D NL EUR12 IRL F DK P E 
1983 data - D and DK 1984, P 1986, E 1987 
It is no accident that the three coun­
tries where part-time working is 
most prevalent among women aged 
25 to 49 — and within this group 
among those with children — are 
also those for which activity rates 
are relatively low (ie the activity 
curve dips) for this age group. In 
these countries, therefore, for sub­
stantial numbers of women with 
children the main choice seems to 
be between being inactive and 
working part-time. 
A further implication of the above 
is that the main reasons for women 
working part-time differ from 
country to country. In each 
country, the existence of part-time 
jobs may partly be due to women, 
for whatever reason — because of 
inadequate childcare and other 
social facilities or because of do­
mestic responsibilities — seeking 143 Men in temporary jobs in the Member States, 1983 and 
1991 
% total employed 
161 
Chapter 6 Women in employment 
144 Women in temporary jobs working part-time in the 
Member States, 1983 and 1991 
% total 
80 r 
145 Women in temporary jobs because they could not find 
permanent jobs in the Member States, 1983 and 1991 
% total on fixed-term contracts 
90 r 
75 r 
60 h 
45 h 
30 
15 90 
75 
60 
45 
30 
15 
UK DK IRL I EUR9 B 
DK 1984, P 1986, E 1987; D, F, L no data NL P GR E part-time rather than full-time 
employment. 
It also, however, reflects the jobs on 
offer, and the conscious policy of 
firms to employ people on a part-
time rather than a full-time basis in 
order, for example, to increase the 
flexibility of production or — more 
usually — the provision of services. 
Distinguishing the relative im­
portance of these demand and 
supply side factors is extremely 
difficult, if not impossible. In 
practice, the two are closely inter­
related and, therefore, inseparable 
from a conceptual as well as prac­
tical point of view. In other words, 
women work part-time partly be­
cause such jobs exist and the fact 
that they are prepared to do so 
encourages the development of 
part-time jobs. 
Women and 
temporary 
employment 
As well as working part-time, a sig­
nificant and growing number of 
women in the Community are em­
ployed under fixed-term contracts 
rather than in permanent jobs. In 
1991,10% of women in employment 
worked in jobs which were of fixed 
duration as opposed to 7% of men 
(Graph 142). Apart from in Spain, 
however, where it was almost 30%, 
in no Member State was the propor-
tion much more than 10%. 
Moreover, between 1983 and 1991, 
the proportion of such jobs in­
creased by more for men than for 
women both across the Community 
as a whole and in most Member 
States (Graph 143). 
A substantial proportion of the 
temporary jobs for women are 
part-time rather than full-time. In 
162-
Chapter 6 Women in employment 
1991, 36% of women employed in 
the Community under fixed-term 
contracts worked part-time (as op­
posed to 14% of men). In the UK, 
the figure was over 75% (50% for 
men), in the Netherlands 66% and 
in Ireland, Luxembourg and Italy, 
over 50% (Graph 144). Neverthe­
less, because of the comparatively 
limited importance of temporary 
jobs in the former two countries 
and the high importance of part-
time working, only just over 10% of 
women working part-time in the 
UK and the Netherlands were em­
ployed on fixed-term contracts. By 
contrast, in Ireland as well as 
Spain, almost 40% of part-time 
jobs for women in 1991 were tem­
porary and in Italy the figure was 
over 30%. 
Although the term "temporary" 
covers a wide range of jobs, includ­
ing some for which the contract 
extends for several years as well as 
many seasonal and very short-term 
jobs, substantial numbers of women 
in the latter three countries in par­
ticular would seem to be working 
under inferior terms of employ­
ment. While such jobs may give 
employers a high degree of oper­
ational flexibility, they tend to leave 
the women so employed in a vulner­
able and exposed position. 
To a large extent, women working 
in temporary jobs do so because 
they are the only jobs available. In 
1991, for the nine Community coun­
tries where the relevant LFS data 
are available, over 60% of women 
replying to the question on why 
they worked in temporary jobs did 
so because they had been unable 
to find permanent employment 
(Graph 145). In Spain, the pro­
portion was over 85%, in Ireland 
and Italy, where fixed-term con­
tracts are also an important 
element in part-time working, it 
was over 50%. 146 Unemployment rates of men by duration in the Member 
States, 1991 
% labour force 
10 r 
8 r 
4 r-
2 f--i 10 
A 8 
P OR DK D F UK E12 NL IRL P GR DK D F UK E12 NL B E I IRL 
L data too small 
147 Unemployment rates of women by duration in the 
Member States, 1991 
% labour force 
10 r 
8 r -i 10 
UK DK O P NL F E12 GR IRL 
L data too small DK D P NL F E12 GR IRL B I E 
163 
Chapter 6 Women in employment 
Unemployment 
of women 
As in the case of part-time working, 
unemployment of women can be 
seen in different lights. The high 
rates of female unemployment 
which prevail throughout the Com­
munity emphasise the difficulty 
which women have in finding em­
ployment. At the same time, 
however, they are also a confirma­
tion of the indisputable presence of 
women in the labour market: even 
though they might not be in em­
ployment, at least they are part of 
the workforce. In other words, the 
women who are today recorded as 
being unemployed would in former 
times have been defined as inactive. 
Despite these difficulties of inter­
pretation, a few tendencies are 
clear. In the first place, unemploy­
ment rates of women are 
systematically higher than those of 
men throughout the Community, 
apart from in the UK, and have 
been so over the whole of the past 
decade (see Chapter 1). 
Secondly, this disparity holds for all 
age groups. In the South ofthe Com­
munity, for those under 25, the 
combination of being young and fe­
male can push unemployment rates 
to extremely high levels. In Spain, 
Southern Italy and Greece, more 
than one in three women under 25 
was unemployed at the last count — 
though this is less than rates 
reached in the mid-1980s, when in 
some areas they rose to as much 
as 50%. 
Thirdly, so far as the duration of 
unemployment is concerned, the 
situation is more complicated. In 
the Community as a whole, the 
average rate of long-term unem­
ployment — those who have been 
out of work for a year or more in relation to the labour force — is 
higher for women than for men 
(Graphs 146 and 147). There are, 
however, important differences be­
tween countries. In most countries 
— in Belgium, Denmark and 
France in the North and in all four 
Southern Community countries — 
more women are affected by long-
term unemployment than men and 
this remains true as the duration of 
unemployment increases. In a few 
other countries, on the other hand, 
after one or two years of unemploy­
ment, the gap between male and 
female rates disappears — in Ger­
many and the Netherlands — or is 
reversed — in Ireland. In the UK, 
there are substantially fewer 
women in long-term unemployment 
than men, especially in the case 
of those out of work for two years 
or more. 
The difference between these four 
countries and the others is difficult 
to interpret. On the one hand, it 
could be due to a greater capacity on 
the part of women in these countries 
to find work, on the other, to women 
moving from long-term unem­
ployment into inactivity. Some 
indication of which of these is likely 
to be more valid can be gained from 
the evidence on unemployment 
benefits. 
With the exception of Belgium and 
Denmark, there are considerable 
disparities between the eligibility of 
men and women for unemployment 
benefits or assistance. In the Com­
munity as a whole, over half of 
unemployed men were in receipt of 
benefits or assistance in 1991 as 
opposed to only a third of women 
(Graph 148). The difference be­
tween men and women is 
particularly marked in the UK, the 
Netherlands and Ireland, where the 
proportion of unemployed men re­
ceiving benefits or assistance is 
twice that for women. By contrast, the difference is less for the South­
ern Member States, though in all 
cases, the relative numbers of both 
men and women receiving pay­
ments were much lower than in the 
North ofthe Community. 
The receipt of benefits or assistance 
also varies according to family 
status. In all Member States, a 
higher proportion of married men 
received payments in 1991 than 
single men, which might partly re­
flect the difference in average age 
between the two. For women, al­
though a higher proportion of 
married than single women were in 
receipt of benefits or assistance 
(35% as opposed to 32%), in most 
countries the difference was small 
and in four countries, the reverse 
was the case. In Ireland, the UK 
and the Netherlands, the propor­
tion of unemployed married women 
receiving benefits or assistance was 
only around half that of single 
women, while in Germany, the dif­
ference was over 10%. 
Indeed in the latter four countries, 
a non-negligible part of the dis­
parity between men and women 
receiving state payments seems to 
be due to the relatively low propor­
tion of married women entitled to 
benefit or assistance. Moreover, 
since these four countries are also 
the ones in which the long-term un­
employment rate of women is 
relatively low as compared with 
that of men, it is possible that 
unfavourable benefit systems in 
these countries tend to persuade an 
increasing proportion of women to 
withdraw from the labour market 
and become inactive the longer they 
are unemployed. 
The border between being unem­
ployed and inactive is, therefore, 
by no means clearcut, and it seems 
in a number of parts of the Com­
munity that married women more 
164 
Chapter 6 Women in employment 
than others are driven out of the 
labour market at the end of a 
period of unemployment, for which 
they are often not eligible for 
benefits. 
Unemployment, 
employment and 
inactivity 
Evidence of the lack of a neat divi­
ding-line between unemployment 
and inactivity in the case of women 
can be obtained from the Com­
munity Labour Force Survey. 
Since this includes questions on 
what respondents were doing one 
year before it provides some indi­
cation of the extent of movement 
between employment, unemploy­
ment and inactivity. At the same 
time, because people sometimes 
have difficulty recalling what they 
were doing a year ago, because not 
everyone asked replied to the ques­
tion and because it ignores what 
happened in the intervening 
period, this evidence needs to be 
interpreted with some caution. (To 
reduce some of these problems, the 
responses to the surveys for a num­
ber of years have been examined to 
check the consistency of the 1991 
results discussed below with ear­
lier surveys.) 
Nevertheless the replies are il­
luminating. In 1991, in the 10 
Member States for which data are 
available (ie excluding Italy and 
Luxembourg), 40% of women of 25 
and over who were recorded as un­
employed — in the sense that they 
were actively seeking work — had 
been inactive one year before 
(Graph 149 — the analysis is con­
fined to those of 25 and over to 
exclude the vast majority of those 
moving from education into the la­
bour force). By contrast, the 
proportion of men of 25 and over 
who had previously been inactive 148 Recipients of unemployment benefit by status in the 
Member States, 1991 
% total unemployed 
100 r 
80 
60 h 
40 h 
20 h n 100 
80 
60 
40 
20 
IRL DK GR P I E F E12 NL 0 
L no data 
149 What the unemployed (25+) were doing a year ago in 
the Member States, 1991 
100 
80 h 
60 
40 
20 % total unemployed Unemployed m Employed 
FR1990, L& I no data -I 100 
80 
A 60 
d 40 
20 
NL GR D E10 B UK F DK P E IRL NL GR D E10 B UK F. DK P E IRL 
Men Women 
165-
Chapter 6 Women in employment 
was only 20% (the disparity was 
much the same for earlier years). 
Moreover there were marked dif­
ferences between Member States. 
In the Netherlands, the figure for 
women who had been inactive the 
year before was 75% in 1991 and in 
Ireland over 60%, whereas in Bel­
gium it was less than 15% and in 
Denmark less than 10%. In all coun­
tries apart from these two, however, 
the proportion who had been inac­
tive was significantly higher for 
women than for men. 
A similar disparity between men 
and women is also evident for em­
ployment. In 1991, less than 20% of 
women who were unemployed in 
the Community had been in em­
ployment one year earlier as 
compared with over 30% of men. 
Again, however, there are substan­
tial variations between Member 
States, reflecting, as would be ex­
pected, the importance of long-term 
unemployment. In countries where 
a high proportion of unemployed 
women are recorded as having been 
out of work for over a year, such as 
Belgium, Ireland and Spain, com­
paratively few women had jobs the 
year before — well below 20%. In 
countries where the reverse is the 
case, more were in employment one 
year earlier. 
Nevertheless, in all Member States 
except Denmark, the UK and Por­
tugal, only around 25% or less of 
women who were unemployed at 
the time ofthe 1991 LFS had been 
in work the year before and only in 
Denmark was the figure more than 
40%. This means that in that year, 
even after a prolonged period of em­
ployment growth between 1985 and 
1990, in most of the Community 
75% or more women who were un­
employed had not been working the 
previous year. For men, the figure 
was lower, but still high. In six of the 10 Member States for which 
data are available, 60% or more of 
men who were unemployed had also 
not been in work the year before. 
These results seem to confirm the 
impression given by the high 
figures for long-term unemploy­
ment in the Community — that 
mobility between employment and 
unemployment is relatively low and 
that, in most Member States, it 
takes considerable time for most 
people who are out of work to find a 
job. This is especially the case for 
women. 
Moreover, for women the re­
sponses to the LFS suggest that 
the distinction between unemploy­
ment — especially long-term 
unemployment — and inactivity is 
not clearcut in the minds of re­
spondents. In three Member 
States, in particular, the Nether­
lands, Ireland and Greece, the 
figures for unemployment one year 
earlier obtained from questioning 
respondents on their status at the 
time do not accord with the figures 
for long-term unemployment (re­
flecting differences between 
personal perceptions of circum­
stances one year previously and 
the application of ILO definitions 
of current status). In the Nether­
lands, only 10% of the women 
unemployed claimed to be unem­
ployed one year earlier in 1991, 
whereas over 45% of the same 
women were recorded by the LFS 
as being unemployed for more than 
a year, following ILO guidelines. In 
Ireland, only just over 20% stated 
that they were unemployed the 
previous year as compared with 
the 60% or so who were counted as 
long-term unemployed, while in 
Greece the figures were 33% and 
55%. For the other countries, the 
two figures are much closer, 
though apart from Spain and Bel­
gium, the proportion who claimed to have been unemployed the year 
before was slightly lower than the 
long-term unemployment figures 
seem to imply. 
For men, although there is some 
difference between the two figures 
in the case of the Netherlands and 
Greece, it is much smaller, while 
the figures for other countries, 
including Ireland, tend to be rea­
sonably close to each other. This 
implies that in a number of Member 
States, especially the three men­
tioned, the distinction between 
unemployment and inactivity is 
somewhat blurred so far as the 
perceptions of respondents are con­
cerned or that, alternatively, the 
power of recall is often defective. 
The segregation 
of women in 
employment 
The large influx of women onto the 
labour market has not been accom­
panied by much diversification in 
the jobs they do. Throughout the 
Community, both horizontal and 
vertical segregation — ie in terms of 
the sectors in which women are con­
centrated and the kind of work they 
do within sectors — remains a domi­
nant feature of the structure of 
female employment. 
The most surprising point about 
this lack of change is perhaps the 
lack, in turn, of any relationship 
between the concentration of 
women in jobs and the growth of 
activity. Irrespective of whether 
rates of activity of women are high 
or low and the pace at which 
they have changed, the same 
phenomenon remains evident 
in Community countries: most 
women in employment are concen­
trated in a few sectors of activity 
and in a small number of jobs. These 
166 
Chapter 6 Women in employment 
tend to be the sectors and jobs 
where women were already an im­
portant part of the labour force at 
the beginning of the 1980s. Al­
though the share of women has 
expanded in a large number of occu­
pations in most countries, and 
inroads have been made into a num­
ber of higher level jobs which were 
previously the exclusive domain of 
men, in most areas the possibilities 
for women of gaining access to top 
jobs remain very small. 
A number of factors seem to com­
bine in this respect to produce a 
cumulative effect. In particular, the 
growth in importance of part-time 
working both reinforces job segre­
gation and at the same time has the 
added effect of differentiating the 
women involved from other mem­
bers of the workforce. Where it 
develops, part-time employment re­
inforces the concentration of women 
by confining them to an even more 
limited number of jobs and pro­
fessions. This is especially true in 
services where women employed 
part-time work predominantly as 
cooks, waitresses, cleaners and 
shop assistants. 
Sectoral concentration 
of women's employment 
The evidence on the distribution of 
women's employment by sector pro­
vides little in the way of surprises. 
In 1991, over 75% of women in work 
were employed in services as 
against under 20% in industry, 
whereas only just over half of men 
in employment worked in services 
and over 40% in industry (Graph 
150). Within services, the largest 
concentration of women's jobs is in 
"other services" — health, educa­
tion and other services — which 
together employed 33% of all the 
women in work in the Community 
in 1991, while a further 22% worked in the "distribution and catering" 
sector. 55% of women in employ­
ment, therefore, worked in these 
two sectors as compared with 52% 
eight years earlier in 1983. Al­
though these sectors are also major 
employers of men, they accounted 
for only 28% of male jobs in 1991, 
while the two sectors employing 
most men — distribution and engin­
eering — between them accounted 
for under 30% of male employment 
(Graph 151). 
Within industry, women's jobs are 
predominantly concentrated in the 
"other manufacturing" sector — 
textiles, clothing and other basic, 
labour-intensive industries. In 
1991, well over half of women 
employed in industry in the Com­
munity worked in this sector as 
compared with 25% of men. 
Except in Greece and Portugal, 
where over 20% of women worked in agriculture, health, education 
and other services together with 
distribution and catering accounted 
for over half of all women's jobs in 
1991 in all Member States (Graph 
152). In the UK, Denmark, Belgium 
and Spain, the figure was around 
60%, while in the ^Netherlands, 
where many fewer women were em­
ployed in industry than elsewhere 
— only 10% as against 20% — it was 
as high as 67%. 
Moreover these two broad sectors 
increased their share of women's 
employment between 1983 and 
1991 in 7 ofthe 12 Member States, 
despite the slow growth of employ­
ment in distribution. Significantly, 
the largest increases occurred in 
Greece, Italy, Germany and France, 
four of the five countries where the 
share of these sectors was below the 
Community average in 1983, while 
Portugal, for which data are avail­
able only from 1986, also recorded a 
150 Employment in services in the Member States, 1983 and 
1991 
% total employed 
90 
80 
70 
60 
50 
40 
30 
20 
10 
0 
P IRL D E GR E12 F UK I DK B L NL P IRL D E GR E12 F UK I DK B L NL 
Men Women 
-167 
Chapter 6 Women in employment 
151 Sectoral employment of men and women in the 
Community, 1991 
0 5 - 10 15 20 25 30 35 
Energy & water 
Construction 
Chemical, mining 
Transport & communications 
Engineering, metals 
Agriculture 
Public administration 
Banking, business services 
Textiles, clothing, other 
Distribution, hotels 
Health, education, other 
Energy & water 
Construction 
Chemical, mining 
Transport & communications 
Engineering, metals 
Agriculture 
Public administration 
Banking, business services 
Textiles, clothing, other 
Distribution, hotels 
Health, education, other Women 
10 15 20 25 30 35 
% total employment 
152 Women working in other services and distribution in 
the Member States, 1983 and 1991 
% employed women Other Services H Distribution significant increase over this shor­
ter period. 
At the same time, apart from 
Spain, the six countries in which 
these sectors were most important 
as employers of women all experi­
enced a reduction in their share of 
female jobs over this period. The 
concentration of women's employ­
ment, therefore, declined in these 
five countries. Indeed in three of 
them, the Netherlands, Denmark 
and Luxembourg, even the propor­
tion of women employed in health, 
education and other services de­
clined between 1983 and 1991 — as 
it did also in Spain between 1986 
and 1991. 
Occupational divisions 
in women's employment 
At the occupational level, two 
trends are evident. A significant 
proportion of women are becoming 
better educated, acquiring more 
qualifications and are increasing 
their share of senior positions, but 
they remain concentrated in public 
sector professional jobs, such as 
teaching, where they have an 
opportunity of using their intellec­
tual or scientific abilities. At the 
same time, there has been a sub­
stantial increase in the number of 
women employed in lower level ac­
tivities, particularly clerical and 
service jobs. 
These two trends are causing a 
widening gulf between women at 
different levels of the labour mar­
ket. For the first group of women, 
opportunities for enhancing their 
job satisfaction and for increasing 
their responsibilities are expan­
ding. The pattern of their careers 
is, therefore, becoming more like 
that of men and less like that of 
other women — which is reflected 
in the marked differences in activ-
168 
Chapter 6 Women in employment 
ity rates between the two groups of 
women noted above. 
By contrast, for other, less well-edu­
cated and qualified women there is 
much less evidence of change. Their 
working careers are much more 
likely to be interrupted by family 
responsibilities and their career 
development is more likely to differ 
from that of men in similar types 
of job. 
The true nature of the division be­
tween men's and women's jobs only 
emerges from a detailed examin­
ation of particular occupations or 
professions. Teaching is one area 
where studies have been under­
taken which show such a division, 
though it is important to recognise 
that teaching may not be repre­
sentative of the position in other 
activities. 
In the Community as a whole, 
around 10% of women in employ­
ment worked in education and in all 
countries, except for the Nether­
lands, there were more women 
employed in this sector than men. 
However, despite the fact that sys­
tems of education differ markedly 
between Member States, the same 
pattern of employment is evident in 
all of them. With few exceptions, the 
divisions between the jobs predomi­
nantly performed by women and 
those which are mainly a male 
preserve are very similar in the dif­
ferent countries. The pattern of 
segregation is as follows: 
• pre-school teaching is almost 
exclusively a task performed by 
women, with the proportion of 
women teachers varying be­
tween 94% and 100% in the 
Member States; 
• primary school teaching is 
also predominantly undertaken 
by women, women teachers accounting for around 65% of 
the total in most countries and 
for as much as 90% in Italy and 
Portugal; 
• . secondary school teaching is 
divided fairly evenly between 
men and women, though in 
Italy and Portugal, the share of 
women teachers is over 60% 
and in the Netherlands, only 
around 30%; 
• higher education is predomi­
nantly a male preserve, with 
women filling only around 25% 
or less of jobs in most countries 
(Graph 153). 
This pattern of demarcation, with 
men firmly in control of the higher 
echelons of the teaching pro­
fession, illustrates very well the 
situation in a number of areas and 
reflects the differential values and 
status, as well as salary levels, accorded to men's and women's 
jobs. 
Nevertheless, despite the growth of 
women's participation in the labour 
force and the inroads that they have 
made into some occupations, dis­
tinct boundaries still exist between 
men's and women's jobs, with many 
clerical and service activities hav­
ing become even more the preserve 
of women over the past decade. 
The concentration of women in ser­
vices, which for some time have 
been the only area of significant job 
creation, has facilitated the growth 
of importance of women in the la­
bour force. It has also protected a 
large number from the effects of 
economic recession and job loss, 
though at the expense of increasing 
job insecurity and denigration of 
skills. But their position is not in­
vulnerable. The structural changes 
which are in prospect in many 
153 Women in teaching in the Member States, circa 1989-91 
% teachers 
100 r 
80 h 
60 r 
40 
20 Primary • Secondary ill Tertiary 100 
80 
60 
A 40 
I 20 
DK NL D IRL GR F I B P E UK DK NL D IRL GR F 
L no data, DK data for primary only P E UK DK NL D IRL GR F 
169-
Chapter 6 Women in employment 
service activities, particularly 
as computerisation spreads and 
innovations are made in communi­
cations, threatens to destroy many 
of the jobs now performed by 
women. 
At the same time, the division 
between men and women in em­
ployment is a major reason for the 
persistence of significant dis­
parities in wage levels. Although 
the axiom of "equal pay for equal 
work" commands general support 
within the Community, its effec­
tiveness will inevitably be limited 
while the actual jobs performed re­
main so unevenly distributed and 
while different values are placed on 
apparently similar types of job done 
by men and women. 
170-
Employment policies 
Part III Employment policies 
Chapter 7 Employment protection and labour force adjustment in 
the Member States 
Chapter 8 The Community Employment Framework 
171-
Employment policies 
172 
Chapter 7 Employment protection and labour force adjustment in the Member States 
Chapter 7 Employment protection and labour force 
adjustment in the Member States 
Restrictions on the ability of firms to hire and fire labour 
vary significantly between Member States. Despite the trend 
towards liberalisation, there have been few changes in the 
constraints on the freedom of action of employers over the 
past decade. 
Although employment protection 
policies have been the subject of 
much controversy — and are likely 
to be increasingly so as the present 
recession persists — relatively little 
is known in practice about the im­
portance and impact of these 
regulations across the Community 
as a whole. 
The aim of this chapter is to com­
pare the employment protection 
policies which exist in different 
Member States, to survey dif­
ferences and similarities in 
regulations and attempt to assess 
their effect. It examines, in particu­
lar, how these policies have been 
modified in the face of the 
widespread tendency towards de­
regulation, which has occurred in 
many parts of the Community over 
the past decade. Using data from 
the Community Labour Force 
Survey, it analyses differences in 
labour force adjustment patterns 
and trends in temporary employ­
ment. It also considers the effect of 
employment protection regulations 
in relation to expenditure on active 
labour market policies. 
Employment protection regulations 
consist of both individual safe­
guards against unfair dismissal and special procedures relating to col­
lective, or mass, redundancies — 
whether based on law or collective 
agreement — which restrict the 
freedom of firms to dismiss 
workers. They include, for 
example, prior consultation with 
trade unions or works councils, no­
tification of dismissal to the public 
authorities, the right of appeal-
against unfair dismissal and 
special protection for certain 
groups (such as pregnant women 
and the disabled). They also 
include provisions specifying 
periods of notice and severance 
pay arrangements. 
They include, in addition, regula­
tions on fixed-term, temporary and 
other atypical forms of employment, 
which determine the scope for la­
bour force flexibility, and which 
have been a primary focus of de­
regulation. These various aspects 
are discussed in turn below. Al­
though such measures as health 
and safety regulations, child labour 
laws and minimum wage legislation 
complement employment protec­
tion in a broad sense and should 
also be considered in any full assess­
ment of the regulatory framework, 
they are outside the scope of this 
chapter. While a major aim of employment 
protection regulations is to protect 
against unfair dismissal and, in­
creasingly, to promote alternatives 
to redundancy, by constraining the 
freedom of firms to reduce their 
workforces, they may impose con­
siderable costs on them, especially 
during periods of economic re­
cession. 
Much of the debate in this area 
has, therefore, focused on the al­
legedly adverse effects on the 
hiring policy of firms and on the 
efficient functioning of the labour 
market. Because of regulations, it 
is argued that firms are likely to be 
discouraged from taking on new 
employees and encouraged to 
make more use of casual workers 
as well as to discriminate against 
women, the handicapped or older 
people who might enjoy special 
protection against dismissal. On 
the same line of argument, re­
gulations might reduce labour 
mobility, increase labour market 
segmentation — between those 
covered by protection and those not 
— and prolong the average dura­
tion of unemployment. 
As against these concerns, it has 
also been argued that employment 
173-
Chapter 7 Employment protection and labour force adjustment in the Member States 
protection can potentially have 
beneficial effects. Apart from its 
effect in deterring unfair dismissal 
and promoting equity, regulations 
arguably correct the imbalance in 
the labour market between the 
power of employers and employees 
and so create the preconditions for 
efficient market transactions. 
Similarly, it is argued, in an unre­
stricted labour market the full 
costs of layoffs to individuals and 
communities are not adequately 
taken into consideration and to 
some extent regulations force firms 
to take more account of these when 
deciding their employment policy. 
At the same time, regulations 
which impose significant non-wage 
labour costs on firms and national 
economies may cause concern that 
Member States with more strin­
gent employment protection 
regimes may be put at a competi­
tive disadvantage. Unfair dismissal 
procedures 
While the stringency of regulations 
and sanctions differ, sometimes 
markedly, across the Community 
all Member States provide workers 
with some form of statutory right 
against unfair dismissal. Most 
Member States require that, when 
employees are dismissed, they are 
given a written statement of the 
reasons (which can serve as the 
basis for a subsequent unfair dis­
missal claim) or that employers 
consult in advance with worker 
representatives. Three countries 
— Denmark, Portugal and Spain 
— require both, while only one 
country — the Netherlands — still 
requires prior administrative 
authorisation even in cases of indi­
vidual dismissal. In all other 
Member States some form of mon­
etary compensation is usual, 
154 Notice and severance entitlements in the Member 
States, 1989-90 
Average weeks of pay 
50 
Total 
40 r H Blue collar workers 
White collar workers 
30 
20 h 
10 -i 50 
40 
30 
20 
10 though there are large differences 
in the maximum statutory 
amounts — which vary from six 
months in Belgium to more than 
three years in Spain. In seven 
countries, severance payments are 
mandatory either for all cases 
except summary dismissals (Den­
mark, France, Greece, Italy and 
Spain) or for those made redun­
dant (Ireland and the UK). 
In general, the extent of protection 
depends on age and length of ser­
vice. In a number of countries, 
workers have to serve a probation­
ary or qualifying period before 
being eligible for protection (eg six 
months in Germany and two years 
in the UK), while entitlement 
to compensation for unfair dis­
missal increases with the time 
spent in the job, and occasionally 
with age. 
In many Member States, unfairly 
dismissed employees may also in 
principle be able to claim reinstate­
ment, although this right is rarely 
exercised in practice, except in 
Italy. 
Collective 
redundancy 
procedures 
There is more similarity across the 
Community as regards the proce­
dures relating to collective 
redundancies. Special regulations 
on this exist in all Member States. 
All require prior consultation with 
employee representatives and 
that advance notice of mass redun­
dancies is given to labour market 
authorities. This uniformity is pri­
marily a reflection of Member 
States complying with the 
Community directive on this 
(EC Council Directive 75/129 of 
17 February 1975). 
174-
Chapter 7 Employment protection and labour force adjustment in the Member States 
Under this directive, Member 
States are required to establish a 
statutory consultation procedure 
for the purpose of avoiding proposed 
redundancies or alleviating their 
impact. The employer is not only 
required to notify and consult with 
employee representatives but also 
to provide them with all necessary 
information (in written form) on the 
number of dismissals, the reasons 
for them, the timetable and so on, 
and to communicate the same infor­
mation to national labour market 
authorities. The directive also re­
quires a delay of at least 30 days 
before the dismissals take effect. 
Although not required by the EC 
directive, all Member States, apart 
from Germany, provide for statu­
tory redundancy payments, and in 
Germany obligatory "social plans", 
in which severance payments are a 
key feature, are partially equival­
ent. The main difference between 
Member States is in the definition 
of mass redundancies to which the 
special regulations apply. In 
France, Portugal and Spain, the de­
finition is narrower than the EC 
minimum specified in the directive 
(at least 10 dismissals in estab­
lishments with from 20 to 99 
employees, 10% in firms with 100 to 
299 and at least 30 in larger firms). 
Four countries — the Netherlands, 
Greece, Portugal and Spain — 
moreover, go significantly beyond 
the directive in requiring not only 
prior notification but also prior 
authorisation of mass dismissals by 
the relevant authorities. 
Although this is a policy area in 
which Community-level regula­
tions have established meaningful 
international standards, major 
differences in the stringency of pro­
cedures still exist. Moreover, since 
in practice regulations primarily 
affect larger, and internationally 
mobile, firms, their potential impact may become an increasingly 
sensitive issue. 
Notice and severance 
requirements 
Mandatory periods of notice and 
severance payments are potentially 
an important constraint on labour 
force adjustment because of the 
possible costs they impose on firms. 
Unlike unfair dismissal procedures, 
their cost can be compared between 
countries in terms of weeks of pay. 
The calculation of an index, based 
on the sum of weeks of pay due 
either in the form of severance pay 
or working out a period of notice, 
shows that across the Community 
as a whole the (unweighted) aver­
age cost amounted to around 22 
weeks pay in 1989-90 (Graph 154 
— see Box for details ofthe calcula­
tion of the index). (It should be 
noted that though periods of notice 
and severance pay are combined 
here, their effect on costs may be 
quite different insofar as the firm 
can at least obtain some benefit 
from the work performed during a 
period of notice.) 
There are, however, striking dif­
ferences between different groups. 
Whereas for white collar workers 
the average is 26 weeks' pay, it is 
only 16 weeks for blue collar 
workers. This difference is entirely 
attributable to the employment pro­
tection regimes in five of the ten 
Member States covered — Belgium, 
Denmark, Germany, Greece and 
Italy — in which white collar em­
ployees enjoy markedly higher 
levels of statutory protection. In 
four of the other countries — Ire­
land, the Netherlands, Spain and 
the UK — the two groups are 
treated the same and only France 
provides better protection for blue 
than white collar workers. Calculation 
of an index 
of costs of 
severance 
The calculation of the 
index referred to in the 
text is based on the 
sum of weeks of pay 
due either in the form 
of severance pay or 
from working out a 
period of notice in each 
of the Member States. 
Special provisions ap­
plicable to collective 
redundancies are not 
included. Since notice 
and severance pay re­
quirements vary with 
age, tenure and em­
ployment status there 
are in practice differ­
ent levels of protection 
for different kinds of 
employee. For each 
country, the data on 
weeks of pay incorpor­
ated in the index 
represent averages for 
three age groups 
(young, prime age and 
older employees) and 
separate indices are 
calculated for white 
and blue collar em­
ployees. The indices 
relate only to statutory 
regulations and those 
based on nationally 
applicable collective 
agreements. They, 
therefore, represent 
national minimum 
rather than actual 
levels of protection. 
Nevertheless, it is 
plausible to assume 
that the indices reflect 
broad national dif­
ferences in this aspect 
of employment protec­
tion. 
175 
Chapter 7 Employment protection and labour force adjustment in the Member States 
155 Notice and severance entitlements by age-group in the 
Member States, 1989-90 
90 Average weeks of pay 
80 
70 -
60 -
50 -n 90 
Young (15-24) 
Prime age (25-49) 
Older (50+ 
Regulations on fixed-term contracts 
Country 
B 
DK 
D 
E 
F 
GR 
IRE 
I 
L 
NL 
P 
UK Restrictions 
No 
No 
Yes 
Yes 
Yes 
Yes 
No 
Yes 
Yes 
No 
Yes 
No Max. Duration 
(incl. renewals) 
no limit 
no limit 
no limit 
36 months 
18 months 
no limit 
no limit 
6-12 months 
24 months 
no limit 
36 months 
no limit Limitations 
on renewals 
no renewal 
no limit 
no limit 
no limit 
once 
twice 
no limit 
once 
twice 
once 
twice 
no limit The second and most universal fea­
ture is the greater protection 
afforded to more senior workers in 
all national employment protection 
regimes, this being especially so in 
Italy and Greece — in the former, 
someone aged 50 or over with a com­
parable length of service being 
entitled to 85 weeks' pay on average 
if made redundant (Graph 155). For 
young employees of under 25, aver­
age entitlement was less than 5 
weeks' pay in six Member States, 
though over 12 weeks in Spain. 
Temporary 
employment 
Fixed-term contracts give enter­
prises the possibility of engaging 
workers for a temporary period and, 
therefore, of by-passing normal dis­
missal procedures or severance 
requirements. While there are often 
sound reasons for the choice of 
fixed-term rather than permanent 
employment contracts, they are, 
nevertheless, potentially open to 
abuse, precisely because they en­
able companies to avoid the 
obligations imposed on them by the 
latter. A number of countries have, 
therefore, introduced measures to 
prevent such abuse (see Table). 
Since Denmark, Ireland and the UK 
have relatively weak employment 
protection regulations, it is not sur­
prising that they do not regulate 
fixed-term contracts. (In Ireland, 
however, the Unfair Dismissals 
(Amendment) Bill 1993, which is 
likely to be enacted with effect from 
October 1993, will extend to certain 
employees whose fixed-term con­
tracts are not renewed.) All other 
countries, except Belgium and 
the Netherlands, attempt to 
restrict the circumstances under 
which fixed-term contracts can be 
used and all except Germany and 
Spain limit the number of times a 
176 
Chapter 7 Employment protection and labour force adjustment in the Member States 
contract can be renewed (though in 
Spain, a fixed-term contract cannot 
be renewed for more than three 
years). 
In Belgium and the Netherlands, it 
is probable that regulation is exer­
cised through collective bargaining 
— which is important at a sectoral 
level in both countries — rather 
than by legislation. 
Moreover in both countries, unlike 
in Denmark, Ireland and the UK, 
there are limits on the renewal of 
fixed-term contracts. In Belgium, 
no renewal at all is allowed except 
in special circumstances, while in 
the Netherlands, a contract can be 
renewed only once (and then can 
only be terminated by authorisation 
ofthe regional labour office). 
Recent 
national trends 
The effect of the tendency towards 
the deregulation of employment 
protection has differed significantly 
across the Community over the 
past decade (see Box). In brief, 
there have been substantial 
changes in seven Member States, 
the five largest countries plus Por­
tugal and Ireland. 
No uniform pattern of liberalisa­
tion, however, is evident. In only 
three countries have employment 
regulations been weakened either 
by eliminating the requirement 
that authorisation for redundancies 
needs to be obtained from the gov­
ernment (France), or by formally 
permitting dismissals for economic 
reasons (Portugal), or by limiting 
their coverage (the UK). In three 
countries, employment protection 
was actually strengthened, by 
extending coverage to smaller en­
terprises (Italy), by increasing 
sanctions (Spain) or by extending Deregulation of employment 
protection in Member States 
France shows the most erratic pattern of develop­
ment due largely to shifts in the composition of 
government during the 1980s. The focus of deregu­
lation — and, after 1989, "reregulation" — has 
been on redundancies and fixed-term contracts. 
The requirement for prior official authorisation of 
all dismissals for economic reasons (redundancy) 
was abolished after the change of government in 
1986. Obligations were also placed on firms with 
50 or more employees to formulate a "social plan" 
whenever 10 or more were made redundant, and a 
general requirement was introduced that all em­
ployees losing their jobs be offered an opportunity 
to undergo training ("contrat de conversion"). After 
another change in government in 1989, there was 
some reversal of policy, the timetable for redun­
dancy procedures being extended and the role of 
public authorities strengthened. This trend to­
wards "reregulation" continued in January 1993, 
in response to the recession, with the introduction 
of a requirement for prior official approval of social 
plans in the event of collective redundancies. 
Regulation of temporary work has fluctuated in a 
similar way. After initially attempting to reverse 
the trend towards temporary employment, 
the socialist government in 1985 introduced 
new legislation extending the maximum duration 
of temporary employment and expanding the 
reasons justifying exceptions to permanent em­
ployment contracts. In 1986, the new centre-right 
government introduced further liberalisation by 
eliminating any requirement for such contracts to 
be justified in terms of specified circumstances as 
well as extending their maximum duration to two 
years. In 1990, after another change in govern­
ment, fixed-term contracts had once more to be 
justified in terms of a limited number of specified 
circumstances. 
By contrast, deregulation tendencies have been 
weak in Germany and largely confined to limited 
liberalisation of fixed-term employment contracts. 
Whereas before, fixed-term contracts were re­
stricted to certain well-defined situations, such as 
seasonal work, temporary replacement of an ab­
sent employee and temporary peaks in demand, 
the 1985 Employment Promotion Act permits their 
use without any reference to special justifying cir­
cumstances. Originally enacted as a time-limited 
measure, the legislation was extended in 1990 for 
an additional six years until the end of 1995. 
-177-
Chapter 7 Employment protection and labour force adjustment in the Member States 
Although the 1985 Act was controversial, its im­
pact appears to have been less than was 
anticipated. 
Italy, which has the most highly regulated labour 
market in the Community, has strengthened em­
ployment protection further in recent years. In 
1990, unfair dismissal regulations dating from 
the late 1960s were extended to small firms. 
Deregulation in Italy has mainly been confined to 
legitimising fixed-term contracts for young 
people of 15 to 29 under the guise of training 
contracts. 
Ireland also strengthened employment protec­
tion in 1991 through the Worker Protection 
(Regular Part-time Employees) Act which ex­
tended protection to part-time employees. 
The UK shows the most consistent trend towards 
liberalisation of unfair dismissal regulations, 
largely in the form of extending the qualifying 
period for unfair dismissal from 26 to 105 weeks 
of continuous employment. There have also been 
technical changes in procedures to discourage 
frivolous claims. Regulations on to collective redun­
dancies have been unaffected, while temporary and 
other atypical forms of employment have never 
been subject to restraint. 
Spain and Portugal, with relatively strong 
protection against dismissal for permanent em­
ployees, have liberalised the use of fixed-term 
contracts. In Spain, beginning in 1980, the cir­
cumstances in which fixed-term contracts are 
permissible was progressively expanded and by 
the late 1980s, Spain had by far the highest 
proportion of employees on such contracts 
(around 25%) in the Community. Prior approval 
of government for collective redundancies was a 
continuing requirement and, in 1990, the already 
high maximum on monetary compensation for 
unfair dismissal was increased from 42 to 54 
months of pay. 
In Portugal, dismissal without "just cause" is 
prohibited and until recently was effectively 
limited to cases of personal misconduct. In prac­
tice, employers make liberal use of fixed-term 
contracts to circumvent restrictions and Portugal 
is second only to Spain in the proportion of em­
ployment covered by these. In 1989, reformers 
secured a statutory basis for dismissal for econ­
omic reasons, while at the same time new 
limitations were imposed on the use of fixed-term 
contracts (maximum duration of 3 years with two 
renewals at most). protective legislation to part-time 
employees (Ireland). 
Perhaps the most significant com­
mon pattern is not the weakening of 
regulations per se but the liberalisa­
tion of regulations governing the 
use of temporary employment as a 
means of achieving labour force 
flexibility. This was the case in five 
of the seven countries where signi­
ficant changes occurred, Ireland 
and the UK being exceptions, 
though in the latter the extension of 
the qualifying period for unfair dis­
missal to two years had the same 
effect by reducing the effective 
coverage of regulations. 
The impact of 
employment 
protection on 
employers 
Dismissal procedures cannot satis­
factorily be assessed simply by 
examining regulations. Despite 
the detailed differences described 
above, regulations on unfair dis­
missal or collective redundancies 
are broadly similar across 
the Community, especially as com­
pared with laissez-faire regimes 
such as the US. This formal 
similarity may, however, be 
misleading, since judicial interpre­
tation and industrial relations 
practice may differ markedly. 
Moreover, statutory provisions are 
supplemented in all countries by 
collective agreements on employ­
ment protection, which can also 
vary between sectors. Statutory 
regulations are, however, a useful 
indicator of national differences in 
minimum standards. 
Employer surveys provide a basis 
for comparing the perceived impact 
on employment protection regula­
tions. Ad hoc surveys of employers 
178 
Chapter 7 Employment protection and labour force adjustment in the Member States 
sponsored by the Commission in 
1985 and 1989, included questions 
on the importance of regulatory re­
straints on the hiring and firing of 
workers (see Box). The answers 
show that employers' perceptions of 
the severity ofthe restraints tended 
either to remain largely unchanged 
or to diminish between the two 
years, though the rank order of 
countries remained much the same 
(Graph 156). The Netherlands is the 
principal exception, with restric­
tions becoming much more 
stringent in the eyes of employers 
even though there were no substan­
tial changes in regulations. While 
the perceived stringency of regula­
tions also increased in the UK 
between these two years, it re­
mained significantly less than 
anywhere else in the Community. 
The views of employers largely con­
firm the conventional wisdom, in 
the sense that restrictions are re­
garded as most severe in Italy and 
least severe in the UK, with France 
and Germany in between. The lib­
eralisation of French employment 
protection policies in the latter half 
of the 1980s, seems to be reflected 
in a moderation of employers' per­
ceptions in France ofthe severity of 
restrictions in 1989 as compared 
with 1985. 
The incidence 
of involuntary 
job losses 
In the last resort the effect of em­
ployment protection regulations on 
employers and the functioning of 
the labour market can only really be 
assessed by examining how firms, 
and individuals, behave in practice. 
Unfortunately, there is little direct 
evidence on this — certainly none 
which is comparable between Mem­
ber States. There is no alternative, therefore, but to resort to indirect 
information. 
One source of relevant data is the 
Community Labour Force Survey 
which gives details ofthe number of 
people who lost their job during the 
preceding six months and the rea­
sons for this. Relating these figures 
to the numbers employed gives 
some indication ofthe rate of invol­
untary job loss in different parts of 
the Community. 
The results, however, need to be 
treated with a good deal of caution. 
In the first place, they relate only to 
those people who, when questioned, 
were not working and either were 
unemployed or had withdrawn from 
the labour market. They, therefore, 
exclude all those who had recently 
lost a job but had found another. In 
periods of employment growth, such 
people are likely to outnumber, per-
haps considerably, those not 
working. 
Secondly, the scale of job losses will 
clearly be affected by the rate of 
economic growth, which can vary — 
sometimes significantly — across 
the Community. In order to com­
pare rates of involuntary job loss on 
a common basis, the LFS results 
should be corrected for this in­
fluence. This is not easy to do, but 
to reduce its importance, the results 
examined here are for 1989, a year 
of reasonably high economic growth 
in most parts of the Community. 
The main exception was Denmark, 
where GDP growth was only just 
over 1%, which is reflected in the 
comparative figures for job losses. 
Nevertheless, for the other Member 
States, there was significant vari­
ation in the rate of involuntary job 
loss, whether caused by dismissal or 
a fixed-term contract coming to an 
end. In Spain, in particular, where 
the rate of job loss was higher than Indes of 
employers' 
perceptions 
of regulatory 
restrictions 
The index is derived 
from the results of two 
ad hoc surveys of busi­
nesses conducted in 
1985 and 1989. 
Employers were asked 
to assess the import­
ance of ^insufficient 
flexibility in hiring and 
shedding labour* as a 
reason for "not being 
able to employ more 
people". 
The possible responses 
were: 
• "very important", 
• "important" and 
• "not so important". 
The index was com­
piled by assigning a 
weight of 2 to the per­
centage of employers 
giving the first answer 
and a weight of 1 to the 
percentage giving the 
second answer (eg if 
40% of employers con­
sidered regulations to 
be very important and 
30% considered them 
important, the value of 
Hie index would be 
110). 
-179-
Chapter 7 Employment protection and labour force adjustment in the Member States 
156 Employers' perceptions of employment protection 
regulations in the Member States, 1985 and 1989 
Index of severity 
160 r -i 160 
UK DK IRL GR P D B F E NL I 
No data; E & P 1985; DK 1989; 11985 & 1989 
157 Relative risk of involuntary job loss in the Member 
States, 1989 
4 r EC average » 1 
T 4 
A 3 anywhere else in the Community 
for all groups — men and women, 
young and old — despite relatively 
high GDP growth, the risk of redun­
dancy was some 6 times higher than 
in Germany, Belgium or the 
Netherlands (Graph 157). 
There is also significant variation 
between Member States in the 
relative importance of dismissals as 
opposed to the expiry of fixed-term 
contracts. In Denmark, the level of 
both was relatively high in 1989, 
whereas in Germany, Belgium, 
Italy and the Netherlands, they 
were both low. In Spain and Portu­
gal, there was a high rate of expiry 
of fixed-term contracts but low dis­
missal rates. By contrast, in Ireland 
dismissals were high, but a below 
average proportion of job losses was 
due to temporary work coming to an 
end. 
These results generally correspond 
with what would be expected given 
the differences in institutional 
regimes. The principal exceptions 
are Belgium and the Netherlands 
where there is.little statutory regu­
lation of fixed-term contracts but 
where this form of employment ad­
justment is relatively little used 
(possibly because it is constrained 
by collective bargaining, as noted 
above). 
The other exception is the UK 
where despite the laxity of restric­
tions, the dismissal rate is low. 
There appear to be two possible rea­
sons for this. The most plausible is 
that Spring 1989, when the LFS 
was conducted, was a period of high 
economic activity which would have 
naturally depressed the rate of job 
loss, especially since the UK dis­
missal rate is particularly sensitive 
to variations in activity. In all the 
other years between 1983 and 1991, 
the rate of involuntary job loss in 
the UK was higher. A second 
180-
Chapter 7 Employment protection and labour force adjustment in the Member States 
possible reason is that a relatively 
high proportion of job losses may 
have taken the form of voluntary 
redundancies which may not be re­
ported as dismissals in the LFS. 
Although, other things being equal, 
countries with more stringent em­
ployment protection regimes, as 
perceived by employers, might be 
expected to have lower rates of in­
voluntary job loss, this is not 
reflected in the LFS data. The pic­
ture is slightly different, however, if 
job losses due to dismissal are dis­
tinguished from those due to expiry 
of fixed-term contracts. While there 
is no clear association between the 
severity of employment protection 
and the latter, a negative relation­
ship emerges between this and the 
rate of dismissal (Graph 158). 
Growth of temporary 
employment 158 Employment protection and dismissals, 1989 
Dismissals (% employees) 
2.5 
1.5 
0.5 ADK 
A|RL 
AF 
AUK AGR 
AD A£ 
AB 
AP 
ANL 2.5 
1.5 
H 1 
0.5 
50 60 70 80 90 100 110 120 130 
Employment protection index 
As noted above, those countries 
which had tended to relax employ­
ment protection restrictions in the 
1980s, showed correspondingly 
high rates of expiry of fixed-term 
contracts in 1989. The impact of de­
regulation is also reflected in 
changes in the importance of tem­
porary employment in the Member 
States. 
In a few countries, where restric­
tions on fixed-term contracts were 
relaxed, their importance increased 
significantly over the 1980s. This is 
especially the case in Spain, where 
the share of employees in tempor­
ary jobs increased from 16% in 1987 
to 32% in 1991, and in France, 
where the rise was from 3% in 1983 
to 10% in 1991 (Graph 159). It also 
seems to be true of Portugal before 
1988, though no data exist for the 
years before 1986 to verify this (the 
share of temporary jobs rising from 
13% in 1986 to 16% in 1988). 159 Temporary employment in the Member States, 1983-1991 
% total employment 
40 r n 40 
181 
Chapter 7 Employment protection and labour force adjustment in the Member States 
160 Rates of dismissal and short-time working in the 
Member States, 1989 
% total employees 
3 r T 3 
161 Employment protection and early retirement rates, 
1989 
4 r Early retirement (% employees aged 49+) 
2 r 
1 r ANL 
A 3 
AB 
AD 
AF 
AE 
ADK 
AUK 
i AGR 
A|RLAp I -Li i_ A 1 
o 
50 60 70 80 90 100 110 120 130 
Employment protection index Although, with the exception of 
Spain and to a lesser extent Greece 
and Portugal (where they represent 
14-15% ofthe total), temporary jobs 
still account for a relatively small 
proportion ofthe total, in a number 
of Member States — France for 
example — they have come to be a 
significant form of entry into em­
ployment. (For firms with 50 or 
more employees in France, most 
new recruits start on fixed-term 
contracts.) 
Employment 
protection and 
labour market policy 
Employment protection regulations 
are just one aspect of labour market 
policy in Member States and have 
to be considered in conjunction with 
measures designed to deal with the 
problems posed by redundancy (by 
encouraging workers to retire early, 
by providing retraining oppor­
tunities and so on) as well as with 
measures designed to avoid them 
completely (such as by subsidising 
short-time working). 
Short-time 
working 
Most Member States provide sup­
port for temporary reductions in 
working time, whether achieved 
through short-time working or tem­
porary layoffs. LFS data on the 
reasons for respondents working 
less than normal hours provide 
some indication of the relative fre­
quency and scale of the use of 
variations in working-time as a 
mechanism for adjusting employ­
ment. 
In 1989, when economic activity 
was high in most countries, only a 
very small proportion of employees 
-182 
Chapter 7 Employment protection and labour force adjustment in the Member States 
worked less than normal hours as 
might be expected. Nevertheless, 
the numbers were significant in 
relation to the numbers made re­
dundant — in the Community as a 
whole one third as high and in Italy 
almost the same (Graph 160). 
Early retirement 
Since employment protection in 
many countries is especially signi­
ficant for older workers, the use of 
early retirement schemes might be 
expected to be an important means 
for firms in these countries to shed 
labour. LFS data for 1989 on those 
retiring early indicate some rela­
tionship between the numbers 
involved and the perceived se­
verity of employment protection, 
though this association seems to be 
confined to Northern Member 
States. In the Netherlands, Bel­
gium, France and Germany, where 
employment protection is regarded 
as relatively stringent, the propor­
tion of workers taking early 
retirement was well above that in 
the other countries (Graph 161). In 
Spain and Italy, however, where 
employment protection is also re­
garded as relatively stringent, 
early retirement was compara­
tively unimportant. 
Public expenditure on 
employment adjustment 
Examination of the patterns of la­
bour market expenditure in the four 
largest Member States tends to in­
dicate that the constraints imposed 
on firms by employment protection 
regulations are in large measure 
offset by spending on employment 
adjustment measures. 
This is particularly true of France 
where such expenditure over the 
period 1985 to 1988 was both higher 
than in the other three countries, at over 2% of GDP, and accounted for 
a much larger share of total labour 
market spending (74%) (Graph 
162). Support for firms and indus­
tries undergoing restructuring was 
especially important, exceeding ex­
penditure on other active measures 
by more than five to one, and taking 
the form predominantly of early re­
tirement. 
While labour market expenditure in 
Italy was below the Community 
average in this period, at 1% of GDP 
(largely because of the small 
amount of spending on unemploy­
ment benefits which are funded in 
a different way to the rest of the 
Community), a relatively high 
proportion was directed at 
employment adjustment and, in 
particular, at firms and industries 
in economic difficulty. This took the 
form largely of temporary or short-
time working as well as special income maintenance and help for 
workers losing their jobs to find new 
ones. 
The UK had the lowest level of 
expenditure on employment adjust­
ment in relation both to GDP (V2%) 
and to total labour market spending 
(20%), with correspondingly rela­
tively high expenditure on problem 
groups. There is, therefore, in the 
UK a lack of both standard labour 
market schemes — almost all re­
sources being concentrated on 
problem groups — and special sup­
port for restructuring. Moreover, 
the UK is the only country of the 
three without a short-time working 
scheme to help firms restructure in­
ternally and avoid having to lay 
people off. 
In Germany, the ratio of expendi­
ture on employment adjustment to 
that on problem groups was lower 
162 Labour market programmes for displaced workers, 
average 1985-1988 
% GDP 
3 r, H Adjustment 
oriented Problem groups I Placement & 
administration 
I Special - external H Special - internal H Unemployment D Other 
benefits T 3 
D I UK 
All programmes D I UK 
Adjustment oriented 
183 
Chapter 7 Employment protection and labour force adjustment in the Member States 
than in France or Italy. Moreover, 
unlike in the other three countries, 
expenditure on standard active la­
bour measures exceeded that on 
support for firms and industries 
undergoing restructuring (by more 
than two to one), subsidies for 
short-time working being the main 
component of the latter. 
In the four countries, therefore, 
there is a positive relationship be­
tween the severity of employment 
protection regulations and public 
expenditure to support employ­
ment. The UK, with the weakest 
regulations, had by far the lowest 
expenditure and the least con­
centration on special support 
measures. By contrast in Italy, 
where employment protection regu­
lations were most restrictive, labour 
market expenditure was most 
concentrated on supporting 
employment restructuring. 
General 
conclusions 
Although regulations differ in de­
tail between Member States, there 
is a broad similarity in the systems 
of employment protection across the 
Community. All Member States 
provide statutory protection 
against unfair dismissal and the 
procedures relating to collective re­
dundancies are fairly uniform, 
partly as a result of Commission 
directives. 
In practice, the Member States can 
be divided into three groups in 
terms of the restrictions on firing 
workers, with Denmark, Ireland 
and the UK having the least restric-
tive regulations, Greece, the 
Netherlands, Portugal, Spain and 
Italy having the most restrictive 
and Belgium, France and Germany 
in between the two. This division is 
also consistent with evidence from surveys of employers' perceptions of 
the degree of restriction applying to 
them. 
It is noteworthy that the group 
with most restrictive regulations 
includes all the Southern Com­
munity countries, where labour 
costs are lower than in other Mem­
ber States — in some cases, by a 
considerable way. Moreover in 
three of these countries, Italy, 
Spain and Greece, the costs im­
posed on firms by statutory periods 
of notice and severance require­
ments are also relatively high. 
Regulations on unfair dismissal 
and collective redundancy were 
relatively unaffected by the trend 
towards deregulation in the 1980s. 
The main exception is the UK, 
where the proportion of employees 
entitled to claim unfair dismissal 
has been greatly reduced. In Italy, 
by contrast, the proportion has 
been increased by extending the 
coverage of regulations to small 
companies. On the other hand, in 
six countries — France, Germany, 
Italy, Spain, Portugal and the UK, 
it was made easier for firms to em­
ploy workers on a temporary basis. 
These differences in regulatory 
regimes are in some degree re­
flected in the data on involuntary 
job losses and the form which they 
take. 
In most parts of the Community, 
employment protection policies 
tend to be complemented by active 
labour market policies, which in 
the form of support through public 
expenditure, of employment ad­
justment and restructuring, go 
some way to compensating for the 
constraints and costs imposed by 
regulations. 
Increasingly the role of government 
in regulating the employment pol­
icy of firms and their working arrangements is likely to come into 
question in the Community, if the 
pressure for adaptability resulting 
from ever-increasing competition 
on world markets continues una­
bated. Job security has declined in 
virtually all sectors of the economy 
and even very large, established 
companies now find it difficult, if 
not impossible, to guarantee sta­
bility of employment. In countries 
like Italy and Spain, where there 
are extensive restrictions on the 
ability of firms to adjust their labour 
force, there are growing indications 
of concealed structural problems. 
Such problems do not necessarily 
imply that government regulation 
of employment should be 
abolished. They do imply, however, 
that the extent and nature of regu­
lations need to be continuously 
evaluated in the light of current 
economic and labour market real­
ities so that they do not unduly 
inhibit changes in working ar­
rangements which might be 
desirable. 
They also imply a need to review 
other aspects of government policy 
which affect employment beha­
viour and which impinge on 
employment protection regula­
tions. In particular, in countries 
where extensive, well-developed 
systems of social protection exist, 
firms are more able to adjust their 
labour force in response to market 
fluctuations knowing that the gov-
ernment will provide income 
support and assistance. In coun­
tries where social protection 
systems are less well developed — 
such as in the Southern Member 
States — firms, on the other hand, 
have been expected to provide sub­
stitute social support by retaining 
labour during periods of mar­
ket decline, and the restrictions 
imposed on employers are ration­
alised in these terms. 
184-
Chapter 7 Employment protection and labour force adjustment in the Member States 
These might simply be regarded as 
two alternative ways of dealing 
with the social consequences of fluc­
tuations in economic activity. The 
increasing pace of structural 
change, however, has highlighted 
the potential drawbacks of relying 
on employers effectively to provide 
income support — not least because 
it has tended to increase their re­
luctance to recruit other than on a 
temporary basis. 
185 
Chapter 7 Employment protection and labour force adjustment in the Member States 
- 186 
Chapter 8 The Community Employment Framework 
Chapter 8 The Community Employment Framework 
A primary policy aim ofthe Community is to create jobs. 
Much can be learned from the diverse experience of Member 
States in generating employment, though any common 
approach has to accommodate national differences 
in social, fiscal and labour market characteristics. 
Reducing unemployment to more 
acceptable levels is the major econ­
omic and social challenge facing the 
Community in the 1990s. As de­
scribed in Chapters 1 and 2 above, 
the average rate of unemployment 
has climbed above 10% and is set to 
continue increasing at least up to 
the second half of 1994. On present 
forecasts, the medium-term pros­
pects for any quick and significant 
reduction are not good and there is 
a serious risk that, without positive 
action, unemployment could re­
main at or above 10% for the 
remainder ofthe decade. 
The problem is not just to create 
enough jobs to provide work for the 
millions now unemployed. No less 
important is the need to generate 
employment opportunities for the 
even larger numbers who would like 
to work but do not enter the labour 
market at all because of the acute 
shortage of jobs. 
The scale of this underemployment 
was revealed in the 1980s when the 
creation of over 9 million additional 
jobs between 1985 and 1990 — more 
than at any time for 30 years — 
resulted in the numbers of unem­
ployed falling by only 3 million, still 
leaving over 12 million people, over 
8% of the workforce, out of work. 
Most of the new jobs during this period, therefore, went to people — 
notably women — either coming 
onto the labour market for the first 
time or returning after a spell of 
inactivity, attracted by the prospect 
of being able to find work. 
Comparisons of rates of employ­
ment between different parts ofthe 
Community, especially between the 
North and South, and between the 
Community and other developed 
parts ofthe world, show clearly that 
this potential workforce is still of 
sizable proportions (as shown in 
-Chapter 1). If the numbers in em­
ployment in the EFTA countries or 
the US or even in the more de­
veloped parts ofthe Community are 
any guide, then there could be 20 
million or more people — most of 
them women but also including 
many men — who would like the 
chance of working. This is in addi­
tion to those officially recorded as 
looking for a job. 
The challenge is not just about cre­
ating jobs per se. It is also about 
improving both the balance of em­
ployment opportunities between 
people who happen to live in differ­
ent parts ofthe Community and the 
access of disadvantaged social 
groups to jobs. It must also include 
improving the quality of the jobs 
which are created and eliminating the spectre of the working poor, 
which has never left some areas of 
the Community and which has re­
turned to others. 
Although, as shown in Chapter 5, 
the period of strong growth in the 
second half of the 1980s was accom­
panied by some convergence in 
income levels between the richer 
and poorer regions, this was not 
matched by a similar convergence 
in employment opportunities. On 
the contrary, the net addition to jobs 
over this period was less, on aver­
age, in the poorer, less developed 
regions than elsewhere in the Com­
munity. 
The Community fared little better 
in improving the position of disad-
vantaged social groups. The 
distribution of income seems, in­
deed, to have become more, rather 
than less, unequal along with em­
ployment opportunities, so that 
problems of social deprivation and 
exclusion were intensified. At the 
same time, many of the jobs created 
carried low rates of pay and poor 
working conditions. 
The Member States have sought, 
through common action at Com­
munity level, as well as through 
national action, to combat the com­
mon problems of inadequate and 
187-
Chapter 8 The Community Employment Framework 
unbalanced economic development, 
lack of jobs and high and rising un­
employment. 
The Single Market programme, 
through the removal of barriers to 
internal trade and competition, 
aims to strengthen economic perfor­
mance and enhance the potential 
for job creation. The moves towards 
monetary unification are intended 
as a further step in this direction. 
The creation and progressive ex­
pansion of the Structural Funds 
and the introduction of the new 
Cohesion Fund were conscious at­
tempts to achieve a more even 
distribution of growth and jobs 
across the Community. These ac­
tions were an explicit recognition of 
the responsibility of the richer na­
tions to assist the more 
disadvantaged areas to resolve 
their problems — an acceptance 
that the Community must act as a 
cohesive entity. 
The Community still has some way 
to go, however, if it is to meet the 
enormous challenge on jobs which it 
faces (as shown in Chapter 4). It has 
both to secure a higher, more stable 
and more sustainable rate of econ­
omic growth and ensure that this is 
more effectively translated into job 
opportunities in all areas. 
This chapter reproduces the Com­
munication which was adopted by 
the Commission on 26 May 1993 
and which provides a framework for 
addressing the employment and un­
employment problems of the 
Community. This Communication 
is an attempt to respond to the na­
ture and scale of the problem as 
described in this report, taking ac­
count of the diversity which exists 
across the Community and the con­
sequent need to tailor policy 
implementation to differences in 
local circumstances. In addition, the heads of state or government, meet­
ing in Copenhagen, requested the 
Commission to prepare a White 
Paper on the issues of employment, 
growth and competitiveness. These 
two initiatives are complementary. 
The purpose of this employment 
initiative is to put in place a frame­
work and strategic process for more 
concerted and collective action — by 
all the Community institutions and 
the Member States — towards more 
employment-intensive growth. The 
aim is to focus on the employment 
problem, not just the unemploy­
ment problem. It is not only a 
strategy to help those without work 
to enter or re-enter the labour mar­
ket, although this is a major 
element ofthe initiative. It is also a 
strategy to provide jobs for all those 
who would otherwise like to work. 
The fundamental thrust ofthe Em­
ployment Framework is to promote 
and develop a more employment-in­
tensive pattern of production in the 
European Community, in order to 
increase the numbers of people 
employed, at whatever rate of econ­
omic growth the Community can 
achieve. 
The Employment Framework sees 
employment-intensity in a double 
sense. Firstly, it focuses on the 
scope for widening access to avail­
able employment, along the lines of 
certain Member States' experi­
ences. Such changes effectively 
involve a re-distribution of income, 
as well as a redistribution of jobs. 
This is a static and a dynamic con­
cept. As the economy develops, it is 
expected that economic growth will 
result in a widening of employment 
opportunities rather than merely 
increased incomes for those in em­
ployment. 
The second aspect concerns not only 
the redistribution of employment opportunities, but the possibility of 
developing a more labour-intensive 
pattern of production, at least in 
certain parts of the economy, in 
order to employ potential labour re­
sources more fully. 
The labour market — like all other 
markets — embodies a series of in­
stitutional and structural features 
which influence its workings. Fir­
stly, there are constraints on what 
can and cannot be done in respect of 
particular categories of people — 
young, older people and, to some 
extent, women. This is often en­
shrined in government legislation 
setting minimum standards for a 
variety of factors concerned with 
the safety, health and welfare of 
those at work. 
In addition, there are the traditions 
regarding the way economic life is 
organised. While some of this may 
be set out in agreements negotiated 
between employers and employees, 
the culture of work in different 
economies and societies extends far 
beyond the issues generally ad­
dressed in collective bargaining. 
There are also the financial factors. 
Labour costs relative to the value 
added produced by employees is 
clearly the major factor influencing 
employers' hiring decisions. How­
ever, such costs include not only 
wages, but also the taxation and 
other costs commonly imposed on 
employers to fund social insurance 
schemes — unemployment, pen­
sions, sickness etc — or to 
contribute to the general funding of 
government expenditure. The cost 
of other welfare provisions by firms 
can also be significant. 
At the same time, actual and poten­
tial employees will be influenced in 
their attitudes to jobs and employ­
ment generally by a variety of 
factors — in particular, by the effect 
188 
Chapter 8 The Community Employment Framework 
of taxation on their gross pay, by 
any alternatives to paid employ­
ment open to them, and by their 
family circumstances. 
Many people are currently inactive 
through no wish of their own. For 
some, leisure activities or doing un­
paid work for themselves or others 
are alternatives to work. Insofar as 
systems of social protection allow, 
some others — notably those with 
low earning capacity, those with de­
pendents, or those with very low 
income aspirations — may become, 
or remain, reliant on social trans­
fers as a source of primary income 
instead of seeking paid employ­
ment. 
The overall result is that both em­
ployer and employee decisions with 
respect to job offers will be signifi­
cantly influenced by: 
• the legislative environment 
• the cultural and social environ­
ment 
• the financial environment. 
The Employment Framework seeks 
to address all three kinds of issue. 
It is recognised that, while employ­
ment is the primary goal, it can 
never be pursued at all costs. And, 
of course, longer term objectives — 
to achieve a sustainable pattern of 
economic development with adequ­
ate job opportunities for those who 
want to work — need to be balanced 
against the short-run objectives of 
reducing unemployment as quickly 
as possible. 
The Employment Framework is 
therefore directed, not only at the 
incentive structures that exist in 
and around the labour market, but 
also at other factors which can in­
fluence the effectiveness of the 
labour market. These include: 
• the extent and quality of infor­
mation available to employers, 
employees and the managers of 
the education and training sys­
tems on the kinds of new jobs 
that are being generated by 
economic progress and chang­
ing needs; 
• the implications of an increas­
ing desire for the devolution 
of decision-making — accom­
modating variations in local 
circumstances and local aspira­
tions — for the establishment 
of a stronger Community econ­
omic, monetary and social 
framework aimed at achieving 
employment growth, as well as 
other objectives; 
• the extent to which institu­
tional structures assist in 
finding efficient solutions to the 
problem of matching demand 
and supply, of supporting the 
processes of change, and of 
pursuing higher levels of em­
ployment. 
Many of these issues are inter-re­
lated and the programme of work in 
the Employment Framework re­
flects this, by setting out a number 
of specific issues, or aspects, of the 
overall problem which need to be 
addressed in greater depth. The 
analyses and proposals which will 
be prepared as part of this pro­
gramme of work are designed to 
point us towards the main ways in 
which the fundamental changes re­
quired in order to achieve a more 
employment-intensive pattern of 
growth can be effectively pursued 
across the Community. 
189 
Chapter 8 The Community Employment Framework 
-190 
Community-wide framework for employment 
Community-wide framework for employment 
1. Introduction 
A high level of employment across all Member States 
and regions is a fundamental objective of the 
Community. Directly or indirectly, Community 
policies — the Internal Market, economic and mon­
etary integration, the policies developed through the 
Structural Funds and the successive research and 
development framework programmes, co-ordinated 
policies in some areas, the pursuit of common 
objectives in others — have all made significant con­
tributions to the goals of competitiveness, economic 
growth and employment. 
Unfortunately, while the Community has grown in 
economic strength with increased integration and cohe­
sion, progress on employment and unemployment has 
been less satisfactory, particularly in the last two years. 
Concern about the issue has been expressed through a 
number of political positions which have been taken up 
at Community level. In particular: 
• the Council of Employment and Social Affairs 
Ministers passed a resolution in December 1992 on 
Action against unemployment; 
• the European Parliament produced a report on the 
post-1992 European Labour Market in 1992; 
• the European Social Partners have agreed a series 
of joint opinions in support of economic growth and 
improvements in the labour market, notably that 
of July 1992 on a Joint Cooperative Growth 
Strategy. 
Most recently, the ECOFIN Council has supported the 
Commission's economic growth initiative — promoting 
economic recovery in Europe — launched at the Edin­
burgh 1992 Summit. The growth initiative ranges 
across a series of areas — public expenditure, private 
investment, support to small and medium sized firms, 
additional training, wage moderation and structural 
reforms. The Commission has also prepared a major revision of 
the European Social Fund in order to strengthen its role 
in the fight against unemployment, and has continued 
to improve its analysis of employment issues through 
the annual Employment in Europe reports. 
In the Informal meeting ofthe Ministers of Employment 
and Social Affairs on 3 and 4 May 1993, the Presidency 
of the Council expressed the need to strengthen the 
Community approach to combating unemployment. 
While recognising that responsibility for employment 
actions lies primarily with themselves, the Ministers 
underlined the need for supplementary coordination 
and action at Community level in order to address the 
common problems of employment and unemployment. 
Council members supported the presentation by the 
Commission of a proposal which would provide a frame­
work for actions at all levels within the Community. It 
would also encompass the role of the Community in 
various ways in relation to employment. 
This Communication responds to the Council request. 
It is based on four key observations: 
• The current high level of unemployment is unac­
ceptable. It is damaging both to the Community's 
competitiveness, and to the cohesion of its 
societies. 
• Stronger economic growth is required, but the em­
ployment problem cannot be resolved by economic 
growth alone. A more employment-intensive pat­
tern of growth is needed if employment needs are 
to be met. 
• An integrated policy response is needed, mobilising 
all actors involved in employment matters. 
• Primary responsibility for action lies with, and 
within, the Member States, but closer co-operation 
at the level of the Community is necessary — econ­
omically and politically — in order to ensure the 
maximum impact of national actions. 
-191 
Community-wide framework for employment 
This Communication sets out the Commission's propo­
sals for a framework within which a process of analysis 
and exchange of experience can be pursued in a struc­
tured and co-operative manner, between all the actors 
concerned, with a view to co-ordinated action. Proce­
dural proposals are made, together with an outline 
timetable. 
2. The scale and nature of 
the employment problem 
2.1. Unacceptable levels 
of unemployment 
Over the past two decades, the rate of economic growth 
has averaged around 2% a year — much lower than in 
the two decades which went before. Employment cre­
ation has been insufficient to meet the growing demand 
for jobs and unemployment has shown a persistent and 
disturbing upward trend. While falling during the 
period of recovery in the latter part of the 1980s, it has 
risen by even more during the current period of re­
cession. 
Unemployment has once more climbed above 10%. Over 
17 million people across the Community are now out of 
work. Almost half have been out of work for more than 
a year. On current forecasts, unemployment will con­
tinue to increase during the rest of this year and next. 
If current trends persist, by the end of 1994, it will be 
some, way above the record level of 10.8% reached in 
1985. 
At the same time, progress has been limited in achiev­
ing convergence between regions in terms of 
employment levels, and in ensuring equal opportunities 
as regards access to the labour market. Many people — 
especially women — are effectively excluded from the 
labour market altogether. 
2.2. Low rates of employment 
The Community has a low rate of employment com­
pared with other industrialised parts ofthe World. Less 
than 60% ofthe Community's population of working age 
are in work, compared with over 70% in the United 
States, EFTA and Japan. 
The counterpart of such a low rate of employment is, not 
only high unemployment, but a large hidden labour 
supply. Thus, even when employment increases, unemployment remains high as new people enter the 
labour market. In the late 1980s, the creation of over 
9 million new jobs only reduced unemployment by 
3 million. 
The consequence is that, in order to get unemployment 
down from current levels of over 10% to more acceptable 
levels — say 5% — the Community will have to create 
extra jobs on a scale large enough, not only to absorb 
the currently recorded unemployed, but also to meet the 
demands of those who will enter the labour market. 
Job creation on that scale cannot be achieved on the 
basis of growth alone. Given the increased numbers 
wishing to work, 3.5% economic growth, with 2% pro­
ductivity growth — the experience ofthe second half of 
the late 1980s — sustained over the rest of the decade, 
would still leave the Community well short of a target 
such as 5% unemployment. 
3. The employment-intensity 
of growth 
3.1. Comparisons within and 
outside the Community 
Levels of employment depend, not only on the rate of 
economic growth, but on the employment-intensity of 
that growth. Employment-intensity is determined, not 
only by the relative use of capital and labour — which 
determines the volume of employment for a given vol­
ume of output — but also by the way in which a given 
volume of employment is divided up between numbers 
of jobs and hours of work. 
In this latter respect in particular, experience between 
the Member States varies. For example, while Belgium 
and the Netherlands have similar levels of labour pro­
ductivity, the Netherlands provide jobs for 10% more 
people of working age than Belgium. Equally, Denmark 
— with a lower level of income per head (measured in 
PPS) than the western part of Germany — has a much 
higher proportion of its population in work. 
Comparisons with other industrialised countries are 
also revealing. In Scandinavia, the rate of employment 
has been at over 70% since the beginning ofthe 1970s. 
The main difference relative to the Community is in 
terms of activity rates of women. Indeed, activity rates 
of women in the Community, although growing, are still 
lower than in most ofthe economically developed world. 
192-
Community-wide framework for employment 
Over the past decade, the United States has sustained 
a similar rate of growth of GDP to the Community — 
around 2% a year, once allowance is made for changes 
in the growth of population. During this period, how­
ever, the rate of income growth per worker has been 
lower in the United States than in the Community — 
1% as opposed to 2%. On the other hand, the United 
States' rate of employment has continued to rise during 
this period to a level of 70% today — 10 percentage 
points above the Community level. Thus, while the 
overall growth of incomes has been the same in the 
Community and the United States, a larger proportion 
of the United States population has had access to paid 
employment. 
Japan has also succeeded in achieving higher rates of 
employment than the Community. In common with 
other industrialised countries, including the Com­
munity, a competitive traded goods sector with high 
productivity has been a means of generating income to 
create jobs in the service sector. The main difference is, 
however, that Japanese productivity in the service sec­
tor is lower than in the Community — thereby 
generating more employment — even though earnings 
in industry and services are much the same in both 
cases. 
While a more employment-intensive pattern of growth 
inevitably implies a wider spreading of paid 
employment, the effect on the distribution of income 
depends on the economic, social and cultural situation 
in the countries concerned. For example, in 
Scandinavian countries, and in Japan, a high level 
of employment has been achieved with an income 
distribution narrower than that in the Community. 
The United States, however, has seen a widening in 
income distribution as its rate of employment has 
increased. 
While experiences are not necessarily easily 
transferable from one Member States to another, 
or from outside the Community to inside the 
Community, such differences as exist are sufficientfy 
wide to warrant more detailed analysis in order to 
identify what approaches are both adaptable to the 
Community, and compatible with its overall economic 
and social aims. In particular, the Community would 
need to ensure that any changes to existing policies 
were carried out in ways that do not exploit workers 
in a weak position in the labour market, or inhibit the 
development of the high value-added knowledge-
based jobs which will be the key to future 
competitiveness. 3.2. Government actions and 
employment-intensity 
In the face of high levels of unemployment, and long-
term unemployment, governments have increased their 
expenditure on a range of policies and instruments 
designed, in general, to alter the incentive structures in 
the labour market in ways which can encourage a more 
employment-intensive pattern of growth, particularly 
in favour ofthe unemployed. 
These measures have generally sought to make unem­
ployed people more attractive to employers by reducing 
the costs of employing them, by increasing their value 
as employees through training or other help, or by 
addressing problems of mis-match or transition, for 
example between school and work. Thus, Government 
support measures have take the form of grants, loans, 
tax incentives and subsidies to the unemployed and to 
potential employers, as well as the direct provision of 
counselling and training services. Governments have 
also sought to change the legislative environment in 
ways which encourage greater labour market 
adaptability. 
Programmes targeted on the unemployed demon­
strate that changes in the structure of incentives 
operating in the labour market can be used to assist 
particular groups or individuals. In general, however, 
such policy actions have tended to take the form of 
derogations to existing national rules — for example, 
to reduce social security charges for the recruitment 
of the unemployed — or to have been directed at 
specific issues — such as the development of part-time 
work. 
A broader lesson has to be drawn — namely that 
changes in the overall incentives structures might be 
pursued so as to bring about a more employment-intens­
ive pattern of growth across the economy as a whole. 
This could have important benefits gi/en the variations 
in incentive structures which currently exist within and 
between Member States. 
For example, while employers' social contributions 
average 15% of wages and salaries across the Com­
munity as a whole, this varies between Member States 
— from virtually 0% to over 20%. The overall effects 
of such differences on employment can only be judged 
in the context ofthe taxation systems in each Member 
State. However, it is possible that the employment 
intensity of different sectors of activities, or the 
193-
Community-wide framework for employment 
potential for employers to offer different types of jobs, 
may be affected by the incidence, or structure, of 
taxation. 
The employment-intensity of production in the economy 
as a whole, in different sectors, or in different types of 
firms can be affected by the legal environment de­
veloped by governments in order to regulate the 
workings of the labour market. It can also be affected 
by other factors — the forms of work organisation and 
types of jobs developed within firms, the preferences 
and attitudes of those seeking to enter the labour mar­
ket, or wider social and cultural changes regarding 
work, employment and life-style. 
3.3. Community support 
The Community's employment objectives have been 
supported at Community level by a wide range of 
policies and activities — economic, industrial, techno­
logical and scientific. In addition, however, the 
Community has focused on employment and related 
human resource issues through a variety of more 
specific activities. 
These have included analysis and research, experimen­
tal action-research and pilot project programmes, the 
dissemination of best practice, as well as funding from 
the Community's structural funds, notably the Euro­
pean Social Fund — which encompasses both 
mainstream funding and specific Community Initiative 
programmes. 
Analysis and research has, over the past 5 years, been 
exploited through the Commission's Employment in 
Europe reports which, on the basis of Community-
wide comparative analysis, and exploiting the 
Community's labour force survey, has deepened 
understanding of the structure of the Community's 
labour markets and the relationship between 
employment and other economic and social develop­
ments. 
Experimentation and evaluation has been pursued 
through action-research programmes — such as the 
local employment development action programme 
LEDA and the action programme against long-term 
unemployment ERGO, as well as through pilot project 
programmes on employment creation — notably the 
ILE programmes for businesses run by women, and the 
SPEC programme on innovative local employment 
actions in response to changes brought by the Internal 
Market. Larger-scale pilot project actions have been undertake 
within the framework of the European Social Fund's 
Community Initiatives — which encompass EURO-
FORM on new qualifications and new jobs, NOW on the 
employment of women, and HORIZON on the employ­
ment problems of the disadvantaged — as well as 
through relevant parts of the Poverty programme. 
A series of related actions on vocational training and on 
the integration of young people into the labour market 
have also been pursued through the Community's pro­
gramme on education and training for technology 
COMETT, the FORCE programme on continuing train­
ing in Europe, the EUROTECNET programme of 
training linked to new technologies, the PETRA pro­
gramme on training for young people, and the IRIS 
programme on improving the access of women to voca­
tional training. 
The exchange of experience has been pursued through 
the Employment Observatory system which provides a 
structure for the collection, analysis, presentation, dis­
semination and discussion of Member State experiences 
covering both trends and structural changes in the 
labour markets, and the development of Member State 
policies. 
In particular, the Community has developed, over a 10 
year period, the Mutual information system on employ­
ment policies, MISEP, which provides a full 
documentation of government policies and structures 
for their implementation, including a growing volume 
of evaluations. This is now supported by SYSDEM — 
which reports on research and analyses on employment 
and labour market issues within the Member States 
and pro Tides a framework for discussion between policy 
makers and researchers at both national and Com­
munity level. 
Policy development has been reinforced through fund­
ing from the European Social Fund which now 
contributes some 6 BECU towards active manpower 
rleasures undeitaken by national governments within 
the structure of Community Support Frameworks — 
some 13% of total expenditure by Member States, and 
a significantly higher proportion in priority regions of 
the Community. 
That support has been targeted on the long-term unem­
ployed and unemployed young people, and on the needs 
of less developed regions in the Community. The bulk 
ofthe support is for vocational training, although some 
support is provided for employment subsidies to 
194-
Community-wide framework for employment 
encourage recruitment and, in the less developed re­
gions, for vocational education in schools. 
4. New framework for action 
From the above analysis, three main conclusions can be 
drawn: 
• . The scale and nature of Europe's employment prob­
lem are cause for major concern. Action is needed if 
the problem is not seriously to impair the Com-
^munity's economic competitiveness into the 21st 
century, and to inflict considerable damage to the 
fabric of our societies; 
• There is sufficient evidence and experience to sug­
gest that ways of, at least, improving the situation 
can be found — over and above those which can re­
sult from higher levels of economic growth — by 
Governments adopting policy mixes which favour a 
more employment-intensive pattern of growth; 
• Although the main instruments lie with, and 
within, the Member States, the Community has an 
important role to play as a catalyst, as a forum for 
coordination, and as a support through the use of 
Community level policies. Action at the level ofthe 
Community is also necessary for reasons which are 
both economic (because the growing interdepend­
ence of our economies requires active cooperation 
across all policies) and political (because it is vital 
that the Community take an active interest in an 
issue of such importance for the well-being of the 
citizens of Europe). 
4.1. Objective 
What is proposed, therefore, is that the Community 
institutions and the Member States commit themselves 
to a structured, cooperative and systematic, process of 
analysis and policy reflection on possible solutions to 
the employment problem with a view to concerted policy 
action, centred principally around the need to create a 
more employment-intensive pattern of growth in 
Europe. 
4.2. Means 
This needs to be a genuinely collective process, in which 
the Commission certainly has its role to play, but where 
individual Member States, groups of Member States, or 
groups of interests from within Member States will also wish to contribute ideas or analyses. Suitable means of 
involving the other Community institutions, such as the 
European Parliament and the Economic and Social 
Committee, need to be explored, as do appropriate 
mechanisms for associating the Social Partners. 
The key starting point is the establishment of an agenda 
and a timetable, aimed at arriving at some operational 
conclusions over an eighteen month period between now 
and the end of 1994. 
Given the complexity of the employment issue and, in 
particular, the fact that responsibility for employment 
matters in the fullest sense is often widely spread, a 
means of ensuring real coordination of the process is 
crucial. 
In this context, a new, wider and more active role could 
be considered for the Standing Committee on Employ­
ment, which does bring together many of the main 
actors, though the question of inter-face with other fora 
would require careful attention. 
4.3. Commission role 
The Commission undertakes to underpin this process 
as well as to contribute analyses and suggestions for 
coordinated action. But this would in no way preclude 
others from doing the same. 
In addition, the Commission will seek to promote the 
transformation of successful Community pilot experi­
ences into mainstream policies, on the basis of a 
systematic evaluation of successful experiences and 
measures, such as those described in section 3.3 above. 
More generally, it is the Commission's intention to 
apply its financial support in ways which can contribute 
to the overall objective of employment expansion. The 
proposed reform ofthe European Social Fund — which 
aims to increase the flexibility ofthe Fund, to anticipate 
labour market developments and to link the Fund more 
with policy-driven objectives — is a step in this direc­
tion. In particular, however, the Commission intends 
that any future Community initiatives in this area will 
be able to support experimentation and innovation on a 
trans-European basis. 
4.4. Issues for analysis and action 
The Commission intends to present analyses and sug­
gestions for co-ordinated action in a number of different 
-195 
Community-wide framework for employment 
areas. As far as specific issues are concerned, the Com­
mission has identified, in particular, the following: 
• adaptability at the workplace, and the potential for 
developing new forms of employment based on new 
forms of work organisation 
I 
• the development of new working time structures 
able to expand employaient opportunities; 
• the development of training systems and qualifica­
tions able to improve integration into the labour 
market, and anticipate structural change 
• investigating the scope for reducing labour costs 
and increasing employment-intensity, notably by 
modifying the incidence of taxation systems; 
• the exploitation of the employment growth poten­
tial of new areas of work — the environmental 
industries, the arts, household services etc; 
• the creation of employment through small busi­
nesses, and self employment, and the role of SMEs 
generally; 
• the role of local initiatives and local economic and 
employment development in strengthening the ca­
pacity of areas to create employment; 
• the role of different agencies and partners in de­
veloping efficient external labour markets. 
4.5. Procedures and organisation 
The Commission intends to establish the necessary 
internal procedures in order to implement and follow-up 
the programme of actions outlined in this Communica­
tion. 
Discussions on current employment concerns have al­
ready begun in Informal meetings of Ministers — not 
only of Employment Ministers but of Economic Affairs 
Ministers and Environment Ministers. Other Ministers 
potentially concerned can be encouraged to address 
these issues, initially on the basis of this document. 
The question of how best to orchestrate this complex 
process will need careful attention. 5. Conclusions 
The Commission requests that the Employment and 
Social Affairs Council: 
• Agrees the need to develop a Community-wide 
framework within which the Member States and 
the Community can conduct a process of com­
parative analysis with a view to promoting a more 
employment-intensive pattern of growth in a co-or­
dinated way; 
• Notes the need to urgently consider how best to as­
sociate all those with responsibilities which 
indirectly or directly affect employment — includ­
ing other Council members — in addressing 
employment concerns, and in exploiting employ­
ment opportunities, within the Community-wide 
framework; 
• Accepts the Commission's proposal to present a 
rolling programme of work, to the end of 1994, 
based on the approach of this paper; 
• Agrees to associate all relevant partners at local, 
national and Community level, notably the Social 
Partners, in the development of appropriate 
responses. 
196 
Graphs 
Graphs 
1 Employment rates in the Community and elsewhere 1970-1992 23 
2 Unemployment rates in the Community and elsewhere 1970-1992 24 
3 Changes in the activity ofthe population in the Community and elsewhere 1973-1992 25 
4 GDP and employment growth in the Community 1980-1992 27 
5 GDP and employment growth in the EFTA countries 1980-1992 27 
6 GDP and employment growth in the United States 1980-1992 27 
7 GDP and employment growth in Japan 1980-1992 27 
8 GDP and employment growth in the Community 
and elsewhere 1980-1985, 1985-1990, and 1990-1992 29 
9 GDP and employment growth in Denmark, France, 
Germany and Luxembourg 1980-1985, 1985-1990, and 1990-1992 29 
10 GDP and employment growth in the UK, Italy, 
the Netherlands and Belgium 1980-1985, 1985-1990, and 1990-1992 29 
11 GDP and employment growth in Spain, Ireland, 
Greece and Portugal 1980-1985, 1985-1990, and 1990-1992 29 
12 Changes in employment by sex in the Community and elsewhere 1980-1991 30 
13 Hours worked in industry and services in the Member States 1983 and 1991 31 
14 Changes in employment in the Member States 1983-1991 31 
15 Changes in full-time and part-time employment in the Member States 1983-1991 32 
16 The importance of self-employment in the Community and elsewhere 1980, 1985 and 1990 34 
17 The importance of self-employment in the Member States 1983 and 1991 34 
18 Status ofthe self-employed one year earlier in the Member States 1983-1991 35 
19 Employment by broad sector in the Community and elsewhere 1980, 1985 and 1991 36 
20 Employment by broad sector in the Member States 1980, 1985 and 1991 37 
21 Contribution of services to total employment in the Member States 1983 and 1991 37 
22 Changes in employment by broad sector in the Community and elsewhere 1980-1991 38 
23 Sectoral division of changes in employment in the Member States 1980-1991 39 
24 Sectoral contribution to employment growth in the Community 1983-1991 39 
25 Changes in employment in banking, finance and insurance in the Member 
States 1983-1991 40 
26 Changes in employment in other services in the Member States 1983-1991 40 
27 Unemployment in the Member States 1985, 1990 and May 1993 41 
28 Unemployment of men and women in the Member States 1985 and May 1993 42 
29 Unemployment of young people (<25) in the Member States 1985, 1990 and May 1993 43 
30 Unemployment by sex and age in the Community 1983 -May 1993 44 
31 Changes in population, active population and employment 
of young people (15-24) in the Member States 1985-1991 45 
-197 
Graphs 
32 Long-term unemployment (>1 year) in the Member States ., 1985 and 1991......46 
33 GDP 1991-1994......53 
34 Investment 1991-1994 54 
35 Consumption 1991-1994 55 
36 Inflation 1991-1994 55 
37 Trade Balance 1991-1994 56 
38 Employment 1991-1994 56 
39 Unemployment 1991-1994 56 
40 Composition of international trade 1970,1980 and 1990 67 
41 Shares of world markets for manufactured goods 1970,1980 and 1990 68 
42 World markets for manufactured goods 1970,1980 and 1990 68 
43 Geographic distribution of extra-Community exports of manufactures 1970,1980 and 1990 69 
44 The growing importance of internal trade for the Community 1970-1991 70 
45 Community share of trade in manufactures by product type 1970, 1980 and 1990 70 
46 Composition of manufactured exports from the Community, 
US, Japan and developing Asia 1970, 1980 and 1990 71 
47 Community share of world trade in services 1970, 1980 and 1990 71 
48 Employment in export industries 1990 72 
49 Changes in GDP and employment in Central and Eastern Europe 1991 and 1992 75 
50 Changes in employment by sector in Central and Eastern Europe 1990-1992 77 
51 Unemployment rates in Central and Eastern Europe 1991 and 1992 78 
52 Unemployment rates of men and women in Central and Eastern Europe 1991 and 1992 78 
53 GDP per head in the Member States, US and Japan 1991 84 
54 GDP per head and productivity in the Member States, US and Japan 1991 84 
55 Working time and employment rates in the Member States, US and Japan 1991 86 
56 Full-time hours and numbers working part-time in industry and services in 
the Member States.. 1983 and 1991 87 
57 Average hourly labour costs in manufacturing in the Member States 1981 and 1990 89 
58 Taxes and social contributions in the Member States 1980 and 1990 91 
59 Average hourly labour costs and productivity in manufacturing in the Member 
States 1981 and 1990 92 
60 Average hourly labour costs and productivity in mechanical engineering in the 
Member States 1981 and 1990 94 
61 Average hourly labour costs and productivity in textiles and clothing in the 
Member States 1981 and 1990 95 
62 Average monthly labour costs in banking and insurance in the Member States 1981 and 1990 96 
63 Labour costs in manufacturing and unemployment rates across the Community 1988...... 98 
64 Educational attainment ofthe labour force (25+) in the Member States 1991.... 103 
65 Educational attainment ofthe labour force (25-34) in the Member States 1991.... 103 
66 Educational attainment ofthe work-force (25+) by sector in the Community 1991.... 104 
67 Educational attainment ofthe work-force (25+) in selected sectors in the 
Member States 1991....105 
68 Educational attainment ofthe work-force (25+) in selected sectors in the 
Member States 1991....106 
198-
Graphs 
69 Educational attainment ofthe employed and unemployed (25+) in the Member 
States... . 1991 ...107 
70 Share of total population who are nationals of other Member States 1991... 108 
71 Population movements within the Community 1987-1991.. 109 
72 Status of migrants within the Community '.. 1987-1991... 110 
73 Contribution of Community migrants to unemployment in the Member States, 
average 1987-1991... Ill 
74 Contribution of Community migrants to employment in the Member States, 
average 1987-1991... Ill 
75 Labour force movements in and out of Germany 1987-1991... 112 
76 Labour force movements in and out ofthe UK 1987-1991... 113 
77 Labour force movements in and out of France 1987-1991... 113 
78 Working-age population assisted by the Structural Funds in the Member States 1989... 119 
79 Income per head by Structural Funds status in the Community 1986 and 1990... 120 
80 Income per head in Objective 1 and unassisted regions . 1986 and 1990... 120 
81 GDP growth in Objective 1 and unassisted regions 1986-1990... 121 
82 GDP growth in Objective 2 and unassisted regions, ! 1986-1990... 121 
83 Unemployment rates in the Community by Structural Funds status, 1986 and 1991... 122 
84 Unemployment rates in assisted and unassisted regions, Objective 2 (NUTS 3) 1986 and 1991... 124 
85 Unemployment rates in assisted and unassisted regions, Objective 1 1986 and 1991... 124 
86 Unemployment rates in assisted and unassisted regions, Objective 2 (NUTS 2) 1986 and 1991... 124 
87 Unemployment rates in assisted and unassisted regions, Objective 5b 1986 and 1991... 124 
88 Unemployment rates in Objective 2 and neighbouring regions..... 1986,1989 and 1991... 126 
89 Employment rates in the Community by Structural Funds status 1986 and 1991... 127 
90 Employment rates in Objective 1 and unassisted regions 1986 and 1991... 127 
91 Employment rates in Objective 2 and unassisted regions 1986 and 1991... 128 
92 Estimates of hidden labour supply in the Community by Structural Funds 
status 1986 and 1991... 128 
93 Estimates of hidden labour supply in Objective 1 and unassisted regions 1986 and 1991... 129 
94 Estimates of hidden labour supply in Objective 2 and unassisted regions 1986 and 1991... 130 
95 Activity rates of women aged 25—44 in the Community by Structural Fund 
status 1986 and 1991... 130 
96 Activity rates of women aged 25-44 in Objective 1 and unassisted regions 1986 and 1991... 131 
97 Activity rates of women aged 25-44 in Objective 2 and unassisted regions 1986 and 1991... 131 
98 Activity rates of older people aged 55-64 in the Community by Structural 
Funds status 1986 and 1991... 132 
99 Activity rates of older people aged 55-64 in Objective 1 and unassisted regions 1986 and 1991... 133 
100 Activity rates of older people aged 55-64 in Objective 2 and unassisted regions 1986 and 1991... 133 
101 Sectoral distribution of employment in the Community by Structural Funds 
status 1986 and 1991... 134 
102 Agricultural employment in Objective 1 and unassisted regions 1986 and 1991... 134 
103 Industrial employment in Objective 1 and unassisted regions 1986 and 1991... 135 
104 Service employment in Objective 1 and unassisted régions 1986 and 1991... 135 
105 Industrial employment in Objective 2 and unassisted regions 1986 and 1991... 136 
-199 
Graphs 
106 Service employment in Objective 2 and unassisted regions 1986 and 1991.... 137 
107 Sectoral changes in employment by Structural Funds status in the 
Community 1986-1991.... 138 
108 Sectoral changes in employment in Objective 1 regions 1986-1991.... 138 
109 Sectoral changes in employment in unassisted regions 1986-1991.... 139 
110 Sectoral changes in employment in Objective 2 regions 1986-1991.... 139 
111 Employment in high growth industries by Structural Funds status in the 
Community 1981 and 1989.... 141 
112 Employment in high growth industries in Objective 1 and unassisted regions 1981 and 1989.... 141 
113 Employment in high growth industries in Objective 2 and unassisted regions 1981 and 1989.... 142 
114 Employment in low growth industries by Structural Funds status in the 
Community 1981 and 1989.... 142 
115 Employment in low growth industries in Objective 1 and unassisted regions 1981 and 1989.... 143 
116 Employment in low growth industries in Objective 2 and unassisted regions 1981 and 1989.... 143 
117 Women in the labour force in the Member States 1983 and 1991....145 
118 Share of women in the labour force in the Community and elsewhere 1970, 1980 and 1991.... 146 
119 Working women who are employees in the Member States 1983 and 1991.... 147 
120 Working men who are employees in the Member States 1983 and 1991.... 147 
121 Activity rates of men aged 50-64 in the Member States 1983 and 1991.... 150 
122 Activity rates of women aged 50-64 in the Member States 1983 and 1991.... 150 
123 Activity rates of women, Denmark 1960-1991....151 
124 Activity rates of women, France 1962-1991.... 151 
125 Activity rates of women, United Kingdom 1961-1991.... 151 
126 Activity rates of women, Germany 1961-1991.... 151 
127 Activity rates of women, Italy 1961-1991.... 153 
128 Activity rates of women, Spain 1960-1991.... 153 
129 Activity rates of women, Greece 1961-1991.... 153 
130 Activity rates of women, Portugal 1960-1991.... 153 
131 Activity rates of women, Ireland 1961-1991.... 155 
132 Activity rates of women, Luxembourg 1960-1991.... 155 
133 Activity rates of women, Netherlands 1960-1991.... 155 
134 Activity rates of women, Belgium 1961-1991..:. 155 
135 Activity rates of women aged 25-49 in the Member States 1983 and 1991.... 156 
136 Activity rates of women aged 25-49 without children 1991.... 156 
137 Activity rates of women aged 25-49 with children in the Member States 1991.... 157 
138 Activity rates of women aged 25-49 by level of educational attainment in the 
Member States 1991.... 157 
139 Employment and hours worked by women in the Member States 1991.... 158 
140 Women in part-time employment by age group in the Member States 1991.... 159 
141 Women in part-time employment by family status in the Member States 1991.... 160 
142 Women in temporary jobs in the Member States 1983 and 1991.... 161 
143 Men in temporary jobs in the Member States 1983 and 1991....161 
144 Women in temporary jobs working part-time in the Member States 1983 and 1991.... 162 
200-
Maps 
145 Women in temporary jobs because they could not find permanent jobs in the 
Member States 1983 and 1991... 162 
146 Unemployment rates of men by duration in the Member States 1991... 163 
147 Unemployment rates of women by duration in the Member States 1991... 163 
148 Recipients of unemployment benefit by status in the Member States 1991... 165 
149 What the unemployed (25+) were doing a year ago in the Member States 1991... 165 
150 Employment in services in the Member States 1983 and 1991... 167 
151 Sectoral employment of men and women in the Community 1991... 168 
152 Women working in other services and distribution in the Member States 1983 and 1991... 168 
153 Women in teaching in the Member States circa 1989-91... 169 
154 Notice and severance entitlements in the Member States 1989-90 ... 174 
155 Notice and severance entitlements by age-group in the Member States 1989-90 ... 176 
156 Employers' perceptions of employment protection regulations in the Member 
States 1985 and 1989 ... 180 
157 Relative risk of involuntary job loss in the Member States 1989 ... 180 
158 Employment protection and dismissals 1989 ... 181 
159 Temporary employment in the Member States 1983-1991... 181 
160 Rates of dismissal and short-time working in the Member States 1989 ... 182 
161 Employment protection and early retirement rates 1989 ... 182 
162 Labour market programmes for displaced workers, average 1985-1988 ... 183 
Maps 
Ml Unemployment rates 1992 42 
M2 Youth unemployment rates , 1992 43 
M3 Long-term unemployment rates 1990 46 
M4 Distribution of working-age population 1990 .....61 
M5 Projected growth of working-age population 1990-2010 62 
M6 Distribution of world income 1990 65 
M7 Income per head compared to the Community 1990 65 
M8 Growth of income per head 1980-1990 66 
M9 Working-age population in employment 1991 81 
M10 Eligibility ofthe population for Structural Funds assistance 1989-1993 ... 115 
201 
Maps 
-202 
Sources and Methodology 
The principal source ofthe historical data regarding the European Community used in this Report is the Statistical 
Office ofthe European Communities (Eurostat) and particularly the Labour Force Survey (LFS) for which the 1991 
results are available for all Member States. In a number of cases data presented have been specifically extracted 
from the LFS and other databases by Eurostat which has given considerable assistance in helping to prepare and 
process the data. 
The LFS is used because it is the only source of comparable and complete data on employment and the labour 
market in all the Member States of the Community. Since it is based on a common coding and methodology, and 
since it is a household survey, it abstracts from differences in administrative arrangements and regulations. This 
is particularly true of unemployment, where the harmonised unemployment data based on the LFS as published 
by Eurostat are designed to permit comparisons between Member States, without needing to take account of the 
frequent changes in the coverage and definition of registered unemployment. The LFS was carried out on a 
two-yearly basis between 1973 and 1981, and since 1983 has been carried out annually using a consistent set of 
definitions and classifications. The results of surveys conducted before 1983, however, are not strictly comparable 
with those conducted since. 
Data from national administrative sources, which do not exist on a consistent basis over time and between Member 
States may therefore differ from the figures used in this Report. 
Additional material has been supplied by other Commission services or has been drawn from studies undertaken 
on behalf of the Commission as indicated below. The short-term forecasts summarised in Chapter 2 have been 
prepared by the Directorate-General for Economic and Financial Affairs on the same basis as those presented in 
the Annual Economic Report. The sources used for each ofthe graphs and maps are listed below. 
It is the Commission's intention that the data used in the preparation of Employment in Europe be made available 
in electronic form. Requests for data should indicate the particular graph or maps for which the data are required. 
Data can be supplied in standard spreadsheet format. Requests should be addressed to: 
Commission ofthe European Communities 
DGV/B/1 
200 rue de la Loi 
1049 Brussels 
Belgium 
Notes 
Unless where otherwise stated, data for Germany in this Report refer to the former Western part of Germany before 
3 October 1990. 
PPS: References to PPS relate to Purchasing Power Standards which are a measure of GDP reflecting the real 
purchasing power of a currency on the national territory. They aim to provide a reliable indication of the volume 
and structure of goods and services intended for a particular final use, and permit comparisons in real tersm of 
GDP and its components between Community countries. See Purchasing Power Parities and GDP in real terms, 
Results 1985, Eurostat 1985, and National Accounts ESA, Aggregates, Eurostat annually. 
Chapter 1: Table 1 is produced from the following sources: Eurostat: National estimates of population and 
employment and Unemployment rates for comparison between Member States. 1992 results are provisional. 1965 
data: OECD Labour Force Statistics 1968-88. 
-203-
Chapter 3: The section on Central and Eastern Europe is based on Employment Observatory, Central & Eastern 
Europe No. 4, published by the Commission. 
Chapter 6: The section on teaching is based on a report prepared by Jill Rubery and Colette Fagan for the 
Commission's Network of Experts on the situation of women in the labour market. 
Chapter 7: This chapter is based on a study carried out for the Commission by the Wissenschaftszentrum, Berlin. 
Graphs 
1-3 OECD Labour Force Statistics (1991, 1992 growth rates OECD Economic Outlook December 
1992); Eurostat, Community Labour Force Survey (1991, 1992 growth rates OECD 
Employment Outlook July 1992) 
4-8 GDP: OECD Quarterly National Accounts 3 1992; European Economy, December 1991, Tables 5 
& 10; Employment: Eurostat, Community Labour Force Survey, supplemented by 
National Accounts and OECD Labour Force Statistics 
9-11 GDP: European Economy, December 1991; Employment: Eurostat, Community Labour Force 
Survey and National Accounts 
12 National Accounts; OECD Labour Force Statistics (1991 growth rates from Economic Outlook Dec 
1992 and Employment outlook 1992) 
13-15 Eurostat, Community Labour Force Survey 
16-17 Eurostat, Community Labour Force Survey; OECD Labour Force Statistics 
18 Eurostat, Community Labour Force Survey 
19 National Accounts 
20 Eurostat, Community Labour Force Survey; OECD Labour Force Statistics 
21 Eurostat, Community Labour Force Survey 
22, 23 Eurostat, Community Labour Force Survey; OECD Labour Force Statistics 
24-32 Eurostat, Community Labour Force Survey 
33-39 Directorate General for Economic and Financial Affairs (DGII),Economic Forecasts 1993-1994 
40-43 United Nations, Trade Yearbooks and Monthly Bulletin of Statistics 
44 Directorate General for Economic and Financial Affairs (DGII), Economic Forecasts 1993-1994 
45, 46 United Nations, Trade Yearbooks and Monthly Bulletin of Statistics 
47 International Monetary Fund Balance of Payments Statistics Yearbook 
48 National Accounts (ESA); Eurostat, Community Labour Force Survey 
49-52 Eastern European correspondents 
53 National Accounts 
54, 55 National Accounts; Eurostat, Community Labour Force Survey 
56 Eurostat, Community Labour Force Survey 
57 Eurostat, Survey of Labour Costs 
58 Eurostat, General Government Accounts and Statistics, 1979-1990 
59-63 Eurostat, Survey of Labour Costs 
- 204 -
64-78 Eurostat, Community Labour Force Survey 
79, 80 Regional Accounts (ESA); Eurostat, Community Labour Force Survey 
81, 82 Regional Accounts (ESA); Directorate General for Economic and Financial Affairs (DGII) 
83 Eurostat, Community Labour Force Survey 
84 Eurostat, REGIO database — series CHOM3HARMONI 
85-87 Eurostat, Community Labour Force Survey 
88 Eurostat, REGIO database — series CHOM3HARMONI 
89-110 Eurostat, Community Labour Force Survey 
111-116 Eurostat, Structure of Industry survey 
117 Eurostat, Community Labour Force Survey 
118 OECD, Employment Outlook July 1992; Eurostat, Community Labour Force Survey 
119, 120 Eurostat, Community Labour Force Survey (1983 E & P obtained using OECD Labour 
Force Statistics) 
121, 122 Eurostat, Community Labour Force Survey 
123-134 ILO, Yearbook of labour statistics; Eurostat, Community Labour Force Survey 
135-152 Eurostat, Community Labour Force Survey 
153 National reports; Eurostat, Community Labour Force Survey 
154, 155 MISEP; European Industrial Relations Review; various national sources 
156 European Economy No 27 (March 1986) and No 47 (March 1991) 
157 Eurostat, Community Labour Force Survey 
158 Estimates based on 1989 Community Labour Force Survey 
159 Eurostat, Community Labour Force Survey 
160, 161 Estimates based on 1989 Community Labour Force Survey 
162 OECD, Labour Market Policy expenditure data (1990) 
Maps 
1,2 Eurostat, REGIO database — series CHOM3HARMONI 
3 Eurostat, REGIO database — series CHOM2LTU 
4, 5 United Nations, Sex and Age distributions of population — Population Studies No 122 
6 United Nations Development Programme, Human Development Report 1992 
7, 8 World Bank, World Development Report 1992; United Nations Development Programme, 
Human Development Report 1992 
9 Eurostat, REGIO database — series EFDT3POP and EFDT2EMPL 
10 Directorate-General for Regional Policy (DGXVI) 
205 -
The following topics were analysed in previous issues 
of the Employment in Europe Report: 
Employment in Europe 1989 
3 Community employment and the world economy 
4 The employment content of growth 
5 Sectoral employment impact of 1992 
6 Job quality — For better or worse? 
SMEs and the self-employed 
7 Women's employment 
8 The demographic time bomb 
9 Vocational training and employment 
10 Unemployment—A social as well as a labour market problem 
11 Black economy 
12 Technological change — A strategic challenge for employment 
13 New partnerships in employment creation — Local development 
14 Mobility and the European labour market 
Employment in Europe 1990 
3 Employment prospects and 1992 
4 Wages and labour costs 
5 The environment and employment : a new balance in economic development 
6 Employment for women — Is access to jobs easier or not? 
7 Managing change in large companies 
8 The development of vocational training 
9 National labour market policies 
10 Promoting economic and social cohesion — The Community's structural policies 
Employment in Europe 1991 
3 The complex problem of persistent unemployment 
4 European integration and regional labour markets 
5 Employment in agriculture : Decline and diversification 
6 Employment in industry : a decade of change 
7 Skill Shortages : a Growing Problem in the Community? 
Employment in Europe 1992 
3 The Community labour force : recent growth and future prospects 
4 Employment in services : more growth to come 
5 Employment developments in Central and Eastern Europe 
6 Men and women in the Community labour market 
7 Help for the unemployed : national unemployment compensation schemes 
-206-
ISSN 0254-1475 
COM(93)314final 
DOCUMENTS 
EN 04 
Catalogue number : CB-CO-93-447-EN-C 
ISBN 92-77-58985-X 
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