COMMISSION OF THE EUROPEAN COMMUNITIES 
C0M(94) 381 final 
Brussels, 14.09.1994 
REPORT FROM THE COMMISSION 
Employment in 
EUROPE 
1994 
Table of contents 
Table of contents 
Foreword 
Summary 
Part I Employment developments 
Chapter 1 Employment trends and prospects in the Community 
Chapter 2 Labour force growth and participation 
Chapter 3 Economic growth and employment 
Part II Follow-up to White Paper on growth, competitiveness, 
employment: background analysis of key areas 
for labour market action 
Chapter 4 Mobility, labour turnover and labour market flexibility 
Chapter 5 Changes in working time 
Chapter 6 Labour costs, social contributions and taxes 
Chapter 7 Unemployment and labour market policy 
Chapter 8 Where has job growth and decline occurred? 
List of graphs and map 
Sources 
^f -3^4-5 
Table of contents 
Summary and conclusions 
Summary and conclusions 
After three years of recession, little 
net job creation and rising unem­
ployment, the immediate outlook 
for the European economy looks 
more favourable. Output is re­
covering and the increase in 
unemployment seems to have come 
to an end in most parts of the Com­
munity. Favourable developments 
do not signify, however, that the 
problem of excessive levels of unem­
ployment is about to be resolved, 
still less that the failure of the Com­
munity to generate enough jobs to 
employ all those who wish to work 
— whether recorded as unemployed 
or not — is a thing of the past. 
Despite the short-term improve­
ment in economic fortunes, 
unemployment remains the major 
economic problem facing the Com­
munity — both now and for the rest 
of the decade. While the outlook for 
the remainder of 1994 and for 1995 
can be forecast with some degree of 
confidence, the prospects for the 
longer-term are highly uncertain. 
Whether economic growth can be 
sustained, and whether this can 
successfully be translated into jobs, 
depends in part on whether growth 
of the global economy continues 
and spreads. It also depends, how­
ever, on what happens within the 
Community itself. In particular, it 
depends on how far the long­
standing structural problems identified and analysed in the 
Commission White Paper on 
Growth, competitiveness, employ­
ment published towards the end of 
1993 can be overcome. 
These problems are: 
• the lack of sufficient coordina­
tion of economic policy in 
Member States which has led to 
instability and inadequate rates 
of economic growth; 
• the failure to achieve a suffi­
ciently employment-intensive 
pattern of growth which has led 
not only to high levels of re­
corded unemployment but also 
to substantial hidden unem­
ployment as people, especially 
women, have been discouraged 
by the lack of jobs even to look 
for work; 
• insufficient flexibility of labour 
markets which has slowed 
down the structural change in 
economic activity necessary to 
maintain competitiveness and 
led to high levels of long-term 
unemployment; 
• inadequate investment in edu­
cation and training to improve 
the skills and capabilities of the 
Community labour force on 
which long-term competitive­
ness ultimately depends. At the same time, these problems 
have been accompanied by — and 
have helped to create — widening 
disparities and growing social prob­
lems in terms of: 
• increasing divergences in in­
comes and job opportunities 
between those in strong posi­
tions in the labour market — 
because of their skills, and their 
possibilities for determining 
and controlling their job pros­
pects — and those in weak 
positions; 
• limited progress in convergence 
of living standards and job op­
portunities between people 
living in different regions of the 
Union, despite the increasing 
economic integration of the 
Member States. 
To tackle these problems effec­
tively, the strategy proposed in 
the White Paper has two basic 
elements. One is a strengthening 
of economic growth through the 
better coordination of national 
economic policies. The other is a 
more employment-intensive pat­
tern of production in order to 
generate more jobs from the econ­
omic growth which is attained. 
The strategy outlined in the White 
Paper and the analysis underlying 
it were endorsed by Member State 
-7-
Summary and conclusions 
Governments at the European 
Council meeting in Brussels in 
December 1993 and were confirmed 
at the meeting in Corfu in June 
1994. In addition, the Council ident­
ified seven key areas for particular 
attention by the Member States. 
These were: 
• improving flexibility within en­
terprises and in the labour 
market; 
• the reorganisation of work at 
enterprise level; 
• targeted reductions in the indi­
rect costs of labour, especially 
statutory contributions and 
particularly of less skilled work; 
• better use of public funds set 
aside for combating unemploy­
ment; 
• developing employment in new 
areas of activity in connection 
with new requirements; 
• specific measures aimed at 
young people without adequate 
training; 
• improving education and train­
ing systems, especially 
continuing training. 
These key areas for action define 
the themes of this report. Specifi­
cally, the report focuses on the first 
five of these issues, addressing 
particular aspects of each in the 
chapters in Part II. It also touches 
upon the sixth issue — young 
people without training — by 
examining the changing problem 
of youth unemployment (in Chap­
ter 7). 
In many respects, these areas 
for action do not lend themselves 
easily to the kind of quantita­
tive analysis which has been the hallmark of the Employment in 
Europe report over the past five 
years. Indeed, for cases such as la­
bour market flexibility, it is 
difficult even to define the concepts 
to be measured and monitored. 
Nevertheless, it is important to 
bring as much empirical evidence 
to bear in order to improve under­
standing of the way labour 
markets function and how employ­
ment systems — more broadly 
defined to encompass influences 
such as education and training and 
social protection — operate to cre­
ate jobs and provide work and 
income for people. 
Better understanding is critical 
to strengthening the basis for pol­
icy-making. While much policy 
action to improve the way employ­
ment systems function and to 
increase job creation is the respon­
sibility of Member States, a major 
task for the Commission is to pro­
vide information and analysis 
about developments in key areas 
across the Community on a consist­
ent basis. 
This report contributes to fulfilling 
that task. Like its predecessors, it 
is deliberately quantitative in its 
approach, its major aim being to 
provide a stronger basis for policy­
making, partly by reducing the 
scope for disagreements and dis­
putes about matters of fact on 
problems to be overcome. 
Before addressing the key areas 
for action in Part II, however, Part 
I sets out the scale of the employ­
ment challenge facing Community 
countries. It reviews the main em­
ployment and unemployment 
developments over the recent past 
and the prospects for the remain­
der of 1994 and for 1995. In 
addition, it examines why employ­
ment in the Community is much 
lower relative to working-age population than elsewhere and 
why the labour force could expand 
considerably in future years, des­
pite the expected decline in the 
number of young people entering 
the labour market. 
Part I also considers the relation­
ship between output growth and 
employment growth over the long-
term in the Community and other 
decelopped countries. This is to 
provide the basis for assessing the 
prospects for translating growth 
into more jobs in the future. 
The main findings and major 
points to emerge from the analysis 
are summarised below. 
Employment and 
unemployment trends 
At the latest count, unemployment 
in the Community stood at more 
than 11%, significantly higher 
than in the US, Japan and the 
EFTA countries. 
The employment difficulties of 
the Community since 1990 are 
however, reflected more compre­
hensively in the employment rate 
— the total numbers employed 
in relation to the population of 
working-age. This measure in­
cludes the effect of low labour force 
participation as well as high unem­
ployment. In 1993, it fell to below 
58% as employment declined by 
2%, the largest fall in the numbers 
in work since the immediate post­
war years. As a result, the average 
employment rate in the Com­
munity is now even further below 
levels in the US and Japan — in 
both cases over 70%. Moreover, 
despite the significant fall in em­
ployment in the EFTA countries 
since 1990, the rate remains some 
10 percentage points higher than 
in the Community. 
-8-
Summary and conclusions 
The rate of unemployment among 
women remains higher than for 
men in all Member States except 
the UK However, the gap between 
the two rates narrowed over the re­
cent recession as job losses among 
men were larger than for women, as 
is usual in such periods. 
How many unemployed? 
While harmonised figures for 
unemployment produced by 
the Community Statistical Office 
imply that there are some 
18 million unemployed in the 
Community (including 1 million in 
the new Lander), monthly figures 
published in each Member State 
for those registered as unemployed 
show a somewhat different picture. 
This is an important source of con­
fusion, since in some cases — Italy 
being a prime example — regis­
tered totals differ considerably 
from harmonised totals because of 
the different method of estimation. 
Whereas the harmonised totals are 
based on the Community Labour^ 
Force Survey of how many people 
out of work are both available for, 
and actively seeking, work — the 
standard internationally-accepted 
definition — registered figures for 
each country reflect a variety of 
rules and regulations about who 
should be included. 
Not only do the totals differ, but 
there is only a limited degree 
of overlap between the people 
recorded in the two sets of figures. 
In 1992, some 22% of those counted 
as unemployed by the LFS were 
not registered as such by the 
respective national employment 
offices, while only 63% of those 
included in the national figures 
met the international standard 
conditions. 
The difference between the two 
measures, moreover, is tending to increase over time, adding to the 
complexity of the policy debate 
since it makes it harder to track 
what is happening to unemploy­
ment and to define the target group 
for assistance. 
Short-term 
economic prospects 
Economic growth in the Community 
as a whole seems to have resumed 
in the first half of 1993 and, accord­
ing to the May 1994 forecasts is 
likely to average lV2% in 1994 and 
to increase to 2V2% in 1995. This is 
unlikely to be sufficient to prevent 
employment from falling across the 
Community in 1994 or to achieve 
more than a very modest increase in 
1995. 
In most Member States, the rise in 
the numbers employed is likely to 
remain below the level required to 
make any significant impact on un­
employment. On the other hand, 
the depressing effect of a low rate of 
job creation on labour force growth 
could help to secure some reduction 
in the unemployment figures in 
1995, though only in four Member 
States is this forecast to be more 
than marginal (Denmark, Ireland, 
Italy and the UK). 
Labour force 
growth and 
participation 
The inadequate rate of net job cre­
ation in the Community in relation 
to the people who want to work is 
associated not only with large num­
bers recorded as unemployed, but 
also with hidden unemployment — 
not only among women but also 
among older people persuaded to 
relinquish their jobs and retire 
early. Increasing 
importance of women 
in the labour force 
The number of women working or 
seeking employment has increased 
rapidly across the Community over 
the past two decades. The growth 
shows little sign of slowing, still less 
of coming to an end. As shown in 
Chapter 2, this has been the main 
source of labour force growth in the 
Community for many years. In all 
Member States, especially those in 
the South, women will continue to 
add to the labour supply in future 
years, representing as much of a 
challenge for employment creation 
as reducing present recorded levels 
of unemployment. 
The growth in importance of women 
has been a feature of all Member 
States, especially those in the 
South, where all or almost all of the 
expansion of the labour force 
was due to increased numbers of 
women. The trend has been as pro­
nounced since 1980 as before. Only 
in Germany, as a result of large-
scale immigration, and in the 
Netherlands, has there been any 
significant increase in the number 
of men in the labour force. 
While the share of women in the 
labour force has risen almost as 
much in the EFTA countries as in 
the Community, men accounted for 
some 40% of labour force growth in 
the US between 1960 and 1992 and 
in Japan for almost 60%. 
The trend increase in the participa­
tion of women in the Community, 
especially among those of prime 
working age (25 to 49), has been 
accompanied by a decline in partici­
pation among men of the same age 
— from 97% to 94% — a trend also 
apparent in the EFTA countries 
and the US, where almost 10% of 
-9 
Summary and conclusions 
prime-age men are not recorded as 
being economically active at all. 
The proportion of both men over 55 
and under 25 in work, or looking for 
work, has declined even more mar­
kedly. These three trends have 
tended to offset the sharply increas­
ing participation of women, so 
that the average activity rate has 
changed comparatively little over 
the past 30 years, giving a mislead­
ing impression of stability. Since 
the reduction in male participation 
seems largely to have come to an 
end, the overall activity rate in 
future years is likely to be domi­
nated by the upward trend in 
female participation. 
Participation 
of older people 
Between 1960 and 1992, the num­
bers of men in the labour force in the 
Community over the age of 55 fell 
significantly as many Member 
States, faced with rising unemploy­
ment, introduced policies of early 
retirement to free up jobs. While 
there was also a marked decline in 
the participation of older men in the 
EFTA countries, in the US and 
Japan, participation only fell 
slightly. 
Since the mid-1980s, however, 
the decline in participation in the 
Community has slowed down, in­
dicating a possible end of the 
trend towards early retirement, in 
response to the escalating costs of 
the policy with the growing number 
of older people. Nevertheless, as a 
result of past reductions, only 6% of 
men aged 65 and over in the Com­
munity were still economically 
active in 1992, as opposed to 15% in 
the US and 40% in Japan. 
For women, the trend increase in 
participation has tended to offset the trend towards earlier retire­
ment. There has, therefore, been 
comparatively little change in the 
Community in the proportion of 
those over 55 who are part of the 
labour force. Nevertheless, the rate 
of participation among women in 
this age group is still much lower 
than in either the US or Japan. 
Participation 
among the young 
Since 1960, the proportion of young 
people of 15 to 19 in the labour force 
has fallen in the Community from 
55% to 30%, as more have stayed 
longer in education. A similar fall 
has occurred in Japan and the 
EFTA countries while in the US, 
falling participation among men 
has been offset by increasing par­
ticipation among women. 
For young people aged 20 to 24, a 
tendency for men to stay longer in 
education has been coupled in re­
cent years with a similar tendency 
for women. While, overall, the pro­
portion of those under 25 who are 
economically active is still tending 
to decline in the Community, it is 
already lower than in the EFTA 
countries or the US. 
Participation of women 
of prime working age 
The growth in the participation of 
women of prime working age (25 to 
49) has been the main reason for 
labour force growth in Western 
Europe for many years. In the 
Community, participation rose 
from 34% in 1960 to 67% in 1992, 
slightly less than in the EFTA coun­
tries and the US, in both of which it 
was over 75% in 1992. In Japan, the 
increase was much more modest, 
though the present rate is similar to 
that in the Community. These comparisons suggest that the 
upward trend in the participation of 
women in this age group in the 
Community may still have some 
way to go, particularly in Member 
States where rates are relatively 
low — in Italy, Spain, Greece, 
Ireland and the Benelux countries. 
In Spain, Ireland and Southern 
Italy, this continuing increase could 
result in labour force growth of over 
3% a year over the remainder of the 
decade and beyond, posing a consid­
erable challenge for job creation. 
Participation 
and employment 
Changes in labour force participa­
tion and, therefore, in labour supply 
are themselves significantly af­
fected by the rate of job creation. 
Past Community experience clearly 
demonstrates that the more em­
ployment opportunities expand, the 
greater the increase in labour force 
participation is likely to be. The act 
of creating jobs, therefore, tends to 
encourage more people to join the 
labour market. 
In the three years between 1990 and 
1993, as net job creation declined, 
the labour force expanded only 
slightly, by under V2% in total, as 
many people effectively disap­
peared from the labour force. 
As recovery occurs, these people are 
likely to re-emerge in the labour 
force figures, taking up a significant 
proportion of the additional jobs cre­
ated — as happened during the 
period 1985 to 1990 — and reducing 
the impact of employment growth 
on unemployment. 
If, on the other hand, employ­
ment creation remains depressed, 
then these people are likely to 
stay hidden, neither adding to 
-10-
Summary and conclusions 
unemployment nor labour force to­
tals, so continuing to disguise the 
true scale of the employment prob­
lem. 
Economic growth 
and employment 
The relationship between economic 
growth and the process of job cre­
ation is of key importance for 
employment policy in the Com­
munity, a strategic objective of 
which is to raise the employment-
intensity of growth. 
As shown in Chapter 3, all de­
veloped countries, without 
exception, experienced a marked 
decline in underlying productivity 
growth around the mid-1970s, coin­
ciding with the reduced rate of 
output growth following the first oil 
crisis. Since then, a much lower 
growth of GDP has been required to 
achieve a given rate of employment 
increase than before. 
The increase in employment which 
has occurred in the Community 
since the mid-1970s has, therefore, 
largely been accommodated by a 
slowdown in the rate of productivity 
growth per person employed. While 
this slowdown may seem beneficial 
from an employment perspective, it 
is potentially worrying so far as the 
Community's competitiveness on 
world markets is concerned. 
However, it is in large measure pro­
ductivity growth in manufacturing, 
rather than in the rest of the econ­
omy which is important, since 
manufactures still account for the 
major part of Community trade. To 
understand employment develop­
ments over the past and to assess 
the prospects for the future, it is 
essential to distinguish manufac­
turing from other sectors of the 
economy. Changes in employment in manu­
facturing are even more closely 
related to output growth than in the 
economy as a whole. While some 
reduction in productivity growth in 
manufacturing has occurred since 
the mid-1970s, the fall has been 
relatively small. 
In the non-manufacturing sector, on 
the other hand, annual productivity 
growth has halved. This slowdown 
has enabled more jobs to be created 
in non-manufacturing in the Com­
munity since the mid-1970s than in 
the 20 years before. Moreover, as 
labour force growth has risen — 
most notably in the 1985-1990 
period — productivity growth has 
fallen even more. Nevertheless, the 
reduction has not been enough to 
compensate for almost continuous 
job losses in manufacturing and 
prevent unemployment from rising. 
Unlike in earlier years, over the 
past decade productivity in manu­
facturing in the US has grown at a 
faster rate than in the Community. 
In contrast, average productivity 
growth in non-manufacturing in the 
US has barely been above zero since 
the 1970s — any increase in value-
added thereby being directly 
translated into more jobs. 
In Japan, productivity growth in 
manufacturing has halved from the 
rates of over 10% a year achieved in 
the 1960s as output growth has 
slowed. The decline has been even 
more pronounced in the rest of the 
economy giving rise to higher 
growth in employment over the past 
20 years than before and securing a 
more stable level of employment 
than in the Community or the US. 
A similar tendency is evident in the 
EFTA countries, at least up to 1990. 
In these countries and in Japan, the 
non-manufacturing sector has ab­
sorbed those coming onto the labour market despite lower output growth 
and, until recently, succeeded in 
keeping down unemployment. 
While a similar tendency has oc­
curred in the Community, it has not 
been strong enough to achieve the 
same result. 
In the US, where underlying pro­
ductivity growth has also 
accommodated to the fall in output 
growth, this has been associated 
with much more instability in em­
ployment — and unemployment. 
It has also been accompanied by a 
significant widening of wage dif­
ferentials (with the average wages 
of the low-paid declining markedly 
in real terms over the 1980s). 
Productivity, 
real wages and 
unit labour costs 
Productivity growth affects cost 
competitiveness through its inter­
action with wages and the exchange 
rate. All three variables are, there­
fore, critical for inflation and trade 
performance and, through these, for 
economic growth and employment. 
Over the past 20 years, real wages 
in manufacturing in the Com­
munity as a whole have risen in line 
with the growth of labour produc­
tivity and the share of profits in 
value-added has been broadly 
maintained. The same has been the 
case in the four largest Member 
States. 
Since 1980, however, in all of these 
countries, wages adjusted for infla­
tion have risen by less than 
productivity and profits have taken 
a greater share of value-added. This 
has also been the case in the US, 
while in Japan, real wages have 
gone up broadly in line with produc­
tivity. 
-11-
Summary and conclusions 
In national currency terms, 
nominal unit labour costs in manu­
facturing in the Community 
increased by twice the rate in the 
US and Japan between 1970 and 
1991, implying in itself a steady 
deterioration in cost competitive­
ness. To a major extent, however, 
exchange rates have compensated 
for the differences, especially so far 
as Japan is concerned. Indeed when 
measured in terms of ECU, unit 
labour costs in Japan rose at a faster 
pace than in the Community over 
the period. 
In general, it is exchange rate move­
ments rather than differentials in 
productivity or wage rises which 
have been the major determinant 
of the cost competitiveness of 
European producers relative to 
those in the rest of the world, as well 
as between producers in different 
European countries. Exchange rate 
movements have been far from 
smooth, however, and rates have 
fluctuated wildly over the past 
10-15 years, causing equally wide 
swings in relative costs of produc­
tion and almost certainly damaging 
world trade, economic growth and 
employment. 
Labour market 
flexibility 
The maintenance of the competi­
tiveness of European producers 
depends on their ability to be able to 
hire people with the skills they 
require and to modify the composi­
tion and organisation of their 
workforce in line with their 
methods of production. 
Although the extent to which such 
an ability exists is difficult to ident­
ify, it is important to understand 
better the way labour markets func­
tion across the Community. A key 
aspect of this concerns the ease with which it is possible to move into a 
job from being unemployed or inac­
tive and the scale of mobility of 
labour between sectors. This is the 
focus of Chapter 4. 
Flows into and 
out of employment 
Change in the overall level of em­
ployment from one year to the next 
conceal large movements of people 
into and out of work. Both tend to 
vary in some degree with the net 
rate of job creation, though the rate 
of exit varies by more than the rate 
of entry. 
Typically, therefore, years of low 
net job creation tend to be associ­
ated more with a high rate of job loss 
than a low rate of new recruitment. 
Women are much more likely to 
both enter and leave employment 
than men. Between 1984 and 1992, 
an average of 9% of women in em­
ployment had been unemployed or 
inactive the year before, as com­
pared with 6% men. 
The typical size of movement into 
employment from unemployment or 
inactivity varies markedly between 
Member States. Between 1984 and 
1992 the average size of flow was 
some 2-3 times higher in the UK, 
France, Denmark, Ireland and, 
above all, in Spain than in other 
Community countries. 
The difference in rates bears little 
relationship, however, to employ­
ment growth and is only loosely 
related to levels of employment. In 
Germany and Greece, only some 
4% of those in employment had 
been out of work the year before as 
compared with some 10% in the 
UK and 15% in Spain. The rate 
of exit shows a similarly large 
difference. Entry into sectors 
from unemployment 
and inactivity 
The rate of entry into services, at 
around 8% a year in the Community 
as a whole, was consistently higher 
than for industry (6%), reflecting 
differences in the relative rate of job 
creation. The rate of entry into 
agriculture was, perhaps unexpec­
tedly, much the same as into 
industry, and in a number of North­
ern Member States — France and 
Germany in particular — was 
higher. 
Within services, the distribution 
and catering sector stands out as 
having a high rate of new entrants, 
almost 10% of those employed in the 
sector not having had a job one year 
before. 
Within industry, the other manu­
facturing sector — which includes 
basic products like textiles and 
clothing and food processing — had 
a higher rate of new entry than 
other areas such as engineering. 
For all sectors, the rate of entry of 
women was higher than for men. 
Sectoral mobility 
The data available only enable 
movements of labour between sec­
tors of activity to be assessed at a 
relatively broad sectoral level 
(NACE 1-digit which is a division of 
the economy into 11 sectors). On 
this basis, an average of 4% of those 
in employment in the Community 
moved from one sector to another 
between 1985 and 1992. The pro­
portion, however, was consistently 
higher in years of high employment 
growth than when employment rose 
relatively little or fell. In 1990, 
for example, 5% of those in employ­
ment moved between sectors 
whereas, in 1992, only 3V2% did so. 
-12 
Summary and conclusions 
In this case, the rate of movement 
between sectors tended to be lower 
in Southern Member States plus 
Ireland and relatively high in the 
North. The main exceptions are 
Belgium and Germany, where only 
around 2V2% changed their jobs 
each year. This compares with a 
figure of about 6% in the UK — the 
highest in the Community — and 
around 5% in France and Denmark. 
As might be expected, the rate of 
movement into agriculture from 
other sectors was relatively low 
over the period. Perhaps less ex-
pectedly, the rate of movement into 
industrial sectors was much the 
same as into services, despite the 
much lower rate of employment 
growth. 
Within services, the sectors to 
show the highest rates of entry 
from other sectors were finance 
and business services rather than 
more basic services, while there 
was little difference between the 
figures for different industrial sec­
tors. 
While there was a tendency for 
inter-sectoral mobility to be higher 
for women than for men, the aver­
age Community difference was 
marginal and entirely accounted 
for by the UK, where an average of 
6x/2% of women in employment 
each year changed sectors as 
against 5% of men. 
As might be expected the chances 
of someone moving from one sector 
to another decline with age. For 
young people under 25, an average 
of just over 7% of those in employ­
ment in the Community changed 
the sector in which they worked 
each year between 1984 and 1992. 
For those aged 25 to 49, an average 
of around 4% a year moved, while 
for those aged 50 and over, the pro­
portion was only around 2% a year. Labour turnover 
The figures for inter-sectoral 
movements together with those 
for the movement from unem­
ployment and inactivity into 
work provide an indication of the 
scale of labour turnover in the 
Community. Between 1984 and 
1992, an average of llV2% of those 
in employment — more than one 
person in 9 — had taken on a new 
job during the preceding year. On 
average around 60% of those enter­
ing a new job were previously 
unemployed or inactive while 40% 
had been employed in another 
sector. 
The extent of labour turnover was 
highest in Spain, with an average 
of almost one in five of those em­
ployed in a particular sector 
between 1986 and 1992 not having 
worked in that sector the previous 
year, and in the UK, where the 
figure was one in six. Whereas in 
the former, however, the high turn­
over is due predominantly to a high 
flow from unemployment and inac­
tivity into work, in the UK, a high 
rate of new entry into employment 
was combined with a high rate of 
inter-sector mobility. France and 
Denmark, the only two other coun­
tries with a rate of labour turnover 
above the Community average, 
were similar to the UK in this re­
spect. 
At the other extreme, in Germany 
and Greece, only an average of one 
in 15 of those in employment were 
newcomers to the sector in any 
year. At the sectoral level, the rate 
of labour turnover is lowest in 
agriculture, though even here, 
an average of 7% of those in em­
ployment in the Community 
during the period 1984 to 1992 
had moved into the sector over 
the preceding year, while 10% had 
left. In the industrial sectors, the rate 
of entry averaged around 10% over 
the period and in services, llV2%. 
In the latter, however, the rate 
of exit was also high, with the 
probability of someone leaving 
their job in a service sector 
being much the same as in agricul­
ture. 
Labour turnover among women 
is significantly greater than 
among men. Between 1984 and 
1992, an average of 15% of women 
working in a sector had entered 
since the previous year, while the 
average figure for men was under 
10%. This difference was true for 
all Member States, but especially 
for Ireland, the UK and Luxem­
bourg. 
In terms of both labour turnover 
and sectoral mobility, therefore, 
there are considerable differences 
between Member States. From this 
it would seem that the (external) 
labour market is used significantly 
more in the UK, France and Den­
mark than in Germany, Belgium 
and Greece. 
Job turnover 
The Community Labour Force 
Survey for 1992 providés, for 
the first time, evidence on the 
numbers of people changing their 
jobs in a particular year. For 
the Community as a whole, it indi­
cates that 17% of those in work — 
one in six — had not been in the 
present job one year earlier. As 
with labour turnover, the figure 
was highest in Spain, Denmark 
and the UK as well as in the 
Netherlands, and lowest in Greece 
and Italy (for which no data are 
available on and over labour turn­
over) at under 13%, with Belgium, 
Germany and Luxembourg having 
figures only slightly above this 
(around 15%). 
13 
Summary and conclusions 
Changes in 
working time 
There has been a long-term tend­
ency for the average time worked 
by those in employment in the 
Community, to decline, so contri­
buting to the growth of the number 
of people in work. Between 1983 
and 1992, average hours worked 
per week in the Community de­
clined by just under 4%, as shown in 
Chapter 5. However, the fall was 
only 1% or less in the UK and Italy. 
In Germany, Belgium and Den­
mark, it was around 5% and in the 
Netherlands 13%. 
The distribution 
of working time 
In 1992, 58% of male employees 
in industry and services in the Com­
munity worked between 38 and 
40 hours a week, while a further 
13% worked between 35 and 
37 hours. Only 6% of men worked 
fewer hours than this, while 
23% had a working week of over 
40 hours. Indeed, 12% of men em­
ployed in industry and services in 
the Community — almost 7 million 
in total — had jobs which exceeded 
the maximum which will be allowed 
on average under the Community 
Working Time Directive. 
Women tend to work fewer hours 
than men in all Member States, 41% 
of those with jobs in industry and 
services working between 38 and 
40 hours in 1992 and 49% working 
less than this. A significant propor­
tion of these — over 4% in total — 
had a normal working week of 
under 10 hours, over half of whom 
usually worked for 6 hours a week 
or less. 
At the other end of the scale, 4% of 
women employees in industry and services — 2 million in total — nor­
mally worked 48 hours a week or 
more. While there is very little dif­
ference between the distribution of 
hours worked by men in industry 
and by those in services, a much 
higher proportion of women worked 
less than 35 hours a week in ser­
vices than industry, reflecting the 
greater incidence of part-time jobs. 
For both men and women, there are 
marked differences in working ar­
rangements across the Community. 
For men: 
• in Greece, Spain, Italy and 
Luxembourg, the normal work­
ing week in 1992 was 40 hours; 
• in France and Ireland, the nor­
mal week was either 39 or 
40 hours; 
• in Belgium, Germany and Den­
mark, between 37 and 38 hours; 
• in the Netherlands, either 38 or 
40 hours; 
• in Portugal, between 40 and 
44 hours, though a significant 
proportion worked 45 and more 
hours a week; 
• in the UK, 55% of men, more 
than anywhere else in the Com­
munity, worked more than 
40 hours a week. 
The long hours worked by men in 
the UK is emphasised by the fact 
that 28% of those employed in 
industry and services had jobs in­
volving working 48 hours a week or 
more, half as much again as in any 
other Member State in 1992, 
and three times higher than in 
all but Greece, Spain, Ireland and 
Portugal. Accordingly, 44% of male 
employees in the Community work­
ing 48 hours a week or more, outside 
agriculture, were in the UK For women, the pattern of working 
time varies between Member States 
in much the same way as for men. 
Countries can, therefore, be divided 
into the same groups as regards 
typical full-time working in 1992. In 
each case, however, the proportion 
of women working these hours was 
much less than for men, especially 
in the Northern Member States, re­
flecting the significant proportions 
working part-time. 
Sizable numbers of women in three 
of these countries — the Nether­
lands (15%), the UK (8%) and 
Denmark (6%) — had jobs of less 
than 10 hours a week, suggesting 
that employment figures need to be 
adjusted downwards when making 
comparisons with other countries. 
Changes in weekly hours 
The main change in working time at 
the Community level over the past 
decade, for both men and women 
employees, has been a reduction in 
full-time working hours by one or 
two hours a week. In 1983, 51% of 
men employed in industry and ser­
vices in the Community usually 
worked for 40 hours a week, and 
16% for between 37 and 39 hours. In 
1992, only 29% of men worked 
40 hours, and 36% worked between 
37 and 39 hours. The proportions 
working either more or less than 
this changed by relatively little. 
Nevertheless, the proportion of men 
working 48 hours or more increased 
from 10% to 12% over this period. 
For women, the proportion with a 
working week of 40 hours fell from 
33% to 17%, while the proportion 
working between 37 and 39 hours 
rose from 17% to 29%. There was 
little change in the relative number 
working more than 40 hours (10%), 
while those working under 30 hours 
a week rose only slightly from 27% 
to 29%. 
14 
Summary and conclusions 
Germany, Denmark and the 
Netherlands showed the largest re­
duction in full-time hours worked 
by men, typically from 40 to 37 or 
38. In Greece and Portugal as well, 
there was a marked reduction in 
normal full-time hours, with the 
proportion of men with jobs of over 
40 hours a week declining consider­
ably. 
In the UK, the proportion of jobs 
with long hours increased between 
1983 and 1992. Those working 
48 hours a week or more went up 
from 22% of the total to 28% over the 
period. Seven other Member States, 
however, also showed a significant 
rise in this proportion. 
A similar pattern of change across 
the Community is also evident 
for women. In Germany, the 
Netherlands and Denmark, there 
were marked falls in normal full-
time hours. In Belgium, Ireland and 
Italy, there was also a fall but on a 
smaller scale. In France, Spain and 
Luxembourg, full-time hours for 
women changed relatively little, 
while in Greece and Portugal, there 
was a significant reduction in the 
importance of jobs of over 40 hours 
a week. 
In contrast, in the UK, there was 
some rise in the proportion of 
women working very long hours 
whereas the relative numbers 
working under 35 hours a week 
changed hardly at all. 
Working hours of 
the self-employed 
A high proportion of people working 
long hours in the Community are 
self-employed rather than 
employees. In 1992, 51% of self-
employed men and 42% of 
self-employed women usually 
worked 48 hours a week or more, and only 12% of men and under 35% 
of women worked less than 
40 hours. This pattern is common to 
all Member States, though it was 
less marked for Spain, Ireland, Italy 
and Portugal, where under 50% of 
self-employed men worked at least 
48 hours a week, and more pro­
nounced in Germany and the 
Benelux countries, where over 60% 
did so. 
For both men and women self-
employed, changes in the pattern of 
working time changed by much less 
between 1983 and 1992 than for 
employees. 
Part-time working 
and normal hours 
Part-time working predominantly 
involves women, who fill 85% of all 
part-time jobs. What is meant by a 
part-time job seems to vary, how­
ever, across the Community. 
Figures for part-time employment 
derived from surveys of how people 
regard their job can differ substan­
tially from those derived from 
information on hours worked. 
In general, in the Northern Member 
States, there tend to be significantly 
more people, especially women, re­
ported as working part-time than 
there are working part-time hours 
— especially in the Netherlands, 
the UK and Denmark — while in 
the Southern Member States, the 
reverse is the case, especially in 
Italy. 
In 1992, 31% of women regarded 
themselves as being in part-time 
jobs in the Community. At the same 
time, 29% of women worked under 
30 hours a week, 25% working what 
can be termed part-time hours of 
between 10 and 29 hours. Another 
6% of women were employed for be­
tween 30 and 34 hours a week, most of whom, therefore, seem to have 
regarded themselves as full-time 
rather than part-time. 
In the Netherlands, whereas 59% of 
women employees were in part-time 
jobs in 1992, 36% worked part-time 
hours of between 10 and 29 a week. 
In the UK, 33% of women employees 
worked part-time hours, while 44% 
were in part-time jobs, in Denmark, 
37% were classified as part-time, 
while 23% worked part-time hours. 
By contrast, in Italy, Greece and 
Portugal, the numbers of women 
classified as working part-time 
amounted to less than half those 
working part-time hours. In these 
countries, therefore, considerable 
numbers of women working in jobs 
of under 30 hours regarded them­
selves as full-time employees. This 
was also the case in Belgium and 
Luxembourg. 
Thus, while a higher proportion of 
women employees were classified as 
part-time in France than in Italy, 
the proportion working part-time 
hours was much the same in the two 
countries in 1992. Similarly, 
Belgium had almost the same 
proportion of women working part-
time hours as in the UK, and a 
significantly higher proportion than 
in Denmark, yet a much lower pro­
portion of women classified to 
part-time jobs than either. 
Much the same is true of men work­
ing part-time in these countries, the 
difference between Member States 
in the relative numbers working 
part-time hours being considerably 
smaller then the difference in the 
numbers regarded as having part-
time jobs. 
The rise in the proportion of women 
working part-time hours between 
1983 and 1992 was substantially 
less than the increase in those with 
-15-
Summary and conclusions 
part-time jobs. In only five Member 
States was the rise in the former 
more than two percentage points 
over this period. The implication is 
that the recorded growth in part-
time working since 1983 is due not 
so much to a reduction in hours as 
to an increase in jobs for women 
classified as part-time, relative to 
ones classified as full-time, even 
though the hours worked might be 
only slightly — if any — less. 
Second jobs 
Only a small proportion of men and 
women in the Community have 
more than one job — about 3% in 
each case. Though there is a greater 
chance of women having second jobs 
the fewer hours they work in their 
main job, in all Member States, 
apart from France and Portugal, 
less than 10% of women working 
under 20 hours a week in their first 
jobs have a second one. 
Unsocial or flexible hours 
The great majority of people in the 
Community work between 8 in the 
morning and 7 in the evening from 
Monday to Friday. Jobs which in­
volve working outside this normal 
time, from.one perspective, can be 
viewed as unsocial, from another, 
as a sign of flexibility. The 1992 
Community Labour Force Survey, 
which contains estimates of this for 
the first time, shows that around 
5 million men in the Community 
— 7% — and 2 million women 
— 3% — normally worked nights, 
while a further 11% of men and 5% 
of women sometimes did so. 
The variation in Member States in 
the proportion usually working at 
night is wide and bears little rela­
tionship to the level of prosperity or 
stage of economic development. It is 
higher in Germany and Denmark— 
for both men and women — than anywhere else in the Community 
and lowest in the Netherlands. 
At the same time, the proportion 
occasionally wWking at night is 
much higher in the UK than in 
other Member States, suggesting 
more flexible working time arrange­
ments. 
Half the men and just over 40% of 
women employed in the Community 
in 1992 had jobs which involved 
them working at least sometimes on 
a Saturday. Unlike night working, 
Saturday working seems more 
prevalent in the South of the Com­
munity than the North — in Spain 
and Italy, especially. Again, the 
relative number sometimes work­
ing on a Saturday was higher in the 
UK than elsewhere (over 40% of 
men), though it was also high in 
Denmark and France (over 30%) 
whereas in Spain and Portugal, 
under 10% of men and women had 
jobs which involved occasional 
Saturday working. 
This suggests relatively inflexible 
working arrangements in the lat­
ter two countries. Moreover, the 
much lower proportion of women 
sometimes working on a Saturday, 
in all Member States, also suggests 
that women generally have less 
flexible working arrangements 
than men. 
Less than half as many employees 
in the Community work Sundays as 
work Saturdays (8% of both men 
and women usually do so, 15% 
sometimes). 
The pattern of Sunday working 
across the Community, however, is 
different from Saturday working, 
showing little tendency to be more 
prevalent in the South than in the 
North. In Italy, where Saturday 
working is important, the propor­
tion of men and women working 
Sundays is among the lowest in the Community, whereas the reverse 
is the case for the Netherlands. In 
France, Belgium and Luxembourg, 
the relative numbers working Sun­
days were also much lower than 
elsewhere, while in Denmark, for 
women in particular, they were the 
highest in the Community. 
The evidence on Saturday and 
Sunday working seems to demon­
strate the importance of social, 
cultural and religious factors as 
influences on working arrange­
ments. These affect the pattern of 
consumer demand for services, 
and, therefore, the incentive for 
business to employ people to work 
weekends. The evidence also indi­
cates that working arrangements 
are more flexible in some countries 
than others — the Southern Mem­
ber States appearing to have 
relatively inflexible arrangements 
— and seemingly more flexible for 
men than for women. 
Labour costs, 
social contributions 
and taxes 
A distinguishing feature of the 
European economies is the high 
level of social protection provided 
through the State or State-
supported systems. The financing of 
extensive social welfare systems 
has become an increasing matter of 
concern as regards the possible con­
sequence for competitiveness and 
the process of job creation. 
As discussed in Chapter 6, three 
interrelated questions are of central 
importance: 
• the extent to which the means 
of financing social protection 
systems adds to labour costs 
and discourages firms from 
taking on more workers; 
16 
Summary and conclusions 
• whether a different method of 
financing would have less effect 
on labour and production costs 
and so provide an inducement 
to increase employment; 
• whether a less extensive and 
costly system of social protec­
tion would reduce labour costs. 
The impact of 
employment taxes 
The effects in terms of output and 
employment of increased costs to 
businesses from the imposition of 
social contributions and taxes can­
not be judged simply on the basis of 
their initial incidence. It is import­
ant to consider how far they are 
passed on by businesses in higher 
prices or lead to the wages paid to 
employees being lower, as opposed 
to being absorbed in lower profits. 
This will tend to vary between econ­
omic sectors of activity and between 
individual firms. 
It is also important to recognise, 
when making comparisons be­
tween Europe and the US and 
Japan, that large companies in 
particular often contribute signifi­
cant amounts to private schemes of 
social protection for their em­
ployees. Moreover, these may not 
always show up as social contribu­
tions — or non-wage labour costs 
— but may be consolidated in 
pay schedules. 
The effects of any reduction in so­
cial contributions on labour and 
productivity costs are not easy to 
assess once account is taken of the 
effect of compensating for revenue 
lost by raising other forms of tax or 
by reducing social expenditure. 
Nevertheless, whatever the effects 
over the long-term once economic 
forces have fully worked themselves out, in the short and medium-term, 
any substantial reduction in social 
contributions may provide a signifi­
cant incentive for job creation. This 
is particularly so because of the 
scale of the tax "wedge" between 
what employees receive in net earn­
ings and what employers pay to 
employ people, implying both a 
possible deterrent to employment 
and an incentive to avoid, or evade, 
paying taxes and contributions. 
This may apply especially to 
workers at the lower end of the pay 
scale. (For this reason, the Com­
mission has suggested reducing the 
combined rate of tax and contribu­
tions on employment, especially 
that of less skilled workers, by 1-2% 
of GDP.) 
Rates of taxes 
and contributions 
The rate of social contribution paid 
by employers — including both 
statutory and voluntary contribu­
tions — averaged 22% of total 
labour costs in 1991 for an employee 
receiving the average wage paid to 
male workers in manufacturing. It 
varied, however from close to 30% of 
labour costs in France, Italy and 
Belgium to under 15% in the UK 
and under 5% in Denmark. This 
variation is largely due to dif­
ferences in the statutory element of 
contributions, though this itself 
varies from 60% in the UK and 
Ireland to over 95% in Belgium and 
Italy. 
In the US, social contributions 
amounted to 21% of labour costs in 
1991 and in Japan, to 15%. 
While the rate of social contribution 
has risen in some Member States in 
recent years, it has fallen in others. 
Only in Belgium did it rise by more 
than 1% of labour costs (for someone 
on average male earnings). In the UK and Denmark, the rate was re­
duced significantly. In Japan, the 
rate increased over the same period, 
but only by around 1% of labour 
costs. 
The relative stability in the Com­
munity in respect of someone on 
average male earnings may, how­
ever, conceal changes at different 
earnings levels. In particular, since 
1991, and since mid-1993 espe­
cially, a number of Member States 
have reduced contributions on 
young employees in an attempt to 
increase the incentive to businesses 
to employ them. 
Differences between the Com­
munity and the US and Japan seem 
more pronounced in respect of em­
ployees' contributions and taxes on 
wages. These amounted to around 
10-15% of labour costs in 1991 in 
the latter two cases and over 20% in 
the Community. With employers' 
contributions, they averaged 45% of 
labour costs in the latter in 1991 in 
respect of the average wage of a 
male worker in manufacturing. 
This represents a significant wedge 
between the cost of employing 
labour to companies and the net 
earnings which workers receive. 
The size of the wedge for someone 
on average male earnings varied 
broadly with GDP per head, from 
over 50% of labour costs in Belgium, 
Germany and the Netherlands in 
1991 and only slightly below this in 
Denmark and France to under 40% 
in the UK, Spain, Portugal and 
Greece. In Luxembourg, however, it 
was the smallest in the Community 
at little more than 30% of labour 
costs. 
In the Community as a whole, the 
wedge was reduced somewhat be­
tween 1985 and 1991 — by almost 
2% of labour costs. Only in France, 
Belgium and Portugal was there an 
17 
Summary and conclusions 
increase — in each case by less than 
2% of labour costs — while in 
Luxembourg, the UK and the 
Netherlands, there were significant 
reductions. 
Labour costs 
and earnings 
The average monthly cost of emplo­
ying a male manual worker in 
manufacturing in the Community 
in 1991 varied from around 
2,750 ECU in Germany, and just 
over 2,500 ECU in Belgium, to 
under 1,000 in Greece and under 
600 in Portugal. These differences 
broadly correspond with differences 
in value-added. In terms of net 
earnings, however, the differences 
are narrower because of the high 
taxes and contributions in the high 
income countries. 
In most Member States, both em­
ployers' and employees' social 
contributions are proportional to 
earnings up to a certain level and 
then become regressive, in the 
sense that the rate declines as earn-
ings increase. This generally 
happens, however, only at rela­
tively high earnings levels. 
This contrasts with taxes on wages 
which are mainly progressive at 
most income levels, the major ex­
ception being Greece where rates 
are proportional over a wide range 
of earnings. The UK is the only 
country in the Community with pro­
gressive contribution rates, while 
Belgium and Portugal, where rates 
are proportional to earnings, are the 
only other Member States where 
rates are not regressive at some 
level of earnings. In 9 of the Member 
States, therefore, non-wage labour 
costs imposed by governments bear 
proportionately more in respect of 
workers at the bottom scale than at 
the upper end of the earnings scale. Tax and 
contribution rates 
for men and women 
Single women are treated the same 
as single men for tax and contribu­
tion purposes in all Member 
States, though tax rates for women 
are generally below those for men 
because their earnings are signifi­
cantly less. The relative cost of 
employing a woman on average 
earnings in manufacturing was 
28% less than a man in 1991, 
though in Denmark, it was only 
15% less and in France 20% less, as 
compared with around 40% less in 
the UK and Ireland. 
Between 1985 and 1991, the gap 
between the average labour costs 
for men, and those for women, re­
mained virtually unchanged 
across the Community, declining 
only in France and widening in 
Germany and the Benelux coun­
tries. The incentive to employ 
women as opposed to men, there­
fore, remained much the same over 
this period. 
In four countries, Belgium, France, 
Ireland and Portugal — especially 
the latter two — women who are 
married effectively paid more tax 
in 1991 than single women, which 
may represent some disincentive 
for married women to seek work. 
Marginal tax rates 
Progression in the combined tax 
and contribution rate means that 
marginal rates are above average 
rates in most countries. As em­
ployers increase the wages paid to 
their workers, progressively less of 
the increase goes to the employee 
and more to the State, so potentially 
affecting the incentive to work and 
the inducement to reward higher 
levels of productivity. This potential effect was greatest 
in 1991 in Belgium, where the com­
bined marginal rate was 63% on 
earnings between 80% of average 
earnings and the average level. 
This means that twice as much of 
any increase in earnings goes to 
the State as to the employee. The 
marginal rate was almost as high 
in Ireland and Germany (both 
above 60%). Only in five Member 
States — Luxembourg, and the 
UK as well as Spain, Greece and 
Portugal — was the marginal rate 
below 50%. 
With the exception of Belgium and 
France, the combined marginal 
rate declined between 1985 and 
1991, though the fall was small in 
Spain, Portugal and Ireland, with 
the largest fall—over 5 percentage 
points — occurring in the Nether­
lands and Greece. 
Marginal rates in the Community 
are higher than in the US (around 
40%) and Japan (30%). For lower 
paid workers, it was lower still 
in the US, because of the low 
level of statutory social contribu­
tions, with employers able to take 
on workers at costs not much 
greater than the net earnings they 
receive. 
Given that a high proportion of the 
unemployed are low skilled, labour 
costs at the bottom end of the scale 
are particularly relevant. The chal­
lenge for policy is to bring about a 
reduction in the costs of employing 
low skilled workers such as to en­
courage employers to take on such 
people, while avoiding any signifi­
cant reduction in their already low 
take-home pay. 
Low pay and poverty 
The importance of safeguarding 
the most disadvantaged on the 
labour market — many of whom 
-18 
Summary and conclusions 
are women — is emphasised 
by the fact that low pay seems 
to be associated with poverty 
in many Member States. Towards 
the end of the 1980s, almost 
10% of households with at least 
one member working had a level 
of expenditure below 50% the 
average for households in the 
country concerned — which can 
be taken as a very approximate in­
dicator of poverty in a relative 
sense. Moreover, 30% of these 
households had at least two mem­
bers in work. 
Whereas low pay is not the pri­
mary source of poverty in any 
Member State except Portugal, 
in a third of households with expen­
diture below 50% of the national 
average in 1988, the head was 
in paid employment. Of these, 
30% were households where the 
head was self-employed, signifi­
cantly greater than the proportion 
of self-employed in total employ­
ment. 
Low pay tends to be a more import­
ant source of poverty in the 
Southern Member States than in 
those in the North, over 40% of the 
households with low expenditure in 
Greece, Spain and Italy and over 
50% in Portugal having the head of 
the household in paid employment 
— in many cases in self-employ­
ment. 
Unemployment and 
labour market 
policies 
Labour market policies can help 
bring down unemployment across 
the Community. However, in order 
to be effective, they need to be 
adapted to the characteristics of the 
unemployed in different parts of the 
Community. Youth unemployment 
In the 1980s, youth unemployment 
was an acute problem. However, the 
combined effect of the measures in­
troduced to combat the problem, 
coupled with high employment 
growth and a fall in the numbers of 
young people aged under 25, re­
duced the unemployment rate 
between 1985 and 1990 by over 5% 
of the youth labour force, much 
more than the fall in the rate of 
adult employment. Since 1990, the 
gap between the youth and adult 
unemployment rate has changed 
little. Whereas the rate among 
young women has risen only slowly 
since 1990, however, that for young 
men has increased sharply — more 
than for any other section of the 
labour force. 
The average rate of youth unem­
ployment in the Community — of 
21% in May 1994 — remains double 
that of those over 25. In Italy, at 
33%, and in Greece, at 23%, it was 
more than four times the adult rate. 
Although the gap between youth 
and adult unemployment was much 
less than this in Spain, the rate of 
youth unemployment was never­
theless some 38%, with some 
regions having rates well over 40%. 
Changes in youth unemployment 
need to be judged, however, in 
terms of the number of young people 
under 25, whose numbers declined 
by 1% in the Community between 
1985 and 1992. At the same time, 
rates of participation in the age 
group also fell (as detailed in Chap­
ter 2), so that the youth labour force 
declined by 2%. The fall in partici­
pation more than offset the growth 
in the number of young people in the 
Member States where this occurred 
— Italy and Portugal, in particular. 
Only in the Netherlands did the 
number of people under 25 in the 
labour force expand. To the extent that falling youth 
participation rates reflect more 
people staying longer in education 
and training, this can be seen 
as a potential benefit. It is diffi­
cult to judge how far this is in fact 
the case, however, because of dif­
ferences between Member 
States in what is meant by educa­
tion and training and, conversely, 
in how far young people are 
counted as being part of the la­
bour force. The large variations in 
participation rates which exist 
across the Community may, there­
fore, reflect differences in 
classification rather than genuine 
differences. 
Because of this, youth unemploy­
ment may be better measured by 
relating the numbers of young 
unemployed to the total numbers 
of those under 25, rather than 
in terms of the number that hap­
pen to be included as part of the 
labour force. On this measure, the 
unemployment rate in Spain is re­
duced to 20% and that in Italy to 
17%, with Ireland having a rate of 
15% and Greece, France, the 
Netherlands and the UK, rates of 
around 10%. 
Whereas youth unemployment 
rates as conventionally measured 
were higher in May 1994 in France 
and Belgium than in the Nether­
lands and the UK, this largely 
reflects the much smaller numbers 
recorded as part of the youth la­
bour force in the former two 
countries. In relation to popula­
tion, youth unemployment was 
much the same in the four coun­
tries. 
The overall effect of these chan­
ges is that, while young people 
under 25 accounted for 43% of 
the total unemployed in 1985, by 
May 1994 they represented only 
32%. 
-19-
Summary and conclusions 
Long-term 
unen:ployment 
Long-term unemployment, which 
rose significantly during the first 
half of the 1980s, has also tended to 
decline since 1985, though it re­
mains substantial. The proportion 
of the unemployed who had been out 
of work for a year or more fell from 
52% to 43% between 1985 and 1992 
— though it may well have risen 
somewhat since then. The fall was 
especially marked in Spain (60% to 
45%) and Portugal (53% to 30%), 
reflecting their strong employment 
growth. In Greece, where there was 
little rise in employment, long-term 
unemployment increased (from 
43% to 50%). 
The proportion of long-term unem­
ployed who are under 25 declined 
from 37% to 26% between 1985 and 
1992 in the Community as a whole. 
In all Northern Member States ex­
cept the UK and Ireland, the 
proportion was 15% or less in 1992 
and in Germany, Denmark and 
Luxembourg, under 10%. In the 
North, therefore, the problem of 
long-term unemployment now 
predominantly affects older age 
groups, while in the South — where 
the share of long-term unemployed 
under 25 was still 30% or more — 
the problem of long-term and youth 
unemployment are still closely asso­
ciated. 
Methods of job search 
The methods used by the unem­
ployed to find work vary markedly 
across the Community. In many 
Member States, a high proportion of 
the unemployed, as defined by in­
ternational conventions, are not 
registered at labour offices. They, 
therefore, have no contact with pub­
lic employment services and rely on 
other methods of finding jobs. Even in countries where most of the un­
employed are registered, they do 
not necessarily use these services as 
the primary means of finding em­
ployment. 
In Germany and Spain, around 90% 
of the unemployed — both men and 
women—relied on a public employ­
ment services to find work in 1992, 
while in France over 80% did so. 
Elsewhere, only in the Netherlands 
did a significant majority of the un­
employed use these services as 
their main method of job search. In 
Belgium! the figure was under 40%, 
in the ÙK and Portugal 30%, in 
Ireland under 20% and in Greece 
under 10%, the figures being much 
the same for women as for men. 
Looking at newspaper advertise­
ments or placing an advert was the 
most widely used method in most 
countries other than using the em­
ployment services (40% relied on 
this in the UK and Ireland). In 
Portugal and Greece asking friends, 
relatives and other acquaintances 
was also widely used. 
In general, therefore, less formal 
and less organised methods of job 
search are more important than the 
use of public employment services 
in most Member States. Moreover, 
use of the latter seems to have de­
clined in importance since 1985, 
possibly reflecting in part the tight­
ening of regulations governing who 
can register as unemployed. 
Labour market 
expenditure 
Public expenditure on labour mar­
ket measures in the Member States 
aimed at assisting the unemployed 
find work, or maintain their income 
levels, amounted to around 3% of 
Community GDP in 1992. Of this, 
over half went to income support and another 10% to funding early 
retirement schemes. 
Little more than 1% of Community 
GDP was devoted to active 
measures aimed at getting the 
unemployed into work, half of 
which went on training and youth 
programmes, with job subsidies, 
payment to the disabled and the 
public employment services ac­
counting for most of the remainder. 
The last item accounted for 15% 
of active expenditure — under 0.2% 
of GDP. Only in Germany and 
Belgium did employment services 
account for more than this. In 
the four Southern Member States, 
as well as Denmark, spending 
amounted to only around 0.1% of 
GDP or less, and not much more in 
France and Ireland. 
Between 1985 and 1992, public 
expenditure on labour market 
measures in the Community 
changed by little, though there was 
some shift to active measures — 
partly reflecting the fall in employ­
ment between these two years — 
especially on training, youth pro­
grammes and job subsidies. 
The scale of expenditure on active 
measures varied substantially 
between Member States, ranging 
from 1.8% of GDP in Denmark and 
over 1% in Ireland and Germany 
(mainly reflecting the scale of sup­
port given in the new Lander) to 
under V2% of GDP in the UK, Lux­
embourg» Spain and Greece. While 
expenditure on active measures 
increased relative to GDP in 8 Mem­
ber States between 1985 and 1992 
— especially in Germany where it 
doubled — it fell in the UK, Ireland 
and Luxembourg and, in Belgium, 
it remained unchanged. 
In terms of expenditure per unem­
ployed person, spending on passive 
20 
Summary and conclusions 
measures varied between Member 
States in line with GDP per head. 
Between 1985 and 1992, it changed 
by little in real terms. 
Active expenditure per unem­
ployed person in 1992 varied 
between Member States in a simi­
lar way to passive expenditure, 
with the level in Luxembourg, 
Denmark and the Netherlands 
being much higher than the Com­
munity average and the level in 
Southern Member States much 
lower, with spending in the UK 
and Ireland (where expenditure 
relative to GDP is relatively high 
reflecting the high rate of unem­
ployment), also being below the 
average. 
Between 1985 and 1992, real ex­
penditure per unemployed person 
on active measures increased in 
real terms in the Community as a 
whole, the rise being most pro­
nounced in Germany, Spain and 
Portugal. 
Between 1985 and 1990, expen­
diture on active measures per 
unemployed person rose in real 
terms in most countries. Between 
1990 and 1992, however, as unem­
ployment began to rise again, it 
fell in all countries apart from 
Germany, the Netherlands and 
Portugal, the decline being espe­
cially marked in the UK, where 
real spending on training per per­
son unemployed halved. 
In sum, therefore, there are pro­
nounced differences between 
Member States in expenditure on 
active measures per person unem­
ployed, which do not just reflect 
differences in GDP per head, but 
partly differing policies and ap­
proaches. Overall, however, in 
most countries in the early 1990s, 
the real value of the support to the 
unemployed to find work declined. The structure of 
employment across 
the Community 
Although it is well known that ser­
vices in the Community now 
account for most jobs, there is a 
dearth of information on the precise 
activities in which these jobs are 
located. Some indication, however, 
can be obtained from the Com­
munity Labour Force Survey, even 
though the small sample on which 
this is based means that the details 
are only approximate. 
This shows that, in 1992, there 
were more people employed in con­
struction in the Community than 
in agriculture; business services 
employed almost as many people 
as agriculture, while as many were 
employed in leisure, arts and cul­
tural activities as in the motor 
vehicle industry. Half as many 
again were employed in personal 
services, such as hairdressing or 
dry cleaning, as in iron and steel 
production. 
There are marked variations in the 
structure of employment between 
Member States, reflecting cultural ^ 
and other differences, which 
emphasise the difficulties of gener­
alising about potential areas of job 
creation. 
In Germany, for example, 50% more 
of the workforce are employed in 
engineering and motor vehicles 
than elsewhere, whereas in the less 
developed Southern Member 
States, these industries account for 
a very minor proportion of employ­
ment. On the other hand, the 
proportion employed in textiles, 
clothing and footwear in the latter 
countries, especially in Greece and 
Portugal,, is some way above that in 
the rest of the Community. Within services, the importance of 
retailing tends to be inversely re­
lated to income per head — the 
proportion employed being particu­
larly small in France and Denmark. 
Employment in domestic services 
follows a similar pattern, being 
much higher in Spain and Portugal 
than anywhere else, though it is 
also significant in France. Social 
services show an opposite tendency 
(accounting for 7-8% of total em­
ployment in Denmark and the 
Netherlands, but only 1% in Spain 
and Greece and V2% in Portugal). 
Health care is similar but with less 
extreme variations, as is education, 
while employment in business ser­
vices also tends to vary with income 
per head. By contrast, there is no 
clear pattern in respect of leisure, 
arts and culture, where the propor­
tion employed was high in 
Denmark, the Netherlands and, es­
pecially, the UK, and low in 
Belgium and Germany, as well as 
Portugal. 
Areas of job growth, 
1985 to 1992 
Most of the increase in employment 
in.the period of high net job creation 
between 1985 and 1990 occurred in 
services, though unlike in years of 
low net job creation, industry also 
accounted for a significant part of 
the employment growth in a num­
ber of countries. 
Over the Community as a whole, 
business services made the largest 
contribution to employment 
growth, accounting for almost one 
in five of the net addition to jobs. 
Employment in social and sanitary 
services, leisure, arts and cultural 
activities and travel and estate 
agents also increased markedly (by 
over 5% a year). On the other hand, 
the sector with the largest decline in 
-21-
Summary and conclusions 
jobs (6% a year), sea and inland 
water transport, was also in service-
s, while employment in railways 
also declined significantly (by 3% a 
year). 
Within industry, 14 of the 22 separ­
ately defined industrial sectors 
showed an increase in employment 
at the Community level over this 
period, with net job creation in office 
machinery, mechanical engineer­
ing, rubber and plastics and 
construction averaging 3% a year— 
more than in many services. These 
14 industries accounted for 25% of 
total employment growth in the 
Community over this period (over 
40% in Germany and Spain). 
Changes in employment 
1990 to 1992 
Emplpyment in industry fell signifi­
cantly in the Community duririg.the 
recession years between 1990 and 
1992', reinforcing the continuing de­
cline in agriculture and offsetting 
all the net job creation in services. 
Only five of the 22 industrial sectors 
showed an increase in employment. 
All the high growth sectors between 
1985 and 1990 experienced sub­
stantial losses between 1990 and 
1992, apart from mechanical engin­
eering. 
Unlike in industry, employment in 
services continued to expand be­
tween 1990 and 1992, with only 9 
out of 25 sectors experiencing a de­
cline in jobs, though some of these 
(estate and travel agents and re­
search and development institutes) 
had been among the fastest growing 
sectors before 1990. 
As in industry, the difference in the 
rise in employment between the 
high growth and recession period 
was most pronounced in what had 
been the fastest expanding sectors. Recession, therefore, seems to hit 
employment in growth sectors dis­
proportionately hard. 
Long-term 
employment growth 
in the Community 
and elsewhere 
Available data suggest that the 
areas of job growth in the Com­
munity over the past 20 years have 
been much the same as in US, 
Japan and the EFTA countries. 
The most striking difference is not 
the areas where employment has 
risen but the scale of job losses 
which have occurred in declining 
sectors. This seems largely respon­
sible for the lower overall rate 
of employment growth in the 
Community than elsewhere. The 
contribution to job growth made by 
services was almost identical in the 
Community to that in Japan and 
the EFTA countries. Half these jobs 
in the Community were in commu­
nal and personal services, as was 
the case elsewhere. 
On the other hand, the reduction in 
jobs in agriculture was much 
greater in the Community than in 
the US, while there were also sub­
stantial job losses in industry in 
which employment rose in the US 
and Japan. Since these job losses 
were predominantly in the private 
sector, they partly offset the expan­
sion of jobs in private services. As a 
direct result, a much higher propor­
tion of net job creation in the 
Community was in the public sector 
than was the case in the US and 
Japan. 
Comparing the high job creation 
period in the Community between 
1985 and 1990 with other years 
demonstrates that the main dif­ference was the fact that employ­
ment in industry rose between 
1985 and 1990 and fell markedly in 
other years. This factor, rather 
than the faster growth of employ­
ment in services, accounts for 
two-thirds of the difference in the 
overall rate of net job creation be­
tween the first and second halves 
of the 1980s. This applies equally 
to individual Member States. 
While industry is unlikely to be 
a major source of job growth in 
future years, the extent of any 
changes in this sector are likely to 
have a major impact on the extent 
to which employment as a whole 
increases. 
Changing skill needs 
in the Community 
Not only is the structure of employ­
ment changing across the 
Community but so also is the nature 
of work. While the growth of ser­
vices is leading to an expansion in 
the demand for highly-skilled la­
bour, it is also creating a significant 
number of low-skilled jobs. 
Overall, however, there seems to be 
a shift in occupational structure to­
wards more skilled jobs. Between 
1983 and 1991, the numbers classi­
fied as professional and technical 
workers in the Community ex­
panded by over 2V2% a year, as 
compared with a growth of total em­
ployment of just over 1% a year. At 
the same time, there was a decline 
of 2V2% a year in the number of 
agricultural workers and V2% a 
year in production and transport 
workers. Professional and technical 
jobs, which accounted for only 15% 
of the total in 1983, were respon­
sible for 40% of the overall rise in 
employment. 
The shift in occupational structure 
was much more marked in periods 
22-
Summary and conclusions 
of low employment growth than in 
high growth years. Indeed, in the 
low growth years (1983 to 1985 and 
in 1991), the increase in numbers in 
professional and technical jobs was 
only slightly less than between 1985 
and 1990, and accounted for most of 
the small rise in employment. By 
contrast, production and transport 
jobs declined significantly in low 
growth years, but rose between 
1985 and 1990. Much the same was 
true of clerical and related jobs, 
which were responsible for as much 
of the net job creation during these 
years as professional and technical 
jobs (30%). 
This evidence implies that in 
periods of recession, it is the lower 
grade jobs which tend to be reduced, 
whereas in periods of expansion, 
such jobs account for a relatively 
high proportion of overall employ­
ment growth. The pace of change in 
occupational structure and the shift 
towards higher skilled occupations 
seem to depend, therefore, on the 
prevailing economic climate. 
Occupations of men and 
women 
Over the Community as a whole in 
1992, a much higher proportion of 
men than women were classified as managers and legislators (9V2% as 
against 6%). This holds true for all 
Member States, the difference 
being relatively uniform if the 
self-employed are excluded. For 
professional jobs, the proportions of 
men and women were broadly the 
same, while, in the case of techni­
cians, the proportion of women was 
in most cases higher than that of 
men. Much the same proportion of 
women as men were, therefore, em­
ployed in these three relatively high 
grade occupational groups in 1992. 
Employment in small 
and medium-sized firms 
Most of the people employed in the 
Community work in small firms. In 
1991, firms of less than 100 em­
ployees accounted for 55% of those 
employed in the private sector in 
the Community and firms of under 
10 employees for about 30%. This is 
much the same as in Japan. 
Small firms, however, are much 
more important in the Southern 
Member States than in the North of 
the Community, though Denmark 
is an exception. In Spain, firms of 
under 100 employees were respon­
sible for 74% of private sector " 
employment in 1991, in Italy, 69% 
and in Portugal, over 60%. In Belgium and Germany, however, 
they accounted for only 46% of the 
total and in the UK and Luxem­
bourg, less than half. 
Small firms are much less import­
ant in the Community in 
manufacturing than in services. In 
1991, under 40% of those employed 
in manufacturing worked in firms of 
under 100, as against 60% in the 
case of services. In Japan, though 
the same phenomenon is evident, 
small firms account for a higher 
proportion of employment in manu­
facturing than in the Community 
(providing 45% of jobs), reflecting 
the prevalence of sub-contracting by 
large corporations. Similarly, in the 
South of the Community, small 
firms provide proportionally more 
jobs in manufacturing than in the 
North (60% in Italy and Spain as 
opposed to under a third in the UK 
and 28% in Germany). 
In private sector services, over half 
of employment was in firms of 
under 100 in all Member States, 
except Belgium (where the data ex­
clude the self-employed), and in 
Spain and Italy, over 75%. Within 
services, small firms account for 
over half of jobs in the two main 
growth sectors — other services 
(mainly personal services in this 
case) and business services. 
-23 
Summary and conclusions 
-24 
Employment developments 
Part I Employment developments 
Chapter 1 Employment trends and prospects in the Community 
Chapter 2 Labour force growth and participation 
Chapter 3 Economic growth and employment 
-25 
Employment developments 
26 
Chapter 1 Employment trends and prospects in the Community 
Chapter 1 Employment trends and 
prospects in the Community 
Economic recovery is now underway in the Community. 
Though unemployment is levelling off, it is likely to remain 
a major problem for some time to come. In the longer-term, 
it is uncertain whether the rate of job creation will be 
sufficient to increase employment to adequate levels. 
Introduction 
After a period of high employment 
growth in the second half of the 
1980s, the Community has experi­
enced a period of three years since 
1990 when the numbers in work 
have progressively declined and un­
employment has increased sharply. 
Although the decline in employ­
ment seems to have slowed 
significantly in 1994 and the out­
look is gradually improving, there 
remains an important question-
mark over the pace of recovery and 
how long it will last. In particular, 
the key issue is whether the rate of 
employment growth will return to 
the levels achieved before the onset 
of the present recession for long 
enough to have a major impact on 
the present rate of unemployment. 
The failure of the Community to 
create jobs since 1990 is reflected in 
the employment rate — the ratio of 
the numbers employed to the popu­
lation of working age, taken as 15 
to 64 — which in 1993 declined to 
58% from 60% three years earlier 
(Graph 1). While employment has 
fallen — by an estimate of almost 
2% in 1993, the largest reduction in 
a single year since the 1950s — working-age population has conti­
nued to grow, even if slowly. At the 
same time, the trend towards an 
increasing proportion of women of 
working-age to want to work has 
been held back by lack of jobs (see 
Box, p 28, for details of the employ­
ment rate). As a result, the employment rate in 
the Community is now even further 
than ever below that in the US and 
Japan, which in both cases is over 
70%. In the US, the rate increased 
again in 1993 as the economy re­
covered from recession while the 
rate of job creation rose sharply and 
1 Employment rates in the Community and elsewhere, 
1971 to 1993 
% population (15-64) 
80 r 
70 h 
60 h V 80 
A 70 
H 60 
50 1 i i i i i i i I i i i I i i i i i i a—i—i—I 50 
1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 
27-
Chapter 1 Employment trends and prospects in the Community 
The employment rate 
The employment rate is a measure of an economy's success in creating 
jobs, taking its working-age population as a benchmark. Like any 
aggregate measure, however, it is inevitably relatively crude and needs 
to be interpreted with caution. In particular, it is important to know 
the underlying reasons for any change in employment rates over time, 
or for any differences between economies, before comparative perfor­
mance can be unambiguously assessed. 
Employment rates, being simple ratios of total employment to working-age 
population, are affected, in the first place, by differences in the importance 
of part-time working and in average working-time. Secondly, they are 
affected by differences in the number of people above working age who are 
in work. Since these people are included in the employment figures but not 
in the working-age population figures, an economy with high numbers of 
people above retirement age still in work may have a high employment 
rate but not necessarily a high proportion of its working-age population in 
work. As shown in Chapter 2, comparisons of the Community with Japan, 
in particular, are significantly affected by this. 
Even if the comparison is confined to people between the ages of 15 and 
64, perceived differences between economies can still be misleading. 
This is particularly the case for the lower age groups, where a low rate 
of employment, and of labour force participation, may reflect a high 
rate of participation in education or training. Such a configuration 
would generally be regarded as favourable rather than as a sign of 
failure to create adequate numbers of jobs. On the other hand, a high 
proportion of young people may be in education or training because the 
economy is unable to provide employment. The proliferation of training 
schemes for young people during the 1980s as youth unemployment 
rose and the encouragement given to stay longer in education were 
motivated by a desire to increase skills and qualifications for work, but 
they also reflected the lack of jobs. 
Older age groups also pose potential problems, in the sense that if 
the effective age of retirement is below 65, this will also tend to reduce 
the employment rate as measured. From one perspective, this can be 
regarded as a favourable feature rather than as a weakness, since it 
can signify that an economy is capable of supporting a relatively high 
proportion of people in retirement. 
From another perspective, however, it might imply that the economy is 
failing to create sufficient jobs to keep such people in employment. The 
early retirement schemes introduced in many Member States since the 
mid-1970s were motivated largely by a desire to free up jobs for other age 
groups, especially the young, rather than to benefit older people. What 
matters in this regard is that older people should have a choice of whether 
to work or not and that, on the other side, their skills and experience should 
not be lost to an economy simply because there is not enough work to go 
round. 
These difficulties do not mean that the employment rate should be disre­
garded as a labour market indicator. On the contrary, in many respects, it 
is a more useful measure than the unemployment rate which excludes 
what can be a considerable number of people who are not actively seeking 
ajob, butwho would work if there was an opportunity to do so. Comparisons 
of employment rates are an essential starting-point in any analysis of the 
success or failure of an economy to create jobs for the people who live there. is set to continue rising in 1994. In 
Japan, where the economy remains 
in recession, the employment rate 
has been maintained despite very 
little growth in output. 
The EFTA countries, on the other 
hand, for the first time for several 
decades have not been able to 
maintain employment levels since 
1990 as recession has taken hold. 
The employment rate has, there­
fore, fallen even more sharply than 
in the Community. Nevertheless, 
despite this, the average rate 
in these countries remains con­
siderably higher than in the 
Community, at around 68%. At the 
same time, it should be empha­
sised that there are significant 
differences in the employment rate 
within both the Community and 
the EFTA countries. In 1993, in the 
Community, this was as high as 
73% in Denmark, but as low as 
45% in Spain, while in the EFTA 
countries, it varied from 73% in 
Switzerland to only 59% in Fin­
land. On the other hand, with the 
exception of Denmark, all coun­
tries in the Community had lower 
employment rates than the US, 
Japan and the EFTA countries 
apart from Finland. 
These respective changes in the 
employment rate are mirrored to a 
large extent in unemployment. In 
the Community, the average rate 
in 1993 increased to 10% from a 
low of under 8% in 1990. The gap 
with the US, which had narrowed 
when the US economy went into 
recession in 1990, has widened 
again (Graph 2). 
The rise in unemployment in the 
Community, however, has been 
dwarfed by the increase in the 
EFTA countries, where the aver­
age rate rose from just 2.5% in 
1990 to almost 8% in 1993, a rise 
even steeper than that experienced 
28 
Chapter 1 Employment trends and prospects in the Community 
by the Community in the early 
1980s. 
This, however, was due to a large 
extent to the substantial increase 
in Finland, where the rate rose 
from 3V2% to 18% between these 
two years. In Austria, on the other 
hand, the increase was only from 
3% to 5%. 
Although unemployment has also 
increased in Japan since 1990, the 
rise has so far been extremely 
small and the rate remains at 
around 2.5%, reflecting the exten­
sive policy of job preservation 
practised by Japanese companies. 
How long this can be maintained in 
the face of very low output growth 
is open to question. 
The rise in unemployment seems 
to have moderated in the Com­
munity during the first few months 
of 1994. At the latest count, the 
rate averaged 11% for the Member 
States taken together (excluding 
the new German Lander), which is 
only marginally above its level at 
the end of 1993 (Graph 3). Only in 
Germany, Spain, Portugal and 
Luxembourg, did the rate rise by 
more than 0.2% over the first five 
months of 1994 and in two coun­
tries, Ireland and the UK, it 
declined. 
Unemployment of 
men and women 
As has been the case for many 
years, though there were slightly 
fewer women included in the Com-
munity total than men, the 
unemployment rate for women was 
higher than that for men — 13% in 
May 1994 as opposed to 10% 
(Graph 4). This remains the case 
for all Member States, the only ex­
ception being the UK, where 
unemployment among men is sig-2 - Unemployment rates in the Community and elsewhere, 
1971 to 1993 
% labour force 
12 r 
MBh 
m h 
6 k n 12 
H 10 
A 8 
H 6 
^ 4 
H 2 
0 I I I I I I I I I l__J I I 1 L 1 I I I I I 1—_J Q 
1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 
3 Unemployment rates in the Member States, 1985,1990 
and May 1994 
% labour force 
25 r 
20 
15 
im H 25 
11 1985 
• 1990 
• May 1994 
GR June 1991, NL April 1994 
29 
Chapter 1 Employment trends and prospects in the Community 
Data on unemployment 
There are two main sources of unemployment figures. One is the labour 
force survey based on a sample of households which is conducted an­
nually, and in some cases quarterly, in Member States. This attempts to 
find out how many people who are out of work are both available for work 
and actively seeking work, which is the internationally accepted defini­
tion of unemployment. The Community Labour Force Survey, which is 
directed by Eurostat and carried out by Member States mostly in the 
Spring of each year using a common methodology, is the main source of 
comparable unemployment figures for the Community as whole. Indeed, 
the figures based on the LFS are the only reliable means of comparing 
unemployment between Member States and the only totals for unem­
ployment at the Community level which, for the most part, are internally 
consistent. 
The other main source is the monthly count of unemployment in each 
Member State based largely on those registering in employment 
offices as being without work and looking for a job, or, in some cases, 
on those claiming unemployment compensation. This is the basis of 
the unemployment totals reported in the media in each country which 
are most widely quoted in public debate. The coverage of these figures 
differs widely between Member States, so that the totals produced 
cannot be compared across the Community. Nor are they intended, in 
most cases, to relate to the ILO definition of unemployment. 
For example, in the UK, only those seeking full-time work and claim­
ing unemployment benefit are counted in the registered figures, which 
in practice leaves out of account many women. In a number of other 
countries, the registered figures are confined to those seeking work 
for more than a given number of hours a week (full-time work in 
France and Ireland, 18 hours a week in Germany, 20 hours in Spain, 
Luxembourg and the Netherlands). Such limitations tend to reduce 
the registration figures relative to the LFS figures which cover all job 
seekers. The registration requirement also tends to work in the same 
direction. 
There are, however, factors working in the opposite direction. In 
particular, in Italy, those working part-time for less than 20 hours a 
week and those employed on fixed-term contracts of 4 months or less 
are counted as unemployed along with those without a job at all. In 
the LFS people falling into both the former two categories are counted 
as employed. 
More generally, although the registered figures in all countries should 
exclude those already with jobs, whether in the formal or informal 
economy, and should include only those available and actively search­
ing for work, the methods of discerning whether these conditions are 
met differ from the confidential survey approach of the LFS, as well 
as varying from country to country. Moreover, taking people off the 
register once they have found work does not always happen instanta­
neously in all Member States. These are all possible reasons why 
registration figures can be higher than the LFS figures. 
Despite the definitional differences and the occasional changes in 
definitions in individual countries, the monthly count is used to adjust 
and update the LFS figures to produce harmonised estimates of 
unemployment rates each month in the Community which are broadly 
comparable between Member States. (These are the figures published 
each month by Eurostat in the monthly unemployment bulletin.) nificantly higher than amon: 
women. 
Nevertheless, there has been som 
narrowing of the gap in recen 
years as unemployment has gon 
up. The rise in 7 of the 12 countrie 
— especially Germany, France 
Portugal and the UK — has af 
fected men more than women. Thi 
was particularly so during the in 
itial stages of the recession. Ai 
unemployment has begun t< 
stabilise, however, female unem 
ployment has being rising slightb 
faster than that of men. This migh 
presage a repetition of what hap 
pened in the mid-1980s, when th< 
unemployment rate for womer 
went on increasing for over tw( 
years after the rate for men hac 
stopped going up — partly because 
of the increased number of womer 
attracted into the labour force — 
though it is too soon to be sure. 
What is 
unemployment? 
The above figures for unemploy­
ment relate to the harmonised 
series produced by Eurostat, which 
are intended to be comparable 
between Member States as well as 
to give a consistent picture of un­
employment over time. These, 
however, differ from the figures 
most familiar in individual Mem­
ber States, which is a source of 
some confusion and misunder­
standing. 
It should be emphasised that 
there is no single set of figures 
which provides an unambiguous 
measure of the scale of unemploy­
ment. This is partly because there 
are different ways of defining un­
employment, partly because 
unemployment in itself is not a 
precise concept. In particular, the 
dividing line between unemploy-
-30-
Chapter 1 Employment trends and prospects in the Community 
ment and inactivity — between 
someone who is searching for work 
but cannot find it and someone who 
has decided that the lack of jobs 
makes it pointless to search but 
who would still like to work — can 
be extremely blurred. 
Not only are there different figures 
published ostensibly measuring 
unemployment, but also there is 
an understandable tendency to re­
gard the unemployment totals as a 
reliable measure of employment 
deficiency, whereas in reality it is 
a very partial measure of this (see 
Chapter 2). 
The two main sources of unemploy­
ment figures are the Labour Force 
Survey of households, which 
attempts to find out from people 
themselves whether they are 
unemployed by applying the inter­
nationally accepted criteria for 
judging this, and the monthly 
count of unemployment in each 
Member State which is based 
on those registering at employ­
ment offices (or, in the case of 
the UK, those making a claim for 
unemployment-related benefits). 
It is the second measure which is 
the best known in Member States. 
It is the first which conforms to 
international standard definitions, 
specifically that recomended by 
ILO, and which is most comparable 
across countries (see Box). 
In order to combine the advantages 
of these two measures, to provide 
up-to-date estimates of unem­
ployment whilst retaining the 
maximum degree of international 
comparability, it is necessary to 
reconcile the two sets of figures to 
produce a "harmonised" rate. This 
tends to show a higher total for the 
Community as a whole than the 
LFS figures, but a lower total than 
the national administrative 
figures. In 1993, the difference 4 Unemployment rates of men and women in the Member 
States, 1990 and May 1994 
35 
Ï'3ÔJ 
Ml 
mi 
M< 
MI-% labour force 
M 1990 • May 1994 
GR June 1991.NL April 1994 -i 35 
30 
25 
20 
15 
10 
L P 0 GR UK NL 8 DK £12 F I iflL E I P D GR UK NL B OK E12 F i IRL E 
Men Women 
5 Unemployment rates in the Member States on 
alternative definitions, 1986 and 1993 
25 
20 
$5f: 
jib:! % Jabour force 
H Harmonised 
H National 
NL 1988, GR 1991 •i 25 
20 
15 
10 
]_ P D GR UK NL B OK E12 F i IRL E L P D GR UK NL B OK E12 F I IRL E 
1986 1993 
31-
Chapter 1 Employment trends and prospects in the Community 
6 Proportion of LFS unemployed who are registered as 
unemployed, 1986 and 1992 
100 r % unemployed 
T 100 
Comparisons of LFS 
and registered unemployed 
To make valid comparisons of those registered as unemployed who are 
also counted in the Community Labour Force Survey as being unem-, 
ployed, a certain amount of manipulation is necessary. This is because 
the LFS is carried out at different times in different Member States, 
which means that, in most cases, it is not possible to compare directly the 
LFS figures with the registration figures for a particular month. 
In some countries, the comparison is straightforward. In Germany, for 
example, the LFS for 1992, as previous surveys, relates to a particular 
week at the end of April, so that the LFS figures can be directly compared 
with the registration figures for the same month (the unseasonally 
adjusted'figures, since, of course, the LFS figures are not seasonally 
adjusted). For most countries/ however, the LFS is conducted over a 
number of weeks — in the Netherlands, in the extreme, over 24 weeks 
from January to June — mostly between March and May. In order to 
make the monthly registration figures comparable with the LFS esti­
mates, therefore, they need to be. weighted according to the proportion of 
LFS respondents in each country covered in each month. In the case of 
Spain, for example, where some 16% of LFS respondents were covered in 
March arid 42% in both April arid May, these percentages need to be 
applied to the registration figures in each of these three months to obtain 
a weighted average figure comparable with the LFS totals. between the national administri 
tive figures and the harmonise 
figures amounted to over 2 millio 
over the Community as a wholi 
18 million aa against 16 million, c 
an implied rate of 11.9% as o\ 
posed to one of 10.5% (Graph 5). 
One country, Italy, howeve 
— where, as noted above, the m 
tional administrative figures ar 
based on a particularly liberal ir 
terpretation of unemployment -
accounted for all of this difference 
In Belgium, Germany, France an 
Portugal, the national figure als 
exceeded the harmonised figur 
significantly, in each case by som 
20% or more, while the former fig 
ure was also some way above th 
latter in Denmark and Ireland. 
On the other hand, in Greece 
Spain and the Netherlands, th 
Community* harmonised total ex 
ceeded the national administrate 
one by some 40% or more, while ii 
the UK and Luxembourg, the dif 
ference was in the same directioi 
but much smaller. 
Comparisons with earlier years in 
dicate that the overall gap betweei 
the harmonised and administra 
tive registration figures has 
tended to widen over time. Thougl 
Italy is responsible for most of th( 
increase in respect of the Com 
munity totals, the difference 
between the two sets of figures has 
also widened for a few other coun 
tries. In a number of other cases 
however, it has narrowed. Betweer 
1986 — a year of similarly high 
unemployment — and 1993. 
the difference widened signifi­
cantly in Greece, Spain and 
the Netherlands, narrowed 
in Belgium, Denmark and 
Luxembourg and was reversed in 
France, Ireland, Portugal and the 
UK Not only, therefore, are the 
two sets of figures different at any 
-32 
Chapter 1 Employment trends and prospects in the Community 
point in time, but for most coun­
tries, they also change in different 
ways over time. 
Unemployed or 
not unemployed? 
Even the above comparisons, how­
ever, do not reveal the full extent of 
the difference between the two sets 
of figures. A significant proportion 
of those counted by the Community 
LFS as being unemployed are not 
registered as so in the national 
totals, while an even larger propor­
tion of those registered in individual 
Member States are not included in 
the LFS totals as being genuinely 
unemployed, as internationally 
understood. To a significant degree, 
therefore, the two sources relate to 
two different, if overlapping, groups 
of people. 
Of the 13 million or so recorded as 
unemployed by the Community 
LFS in 1992, only just over 10 mil­
lion, or 78%, were registered in the 
Member States (Graph 6). (These 
figures relate to the estimates cal­
culated from the 1992 LFS for the 
period during the year to which the 
survey relates — see Box for further 
details.) The proportion registered 
was lower for women than for men 
— 73% as opposed to 82%. 
The variation in this proportion be­
tween Member States, however, 
was extreme. Whereas in Belgium 
and Spain, it was over 91% and in 
Germany and France, over 85%, in 
the Netherlands, it was only 57%, in 
Luxembourg, 53%, in Portugal, 49% 
and in Greece, as low as 13%. In half 
the Member States, therefore — the 
last four.listed plus the UK and 
Ireland — some 30% or more of 
those counted, as unemployed in the 
Community statistics were not in­
cluded in national totals. Moreover 
in each of these countries, except Portugal where the proportion was 
just over half, under half of the 
women counted as unemployed do 
not appear as such in the national 
figures. 
At the same time, only 63% of those 
included in the national totals of 
unemployment were counted by the 
LFS as being unemployed in 1992 
(Graph 7 — in which for Spain, it 
should be noted, that there is some 
inconsistency between the numbers 
registered as unemployed and those 
who stated that they were regis­
tered in the LFS, the latter being 
greater than the former). This im­
plies that in 1992 some 19 million 
altogether were counted as unem­
ployed in the Community on either 
the Community or national defini­
tions of unemployment — 6 million 
higher than the LFS total (equival­
ent to 4% of the labour force), 
4 million higher than the registered 
total. To put this into perspective, it implies that, on the latest 
count, instead of 17 million being 
unemployed in the Community (ex­
cluding the new German Lander), 
which is the harmonised total for 
May 1994, some 23 million are 
counted as unemployed on either of 
the two definitions. In no Member 
State, apart from Spain — where all 
those registered were also included 
in the LFS unemployment totals — 
were more than 75% of those 
included in registration figures 
treated as unemployed by the LFS 
in 1992 and in half the countries, 
the figure was under 60%. 
In most countries — the only excep­
tions being France, Italy and the 
Netherlands — the proportion of 
women registered and counted as 
unemployed by the LFS was less 
than for men, and below 40% in 
three of the four Southern Member 
States — the only exception being 
Spain — as well as in Ireland. In 
7 Proportion of registered unemployed declared to be 
unemployed in the LFS, 1986 and 1992 
120 
100 • 1992 
U NL 1988. JRL 1991 120 
33 
Chapter 1 Employment trends and prospects in the Community 
these countries, therefore, the large 
majority of women included in na­
tional unemployment registers did 
not appear in the LFS unemploy­
ment total. 
While the proportion of the LFS un­
employed who were registered as 
such in national statistics was much 
the same in 1992 as in 1986, the 
proportion of those registered who 
were also counted in the LFS total 
went down significantly between 
these two years in virtually all 
Member States (from 72% to 63% in 
the Community as a whole). A grow­
ing number of the people included 
in national unemployment regis­
ters, therefore, do not appear in 
Community totals as being unem­
ployed. Consequently, in some 
sense, discussions of the unemploy­
ment problem in a number of 
Member States do not relate to the 
same group of people as discussions 
at the Community level, which does 
not make the policy debate any ea­
sier, let alone the formulation of 
policies. 
The scale of 
the employment 
challenge facing 
the Community 
The prospects of unemployment 
coming down across the Community 
over the next few years depend in 
large measure on the pace of econ­
omic recovery and the longer-term 
rate of growth which can be sus­
tained, as well as on the success in 
translating growth into new jobs. 
The outlook for the Community 
economy for the remainder of 1994 
and for 1995 is summarised below. 
However, the challenge confronting 
the Community so far as employ­
ment creation is concerned 
is reflected only partially in the prevailing level of unemployment. 
A major part of the problem to be 
addressed lies in the low level of 
labour force participation of people 
of working-age. These together 
are responsible for the low rate of 
employment in the Community 
as compared with other countries 
described above. 
As is indicated in Chapter 2, the low 
level of labour force participation, 
especially among women, together 
with the clear trend towards 
increasing numbers of those who 
are at present inactive — and not 
counted as part of the labour 
force — to want to work, means that 
efforts at reducing unemployment 
are akin to aiming at a moving tar­
get. The more success is achieved in 
creating jobs, the more people, espe­
cially women but also men in older 
age groups, will be encouraged 
to look for work and, therefore, 
the more they will tend to expand 
labour supply. 
This hidden potential labour sup­
ply, which emerges only when jobs 
are created, undermines the tradi­
tional approach of assessing labour 
market balance in terms of compar­
ing the prospective rate of job 
growth with an independent projec­
tion of those seeking employment. 
The two sides of the equation, in 
other words, are very much interre­
lated. By the same token, the 
performance of the Community in 
this regard should not be judged 
solely, or even mainly, in terms of 
what happens to unemployment — 
even though this is the most palp­
able indicator of policy success or 
failure — but at least as much in 
terms of the rise in participation 
rates to a level more comparable 
with that in other parts of the de­
veloped world. 
In more concrete terms, the chal­
lenge facing the Community is to raise its employment rate, both by 
reducing unemployment and by in­
creasing participation, by around 
10% or more over the coming years. 
Given the likely, if small, growth in 
people of working-age who will be 
swelling the numbers coming onto 
the labour market independently 
of what happens to participation, 
this translates into an increase in 
employment of around 1V2% a year 
sustained for the next 10 years 
achieve an employment rate simi­
lar to that in the US by the year 
2005. 
The economic prospects described 
below, and their likely implications 
for job growth, need to be assessed 
in these terms. 
Economic and 
employment prospects 
for 1994 and 1995 
The economic situation and 
outlook for the Community econ­
omy have improved considerably 
over the past year. The recession 
which has plagued the economy 
during most of 1992 and 1993 has 
receded and recent evidence sug­
gests that economic recovery is 
8 GDP, 1992 to 1995 
Annual change (%) 
1992 1993 1994 1995 
34-
Chapter 1 Employment trends and prospects in the Community 
strengthening and that the foun­
dations are being laid for 
sustained, non-inflationary-
growth of output and employment 
over the medium term. 
Gradual recovery of the Community 
economy seems to have begun in 
Spring 1993, GDP growth av­
eraging 1-1V2% during the 
remainder of the year (Graph 8). 
Nevertheless, for the Community as 
a whole growth was not sufficient to 
prevent a decline in GDP of 0.3% 
between 1992 and 1993. Prelimi­
nary quarterly data suggest that 
the recovery strengthened during 
the first half of 1994. 
According to the May 1994 fore­
casts, Community GDP is expected 
to expand by 1Y2% in 1994 and by 
2V2% in 1995, with the projected 
recovery being widespread throug­
hout the Community. All Member 
States which experienced a fall 
in output or no increase in 1993 
are expected to record growth in_ 
1994. Higher than average rates of 
growth are expected in Ireland, 
Denmark and the UK The pros­
pects are for a further increase in 
growth in 1995 with the rate in most 
Member States averaging around 
2V2%. The factors underlying the prob­
ability of increased growth are: 
• the growth of the global 
economy is set to gather 
momentum, so benefiting 
Community exporters, as a re­
sult of the successful conclusion 
of the Uruguay round, the 
much improved performance 
of the US economy and the 
buoyant Asian markets; 
• short-term interest rates in the 
Community could come down 
further because of declining in­
flation and the fact that 
budgetary and wage develop­
ments seem to be increasingly 
consistent with monetary 
stability; 
• business and consumer con­
fidence is improving because of 
recovery, the fading of uncer­
tainties about European 
integration and the enlarge­
ment to include Austria, 
Finland, Norway and Sweden; 
this improvement in confidence 
is likely to strengthen company 
and household spending; 
• consumers' expenditure stands 
to expand in response not only to lower interest rates and im­
proving confidence, but also to 
the moderation of the rise in 
unemployment which will im­
prove perceptions about job 
security and lead to less need 
for precautionary savings. 
On the other hand, as a corollary of 
wage moderation and fiscal consoli­
dation, there will be little or no 
growth in real disposable income 
which could restrain growth in the 
short-term. 
The recovery is initially being 
driven by exports. Following an es­
timated fall of almost 1% in 1993, 
export volumes are projected to ex­
pand at an annual rate of around 6% 
in 1994 and 1995. This should pro­
gressively spill over into domestic 
expenditure and induce an increase 
in investment. Following a decline 
of almost 5% in 1993 (Graph 9), 
fixed investment is likely to in­
crease slightly in 1994 and more 
substantially in 1995 (to 
around 5%). 
Because of the depressed growth in 
real disposable income, however, 
private consumption is expected to 
lag behind output growth in both 
years (Graph 10), though improved 
9 Investment, 1992 to 1995 
Annual change (%) 10 Consumption, 1992 to 1995 
Annua) change (%) 
1992 1993 1994 1995 11 Inflation, 1992 to 1995 
% 
1992 1993 1994 1995 
-35 
Chapter 1 Employment trends and prospects in the Community 
confidence should gradually bring a 
revival in expenditure. The pro­
jected export and investment driven 
recovery is in line with the strategy 
underlying the Commission's White 
Paper on Growth, Competitiveness, 
Employment and if growth forecasts 
for 1994 and 1995 are realised, out­
put growth in the Community could 
accelerate further to 3% or more in 
1996. 
Inflation 
After falling in 1992 (Graph 11), the 
rate of inflation is likely to decline 
further in the short-term, despite 
indirect tax increases, to an average 
of just below 3% in 1995. Inflation 
remains high in Greece as well as in 
Spain and Portugal, though in both 
latter cases it is falling. A major 
underlying factor is the strong 
moderation in wage cost pressures. 
Real wages are not expected to in­
crease at all in 1994 and 1995 and 
labour costs per unit of output in 
real terms are likely to decline by 
almost 2% a year, so contributing to 
a rise in profitability. 
Public finances 
Recovery of output is combining 
with lower interest rates and fiscal restraint to reduce budget deficits 
in the Community — by a projected 
1% of GDP between 1993 and 
1995 — reducing the aggregate 
deficit of Member States to around 
5% of GDP. Significant reductions 
in structural deficits are expected 
in a large number of Member 
States but especially in Belgium, 
Germany, Spain, Portugal and the 
UK Because of output continuing 
to be below trend, however, actual 
budget deficits are likely to come 
down by less. Over the next two 
years, the largest adjustment is 
projected in the UK where the 
deficit is expected to decline by 
some 3% of GDP between 1993 and 
1995. Considerable but less pro­
nounced cuts in budget deficits are 
also expected in Belgium and 
Portugal. Conversely, in Greece 
and Italy, where the budgetary 
situation is most problematic, little 
reduction is expected. 
External balances 
As a result of weak domestic expen­
diture growth relative to other 
countries and improved export per­
formance, the Community's trade 
surplus is set to increase signifi­
cantly in 1994 and 1995 to reach 
90 billion ECUs or 1V2% of GDP in the latter year (Graph 12), which 
would imply an overall current ac­
count surplus of V2% of GDP. 
Risk and uncertainties 
With the upswing now underway, 
the major uncertainty in the short-
term relates to the future strength 
of the recovery. There are number 
of reasons why growth could turn 
out higher than expected. In par­
ticular, investment could rebound 
more strongly if businesses react 
more vigorously to improved de­
mand and profitability, while 
consumers expenditure could in­
crease more markedly if confidence 
were to improve by more than is 
expected as unemployment sta­
bilises. 
On the other hand, growth might be 
weaker if monetary conditions, and 
long-term interest rates in particu­
lar, were to develop unfavourably. 
At the same time, there is some 
uncertainty about the growth of 
Community exports, both because 
expansion of global markets could 
turn out to be less buoyant than 
expected and because the recent 
weakening of the US dollar could 
make it more difficult for European 
producers to compete. 
12 Trade balance, 1992 to 1995 
%6DP 13 Employment, 1992 to 1995 
Annual change (%) 
Actual Forecast 14 Unemployment, 1992 to 1995 
% labour force 
1992 1993 1994 19951 1992 1993 1994 1995 1992 w$â I1Ô941 1995s 
36 
Chapter 1 Employment trends and prospects in the Community 
Employment 
The expected growth of output is 
unlikely to prove sufficient, given 
the probable growth in productivity, 
to prevent employment from falling 
in the Community as a whole in 
1994 for the third year in suc­
cession. In 1994, the number 
employed is likely to be some 3V2% 
less than in 1991. It is only during 
1995 that the growth of output is 
likely to reach a rate high enough to 
bring the decline in employment to 
an end and enable a renewed in­
crease to take place. However, it 
will take two to three years of high 
rates of net job creation similar to 
those experienced in the 1985 to 
1990 period for the number in em­
ployment to return to the level 
reached before the recession began 
(Graph 13). 
Indeed, only in Denmark, Ireland, 
Luxembourg and the UK is employ­
ment expected to increase in 1994, 
and only in Ireland, is the rise likely 
to be more than 1%. In Germany, 
Spain, Italy and Portugal, by con­
trast, the numbers employed are 
expected to decline by over 1% be­
tween 1993 and 1994. 
In 1995, although some recovery in 
employment is anticipated in all 
Member States, apart from 
Belgium, only in three countries 
— Denmark, Luxembourg and 
Ireland — is growth of more than 
1% projected. In most countries, 
therefore, the rate of net job, cre­
ation is likely to remain below the 
level required to make any appreci­
able impact on unemployment. 
Unemployment 
Given the continuing depressed 
rate of employment growth, there 
might be little expansion in the 
Community labour force in 1994 or 
1995 as participation, especially among women, is discouraged. On 
this basis, the rise in unemploy­
ment, which was already showing 
signs of moderating significantly in 
the first part of 1994, could come to 
an end in the first half of 1995 
(Graph 14). At that time, however, 
unemployment is likely to be over 
11V2% of the Community labour 
force. 
In only three Member States 
— three of the four in which em­
ployment is expected to rise, 
Denmark, Ireland and the UK — is 
the average rate of unemployment 
in 1994 likely to be lower than in 
1993. In Italy, where employment is 
also forecast to rise, no change in 
unemployment is expevted. More­
over, in 1995, despite the general 
improvement in employment condi­
tions, unemployment is expected 
to be higher than in 1994 in five of 
the 12 Member States — Belgium, 
Germany, Greece, Spain and the 
Netherlands — and in another 
three — Portugal, Luxembourg and 
France — the decline is expected to 
be marginal. 
As shown in the next chapter, how­
ever, these unemployment figures 
conceal the fact that significant 
numbers of the Community's poten­
tial workforce remain outside the 
labour market primarily because of 
the inadequate rate of job creation. 
It is their presence, and their likely 
entry into the labour market if the 
recovery in employment were to ac­
celerate significantly, which makes 
it difficult to reduce unemployment 
substantially over the medium-
term. It is their presence, moreover, 
which, as noted above and elabor­
ated in the next chapter, makes 
the employment rate rather than 
the unemployment rate a more 
meaningful indicator of progress in 
tackling the employment problem 
in the Community. 
-37 
Chapter 1 Employment trends and prospects in the Community 
Key employment indicators in the Member States, 1985 
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 
9805 
6610 
3512 
53.1 
449 
11.3 
23.6 
127 
1119 
2266 
3.6 
31.9 
64.5 
4779 
3301 
2280 
69.1 
181 
7.4 
17.7 
89 
914 
1278 
3.9 
40.1 
56.0 
5026 
3309 
1231 
37.2 
267 
17.8 
29.8 
38 
205 
988 
3.1 
16.7 
80.2 DK 
5064 
3357 
2539 
75.6 
215 
7.8 
11.5 
170 
706 
1657 
6.7 
27.8 
65.5 
2501 
1689 
1400 
82.9 
95 
6.4 
10.0 
131 
526 
738 
9.3 
37.6 
52.7 
2562 
1668 
1139 
68.3 
119 
9.5 
13.2 
39 
180 
918 
3.4 
15.8 
80.6 D Units : 1000s 
Unless otherwise specified 
GR E F 
59859 
42002 
26167 
62.3 
1932 
6.9 
9.8 
1349 
10728 
14090 
5.2 
41.0 
53.8 
28430 
20672 
15958 
77.2 
987 
5.8 
9.0 
711 
8114 
7133 
4.5 
50.8 
44.7 
31429 
21330 
10209 
47.9 
945 
8.5 
10.7 
639 
2614 
6956 
6.3 
25.6 
68.1 9656 
6259 
3589 
57.3 
304 
7.8 
23.9 
1037 
921 
1629 
28.9 
25.7 
45.4 
4662 
3002 
2371 
79.0 
142 
5.6 
17.5 
576 
720 
1074 
24.3 
30.4 
45.3 
4994 
3257 
1218 
37.4 
162 
11,7 
31.7 
461 
201 
555 
37.9 
16.5 
45.6 37549 
24306 
10834 
44.6 
2925 
21.3 
46.5 
1752 
3445 
5619 
16.2 
31.8 
51.9 
18235 
11930 
7658 
64.2 
1866 
19.6 
44.2 
1314 
2913 
3422 
17.2 
38.0 
44.7 
19314 
12376 
3175 
25.7 
1059 
25.0 
49.6 
439 
532 
2197 
13.8 
16.8 
69.2 52929 
34825 
21297 
61.2 
2436 
10.3 
25.8 
1734 
6871 
12610 
8.1 
32.3 
59.2 
25556 
17088 
12439 
72.8 
1155 
8.5 
22.9 
1108 
5167 
6116 
8.9 
41.5 
49.2 
27373 
17736 
8858 
49.9 
1281 
12.6 
28,8 
626 
1704 
6495 
7.1 
19.2 
73.3 
Source: Eurostat, Labour Force Survey, 1985; E1986 
38-
Chapter 1 Employment trends and prospects in the Community 
Key employment indicators in the Member States, 1992 
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 
9963 
6635 
3770 
56.8 
271 
6.7 
13.2 
109 
1164 
2498 
2.9 
30.9 
66.2 
4859 
3324 
2286 
68.8 
115 
4.8 
11.3 
72 
932 
1281 
3.2 
40.8 
56.1 
5104 
3311 
1484 
44.8 
156 
9.5 
15.2 
37 
231 
1216 
2.5 
15.6 
81.9 DK 
5112 
3467 
2637 
76.1 
262 
9.0 
12.3 
136 
715 
1780 
5.2 
27.1 
67.5 
2521 
1752 
1414 
80.7 
128 
8.3 
12.1 
103 
524 
784 
7.3 
37.1 
55.6 
2592 
1714 
1222 
71.3 
134 
9.9 
12.6 
32 
190 
996 
2.7 
15.6 
81.5 D Units :1000s 
Unless otherwise specified 
GR E F 
63748 
43859 
29715 
67.8 
1286 
4.1 
7.3 
1044 
11719 
16952 
3.5 
39.4 
57.0 
30938 
22173 
17538 
79.1 
681 
3.7 
4.2 
612 
8771 
8155 
3.5 
50.0 
t 46.5 
32810 
21687 
12177 
56.2 
605 
4.7 
4.3 
432 
2947 
8797 
3.6 
24.2 
72.2 9943 
6640 
3680 
55.4 
313 
7.8 
25.0 
804 
933 
1942 
21.9 
25.4 
52.8 
4817 
3202 
2400 
74.9 
124 
4.9 
17.2 
467 
713 
1220 
19.5 
29.7 
50.8 
5125 
3438 
1280 
37.2 
189 
12.9 
34.2 
337 
221 
722 
26.3 
17.2 
56.4 38624 
25540 
12458 
48.8 
2684 
17.7 
33.3 
1257 
4075 
7126 
10.1 
32.7 
57.2 
18745 
12604 
8360 
66.3 
1313 
13.6 
28.0 
910 
3403 
4047 
10.9 
40.7 
48.4 
19878 
12936 
4098 
31.7 
1371 
25.1 
39.8 
347 
672 
3079 
8.5 
16.4 
75.1 55478 
36386 
22021 
60.5 
2514 
10.2 
21.7 
1301 
6497 
14187 
5.9' 
29.5 
64.4 
26817 
17884 
12489 
69.8 
1105 
8.1 
18.6 
835 
4884 
6750 
6.7 
39.1 
54.0 
28661 
18501 
9532 
51.5 
1409 
12.9 
25.0 
466 
1613 
7437 
4.9 
16.9 
78.0 
Source: Eurostat, Labour Force Survey, 1992; figures in italic are not comparable with earlier years. 
39 
Chapter 1 Employment trends and prospects in the Community 
|Key employment indicators in the Member States, 1985 
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 (%) 
Source: Eurostat, Labour Force Survey, 1985; P1986 IRL 
3472 
2079 
1069 
51.4 
234 
18,0 
25.1 
175 
319 
571 
16.4 
29.8 
53.4 
1748 
1053 
739 
70.2 
155 
17.4 
26.4 
152 
256 
329 
20.5 
34.6 
44.4 
1725 
1026 
330 
32.1 
79 
19.3 
23.5, 
23 
63 
242 
7,0 
19.0 
73,3 Units : 1000s 
Unless otherwise specified 
NL P UK 
56267 
38048 
20583 
54.1 
2154 
9.5 
32.2 
2258 
6902 
11422 
11.0 
33.5 
55.5 
27267 
18601 
13955 
75.0 
947 
6.4 
26.5 
1496 
5278 
7180 
10.7 
37.8 
51.5 
28999 
19447 
6628 
34.1 
1207 
15.4 
39.3 
762 
1624 
4242 
11.5 
24.5 
64.0 356 
250 
148 
59.0 
4 
3.0 
6.5 
7 
47 
93 
4.6 
31.7 
62.9 
175 
124 
97 
78.2 
2 
2.2 
6.4 
5 
42 
.50 
4.9 
42.8 
51.0 
181 
126 
50 
40.1 
2 
4.3 
6.5 
2 
5 
43 
3.8 
10.0 
86.7 14103 
9744 
5124 
52.6 
601 
10.5 
17.7 
269 
1436 
3378 
5.2 
28.0 
65.9 
6989 
4907 
3375 
68.8 
353 
9.5 
18.7 
215 
1229 
1904 
6.4 
36.4 
56.4 
7114 
4837 
1749 
36.2 
247 
12.4 
16.7 
54 
206 
1473 
3.1 
11.8 
84.2 10167 
6562 
4225 
64.4 
408 
8.8 
20.3 
909 
1431 
1878 
21.5 
. 33.9 
44.5 
4879 
3152 
2541 
80.6 
186 
6.8 
16.5 
472 
1019 
1044 
18.6 
40.1 
41.1 
5288 
3410 
1684 
49.4 
222 
11.6 
25.3 
436 
412 
834 
25.9 
24.5 
49.5 55769 
36706 
24282 
66.2 
3151 
11.5 
18.2 
563 
8274 
15040 
2.3 
34.1 
61.9 
27176 
18333 
14173 
77.3 
1903 
11.8 
19.6 
438 
6327 
7145 
3.1 
44.6 
50.4 
28593 
18372 
10110 
55.0 
1248 
11.0 
16.6 
125 
1946 
7895 
1.2 
19.2 
78.1 
40 
Chapter 1 Employment trends and prospects in the Community 
Key employment indicators in the Member States, 1992 
IRL Units :1000s 
Unless otherwise specified 
NL P UK 
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 {%) 3494 
2191 
1149 
52.4 
203 
15.0 
22.7 
157 
322 
667 
13.7 
28.0 
58.1 
1744 
1104 
743 
67.3 
130 
14.9 
24.3 
143 
247 
351 
19.2 
33.3 
47.3 
1750 
1088 
406 
37.3 
73 
15.6 
20.8 
14 
75 
316 
3.5 
18.4 
77.8 56947 
39189 
21015 
53.6 
2191 
9.4 
28.2 
1657 
6962 
12396 
7.9 
33.1 
59.0 
27587 
19368 
13642 
70.4 
1014 
6.9 
24.4 
1050 
5283 
7309 
7.7 
38.7 
53.6 
29359 
19821 
7373 
37.2 
1176 
13.8 
32.9 
606 
1679 
5087 
8.2 
22.8 
69.0 382 
266 
165 
62.0 
3 
2.0 
3.7 
5 
47 
107 
3.2 
28.6 
65,1 
188 
135 
104 
76.9 
2 
1.6 
4.2 
4 
41 
56 
3.6 
39.5 
53.9 
193 
131 
61 
46.6 
2 
2.8 
3.1 
2 
6 
51 
2.5 
10.1 
84.2 14822 
10294 
6614 
64.2 
389 
5.6 
8.1 
247 
1571 
4503 
3.7 
23.8 
68.1 
7341 
5201 
4006 
77.0 
169 
4.0 
7.7 
189 
1310 
2384 
4.7 
32.7 
59.5 
7481 
5094 
2608 
51.2 
220 
7.8 
8.5 
58 
262 
2118 
2.2 
10.0 
81.2 9736 
6591 
4509 
68.4 
187 
4.0 
9.7 
517 
1468 
2523 
11.5 
32.6 
56.0 
4620 
3131 
2522 
80.5 
88 
3.4 
8.7 
261 
984 
1276 
10.4 
39.0 
50.6 
5117 
3460 
1987 
57.4 
99 
4.8 
10.8 
256 
484 
1247 
12.9 
24.4 
62.8 56772 
36941 
25630 
69.4 
2755 
9.7 
15.6 
569 
7715 
17237 
2.2 
30.1 
67.3 
27768 
18497 
14229 
76.9 
1857 
11.5 
18.9 
440 
5872 
7853 
3.1 
41.3 
55.2 
29003 
18444 
11400 
61.8 
898 
7.3 
11.7 
129 
1843 
9384 
1.1 
16.2 
82.3 
Source: Eurostat, Labour Force Survey, 1992; figures in italic are not comparable with earUeryears. 
-41-
Chapter 1 Employment trends and prospects in the Community 
Key employment indicators in the Community 
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 (%) 1965 
293.2 
188.0 
122.6 
65.2 
2.6 
2.1 
20.1 
49.5 
53.1 
16.4 
40.4 
43.3 
142.3 
83.0 
13.3 
38.0 
31.6 
16.0 
45.8 
38.0 
150.9 
39.6 
6.8 
11.5 
21.5 
17.2 
29.0 
54.2 1975 
312.4 
197.9 
124.3 
62.8 
5.3 
4.1 
13.9 
48.3 
62.2 
11.2 
38.8 
50.0 
152.0 
81.9 
3.3 
3.9 
9.1 
37.1 
35.7 
11.1 
45.3 
43.6 
160.4 
42.5 
2.3 
5.1 
4.8 
11.2 
26.5 
11.3 
26.4 
62.4 1985 
322.0 
215.2 
122.7 
57.0 
15.0 
10.8 
23.3 
10.4 
41.3 
71.1 
8.4 
33.6 
57.9 
156.6 
107.3 
75.8 
70.6 
8.0 
9.4 
21.6 
6.7 
31.7 
37.3 
8.9 
41.9 
49.2 
165.4 
107.9 
46.9 
43.5 
7.0 
13.0 
25.0 
3.6 
9.6 
33.8 
7.7 
20.4 
71.9 Units : Millions 
Unless otherwise specified 
1990 1992 1993 
327.7 
219.7 
132.8 
60.5 
12.2 
8.3 
16.8 
8.6 
43.0 
81.2 
6.5 
32.4 
61.2 
159.7 
109.5 
79.6 
72.7 
5.8 
6.6 
14.7 
5.6 
32.8 
41.2 
7.0 
41.2 
51.8 
168.0 
110.2 
53.2 
48.3 
6.4 
10.8 
19.1 
3.0 
10.2 
40.0 
5.7 
19.1 
75.2 331.0 
221.7 
132.0 
59.5 
13.9 
9.4 
18.4 
7.6 
41.0 
85.0 
5.8 
31.1 
62.9 
161.3 
110.7 
77.8 
70.3 
7.2 
8.1 
17.4 
5.0 
31.3 
41.5 
6.4 
40.2 
53.2 
169.7 
111.0 
53.9 
48.5 
6.8 
11.3 
19.5 
2.6 
9.7 
41.5 
4.8 
18.1 
77.1 331.6 
222.3 
128.8 
58.0 
15.8 
10.5 
20.1 
7.1 
39.3 
,82.3 
5.5 
30.5 
63.9 
161.8 
111.0 
76.0 
68.4 
8.3 
9.3 
19.5 
4.8 
29.7 
41.4 
6.3 
39.2 
54.5 
169.8 
111.2 
53.5 
48.1 
7.5 
12.3 
21.0 
2.4 
9.4 
41.7 
4.6 
17.5 
78.0 
Source: Eurostat National estimates of population and employment and unemployment rates for comparison between 
Member States; 1993 figures are provisional; 1965 figures from OECD 
-42 
Chapter 2 Labour force growth and participation 
Chapter 2 Labour force growth and participation 
The low rate of employment in the Community reflects not 
only high unemployment but low levels of activity. Too few 
women have the opportunity of working and too many older 
people are forced to retire early. Participation of women, 
however, is rising strongly and the labour supply is set 
to expand as and when job creation increases. 
Introduction 
A distinguishing feature of the 
Community in relation to other 
comparable parts of the world is its 
low rate of employment. As noted 
in Chapter 1 above, this results 
not only from a high rate of unem­
ployment, a rate which has risen 
significantly over the past 
20 years, but also from a low rate 
of labour market participation 
among people of working-age. Un­
like unemployment, this has 
shown only a small tendency to 
change over the past 20 years and 
more, at least so far as the aggre­
gate rate is concerned. Indeed the 
average proportion of people of 
working-age who are recorded as 
being economically active and part 
of the labour force is only slightly 
higher now than in 1960. This 
relative stability, however, con­
ceals markedly divergent trends 
for men and women, as well as for 
people of different age-groups. 
In consequence, the aggregate rate 
represents a highly misleading 
basis for assessing future labour 
force developments. In particular, it 
is liable to lead to gross underesti­mates of the growth in labour sup­
ply over the coming years and, 
correspondingly, over-optimistic as­
sessments of the prospective path of 
unemployment. 
The concern of this chapter is 
to examine in detail rates of la­
bour market participation in the 
Community and Member States for 
men and women in different age 
groups, and how these are tending 
to change over time. This is in­
tended to identify the groups for 
which the gap in participation rates 
between the Community and other 
comparable parts of the world is 
widest and which, therefore, repre­
sent a major part of the explanation 
for the relatively low employment 
rate. It also, however, provides es­
sential background analysis for 
judging the prospective growth in 
the Community labour force over 
the coming years. 
More specifically, labour force 
growth in the Community over the 
past three decades is, first, com­
pared with that in the US, Japan 
and the EFTA countries, distin­
guishing between the contribution 
of the growth of population of work­
ing age and that of changes in participation and between the dif­
ferent trends for men and women. 
Secondly, the changes which have 
occurred for people in different age 
groups are examined in the four re­
gions, focusing on older people of 55 
and over, younger people under 25 
and women of prime working age, 
since it is these groups which have 
shown the most significant changes 
during this period. 
Thirdly, rates of participation and 
the trends which are evident are 
compared between Member States 
within the Community. 
Fourthly, the implications of these 
trends for future labour force par­
ticipation and the growth in labour 
supply in the Community over 
the coming years are examined, 
drawing attention to the interrela­
tionship between these and the 
growth of employment oppor­
tunities. 
Labour force growth 
since 1960 
Over the past .30 years, the labour 
force in Community countries has 
43 
Chapter 2 Labour force growth and participation 
15 Factors influencing changes in the labour force in the 
Community, 1961 to 1992 
K).5 
Population (15-64) f 
Participation (15-54) 
Participation (55+) 
Labour force 
Population (15-64) 
Participation (15-54) 
Participation (55+) 
, Labour force 
Population (15-64) 
Participation (15-54) 
Participation (55+) 
Labour force 
Population (15-64) 
Participation (15-54} 
Participation (55+) 
Labour force 
0.5 . 1 1.5 2 2.5 3 
Average annual change {% labour force in base year) 
16 Factors influencing changes in the labour force in the 
EFTA countries, 1960 to 1992 
T05 
„> Population (15-64) 
Participation (15-54) 
Participation (55+) 
Labour force 
Population (15-64) 
Participation (15-54) 
Participation (55+) 
Labour force 
Population (15-64) 
Participation (15-54) 
Participation (55+) 
Labour force 
Population (15-64) 
Participation (15-54) 
Participation (55+) 
Labour force 
"°-5 ° 0.5 1 1.5 2 2.5 3 
Average annual change (% labour force in base year) grown by around 30 million. 
Around half of this growth has 
been matched by an increase in 
employment, half by a rise in un­
employment. Of this 30 million, 
over 25 million have been women, 
(Graph 15) a disparity which is 
mirrored in the EFTA countries, 
where over 2 million of the 2 V2 mil­
lion or so who came into the labour 
force over the same period were 
women (Graph 16). 
This pronounced feature of labour 
force growth in the Community is 
true of all Member States, to va­
rying degrees. It is most marked, 
perhaps surprisingly, in the South 
of the Community where the pro­
portion of women in paid 
employment in the 1960s and 1970s 
was, in most cases, low. In Italy and 
Portugal, there has been no growth 
at all in the number of men in the 
labour force over the past 30 years, 
while in Spain and Greece, there 
has been only a small increase. All, 
or virtually all, the expansion of the 
workforce in these four countries 
has come from more women work­
ing. This is also true of Belgium and 
the UK where the male labour force 
has fallen since 1960. 
These differences in relative rates of 
growth of men and women have 
shown little sign of narrowing in 
recent years. Since 1980, the 
Community's labour force has 
grown by almost 15 million, the 
number of women in the labour 
force by over 12 million. 
All Member States experienced a 
substantial growth of the female 
workforce over this period — of over 
50% in Spain, Greece and the 
Netherlands and almost 50% in 
Portugal. Only in Germany — 
because of immigration — and the 
Netherlands was there any signifi­
cant expansion in the number of 
men in the labour force. 
-44 
Chapter 2 Labour force growth and participation 
The overall effect has been to in­
crease the importance of women in 
the European labour force. In 1960, 
women accounted for under 30% of 
the Community's workforce. By 
1992, they accounted for over 40%. 
In the US and Japan, labour force 
growth has been much more evenly 
divided between the sexes. Indeed, 
in Japan, of the increase of 21 mil­
lion in the labour force over these 
30 years, 12 million were men and 
only 9 million were women 
(Graph 17), while in the US, men 
accounted for some 40% of the addi­
tional 57 million people who 
entered the labour force during this 
period (Graph 18). 
These differences in the relative 
growth of working men and women 
do not reflect differences in the 
relative increase of menand women 
of working age (denned as 15 to 64). 
In fact, in the Community as in all 
developed parts of the world, there 
has been a larger rise in the number 
of working-age men than working-
age women over the past 30 years. 
Rather they are a reflection of a 
marked decline in the participation 
of working-age men in the labour 
force in Europe and the even more 
pronounced growth in the participa­
tion of women. Both trends are 
apparent in the US and Japan over 
this period, though much less so in 
the latter. 
Changing 
participation 
of older people 
In Europe, however, there has been 
a significant decline in the numbers 
of men over the age of 65 who re­
main in the labour force, a decline 
which has occurred to a much smal­
ler extent in the US and not at all in 
Japan (see Box, p 46, for details of 
the data used in this analysis). 17 Factors influencing changes in the labour force in 
Japan, 1960 to 1992 
-0.5 0 0.5 1 1.5 2 2.5 3 
- Population (15-64) r 
Participation (15-54) 
Participation (55+) 
• tabour force 
Population (15-64) 
Participation (15-54) 
Participation (55+) 
Labour force 
Population (15-64) 
Participation (15-54) 
Participation (55+) 
Labour force 
• Population (15-64) 
Participation (15-54) 
" Participation (55+) 
Labour force 
-0.5 0 0.5 1 .1.5 2 2.5 3 
Average annual change (% labour force in base year) 
18 Factors influencing changes in the labour force in the 
United States, 1960 to 1992 
-0.5 
Population (15-64) r 
.. Participation (15-54) 
Participation (55+) 
Labour force 
- Population (15-64) 
Participation (15-54) 
Participation (55+) 
Labour force 
Population (15-64) 
ParVctpafion (15-54) 
Participation (55+) 
Labour force 
Population (15-64) 
Participation (15-54) 
Participation (55+) 
Labour force 
1 • • • ;•••• * 
-0.5 0 0.5 1 1.5 2 2,5 3 
Average annual change (% labour force in base year) 
-45 
Chapter 2 Labour force growth and participation 
J Data on the labour force * 
and participation rates 
The figures for the labour force and rates of participa­
tion by age group for the period 1960 to 1980 are taken 
from the ILO Retrospective Year Book, which in turn 
is based mainly on Censuses of Population for each of 
the countries. Although the Censuses were conducted 
at approximately the same time in each country 
— around the first year of the decade — in a few 
countries, they were a year earlier or later than this. 
This ought not to affect the changes in activity rates 
shown more than marginally. 
Since data for Switzerland are not available for the 
same age groups as the other countries, Switzerland 
has been excluded from the analysis. The EFTA figures 
therefore relate to Austria, Finland, Norway and 
Sweden only. 
For 1985 and 1992, the figures are taken from the ILO 
Yearbook of Labour Statistics in respect of the US, 
Japan and the EFTA countries. For the Community 
and Member States, the figures for 1986 and 1992 are 
, based on the Community Labour Force Survey. 
Figures for earlier years from ILO sources have been 
approximately adjusted to an LFS basis by applying 
the ratio of the latter figures to the former in a year for 
which both sets of data exist In practice, this adjust­
ment is in almost all cases very small since the ILO and 
LFS figures for the labour force and, most especially, 
participation rates are very close for the different age 
groups distinguished here. 
Although the data are from a common source and are 
based on a standard set of definitions, differences may 
still exist between the precise methods chosen by coun­
tries to collect and compile the data. Two areas in 
particular where discrepancies may be significant are 
in the definition of activity, where much depends on 
the number of hours a person needs to be working to 
be counted as employed and how actively they need to 
be searching for work in order to be counted as unem­
ployed, and in the treatment of groups such as the 
armed forces, people engaged in part-time work and 
students. 
Observed changes in activity rates, of women espe­
cially, may, therefore, in some cases partly reflect 
changes in the way activity is defined in practice as 
well as genuine changes. There is little way of knowing 
how important this factor is likely to be in practice, but 
over a time span of 30 years, it may be significant in 
some cases. Between 1961 and 1992, in the 
Community, the number of men 
older than working age who were 
part of the labour force fell by 2 mil­
lion. The number of women above 
this age fell by some 700 thousand. 
Together they effectively reduced 
the Community's workforce by al­
most 3 million. While there was also 
a marked decline in the number of 
this age group in the EFTA coun­
tries, in the US, the number of men 
over the age of 65 in the labour force 
went down only slightly and the 
number of women increased. In 
Japan, the number of both men and 
women of 65 and over rose signifi­
cantly (by over 2 million) — though 
this was coupled with some decline 
in the rate of participation. 
At the same time, the participation 
of older men of working age also fell 
considerably in Europe but declined 
only to a small extent in the US and 
Japan. Between 1960 and 1992, the 
rate of participation of men aged 55 
to 64 in the Community fell from 
over 75% to below 55%, so reducing 
the workforce by a further 3 million 
or so, while in the EFTA countries 
it fell to a very similar extent 
(Graphs 19 and 20). 
Virtually all the decline in partici­
pation of older men both above and 
below 65 occurred, however, be­
tween 1960 and the mid-1980s. 
Since then, the proportion of men 
aged 55 and over in the labour force 
has fallen only slightly. The trend 
towards earlier retirement, which 
was so pronounced in the years be­
fore 1980 seems to have come to an 
end. Nevertheless, it has left Eu­
rope with a much lower rate of 
participation among older men than 
in either the US and Japan. 
Whereas only just over 35% of men 
aged 60 to 64 were still in the labour 
force in the Community in 1992, in 
the US, the figure was around 55% 
-46 
Chapter 2 Labour force growth and participation 
Participation rates of men by age group 
in the Community and elsewhere, 1960 to 1992 
1001 20 EFTA countries - men 
% 
100 r 100: 
15-19 20-24 25-49 50-54 55-59 60-64 65+ 15-19 20-24 25-49 50-54 55-59 60-64 65+ 
21 United States • men 
% 
100 
so ; 
60 
:;:40" 
mm 19701 100 
i 80 
I960 60 
mm 
W'\ 
15-19 20-24 25-49 50-54 55-59 60-64 65+ 15-19 20-24 25-49 50-54 55-59 60-64 65+ 
47 
Chapter 2 Labour force growth and participation 
Participation rates of women by age group 
in the Community and elsewhere, 1960 to 1992 
23 EUR12- women 
% 
1Ô0I 
15-19 20-24 25-49 50-54 55-59 60-64 65+ 24 EFTA countries - women 
% 
100 r 100 
15-19 20-24 25-49 50-54 55-59 60-64 65+ 
25 United States - women 
% 
100 
80 
60 
40 
20 :^tm 
^>* ' ~ * \ 1 * 
K^^v •• # - - „ 100: 
15-19 20-24 25-49 50-54 55-59 60-64 65+ 26 «Japan - women 
100 1 100 
15-19 20-24 25-49 50-54 55-59 60-64 65+ 
48 
Chapter 2 Labour force growth and participation 
and in Japan, almost 75% (Graphs 
21 and 22). Moreover, while only 
around 6% of men of 65 and over 
were still economically active in the 
Community, in the US, the figure 
was over 15% and in Japan, almost 
40%. Furthermore, in the US, as in 
Europe, the trend decline in rates of 
participation among men of this age 
which was evident before 1980 
seems to have come to an end during 
the 1980s and, especially, over the 
past 5-6 years. This seems to be 
true for most Member States (as 
shown below). 
Differences in the participation of 
older men contribute significantly 
to the low overall rate of activity in 
the Community as compared with 
other advanced countries. Low par­
ticipation rates of older women, 
however, are also a factor. Though 
the average proportion of women 
aged 55 and over who are in the 
labour force has not changed much 
since 1960, it has increased for 
women aged 55 to 59, reflecting the 
trend among younger age groups 
for more women to work, and fallen 
for those over 60, reflecting the 
trend towards earlier retirement. 
In the EFTA countries and the US, 
however, it has increased and in 
Japan, it has remained at a rela­
tively high level (Graphs 23, 24, 25 
and 26). 
In the Community, just over 5% of 
women of 60 and over were still 
economically active in 1992, as com-
pared with 9% in the EFTA 
countries, 14% in the US and almost 
25% in Japan. 
Participation 
among the young 
Since 1960, the proportion of young 
people over 15 but under 20 who 
are either in work or actively look­
ing for a job has fallen markedly in the Community, from around 55% 
to 30%, reflecting the growing 
tendency for men and women in 
this age group to stay longer in 
education or embark on a training 
course. Although this fall in par­
ticipation was more pronounced up 
to 1980 than since, the downward 
trend has, nevertheless, conti­
nued. There are, however, 
differences between Member 
States, as described below. 
This trend is also evident in Japan, 
where the rate of participation of 
15 to 19 year olds has declined from 
50% to under 20% since 1960, 
though it seems to have stabilised 
during the 1980s. Similarly, in the 
EFTA countries, participation of 
young people has also fallen over 
the past 30 years, though the rate 
in 1992 was still over 40%, signifi­
cantly higher than in either the 
Community or Japan. In the US, 
however, where the rate is also 
around 40%, a decline in participa­
tion among men has been offset 
since 1960 by higher participation 
among women, resulting in little 
overall change. 
For young people aged 20 to 24, in 
the Community as elsewhere, there 
have been opposing trends for men 
and women since 1960. While la­
bour force participation of men of 
this age group has declined as par­
ticipation in education and training 
has risen — with no sign of this 
trend coming to an end over the past 
few years — that of women has in­
creased, the tendency for more 
women to work offsetting the tend­
ency for more to stay longer in 
education. Over the past few years, 
however, the latter tendency seems 
to have outweighed the former and 
the proportion of women of this age 
who are economically active has fal­
len slightly. This also seems to have 
occurred to a marginal extent in the 
EFTA countries and the US. Participation 
of prime age men 
One of the most significant trends of 
the past 30 years has been the tend­
ency for the participation of men 
of prime working age — between 
25 and 49 — to decline. In the 
Community, the rate fell from 97% 
to 94%, which may not seem much 
of a change, but implies that some 
3 million men in this age group in 
1992 were neither working nor ac­
tively seeking work (which is 
equivalent to almost half the total 
number of men recorded as being 
unemployed). Moreover half of this 
reduction occurred in the six years 
between 1986 and 1992, when 
almost 2 million men effectively dis­
appeared from the workforce with 
no obvious reason, except a lack of 
employment opportunities. 
A similar tendency is evident in the 
EFTA countries and the US. In the 
former, the rate of participation of 
prime age men in 1992 was down to 
92% (from 96% in 1960), and in the 
US to only 91% (from 95% in 1960), 
significantly below the rate in the 
Community. In Japan, on the other 
hand, the rate for prime age men 
has declined only marginally over 
the past 30 years and in 1992 was 
still almost 98%. 
Participation 
of women 
The rate of participation of prime 
age women in the labour force has 
shown the most radical change 
since 1960 in both Europe and the 
US. In the Community, it has risen 
from 34% in 1960, and from 39% 
in 1970, to 67% in 1992, with 
little sign of any slowdown. In­
deed, it rose by much the same rate 
between 1980 and 1992 as in the 
1970s and by the same in the 
49 
Chapter 2 Labour force growth and participation 
second half of this period as in the 
first half. 
This growth in the participation of 
women of prime working age has 
been the main factor behind the 
growth of the labour force in the 
Community over the past 30 years. 
Between 1980 and 1992, for 
example, it was responsible for 
10 million of the 15 million increase 
in the workforce. Given the conti­
nued upward trend, there remains 
significant scope for further in­
creases in most parts of the 
Community. As shown below, the 
average rate is still well below that 
in the EFTA countries or the US 
and it is likely to continue to be the 
main factor for some time to come. 
In the EFTA countries, the growth 
of participation of women in this age 
group has been even more pro­
nounced, the rate rising from 44% 
in 1960 to 80% in 1992. Here, how­
ever, a marked slowdown in the rate 
of increase is evident since the mid-
1980s, with the rate going up by 
only 2 percentage points between 
1985 and 1992. Further increases of 
any significance may, therefore, be 
unlikely. 
In the US, the proportion of women 
of prime working age in the labour 
force has risen over the past 
30 years by only slightly less than 
in the EFTA countries but by more 
than in the Community, and in 
1992, it stood at 76%. 
In Japan, on the other hand, the 
rate of participation of prime age 
women has risen by much less over 
the past 30 years, from 54% in 1960 
to 65% in 1992, almost the same 
level as in the Community. Vir­
tually all of this increase, however, 
has been concentrated into the 
period since 1980. Between 1980 
and 1992, participation of women 
in the labour force went up by almost the same rate as in the 
Community. 
Prospects for 
labour force growth 
in the next 10 years 
Trends in participation over the 
past 30 years are marked by: 
• a declining rate of participation 
of young people under the age 
of 25 as more stay longer in 
education and basic training; 
• a declining rate of participation 
of older people, particularly 
men, partly in response to 
policies to encourage people to 
retire early to free up jobs for 
younger people; 
• a growing rate of participation 
of women, especially those 
within the prime working-age 
group of 25 to 49. 
These trends have been evident in 
other countries. However, the de­
cline in the participation of older 
people has proceeded much further 
in the Community than in the US or 
Japan, while the growth in partici­
pation of women has been less rapid 
and remains much lower than in the 
US or the EFTA countries. The low 
participation of prime-age women 
and older people are the two main 
explanations for the low overall pro­
portion of working-age population 
in the workforce. Together with 
higher rates of unemployment than 
elsewhere, they also explain the low 
employment rate of the Community 
relative to other economies. 
At the same time, while the growing 
participation of women in the la­
bour force shows no sign of coming 
to an end, there are clear signs that 
the falling participation of older people is slowing considerably as 
Member States reassess the costs o 
supporting high numbers of peoph 
in retirement. Indeed in a numbei 
of Community countries, as showr 
below, there are signs of the fal 
being reversed. This suggests thai 
the future trend in participation ir 
the Community is likely to be domi 
nated by a continuing increase ir 
the proportion of prime-age womer 
joining the workforce, whereas ir 
the past this has tended to be offsei 
by earlier retirement. 
It has also been offset in the past, as 
in other economies, by declining 
participation among youngei 
people reflecting the growth of fur 
ther and higher education 
However, the decline has been rela 
tively small in recent years, largely 
because participation rates in mosl 
Member States have already faller 
to comparatively low levels. While 
some further fall in the future mighl 
be expected in those parts of the 
Community where the proportion ol 
young people staying in educatior 
beyond the official school-leaving 
age is still relatively small, the over­
all decline in this age group for th* 
Community as a whole is unlikelj 
to be very large. It should, therefore 
represent a relatively minor offsei 
to the trend rise in the participation 
of women over the coming years. 
The implication is that, if participa­
tion rates in the younger and older 
age groups change little over the 
remainder of the decade, and if the 
participation of women continues tc 
rise at the same rate as over the 
past 10 years, then the Community 
labour force would grow by around 
V2% a year over and above the 
growth of working-age population. 
Current (Eurostat) projections ol 
working-age population, suggest a 
rate of increase of around 0.2-0.3% 
a year up to the year 2000. Increas-
-50 
Chapter 2 Labour force growth and participation 
ing participation could, therefore, 
be twice as important as the growth 
of working-age population as a 
source of labour force growth over 
this period. Overall, therefore, the 
Community labour force can be ex­
pected to grow by 0.7-0.8% a year 
over the remainder of the decade, 
which would mean an additional 
7 million or so joining the workforce 
between 1993 and the year 2000. 
Most of these, as in the past, would 
be women. 
Moreover, since most of the women 
would also be of prime working age, 
this — together with young people 
entering the labour market for the 
first time — is likely to result in 
some reduction in the average age 
of the workforce, or at least prevent 
an increase. Thus, though some con­
cern has been expressed about the 
prospect of an ageing labour force in 
the Community in future years as a 
consequence of declining birth 
rates, this is something which is 
unlikely to occur to any significant 
extent within the next 10 ox 
20 years, at least in the Community 
as a whole. A few Member States, 
however, particularly those where 
female participation is already 
high, could experience some ageing. 
The challenge to Community coun­
tries is to ensure that the rate of job 
creation is sufficient not only to pro­
vide employment for these new 
entrants to the labour market but 
also to reduce the numbers in the 
workforce who are unemployed. 
Participation and 
labour force growth 
in Member States 
The future rate of job creation re­
quired, however, differs widely 
between Member States not only in 
terms of levels of unemployment but also in terms of the prospective 
labour force growth. Thus although 
the trends in participation noted 
above have, for the most part, been 
common to all Member States, they 
have differed significantly in scale 
(see Graphs 27 to 38 for activity 
rates of men over the period 1960 to 
1992 and Graphs 39 to 50 for activ­
ity rates of women). 
Present rates of participation, espe­
cially of women, vary substantially 
between countries. Therefore, the 
prospective growth in participation 
in the coming years also varies 
markedly — quite apart from dif­
ferences in the likely expansion of 
working-age population. 
In terms of labour force partici­
pation among older men, the 
slowdown in the rate of decline over 
the 1980s as compared with earlier 
years has been common to all 
Member States. It has been particu­
larly pronounced in Germany, Italy, 
Portugal and the UK, where the 
downward trend in participation 
among this age group seems to have 
slowed down considerably in recent 
years. In the case of Germany 
and Italy, it has even started to be 
reversed. Significantly perhaps, 
these are both countries where the 
indigenous population has ceased to 
grow because of a reduction in the 
birth rate. The growth of working-
age population in future years, in 
the absence of significant immigra­
tion, is, therefore, likely to be 
negative or very small. Both are 
countries where a policy of encour­
aging earlier retirement has largely 
been abandoned. 
Nevertheless, the steep fall in par­
ticipation has left the activity rate 
of men of 55 and over at 30% or 
below in half the Member States 
and only in Ireland and Portugal 
was the rate in 1992 above that in 
the US at close to 40% (Graph 51). For men of 65 and over, participa­
tion was below 5% in Belgium, 
Germany, Spain, France and 
Luxembourg and over 15% only in 
Ireland and Portugal. 
A similar tendency is apparent for 
older women as well. In most coun­
tries, any downward trend in 
participation rates of women of 60 
and over seems to have come to an 
end. Moreover, in half the Member 
States, participation of women of 
between 55 and 59 has tended to 
increase in recent years — in 
Denmark, Germany, Spain, the 
Netherlands, Portugal (where it is 
also true of older age groups) and 
the UK As a result the average rate 
of participation for women of 55 and 
over was under 10% in 1992 in half 
the Member States and above 15% 
only in the UK, Denmark and 
Portugal (Graph 52). Even in these 
three countries, however, the rate 
was below that in the US (just over 
25%). Nowhere except Portugal was 
the participation rate of women of 
65 and over more than 5%. 
There is very little possibility, 
therefore, of any significant reduc­
tion in rates of participation of older 
people, men or women, in any Mem­
ber State in the coming years. 
Indeed, on the contrary, there is 
some chance of an increase as 
policies for earlier retirement are 
reversed. 
Among younger age groups, the 
pattern is more mixed. In most 
Member States, participation of 
men younger than 25 has fallen 
markedly over the past 30 years and 
by almost 10 percentage points be­
tween 1980 and 1992 over the 
Community as a whole (Graph 53). 
In the Netherlands, Denmark and 
the UK, however — the three coun­
tries where the rate was highest in 
1992 and the only three where it 
was higher than in the US or Japan 
51-
Chapter 2 Labour force growth and participation 
Participation rates of men by age group in the Member States, 
1960 to 1992 
100; 28 Denmark - men 
iioo 
80 
60 
40 
20 I960: 
v si 970: 100 
80 
60; 
40 
20 
15-19 20-24 25-49 50-54 55-59 60-64 65+ : 1M 9! 20-24 25-49 50-54 55-59 60-64 : 65+! 
29 Germany • men 
100 
80 
60 
40 
20 1961 100> 
A 80 
60 
40: 
201 100; 
15-19 20-24 25-49 50-54 55-59 60-64 65+ 15-19 20-24 25-49 50-54 55-59 60-64 65+Û 
100 WMm 
15-19 20-24 25-49 50-54 55-59 60-64 65+ 15-19 20-24 25-49 50-54 55-59 60-64WB&ë 
52 
Chapter 2 Labour force growth and participation 
Participation rates of men by age group in the Member States, 
1960 to 1992 
100 100 
15-19 20-24 25-49 50-54 55-59 60-64 65+ 15-19 20-24 25-49 50-54 55-59 60-64 65+ 
35 Luxembourg - men 
:100 36 The Netherlands • men 
% 
100 100 
15-19 20-24 25-49 50-54 55-59 60-64 65+ 15-19 20-24 25-49 50-54 55-59 60-64 65+ 
100 38 United Kingdom - men 
% 
100 
80 
60 
40 
20 -•—-j^HHJ* yXMfg* 
1961 /tfï 1 100 
80 
60 
40 
20 
15-19 20-24 25-49 50-54 55-59 60-64 65+ 15-19 20-24 25-49 50-54 55-59 60-64 65+ 
53 
Chapter 2 Labour force growth and participation 
Participation rates of women by age group in the Member States, 
1960 to 1992 
39 Belgium - women 
% 
100 r 40 Denmark - women 
% 
100 
>80 
160 
mm 
20 £1: *V-i:D05: 
;:;80l 
MÛ 
mm 
iûl 
15-19 20-24 25-49 50-54 55-59'60-641; 65+ 15-19 20-24 25-49 50-54 55^:60-641 65+ 
41 Germany-women 
-100 IliÔO!: 42 Greece - women 
% 
100 
180.:: 
160'; 
mm 
m) mitm 
mm 
60 
40 
:;20:::: 
15-19 20-24 25-49 50-54 55-59 60-64 65+ 15-19 20-24 25-49 50-54 55-59 60-64 65+ 
;43 Spain - women 
1100 100; mMQOl 
15-19 20-24 25-49 50-54 55^!«^i65+'::: 15-19 20-24 25-49 50-54 55-59 60-64 65+ 
54-
Chapter 2 Labour force growth and participation 
Participation rates of women by age group in the Member States, 
1960 to 1992 
45 Ireland • women 
% 
100 
80 
60 
40 
20 100 
80 
H 60 
40 
20 46 Italy-women 
% 
100 
80 }• 
60 
40 
20 Msm 100 
80 
60 
40 
i 20 
15-19 20-24 25-49 50-54 55-59 60-64 65+ 15-1920-24 25-49 50-54 55-59 60-64 65+ 
47 Luxembourg - women 
% 
100 -i 100 48 The Netherlands - women 
% 
100 100 
15-19 20-24 25-49 50-54 55-59 60-64 65+ 15-19 20-24 25-49 50-54 55-59 60-64 65+ 
49 Portugal - women 
% 
100 
80 
60 
40 K 
20 lill 
1960 \ •"•• 
t-itfflîiiï i ;•;-;;;•;•;;•;•;•;-| «__ i_ 1 100 
80 
60 
40 
20 50 United Kingdom - women 
% 
100 
80 
60 
40 
20 
• • 
15-19 20-24 25-49 50-54 55-59 60-64 65+ 15-19 20-24 25-49 50-54 55-59 60-64 65+ 100 
80 
60 
40 
20 
-55 
Chapter 2 Labour force growth and participation 
51 Activity rates of men aged over 55 in the Member States 
and elsewhere, 1980,1986 and 1992 
1 70 
8 >- * NL 1 E12 E D UK GH OK WL P EFTA USA Japan 
52 Activity rates of women aged over 55 in the Member 
States and elsewhere, 1980,1986 and 1992 
1980 • 1986 • 1992 
n 70 
8 L ' *• «• E F El* D Qfl UK OK ? EFTA USA Japan — the rate of participation rose 
slightly during the 1980s, though in 
the latter two cases it has declined 
since 1986. 
The relatively high rates of partici­
pation in these three countries — in 
the UK and Denmark, in particular 
— partly reflects the comparatively 
high numbers recorded as being in 
full-time education while also being 
economically active — a combina­
tion of circumstances which is much 
less important in other parts of the 
Community (in Belgium, France 
and Italy, in particular, perhaps re­
flecting differences in the extent of 
enterprise-based training). 
Thus, while the proportion of men 
aged 15 to 19 in education or train­
ing varies in some degree between 
countries, the variation is much 
narrower than that of participation 
rates. In 1992, these varied from 
under 10% in Belgium and 15% in 
France to around 45% in the 
Netherlands, 55% in the UK and 
65% in Denmark. Much the same 
differences also apply to women in 
this age group. Although the high 
rate in the UK partly reflects a low 
proportion of young people remain­
ing in education after the 
school-leaving age as compared 
with other countries (which is tend­
ing to change over time), this is not 
the case in Denmark. 
The participation rate of women 
under 25 has generally changed less 
— increasing activity balancing in­
creasing participation in further 
education. Only in Belgium, Italy 
and Ireland was there a consistent 
tendency for the rate to fall between 
1980 and 1992 (Graph 54). While 
half the Member States registered a 
rise over this period, in all of these 
there was a fall between 1986 and 
1992. The relative rates in 1992 
were much the same as for men, 
with participation being highest in 
-56 
Chapter 2 Labour force growth and participation 
Denmark, the UK and the Nether­
lands — with Germany, the only 
Member States where the rate was 
higher than in the US — and lowest 
in Belgium, France and Greece. 
Overall, there seems little reason to 
expect a marked reduction in activ­
ity rates of younger people in future 
years in most Member States, 
though Denmark and the UK, 
where rates of 15-19 year-olds are 
much higher than elsewhere, might 
be exceptions. Even in the Southern 
Member States, rates of participa­
tion for this age group are already 
low in most cases. In Spain and 
Greece, rates for young men are 
below 30% and for young women 
below 25%, while the same is true 
in Southern Italy. Only in Portugal, 
where the rate for men in this age 
group is just above 40% and for 
women around 30%, does there 
seem much scope for further reduc­
tion. 53 Activity rates of men aged under 25 in the Member 
States and elsewhere, 1980, 1986 and 1992 
100 -i 100 
i 80 
60 
40 
20 
B F GR I E L IR. E12 P D NL UK DK EFTA USA Japan 
This leaves participation among 
people of prime working age, as at' 
the Community level, as the major 
determinant of future changes. 
While there has been a tendency in 
all Member States for the propor­
tion of prime-age men in the labour 
force to decline, especially over the 
1980s, the main trend in this age 
group has been the increase in par­
ticipation among prime-age women. 
This is common to all countries and 
in the 1980s has been most marked 
in those parts of the Community 
— Spain, Ireland, Germany and the 
Netherlands — where it was com­
paratively low initially. Even in 
Denmark, however, where the rate 
is significantly higher than else­
where — and almost on a par with 
that of men — it has continued to 
rise in recent years, even though 
at a much slower rate than before. 
(See Employment in Europe, 1993, 
Chapter 6, for a detailed break 
down of the long-term change in 54 Activity rates of women aged under 25 in the Member 
States and elsewhere, 1980,1986 and 1992 
I 100 
57-
Chapter 2 Labour force growth and participation 
participation rates of women be­
tween the ages of 24 and 49.) 
Nevertheless, differences across the 
Community in rates of participation 
of women in this age group remain 
extremely wide. In Ireland, the rate 
was still only around 50% in 1992, 
in Spain and Greece below 55% and 
in Italy only slightly above, whereas 
in Portugal and the UK, it was over 
70%, in France over 75% and in 
Denmark almost 90%. This implies 
that, apart from Denmark, further 
increases in participation are likely, 
but most especially in those parts of 
the Community where rates for 
women are still significantly below 
60%. 
These to a large extent are areas 
which are still developing economi­
cally and where there is scope for 
high rates of economic growth — as 
occurred in the latter part of the 
1980s in many cases. However, growth in the past has not always 
been accompanied by large-scale job 
creation — in Ireland, for example, 
employment increased by much less 
than in the rest of the Community 
between 1986 and 1990 despite a 
higher rate of growth than any­
where else. 
Such areas also tend to be, however, 
areas where unemployment is rela­
tively high. In Spain, Ireland and 
Southern Italy — where parti­
cipation rates of women are 
significantly lower than in the 
North of the country — unemploy­
ment is around 20%. 
Moreover, these are also areas 
where growth of working-age popu­
lation over the remainder of the 
decade is projected to be well above 
the Community average. Indeed, 
according to the latest forecast, in 
Spain and Ireland, working-age 
population will increase by more be-
55 Changes in employment and the labour force in the 
Community, 1986 to 1993 
Annual change {%) 
2 r 
1 r 
-1 r -i 2 
H 1 
H -1 
-2 
1986 1987 1988 1989 1990 1991 1992 1993 tween 1995 and 2000 than any­
where else in the Community - by 
over 10% on the mean projection. 
Combined with the increasing par­
ticipation of women, this could 
mean a labour force growth of 
around 3% a year or more. In other 
words, without significant emigra­
tion, employment would need to 
increase at this rate merely in order 
to keep unemployment from rising. 
In this respect, it can be noted that 
Spain has achieved growth of em­
ployment of 3% or more only three 
times in the past 30 years — but all 
three since 1986 — and Ireland only 
twice. 
In the rest of the Community, 
growth of working-age population of 
over V2% a year is projected in six 
other Member States as well as in 
Spain and Ireland — in Denmark, 
Greece, France, Luxembourg, the 
Netherlands and Portugal. Given 
the prospective increase in partici­
pation, the growth of the labour 
force could, therefore, be around 1% 
or more in 8 of the 12 Community 
countries, and not much less than 
this, if any, in Italy and the UK 
The only exceptions are Denmark, 
where participation rates are al­
ready very high and may not rise 
much further, and Germany, where 
without immigration on a substan­
tial scale, working-age population is 
set to decline by over 1% a year. 
Although a continuing increase in 
the participation of women may off­
set this fall, it is unlikely to give rise 
to any substantial growth in the 
labour force. 
The outlook for Germany depends 
critically on the scale of inward mi­
gration, however. In recent years, 
this has been large enough more 
than to offset the natural decline in 
working-age population and to 
cause the latter to expand by more 
than in most other countries in the 
-58 
Chapter 2 Labour force growth and participation 
Community (by almost 1% a year 
between 1986 and 1991). If immi­
gration from Central and Eastern 
Europe were to continue on a simi­
lar scale as in the past, then any fall 
in working-age population would be 
relatively small and labour force 
growth would be closer to that in 
other Member States. To other 
Member States, however, immigra­
tion is unlikely to be a major cause 
of labour force growth. 
Changes 
in participation 
and employment 
Matching job growth to labour force 
growth is not a simple equation. The 
rate at which the latter occurs is 
likely itself to be related to the for­
mer, in the sense that the more 
employment opportunities expand 
the greater the increase in labour 
force participation is likely to be. In 
other words, creating more jobs will, 
on past evidence, encourage more 
people who are at present economi­
cally inactive, to join the labour 
force. 
As noted in previous Employment in 
Europe reports, the high growth in 
employment which occurred be­
tween 1985 and 1990 was 
associated more with increased 
numbers of people entering the la­
bour force than with a reduction in 
unemployment. Of the net addi­
tional jobs created over this period, 
some 70% were filled by new en­
trants to the labour market rather 
than by those who were officially 
recorded as being unemployed. 
While population of working age in­
creased by just over 2% over these 
five years, boosted by signifie?nt 
immigration from Central and 
Eastern Europe in the later part of 
the period, the labour force ex­
panded by 4% as a result of increasing participation (Graph 
55). 
Since 1990, however, as net job cre­
ation has declined, the labour force 
has expanded only slightly. Be­
tween 1990 and 1993, it increased 
by under V2% in total, less than the 
rise in working-age population, 
which was around 1% over these 
three years. Indeed in 1993, the la­
bour force as measured actually 
seems to have contracted signifi­
cantly (though it should be borne in 
mind that the 1993 figures for em­
ployment in particular involve a 
significant amount of estimation 
and so are subject to revision). In­
stead of increasing, therefore, 
labour force participation has fallen 
since 1990. The rise in unemploy­
ment, therefore, large though it has 
been, has not revealed the true ex­
tent of the employment problem. 
The implication is that the contrac­
tion in employment opportunities 
over the past few years has deterred 
many people from actively looking 
for a job and they have disappeared 
from the labour force. This is un­
likely to be a permanent state of 
affairs. If and when employment op­
portunities begin to be created in 
sigmficant numbers, it is probable 
that these people will re-emerge as 
job seekers to swell the size of the 
Community labour force once again. 
On the other hand, if recovery of 
employment on any substantial 
scale fails to occur, then labour force 
growth is likely to remain de­
pressed, so tending to moderate the 
rise in unemployment. This would 
not mean, however, that the em­
ployment problem is any less 
serious, simply that it has been dis­
guised to a greater extent. 
59-
Chapter 2 Labour force growth and participation 
60 
Chapter 3 Economic growth and employment 
Chapter 3 Economic growth and employment 
Employment growth in the Community as elsewhere is 
closely related to output growth, but productivity growth 
has slowed down markedly since the mid-1970s which has 
boosted the rate of job creation. This has been especially 
the case in non-manufacturing sectors. 
Introduction 
The relationship between economic 
growth and the process of job cre­
ation is of key importance for 
employment in the Community. On 
the one hand, it indicates how much 
employment is likely to rise as re­
covery takes place, on the other, 
what rate of growth might be re­
quired to achieve any given rate of 
job creation. Moreover, the stability 
or otherwise of the relationship 
over time, as well as the variation 
between Member States, gives 
some guide to how far it is likely to 
be susceptible to the influence of 
policy. 
In practice, the historical evidence 
demonstrates that the relationship 
between the growth of output and 
employment tends to be very close 
for individual countries as well as 
for the Community as a whole. How­
ever, the form of the relationship 
has changed markedly over the 
long-term. It also varies signifi­
cantly between Member States as 
well as between the Community 
and other advanced economies. 
Thus some countries, like the US 
have experienced a significant 
increase in employment with 
a relatively low rate of output growth, while others, like Ireland, 
have had very little rise in employ­
ment despite a much higher rate of 
growth. 
The fact that these variations exist 
suggests that it may be possible, 
through policy, to influence the na­
ture of the relationship in future 
years and achieve a more employ­
ment-intensive pattern of output 
growth. 
A key aspect underlying the rela­
tionship between output and 
employment is technology, the ad­
vance of which is a major factor 
determining the growth of produc­
tivity. The use made of technology, 
and, in particular, information tech­
nology, is likely to have a major 
influence on the development of 
both the economy and society in fu­
ture years, and, therefore, on the 
process of job creation. This issue is 
considered only indirectly in the 
analysis below. 
GDP and 
employment growth 
in the Community 
since the 1960s 
The numbers in employment in the 
Community have varied closely with the rate of growth of GDP over 
the past 30 years. Upturns in output 
growth have on every occasion been 
followed, within the space of six 
months or so, by an increase in em­
ployment growth, while downturns 
have, equally consistently, led to a 
reduction in growth, and on occa­
sions to an absolute decline 
— notably in 1967, 1975, 1981 and, 
most strikingly, during the present 
recession (Graph 56, where GDP 
growth is lagged two quarters to 
adjust for the delayed response of 
employment to changes in output). 
Indeed the pattern of employment 
growth since the early 1960s has 
been almost an exact image of that 
of GDP growth. 
What has changed, however, is the 
gap between the two or, in other 
words, the rate of increase in output 
per person employed, which is an 
indicator of productivity growth 
(though it leaves out of account 
changes in average working time). 
In the 1960s, the trend rise in pro­
ductivity in the Community was 
over 4% a year, so that in 1967, for 
example a fall in GDP growth to a 
little under 4% led to a decline in 
employment of almost 1%. By the 
early 1970s, the trend rise in pro­
ductivity had fallen to about 4% a 
year, but after the oil crisis of 
1973-74 — when output growth fell 
61-
Chapter 3 Economic growth and employment 
Growth of employment and GDP 
in the Community, US, Japan and EFTA countries, 1962 to 1993 
56 EUR12 
Annual change (%) 57 United States 
Annua! change (%) 
12 r GDP (lagged 2. 
qtrs) 
1962 1365 1968 1971 1974 1977 1980 1983 1986 1989 1992 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 
58 Japan 
Annual change {%) 69 EFTA countries 
Annual change (%) 
1962 196S 1968 1971 1974 1977 1980 1983 1986 1989 1992 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 
62-
Chapter 3 Economic growth and employment 
sharply — it slowed further to 
around 3% a year. 
Since the second oil crisis in 
1979-80, there has been another 
apparent slowdown in trend pro­
ductivity growth to not much more 
than 2% a year. As a result, the GDP 
growth which occurred in the latter 
part of the 1980s, which was modest 
by the standards of the 1960s, was 
accompanied by a larger increase in 
employment than at any time since 
1960. 
This apparent reduction in under­
lying productivity growth can be 
regarded as being favourable from 
an employment perspective. It sug­
gests that the rate of output 
recovery which could be expected to 
generate the size of increase in em­
ployment required to have any 
significant impact on unemploy­
ment in the Community over the 
remainder of the 1990s is much 
lower than it used to be. 
At the same time, however, it might 
be regarded as unfavourable to the 
extent that, especially through 
weakening competitiveness, it re­
duces the attainable growth of 
output and so the capacity of the 
economy to create employment. In 
this regard, the sectors where the 
slowdown in productivity occurred 
assume some importance. 
As indicated below, the fact that 
there was a decline in aggregate 
productivity growth does not mean 
that there was a similar reduc­
tion in all sectors. It is perfectly 
compatible with continued high 
productivity growth in key areas of 
the economy — in manufacturing, 
in particular — where the inter­
national competitiveness of 
production is critical for trade per­
formance and long-term economic 
growth. Indeed the shift of labour 
from high productivity growth sectors to those with lower growth 
has been an important part of the 
employment creation process, while 
at the same time providing part of 
the explanation for the slowdown in 
overall productivity growth itself. 
A further part of the apparent fall 
in underlying productivity growth 
seems to be due to a reduction in the 
average amount of time those in 
employment work. Since 1988, thte 
evidence of the Community Labour 
Force Survey is that the average 
number of hours worked per week 
(both actual and usual) have grad­
ually fallen. This seems to have 
been as significant in 1989 and 1990 
at the peak of the economic upturn 
as in 1991 and 1992 when recession 
set in. In practice, this means that 
a given amount of work has been 
shared among more people, so ad­
ding appreciably to the numbers in 
employment and reducing apparent 
productivity. 
Between 1988 and 1992, the reduc­
tion in average working time could 
be interpreted to mean that the 
numbers in employment in 1992 
were almost 3 million higher than if 
there had been no change in hours 
worked. This almost certainly over­
states the effect of reducing working 
time on the numbers employed. 
Thus in certain sectors of activity 
the nature of the production process 
may limit the extent to which num­
bers can be reduced when the 
volume of work declines — ie even 
if working time had not fallen the 
same number of people would have 
needed to have been employed. 
Moreover, in a number of cases, the 
reduction in working-time may 
have been accompanied by an in­
crease in productivity which would 
not have occurred if average hours 
had not fallen. In this case, the 
number of people employed would 
have been the same, but their pro­
ductivity lower. Nevertheless, it is indicative of the significance of this 
factor. 
Unfortunately, it is not possible 
with the data available to distin­
guish between the numbers 
employed and the volume of work 
performed in earlier years, nor, 
therefore, to examine the change in 
productivity growth on a more 
meaningful basis than in terms of 
the numbers in employment. 
In seeking an explanation for the 
slowdown in productivity growth in 
the Community, it is important to 
be aware that not only is it a com­
mon feature of all Member States, 
but that it also occurred at around 
the same time in other developed 
parts of the world. 
GDP and 
employment growth 
in other developed 
countries 
The relationship between GDP and 
employment growth in the US has 
been just as close as in the 
Community (Graph 57, where, it 
should be noted, the data for GDP 
growth for the years before 1978 are 
based on annual rather than quar­
terly figures and where the 
two-quarter lag is, therefore, only 
very approximate, which affects the 
timing of changes in GDP growth 
and which may explain why the two 
series are less in synchrony than for 
the Community). Nevertheless, 
there are three major differences in 
the pattern of growth rates. In the 
first place, both output and, espe­
cially, employment growth have 
fluctuated far more than in the 
Community since 1960. Much 
larger increases in employment 
have been recorded — 4% or more 
in a single year on at least four 
occasions, while the Community 
-63 
Chapter 3 Economic growth and employment 
has never achieved an annual rise 
of even 2% — coupled with larger 
downward variations. 
Secondly, the rate of GDP growth 
has slowed by less over these 
30 years than in the Community. 
Peak rates of GDP growth attained 
in the 1970s and 1980s were on a 
par with those achieved in the 
1960s. The main difference in the 
later period was that these were 
interspersed with much larger 
downturns — and lower cyclical 
troughs — than in the earlier post­
war years. 
Thirdly, the gap between output 
growth and employment growth — 
ie the growth in productivity — has 
been consistently smaller than in 
the Community, averaging under 
1% a year since the early 1970s. 
Like the Community, this repre­
sents a reduction in the underlying 
rate compared with that which was 
evident in the years before then, by 
around 2% a year. The US, there­
fore, has been able to achieve 
considerably larger increases in em­
ployment with a given rate of GDP 
growth over the past 30 years than 
the Community, though equally it 
has had a much faster growing la­
bour force requiring more jobs to be 
created. 
The evidence suggests that, unlike 
the Community, none of this low 
rate of apparent productivity 
growth has been due, over the past 
decade at least, to a reduction in the 
average time worked per person in 
employment. Indeed between 1983 
and 1992, both average hours 
worked per week and average hours 
worked per year increased slightly 
in the US (according to the US La­
bour Force Survey). 
The relationship between GDP and 
employment growth in Japan has 
been similar in a number of ways to that in the Community. Economic 
growth has slowed down markedly 
since the 1960s — when rates of 
10% a year or? more were common. 
This slowdown has been accompa­
nied, as in the Community, by a 
significant reduction in productiv­
ity growth — from around 9% a year 
in the 1960s to not much more than 
3% a year since the mid-1970s 
(Graph 58). As a result, the average 
rate of employment growth attained 
in recent years, at around 1% a year, 
has been similar to the growth in 
the 1960s. 
As compared with the Community, 
however, employment growth in 
Japan has varied much less from 
year to year. The contrast has been 
most marked since 1990 when the 
present recession began. Though 
the fall in output growth has been 
even more pronounced in Japan 
than in the Community, declining 
from 5% to zero, the numbers in 
employment have continued to go 
up, while in the Community they 
have declined sharply. 
Moreover, unlike in the Com­
munity, average hours worked by 
those in employment in Japan 
seem to have remained broadly 
unchanged during most of the 
1980s (at a level at least a third 
higher than the average in the 
Community). Since 1989, however, 
there is evidence of a reduction in 
working time as output growth 
slowed down, average hours 
worked per week falling by around 
5% between then and 1992 (accord­
ing to the Japanese Labour Force 
Survey). 
Finally, the EFTA countries have 
also shown a similar pattern to the 
Community as regards GDP and 
employment change over the past 
20 years. The rate of both output 
and productivity growth has slowed 
since the mid-1970s — the latter to much the same level, just over 2% ; 
year, as in the Community — whiL 
up until the present recession 
growth of employment was main 
tained at around 1% a yea: 
(Graph 59). Since 1990 and th< 
onset of recession, however, em 
ployment has fallen considerably 
declining by 2% in 1992 and by ar 
estimated 4% in 1993. 
One common feature whicl 
emerges from this comparative 
analysis is that productivitj 
growth — measured by output pei 
person employed — has been signi 
ficantly lower in all the developed 
economies since the mid-1970s 
than before. In the US, Japan and, 
until recently, in the EFTA coun­
tries, this decline in productivity 
growth has been on the scale which 
was necessary to maintain employ­
ment at the level required to keep 
unemployment down to reasonable 
levels. 
Japan and the EFTA countries, in 
other words, succeeded in offsetting 
the adverse effects of the decline in 
GDP growth which, on earlier ex­
perience, would have been expected 
to result in a substantial increase in 
unemployment. For the EFTA coun­
tries, however, this success has 
faltered since 1990, while in Japan, 
the costs of maintaining levels of 
employment when production re­
mains depressed are becoming 
increasingly difficult for enterprises 
to sustain. 
In the Community, on the other 
hand, though productivity growth 
has also fallen appreciably since the 
mid-1970s, and though this has en­
abled employment to be maintained 
at higher levels than would have 
been expected previously in the face 
of the slowdown of GDP growth, the 
fall has not been enough to prevent 
unemployment from increasing con­
siderably. 
64 
Chapter 3 Economic growth and employment 
Growth of employment and GDP 
in Germany, France, UK and Italy, 1962 to 1993 
60 Germany 
Annual change (%) GDP (lagged 2 
qtrs) T 12 61 Prance 
Annual change (%) GDP (lagged 2 
qtrs) T 12 
1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 
62 United Kingdom 
Annual change (%) 
12 r GDP (lagged 2 
qtrs) i 12 
*-".--8. 63 Italy 
Annual change (%) GDP (lagged 2 
qtrs) 
1962 1965 1966 1971 1974 1977 1980 1983 1986 1989 1992 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 
-65-
Chapter 3 Economic growth and employment 
GDP and 
employment growth 
in Member States 
The close relationship between 
GDP growth and changes in em­
ployment is also evident in 
individual Member States. In three 
of the four largest economies — 
Germany, France and the UK— the 
pattern of employment growth has 
been virtually identical to that of 
the growth of output since the early 
1960s (Graphs 60, 61, 62). In Italy, 
the patterns are similar but employ­
ment has varied less than GDP 
since the mid-1970s (Graph 63). 
In all four countries (but especially 
in France and Italy) there is evi­
dence of a slowdown in GDP growth 
since the mid-1970s. This has been 
disguised in Germany by the boost 
to output from the process of unifi­
cation and in the UK by the greater 
amplitude of cyclical fluctuations 
than elsewhere over this period. 
The slowdown in output growth has 
been accompanied by a significant 
decline in productivity growtn, 
which has been less pronounced in 
the UK because of the lower trend 
rate before the mid-1970s. In each 
case, the underlying growth rate of 
productivity appears to be not much 
above 2% a year — though slightly 
higher in France and Italy than in 
the other two countries. 
In Germany, apparent productivity 
growth, measured in terms of out­
put relative to numbers employed, 
has been reduced by the decline in 
average working time, which has 
been significant since 1989. In 
terms of hours worked, the growth 
of productivity over this period has 
been around 3% a year rather than 
2%. Sharing available work among 
more people has, therefore, been a 
major factor over the past 3-4 years in increasing the numbers in work, 
even if by not enough to prevent 
unemployment from rising. 
In Italy and the UK, in contrast, 
changes in working time have 
served to exaggerate apparent pro­
ductivity growth. In both countries, 
average hours worked per person 
went up in years of high output 
growth to meet the demand for in­
creased production. On the other 
hand, in both cases also, hours 
worked per person deckined during 
the present recession. Reductions in 
working-time have, therefore, 
served to maintain higher numbers 
in employment as production has 
been depressed. 
Output and 
employment growth 
in manufacturing 
and elsewhere 
The apparent slowdown in produc­
tivity growth in the Community, 
though seemingly beneficial from 
an employment perspective, is a 
potential cause for concern as re­
gards competitiveness. Insofar as 
the ability of Community producers 
to compete on world markets 
depends on their efficiency, produc-
tivity growth underpins the 
capacity of the Community to sus­
tain desirable rates of economic 
growth. What matters most in this 
regard is producti /ity in export, im­
port-competing and related sectors 
rather than over the economy as a 
whole. 
Manufactured goods still dominate 
international trade. Over 70% of 
Community export earnings come 
from manufactures rather than pri-
mary production or services. 
Though trade in services has grown 
significantly in recent years, the 
rate of increase has been no higher than for manufactures. It is in larg 
measure productivity growth ii 
manufacturing rather than in th 
rest of the economy which is c 
importance in assessing th 
implications for competitiveness 
Moreover, the measurement o 
productivity growth is mor 
meaningful for manufacturing thai 
the rest of the economy since th 
difficulties of measuring changes ii 
output are much less serious, bot] 
in principle and practice, than ii 
the case of services where outpu 
tends to be less tangible. 
Changes in employment in manu 
facturing in the Community ar< 
even more closely related to outpu 
growth than for the economy as i 
whole. Since the late 1960s — dati 
problems make it difficult to go bad 
much further than this for a re pre 
sentative number of Membe: 
States — the numbers employed ii 
the sector, with a lag of some si: 
months, have followed variations ii 
production almost exactly 
(Graph 64). 
Although the relationship betweei 
output and employment in the res 
of the economy is less close than ii 
manufacturing, growth in the num 
bers employed has, nevertheless 
varied systematically with outpu 
growth over the past 25 yean 
(Graph 65). There is, however, i 
difference in productivity growtl 
between the two parts of the econ 
omy. In particular, the gap betweer 
output and employment growth ir 
manufacturing has remained mon 
stable than for the rest of the econ 
omy. While there has been some 
reduction in productivity growth ir 
manufacturing since the mid' 
1970s, the underlying rate in the 
early 1990s, at around 3% a year 
was only slightly lower than in the 
early 1970s, when it was some 4% z 
year, even if significantly lowei 
than in the 1960s. 
-66 
Chapter 3 Economic growth and employment 
Growth of manufacturing and non-manufacturing value-added 
and employment in the Community, US and Japan, 1962 to 1993 
64 EUR7 - manufacturing 
Annual change (%) Value added 
(lagged 2 qtrs) 65 EUR7 - non-manufacturing 
Annual change (%) Value added 12 
H 4 
^ -4 
1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 
66 United States - manufacturing 
Annual change (%) 
Employment 67 United States - non-manufacturing 
Value added 
(lagged 2 qtrs) "> 12 Annual change (%) Value added 
1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 
68 Japan - manufacturing 
Annual change (%) Value added 
(lagged 2 qtrs) ~> 12 69 Japan - non-manufacturing 
Annual change (%) Value added 12 
(tagged 2 qtrs) 
1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 
-67-
Chapter 3 Economic growth and employment 
In otht - sectors, there are clearer 
signs o a narrowing of the gap 
between value-added and employ­
ment growth. In the 1980s, 
productivity growth in non-manu­
facturing seems to have fallen to 2% 
a year or below, as compared with 
2V2% or so in the late 1970s and 4% 
or more in the 1960s. As a result, 
employment has tended to rise at a 
faster rate after the mid-1970s than 
before, despite the slower growth of 
output. 
Nevertheless, though the slowdown 
in productivity since the mid-1970s 
has increased the rate of job cre­
ation significantly, it has not done 
so by enough in most years to main-
tain employment at the level 
required to prevent unemployment 
from rising in the face of almost 
continuous job losses in manufac­
turing. (In manufacturing, 
employment has risen in only four 
years since 1974 and always by less 
than 1%.) Moreover, in the present 
recession for the first time, employ­
ment in non-manufacturing sectors 
in the Community has fallen in ab­
solute terms, coinciding with a 
substantial loss of jobs in manufac­
turing. 
So far as other countries are con­
cerned, the US and Japan also show 
a closer relationship between out­
put and employment growth in 
manufacturing than in the rest of 
the economy. The pattern of change 
over time, however, differs between 
the two. In the US, even more than 
in the Community, there is much 
less sign of a slowdown in productiv­
ity growth in manufacturing over 
the past 20 years. The underlying 
rate of increase in the 1980s seems 
to have been around 4% a year, 
which if anything appears to be 
higher than in the 1960s 
(Graph 66). Productivity in manu­
facturing in the US has, therefore, 
grown at a faster rate than in the Community over the past decade, 
whereas before 1974, the reverse 
was the case. 
In other sectors of the US economy, 
in contrast, the relationship be­
tween output and employment is 
much less systematic than for 
manufacturing. Indeed, employ­
ment has fluctuated more than 
value-added and in number of 
years, implied productivity has fal­
len significantly (Graph 67). This 
was particularly the case in the 
1970s. Since then, the average rate 
of productivity growth has been 
barely above zero — thereby trans­
lating any increase in value-added 
directly into more jobs. Moreover, 
average hours worked by those in 
employment in non-manufacturing 
activities seem to have remained 
much the same over this period and 
in the 1980s even increased slightly. 
In Japan, productivity growth in 
manufacturing as well as in the rest 
of the economy has declined mar­
kedly over the past 20 years as 
output growth has slowed. Since the 
mid-1970s, the underlying rate of 
increase of productivity in manufac­
turing, though higher than in the 
US and the Community at around 
5% a year, seems to have been only 
about half that in the 1960s 
(Graph 68). The decline has been 
even more pronounced in the rest of 
the economy, falling to around 3% a 
year as compared with rates of 8% 
or more in the 1960s (when the 
economy was growing rapidly — 
Graph 69). As a result, the rate of 
growth in employment in non-
manufacturing has tended to be 
higher since 1973 than before, as in 
the Community, so compensating 
for the lower rate of job creation in 
manufacturing. 
This compensatory effect has suc­
ceeded in achieving in Japan a 
much more stable growth in the overall numbers employed in the 
economy as a whole than in the 
Community and, more especially, 
than in the US. The effect was espe­
cially marked in years when 
employment in manufacturing de­
clined in absolute terms, such as 
1975, 1978 and 1987, when jobs in 
other parts of the economy in­
creased by more than average. It 
has also occurred in the present re­
cession, which has been much more 
serious than during the first oil 
crisis. This time however, the com­
pensatory effect seems to have been 
assisted, at least initially, by 
greater job preservation in manu­
facturing than was the case in 1975, 
partly aided by some reduction in 
working time. If the recession con­
tinues, however, it will clearly 
become more difficult to maintain 
employment levels in the economy 
as a whole. 
The slowdown of 
productivity growth 
in the Community 
The separation of manufacturing 
from the rest of the economy pro-
vides some insight into the 
proximate causes of the slowdown 
in GDP per person employed ob­
served in the Community. In the 
first place, this slowdown is more 
marked in non-manufacturing sec­
tors than in manufacturing. Since 
the former consist predominantly of 
service activities, which, at least in 
the past, have had less scope for the 
introduction of mechanisation and 
other labour-saving techniques, 
this is perhaps to be expected. 
Secondly, since value-added in non-
manufacturing sectors has 
invariably increased since the mid-
1970s at a higher rate than in 
manufacturing — which was not 
the case before — it has come to 
68 
Chapter 3 Economic growth and employment 
account for a progressively higher 
share of GDP. The slowdown in pro­
ductivity growth within these 
sectors has, therefore, been rein­
forced by the fact that a larger 
proportion of output has been pro­
duced in sectors where the growth 
ofproductivity is relatively low. 
This leaves open the question of 
what caused the slowdown in pro­
ductivity growth within these two 
sectors. Reductions in the average 
time worked per person employed 
might be a very small part of the 
answer, but for non-manufacturing 
rather than manufacturing and 
mainly it would seem for the most 
recent years (Graphs 64 and 65). 
Other explanations might lie in 
measurement problems, in a syste­
matic underestimation of constant 
price value-added in services, in 
particular. It is possible, for 
example, that improvements in the 
quality and range of service, associ­
ated partly with technological 
advance and computerisation, are 
not adequately captured in the 
constant price measure of value-
added. It is also possible that 
constant price value-added has 
been depressed to some extent by 
the increasing proportion of women 
in employment, since their wages — 
the major element of value-added — 
tend to be considerably lower than 
those of men. The maximum plaus­
ible size of this effect, however, is 
considerably smaller than the re­
duction in productivity growth 
witnessed. Neither explanation, 
moreover, gives a plausible answer 
to the question of why there was a 
sudden slowdown in productivity 
growth in the mid-1970s. 
A further factor underlying these 
developments is technology itself 
and, in particular, the information 
technological revolution which has 
broadly coincided with the slowing down ofproductivity growth. While 
the coincidence of the two may 
appear paradoxical, in practice, it 
is arguable that, as well as the 
possible effect on the measurement 
of value-added, the new technology 
has been difficult to implement 
and exploit fully, precisely because 
of the far-reaching nature of its 
potential effect on the production 
process and the organisation of 
work. The potential large-scale 
gains in productivity have, on this 
argument, been slow to be realised 
but may materialise with a venge­
ance over the coming years as the 
learning process is completed, the 
structure of production changes 
and businesses adapt to take full 
advantage of the possibilities 
created. 
Whatever the explanation, the 
evidence of developments in Japan, 
and also in the EFTA countries, in-
dicates, however, that the 
Community has not been the only 
economy experiencing such a slow­
down. In all the economies, the 
slowdown was arguably, in some 
sense, a result of the decline in GDP 
growth, which effectively meant 
that productivity growth had to fall 
if sufficient jobs were to be created 
for the increasing numbers of 
people wanting to work. 
This is consistent with labour mar­
ket forces operating to drive down 
productivity in response to the ex­
cess supply of labour in order that 
the excess should be absorbed. The 
absorption, however, seems to 
have occurred in Japan and the 
EFTA countries without a fall in 
wages to encourage employers to 
take on more labour and without 
a period of high unemployment. 
This suggests other mechanisms 
were at work, such as deliberate 
policy action or an autonomous 
change in. behaviour on the part of 
employers. In the Community, the same kind of 
mechanisms may have come into 
play but were less powerful, while 
in the US, market forces seem to 
have played a larger role in pushing 
down wages in the non-manufactur­
ing sector and stimulating the 
creation of substantial numbers of 
additional jobs. 
Output 
and employment 
in manufacturing 
in Member States 
Changes in the relationship 
between output growth and em­
ployment in manufacturing in the 
Community as a whole disguise 
some differences between Member 
States. As at the Community level, 
the numbers employed have 
tended to vary in line with produc­
tion in each of the largest four 
economies. However, whereas in 
Germany, France and Italy, there 
are signs of a progressive slow­
down in underlying productivity 
growth since the 1960s, this does 
not seem to be the case in the UK 
If anything, trend productivity 
growth seems to have been higher 
in the 1980s — at around 4% a year 
— than in the 1960s and higher 
still than in the second half of the 
1970s, though during the earlier 
period, manufacturing output 
grew in only two years, and then by 
under 2%, which makes for diffi­
culty in establishing any trend at 
all (Graph 74). 
The figures for output per person, 
however, tend to exaggerate pro­
ductivity growth in the UK in the 
1980s, since at times of increasing 
production, in particular, average 
hours worked tended to increase. 
Underlying productivity growth, 
therefore, appears to have been 
closer to 3% a year than 4%. 
-69 
Chapter 3 Economic growth and employment 
Growth of manufacturing value-added and employment 
in Germany, France, Italy and UK, 1962 to 1993 
70 Germany 
Annual change (%) Value added 
(lagged 2 qtrs} 12 
Employment 
Volume of j 8 
employment 71 France 
Annual change (%) Value added 
(lagged 2 qtrs) ^ie 
1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1962 1965 1968 1971 1974 1877 19» 1983 1986 1989 1982 
72 Italy 
Annual change {%) Value added 
(lagged 2 qtrs) 12 73 United Kingdom 
Annual change (%) Value added 
(lagged 2 qtrs)., 12 
1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 
-70 
Chapter 3 Economic growth and employment 
Growth of non-manufacturing value-added and employment 
in the Member States, 1962 to 1993 
74 Germany 
Annual change {%) Value added 
(lagged 2 qtrs) 12 75 Prance 
Annual change (%) Value added 
(lagged 2 qtrs) 12 
Employment 
1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 
76 Italy 
Annual change (%) Value added 
(lagged 2 qtrs) n 12 77 United Kingdom 
•a 
Annual change (%) Value added 
(lagged 2 qtrs) 12 
Employment 
1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1962 1965 1968 1971 1974 1977 1980 1983 1966 1989 1992 
71 
Chapter 3 Economic growth and employment 
The progressive decline in pro­
ductivity growth in manufacturing 
is most pronounced in Germany, 
"here the underlying rate of 
increase seems to have fallen 
ft om around 5% a year in the 1960s 
to 4% a year in the 1970s and to only 
just over 2% a year in the 1980s. 
Part of this fall, however, can be 
explained in terms of reductions in 
working hours, which seem to 
have reduced the observed 
growth in output per person em­
ployed by around V2% a year or so 
since 1984. 
In both France and Italy, although 
a progressive slowdown in produc­
tivity growth in manufacturing has 
also been evident over the past 
20 years, it has been less marked 
than in Germany. Underlying pro­
ductivity growth still seems to be 
around 4% a year or so in both coun­
tries, though, as in the UK, changes 
in average hours worked have 
tended to boost the observed growth 
in output per person employed. 
Output and 
employment in 
non-manufacturing 
in Member States 
The relationship between growth of 
value-added and employment in 
sectors other than manufacturing 
in all of the four largest Member 
States is much less systematic. This 
is less true of Germany, however, 
where employment has generally 
followed variations in output more 
closely than in the other three coun­
tries. Here, there are signs of a 
slowdown in productivity growth 
since the mid-1970s, though it ap­
pears to be less marked than for 
manufacturing (Graph 74). 
This is particularly the case if em­
ployment is measured in terms of total hours worked rather than the 
number of people in work, since re­
ductions in working time have been 
significant in the past few years. 
Adjusted for this, underlying pro­
ductivity growth seems to have 
been running at around 3% a year 
since the mid-1980s — as much as 
in manufacturing. Nevertheless, 
because of reductions in average 
hours worked, value-added per per­
son employed has risen by only 
some 2% a year or less. 
In all three of the other large 
Community countries, apparent 
productivity growth has also fallen 
over the past 20 years, in France 
and Italy, particularly so. In 
France, having been around 4% a 
year throughout the 1960s, the 
rate of growth in value-added per 
person employed has fluctuated 
between 1% and 3% since 1975, 
and in terms of hours worked by 
even more (Graph 75). Overall, 
however, the rate of job creation in 
non-manufacturing sectors in this 
period has been greater than be­
fore, though during the present 
recession, the numbers employed 
have declined significantly for the 
first time. 
In Italy, employment growth in 
non-manufacturing sectors since 
1975 has also tended to have been 
higher than before, the slowdown in 
productivity growth more than com­
pensating for the fall in the growth 
of value-added (Graph 76). As in 
France, on the other hand, the num­
bers employed have also fallen in 
the present recession, in this case, 
for the first time since 1972, when 
the reduction was concentrated in 
agriculture. 
In the UK, the underlying rate of 
increase in value-added per person 
employed in non-manufacturing 
sectors, which was already much 
lower than elsewhere in the Community before 1973, appears to 
have fallen to under 2% a year since 
then (Graph 77). As a result, as in 
the other countries, employment 
growth has been higher on average 
over this period than before (though 
as compared with elsewhere, the 
growth in value-added has declined 
by less). 
To sum up, in all four of the lar­
gest Member States, a slowdown 
in productivity growth in non-
manufacturing sectors over the past 
20 years has helped to meet the 
need for a higher rate of job cre­
ation, resulting partly from job 
losses in manufacturing and partly 
from the higher rate of growth in the 
labour force. Reductions in average 
hours worked have contributed to 
this in Germany in particular, and 
in all four countries during the pres­
ent recession. However, neither 
factor has been sufficiently power­
ful, especially in France, Italy and 
the UK, to avoid high levels of un­
employment. 
Productivity growth 
in manufacturing 
and competitiveness 
The rate of growth of labour produc­
tivity is an important determinant 
of the costs of production in manu­
facturing and, therefore, of cost 
competitiveness vis à vis producers 
in other countries or regions. It is 
not the only determinant, however. 
The rate at which wages increase is 
equally important as is the ex­
change rate which ultimately 
determines how costs and prices 
compare between countries. The in­
teraction between productivity 
growth, wage rises and the ex­
change rate is critical to trade 
performance and inflation and, 
through these, to economic growth 
and employment. 
72 
Chapter 3 Economic growth and employment 
If wage increases are to avoid push­
ing up prices, they need to be no 
higher than the rate of growth in 
labour productivity. If this is 
achieved, labour costs per unit of 
output will remain constant in 
nominal terms. In a world of infla­
tion, however, things are not so 
simple. If prices generally are going 
up and wages in manufacturing 
only rose in nominal terms in line 
with productivity, there would al­
most certainly be a reduction in real 
wages (unless the growth ofproduc­
tivity in manufacturing was 
sufficiently higher than in the rest 
of the economy to compensate for 
inflation). In such a case, an in­
creased share of value-added would 
go to profits. Clearly, the extent of 
the real reduction in pay would tend 
to be greater the higher the rate of 
inflation. 
In an inflationary context, wage 
rises no higher than the growth of 
productivity plus the rate of in­
crease in prices will not add to 
inflationary pressure — ie they will 
not cause higher inflation. Nor will 
they reduce the share of value-
added going to profits. 
It is important to recognise in this 
regard, however, that to maintain 
the share of profits in manufactur­
ing, wages per unit of output 
(ie wages adjusted for productivity 
growth) need to increase in line with 
the price of manufactured goods 
rather than that of goods and ser­
vices as a whole. Moreover, if 
non-wage labour costs were to in­
crease in relation to value-added, 
the wage element of labour costs 
would need to adjust to prevent the 
share of profits falling. 
It is also important to recognise, 
of course, that there may be 
circumstances when it is desirable 
for wages — ie average labour costs 
multiplied by the numbers em­ployed — to fall as a share of value-
added either because the share of 
profits is too low in relation to in­
vestment needs or because there is 
an increase in the capital-intensity 
of production (and a corresponding 
fall in labour-intensity). 
Real wages and 
real product wages 
In practice, over the past 20 years 
or so, nominal labour costs in manu­
facturing ( ie wages plus employers' 
contributions and other non-
wage labour costs) rose on average 
by around 11% a year in the 
Community as a whole — more in 
the 1970s, less in the 1980s and 
even less in the 1990s. (Average la­
bour costs here, it should be noted, 
relate to men and women com­
bined.) The rate of growth of labour 
productivity over this period aver­
aged just under 4% a year. Prices of 
manufactured goods went up by an 
average of 7% a year (much the 
same as the excess of wage rises 
over productivity) so that the share 
of profits in value-added in manu­
facturing was broadly maintained. 
In other words, what is known as 
the real product wage (ie wages plus 
non-wage labour costs adjusted by 
the price of manufactured goods) 
rose in line with la­
bour productivity 
(Graph 78). 78 Growth 
costs in productivity — by around 1% a year 
more. Although real wages (plus 
non-wage costs) measured in terms 
of consumer goods went up by less 
than this, there was a significant 
shift of value-added from profits to 
wages. 
Since 1980, the real product wage 
has risen at a slower rate than 
productivity growth, so causing 
value-added to shift back towards 
profits. Thus, the real product wage 
rose by just over 2% a year while 
labour productivity went up by 
around 3%. In terms of consumer 
goods, real wages in manufacturing 
went up on average by under 2% a 
year. At the same time, inflation 
slowed appreciably from an average 
in the 1970s of over 10% a year in 
the Community as a whole to one of 
67a% in the 1980s and to 4-5% since. 
Wage moderation clearly con­
tributed to this process as did the 
reduction in energy and primary 
product prices. 
Although there are some dif­
ferences in the pattern of change 
over time in individual Member 
States, over the period 1970 to 1991 
as a whole, the real product wage 
rose broadly in line with 
productivity in the four largest 
countries (Graphs 79, 80, 81 and 
of productivity and real labour 
manufacturing in EUR7,1970-91 
There were, however, 
marked differences 
between what hap­
pened in the 1970s 
and what has hap­
pened in the period 
since. Between 1970 
and 1980, real 
(product) wages in 
manufacturing in 
the Community rose 
at a higher rate 
than the growth in 350 
300 
250 
200 
150 
100 
50 Index: 1970=100 
• Productivity 
Real labour costs 
{Manufacturing, 
price deflator) 
Rea} labour costs 
{Consumer price 
deflator) 350 
300 
250 
200 
H 150 
100 
1970 1973 1976 1979 1982 1985 1988 1991 
-73 
Chapter 3 Economic growth and employment 
Growth of productivity and real labour costs in manufacturing 
in Germany, France, Italy, UK, US and Japan 1970 to 1991 
79 Germany 
Index: 1970=100 
350 
300 
250 
200 
150 
100 
50 • Productivity 
Real labour costs 
(Manufacture) 
price deflator) 
Real labour costs 
(Consumer price 
deflator) T 350 
1 300 
250 
200 
150 
100 80 France 
Index; 1970=100 
350 
50 300 
250 
200 
150 
100 
50 Productivity 
Real labour costs 
(Manufacturing 
price deflator) 
Real labour costs 
(Consumer price 
deflator) 350 
300 
250 
200 
150 
100 
50 
1970 1973 1976 1979 1982 1985 1988 1991 1970 1973 1976 1979 1982 1985 1988 1991 
81 Italy 
Index: 1970=100 
350 
300 
250 
200 
150 
100 
50 • Productivity 
Real labour costs 
(Manufacturing 
price deflator) 
' Real labour costs 
(Consumer price 
deflator) 350 
300 
250 
200 
150 
iOO 
50 82 United Kingdom 
Index: 1970=100 
350 
300 
250 
200 
150 
100 
50 ' Productivity 
Real labour costs 
(Manufacturing 
price deflator) 
* • Real labour costs 
(Consumer price 
deflator) - 350 
- 300 
• 250 
200 
150 
100 
50 
1970 1973 1976 1979 1982 1985 1988 1991 1970 1973 1976 1979 1982 1985 1988 1991 
83 United States 84 Japan 
Index: 1970=100 
350 
300 
250 
200 
150 
100 
50 • Productivity 
Real labour costs 
(Manufacturing 
price deflator) 
— Real labour costs 
(Consumer price 
deflator) 350 
- 300 
• 250 
200 
150 
100 
50 Index: 1970=100 
350 -, 350 
1970 1973 1976 1979 1982 1985 1988 1991 1970 1973 1976 1979 1982 1985 1 
74 
Chapter 3 Economic growth and employment 
82). In each case, therefore, in­
creases in labour productivity were 
passed fully into wages — or more 
accurately into labour costs — and 
the share of wages and profits in 
value-added remained much the 
same. Since 1980, however, in all 
countries, labour costs adjusted for 
inflation have risen by less than 
productivity and profits have taken 
a greater share of value-added, 
thereby recouping what they lost in 
the 1970s. 
At the same time, in terms of the 
growth of real labour costs 
(ie measured in terms of consumers' 
expenditure), there were some dif­
ferences between countries, with an 
average increase over the period as 
a whole of just over 2% a year in 
France and Germany, just over 
2V2% a year in Italy and just over 3% 
a year in the UK 
The differences have been more pro­
nounced since 1980. Whereas in the 
1970s, real labour costs increased 
on average by a similar rate in all 
four countries (by around 3% a year) 
between 1980 and 1991, the rate of 
growth of real labour costs was sig­
nificantly lower in each case, apart 
from the UK In this later period, 
real labour costs in France went up 
by only just over 1% a year, in 
Germany by just under 2% a year 
and in Italy by around 2% a year. 
Only in the UK did these increase 
by some 3% a year — much as in the 
previous decade. 
These differences partly reflect dif­
ferences in productivity growth over 
this period. But since this was 
higher in Italy than in the UK, they 
also reflect differences in the rate of 
increase in the price of manufac­
tured goods relative to that of 
consumers' expenditure generally. 
In Italy, the price of manufactures 
rose at a much slower rate than 
general inflation, especially over the 1980s, while in the UK the two 
rose more or less together. A given 
rise in the real product wage, there­
fore, was worth much less in terms 
of purchasing power in Italy than in 
the UK As such, keeping the real 
product wage in manufacturing in 
line with productivity growth in­
volved a significantly greater 
degree of wage moderation in the 
former than the latter. 
The degree of wage moderation was 
also significant in France, where 
both the real product wage in manu­
facturing and real labour costs in 
terms of purchasing power went up 
by almost 2% a year less than the 
growth of productivity. 
The relationship between produc­
tivity growth and real wages in 
manufacturing has been somewhat 
different in the US and Japan, 
though there are some similarities 
with the experience in Europe. In 
particular, the real product wage 
(the average wage deflated by 
manufacturing prices) in the US 
went up very much in line with pro­
ductivity between 1970 and 1991, 
just as in Europe, with wages in­
creasing slightly faster than 
productivity in the 1970s and 
slightly slower in the 1980s (Graph 
83). 
In Japan, on the other hand, the 
real product wage in manufacturing 
increased by around 1% a year more 
than productivity between 1970 and 
1991 — 6% as opposed to 5% — 
implying a decline in the share of 
profits in value-added, though after 
1980, the two rose at much the same 
rate (Graph 84). As in Italy, how­
ever, real labour costs (in 
purchasing power terms) increased 
by much less than the real product 
wage — by 3% a year instead 
of 6% — by only slightly more than 
the Community average and by less 
than in the UK This reflects, as in Italy, a much 
slower rise in the price of manufac­
tured goods compared with 
consumers' expenditure as a whole. 
This was also the case in the US. 
There, real labour costs in manufac­
turing increased by an average of 
only 1% a year over the period 1970 
to 1991 and by less than 1% a year 
after 1980. Indeed, between 1985 
and 1991, there was no growth at all 
in average real labour costs in 
manufacturing, though the real pro­
duct wage went up at the same rate 
as productivity. The degree of wage 
moderation seems, therefore, to 
have been substantial in both the 
US and Japan. 
Unit labour costs 
in manufacturing 
The above analysis suggests that 
the real product wage in manufac­
turing in the Community, as in the 
US and Japan, has risen broadly in 
line with productivity over the past 
20 years and by slightly less since 
1980. This implies that real labour 
costs per unit of output have re­
mained unchanged over the period 
as a whole, though they have fallen 
a little over the past decade. It also 
implies that, in nominal terms, 
labour costs per unit of output 
have gone up at much the same 
rate as the price of manufactures 
and by a slightly lower rate since 
1980. Since manufactured prices 
have risen at different rates in the 
different countries, however, nomi­
nal unit labour costs have also 
diverged when measured in na­
tional currencies. 
In national currency terms, nomi­
nal unit labour costs in the 
Community increased on average 
by just under 7V2% a year between 
1970 and 1991, though by only 
around 3V2% a year in the second 
half of the period as inflation fell 
-75-
Chapter 3 Economic growth and employment 
(Graph 85). By contrast, in the US, 
prices of manufactures rose 
by under 4% a year over the period 
as a whole and increased only 
marginally after 1982. The dif­
ferential rate of increase between 
the Community and the US, there­
fore, narrowed only slightly in the 
1980s as compared with the 1970s. 
In Japan, nominal unit labour 
costs rose by an average of only 3% 
a year between 1970 and 1991, 
most of the increase being concen­
trated in the first five years of the 
period. After 1975, nominal unit 
labour costs went up only margi­
nally and declined slightly in the 
1980s. Between 1975 and 1991, 
there was a fairly consistent dif­
ference between the rate of 
increase in the Community and 
that in Japan of around 4% a year. 
In themselves, these differences 
in inflation rates imply a steady 
deterioration in the cost 
competitiveness of Community 
manufacturers vis à vis their main 
competitors in the rest of the world. 
To a major extent, however, ex­
change rates have adjusted to 
compensate for the differences, 
especially so far as Japan is con­
cerned. 
When measured in terms of a com­
mon currency — in this case the 
ECU — therefore, unit labour costs 
in Japan went up in most years 
between 1970 and 1991 at a faster 
rate than in the Community 
(Graph 86). This was true over the 
period up to 1986, in particular, 
when the rise in unit labour costs 
in Japan averaged over 2% a year 
more than for the Community. 
From 1986 to 1991, however, unit 
labour costs in Japan declined in 
ECU terms, restoring much of the 
loss in cost competitiveness vis à 
vis the Community in the years 
before. The fact that nominal unit labour 
costs in manufacturing in Japan 
have been consistently lower than 
in the Community has, therefore, 
been negated by exchange rate 
movements between the ECU and 
the Yen. It is these movements, 
rather than the rate of wage rises 
or productivity growth, which have 
primarily determined changes 
in the cost competitiveness of 
European manufacturers relative 
to their Japanese counterparts. 
Moreover, exchange rate move­
ments have been far from smooth. 
At various times over the past 
20 years, they have caused the 
relative cost competitiveness of 
European and Japanese manufac­
turers to fluctuate wildly. Between 
1978 and 1981, for example, manu­
facturing unit labour costs in ECU 
terms in Japan declined by over 
30% relative to those in the Com­
munity, more than restoring the 
loss in cost competitiveness over 
the preceding 8 years. They then 
rose by almost 40% in relative 
terms between 1982 and 1986, be­
fore falling by 30% between 1986 
and 1991. During this period, 
Japanese nominal unit labour 
costs in terms of Yen changed rela­
tively little, while between 1982 
and 1991, those in the Community 
rose steadily at around 3V2% a 
year. 
The scale of fluctuations in US unit 
labour costs when measured 
in terms of ECUs has been simi­
larly large and again is in marked 
contrast to the relative stability 
of the same costs in national 
currency terms. Having fallen 
significantly in the 1970s, unit 
labour costs in US manufactur­
ing relative to those in the 
Community increased by over 
50% between 1980 and 1985. They 
then fell by over 40% over the next 
three years. These extreme fluctuations in cost 
competitiveness are due almost en­
tirely to fluctuations in exchange 
rates, especially between the US 
Dollar and the Yen, and are very 
difficult to rationalise in economic 
terms. They would be even more 
difficult to offset by changes in the 
rate of growth of productivity or 
pay. 
Over the long-term, however, there 
is a broad tendency for exchange 
rate movements to adjust for dif­
ferential rates of inflation. At the 
same time, long-term exchange 
rate movements also tend to 
compensate for differences in 
underlying competitiveness and 
trade performance, which are not 
directly related to the unit costs of 
production. The long-term appreci­
ation of the Yen against both the 
ECU and the Dollar, and the 
relative increase in unit labour 
costs which this has caused, is 
due in large measure to the com­
parative success of Japanese 
manufacturers in world export 
markets. Conversely, the long-
term depreciation of the Dollar 
reflects the deterioration in the 
trade performance of US manufac­
turers relative to their European 
and Japanese rivals. 
Unit labour costs 
in Member States 
This marked difference in the beha­
viour of unit labour costs when 
measured in domestic currency or 
ECU terms is also a feature within 
the Community. Since 1970, there 
have been significant differences in 
rates of inflation between Member 
States which have shown up in 
equally large differences in the in­
crease in unit labour costs, though 
since 1980, inflation has slowed 
down everywhere and differences 
have tended to narrow. 
76-
Chapter 3 Economic growth and employment 
Nominal unit labour costs in national currency and ECU terms 
in the Community, US and Japan, 1970 to 1991 
85 EUR7, US and Japan - national currency 86 EUR7, US and Japan - ECU 
Index: 1970=100 
800 
EUR7 
600 j- USA 
Japan 
400 
200 h 800 
600 
400 
200 Index 1970=100 
800 r 
600 t 
400 
200 t -, 800 
i 600 
400 
200 
1970 1973 1976 1979 1982 1985 1988 1991 1970 1973 1976 1979 1982 1985 1988 1991 
87 Member States - national currency 88 Member States - ECU 
Index: 1970=100 
800 r 
600 Y 
400 h 
200 > 800 
600 
400 
200 Index: 1970=100 
800 
600 
400 Y 
200 Y 800 
H 600 
400 
200 
1970 1973 1976 1979 1982 1985 1988 1991 1970 1973 1976 1979 1982 1985 1988 1991 
-77-
Chapter 3 Economic growth and employment 
Between 1970 and 1991, nominal 
unit labour costs in manufacturing 
in Italy rose by an average of 10% a 
year and in the UK by over 9% a 
year, more than twice the increase 
in Germany of only 4% a year and 
significantly above the rise in 
France of 7% a year (Graph 87). In 
each case, as noted above, these dif­
ferences largely reflect similar 
differences in underlying inflation 
rates. 
When measured in terms of ECUs, 
however, instead of national cur­
rencies, a radically different picture 
emerges. The depreciation of the 
Italian Lire relative to other curren­
cies throughout much of the period 
more than cancelled out the high 
Italian inflation rate. As a result, in 
Italy, unit labour costs in manufac­
turing in ECU terms went up by less 
between 1970 and 1991 than in any 
other major Community country 
(Graph 88). By contrast, the 
strength of the Deutschmark more 
than offset the low inflation rate in 
Germany causing unit labour costs 
of German manufacturers 
measured in ECUs to increase by 
more than those in other parts of 
Europe over the period, and at a 
similar rate to those in Japan. 
Exchange rate adjustments within 
the Community as cutside have, 
therefore, largely compensated for 
differential rates of inflation. In 
terms of ECUs, the extent of ths 
difference between the four major 
countries in the average rise in unit 
labour costs over the period 1970 to 
1991 was only just over 1% a year, 
as opposed to over 6% a year in 
terms of national currencies. 
By the same token, when inflation 
rates differ significantly between 
countries, as they did throughout 
this period, the failure of the ex­
change rate to adjust can cause a 
rapid deterioration in cost competi­tiveness. For example, between 
1988 and 1991, the Italian Lire was 
maintained a,t a constant value 
against the ECU as part of EMS 
policy, at a time when Italian infla­
tion exceeded that in most other 
Community countries and, more 
significantly, at a time when the 
real product wage in manufacturing 
in Italy increased markedly. As a 
consequence, unit labour costs in 
manufacturing in Italy rose by 
almost 20% relative to those in the 
rest of the Community over 
this three-year period. This con­
tributed to the pressure on the 
exchange rate which proved irresis­
tible in September 1992. 
Nevertheless, though exchange rate 
movements seem, over the long-
term at least, to have acted as an 
effective adjustment mechanism to 
offset the impact of differential in­
flation, it has to be recogrdsed that 
the use of this mechanism is not 
necessarily costless. To the extent 
that exchange rate depreciation in­
creases the price of imports in terms 
of national currency, it is liable to 
increase production costs and raise 
the general rate of inflation. More­
over, if wages rise in line with 
inflation and profit margins are 
maintained, this increase will be 
perpetuated, resulting in the need 
for further depreciation and poten­
tially initiating an inflationary 
spiral as prices and wages chase 
each other upwards. 
To avoid this danger, countries have 
attempted, through judicious oper-
ation of monetary and fiscal 
policies, to maintain a stable ex­
change rate if at all possible. This 
has served to throw most of the re­
sponsibility for adjustment onto 
wages and there has been a general 
tendency, as noted above, for real 
wage increases in manufacturing at 
least to moderate over the past 
10 years. This approach has helped to bring down inflation in the 
Community. 
-78 
Growth, competitiveness, employment: background analysis of key areas for labour market action 
Part II Follow-up to White Paper on growth, 
competitiveness, employment: background 
analysis of key areas for labour market action 
Chapter 4 Mobility, labour turnover and labour market flexibility 
Chapter 5 Changes in working time 
Chapter 6 Labour costs, social contributions and taxes 
Chapter 7 Unemployment and labour market policy 
Chapter 8 Where has job growth and decline occurred? 
79-
Growth, competitiveness, employment: background analysis of key areas for labour market action 
80 
Part II Growth, competitiveness and employment: background analysis of key areas for labour market action 
Part II Growth, competitiveness and employment: 
background analysis of key areas for labour 
market action 
In response to the analysis con­
tained in the Commission White 
Paper, Growth, competitiveness and 
employment, published towards the 
end of 1993 and the strategy out­
lined in the document, the 
European Council identified seven 
areas of action which Member 
States should address. The focus of 
this part of the report is on these 
areas. 
The following chapters present 
background information and ana­
lysis on five of these areas for action, 
namely: 
• labour market flexibility — in 
Chapter 4, which examines the 
sectoral mobility of labour; 
• the reorganisation of working 
time within enterprises — in 
Chapter 5, which considers re­
cent changes in working time; 
• targeted reductions in indirect 
cost of labour — in Chapter 6, 
which analyses the importance of employers' social contribu­
tions and the gap between 
labour costs and the net earn­
ings received by employees; 
• better use of public funds set 
aside for combating unemploy­
ment — in Chapter 7, which 
examines the changing nature 
of the problem which labour 
market policies have to address 
and the scale and distribution 
of funding; 
• developing employment in con­
nection with new requirements 
— in Chapter 8, which exam­
ines new areas of job growth in 
the Community. 
In addition, Chapter 7 considers in 
some detail the problem of youth 
unemployment which was a par­
ticular concern of the White Paper. 
Indeed, the European Council 
stressed the need to ensure that 
young people have access to adequ­
ate training to improve their 
chances of finding work as one of the main areas for action which Mem­
ber States should address. 
Wherever available, comparable 
Community-wide data and informa­
tion is used in order to clarify issues 
and inform the debate. Such infor­
mation, however, is far from 
comprehensive. Many issues, such 
as changes in internal work organi­
sation in companies, are in any 
event not easily amenable to quan­
titative analysis. Moreover, for 
issues — such as the growth of new 
areas of employment — available 
data throw only a limited amount of 
light on key aspects. Nevertheless, 
as much use as possible has been 
made of the data which are avail­
able to try to provide an improved 
understanding of the issues in­
volved and, thereby, to contribute to 
a more informed debate in which 
discussion is focused on matters 
where there are genuine and legit­
imate differences of opinion and 
rather than on matters of fact. 
81-
Part II Growth, competitiveness and employment: background analysis of key areas for labour market action 
-82-
Chapter 4 Mobility, labour turnover and labour market flexibility 
Chapter 4 Mobility, labour turnover 
and labour market flexibility 
Changes in employment conceal much larger flows of people 
moving into and out of work and between jobs. The scale 
of these movements varies with the rate of job creation, but 
it is consistently higher in some Member States than others 
and much higher for women than for men. 
Introduction 
European producers operate in in­
creasingly competitive markets, 
many of which are now global in 
scale, where the ability to adapt to 
continuously changing market and 
technological pressures and to en­
sure that the products supplied-
appeal in terms of quality, design 
and after-sales service as well price 
is critical. Such an ability depends 
not only on the knowledge, judge­
ment and organisational expertise 
of the decision-makers in an enter­
prise, but on the competence and 
adaptability of the existing work­
force and on the possibilities of 
hiring new people with the requisite 
skills. 
It is widely perceived that, in many 
parts of Europe, these conditions 
are not adequately met, that firms 
are slow to adapt to changing imper­
atives, that it is difficult to change 
methods of working and the jobs 
which people do, and that too often 
there is a lack of people with suit­
able skills to recruit. Blame is 
commonly levelled at the labour 
market, both internal and external, 
which is judged insufficiently flex­ible to enable businesses to organise 
production and their workforce in 
the most cost effective way and to 
hire — and fire — employees when 
and where needed. 
The evidence which exists on this, 
however, is largely anecdotal and, 
in practice, it is not easy to assess 
the extent to which an inflexible 
labour market in various parts of 
the Community is damaging the 
competitiveness of European pro­
ducers, obstructing the shifts of 
manpower, and capital, between 
different areas of production to 
meet changing patterns of demand 
and global competition. 
A major problem of evaluation is 
that the concept of labour market 
flexibility is not easy to define and, 
consequently, to measure. The only 
viable approach is to try to build up 
an understanding of the way the 
labour market in any part of the 
Community functions by examining 
individual features one by one and 
then putting the pieces together. 
This analysis exploits the 
Community Labour Force Survey in 
order to contribute to this task. It 
should be stressed, however, that it deals only with the external labour 
market and not the internal one 
within firms, which is equally as 
important, if even more difficult to 
assess in terms of flexibility. The 
chapter focuses on: 
• the process of job creation and 
destruction; 
• the flows into and out of 
employment; 
• the extent of labour mobility 
between sectors of activity; 
• the overall rate of labour turn­
over. 
Flows into and out of 
employment 
Figures for overall changes in em­
ployment from one year to the next 
conceal much larger movements of 
people into and out of work. The 
aim here is to examine the size 
of these flows and how they vary 
over time and between differ­
ent parts of the Community. The 
evidence covers the period 1983 
to 1992, which includes years of 
low employment growth at the 
83-
Chapter 4 Mobility, labour turnover and labour market flexibility 
Data on sectoral mobility and job turnover 
The data on which the analysis in this chapter is based come from the 
Community Labour Force Survey for successive years from 1983 to 1992. 
Essentially they relate to the replies given by respondents to questions 
about their employment status one year earlier — whether they were 
employed and, if so, in what NACE l-digit sector they worked or whether 
they were unemployed or economically inactive. 
The usual qualifications apply to this kind of data insofar as they are 
based on individual recollection of events one year before which might 
not always be accurate. Nevertheless, the figures derived seem to be 
reasonably consistent from year to year which provides some reassurance 
about their reliability. 
The data used in the final section of the chapter on job turnover are based 
on replies to the question included for the first time in the 1992 LFS on 
how long respondents had been in their present employment. The ana­
lysis relates specifically to those who had been in their present 
employment fo*- less than a year. 
89 Rates of entry into and exit from employment and 
employment growth in the Community (EUR8), 1984 to 
1992 
Employment -i 10 
-10 
1984-65 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91 1991-92 beginning, of declining employ­
ment at the end and years of 
substantial net job creation in the 
middle (see Box for an explanation 
of the data used). 
For the countries taken together 
over the period 1983 to 1992 as a 
whole, an average of just over 7% 
of those in work at the time of the 
survey were either unemployed or 
inactive the year before, half of 
whom because they were still being 
educated or trained (Graph 89). 
Although there is some tendency 
for the numbers of people finding 
work to be higher in years of high 
employment growth, the difference 
between years of recovery and 
years of recession is smaller than 
might be expected. The largest 
number of new entrants was re­
corded in 1989 when employment 
increased by 2%, and when 7.6% of 
those in work were unemployed or 
inactive the year before. This, how­
ever, is only 1 percentage point 
higher than in 1991, when employ­
ment declined slightly. Moreover, 
whereas the rate of new entry in 
the years of high growth from 1987 
to 1990 — when employment rose 
by over 2% a year — averaged 
7.4%, it still averaged 7.0% when 
employment rose by only V2% a 
year. 
The proportion finding work after 
being unemployed or inactive is 
not much lower in years of low net 
job creation than in years of high 
net job creation. However, al­
though the difference in the rate 
of inflow into employment might 
be small, in terms of the num­
ber of people affected — ie the 
unemployed and inactive — it is 
significant. A difference of 1 per­
centage point in the rate of new 
entry translates into a difference of 
10-15% in the numbers of unem­
ployed. 
-84-
Chapter 4 Mobility, labour turnover and labour market flexibility 
At the same time, since the rate of 
new entry into employment varies 
comparatively little between 
years, it follows that the rate of exit 
varies more. Indeed the figures 
imply that, over the period exam­
ined, the proportion of people 
leaving employment to become un­
employed or inactive varied by 
twice as much as the proportion 
entering employment. In the years 
of high net job creation, an average 
of 5.3% of people who had been in 
employment the year before were 
no longer in work at the time of the 
survey, the figure reaching a low 
4.9% in 1990. This compares with 
an average of 6.7% in the other 
years and a high of 7.3% in 1992. 
Typically, therefore, years of low 
net job creation are associated more 
with a high rate of job loss than a 
low rate of new recruitment, some 
two-thirds of the variation in em­
ployment change between years 
being attributable to the variation 
in the proportion of people leaving 
employment and only a third to the 
variation in the proportion enter­
ing. 
These conclusions remain unal­
tered if the analysis is extended to 
Spain and Portugal, data for which 
are available only for the period 
from 1986. A consistently high rate 
of entry into employment in Spain 
over this period and a correspond­
ingly high rate of job loss (as 
detailed below), however, pushes 
up the Community figures for 
movements of people into and out 
of work. For the 10 Community 
countries, excluding Italy and the 
Netherlands, the proportion in em­
ployment in any given year 
between 1986 and 1992 who had 
previously been unemployed or in­
active averaged just over 8% — 
around one in 12 — with a simi­
larly small variation as for the 8 
countries. Changes in male and 
female employment 
Between 1984 and 1992, employ­
ment of women expanded by 
significantly more than that of 
men. Over the period as a whole, 
the numbers in employment in­
creased by around 8% in the 
8 Member States for which a com­
plete set of data is available. 
Women accounted for some two-
thirds of this increase. Moreover, 
the gap between the growth of 
female employment and that of 
men was particularly wide in the 
years of low net job creation at the 
beginning and end of the period — 
women accounting for 90% of the 
addition to the numbers in employ­
ment during these years — while 
in years of high net job creation 
there was relatively little dif­
ference between the two. This pattern of experience is re­
peated in the figures for the gross 
movements into and out of employ­
ment. For the 8 Member States, 
the proportion of women moving 
from being unemployed or inactive 
into a job was consistently higher 
than the proportion of men, 
averaging over 9% a year of those 
in employment between 1984 and 
1992, as compared with under 6% 
of men (Graph 90). At the same 
time, the proportion of women 
leaving employment in any year 
was also higher than that of men, 
especially during years of rela­
tively high net job creation. High 
employment growth of men, there­
fore, tends to be associated with 
fewer numbers leaving jobs rather 
than with more entering work. 
The more unstable nature of male 
employment is due to the fact that, 
in contrast to women, men are 
90 Rates of entry into and exit from employment of men 
and women in the Community (EUR8), 1984 to 1992 
12 % employed Entries Exits 
-12 Men H Women M Men D Women -1 12 
L » I 
L 
EUR8 = B, DK, D. GR, F, IRL, I, UK 
-12 
1984-85 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91 1991-92 
85-
Chapter 4 Mobility, labour turnover and labour market flexibility 
employed in much larger propor­
tions in industry, where output is 
more sensitive to the rate of econ­
omic growth than is the case for 
services. Accordingly, job creation 
and job loss fluctuate more from 
year to year in industry than in 
services. Moreover, given the long-
term decline in employment in 
industry, it is really only in years 
of relatively high growth that there 
is any net job creation at all in this 
sector. 
The relationship 
to unemployment 
The size of flows into and out of 
work are both influenced by the 
prevailing level of unemployment 
and have important implications 
for the problem of joblessness. 
Other things being equal, the 
higher the rate of unemployment, 
the greater the chances of someone in work at the time of the survey 
having been unemployed the year 
before. In parts of the Community 
with high unemployment rates, 
therefore, flows into employment 
would also be expected to be high 
on this basis. 
However, other things are not 
necessarily equal. In particular, 
the time it takes for someone 
unemployed to find a job, and, 
therefore, the probability of being 
recorded as out of work in two con­
secutive surveys, tend to vary 
across the Community. Equally, 
competition for jobs is not only con­
fined to the unemployed but also 
extends to young people entering 
the labour market for the first time 
and those re-entering after a spell 
of inactivity — in a number of 
Member States, the UK and 
Germany, for example, women 
with family responsibilities, in 
particular. 
91 Rates of entry into employment in the Member States, 
average 1984-87,1987-90 and 1990-92 
% employed 
1 20 
^ is 
H 10 
B DK D GR 
no data, NL data not reliable IRL UK Leaving aside variations in the im­
portance of the latter, a comparison 
of the size of flows into employment 
with the rate of unemployment in 
the preceding year provides an indi­
cation of the ease with which 
someone without a job can find work 
and, conversely, of the scale of the 
potential problem of long-term un­
employment. In other words, the 
larger the flows into employment 
relative to the rate of unemploy­
ment, the higher the turnover 
among the unemployed is likely to 
be and the shorter the spell they 
tend to spend out of work. Small 
flows in relation to unemployment, 
by contrast, imply that a high pro­
portion of the unemployed fail to 
find a job within a year or, if they 
do, that they lose it before the year 
is out. Unemployment, in this case, 
therefore, as compared with the for­
mer, tends to affect only a relatively 
narrow group of people. 
Employment 
changes across 
the Community 
The pattern of flows into and out of 
employment that is evident at the 
Community level — ie the relative 
numbers entering work tend to in­
crease when employment expands 
and to decline when it contracts — 
is also apparent in individual Mem­
ber States. Nevertheless, the scale 
of the flows in both directions varies 
considerably and consistently be­
tween countries, bearing very little 
relationship to differences in the 
rate of employment growth. Though 
there is some relationship to dif­
ferences in unemployment, it is by 
no means a uniform one. 
Throughout the period 1984 to 
1992, the size of flows was relatively 
large in the UK, France, Denmark, 
Ireland and, above all, in Spain (in 
86-
Chapter 4 Mobility, labour turnover and labour market flexibility 
this case from 1986) and rela­
tively small in Belgium, Greece, 
Portugal (also from 1986), Luxem­
bourg and most especially in 
Germany (Graph 91). (Although the 
Netherlands also shows substantial 
movements into and out of work, the 
figures seem implausibly high for 
women, almost one in three of those 
in employment in each year be­
tween 1987 and 1992 seeming to 
have been unemployed or inactive 
the year before. This contrasts with 
a figure of 9-10% in 1983 and 
1985, which could reflect a tend­
ency after 1987 for the LFS to record 
more short-time casual work than 
before.) 
The former group includes the two 
countries — Spain and Ireland — 
where unemployment was much 
higher than the Community aver­
age throughout the period. But it 
also includes two countries 
— France and the UK —• where 
unemployment was below average 
for half the time and one country 
— Denmark — where, except 
for 1991 and 1992, it was consist­
ently below the average, in most 
years significantly so. The latter 
group, where flows into and out of 
work were low, includes the coun-
tries with the lowest rates 
of unemployment in most years 
— Luxembourg, Germany and 
Portugal — and Greece where 
the rate was also below the 
Community average, but it also in­
cludes Belgium, where for 5 of the 
8 years, unemployment was above 
the average. Moreover in a number 
of cases, the difference in the size 
of flows into and out of work be­
tween countries in the two groups 
is much larger than the difference 
in unemployment rates. 
The difference between the coun­
tries with the largest flows in the 
former group and those with the 
smallest flows in the latter was around 2 to 3 times. In Spain, an 
average of almost 17% of those in 
employment in the years of high 
net job creation between 1987 and 
1990 had been unemployed or inac­
tive the year before — only slightly 
below the average rate of unem­
ployment. In contrast, the figure 
was only around 5% or less in each 
of the countries in the group with 
a low rate of entry into employ­
ment. This includes Greece and 
Belgium, where 5% is significantly 
below the prevailing level of unem­
ployment over this period. 
In the latter two countries, there­
fore, it appears to have been 
considerably more difficult for 
those out of work to find a job than 
in Spain. This is reflected in the 
high level of long-term unemploy-
ment in Belgium, where an 
average of almost 65% of the unem­
ployed over the period had been out 
of work for a year or more, as 
against a figure of just over 50% in 
Spain. It is also reflected in the 
much larger increase in activity 
rates over the period in Spain as 
compared with either Belgium or 
Greece, where the entry, or re­
entry,-of women into the labour 
market was significantly less than 
in other Southern Member States. A 
Large differences in the rate of 
entry into employment are mir­
rored by equally large differences 
in the rate of exit. In Belgium and 
Greece, as well as in Germany and 
Portugal, an average of only 
around 3-4% of people left work 
each year to become unemployed or 
inactive between 1987 and 1990 — 
not much more than the natural 
rate of retirement. In Spain, in 
comparison, the figure was 13%. 
The contrast is equally marked be­
tween Spain and Ireland. In the 
latter, where unemployment was 
only slightly lower than in Spain, the rate of entry into employment 
was only some 8V2% between 1986 
and 1990, only around half the 
Spanish rate. This is reflected, as 
in Belgium, in a high rate of long-
term unemployment, an average of 
60% of the unemployed being out of 
work for a year or more over this 
period. 
Similarly, although the UK had a 
higher rate of unemployment than 
Germany throughout the period 
1984 to 1992, the chances of some­
one without work finding a job in 
the UK — whether unemployed or 
inactive — seem to have been 
greater than in Germany. In the 
UK, the rate of entry into employ­
ment was around 10—11% in each 
year between 1984 and 1989, 
2-3 times higher than in Germany, 
where the rate in most years was 
only 3^%. Even in 1991 and 1992, 
when employment fell by over 2% 
in the UK, there was still an aver­
age of around 8% of those in work 
who had moved into a job after 
being unemployed or inactive the 
year before. Moreover, even in 
years of high net job creation, the 
rate of people leaving employment 
remained relatively high at over 
7% — substantially above the rate 
of 2-3% in Germany. 
Again, this difference is mirrored 
in rates of long-term unemploy­
ment. Despite the comparatively 
low level of unemployment in Ger­
many, over 45% of the unemployed 
had been out of work for at least a 
year throughout the period, even in 
1991 after 7 years of net job cre­
ation. By contrast, in the UK, by 
1991, this figure had declined to 
under 30%. Moreover in Germany, 
to a greater extent than elsewhere, 
the unemployed not only faced 
competition for jobs from those 
who had previously been inactive 
or in education but also from new 
immigrants from the East. 
87-
Chapter 4 Mobility, labour turnover and labour market flexibility 
92 Rate of entry into employment by broad sector in the 
Community (EUR8), average 1984-87, 1987-90 and 1990-92 
0 2 4 
EUR8 = B, DK, D, GR, F, IRL, L, UK 10 12 
% employed 
93 Rate of entry into employment by broad sector in the 
Member States, average 1984-92 
10 15 20 
Agriculture 
Industry 
Services 
0 5 
1 no data, NL data not reliable 10 15 20 
% employed In France, the rate of entry into 
employment was only slightly less 
than in the UK, at 8-9% of those in 
work, though the net increase in 
the numbers employed was much 
lower in most years (never being 
much above 1% as against 372% in 
1988 and 1989 in the UK). The 
proportion of those leaving employ­
ment annually was, therefore, 
much the same as in the UK. Just 
as in the UK as well, this relatively 
high rate of movement into and out 
of work was reflected in a compara­
tively low level of long-term 
unemployment, which in spite of 
the low rate of net job creation had 
fallen to under 40% of the total 
number of jobless in 1991, less 
than in Germany. 
Flows into 
employment by sector 
The inflow of people into employ­
ment in services from being 
unemployed or inactive was consist­
ently higher than into other sectors 
throughout the period 1984 to 1992, 
reflecting relative rates of net job 
creation. For the 8 Community 
countries for which a complete set of 
data is available, an average of just 
under 8% of those employed in ser­
vices in any given year had been 
unemployed or inactive a year ear­
lier (Graph 92). The variation 
between years was small (at only 
around half a percentage point 
between years when employment 
increased by 2V2% or more and years 
when it went up by 1% or less). For 
the 8 countries plus Spain and 
Portugal, the average rate of entry 
into services between 1986 and 
1992 was just over 8V2% of those 
employed, with a similarly small 
difference between high and low 
growth years. 
Entry into industry was over 2 per­
centage points lower than into 
Chapter 4 Mobility, labour turnover and labour market flexibility 
services for the 8 Community coun­
tries, at around 5V2% of those in 
employment, reflecting the lower 
rate of net job creation, but only 
around 1V2 percentage points lower, 
at 67:2-7% if Spain and Portugal are 
included. Indeed in Spain, the rate 
of entry of the unemployed and in­
active into jobs in industry over the 
period was more than for services 
(Graph 93). This was also the case 
in most years in Greece and 
Portugal, which like Spain have so 
far experienced less of a shift in 
employment from industry to ser­
vices than other Community 
countries. 
For these three countries, more­
over, the rate of entry into industry 
of women as well as men was 
higher than for services, a phe­
nomenon which in a number of 
years was also evident in Denmark 
and Belgium. 
Perhaps unexpectedly, the rate 
of entry into agriculture of those 
without jobs was much the same' 
over the Community as a whole as 
into industry. This contrasts with 
the frequent portrayal of agricul­
ture as a sector where there are few 
new entrants and the only real mo­
bility takes the form of people 
leaving, either because they are 
made redundant or because they 
reach retirement age. For the 
8 Community countries, in every 
year between 1984 and 1992, be­
tween 572 and 6% of those in 
employment in agriculture had 
been unemployed or inactive one 
year earlier, and between 6 and 7% 
for these countries plus Spain and 
Portugal. In a number of countries 
in the North of the Community, 
moreover, the rate of entry of 
people out of work into jobs in ag­
riculture over this period was 
higher than for industry. This was 
the case in France, where an aver­
age of 872% of those working in agriculture during these years had 
been unemployed or inactive the 
year before — some 172 percentage 
points higher than the figure for 
industry — and in Germany, where 
the average proportion was 472% 
as opposed to just over 3% in the 
case of industry. 
In these two countries, there­
fore, given the net job losses in 
the sector, the rate of exit from 
agriculture was substantially 
greater than from other sectors of 
activity. 
Similarly in the UK, in around 
half the years over the period, the 
rate of entry of those out of work 
into jobs in agriculture exceeded 
that for industry, though here un­
like in the other two countries, the 
numbers employed in agriculture 
declined by less than those em­
ployed in industry between 1984 
and 1991. Moreover whereas in France and Germany, a higher rate 
of entry into agriculture than in­
dustry applied to both men and 
women, in the UK, it was only true 
of men. Indeed in every year over 
the period, except for 1985, but es­
pecially in years of low growth or 
decline in employment, a higher 
proportion of men working in agri­
culture had been out of work one 
year earlier than was the case for 
industry. 
In the Southern Member States, 
where agriculture is a much more 
important provider of jobs, though 
a rapidly diminishing one, the rate 
of entry into the sector was signifi­
cantly less than that into industry 
over this period. This was espe­
cially the case in Greece and 
Portugal where only around 2% or 
less of those employed in agricul­
ture in any year were not in work 
the year before. It was also true of 
Spain and Ireland. In the former, 
94 Rate of entry into employment by NACE l-digit sector in the 
Community (EUR8), average 1984-92 
10 12 
EUR8 . B. DK. D, Ga F. IRL, l_ UK 10 12 
% employed 
89-
Chapter 4 Mobility, labour turnover and labour market flexibility 
however, the proportion was well 
over 10% in every year, indicating 
a rapid rate of job turnover in the 
sector, and in the latter, it was 
around 5-6%, though this was 
wholly due to an extremely high 
rate of entry of women. 
Indeed in Ireland, in most years 
over the period, more than one in 
every four women employed in agri­
culture — in some years more than 
one in three — was unemployed or 
inactive one year earlier, as com­
pared with only around 3% of men, 
and substantially higher than the 
same figures for industry and ser­
vices. (A similar pattern is evident 
for the Netherlands, where simi­
larly high figures also apply to other 
sectors and where there are doubts 
about the reliability of the data.) 
The rate of entry into agriculture is, 
therefore, extremely high for 
women which, given the high rate of 
exit, also means that the rate of turnover among women is equally 
high. 
Within the service sector, distri­
bution and catering stands out 
as having a high rate of new en­
trants from among the unemployed 
and inactive. On average for the 
8 Community countries examined 
here, in the years between 1984 and 
1992, just under 10% of those em­
ployed in distribution and catering 
were unemployed or inactivity 
the year before, and around 11% 
if Spain and Portugal are added 
(Graph 94). This applies fairly 
generally in all Member States, 
with the proportion reaching 17-
18% in Spain and 14-15% in the 
UK It also applies to women in par­
ticular, for whom the average 
proportion of new entrants was 
around 12% for the 8 Community 
countries (13% with Spain and 
Portugal included), though the fig­
ure for men was also higher than 
95 Rate of entry of men and women into employment by 
NACE l-digit sector in the Community (EUR8), average 
1984-92 
0 2 4 6 8 10 12 
Distribution, hotels 
Health, education, other 
0 2 
EUR8 = B, DK. D, GR, F. IRL, L, UK 10 12 
% employed other sectors, averaging 8-9% 
(Graph 95). 
The other services category, which 
includes education and health as 
well as a range of personal services, 
is only slightly less important as a 
point of entry into employment, 
though unlike distribution and 
catering, the numbers employed 
rose significantly between 1984 and 
1992. Over the period as a whole, 
8-9% ofthose working in this sector 
in the 8 Community countries were 
unemployed or inactive one year 
earlier (9-10% with Spain and 
Portugal). 
Within industry, the other 
manufacturing sector, which pre­
dominantly includes basic 
products such as food and drink, 
textiles and clothing and footwear, 
and construction consistently had 
a proportionately higher rate of 
new entry than other areas over 
the period, though again these 
were not sectors of correspondingly 
high rates of employment growth. 
In these two sectors, an average of 
6-7% ofthose in work in each year 
between 1984 and 1992 had been 
unemployed or inactive the year 
before in the 8 Community coun­
tries (8-9% with Spain and 
Portugal). 
Moreover in both cases, as for all 
other sectors, the figures for 
women were higher than those for 
men, an average of 9-10% of 
women employed in these two sec­
tors having been out of work one 
year earlier in the 8 Community 
countries over this period (10-11% 
with Spain and Portugal), much 
the same proportion as in services 
— though in the case of construc-
tion this translates into 
comparatively few jobs (only 
around 800 thousand women 
worked in this sector in the 
Community as a whole in 1992). 
-90 
Chapter 4 Mobility, labour turnover and labour market flexibility 
Movements 
between sectors 
As has been increasingly argued in 
recent years, a major implication of 
the accelerating pace of techno­
logical advance in processes of 
production and continuous changes 
in the structure of economic activity 
is that people can no longer count on 
being employed in one job throug­
hout their working lives. Indeed, 
many may be obliged to change 
what they do, and acquire new skills 
accordingly, several times during 
their working lives. Both the will­
ingness and ability of the workforce 
to adapt in this way are likely to be 
important determinants of econ­
omic competitiveness. 
Direct evidence on the prevailing 
extent of job mobility is difficult to 
obtain. Data on occupations (as 
pointed out in Chapter 8) are 
among the least comparable labour 
market indicators as between 
countries. Moreover, there is a lack 
of cohort-type information which 
might enable the movements of in­
dividuals to be tracked and 
analysed. 
The analysis here is based on move­
ments of workers between sectors 
of activity from one Labour Force 
Survey to the next, sectors being 
defined at the NACE l-digit level 
which essentially means dividing 
the economy into 11 broad indus­
try or service groups (listed in 
Graph 95). This is not an en­
tirely satisfactory basis of analysis 
since a number of the groups con­
tain very different activities — 
health and education are included 
with personal services, such as hair-
dressing, for example, retailing 
with hotels and mining with chemi­
cals, and shifts between these will 
not be registered. Moreover, while shifts between similar jobs in differ­
ent groups will be registered — 
though the broad nature of the 
groups defined here reduces the li­
kelihood of the jobs being the same 
— shifts between different jobs in 
the same sector will not be. 
Nevertheless, the figures provide 
some indication of the scale of job 
mobility and the way in which this 
varies across the Community, as 
well as over time. Indeed the fact 
that groups are widely defined 
should imply that the figures under­
state actual mobility and, even 
more, the rate of job turnover (some 
evidence on job turnover for 1992 is 
presented below). 
For the 8 Community countries for 
which data are available throug­
hout the period, an average of 
around 4% — one in 25 — moved 
from one sector of activity to an­
other each year between 1983 and 1992 (Graph 96). This figure, how­
ever, varied from under 4% in the 
early, low growth, years of the 
period (as well as in 1992) to over 
5% — one in 20 — in 1990 afrer a 
period of high employment expan­
sion, which suggests that a high 
rate of job creation encourages sec­
toral mobility. 
Adding Spain and Portugal in this 
case tends to reduce the figures 
marginally, since in both countries 
sectoral mobility is below the 
Community average, at just over 
3% in most years in both cases, des­
pite their relatively high rates of 
employment growth. Greece and 
Ireland also registered low rates of 
movement, in the former an average 
of only around 2% a year ofthose in 
employment changing the sector in 
which they worked over the period, 
while in Ireland the average was 
under 1V2% a year, the lowest in the 
Community (Graph 97). 
96 Rate of movement between NACE l-digit sectors and 
employment growth in the Community (EUR8), 1984 to 1992 
% employed 
H 4 
H 3 
-> -1 
1984-85 1985-86 1966-87 1987-8 
EUR8 - B, DK. D. GR, F. IRL, U UK 1988-89 1989-90 1990-91 1991-92 
-91 
Chapter 4 Mobility, labour turnover and labour market flexibility 
97 Rate of movement between NACE l-digit sectors in the 
Member States, average 1984-87,1987-90 and 1990-92 
% employed 
-i 8 
98 Rate of inter-sector movement by broad sector in the 
Community (EUR8), average 1984-87,1987-90 and 1990-92 
% employed 
Agriculture 
Industry 
Services 
2 r 
1984-87 1987-90 1990-92 1984-87 1987-90 1990-92 1984-87 1987-90 1990-92 
EUR8 = B, DK, D, GR, F, IRL, L, UK In the more developed Member 
States, the rate of mobility tends to 
be higher, the main exception being 
Belgium where the proportion mov­
ing between sectors over the period 
was much the same as in Greece 
(just over 2% a year). In Germany 
also, however, the average figure 
was only around 2V2%, well below 
the Community average. By con­
trast, in the UK, France and 
Denmark, the figure averaged over 
5%, and indeed almost 6% in the 
UK, where the movement of 
workers between sectors was in 
most years the highest in the 
Community. (In the Netherlands, 
where there is less doubt about 
these figures than about those for 
new entrants, the average propor­
tion moving between sectors was 
just under 4% between 1987 and 
1992.) 
In most of the countries, as at the 
Community level, some tendency is 
evident for the rate of sectoral mo­
bility to increase with the rate of 
employment growth, though it is 
not particularly pronounced in all 
cases. In the UK, for example, an 
average of 5% of those employed 
moved from one sector to another in 
1991 and 1992, years when employ­
ment declined by over 2%, as 
compared with an average of 7% in 
the years between 1987 and 1990 
when employment rose consider­
ably. On the other hand, in 
Germany, the average rate of mo­
bility during the high growth years 
between 1987 and 1990 was much 
the same as over the preceding 
three years or the subsequent two 
years, when employment growth 
was much less. 
Mobility by sector 
As would be expected, considerably 
fewer people moved into agriculture 
than into other sectors. In the 
92 
Chapter 4 Mobility, labour turnover and labour market flexibility 
Community as a whole (for the 
10 countries as well as the 8), an 
average of only around 1V2% a year 
of those working in agriculture 
moved into the sector from another 
job between 1984 and 1992 
(Graph 98). For Ireland and Greece, 
the proportion was under 1% and in 
Belgium only marginally higher 
(Graph 99). In the UK, on the other 
hand, the figure rose to 4% at the 
beginning of the 1990s (from around 
2V2% in the mid-1980s), while in 
Denmark, it averaged 272% over the 
period as a whole. 
The high figure for the UK may 
reflect the fact that, almost alone in 
the Community, it experienced 
some growth in agricultural em­
ployment over this period, though it 
may also reflect the fact that very 
few people were employed — only 
around 2% of the workforce. Never­
theless, in the Netherlands, where 
employment in agriculture also in­
creased and where the proportion 
employed in the sector was not much 
higher than in the UK, the average 
movement into the sector was around 
the Community average. 
Despite the very different rates of 
employment growth, the rates of 
inter-sectoral mobility in industry 
and services were very similar be­
tween 1983 and 1992. For the 
8 Community countries over this 
period, an average of just over 4% of 
those employed in the five indus­
trial sectors moved into one of these 
sectors each year. (This includes 
those moving from one industrial 
sector to another as well as those 
moving from services or agricul­
ture.) For the five service sectors, 
the average was 4V2% . 
For industry, there was some tend­
ency for the proportion moving 
between sectors to be higher in 
years of high employment growth 
— between 1987 and 1990, the average was almost 5%, between 
1983 and 1987, it was under 4%. In 
services, the difference was less 
marked, though still evident. In 
both sectors, the rate of mobility 
seems to have increased over time, 
though not by much. 
For both sectors also, the variation 
in the scale of movement between 
Member States evident at the ag­
gregate level and for agriculture is 
apparent for both industry and ser­
vices. Indeed there is a high degree 
of uniformity between sectors in the 
relative rates of mobility shown by 
different countries. 
In the UK, Denmark and France, 
the rate of inter-sectoral movement 
was higher than elsewhere in the 
Community in both industry and 
services, the proportion moving av­
eraging 6-7% a year between 1986 
and 1992 in each case in the former 
two countries and 5V2% a year in France. Similarly, Ireland, Greece, 
Belgium and Germany had much 
lower than average rates of mobility 
in both sectors over the period, in 
each case the figure being around 
2V2% a year or less and only around 
1V2% a year in Ireland, though the 
rate for services in Belgium was not 
much higher. 
Within industry and services, the 
rate of entry into individual sectors 
by those who were employed else­
where shows a significantly 
different pattern than entry by 
those who had previously been un­
employed or inactive. For the latter, 
the main flows were into basic in­
dustries and services, like textiles 
and retailing. For those who 
already have a job, the highest rate 
of entry occurred in finance and 
business services, where the pro­
portion in employment who had 
been working in another sector a 
year before averaged over 6% a year 
99 Rate of inter-sector movement by broad sector in the 
Member States, average 1984-92 
8 r 
6 r % employed 
2 r T 8 
BDKDOREFM.(.M.I>UK 8 0KD<MEF«.IM.PUK 
1 no data; E, NL, P average 1986-92 I K t W E FM.LNLPUK 
93 
Chapter 4 Mobility, labour turnover and labour market flexibility 
100 Rate of entry into NACE l-digit sectors from other 
sectors in the Community (EUR8), average 1984-92 
Banking, business services 
Distribution, hotels 
Textiles, ctotfiing, other 
Engineering, metals 
Transport & communications 
Chemical, minÈng 
Health, education, other 
Construction 
Energy & water 
Public administration 
0 2 
EUR8 = B, DK, O, GR, F, IRL, L, UK % employed 
101 Rate of inter-sector movement of men and women in the 
Member States, average 1984-92 
% employed 
6 h -i 8 
H 2 
EUR11 B DK D GR E 
I no data; EUR11, E, NL, P average 1986-92 iRL NL UK in the Community between 1986 
and 1992 — in the UK, the average 
was over 9%, in Germany under 3% 
(Graph 100). Moreover in industry, 
the rate of entry was much the same 
in engineering, as in the other 
manufacturing group, with an aver­
age of around 5% a year over the 
period (in Denmark and the UK, 
7-8%, in Germany, under 3%). 
At the other extreme, public admin-
istration showed the smallest 
inflow into employment from an­
other sector, the rate averaging only 
around 3% a year in the Community 
as a whole between 1986 and 1992 
— though the figure was over 4% a 
year in the UK and under 1% a year 
in Ireland. 
Mobility of 
men and women 
Over the Community as a whole, 
there was a greater tendency for 
women to move between sectors 
than men over the period 1984 to 
1992. The difference, however, was 
very small — the average propor­
tion for women being just over 4%, 
for men 4% (Graph 101). Moreover, 
the difference was predominantly 
accounted for by one country 
— the UK — where inter-sectoral 
mobility among women was on 
average almost 1V2 percentage 
points higher than for men over the 
period (6V2% of women in employ­
ment moved between sectors each 
year, just over 5% of men). For all 
other countries, either there was 
little difference in rates of mobility 
between men and women or mo­
bility among men was consistently 
higher. 
At the sectoral level, an interesting 
and somewhat unexpected pattern 
emerges. In agriculture, mobility is 
higher among men than women 
in all countries except the UK 
94-
Chapter 4 Mobility, labour turnover and labour market flexibility 
— where the rate of entry of 
women from other sectors aver­
aged over 4% — and, in the later 
years of the period, Denmark and 
Ireland. In industry, however, mo­
bility was significantly higher 
among women than among men — 
almost 1V2 percentage points 
higher on average over the period 
for the 8 Community countries 
(slightly less for the 10). This, 
moreover, was true in all countries 
in most years, except Greece, Por­
tugal and Spain — in the latter 
case only for half the years (Graph 
102). 
In services, on the other hand, the 
reverse is the case. Though the dif­
ferences are not so marked as for 
industry, in most countries the mo­
bility of men was consistently 
higher than that of women over the 
period 1984 to 1992 (Graph 103). 
Almost the only exception is the 
UK where proportionately more 
women than men already in em­
ployment moved into one of the 
service sectors over the period, 
though again the difference was 
much smaller than in the case of 
industry. 
Mobility by age 
The chances of someone moving 
from one sector to another decline 
with age. For young people under 
25, an average of just over 7% of 
those in employment in the 
Community changed the sector in 
which they worked in every year 
between 1984 and 1992, the figure 
rising to almost 9% in 1989 and 
1990 at the end of the period of 
high job creation (Graph 104). In 
Denmark, the proportion was over 
10% and in the UK and France not 
much lower, while in contrast it 
was only just over 2% in Ireland, 
not much above 3% in Greece and 
under 4% in Germany. 102 Rate of inter-sector movement of men and women in 
industry in the Member States, average 1984-92 
% employed 
10 r 
8 r 1 10 
m e 
EUR11 B DK D GR E f IRL L NL P UK 
I no data; EUR11, E, NL, P average 1986-92 
103 Rate of inter-sector movement of men and women in 
services in the Member States, average 1984-92 
8 r 
6 h % employed 
n 8 
¥ 6 
EUR 11 B DK D GR E F IRL L NL P UK 
1 nodata; EUR11, E, NL, P average 1986-92 
95-
Chapter 4 Mobility, labour turnover and labour market flexibility 
104 Rate of inter-sector movement by age group in the 
Member States, average 1984-92 
? 
% employed 
12 r _ _ 
10 
8 r T 12 
10 
H 4 
0 ai 0 
EUR11 B DK D GR E F IRL L NL P UK 
I no data; EUR11, E, NL, P average 1986-92 
105 Rate of labour turnover and employment growth in the 
Community (EUR8), 1984 to 1992 
% employed 
12 r 
10 Labour turnover m Employment change 
-2 «-n 12 
10 
H 8 
H 4 
H 2 
1984-B5 1985-86 1986-87 1987-1 
EUR8 = B, DK. D, GR, F, IRL, L, UK 1988-89 1989-90 1990-91 1991-92 For those aged between 25 and 49, 
the average proportion moving be­
tween sectors was 4% over this 
period in the Community, rising to 
5% in 1990, but falling back to 
under 4% in 1992. A similar vari­
ation emerges between Member 
States, with the UK, France and 
Denmark having the highest rate of 
movement — with 5% or more of 
people a year changing sectors — 
and Ireland the lowest at barely 
over 1% a year, though this time 
joined by Belgium as well as Greece. 
For those aged 50 or over, the aver­
age proportion of those in 
employment moving was only 
around 2% a year in the Com­
munity, with figures of just over V2% 
a year in Belgium and Ireland as 
well as in the Netherlands. In 
France, however, the average was 
almost 3% a year and in the UK and 
Spain not far below. 
Much the same pattern of variation 
is in this case true for both men and 
women. 
The probability of someone moving 
from employment in one sector to a 
job in another, therefore, declines 
by around 50% as the person passes 
from the 15-24 age group to the 
25-49 age group and falls by an­
other 50% or so as they pass into the 
over 49 age group. 
Labour turnover 
The figures examined above on 
flows into employment from unem­
ployment and inactivity and on 
movements between sectors 
provide, in combination, an indica­
tion of the overall extent of labour 
turnover in the Community. Speci­
fically, they show the number of 
people employed in a particular sec­
tor at a given time who were not 
working there one year earlier. 
96 
Chapter 4 Mobility, labour turnover and labour market flexibility 
Between 1984 and 1992, an average 
of 11V2% of those in employment 
— more than one person in 9 — had 
entered a new job during the 
preceding year in the 8 Community 
countries for which complete data 
are available. For the 10 Com­
munity countries, including Spain 
and Portugal, the average for the 
period 1986 to 1992 rises to 12V2% 
or one in 8 (Graph 105). 
The proportion also rises in the high 
growth years between 1987 and 
1990 — to 13% for the 10 Com­
munity countries and to almost 
12V2% for the 8, compared with an 
average of under 11% in the other 
years. On average, around 60% 
of those entering a new job were 
previously unemployed or inactive, 
40% were employed in another 
sector. 
Given that the data on inter-
sectoral movements encompass 
only those moving between broad 
sectors of activity, these figures 
clearly understate the actual pro­
portion of people entering a new job 
each year and the extent of job turn­
over. They suggest, however, a 
significant degree of fluidity in the 
Community labour market taken as 
a whole. 
Nevertheless, the extent of labour 
turnover varies markedly between 
Member States. Spain has the hig­
hest rate with an average of over 
18% a year — almost one in 5 — of 
those working in a particular sector 
over the period 1986 to 1992 not 
having been employed in that sector 
one year earlier (Graph 106). The 
UK has the second highest rate with 
an average figure of almost 16% 
— one in 6 — for the same period, 
while France and Denmark, the 
only other two countries with rates 
above the Community average, 
come some way behind with aver­
ages of 13%. Although Spain and the UK have 
similarly high rates of labour turn­
over, the proximate reasons for this 
are significantly different as noted 
above. Whereas in Spain, the high 
rate is due almost entirely to a much 
larger than average flow of people 
from unemployment and inactivity 
into work, the rate of inter-sectoral 
movement being less than the 
Community average, the UK has 
relatively high figures for both 
new entrants into work and those 
moving between sectors. France 
and Denmark are similar in this 
respect. 
At the other extreme, in Germany 
and Greece, the countries with the 
lowest rates of labour turnover, over 
the same period an average of under 
7% of those in employment — one 
in 15 — were not employed in the 
same sector one year earlier, while 
in Belgium, the average was only 
slightly higher at 7%. (In Germany, it should be noted, a higher propor­
tion of jobs than elsewhere are 
likely to have been filled by immi­
grants over this period — people 
who one year earlier had not been 
living in the country at all and who, 
therefore, are left out of account 
here. However, including immi­
grants would add an average of less 
than V2% to the proportion of those 
entering employment in any year 
— not enough to make a significant 
difference to the comparisons.) 
Labour turnover 
by sector 
At the sectoral level, the rate of 
labour turnover is lowest in agricul­
ture, as would be expected in view 
of the large and continuous reduc­
tion in employment which has been 
experienced. Even in this sector, 
however, new entrants are far 
from rare. For the 8 Community 
106 Rate of labour turnover in the Member States, average 
1984-92 
% employed 
20 r 
16 r 
12 r 
8 h -i 20 
16 
12 
D GR B P 
1, NL no data; E. P 1986-92 IRL DK UK 
-97 
Chapter 4 Mobility, labour turnover and labour market flexibility 
107 Rate of labour turnover by broad sector in the Member 
States, average 1984-92 
20 r 
15 \-
10 h % employed 
-i 20 
15 
10 
EUR10 B DK D GR E F IRL L P UK 
I, NL no data; E, P 1986-92; EUR11 1987-92 
108 Rate of labour turnover of men and women in the 
Community (EUR8), 1984 to 1992 
% employed 
20 r 
15 r 
10 p T 20 
H 15 
10 
1984-85 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91 1991-92 
EUR8 = B, DK, D, GR, F, IRL. L, UK countries, between 1984 and 1992, 
an average of 7% of those employed 
in the sector in any year were not 
working in agriculture a year ear­
lier, most of them (80%) having been 
unemployed or inactive. At the 
same time, over 10% of workers left 
the sector each year (Graph 107). 
The variation between countries, 
however, is considerable. In Spain, 
the rate of entry into agriculture 
averaged over 13% a year between 
1986 and 1992, while in the UK over 
the same period it was over 11% a 
year. In contrast, the average figure 
for Greece was only 2V2% and for 
Portugal and Belgium, 3V2%. 
For the industrial sectors, the rate 
of entry averaged 10% in the 8 Com­
munity countries between 1984 and 
1992 — and over 11% if Spain and 
Portugal are added — with an aver­
age rate of exit only slightly lower 
than this. Spain again had the hig­
hest rate, with an average of over 
19% of people entering industry 
each year between 1986 and 1992. 
The UK, France and Denmark were 
the only other countries with rates 
consistently above the Community 
average (at 12V2-14%), though this 
was also true of Portugal in a num­
ber of years, while Ireland was not 
far below the average. 
At the other end of the scale, 
Germany had by some way the lo­
west rate of entry into industry, 
with an average of less than 6% a 
year of those employed in an indus­
trial sector between 1984 and 1992 
not having worked there a year be­
fore. 
Services, not unexpectedly, had 
the highest rate of entry, with an 
average of 11V2% a year starting to 
work in a service sector in the 8 
Community countries between 
1984 and 1992 (14% if Spain and 
Portugal are added). It also, how-
-98-
Chapter 4 Mobility, labour turnover and labour market flexibility 
ever, had a higher rate of exit than 
in industry and one which was 
similar to that in agriculture — ie 
the chances of someone in a service 
sector leaving their job in any year 
were much the same as someone in 
agriculture. 
The same general variation in rates 
oflabour turnover between Member 
States applies as for industry. Spain 
had the highest rate of entry into a 
service sector, with an average of 
around 19% moving into a service 
job each year between 1986 and 
1992, the UK the second highest 
rate, with an average of almost 17% 
in the same period, in this case, 
significantly higher than in France 
(15%) or Denmark (14%). Germany, 
with Belgium, had the lowest rates, 
with an average figure of only 
around 7%. 
Labour turnover of 
men and women Labour turnover of women, there­
fore, exceeded 15% in the high 
growth year of 1990 and averaged 
only just under 15% between 1987 
and 1990, when there was signifi­
cant net job creation. Even in years 
of recession, such as 1991 and 1992, 
labour turnover was still around 
13%. In contrast, labour turnover 
among men exceeded 10% only in 
years of high employment growth 
and fell to under 9% in 1992. 
The marked difference between 
rates oflabour turnover for men and 
women is true of all Member States. 
This is particularly the case for 
Ireland, where the average turn­
over of women each year between 
1984 and 1992 was around 14% of 
those in employment, double the 
rate for men (Graph 109). In the 
UK and Luxembourg, the annual 
turnover of women was around 50% 
higher than for men, while only 
in Portugal and Greece was the difference between the two rates 
less than 20%?. 
The implications 
for flexibility 
Conclusions about overall labour 
market flexibility can be drawn 
from the above evidence only with a 
great deal of caution. 
Although the inflow of people into 
employment from the ranks of the 
unemployed or inactive is much 
higher in some countries — Spain, 
the UK, France and Denmark, in 
particular — than others — 
Germany, Belgium, Greece and 
Portugal — part of the difference 
can be attributed to differing levels 
of unemployment. This is clearly 
the case in respect of Spain vis à vis 
Portugal or Germany. However, it is 
less true of Spain vis à vis Ireland 
or Belgium or of the UK, France or 
On average, over the Community, 
as a whole, men accounted for a 
higher proportion of the people 
moving into new jobs over the 
period 1984 to 1992 than women. 
The difference, however, was very 
small, men accounting for 51% of 
labour turnover, women for 49%. 
Given the relative numbers of men 
and women in the workforce, how­
ever — over 60% men, under 40% 
women — women were on average 
50% more likely to be involved in 
moves, whether entering or re­
entering employment or moving 
from one sector to another, than 
men (Graph 108). Moreover, partly 
reflecting the growing participa­
tion of women in the labour force, 
the proportion of moves involving 
women increased significantly 
over the period. Indeed between 
1989 and 1992, women accounted 
for a higher proportion of labour 
turnover than men. 109 Rate of labour turnover of men and women in the 
Member States, average 1984-92 
% employed 25 r -i 25 
-99-
Chapter 4 Mobility, labour turnover and labour market flexibility 
Denmark relative to most other 
countr ;s. Here, the turnover 
among he unemployed seems to 
have been higher than elsewhere 
and the chances of someone 
unemployed finding work corre­
spondingly greater. 
The implications of the similarly 
large variation in movements 
between sectors seem less unequi­
vocal. The scale of labour mobility, 
in a sectoral rather than a spatial 
sense, is significantly greater in the 
UK, France and Denmark than in 
other parts of the Community and 
significantly lower in Germany, 
Belgium and Greece. In Greece, this 
is due in large measure to the size 
of the agricultural sector which 
has a very low rate of entry. In 
Germany, the low rate of sectoral 
mobility may reflect in part the 
influence of the vocational training 
system and the requirement that 
people need to have gone through the training system before working 
in a particular sector. Whatever the 
underlying reason, in terms of 
sectoral mobility, the external 
labour market can be said to be 
much more flexible in the former 
three countries than in the latter 
three. 
On the other hand, flexibility in this 
sense does not necessarily imply 
greater efficiency. In all three of the 
former countries, as well as in 
Spain, a high proportion of those 
working in a particular sector of ac­
tivity were not working in that 
sector, or not working at all, the 
previous year. A high proportion, 
therefore, are comparative new­
comers, whose productivity could 
well be lower than more experi­
enced workers. 
Moreover, there is some evidence 
that investment in training tends to 
be discouraged if labour turnover is 
110 Persons changing job since previous year in the 
Member States, 1992 
% total employed 
30 r 
20 h 
10 -i 30 
20 
10 high, since firms financing the in­
vestment are less sure of recouping 
the benefits. More fundamentally, 
labour market flexibility in its 
broadest and most meaningful 
sense, can only be fully assessed by 
considering the internal as well as 
the the external market, which es­
sentially means examining at the 
same time the adaptability of la­
bour organisation within firms. In a 
number of the Member States with 
low sectoral mobility, Germany and 
Belgium, in particular, the internal 
labour market structure seems to be 
well developed, with investment in 
training a key element. 
Job turnover 
within sectors 
The above analysis, based as it is on 
movements between sectors, leaves 
out of account job changes in the 
same sector. The 1992 Labour Force 
Survey, for the first time, provides 
some evidence on this since it in­
cluded a question on how long the 
respondent had been in their pres­
ent employment. Collating the 
replies from all those who had been 
in their present employment for less 
than a year gives an indication of 
the number of people who had 
either changed jobs during this 
time, or had began working after 
being unemployed or inactive 
— though this still leaves out of ac­
count people changing their jobs 
within the same enterprise. 
The results broadly confirm the 
above findings, in the sense that 
those countries which had high 
rates of labour turnover between 
sectors also have high rates of job 
turnover within sectors, and vice 
versa for countries with low rates of 
turnover. For the Community as a 
whole, some 17% of those in work 
— around one in six — had not been 
in their present job one year earlier 
100 
Chapter 4 Mobility, labour turnover and labour market flexibility 
(Graph 110). This compares with 
the above figure of just under 11% 
in the same year if those moving 
within sectors are excluded, which 
implies that the latter — those mov­
ing to another job in the same 
sector — amounted to around 6% of 
the total numbers in employment in 
1992. 
As in the above analysis, Spain, 
Denmark and the UK — as well as 
the Netherlands — had the highest 
proportions of people in work who 
had not been in the same employ­
ment one year before — in Spain, 
the figure being as high as 28%, 
implying that over one in four 
people in work either entered em­
ployment or changed their place of 
work over the preceding year, while 
in Denmark, it was over one in five. 
At the other end of the scale, the 
rate of turnover was under 13% 
in Greece as well as in Italy (for 
which there were no data for the 
foregoing analysis) and only around 
15% in Belgium, Germany and 
Luxembourg — countries which 
also had a low rate of turnover if 
intra-sector movements are left out 
of account. change as the former. Moreover, 
even after taking account of intra-
sector employment changes, the 
differences in overall rates of job 
turnover between Member States 
remain significant. 
As noted above, countries with ap­
parently low rates of labour 
mobility, may well compensate 
through higher rates of job turnover 
within companies — a flexible inter­
nal labour market substituting for a 
less flexible external one. 
Relying on intra-firm mobility to 
achieve structural change might, 
however, be seen as a higher risk 
strategy than pursuing this 
through increased external labour 
market flexibility. On the other 
hand, the greater stability inherent 
in relying more on the internal la­
bour market may be associated with 
higher potential productivity if it is 
managed correctly. 
Overall, there seems to be some 
tendency for the scale of movement 
within sectors to be relatively high 
in countries with low rates of move­
ment between sectors. Greece, 
Belgium and Germany, all with low 
rates of inter-sector mobility, had a 
slightly higher than average pro­
portion of workers moving from one 
job to another within the same sec­
tor, while for both France and the 
UK the reverse was the case. 
Countries with low mobility be­
tween sectors seem, therefore, to 
compensate to some extent through 
higher mobility within sectors, 
though this does not necessarily sig­
nify the same kind of structural 
101-
Chapter 4 Mobility, labour turnover and labour market flexibility 
-102 
Chapter 5 Changes in working time 
Chapter 5 Changes in working time 
The normal working week in the Community has shortened 
over the past decade, but by much more in some countries 
than others. A reduction in full-term working hours has been 
widespread, but significant numbers still work long hours. 
While part-time jobs have increased, these do not always 
involve shorter working hours. 
Introduction 
Over many years, there has been a 
general tendency throughout the 
Community for the average time 
worked by those in employment to 
decline^ so contributing to the 
growth in the number of people in 
work. However, the extent of the 
reduction has varied considerably 
between Member States as have 
the factors underlying the decline. 
This chapter examines, in the first 
part, the changes in the average 
hours usually worked per week 
over the past decade. Specifically, 
the main focus ic twofold: first, 
upon the changes which have 
occurred in what constitutes full-
time weekly hours across the 
Community between 1983 and 
1992 and, secondly, upon the 
growth of part-time working over 
this period. 
It should be recognised that this 
leaves out of account any changes 
which have occurred in the num­
ber of weeks worked per year, 
the general trend towards in­
creased numbers of holidays also 
being a factor reducing working 
time. Complete, up-to-date and comparable data on hours worked 
per year, however, are not yet 
available for the Community as a 
whole. 
It should also be recognised that 
the chapter does not address the 
equally important issue of changes in working patterns over an em­
ployee's lifetime, in the form, for 
example, of time off for study, the 
pursuit of other interests or to take 
care of a family. 
The second part of the chap­
ter examines the importance of 
111 Change in hours usually worked per week in the 
Member States, 1983 to 1992 
% change 
2 r -i 2 
-4 
-10 
•12 
-14 
ii UK E tRL L F EUR12 P OR DK O B NL 
103 
Chapter 5 Changes in working time 
weekend and night working and 
the way that this varies across the 
Community. 
Changes in 
average weekly 
hours, 1983 to 1992 
Between 1983 and 1992, average 
hours usually worked per week in 
the Community declined by just 
under 4% — or by around an hour 
and half (Graph 111 — see Box for 
a description of the data on hours 
worked). By far the largest reduc­
tion occurred in the Netherlands, 
where average hours fell by 13% — 
by 4 hours a week (though a signifi­
cant part of this is due to the change 
in the method of measuring employ­
ment in 1987 which led to a large 
rise in jobs with short hours). By 
contrast, in Italy and the UK, the fall was only 1% or less—under half 
an hour a week — while in Spain, 
Ireland and Luxembourg, the re­
duction was around 2%. In the 
remaining countries, the decline in 
hours ranged from 5% or more in 
Denmark and Germany to 3% in 
France. 
Overall, it is difficult to discern a 
consistent pattern in the relative 
rates of decline over this period. 
While the fall was relatively large 
in the Netherlands and Denmark, 
where the average working week 
was comparatively short, the fall 
was also above average in Greece 
and Portugal, where the average 
working week was relatively long 
and below average in Spain and 
Ireland, where it was also long. No 
trend towards convergence in the 
average hours worked per week 
was, therefore, evident over this 
period. 
112 Effect of structural changes on changes in hours 
usually worked per week in the Member States, 1983 to 
1992 
Change in number of hours worked per week 
-i 3 
D Total change 
Increased employment of 
women 
H Shift between sectors The reductions which occurred 
were the result of a combination of 
factors in each country. In the first 
place, most Member States have 
experienced a shift in employment 
from agriculture and industry to 
services. Since average hours 
worked tend to be less in services 
than in the other two sectors, espe­
cially in agriculture, this in itself 
tends to reduce average working 
time. 
Secondly, over the past decade, all 
Member States have experienced a 
relative increase in the employ­
ment of women who tend to work 
fewer hours than men in individual 
countries (though women in some 
countries work longer hours than 
men in others). This trend is, 
therefore, also likely to have been 
accompanied by some overall re­
duction in average hours worked, 
though whether this is due to the 
employment of women per se or to 
the nature of the jobs which have 
been created — ie jobs involving 
shorter than average hours which 
have just happened to have gone to 
women — is a moot point. Both the 
relative growth of female employ­
ment and the expansion of services 
has gone along with a rise in part-
time working. 
These two developments tend to 
obscure the reduction in working 
time which has occurred within 
sectors of activity, as a result, on 
the one hand, of more part-time 
rather than full-time jobs being 
created and, on the other, of a re­
duction in full-time working hours. 
Estimates of the effect of the two 
developments show that, on aver­
age, some 30% of the decline in 
hours worked in the Community as 
a whole between 1983 and 1992 
was the direct result of structural 
changes in the economy — in other 
words, of a decline in agriculture 
104-
Chapter 5 Changes in working time 
coupled with a growth of services 
(Graph 112). In Italy, the UK and 
Ireland, all, or almost all, of the 
reduction in average hours worked 
over this period can be attributed 
to such changes, while in Spain 
and Portugal over half of the reduc­
tion was due to sectoral shifts of 
this kind. In the four countries 
experiencing the largest falls, how-
• ever — the Netherlands, Belgium, 
Germany and Denmark — very 
little of the decline was the result 
of sectoral shifts. 
Although the increased employ­
ment of women was a less 
important factor, it can, neverthe­
less, explain 10% of the overall 
reduction in average weekly hours 
over this period. In absolute terms, 
the relative growth of female 
employment had the largest effect 
in reducing the average working 
week in Belgium and the 
Netherlands, though in both cases, 
the decline due to this factor was 
only 12 minutes over the 9-year 
period. In relative terms, however, 
it was most significant in the UK, 
where it amounted to 40% of the 
overall, very small, reduction in 
working time which occurred (sig­
nifying that if allowance is made 
for this factor and the shift be­
tween sectors average hours 
usually worked increased in the 
UK over this period). In contrast, 
in Denmark, Greece and Italy, be­
cause of the similar average 
number of hours worked per week 
by men and women, the effect was 
negligible. 
Once allowance is made for the 
shift in employment between sec­
tors and the relative growth in 
employment of women, only 5 of 
the 12 Member States showed a 
fall in average working time of 
more than one hour a week be­
tween 1983 and 1992 and only the 
Netherlands a fall of more than two hours. In the UK and Ireland, 
there was a small increase in the 
average hours worked per week 
after allowing for these two factors. 
The distribution 
of working time 
of employees 
The figures for average working 
time discussed above say nothing 
about how this average is dis­
tributed across the workforce, 
about how many people normally 
work longer hours than the aver­
age and how many shorter hours. 
Nor do they reveal how the dis­
tribution of hours worked is 
tending to change over time. 
In practice, the detailed figures on 
working time collected as part of 
the Labour Force Survey indicate 
that a large proportion of em­
ployees tend to work very similar 
hours and that in most parts of the 
Community a standard working 
week of a given number of hours is 
clearly discernible (though in a few 
Member States, the UK, in particu­
lar, this is far from the case). 
In 1992, 58% of male employees 
in industry and services in the 
Community usually worked be­
tween 38 and 40 hours a week, 
while a further 13% worked 
between 35 and 37 hours 
(Graph 113). (The analysis here is 
confined to industry and services 
because of the difficulty of measur­
ing normal working time in 
agriculture.) Only 6% of men had a 
normal working week which was 
less than 35 hours, which means 
that 23% of men employed in these 
two sectors worked more than 
40 hours a week. 
For a significant proportion of 
these, the normal working week Data on 
hours worked 
The data used in this chapter 
come from the Community 
Labour Force Survey and re­
late to the number of hours 
people responding normally 
worked each week, including 
any overtime or extra hours, 
whether paid or unpaid, if 
these were usual, as well as 
any work done at home. In 
cases where respondents are 
unable to give a figure for 
usual hours, ithe average of 
the hours actually worked 
over the preceding four week 
is used. 
Because of the difficulty of 
measuring hours of work in 
agriculture (there is, for 
example, significant dif­
ferences between the LFS 
figures on this and the Com­
munity farm survey), and 
because agriculture differs 
markedly in importance be­
tween Member States, the 
analysis is largely confined to 
industry and services. In ad­
dition, employees are 
distinguished from the self-
employed since the issues are 
somewhat different in the 
two cases. 
105-
Chapter 5 Changes in working time 
113 Male employees in industry and services by usual 
weekly hours in the Community, 1983 and 1992 
% employed 60 r 
50 
40 f-
30 
20 
i10 1992 
• l983 
P 1986, E1987.NL 1991 -i 60 
H 50 
H 140 
30 
H 20 
mm 
0 mmsmmmmmi i i • • • • • • • 0 
< 10 10- 15- 20- 25- 30- 35 36 37 38 39 40 41 42 43 44 45- 50+ 
14 19 24 29 34 49 
Weekly hours 
114 Men and women employees working 48 hours a week or 
more in the Member States, 1983 and 1992 
% total 
30 r 
20 r-
10 1 1983 • 1992 
P 1986, E 1987 30 
20 
mi 
NL B L 0 E DK F I P E12 IRL GR UK NL B L O E DK F i P E12 IRL GR UK. 
Men Women was 48 hours or more. Indeed 12% 
of all men employed in industry 
and services in the Community in 
1992, almost 7 million in total, 
usually worked at least 48 hours a 
week—in other words, in excess of 
the maximum number of hours 
which will be allowed, on average, 
under the Working Time Directive 
(Graph 114). At the same time, an­
other 550 thousand men employed 
in agriculture had a normal work­
ing week of at least 48 hours. 
Although women in most parts 
of the Community tend to work 
fewer hours than men, 41% of 
female employees in industry and 
services normally worked between 
38 and 40 hours a week in 1992 
(Graph 115). Only 10%, however, 
worked longer hours than this 
and only 4% 48 hours a week or 
more. Nevertheless, this amounts 
to some 2 million women in total, 
while another 500 thousand 
women worked these hours in 
agriculture. Just under 11 mil­
lion employees in total in the 
Community in 1992, therefore, had 
a normal working week which 
exceeded the maximum allowed 
under the Working Time Directive. 
Almost half of women in the 
Community in 1992, 49%, usually 
worked less than 38 hours a week 
and almost 30% normally worked 
under 30 hours. A significant pro­
portion, over 4% — over 2 million 
— moreover, had a normal working 
week which was less than 10 hours. 
Over half of these — over 2% of all 
women employees in industry and 
services in the Community — 
usually worked 6 hours a week or 
less — that is, for less than one full 
day a week. 
Such women ara clearly in a differ­
ent kind of employment than those 
who work longer hours, even though 
by working for at least one hour a 
106-
Chapter 5 Changes in working time 
week they conform to the interna­
tional standard (ILO) definition of 
what constitutes someone being in 
employment. While it is important 
to have this information, when ana­
lysing the figures for employment 
some allowance needs to be made 
for those working short hours, 
perhaps by according the jobs 
concerned a lower weight than 
others. This is potentially import­
ant when making comparisons 
between countries, as noted below, 
or when assessing the rate of job 
creation. 
More detailed comparisons of 
working time indicate that there is 
very little difference for men in the 
distribution of working time as be­
tween industry and services, while 
for women, a significantly higher 
proportion work less than 35 hours 
a week in services than industry, 
reflecting the more flexible work­
ing arrangements. 
Variations in 
working time across 
the Community 
While there are marked dif­
ferences in the distribution of 
working time between Member 
States, there are also a number of 
common features. In particular, 
men tend to work longer hours 
than women in all countries, with 
very few working less than full-
time and a significant proportion 
in a number of Member States 
working long hours. In addition, in 
all Member States, more women 
work part-time in services than in 
industry. Moreover, for most coun­
tries, for men much more than 
women, there is a narrow band of 
working hours which constitutes 
the normal full-time working week 
which covers the large majority of 
employees. Male employees 
For five countries in the Community 
— three of the Southern Member 
States Greece, Spain and Italy plus 
Ireland and Luxembourg — the nor­
mal working week for men in 1992 
was 40 hours. In four of these coun­
tries, more than half of all male 
employees usually worked these 
hours — 75% in the case of Spain, 
88% in the case of Luxembourg — 
while in Ireland over 40% did so 
(Graphs 119,120,123,122 and 124). 
In France the normal week was 39 
hours — 54% working these hours 
(Graphs 121). 
For three Member States — 
Belgium, Germany and Denmark — 
the normal working week in 1992 
was between 37 and 38 hours — 
closer to 38 in the former two, 37 in 
Denmark (Graphs 116,117 and 118). In one Member State, the Nether­
lands, men seem to have been 
employed either to work 40 hours a 
week (32% of the total) or 38 hours 
a week (38%) (Graph 125 — where 
the data are for 1991 because of 
problems with the 1992 data). 
In the other two Member States — 
Portugal and the UK — a less clear-
cut pattern is discernible. In both 
cases, particularly the UK, for a high 
proportion of men the normal work­
ing week was significantly longer 
than elsewhere in the Community. 
In Portugal, 27% of male employees 
usually worked 40 hours a week in 
1992, while 21% worked a 44-hour 
week and 26% a 45-hour week or 
more, of whom 8% normally worked 
at least 50 hours a week (Graph 126). 
The UK, however, stands out as 
having by far the longest working 
hours for male employees in indus­
try and services in the Community. 
115 Female employees in industry and services by usual 
weekly hours in the Community, 1983 and 1992 
60 r 
50 
40 
30 
20 
10 employed 
H 1992 
• 1983 
P 1986, E 1987, NL 1991 -1 60 
-\ 50 
-{ 40 
H 30 
i 20 
10 
<10 10- 15-20-25-30-35 36 37 38 39 40 41 42 43 44 45- 50+ 
14 19 24 29 34 49 
Weekly hours 
-107-
Chapter 5 Changes in working time 
Distribution of male employees in industry and services 
by hours usually worked in the Member states, 1983 and 1992 
116 Men - Belgium 
% employed 
90 
60 
30 M 1992 
D1983 90 
60 
30 
< 10- 15- 20- 25- 30- 35 36 37 38 39 40 41 42 43 44 45- 50+ 
10 14 19 24 29 34 49 
Weekly hours 117 Men • Denmark 
% employed 
90 
60 
30 H 1992 
• 1983 
•lai 90 
60 
30 
0 ŒH»——M»— ' ' ^^ 0 
< 10- 15- 20- 25- 30- 35 36 37 38 39 40 41 42 43 44 45-50+ 
10 14 19 24 29 34 49 
Weekly hours 
118 Men - Germany 
% employed 90 
60 
30 M 1992 
D 1983 -j 90 
60 
30 
< 10- 15- 20- 25- 30- 35 36 37 38 39 40 41 42 43 44 45-50+ 
10 14 19 24 29 34 49 
Weekly hours 119 Men- Greece 
% employed 
< 10- 15- 20- 25- 30- 35 36 37 38 39 40 41 42 43 44 45-50+ 
10 14 19 24 29 34 49 
Weekly hours 
120 Men - Spain 
% employed 
90 
60 
30 I 1992 
Dl987 
No da» 1983-86 T 90 
60 
-QL 30 
< 10- 15- 20- 25- 30- 35 36 37 38 39 40 41 42 43 44 45- 50+ 
10 14 19 24 29 34 49 
Weekly hours 121 Men - France 
% employed 
!M 
(50 H 1992 
Dl963 
< 10- 15- 20- 25- 30- 35 36 37 38 39 40 41 42 43 44 45-50+ 
10 14 19 24 29 34 49 
Weekly hours 
-108-
Chapter 5 Changes in working time 
Distribution of male employees in industry and services 
by hours usually worked in the Member states, 1983 and 1992 
122 Men - Ireland 
% employed 
90 r 
60 
30 h M 1992 
• 1983 90 
60 
H 30 
< 10- 15-20-25- 30- 35 36 37 38 39 40 41 42 43 44 45-50+ 
10 14 19 24 29 34 49 
Weekly hours 123 Men-Italy 
% employed 
90 
60 j-
30 B 1992 
• 1983 90 
60 
-I 30 
0 •' innirm • •-" 0 
< 10- 15- 20- 25- 30- 35 36 37 38 39 40 41 42 43 44 45- 50+ 
10 14 19 24 29 34 49 
Weekly hours 
124 Men - Luxembourg 126 Men - Netherlands 
% employed 
90 r 
60 h 
30 M 1992 
• 1983 90 
H 60 
30 
< 10- 15- 20- 25- 30- 35 36 37 38 39 40 41 42 43 44 45-50+ 
10 14 19 24 29 34 49 
Weekly hours % employed 
90 r 
m 1991 
D1983 
60 
30 90 
•I 60 
-I 30 
< 10- 15- 20- 25- 30- 35 36 37 38 39 40 41 42 43 44 45-50+ 
10 14 19 24 29 34 49 
Weekly hours 
126 Men-Portugal 
% employed 
90 r 
< 10- 15- 20- 25- 30- 35 38 37 38 39 40 41 42 43 44 45-60+ 
10 14 19 24 29 34 49 
Weekly hours 127 Men-UK 
% employed 
90 
60 
30 M 1992 
• 1983 T 90 
-I 60 
-I 30 
< 10- 15- 20- 25- 30- 35 36 37 38 39 40 41 42 43 44 45-50+ 
10 14 19 24 29 34 49 
Weekly hours 
- 109-
Chapter 5 Changes in working time 
Distribution of female employees in industry and services 
by hours usually worked in the Member states, 1983 and 1992 
128 Women - Belgium 
p. % employed 
60 
30 h a 1992 
D 1983 90 
60 
30 
< 10- 15- 20- 25- 30- 35 36 37 38 39 40 41 42 43 44 45-50+ 
10 14 19 24 29 34 49 
Weekly hours 129 Women - Denmark 
% employed 
1 90 
H 60 
30 
< 10- 15- 20- 25- 30- 38 36 37 38 39 40 41 42 43 44 45-50+ 
10 14 19 24 29 34 49 
Weekly hours 
130 Women • Germany 
% employed 
90 
60 
30 
< 10- 15- 20- 25- 30- 35 36 37 38 39 40 41 42 43 44 45- 50* 
10 14 19 24 29 34 49 
Weekly hours 131 Women-Greece 
% employed 
< 10- 15- 20- 25- 30- 35 36 37 38 39 40 41 42 43 44 45-50+ 
10 14 19 24 29 34 49 
Weekly hours 
132 Women-Spain 
% employed 
< 10- 15- 20- 25- 30- 35 36 37 38 39 40 41 42 43 44 45-50+ 
10 14 19 24 29 34 49 
Weekly hours :133 Women - France 
% employed 
90 
60 
30 r-H 1992 
D1983 i 90 
60 
30 
< 10- 15- 20- 25- 30- 35 36 37 38 39 40 41 42 43 44 45-50+ 
10 14 19 24 29 34 49 
Weekly hours 
110 
Chapter 5 Changes in working time 
Distribution of female employees in industry and services 
by hours usually worked in the Member states, 1983 and 1992 
134 Women - Ireland 
% employed 
90 r 
< 10- 15- 20- 25- 30- 35 36 37 38 39 40 41 42 43 44 45- 50+ 
10 14 19 24 29 34 49 
Weekly hours 135 Women Italy 
% employed 
0 •— ————-— —— —— —— ^^ Bmn g 
< 10- 15- 20- 25- 30- 35 36 37 38 39 40 41 42 43 44 45- 50+ 
10 14 19 24 29 34 49 
Weekly hours 
136 Women • Luxembourg 
% employed 
90 
60 
30 M 1992 
D 1983 -i 90 
60 
30 
< 10- 15- 20- 25- 30- 35 36 37 38 39 40 41 42 43 44 45- 50+ 
10 14 19 24 29 34 49 
Weekly hours 137 Women - Netherlands 
% employed 
90 
60 
30 S 1991 
D1983 
J5§L BB mi 1 90 
60 
30 
0 *g5z"BM»a»^BTii¥Tiii[nhM*«M mm MMP • J g 
< 10- 15- 20- 25- 30- 35 36 37 38 39 40 41 42 43 44 45- 50+ 
10 14 19 24 29 34 49 
Weekly hours 
138 Women - Portugal 
% employed 90 
60 B 1992 
D 1986 
- Nodata 1983-85 90 
60 
10 14 19 24 29 34 139 Women-UK 
% employed 
90 r 
60 
30 • 1992 
D1983 90 
60 
30 
Weekly hours 0 lœ^BmaœssnaBammmmmBnaœmm^a^—eBmBn 0 
< 10-15-20-25-30-353637383940 41 42434445-50+ 10 14 19 24 29 34 49 
Weekly hours 
111-
Chapter 5 Changes in working time 
Only 32% of male employees in the 
UK had a normal working week of 
less than 40 hours in 1992 and an­
other 13% one of 40 hours. For 55% 
of men working in the UK — signi­
ficantly more than anywhere else in 
the Community—the normal work­
ing week was, therefore, over 
40 hours. Indeed for 39% of men, it 
was 45 hours or more and for 22%, 
50 hours or more (Graph 127). 
In terms of the provisions of the 
Working Time Directive, the UK, 
not surprisingly, is the country 
which will be most affected. In 1992, 
28% of men employed in the UK 
worked 48 hours a week or more, 
50% higher than the country with 
the next largest proportion — 
Greece — and over three times 
higher than all but four Member 
States (Ireland, Portugal and Italy 
in addition to Greece). Indeed, as 
much as 44% of all male employees 
in industry and services usually 
working a 48-hour week or more 
were employed in the UK 
At the other end of the scale, a very 
small proportion of men in most 
Member States normally worked for 
less than 35 hours a week. Only in 
Denmark and the Netherlands was 
the proportion over 10% in 1992, 
and then only slightly so in the for­
mer. In the Netherlands, however, 
the figure was 18%, and as many as 
6% had a normal working week of 
less than 10 hours (4% in Denmark, 
2% in the UK and less than 1% 
everywhere else). 
Women employees 
In most Member States, there is a 
close association between the nor­
mal working time of men and 
women. For full-time employees, 
therefore, the countries can be 
divided into the same groups as for 
men. For Greece, Spain, Italy, Ireland and Luxembourg, conse­
quently, the normal working week 
for women employees was 40 hours 
in 1992 (Graph's 131, 132, 135, 134 
and 136), for France 39 hours 
(Graphs 133), for Belgium, Ger­
many and Denmark, 37 or 38 hours 
(Graphs 128, 130, 129) and for the 
Netherlands, 38 or 40 hours 
(Graph 137). In each case, however, 
the proportion working these hours 
was less than for men, reflecting in 
the Northern countries, at least, the 
relatively high proportions working 
less than full-time, especially in 
the Netherlands (see below for a 
more detailed analysis of part-time 
working). 
For the other two countries, 
Portugal and the UK, as with men, 
the pattern of working time is more 
varied. In Portugal, the normal 
working week for women in 1992 
seems to have been either 35 hours 
(16% of the total) or 40 hours (22%) 
or 44 hours (18%) (Graph 138). 
In the UK, there is even less sign of 
any conformity in full-time hours. 
Here only 31% of women employees 
normally worked between 37 and 
42 hours a week, while almost 12% 
worked longer hours — 9% working 
45 hours a week or more — while 
41% usually worked under 30 hours 
a week (Graph 139).Of these, one in 
five, or 8% of all women employees 
worked less than 10 hours a week 
in 1992, more than half of these 
having jobs of 6 hours a week or less. 
In the UK, therefore, some allow­
ance needs to be made for the 
importance of jobs with very short 
hours when assessing its rate of em­
ployment. This applies even more 
forcibly to the Netherlands, where 
almost 15% of women employees 
normally worked under 10 hours a 
week, just under half of these for 
6 hours a week or less. In Denmark, 
also, the proportion of women employed for under 10 hours a week 
was significant, at 6%, while for the 
other countries, only in Germany 
was it more than 3%. 
Changes in working 
time, 1983 to 1992 
The main change which is evident 
at the Community level in the pat­
tern of working time over the past 
decade is the reduction in full-time 
working hours by an hour or two a 
week. This is as true of women as of 
men. 
So far as men are concerned, in 
1983, 51% of employees in industry 
and services in the Community had 
a normal working week of 40 hours, 
while another 16% usually worked 
between 37 and 39 hours a week. 
Nine years later in 1992, only 29% 
of men normally worked 40 hours a 
week, while 36% worked between 
37 and 39 hours. 
At the upper end of the scale, the 
proportion of men employed for over 
40 hours a week declined only mar­
ginally, from 24% to 23%, while at 
the lower end of the scale, the pro­
portion usually working under 
35 hours a week rose slightly from 
4% to almost 6%. 
Nevertheless despite the small fall in 
those working over 40 hours a week, 
the proportion of men employed in 
jobs of 48 hours a week or more in 
industry and services increased be­
tween 1983 and 1992, from 10 to 
12%. There was also a marginal in­
crease in this proportion for women, 
so that if anything the trend in re­
spect to working long hours is 
upwards rather than downwards. 
For women, however, as for men, 
the most marked tendency over this 
period was for a small fall in normal 
full-time working hours. In 1983, 
-112-
Chapter 5 Changes in working time 
33% of women employees in the 
Community had a usual working 
week of 40 hours and 17% one of 
between 37 and 39 hours. In 1992, 
only 17% of women normally 
worked 40 hours a week, while 29% 
worked between 37 and 39 hours. 
Much the same proportions in the 
two years worked more than 
40 hours a week (10%), while there 
was a small rise in those working 
under 30 hours (27% to 29%) — and 
an equally small rise in those work­
ing less than 10 hours a week. 
Changes 
in working-time 
in Member States, 
1983 to 1992 
The reduction in full-time hours 
of work in the nine years to 1992 
is most apparent in Germany, Den­
mark and the Netherlands. In these 
three countries, for women as well 
as men, normal weekly hours were 
reduced over this period from 40 to 
38 or less. In Germany, for example, 
87% of all male employees in 1983 
worked a normal week of 40 hours; 
in 1992, only 19% did so, while 56% 
worked for 37 or 38 hours. In Den­
mark, 75% of men were employed 
for 40 hours a week in 1983, in 1992 
only 6% and 62% worked a 37-hour 
week. In the Netherlands, 80% of 
men usually worked 40 hours a 
week in 1983, in 1991, 32%. 
In Belgium, Italy and Luxembourg, 
a similar tendency is apparent, 
though less marked, while in 
France, the main change seems to 
have been a small reduction in the 
proportion of men working a 40-
hour week (15% to 11%) and a small 
rise in those working a 39-hour 
week (49% to 54%). 
In Spain, very little change is ap­
parent (though in this case, the figures cover only the period 1987 
to 1992), while in both Greece and 
Portugal, there was a significant 
reduction in the relative number of 
men usually working over 40 hours 
a week. This was most pronounced 
in the latter, where the proportion 
of men employed for 45 hours a 
week or more declined from 58% in 
1986 to only 26% six years later. 
Finally for men in the UK, in sharp 
contrast to all the other Member 
States, the prevalence of long hours 
of work increased between 1983 and 
1992. In the former year, 51% of 
men normally worked over 40 hours 
a week, by 1992, this had risen to 
55%. Moreover, the proportion of 
male employees working a 45-hour 
week or more, went up from 33% to 
39%. A similar rise is evident over 
this period in the relative number of 
men normally employed for 48 
hours a week or more — from 22% 
to 28%. The UK, however, is by no 
means alone in this respect, 7 other 
Member States showing an increase 
in the proportion of such jobs, with 
significant rises — around 3 per­
centage points or more — in 
Ireland, Italy and Portugal, and a 
rise of 2 percentage points in Den­
mark and France. Indeed only the 
Netherlands showed a significant 
fall — more than 1 percentage point 
— in the proportion of jobs of 48 
hours a week or more between 1983 
and 1992. 
For women, much the same pat­
tern of change — or lack of change 
— in the individual countries is 
evident as for men. In Germany, 
60% of women employees usually 
worked a 40-hour week in 1983, 
only 13% in 1992. In Denmark and 
the Netherlands, around 40% did 
so in the earlier year, only 3% in 
the former and under 15% in the 
latter in the later year. There was 
much the same kind of reduction in 
Belgium, Ireland and Italy, though on a smaller scale, in Italy a de­
cline in the proportion of women 
employed for 40 hours a week 
being matched by an increase in 
those employed for 36 hours a 
week. 
In France, Spain and Luxembourg, 
normal hours for full-time women 
employees changed very little, 
while in Greece, there was a signi­
ficant shift to women working 
40 hours a week from them work­
ing longer hours (46% of women 
employees had a normal working 
week of 40 hours in 1992 as 
against 30% in 1983). Similarly in 
Portugal, there was a reduction in 
the proportion of women employed 
in jobs of 45 hours a week or more 
and a rise in those working be­
tween 40 and 44 hours a week (41% 
of women employees normally 
worked 45 hours a week or more in 
1983, only 14% in 1992, while those 
working between 40 and 44 hours 
went up from 22% to 47%). 
In the UK, again in contrast to 
other Member States, there are 
signs of an increase in the propor­
tion of women employed in jobs 
involving long hours. In 1992, 9% 
of female employees in the UK 
were employed in jobs of over 45 
hours a week as against 6% nine 
years earlier, while the proportion 
of women working under 35 hours 
a week remained virtually un­
changed. 
As for men, there was a rise in the 
UK in the relative number of 
women employees working 48 
hours a week or more between 
1983 and 1992 (from 3% to 6%). In 
this case, however, only four other 
Member States — Denmark, 
Greece, Ireland and Italy — 
showed an increase in the propor­
tion of women working these long 
hours and only one, Greece, a rise 
comparable to that in the UK 
-113-
Chapter 5 Changes in working time 
140 Self-employed men and women working 48 hours a 
week or more in the Member States, 1983 and 1992 
100 % total 
80 
60 h 
40 h 
20 1 1983 • 1992 
P1986,E1987 -l 100 
80 
60 
40 
20 
E iflL I P UKE12DK L GR 0 NL F B E IW. 1 P UKE120K L QR 0 NL f B 
Men Women 
141 Self-employed men in industry and services by usual 
weekly hours in the Community, 1983 and 1992 
% employed 
50 
40 
30 
20 
10 M 1992 
• 1983 
P 1986, E 1987, NL 1991 -I 50 
40 
m 30 
20 
10 
<10 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-
Weekly hours The self-employed 
The major difference in working 
time is not between sectors — 
agriculture apart — or betweer 
men and women but between th< 
self-employed and employees. £ 
large proportion of the relatively 
high numbers of people working 
long hours are self-employed 
Indeed over the Community as 
a whole, 51% of self-employed mer 
in industry and services anc 
32% of self-employed womer 
usually worked 48 hours week oi 
more in 1992 (Graph 140). Th< 
self-employed, therefore, ac 
counted for almost half of all those 
working very long hours in the 
Community. 
The implication of these figures 
seems to be that self-employmenl 
in large numbers of cases necessi 
tates long hours of work in order tc 
ensure business success or ever 
perhaps a decent level of income 
(see Chapter 7 which indicates that 
the self-employed are more likel> 
to fall below the poverty line than 
wage-earners). Alternatively, the 
self-employed may derive more job 
satisfaction from what they dc 
than employees and are therefore 
willing to work more. Whatever the 
reason, only 12% of self-employed 
men in the Community in 1992 
worked less than 40 hours a week 
in 1992 (Graph 141), while under 
35% of women did so (Graph 142). 
At the same time, however, 5% of 
self-employed women in industry 
and services usually worked less 
than 10 hours a week in 1992, 
slightly higher than the figure for 
employees. 
A high proportion of the self-
employed work very long hours in 
all Member States. In only one 
country — Spain — did less than 
- 114-
Chapter 5 Changes in working time 
40% of self-employed men in indus­
try and services work for 48 hours 
a week or more in 1992, and in only 
three other countries — Ireland, 
Italy and Portugal — was the pro­
portion less than 30%. In the 
Netherlands, Germany, Luxem­
bourg and Belgium, the figure was 
over 60% — indeed in Belgium, 
almost 70%. 
The figures for self-employed 
women are also high for most coun­
tries. In Belgium and Luxembourg, 
the proportion was over 50% in 
1992, while in Greece, France and 
Portugal, it was 40% or more. Only 
in the Netherlands and Ireland 
was the proportion under 20%. 
Changes 
in working-time 
of self-employed, 
1983 to 1992 
For both men and women self-em­
ployed, the changes in the pattern 
of working time were less marked 
than for employees. For men, there 
was a small reduction in the propor­
tions working 50 hours a week or 
more and between 35 and 39 hours 
accompanied by an increase in 
those working between 40 and 
49 hours a week. For women, the 
change was more pronounced, with 
proportionately more normally 
working 40 hours a week or more 
and less working under 40 hours. 
At the Member State level, the pat­
tern of change over the period was 
mixed, with half the countries 
showing a decline in the proportion 
of self-employed men working very 
long hours and 8 countries show­
ing a decline in the proportion of 
women working these hours — 
the fall for both men and women 
being particularly pronounced in 
Ireland. Part-time working 
and hours worked 
There is a general perception that 
part-time working has increased in 
importance in the Community and, 
moreover, that there is scope for 
expansion as a means of increasing 
the numbers employed in many 
Member States where at present it 
seems to be underdeveloped. How­
ever, much of the policy debate on 
part-time working often takes place 
without a clear definition of what is 
meant by the term. 
In the simplest sense, part-time em­
ployment means working less than 
full-time hours. Since, however, the 
latter can vary significantly both 
between countries, according to the 
prevailing conventions and working 
practices, and between occupations, 
it is compatible with a wide vari­
ation in actual hours worked. In some cases where a normal full-
time job involves long hours, 
working part-time may mean work­
ing similar hours to a full-time 
employee in another occupation or 
country. 
The term part-time may also be 
used, not so much to denote the ac­
tual hours normally worked, but to 
differentiate the person concerned 
from someone working full-time, in 
the sense that they are subject to 
different — often less favourable — 
terms and conditions of employ­
ment. A part-time worker in this 
sense may again, in practice, work 
hours which are not so different 
from a full-time worker. 
These differences in conventions 
and practices make it difficult to 
compare the importance of part-
time employment between 
countries, as well as to interpret 
changes over time. The data on 
142 Self-employed women in industry and services by usual 
weekly hours in the Community, 1983 and 1992 
% employed 
50 r 
40 h 
30 h 
20 h 
10 \--i 50 
H 40 
30 
20 
10 
<10 10-14 15-19 20-24 25-29 30-34 35-39 
Weekly hours 40-44 45-49 50+ 
115-
Chapter 5 Changes in working time 
hours worked presented above, 
howeve enable a clearer picture 
to be gained ofthose working fewer 
hours a week than the norm in 
different Member States and how 
the numbers have changed over 
the past decade. In addition, com­
parisons of the hours worked 
figures with the data on part-time 
working obtained from labour force 
or business surveys — the usual 
sources — gives an indication of 
how many hours a week are seen 
as constituting part-time employ­
ment in different parts of the 
Community. 
Part-time 
employment 
of women 
Although many men work part-
time hours, it is women who make 
up the vast majority (85%) of part-time workers in the Community. In 
1992, according to the Labour 
Force Survey, 31% of women em­
ployees in industry and services in 
the Community were employed on 
a part-time basis (ie they inter­
preted their job as being part-time 
when asked). In the same survey, 
29% of women were recorded as 
normally working less than 30 
hours a week and another 6% as 
working between 30 and 34 hours 
a week. The implication is that just 
over two-third of women in the 
Community with jobs of 30 to 34 
hours a week regarded themselves 
as in full-time rather than part-
time employment (Graph 143). 
In addition, just over 4% of all 
women employed in industry and 
services, as noted above, normally 
worked under 10 hours a week, 
more than half of these 6 hours or 
less. If these are excluded from the 
figures as being in a somewhat dif-
143 Comparison of part-time employment of women with those 
working part-time hours in the Member States, 1992 
70 % employed 
Working 30-34 hrs 
Working <10 hrs 
Working 10-29 hrs 
Declared as part-time ferent category of employment to 
other workers, just over 25% of 
women worked what can be termed 
part-time hours (10 to 29 hours a 
week) in 1992. 
The number of women classified as 
being in part-time jobs varies enor­
mously across the Community, 
from 59% in the Netherlands (see 
Box p. 117) and 44% in the UK to 
only around 8% in Italy and Portu­
gal and 6% in Greece. The extent of 
variation in those working be­
tween 10 and 29 hours a week, 
however, though still wide, is much 
less. This is because of the different 
conventions which prevail in the 
Member States as to the interpre­
tation of part-time working. 
Thus in Ireland and Spain, all 
women normally working under 30 
hours a week seem to have been 
classified as part-time employees 
in 1992 (the proportion in such jobs 
being the same as the proportion of 
part-timers). In France and the 
UK, all such jobs were similarly 
classified plus almost half of the 
jobs involving hours of work of be­
tween 30 and 34 hours a week. In 
Denmark, Germany and the 
Netherlands, most of the women 
working 30 to 34 hours a week 
seem to be classified as part-time 
together with those working under 
30 hours. 
In these seven countries, therefore, 
the two sets of figures give similar 
results. In the Netherlands, the 
UK and Denmark, however, as 
noted above, significant numbers 
of women classified as part-time 
worked under 10 hours a week. Ex­
cluding these and those normally 
working 30 hours a week or more 
— as being in more or less full-time 
employment — gives much lower 
figures for those working part-time 
hours than for part-timers as 
usually measured. 
-116 
Chapter 5 Changes in working time 
Part-time working in the Netherlands 
Part-time working is much more common in the 
Netherlands than in other European countries. On 
average, about 5 workers do the equivalent of what 
would be 4 full-time jobs in most other Member 
States. Around one-third of all employees work 
part-time, most of them women, in services espe­
cially, in less skilled positions. The growth of 
part-time work, however, is above average for men 
in industry and in high skilled jobs. 
The variety of working time arrangements which 
exists reflects the absence of government regula­
tions. In general, while there are no legal or 
financial incentives to stimulate the growth of part-
time working, there are also no major constraints 
on the creation of part-time jobs as compared with 
full-time ones. 
For an employer, there are essentially three con­
siderations when deciding whether a job should be 
full-time or part-time: 
• the variability of work over the week — ie the 
extent of any peak in demand; 
• the potentially higher productivity of employees 
who work the weekly hours of their choice, who 
therefore may be more motivated; 
• the potentially higher overhead costs of part-
time labour (in terms of office, management and 
training). 
For an employee, the motivation for working part-
time is to have more time for other obligations (like 
family responsabilities) and for leisure activities. In­
deed, many people would like to vary the number of 
weekly hours worked at different stages of their life. 
Part-time work has greatly expanded the number 
of people in employment. The Dutch central Plan­
ning Bureau has calculated that the growth of 
part-time work increased the numbers employed by 
300 thousand between 1979 and 1990. Although 
the recent recession has led to a decline in full-time 
equivalent employment, the number of people in 
work has not fallen because of the continued growth 
of part-time working. 
The historical explanation for the growth of part-
time working lies in the response to the situation in the 1960s when there was an excess demand for 
labour. Up to then in the Netherlands participation 
of women was very low compared to other 
countries, and employers were forced to offer jobs 
to women which were tailor-made for them 
(given family responsibilities and the limited 
availability of childcare facilities) which in practice 
meant part-time jobs. From then on, part-time 
work became an accepted feature of the labour 
market and developed from providing second-class 
jobs for married women to fully acceptable jobs 
for all women and increasing numbers of men. 
Increasingly employers now use part-time employ­
ment as the best solution to meet particular labour 
needs instead of as a second-best option as in the 
1960s. 
Since 1980 or so, the Government has supported 
the use of part-time employment by research, infor­
mation, dialogue with the social partners and 
legislation aimed at removing differences between 
part-time and full-time contracts. Part-time con­
tracts in many areas now have the same legal 
status and conditions (job protection, social 
security, pensions and so on) as full-time ones. 
There have never been any financial incentives (or 
disincentives) in respect of part-time work, on the 
ground that these would distort employer and 
employee choice and so be liable to reduce economic 
efficiency. The introduction of a legal right of 
workers to part-time employment was rejected by 
the Parliament in 1993 mainly for these reasons. 
.••••* 
There is an increasing consensus between the social 
partners on the value of part-time work and they 
have agreed to promote this as well as the quality 
and quantity of jobs. 
The already high proportion of jobs which are part-
time in the Netherlands is still growing relatively 
rapidly, stimulated in part by a lessening of 
prejudice against such jobs and the disappearance 
of cultural barriers to part-time work. 
Recent research indicates that 21% of men and 23% 
of women would prefer to work fewer hours than at 
present for the same hourly rate of pay, while 14% 
of employees would like to work more hours. The 
implication is that 110 thousand additional 
32-hour jobs could be created if all employees were 
able to work the hours they wished. 
117 
Chapter 5 Changes in working time 
In the Netherlands, 36% of women 
employees worked 10 to 29 hours 
in 1992 as opposed to the 59% 
classified as in part-time employ­
ment, in the UK, 33% as opposed to 
44% and, in Denmark, 23% as 
against 37%. In the other four of 
these 7 countries, the differences 
are less marked but in each case 
the proportion of women working 
10 to 29 hours a week was signifi­
cantly less than those classified as 
part-timers. 
In the remaining five Member 
States — the Southern countries, 
excluding Spain, plus Belgium and 
Luxembourg — the position is very-
different, in that a significant 
number of those working under 30 
hours a week in 1992 were classi­
fied as full-time rather than 
part-time employees. This was par­
ticularly the case in Italy, Greece 
and Portugal where the proportion of women classified as part-timers 
amounted to half or less of those 
working between 10 and 29 hours. 
In terms of usual hours worked, 
therefore, there is much less dif­
ference in the working patterns 
of women in these countries as 
compared with the rest of the 
Community than the figures for 
part-time employment seem to 
imply. In particular, the propor­
tion of women working under 34 
hours a week in Belgium was much 
the same as in the UK in 1992, 
except that there were very much 
fewer working under 10 hours a 
week (33% of women worked be­
tween 10 and 29 hours a week in 
the UK, 32% in Belgium, while 6% 
in both countries worked between 
30 and 34 hours). Yet in Belgium, 
only 30% of women were classified 
as working part-time as against 
44% in the UK. 
144 Comparison of part-time employment of men with those 
working part-time hours in the Member States, 1992 
25 
20 
15 
10 % employed 
Working 30-34 hrs 
Working <10hrs 
Working 10-29 hrs 
Declared as part-time 25 
20 
15 
10 
L P 
NL 1991 GR EUR12 IRL UK DK NL Indeed, a much higher proportion 
of women worked between 10 and 
29 hours a week in Belgium than 
in Denmark, where a significantly 
larger proportion of women are 
classified as part-time employees. 
Similarly, the proportion of women 
employed in jobs with part-time 
hours was hardly any different in 
Italy than in France — 20% in both 
countries normally worked be­
tween 10 and 29 hours — yet 
almost three times as many women 
were classified as part-time em­
ployees in France as in Italy. 
Moreover, the proportions working 
10 to 29 hours a week were very 
similar in Portugal and Greece as 
in Spain, even though only half the 
proportion of women were classi­
fied as part-time employees. 
In the Southern countries, in 
particular, therefore — as also 
in Belgium and Luxembourg — 
the main difference with the rest 
of the Community in this regard 
is not so much the relative num­
bers of women working part-time 
hours but the way such women are 
classified. In other words, signifi­
cant numbers are classified as 
full-time employees who in other 
countries would be classified as 
part-time. 
Part-time 
employment of men 
Only 4% of men employed in indus­
try and services in the Community 
were classified as working part-
time in 1992, as compared with 4% 
normally working under 30 hours 
a week and 1% working under 
10 hours a week. 
The same variation in practices re­
garding part-time employment 
also apply to men, and the Member 
States can be divided into the same 
118-
Chapter 5 Changes in working time 
groups as for women, with the 
sole exception of France. Thus 
in the North of the Community, 
apart from in Belgium, Luxem­
bourg and France, but together 
with Spain, a part-time job is 
broadly equivalent to one of under 
30 hours a week, though in a few 
countries, the Netherlands, in 
particular, some of those working 
30 hours a week or more are classi­
fied as in part-time employment 
(Graph 144). 
In the Southern Member States ex­
cept Spain but together with 
Belgium, France and Luxembourg, a 
significant proportion of men work­
ing under 30 hours in industry and 
services are classified as in full-time 
work. In terms of hours worked, 
therefore, as in the case of women, 
there is much less difference in the 
proportion of part-time employees 
between these countries and the rest 
of the Community than the usual 
figures suggest. 
Indeed, though Greece and Belgium 
had under 2% of male employees 
classified as part-time in 1992 as op­
posed to 6% in the UK, a higher 
proportion worked between 10 and 
29 hours a week (5%) in the former 
two countries than the latter (4%). 
Similarly, Italy had almost the same 
proportion of men working these 
hours as the UK, but under a third of 
the proportion of men classified as 
part-time. 
Moreover, in the Netherlands and 
Denmark, where part-time work­
ing as usually measured is much 
more important than elsewhere 
(accounting for over 15% and 10% 
of male employees in industry 
and services, respectively), only 
around half of these were actually 
in jobs with part-time hours, a 
significant proportion (6% and 4%) 
being in jobs of under 10 hours a 
week. Changes in 
part-time working, 
1983 to 1992 
The proportion of people normally 
working 10 to 29 hours a week in 
industry and services increased by 
much less in the Community 
between 1983 and 1992 than the 
proportion classified as in part-time 
employment. In other words, a sig­
nificant part of the apparent growth 
in part-time working seems to have 
been due to more jobs being inter­
preted as part-time rather than full 
time rather than to an increase in 
the relative numbers of people in 
jobs with part-time hours. 
In the nine years to 1992, the num­
ber of women employees in industry 
and services in the Community 
classified as working part-time in­
creased from 26% of the total to 31%. Over the same period, the pro­
portion of women working 
part-time hours in these two sectors 
only went up from 23% to 25% 
(Graph 145). At the same time, the 
proportion of women in jobs of 
under 10 hours and in those of be­
tween 30 and 34 hours increased 
slightly (by under 1 percentage 
point in each case) 
Whereas in all Member States, 
apart from Denmark and Greece, 
the number of women employees 
classified as part-time increased be­
tween 1983 and 1992 as a share of 
the total, in most cases signifi­
cantly, in only five countries was 
the rise in the share of those work­
ing 10 to 29 hours a week more than 
2 percentage points. The largest in­
crease was in Belgium, where the 
proportion of women working 10 to 
29 hours a week went up from 23% 
to 32%, while in the Netherlands, 
which registered a substantial rise 
145 Men and women working part-time hours (10-29) in the 
Member States, 1983 and 1992 
40 
30 
20 
10 % employed 
H 1983 • 1992 
P 1986, E 1987, NL 1991 -I 40 
30 
20 
10 
L IRL 
Men F 8 E12 0 OK UK NL IRL F B E12 
Women O DK UK NL 
-119 
Chapter 5 Changes in working time 
146 Women with second jobs by hours worked in main job 
in the Community, 1992 
% women with second job 
20 r 
15 r Average hours worked per 
week in second job -i 20 
H 15 
10 10 
<10 10- 15- 20-25-30-35-40-45- 50+ <10 10- 15-20-25-30-35-40- 45- 50+ 
14 19 24 29 34 39 44 49 14 19 24 29 34 39 44 48 
Hours worked in main job 
147 Women with second jobs by hours worked in main job 
in the Member States, 1992 
30 
25 
20 
15 
10 % women with second jobs 
Weekly hours usually worked in main job: 
• <20 • 20-34 H 35-44 El 45+ -\ 30 
25 
20 
15 
10 
EUR10 B DK 
E, L no data GR IRL NL P UK on the usual measure, the increase 
was considerably less, from 33% to 
36%. 
In Germany, Spain, Ireland, Portu­
gal and the UK, there was either a 
very small increase in the propor­
tion working 10 to 29 hours a week 
or a small fall, while in Denmark 
and Greece, the reduction was 
significant (almost 12 percentage 
points in Denmark). 
For men, on the other hand, there 
was an increase in the proportion of 
employees working 10 to 29 hours a 
week between 1983 and 1992 in all 
Member States apart from Greece 
— by over 1 percentage point in 
Belgium, France, the Netherlands 
and the UK 
The above analysis strongly sug­
gests that figures for part-time 
employment need to be treated with 
a good deal of caution, especially 
when comparisons between Mem­
ber States are made or when policy 
conclusions are drawn. 
Second jobs 
The interpretation of the above 
analysis is potentially affected by 
the fact that the figures on hours 
worked relate only to main jobs. It 
is possible that a number of those 
working relatively few hours a 
week also have second — or even 
third — jobs. In practice, how­
ever, only a very small proportion 
of men and women employed in the 
Community reported that they had 
more than one job (about 3% in 
1992 in each case) — at least ac­
cording to the Labour Force 
Survey. Second jobs are, therefore, 
not nearly important enough to af­
fect the conclusions. 
Nevertheless, for women at least, 
there is some tendency for the pro-
- 120 
Chapter 5 Changes in working time 
portion ofthose in employment with 
second jobs to be higher the fewer 
the number of hours worked in the 
main job. Some 7% of women work­
ing under 10 hours a week in their 
main job in 1992 had a second job — 
which on average involved them 
working an additional 8 hours — as 
compared with under 4% of those 
working over 20 hours and under 
2% of those with full-time jobs 
(Graph 146). At the same time, 
there is also some tendency for the 
few people with second jobs to work 
longer in these if they work more 
than very few hours in their first 
job. 
The tendency for the proportion of 
women with second jobs to be higher 
if they work short hours in the first 
job is general throughout the 
Community. It is especially pro­
nounced in France, the Netherlands 
and Portugal, in each of which 
women employed for under 20 hours 
a week in their main job were four 
times as likely to have another job 
as women working full-time (Graph" 
147). In only France and Portugal, 
however, did more than 10% of 
women working under 20 hours in 
1992 have a second job. 
For men, on the other hand, the 
proportion of employees with sec­
ond jobs tends to be highest for 
those working "normal" part-time 
hours — between 15 and 29 hours 
a week (Graph 148). Around 10% 
of these had second jobs in the 
Community in 1992, in which they 
worked an average of around 
16 hours a week. For these men, 
therefore, the two jobs effectively 
involved them working full-time 
hours in total. 
This pattern, however, is less typi­
cal across the Community than that 
for women. While it is true of five 
Member States — Denmark, 
Germany, Greece, Italy and the 148 Men with second jobs by hours worked in main job in 
the Community, 1992 
20 
15 
10 % men with second job 
Men with second job 
Hours worked in second 
job Average hours worked per 
week in second job" 
<10 10- 15- 20- 25-30-35-40-45-50+ <10 10- 15- 20-25-30-35-40- 45- 50+ 
14 19 24 29 34 39 44 49 14 19 24 29 34 39 44 49 
E, L no data Hours worked in main job 
149 Men with second jobs by hours worked in main job in 
the Member States, 1992 
% men with second jobs 
30 r 
25 
20 
15 
10 Weekly hours usually worked in main job: 
• <20 • 20-34 H 35-44 • 45+ -i 30 
25 
20 
15 
10 
EUR10 B 
E, L no data DK GR IRL NL UK 
121 
Chapter 5 Changes in working time 
Data on unsocial 
or flexible hours 
The data in this section are 
based on the responses given 
by those questioned during 
the 1992 Community Labour 
Force Survey. 
Night work is defined as 
work carried out during 
usual sleeping hours, which 
implies that the person con­
cerned has an abnormal 
sleeping pattern. 
Someone who usually works 
at night means someone who 
worked nights on at least half 
of the days during the four 
week preceding the reference 
period; someone who some­
times works at night will 
have worked at least one 
night during the preceding 
four weeks. 
Saturday and Sunday work 
is intended to relate to formal 
working arrangements and 
the data, therefore, should 
exclude those who work on 
their own initiative over the 
weekend. 
Usually in this context 
means two or more Satur­
days during the preceding 
four week, sometimes means 
one Saturday during this 
period. 
Nevertheless, while the data 
should conform to these crite­
ria, it is possible that there 
were some differences in in­
terpretation between the 
Member States in carrying 
out the survey, especially 
since this was the first year 
these questions were in­
cluded. Netherlands — in the other seven, 
men who worked under 20 hours a 
week in their first job were much 
more likely to have a second job 
than those who worked longer 
hours (Graph 149). Only in Portu­
gal, Denmark, France and the 
Netherlands, however, did more 
than 10% of men working part-time 
have second jobs in 1992. 
Unsocial or flexible hours 
An additional dimension to working 
time concerns when during the day, 
week or year the work is actually 
performed. The great majority of 
people employed in the Community 
normally work sometime between 
the hours of 8 in the morning and 7 
in the evening — earlier in North­
ern Member States, later in 
Southern ones — from Monday to 
Friday, with a few weeks' holiday 
each year, usually in the Summer. 
There is, however, growing interest 
in a number of countries over mak­
ing this typical pattern more 
flexible and more adaptable to the 
individual circumstances of em­
ployers, on the one hand, and 
employees, on the other. 
From one perspective, any hours 
which are worked outside these nor­
mal working times, such as at night 
or at the weekend, are regarded as 
unsocial. Indeed the trend over the 
very long-term in advanced coun­
tries has been to reduce the work 
which is done at such times. 
From another perspective, how­
ever, work carried out during 
so-called unsocial hours can add to 
economic efficiency by enabling 
plant and machinery to be produc­
tively used for a longer length of 
time (indeed in certain processes, 
such as steel-making, it is vital 
that the plant be kept in operation 
continuously). It can also enable 
consumer demands for service to be met at any time of the day, week 
or year. Moreover, it also gives in­
dividuals more choice over the 
hours and days they work so that 
they can better organise their 
leisure time. 
From the latter perspective, there­
fore, a larger amount of work 
performed during unsocial hours 
can be seen as a sign of the greater 
flexibility of the productive system 
and one which is not necessarily to 
the detriment of workers — pro­
vided, of course, that workers are 
willing participants in the working-
time arrangements. 
Up to now it has been difficult to 
obtain information on the numbers 
of people working non-standard 
hours across the Community. The 
Labour Force Survey for 1992, how­
ever, included for the first time 
questions on night and weekend 
working which provides a partial 
insight into the scale of the phe­
nomenon, how it varies between 
Member States and the sectors of 
activity in which it is most preval­
ent (see Box for data details). 
Night working 
In 1992, some 7% of men employed 
in the Community — around 5 mil­
lion — usually worked at nights, 
while 3% of women — just under 
2 million — did likewise (Graph 
150). In addition, a further 11% of 
men and 5% of women sometimes 
worked at night, making a total of 
over 16 million employees working 
at night at least occasionally. 
Night working is most prevalent in 
transport and communications, 
where around 14% of men in 1992 
usually worked nights and another 
20% sometimes did, in the energy 
and water industry and in mining 
and chemicals (these days mainly 
chemicals), in both of which 12% of 
122 
Chapter 5 Changes in working time 
men usually worked nights. When 
occasional night working is also 
taken into account, night working is 
also important in public adminis­
tration (almost 30% of men at least 
worked sometimes at night), which 
includes policing. Apart from con­
struction, where there are obvious 
constraints on working nights, 
night working is least prevalent in 
financial and business services, but 
even here some 3% of men in 1992 
usually worked at nights. 
For women, only in transport and 
communications and other services 
— which includes healthcare — did 
more than 10% either usually or 
sometimes work at night. 
The prevalence of night working 
varies a good deal between Mem­
ber States, both in total and in 
individual sectors, bearing no clear 
relationship to the level of econ­
omic development or prosperity. 
Indeed, if anything, there is some 
tendency for the relative numbers 
usually working at night to be 
higher in the more developed than 
the less developed countries, 
though it is by no means syste­
matic. Moreover, the countries 
with relatively high proportions of 
men working nights also tended to 
have relatively high proportions of 
women doing likewise. 
The proportion of wage-earners who 
usually worked nights in 1992 was 
higher for men in Germany than 
anywhere else in the Community, at 
11% (this figure includes those 
working in the New Lander), while 
for women, Germany (with a figure 
of 5%) was second only to Denmark 
(6%), which, in turn, had the second 
highest proportion of men working 
nights (Graph 151). By contrast, 
only 2% of men usually worked 
nights in the Netherlands and only 
around 1% of women, while in 
Portugal, the figure for men was 150 Employees working nights by sector in the Community, 
1992 
10 20 30 40 
Agriculture 
Mineral extraction, 
chemicals 
Other manuf. industries 
Distribution, hotels 
BanWng, finance, insurance 
Other services 
Energy and water 
Metal manuf., engineering 
Construction 
Transport, communications 
Public adminisfcatton 
Total Women M Sometimes 
I Usually 
IRL no data 
10 20 30 40 
% employees 
151 Employees working nights in the Member States, 1992 
% employees 
40 r 
- 123-
Chapter 5 Changes in working time 
under 1% and for women, under V2% 
(though such low figures raise 
doubts about the reliability of the 
Portuguese data, which are rein­
forced by the fact that virtually 
no-one was recorded as sometimes 
working nights). 
The figures for the relative num­
bers sometimes working at night 
show a similarly large variation 
across the Community, at least for 
men. Whereas for 6 Member 
States, the proportion of men who 
sometimes worked at night was 
around 10% or just over, for the 
UK, it was as high as 21%, signifi­
cantly above any other country. At 
the other end of the scale, in Spain, 
Luxembourg and the Netherlands, 
the proportion was only around 6% 
(ignoring Portugal, for which the 
figures are clearly unreliable). 
For women, the proportions some­
times working at night were much closer, at 4 to 6% for all countries 
except Luxembourg, where the 
number was low (2%) and the UK, 
where it was high (8%). 
These variations, especially for 
men, imply very different working 
arrangements in the same sectors 
of activity. For example, in the en­
ergy and water industry, 45% or so 
of men in both Germany and the 
UK, worked at night at least some­
times, whereas in Spain, under 
20% did so and in the Netherlands, 
only 5%. In the other manufactur­
ing sector (which includes food, 
drink and tobacco and textiles and 
clothing), almost 30% of men 
worked at night at least sometimes 
in France and the UK, while in 
Spain and Greece, the figure was 
only just over 10%. In financial and 
business services, under 5% of 
men ever worked at night in Italy, 
Greece, Luxembourg and the 
Netherlands, whereas in France, 
152 Employees working Saturdays by sector in tne 
Community, 1992 
20 40 60 80 
Agriculture 
Mineral extraction, 
chemicals 
Other manuf. industries 
Distribution, hotels 
Banking, finance, insurance 
Other services 
Energy and water 
Metal manuf., engineering 
Construction 
Transport, communications 
Public administration 
Total Sometimes 
20 40 60 80 
% employees Germany and Denmark, over 10% 
did, and in the UK, over 20%. 
Saturday working 
Almost half the men employed in 
the Community in 1992 had jobs 
which involved them working Sat­
urdays at least some of the time, 
while over 20% of men usually 
worked Saturdays (Graph 152). The 
proportion of women usually work­
ing Saturdays was even higher at 
25%, while another 17% sometimes 
did. 
For both men and women, Saturday 
working, as might be expected, was 
most prevalent in agriculture and 
distribution and catering (which in­
cludes hotels). In the latter, almost 
half of women employed in 1992 
usually worked Saturdays and an­
other 20% sometimes did. As also 
might be expected, the proportion of 
employees working Saturdays 
tended to be higher in service acti­
vities than in industry, though 
financial and business services, 
where only around 30% of wage-
earners ever worked on Saturday 
(40% of men, 20% of women — simi­
lar to the figure for manufacturing 
sectors), is a partial exception. 
The greater importance of Satur­
day working in services than in 
industry is the reason why the 
overall proportion of women 
usually working Saturdays is 
higher than for men, despite the 
fact that in every sector apart from 
distribution and catering, propor­
tionately more men than women 
work Saturdays. Since women tend 
to work predominantly in services, 
there is more chance of them work­
ing on Saturdays than there is for 
men who work a much greater ex­
tent in industry. 
In the case of men, there is some 
tendency for the proportion 
124 
Chapter 5 Changes in working time 
usually working on Saturday to be 
higher in the Southern Member 
States than in the North, some­
thing which seems to be true in 
most sectors of activity — ie it is 
not a reflection of a difference in 
the structure of employment. In 
both Italy and Spain, around 30% 
of men usually worked Saturdays 
and in Greece, just under 25%, 
while in most Northern countries, 
the figure was under 20% — in 
Belgium under 10% — the UK 
being the main exception with a 
figure of 23% (Graph 153). 
In the UK, moreover, a signifi­
cantly higher proportion of men 
than elsewhere in the Community 
sometimes worked on Saturdays — 
some 40% overall — which apart 
from agriculture holds for all sec­
tors of activity. Indeed in virtually 
every sector, around 60% or more 
of men either usually or sometimes 
worked Saturdays in 1992, even in 
metal manufacturing and engin­
eering and construction, where the 
average figure for the Community 
was 35% or less. Except for Italy, 
where the average proportion was 
55%, in all other Member States, 
under 50% of men ever worked 
on Saturdays and in three coun­
tries, Belgium, Luxembourg and 
Portugal, under 30% did so. 
This marked difference implies 
significant variations in working 
arrangements across the Com­
munity, even in areas of activity, 
such as distribution and cater­
ing, where there is a widespread 
need for services to be provided on 
Saturdays (in the latter three 
countries, for example, only some 
40% or less of men in this sector 
had jobs which involved working 
on Saturdays as opposed to 60% 
or more in most other countries). 
The differences in the proportions 
sometimes working Saturdays also 
implies large variations in the degree of flexibility of these ar­
rangements, with Spain and 
Portugal, in particular, where the 
proportion was under 10%, seem­
ing to have relatively inflexible 
arrangements, especially com­
pared to the UK, France and 
Denmark, where it was 30% or 
more. 
The variations between Member 
States in the prevalence of Satur­
day working are much the same for 
women as for men. Both Italy and 
Spain had the highest proportion 
of women usually working on 
Saturday in 1992, at over 30%, 
though in contrast to the position 
for men, the figure for Greece was 
among the lowest in the Com­
munity. Indeed, apart from 
Portugal and the UK, Greece was 
the only Member State where the 
proportion of women usually work­
ing Saturdays was lower than for 
men. On the other hand, in all Member 
States without exception, propor­
tionately fewer women than men 
sometimes worked on Saturday, 
which seems to imply that working 
arrangements for women are less 
flexible than for men. This is par­
ticularly so for the UK and France, 
where there was a difference of 
12-15 percentage points in 1992 in 
the two proportions, though where, 
nevertheless, significantly more 
women employees sometimes 
worked Saturdays than anywhere 
else in the Community. 
As for men, the differences in the 
importance of Saturday working 
between Member States is fairly 
uniform across sectors of activity, 
though in all countries apart from 
Luxembourg, the proportion of 
women employed in distribution 
and catering was generally high 
throughout the Community — 
around 60% or more. 
153 Employees working Saturdays in the Member States» 1992 
% employees 
-i 80 
60 
40 
20 
Ell 9 DK O GR E F 
Men E11 8 OK O OR E F I 1. 
Women 
125 
Chapter 5 Changes in working time 
154 Employees working Sundays by sector in the 
Community, 1992 $ 
Agriculture 
Mineral extraction, 
chemicals 
Other manuf. industries 
Distribution, hotels 
Banking, finance, Insurance 
Other services 
Energy and water 
Metal manuf., engineering 
Construction 
Transport, communications 
Pubflc administration 
Total 
20 40 60 
% employees 
155 Employees working Sundays in the Member States, 1992 
% employees 
-i 60 
Sometimes 
I Usually 
IRL no data Sunday working 
Under half as many employees 
usually work Sundays in the Com­
munity than work Saturdays. In 
1992, around 8% of both men and 
women had jobs which involved 
regular Sunday working — giving a 
total number of some 9 million. 
Another 15% or so — 18 million — 
occasionally worked on Sunday 
(Graph 154). 
Sunday working varies less be­
tween sectors than Saturday 
working. In the case of men, the 
proportion usually working Sun­
days in 1992 was over 10% in 7 of 
the 11 sectors of activity and only 
in metal manufacturing and engin­
eering, construction and financial 
and business services was it less 
than 5%. For women, the propor­
tion usually working Sundays was 
less than for men in all sectors and 
was over 10% in only three — agri­
culture, distribution and catering 
and other services — and in 7 other 
sectors it was less than 5%. Again, 
however, the concentration of 
women in service activities — and 
in distribution and catering and 
other services, in particular — 
meant that the overall proportion 
of women working Sundays was 
much the same as for men. 
The pattern of Sunday working 
across the Community is some­
what different than for Saturday 
working. In particular, there is 
little sign of any tendency for Sun­
day working to be more — or less 
— important in the South than in 
the North. Italy, where Saturday 
working is most prevalent, had 
among the lowest proportions of 
both men and women regularly 
working on Sundays in 1992, 
whereas the Netherlands, which is 
below the Community average for 
Saturday working, has among the 
highest proportions of men and 
-126-
Chapter 5 Changes in working time 
women usually working on Sun­
days. 
In the case of both men and women, 
the proportion of employees 
usually working Sundays was 
highest in Denmark in 1992, at 
around 15% for men and 20% 
for women, the latter figure in par­
ticular being substantially more 
than in any other country (Graph 
155). At the other end of the scale, 
in Belgium, France, Italy and 
Luxembourg, the proportion for 
both sexes was only around 5-6%. 
As for Saturday working, the pro­
portion of employees sometimes 
working Sundays is considerably 
higher in the UK than elsewhere. In 
1992, over 30% of men and 17% of 
women occasionally worked on 
Sunday, with remarkably little 
variation between sectors of activ­
ity, the proportion being as high for 
men in engineering — 35% — as in 
transport and communications or 
other services, and not much lower 
for women in financial and business 
services than in distribution and 
catering. 
As many as 43% of men in the UK, 
therefore, had jobs which involved 
at least some Sunday working, 
whereas apart from in Denmark, 
where the figure was 37%, and 
Greece, where it was 27%, in all 
countries, the proportion was only 
around half or less of this. For 
women, the UK, Denmark and the 
Netherlands were the only coun­
tries where the proportion ever 
working on Sundays was more than 
20%. 
Again as in the case of Saturday 
working, in all Member States 
proportionately fewer women some­
times worked on Sundays than men, 
so confirming the impression that 
they tend to have more regular 
working patterns. Moreover, unlike in the case of men, there is some 
tendency for the proportion of 
women who ever work Sundays to 
be lower in the Southern Member 
States than in the North of the Com­
munity. 
The pattern of variation in the im­
portance of Sunday working 
between sectors is similar across 
countries — in all Member States, 
the proportion of employees at least 
occasionally working Sundays was 
relatively low in engineering and 
construction and, in most, it was 
relatively high in transport and 
communications, distribution and 
catering and other services. The dif­
ference in the absolute values of 
these proportions, however, in a 
number of cases is extreme, im­
plying that there are marked 
differences in working arrange­
ments between countries. 
For example, in the Benelux coun­
tries, distribution and catering 
services operate with under 20% of 
those employed ever working on 
Sunday, whereas in Denmark and 
Greece, over 50% of men and over 
25% of women sometimes work 
Sundays. This clearly may reflect 
differences in institutional and so­
cial conventions which affect the 
pattern of consumer demand — 
such as the demand for Sunday 
shopping, for example — and is not 
necessarily a sign of less flexible 
working. On the other hand, there 
are instances of equally wide dif­
ferences in respect of other service 
sectors as well as manufacturing 
where variations in consumer pref­
erences between countries ought to 
have relatively little effect. 
In engineering, for example, under 
10% of men ever work on Sundays 
in most Member States, in some 
cases, such as Spain and Portugal, 
under 5%, but in Denmark, the fig­
ure is 25% and in the UK, 40%. Similarly, in other services—which 
includes healthcare as well as 
various personal and recreational 
services — over 35% of women 
sometimes work on Sunday in the 
latter two countries as well as in 
Germany, whereas in Spain, Portu­
gal and Italy, the figure is under 
20%. 
127 
Chapter 5 Changes in working time 
128-
Chapter 6 Labour costs, social contributions and taxes 
Chapter 6 Labour costs, social contributions and taxes 
The cost oflabour to businesses is substantially greater 
than the take-home pay of employees in many Member 
States, even at low pay levels, with possible adverse effects 
on the employment of the less skilled. The challenge is 
to encourage more job creation for these without adding 
to the working poor. 
Introduction 
A distinguishing feature of most 
Community economies is the high 
level of social protection provided by 
the State. This is associated, more­
over, with charges on business 
made oy government to fund sys­
tems of social protection — 
specifically, social security con­
tributions paid by employers — 
being higher than in other de­
veloped countries. As international 
competition has become more in­
tense, there has been concern that 
the effects on labour costs are such 
as to put European companies at a 
competitive disadvantage relative 
to those located in other countries, 
and to discourage them from emplo­
ying people. 
There is also a concern about com­
petition between producers located 
in different European countries be­
cause of the large variations in the 
scale of charges which exist. Coun­
tries where employers are required 
to pay substantial amounts to fin­
ance social welfare benefits, it has 
been argued, are likely increasingly 
to lose business and employment to 
those where this requirement is 
lower. The effects of the costs imposed by 
systems of social protection on 
European producers raise at least 
three kinds of question : 
• first, how far social contribu­
tions paid by European 
employers add to labour costs 
and thereby discourage firms 
from taking on more workers; 
• secondly, whether a different 
method of financing social ex­
penditure would have less of 
an effect on labour and produc­
tion costs and thereby provide 
an inducement to increase em­
ployment; 
• thirdly, whether a less exten­
sive, less generous and, 
therefore, less costly system of 
social protection would reduce 
labour costs; 
• fourthly, whether a shift in the 
structure of the charges to re­
lieve the burden on lower paid 
employees would increase the 
numbers in work. 
In response to these questions, the 
Commission has suggested a reduc­
tion in social contributions and 
taxes on employment, especially on the employment of less skilled 
workers, of 1-2% of GDP, though 
the exact figure would depend on 
the fiscal situation in individual 
Member States. 
The impact of 
employment taxes 
The extent to which charges on 
employers increase the costs of em­
ployment and production cannot 
be judged simply on the basis of 
their initial impact. Charges on 
business may be borne by the busi­
ness itself (reducing profits and the 
incentive to employ people) may be 
passed on to customers (raising 
prices) or may be passed back to 
employees (reducing wages). Which 
of these outcomes predominates, 
and all three will generally occur to 
some extent, depends on the bal­
ance of economic forces in the 
product and labour markets con­
cerned. 
In none of the cases - leaving aside 
possible disincentive effects - need 
there be any depressing effect 
on aggregate demand and output 
in the economy, so long as the 
revenue raised from charges is 
matched by equivalent government 
129-
Chapter 6 Labour costs, social contributions and taxes 
expenditure, and so long as ex­
change rates adjust appropriately 
to keep price and cost levels in line 
between countries. 
The composition of demand and 
output would, however, stand to 
change since the effective cost im­
posed on businesses will vary 
according to the characteristics of 
the market in which they operate 
and the labour intensity of the pro­
duction process. Similarly, the 
increased cost of employing labour 
provides some incentive to choose 
less labour-intensive methods of 
production, insofar as the tech­
niques of production allow such a 
choice to be made. 
To a major extent, the social con­
tributions paid by employers 
appear to be passed back to em­
ployees and, therefore, to lead to 
wages being lower than they other-
wise would have been. Thus, 
countries with similar levels ofpro­
ductivity (ie with similar levels of 
value-added per person employed) 
tend to have similar levels of la­
bour costs, irrespective of the rate 
of social contribution imposed on 
employers, but often very different 
levels of gross earnings. The re­
spective shares oflabour costs and 
profits in value-added, therefore, 
are also similar and appear not to 
be affected to any great extent by 
the relative importance of em­
ployers' contributions in total 
labour costs. 
To the extent that this is the case, 
it is employees as a group who pro­
vide much of the finance for the 
systems of social protection 
designed to support them when 
they are unable to do so because 
of sickness, invalidity, old-age or 
unemployment. As such, their po­
sition may not be so different from 
workers in other developed coun­
tries with less developed public systems who rely on private 
schemes to provide protection. 
Alternatively, or additionally, com­
panies, especially large enterprises, 
may provide employee protection on 
a voluntary rather than statutory 
basis. Outside the Community, this 
is most notably the case in Japan, 
where the largest companies pro­
vide a level of social protection to 
their workers which is on a par with 
that provided by the State in the 
most advanced European countries. 
However, such expenses do not 
always show up in the data on non-
wage labour costs. Though only a 
minority of workers in Japan are 
employed by such companies, these 
are, nevertheless, the ones most ac­
tively engaged in international 
trade where cost competitiveness is 
a major consideration. On the other 
hand, large Japanese companies 
also tend to rely on smaller com­
panies acting as sub-contractors to 
undertake a significant part of the 
production process, and workers in 
these firms are very much less well 
protected in this respect. 
At the same time, there are also a 
number of European countries in 
which marital status or family cir­
cumstances are reflected in gross 
wages. Equally, though the effects 
on labour costs of statutory or 
voluntary contributions may be 
similar, their social effects are 
likely to be very different, since less 
skilled workers and part-time em­
ployees, who are predominantly 
women, tend to benefit less from 
voluntary schemes. 
Nevertheless, the evidence would 
seem to imply that reducing their 
contribution to the cost of social 
protection in Europe would not 
necessarily benefit European pro­
ducers as much as it might seem 
in relation to their counterparts 
in other countries, where State systems are less extensive, but 
where private or company schemes 
are more developed. Much depends 
on how the reduction is financed 
and, in particular, whether it is ac-
companied by an equivalent 
reduction in the level of social pro­
tection provided to workers or 
whether other taxes are raised to 
compensate for the loss in revenue. 
To the extent that workers are 
worse off, either because the real 
value of social protection declines or 
because they pay more in tax, then 
over the long-term, there is likely to 
be pressure for wages to adjust to 
compensate for this loss of real in­
come combined with a tendency for 
companies to increase the voluntary 
element in benefit provision. At the 
end of the day, when economic force-
s have fully worked themselves out, 
the difference in overall labour costs 
between Europe and elsewhere may 
be little altered. 
However, though this may be true 
over the long-term, reductions in 
employers' contributions could 
serve to reduce the cost of labour 
and provide an incentive to increase 
employment over the period when 
this adjustment is taking place, 
which might well be a great many 
years. 
The effect on labour costs of such a 
reduction is likely to be streng­
thened by the fact that businesses 
in most parts of Europe perceive 
employers' contributions as an im­
portant addition to their labour 
costs. Moreover, the contributions 
paid by employers and employees 
together, when combined with taxes 
levied on wages, represent a sizable 
'wedge' between what employers 
pay to hire labour and what workers 
receive in the form of take-home 
pay. As such, they represent a major 
incentive for both employers and 
employees to avoid these payments 
by seeking other arrangements 
130 
Chapter 6 Labour costs, social contributions and taxes 
outside the formal economy. Any 
narrowing of the difference between 
labour costs and take-home pay will 
reduce the incentive to avoid or 
evade the payment of state levies 
and may, therefore, lead to a reduc­
tion in the size of the informal, or 
grey, economy and to an increase in 
GDP and employment as officially 
recorded. 
Furthermore, contributions and 
taxes are not necessarily neutral as 
regards the incentive to employ 
people at different wage levels — 
and, therefore, at different skill 
levels — nor, as noted above, as 
between different kinds of goods 
and service produced. Any change 
in the rate of contribution is likely, 
as a result, to affect the composition 
of demand and output and, if it is 
not proportional to earnings, the 
employment of people at different 
wage levels. 
In this regard, employers' con­
tributions cannot be passed back to 
workers without limit. At the bot-. 
torn end of the pay scale, earnings 
cannot in most cases be reduced 
below a certain point without run-
ning foul of minimum wage 
legislation or of conventional 
standards as to what constitutes a 
living wage or, if these are not ef­
fective, below the level of social 
benefits available to someone out 
of work. 
Equally, if contributions are passed 
on in higher prices or borne by the 
company, the costs of production 
might be such as to affect the will­
ingness of consumers to pay or the 
company's willingness to employ 
people who contribute only margi­
nally to production. Reductions in 
employers' contributions, in other 
words, can lead to marginal produc­
tion becoming profitable and the 
employment of workers with low 
productivity becoming viable. The concern here is not to under­
take a detailed investigation of the 
links between social contributions 
and employment. Instead it is to 
examine the levels of contributions 
and taxes levied on wages in differ­
ent parts of the Community and 
their proximate effect on com­
parative labour costs and net 
earnings and to relate these to le­
vels in other countries. The concern 
is also to indicate the size of the 
wedge between labour costs and 
take-home pay and the way that it 
varies with wages. 
Tax and 
contribution rates 
The rate of social contribution paid 
by employers — including both 
statutory and voluntary amounts — 
varies considerably across the 
Community. In 1991, for an em­
ployee receiving the average wage paid to male workers in manufac­
turing, it ranged from close to 30% 
oflabour costs in France, Italy and 
Belgium to under 20% in Ireland 
and Luxembourg, under 15% in the 
UK and under 5% in Denmark, 
giving an average rate for the 
Community of around 22% (Graph 
156 — see Box for a description of 
the data used). 
This is not so different from the 
rate in the US for the same kind of 
employee — 21% — though above 
the 15% rate in Japan. In Japan, in 
particular, however, part of what 
in Europe are social welfare 
benefits funded through em­
ployers' contributions — such as 
family allowances — tend to be 
consolidated into the wage. The 
recorded rate of employers' con­
tributions in Japan is likely to 
understate the social element in 
the wage and to distort the com­
parison with Europe. 
156 Tax on pay and social contributions (single male worker in 
manufacturing) in the Member States, 1985 and 1991 
60 
50 
40 
30 
20 
10 % total labour costs 
I Employees' II Employers' 
contributions plus tax contributions 
Lett bar 1985, right bar 1991 -l 60 
1 50 
m 40 
30 
20 
10 
L UK E GR P E11 I 
11968, no data 1985 F IRL DK NL D B 
131-
Chapter 6 Labour costs, social contributions and taxes 
Data on earnings, social 
contributions and taxes 
The data which form the basis of the analysis in this 
chapter have been compiled mainly by Eurostat sup­
plemented by information on social contribution 
regulations published in MISSOC. They relate, first, to the 
taxes and social contributions which would be paid in each 
of the countries, on the basis of the tax and contribution 
schedules in operation, by each of six categories of em­
ployee, defined in terms of marital status, dependents and 
level of earnings in relation to the average wage of a 
manual worker in manufacturing industry (taken from 
Eurostat, Net earnings of manual workers in manufac­
turing industry in the Community). As such, they are 
theoretical rather than actual amounts. They, therefore, 
do not allow for individual circumstances beyond these 
basic characteristics and may accordingly differ from the 
actual amounts someone might pay in practice. No data 
are available on this aspect for Italy, which means that it 
is excluded from the analysis. 
Secondly, these data have been combined with figures on 
employers' social contributions from the survey of labour 
costs published by Eurostat (updated to 1991 — Eurostat, 
Labour costs: updating 1989-1991), which give for each 
Member State the average contributions paid by em­
ployers in manufacturing. Information published in 
MISSOC on the rates of employers' contribution payable 
at various levels of earnings have been used to estimate 
contributions at other than average earnings in those 
countries where the rate is not proportional over the range 
of earnings considered (ie Denmark, the Netherlands and 
the UK). Since this only covers statutory contributions, it 
has been assumed for all countries that voluntary con­
tributions vary in proportion to earnings, which may not, 
of course, be the case in practice. Comments in the text on 
the variation in social contributions with earnings, it 
should be emphasised, are based on national regulations 
relating to contributions. 
The analysis leaves out of account taxes on expenditure 
which are more difficult to incorporate both in practice and 
in principle since, as they manifest themselves in higher 
prices, along with a range of other factors — including 
perhaps employers' contributions in part — they tend not 
to be perceived in the same way as deductions from gross 
wages. Their incidence also depends on the spending pat­
tern cf the individual concerned. 
The analysis also largely leaves out of account the benefits 
and services received which are financed by the taxes and 
social contributions paid and which can be considered as 
part of net earnings in a broad sense. In the main, variations in em­
ployers' contributions in the 
Community reflect differences in 
the statutory levies imposed on 
businesses when taking on labour, 
though they may also be due to non­
statutory contributions paid by 
employers to employee pension 
funds, health insurance schemes 
and the like. Such contributions, 
while often voluntary, are not 
wholly so in a number of countries, 
in that they are often the result of 
collective agreements between 
employer and employee repre­
sentatives. The importance of this 
element varies from around 40% of 
the total contribution paid in the 
UK and Ireland (where it is volun­
tary for the most part), 30% 
in France and the Netherlands 
(where it is mainly the result of 
collective agreements), to under 5% 
in Belgium, Italy and Luxembourg. 
In the US, the non-statutory ele­
ment is more important than in 
Europe, accounting for about a third 
of the 21% of labour costs repre­
sented by the non-wage element 
(around 7% oflabour costs). 
In most Member States, rates of 
employers' contribution have not 
changed much over many years. In 
only three countries — Belgium, 
Denmark and the UK — did the 
effective rate change by more 
than 1% of labour costs between 
1985 and 1991. In Belgium — the 
only country where there was a 
significant increase — the rate for 
someone on average earnings in 
manufacturing went up from just 
over 24% to over 28% of labour 
costs, while in Germany, Ireland, 
Greece and Luxembourg, there 
was also an increase, but much 
smaller. By contrast in Denmark, 
the rate fell from 7% to 3% and in 
the UK, from almost 17% to 12%. 
The result, for the Community as a 
whole, was that the average rate in 
- 132 
Chapter 6 Labour costs, social contributions and taxes 
1991 was virtually the same as six 
years earlier. 
This stability has changed some­
what recently. In the second half of 
1993 and the first half of 1994, 
changes have taken place in a num­
ber of Member States, mostly 
designed to reduce employers' 
charges for unskilled workers or 
young workers. 
In Japan, social contributions ap­
pear to have increased between 
1985 and 1991, but only by around 
1% oflabour costs. 
Differences between the Com­
munity, on the one hand, and the 
US and Japan, on the other, seem 
more pronounced in respect of em­
ployees' contributions and taxes on 
wages (though because the latter 
are affected to a considerable extent 
by individual circumstances, it is 
more difficult to identify effective 
rates and compare these between 
countries). In the US and Japan 
these in combination amounted 
to only around 10-15% of labour 
costs in 1991, whereas in the Com­
munity, they averaged over 20%. 
Together with employers' contribu­
tions, therefore, they represent a 
significant wedge between the cost 
of employing labour to companies 
and the net earnings which workers 
receive. 
On average, the total social con­
tributions and income tax paid in 
the Community by a single person 
on the average wage of a male 
worker in manufacturing was some 
45% of labour costs in 1991 — ie 
such a person received less than 
55% of what it cost the company to 
employ them. 
The size of the wedge, however, 
varies considerably across the Com­
munity — broadly, but not entirely, 
in line with the level of prosperity, as measured by GDP per head. For 
a single person, as defined above, 
the overall rate of ta?; plus contribu­
tion was under 35% in Spain, 
Portugal and Greece in 1991, but 
over 50% in Belgium, Germany and 
the Netherlands, and not far below 
this in Denmark and France. On 
the other hand, the overall rate 
was lowest, at just over 30% in 
Luxembourg, while in the UK, it 
was 35%. 
In most Member States, the taxes 
and social contributions paid by 
wage earners either declined or 
remained broadly unchanged 
between 1985 and 1991 in relation 
to pay. The only two countries 
where there was much of an in­
crease were France and Denmark. 
(In the latter, this was partly a re­
flection of a shift in the tax burden 
from employers to employees, 
though overall the wedge between 
labour costs and net earnings was reduced slightly.) In Luxembourg, 
the UK and the Netherlands, there 
were significant reductions in taxes 
on employees which were coupled 
with a substantial narrowing of the 
difference between labour costs and 
net earnings. In Belgium, on the 
other hand, a reduction in taxes on 
employees was combined with a 
widening of the difference because 
of the increase in employers' con­
tributions. However, this was only 
one of three countries — the others 
being Portugal and France — where 
the tax wedge increased over this 
period. 
Focusing on a single person on aver­
age earnings gives only a partial 
indication of the scale and variation 
of effective rates across the 
Community. Though social con­
tributions tend to be related 
solely to gross earnings, taxes on 
wages vary in most cases with indi­
vidual circumstances — notably the 
157 Tax on pay and social contributions (couple with two 
children, one salary) in the Member States, 1985 and 1991 
60 
50 
40 
30 
20 
10 % total labour costs 
• Employees' H Employers' 
contributions plus tax contributions 
Left bar 1965, right bar 1991 60 
50 
m 40 
30 
20 
10 
L . UK E GR P E11 I 
I 1988, no datai 9&5 F IRL DK NL D B 
- 133-
Chapter 6 Labour costs, social contributions and taxes 
number of dependents. Thus, in all 
countries, apart from Greece, taxes 
on wages are lower if the person 
concerned has a dependent wife or 
husband than if they are single. 
Moreover, allowances are payable 
to families with children in all coun­
tries, though at significantly 
differing rates. 
For a married person with two 
children earning the average wage 
of a male worker in manufacturing, 
for example, the average taxes and 
contributions paid in the Com­
munity as a whole in 1991 were 5% 
oflabour costs less than for a single 
person, and around 10% less if fam­
ily allowances are treated as an 
offset to tax (Graph 157). In 
Belgium (partly because of the high 
level of family benefits) the overall 
tax rate was over 15% less and in 
Luxembourg and Denmark, some 
13% less. On the other hand, in the 
poorer countries in the South of the Community, the difference was 
very much smaller — 4% less in 
Spain and Greece, 6% less in 
Portugal. 
The effective tax wedge, therefore, 
is smaller for workers with depend­
ents, net earnings for most Member 
States averaging around 65% or 
more oflabour costs in 1991. As for 
a single person, the wedge was re­
duced between 1985 and 1991, 
though the reduction in most cases 
was less — the main exceptions 
being Denmark and Portugal — 
while only Greece showed a signifi­
cant increase in the size of the 
wedge. 
Labour costs 
and earnings 
The average monthly cost of emplo­
ying a male manual worker in 
manufacturing in the Community 
158 Division of monthly labour costs in the Member States, 1991 
3000 
2500 
H 2000 
i 1500 
1000 
500 varied from around 2,750 ECUs in 
Germany and just over 2,500 ECUs 
in Belgium to just under a 
1,000 ECUs in Greece and under 
600 ECUs in Portugal — a dif­
ference at the two extremes of over 
4 to 1 (Graph 158). This is broadly 
in line with the difference in value-
added per person employed. 
In terms of net earnings, the dif­
ference is narrower, measured in 
ECUs, since the rate of tax and so­
cial contributions tends to be less in 
the poorer, lower productivity econ­
omies. However, this understates 
differences in living standards since 
in the latter, workers have less 
generous welfare benefits and less 
well developed health services. 
On the other hand, ECU figures 
overstate differences because they 
fail to take account of variations 
in price levels. which are not re­
flected in the exchange rate. In 
terms of purchasing power stand­
ards (PPS), differences in net 
earnings between Member States 
are greatly reduced — monthly 
take-home pay in Luxembourg 
being on average less than three 
times greater than in Portugal in 
1991. In these terms, a single male 
worker in manufacturing in Spain 
on the average wage has a higher 
level of take-home pay than a com­
parable worker in Denmark, though 
their standards of living are not 
necessarily equivalent. 
The variation of 
effective tax rates 
with earnings 
In most Community countries, so­
cial contributions are regressive — 
in the sense that their effective rate 
declines as earnings increase. This 
is true of both employers' and 
employees' contributions. This 
134 
Chapter 6 Labour costs, social contributions and taxes 
contrasts with the fact that in 
all countries, taxes on wages are 
progressive, in that they rise more 
than in proportion to earnings. 
The extent to which either is the 
case, however, differs significantly 
between Member States. Unfortu­
nately, the data available enable 
only a partial Community-wide 
analysis to be made of the degree 
to which contributions and taxes 
vary with wage levels, since they 
cover only a relatively narrow 
range of earnings, from 80% of the 
average wage of men working in 
manufacturing to 125%. This 
leaves out of account less skilled 
workers near the bottom end of the 
pay scale who represent a major 
proportion of the unemployed and 
who represent the main focus of 
concern as regards job creation. It 
also leaves out of account a large 
proportion of women whose aver­
age wage in manufacturing in 
many countries is below 80% of the 
male average and is even lower in 
many service activities in which 
women predominantly work. 
Within this relatively narrow 
range of wage variations, the social 
contributions levied by the state on 
employers in most Member States 
— 8 of the 12 — are proportional to 
earnings (Graph 159). In three 
countries, Denmark, the Nether­
lands and Italy contributions are 
slightly regressive (though in the 
latter, they only become so on earn­
ings above the average), bearing 
more on low paid workers than 
higher paid ones. This is especially 
the case in Denmark where con­
tributions are fixed in nominal 
terms and where they therefore de­
cline markedly in relation to wage 
levels, although, since they are so 
small, the effect is marginal. The 
UK is the only country in the Com­
munity where contribution rates 
are progressive within this or any earnings range and where for those 
on very low wages — and/or those 
working relatively few hours a 
week — nothing at all is payable. 
Above 125% of the average wage, 
however, rates in most Member 
States become regressive at some 
level of earnings. In Germany, 
Greece and Ireland, this happens at 
between average earnings and 
twice average earnings, with rates 
declining continuously as wages in­
crease — at 4 times average 
earnings, the rate in each case be­
coming only around half that on 
wages below the average. In France 
as well as Italy, the same is true, 
though the decline in relation to 
earnings is considerably less. In 
Spain and Luxembourg, contribu­
tion rates become regressive only at 
above twice average earnings, 
though the decline is as steep as in 
the former three countries. Only in 
Belgium and Portugal is the rate proportional at all levels of income 
and only in the UK, is the rate pro­
gressive, but then only marginally 
so (at above 1V2 times average earn-
ings, the marginal rate of 
employers' contribution remains 
constant). 
In 9 of the 12 countries in the Com­
munity, therefore, the non-wage 
labour costs imposed by govern­
ment bear proportionately more on 
workers at the lower end of the 
earnings scale than on those at the 
higher end. In two of the other 
three, the addition to costs is 
the same in percentage terms, in 
both cases the rate being higher 
than the Community average. Tne 
only country where differential 
contributions provide any incentive 
for employers to take on lower paid 
workers is the UK. 
In practice, it appears, the sche­
dule of contribution rates in most 
159 Tax on pay and social contributions at 80% and 125% of 
average earnings in the Member States, 1991 
% labour costs 
60 
50 
40 
30 h 
20 I 
10 Employers' contributions 
Employees' contributions 
plus tax 60 
50 
40 
30 
20 
10 
GR IRL EUR11 DK NL 
Left bar 80% of average earnings, right bar 125% of average earnings (male worker in 
manufacturing); I no data 
- 135-
Chapter 6 Labour costs, social contributions and taxes 
countries has been determined 
without much regard to the poten­
tial effects on employment. The 
-oparent reason why rates are re-
; œssive is that the social benefits to 
w*.;ich the payment of contributions 
gives entitlement are also effec­
tively regressive relative to 
earnings, in that there are limits on 
the amount payable to recipients. 
Since benefits decline in relation to 
earnings as salaries increase, it was 
considered appropriate that con­
tributions should do likewise. 
However, as statutory benefits 
these days seldom reflect the actual 
contributions which individuals 
have paid, or have had paid on their 
behalf, the logic of this state of af­
fairs is now qLiestionable. It is even 
more questionable in the light of the 
high level of unemployment in most 
of the countries concerned. 
Employees' contributions have 
much the same characteristics as those imposed on employers, in that 
they are either proportional to earn­
ings or, especially towards the 
upper end of the earnings scale, re­
gressive. This is also true of the UK 
in this case, where the rate of con­
tribution declines continuously as 
pay increases above 1V2 times the 
average wage. 
On the other hand, taxes on wages 
are progressive in all Member 
States, though the extent to which 
this is so is much less marked 
within the range of earnings for 
which comparable data exist than 
at higher wage levels. 
Only in Greece, was the same rate 
of tax levied on earnings at 125% of 
the average as on those at 80% 
(Graph 159). In all other Member 
States, the effective tax rate in­
creases as wages go up within this 
range, with the result that overall 
the rate of tax plus contributions is progressive. The extent of this, how­
ever, varies significantly across the 
Community, being most pro­
nounced in 1991 in Luxembourg, 
Ireland and Denmark (in the latter, 
the progressive nature of the tax 
system much more than offsetting 
the regressive nature of social con­
tributions) and least so in the UK, 
Portugal, France and the Nether­
lands. 
At 80% of average earnings, taxes 
and contributions in combination 
still amounted, on average, to 
close to 45% of labour costs in the 
Community as a whole in 1991 for 
a single person, not much below 
the rate at average earnings. In 
the Netherlands, Germany and 
Belgium, they amounted to over 
50%. At 125% of average earnings, 
the combined rate averaged just 
under 50% of labour costs in the 
Community and was over 55% in 
Germany and Belgium. 
160 Average labour costs of women compared to those of men in 
the Member States, 1991 
100 
80 
60 
40 
20 % average male labour costs 
• Net earnings • Employées' m Employers' 
contributions contributions 
plus taxes 
Left bar 19S5, right bar 1991 -I 100 
80 
60 
40 
20 
0 i i ^«_^«_^ o 
IRL UK L D P NL EUR10 B GR F DK 
E no separate data for women; I no data Tax and contribution 
rates for men and 
women 
For tax and contribution purposes, 
single women are treated in the 
same way as single men in all Mem­
ber States. Since, in all countries, 
women tend on average to earn less 
than men — over the Community as 
a whole, around 28% less for ma­
nual workers in manufacturing in 
1991 (though it should be stressed 
that this is a difference between two 
averages and does not relate to a 
man and woman in the same job) — 
tax rates for a woman on average 
earnings are generally below those 
of a man on average earnings, re­
flecting the progressive nature of 
the tax schedule. 
The rates of contribution are the 
same, apart from in Denmark and 
- 136-
Chapter 6 Labour costs, social contributions and taxes 
the Netherlands, where they are 
marginally higher and in the UK, 
where they are slightly lower, re­
flecting the variation of rates with 
income in these countries. On aver­
age, therefore, the wedge between 
labour costs and net earnings is 
similar to, though slightly less 
than, that for a male worker on 
80% of average earnings discussed 
above. 
The relative level of labour costs 
for women employees compared 
with men, however, varies a good 
deal across the Community. In 
the case of manual workers in 
manufacturing, the average labour 
costs for women in 1991 ranged 
from 85% of those of men in 
Denmark and just under 80% in 
France to only 61% in the UK and 
59% in Ireland (Graph 160). A 
similar range of differences exists 
for other workers in other sectors 
of activity. 
The net earnings received by a 
woman on the average wage, on the 
other hand, shows a somewhat dif­
ferent pattern of variation, being 
highest relative to male earnings 
in Greece and Luxembourg, where 
the combined tax and contribution 
rate is relatively low and lowest in 
Germany and Belgium, where it is 
relatively high. 
Between 1985 and 1991, the aver­
age level oflabour costs for women 
relative to men remained virtually 
unchanged over the Community as 
a whole, increasing slightly in Ger­
many and the Benelux countries 
and declining in France but hardly 
changing at all in the other Mem­
ber States. Net earnings relative to 
labour costs, however, rose margi­
nally over this period in Denmark, 
the Netherlands and Ireland and 
more significantly in the UK and 
Luxembourg, but declined in all 
the other Member States. Overall, therefore, the relative la­
bour costs for men and women 
seem to have changed very little 
between 1985 and 1991, as does 
the relative tax wedge. Since the 
data available, however, is re­
stricted to women on the average 
earnings of female manual 
workers in manufacturing, this 
conclusion needs to be treated with 
a great deal of caution. Most 
women are employed in services 
and most earn less than the aver­
age in manufacturing. Most 
women in employment, moreover, 
are married rather than single and 
for these a somewhat different tax 
regime applies in a number of the 
Member States. 
While in the Community overall, 
a man and woman on average 
earnings, treated as a couple for 
tax purposes, pay much the same 
tax and contributions as if they 
were treated singly, in six of the 10 Member States for which com­
parative data are available, the 
amount they paid was different in 
1991 (Graph 161). In Greece and 
the UK, a couple on average earn­
ings (ie receiving the average wage 
of a male manual worker in manu­
facturing plus the average of a 
female) paid less in tax and con­
tributions than a man and woman 
treated singly. In Belgium and 
France, however, they paid margi­
nally more and in Ireland and 
Portugal, significantly more, re­
flecting the combining of their 
incomes for tax purposes and the 
higher rate of tax charged accord­
ingly. 
In the latter four countries, there­
fore, and in Ireland and Portugal, 
in particular, the tax system seems 
to discriminate against married 
women who work and, accordingly, 
is liable to have a deterrent effect 
on them seeking employment 
161 Comparison of tax and social contributions for a couple 
and two single people on average earnings in the Member 
States, 1991 
70 r 
60 h 
50 r-
40 II 
30 m 
20 
10 % labour costs Employers' contributions 
70 
60 
H 50 
-\ 40 
30 
20 
10 
EUR10 B DK D GR 
E no separate data for women; I no data F IRL L NL P UK 
137 
Chapter 6 Labour costs, social contributions and taxes 
(or perhaps on them seeking mar­
riage). 
Marginal rates of tax 
Progression in the combined tax 
and contribution rate means, of 
course, that marginal rates are 
above average rates in most coun­
tries. One consequence is that, as 
employers increase the wages paid 
to their workers, progressively less 
of the increase goes to the employee 
and progressively more to the State, 
so potentially affecting both the in­
centive to work and the inducement 
to reward higher levels ofproductiv­
ity. Insofar as this is the case, it 
gives rise to a potential conflict be­
tween considerations of economic 
efficiency and equity. 
In 1991 the combined marginal rate 
was highest in Belgium — the 
country with the highest average rate — with 63% of any increase in 
labour costs above 80% of the aver­
age going to the State (Graph 162). 
This means, in more comprehen­
sible terms, that if an employer 
wishes to increase an employee's 
take-home pay, he or she must be 
prepared to pay almost twice as 
much as the employee receives to 
the State. In other words, the total 
cost of raising an employee's pay is 
nearly three times the addition to 
their net wage. 
This, moreover, is the position to­
wards the lower end of the wage 
scale. As wages increase above aver­
age earnings, then the marginal 
income tax rate also goes up, reflect­
ing the progressive nature of the 
tax, so that the overall marginal tax 
plus contribution rate can rise to 
well above 63%. 
The marginal rate was only just 
below the Belgian level in Ireland, 
162 Marginal tax rates in the Member States, 1985 and 1991 
0.8 
0.6 
0.4 
0.2 m Employers' contributions 
H Employees' contributions 
plus tax 
{at between 80% of average earnings and average earnings) -i 1 
A 0.8 
0.6 
0.4 
0.2 
0 ^B-^H-^H-^H-^H-^M 0 
GR UK P E L F EUR11 NL OK D IRL B 
Left bar 19B5, right bar 1991; I no data even though the average rate was 
significantly lower than in Belgium, 
and was also above 60% in Germany. 
Moreover, Luxembourg which had 
the lowest average combined rate 
had a marginal rate above that in 
Spain, Portugal and Greece as well 
as that in the UK, these five coun­
tries being the only ones in the 
Community with a marginal rate 
below 50%. 
With the exception of Belgium, 
where it rose slightly, and France, 
where it remained unchanged, the 
combined marginal rate was re­
duced in all Member States between 
1985 and 1991, though in Portugal, 
Spain and Ireland, the reduction 
was very small. The largest reduc­
tions, of 5 percentage points and 
more, occurred in the Netherlands 
and Greece, predominantly because 
of a smoothing of the tax schedule, 
while reductions of around 3 per­
centage points occurred in 
Luxembourg and the UK, in the lat­
ter largely due to lower employers' 
contributions. 
These marginal tax plus contribu­
tion rates are higher in the 
Community than in either the US 
or Japan. In the US, the combined 
marginal rate in 1991 was around 
40% at the average wage of a pro­
duction worker (according to OECD 
estimates), a little lower than in the 
UK, which had the lowest rate of all 
Community countries, while in 
Japafi, it was only around 30%. 
In the US, in particular, the mar­
ginal rate for many workers was 
significantly lower at lower wage 
levels. This is not only because the 
rate of income tax at low wages is 
low, but more importantly because 
of the relatively small size of statu­
tory social contributions imposed 
on employers and the correspond­
ingly greater discretion which 
employers have over the level of 
- 138-
Chapter 6 Labour costs, social contributions and taxes 
non-wage labour costs. Employers 
in the US, therefore, have the op­
tion of taking on workers at costs 
which are not far above the take-
home pay which they receive, since 
they can — and often do — reduce 
the voluntary element in social 
contributions to a minimum, espe­
cially in sectors where trade union 
representation is relatively low or 
non-existent. 
This, in practice, applies particu­
larly to women who in many cases 
are employed on a part-time basis 
and are not covered by health insur­
ance. 
In most European countries, this 
option is not available — or at least 
was not until very recently. Since, 
irrespective of the level of wages, 
both employers and employees are 
required to pay statutory social 
contributions at the same — or in 
some cases a higher—rate as on the 
average wage, this imposes a limit 
on the extent to which the non-wage 
element in labour costs can be re­
duced. 
In a number of European countries 
— Belgium, Germany, France, Italy 
and the Netherlands, in particular 
— the tax wedge as defined here 
still amounted to 35% of labour 
costs or more even in respect of 
workers on wages too low to attract 
income tax. In the UK, on the other 
hand, the low rates of statutory con­
tribution levied on those at the 
bottom end of the earnings scale 
mean that the non-wage element in 
labour costs — and, therefore, the 
tax wedge — can be reduced to a 
very small amount. As a conse­
quence, the overall costs of 
employing people at the lower end 
of the scale are much less in the UK 
than in most other parts of the 
Community, even leaving aside the 
absence of minimum wage legisla­
tion which itself imposes a lower limit on the costs of employment in 
other countries. 
Very recently, however, measures 
have been introduced in a number 
of other countries to reduce the 
level of contributions on less skilled 
workers and on young people. Given 
that a high proportion of the unem­
ployed are unskilled, with few 
qualifications and a low level of 
education, the costs of employment 
at the lower end of the earnings 
scale are particularly relevant 
for any policy aimed at bringing 
down unemployment. This was 
specifically recognised in the 
Commission White Paper on 
Growth, competitiveness, employ­
ment. 
It was also recognised, however, 
that there is a need to prevent any 
measures taken from worsening the 
income prospects among those 
already in the weakest position in the labour market. The challenge 
for policy is to bring about a reduc­
tion in the costs of employing low 
skilled workers so as to encourage 
employers to take on such people, 
while at the same time avoiding any 
significant reduction in their in­
come and any increase in the 
working poor. 
This latter objective is important, 
especially in view of the many 
people in the Community who al­
ready fall below the poverty line 
despite being in employment and 
earning a wage — a combination of 
circumstances which social protec­
tion systems in most Member States 
fail to address. 
Many of these people are women, 
who still in a number of Member 
States earn significantly less than 
their male counterparts and who 
make up the bulk of low-paid 
workers. The challenge for policy, 
163 Households with expenditure below the poverty line by 
number of members employed in the Member States, 1988 
20 
15 
10 % total households with at least one member working 
At least two members m Only one member 
working working -i 20 
15 
10 
0 . 0 
DK NL D UK IRL . B L F EUR12 E GR I P 
Numbers above bars show the number of households affected (in 000s) 
Chapter 6 Labour costs, social contributions and taxes 
Data on poverty 
The data on which the analysis of low pay and 
poverty is based are derived from national sur­
veys of family budgets, or household 
expenditure, in the Member States. More speci­
fically, they are taken from "Poverty statistics 
in the late 80s: research based on micro-data" a 
study carried out for Eurostat by Aldi J.M. 
Hagenaars, Klaas de Vos and M. Asghar Zaidi 
of the Department of Economic Sociology and 
Psychology, Erasmus University, Rotterdam (to 
be published towards the end of 1994). 
Although the data have been harmonised in 
some degree, significant differences exist be­
tween the national surveys in the way the 
survey was conducted, in the sample size and in 
the definitions and concepts used. These mean 
that the results should be regarded as very 
much approximate and prek'minary only and as 
broadly indicative of the numbers of households 
with expenditure below 50% of the average 
expenditure in the different Member States. 
The national surveys were carried out in 1988 
in six of the Member States, in 1986/87 in 
Luxembourg, in 1987 in Denmark, Ireland and 
Belgium, in 1989 in France and in 1989/90 in 
Portugal. 
Poverty is defined in the text in terms of house­
hold expenditure which is below 50% of the 
average expenditure of households in the 
country in question — ie it is a relative rather 
than an absolute measure and is just one among 
many of such measures. Although the standard 
international definition of poverty relates to 
income rather than expenditure, the surveys 
from which the data are derived do not enable a 
reliable estimate of household income to be 
made. Since expenditure is likely to be higher 
relative to income in poorer than in richer 
households, the use of an expenditure measure 
is likely, if anything, to give an underestimate 
of the number of households below the poverty 
line. 
Members of households are weighted to enable 
comparisons to be made of households of differ­
ent size, with the head of the household having 
a weight of 1, the second member a weight of 0.5 
and each subsequent member a weight of 0.3. therefore, is not only to provide in­
centives for creating jobs, but also to 
protect women's earnings. 
Low pay and poverty 
While there is some difficulty from 
the data available to estimate the 
number of people in employment in 
the Community with low earnings, 
evidence from household and family 
budget surveys suggests that low 
pay is associated with poverty in 
many Member States. (The prelimi­
nary nature of this evidence, 
however, should be emphasised 
since the data on which it is based 
are not fully harmonised between 
Member States and, moreover, re­
late to expenditure rather than 
income — see Box for details.) 
Towards the end of the 1980s, almost 
10% of households in the Community 
with at least one member working 
had a level of expenditure below 50% 
of the average for households in the 
country concerned, which can be 
taken as an indicator of poverty in a 
relative sense. This represents a 
total of around 7V2 million house­
holds or an estimated 19 million 
people (Graph 163). Moreover, 
around 30% of these households had 
at least two members in work and yet 
wages from employment were still 
not sufficient to bring their expendi­
ture above the poverty line. 
(Although the analysis here is in 
terms of households, which is the 
usual unit for measuring the in­
cidence of poverty, this should not be 
taken to mean that the income, or 
wages, of individualsperse is not also 
of relevance, especially since low pay 
may make the individual concerned 
reliant on the income of the rest of 
the household and, therefore, less in • 
dependent.) 
As might be expected, the working 
poor are particularly numerous 
140 
Chapter 6 Labour costs, social contributions and taxes 
in the less developed Southern 
Member States. In 1988, 19% of 
Portuguese households where at 
least one person was in employment 
had a level of expenditure below the 
poverty line (almost half of these 
having at least two members in 
work), while in Italy, the figure was 
16%, in Greece, 14% and in Spain, 
over 12%. At the same time, in 
France, which has one of the highest 
levels of income per head in the 
Community, 9% of households with 
someone working had a level of ex­
penditure below 50% of the average. 
On the other hand, in the Nether­
lands, under 4% of households with 
at least one person in employment 
had expenditure below this level 
and in Denmark, under 3%. 
Low pay is not the primary source 
of poverty in any Memoer State. In 
most countries, old-age and conse­
quent retirement from paid activity 
is a much more important reason 
for poverty levels of expenditure. 
However, in a real sense, this 
partly reflects wages being too low 
to produce an adequate retirement 
pension when the person concerned 
was in work. It also partly reflects 
the large number of women who are 
left alone in old age with insufficient 
pension entitlement to bring them 
above the poverty line. 
Nevertheless, in one third of the 
households with expenditure below 
the poverty line in the Community in 
1988, the head of the household was 
in employment. This represents 5% 
of total households in the Com­
munity (Graph 164). Of these, 30% 
on average were households where 
the head was self-employed rather 
than a wage-earner. This is signifi­
cantly higher than the proportion of 
self-employed households in the 
total (21%), which implies that there 
is a much greater chance of someone 
who is self-employed having income 164 Households in poverty by socio-economic group in the 
Member States, 1988 
% total households 
30 r 
25 
20 
15 
10 r 
5 h . EH Pensioner 
H Not in paid work 
M Self-employed 
I Employees 30 
H 25 
H 20 
15 
10 
DK NL B L D F EUR12 IRL UK E GR I 
NL, P, UK figures (or "Not in pad work" include those incapable of working 
165 Households in poverty where the head of household is 
unemployed in the Member States, 1988 
-l 50 
141-
Chapter 6 Labour costs, social contributions and taxes 
below the poverty level than some­
one who is an employee. 
Low pay tends to be a more import­
ant source of poverty in the 
Southern Member States than in 
those in the North. In 1988, over 
40% of the households falling below 
the poverty line in Greece, Spain 
and Italy had the head of the house­
hold in paid employment, while in 
Portugal, the figure was over 50%. 
Low pay was also, however, an 
important source of poverty in a 
number of Northern Member 
States. This is particularly the 
case in Denmark and Luxembourg, 
though, in the former this primarily 
reflects the low incidence of poverty 
overall. By contrast, in the UK, low 
pay is a relatively minor source of 
poverty levels of expenditure, but, 
in this case, it reflects the high pro­
portion of total households with 
expenditure below 50% of the aver­
age (17% in 1988). 
Overall in the Community, there 
are more households which fall 
below the poverty level of expendi­
ture because of low pay than 
because the head of the household 
is not in paid work despite being 
below pensionable age (because of 
being, for example, unemployed or 
disabled). Only in four Member 
States — Belgium, the Nether­
lands, and most especially, Ireland 
and the UK, where being out of 
work was a much more important 
source of poverty than elsewhere — 
was this not the case. 
Moreover, even this tends to under­
state the problem of low pay. Other 
evidence indicates that the majority 
ofthose on low wages are women who 
are not usually the sole wage-earner 
in a household and whose poverty-
level pay is, therefore, concealed in 
the overall expenditure of the house­
hold. Nevertheless, both in the South and 
the North of the Community, being 
unemployed Ijrings with it a high 
probability of having a poverty 
level of income. In 1988, 38% of the 
households where the head was un­
employed had expenditure below 
50% of the average, the proportion 
being as high as 48% in the UK, only 
slightly less in Portugal and over 
40% in Germany and Luxembourg as 
well as in Ireland (Graph 165). Only 
in Greece — perhaps somewhat sur­
prisingly — the Netherlands and 
Denmark was the proportion below 
25%, Denmark having a figure of 
under 5%, by far the lowest in the 
Community. 
The chances of a household falling 
below the poverty line were over 
4 times greater, on average, in the 
Community as a whole if the head 
was unemployed than if they were 
in work. This would seem to imply 
a relatively powerful incentive in 
most parts of the Community for 
people to avoid unemployment — 
though more in some countries, 
such as Belgium, Germany, Ireland, 
the Netherlands and the UK, where 
the probability was over 7 times 
greater in 1988, than in others, such 
as Denmark where it was less than 
twice as great. It also indicates the 
serious implications for their 
relative level of expenditure of any 
reductions in social benefits to the 
unemployed. 
142 
Chapter 7 Unemployment and labour market policy 
Chapter 7 Unemployment and labour market policy 
As the characteristics of the unemployed change across 
the Community, labour market policies need to adapt 
accordingly. The scale of expenditure on these varies 
markedly between Member States, as does the role played 
by public employment services in helping the unemployed 
find work. 
Unemployment is the major econ­
omic problem facing the 
Community. Since 1973, when two 
decades of high and relatively 
stable economic growth in Europe 
came to an end, unemployment has 
increased progressively, inter­
rupted only during the period 
between 1985 and 1990, from an 
average rate of under 3% to one of 
11% at the present time. In the 15 
years before 1973, only Italy and 
Greece had experienced unemploy­
ment rates of over 5% and then only 
slightly over. Since then, only 
Luxembourg of the Community 
countries has consistently had rates 
below 5%. 
Although the recent rise in unem­
ployment is moderating and 
although the prospects are for little 
further increase in the short-term, 
this should in no way divert atten­
tion away from the problem. The 
clear lesson of the past 20 years is 
that no Member State has suc­
ceeded in reducing unemployment 
significantly and keeping it at a low 
level for a sustained period, except 
for Luxembourg. The chances of this 
happening in the future without a 
significant change in policy or with­
out a radically different set of 
circumstances are remote. A central aim of this chapter is to 
consider the labour market 
measures which are being im­
plemented in Member States to 
alleviate the problem and the scale 
of assistance to find work being 
given to the unemployed. These, it 
should be emphasised, are only one 
aspect of the range of policies re­
quired to tackle unemployment 
effectively, though the European 
Council highlighted the importance 
of improving the use of public funds 
in the area. 
First, however, the chapter exam­
ines the changing nature of the 
unemployment problem in different 
parts of the Community. The two 
major features of unemployment in 
the 1980s were, first, the large num­
bers of young people who were 
affected. In 1985, well over 40% of 
the total numbers unemployed were 
under 25, even though these repre­
sented only around 20% of the 
labour force. The second feature 
was the high incidence of long-term 
unemployment. In 1985, half of the 
unemployed had been out of work 
for a year or more. 
Labour market measures in the 
1980s came to be increasingly fo­
cused on these two problems. The first section below considers the 
present scale of the two problems 
and how they are tending to change 
over time. In so doing, it touches 
upon another area of concern high­
lighted in the White Paper and 
endorsed by the Council, namely, 
the large numbers of young people 
in various parts of the Community 
without adequate training. 
The second section examines the 
differing methods used by the un­
employed to look for work, while the 
third section, as noted above, con­
siders the scale of public 
expenditure on labour market 
policies, both those of income sup­
port and more active measures 
aimed at increasing the chances of 
the unemployed of being able to find 
work. 
Youth unemployment 
The rate of unemployment among 
young people dechned significantly 
in the Community during the sec­
ond half of the 1980s with the high 
rate of new job creation over this 
period, the range of measures intro­
duced to alleviate the problem and 
the fall in the number of those 
under 25. 
-143 
Chapter 7 Unemployment and labour market policy 
Ml Youth unemployment rates, 1993 
t**g20 
166 Unemployment rates by sex and age in the 
Community, 1983 to May 1994 
% labour force 
30 
25 
20 
15 
10 /v 
Women <25 ..-" 
\- — 
X Men<25 • v' n 30 
25 
20 
15 
Total 
Men >25 
0 1 I 1 1 t • I t I t I I I I I I I I 1 1 I I 1 1 I I I I I I I I Q 10 
1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 The youth unemployment rate fell 
by over 5 percentage points be­
tween 1985 and 1990, much more 
than the rate for those over 25 
which declined by relatively little 
(Graph 166). Since then, the rate of 
youth unemployment relative to 
adult unemployment has changed 
hardly at all. However, this con­
ceals a marked difference in the 
change in unemployment of young 
men and young women. While the 
rate for women under 25 has risen 
only slowly since 1990, the rate for 
young men has increased sharply 
— by over 5% of the labour force — 
and by much more than for older 
men or women. A gap of 5% of the 
labour force between the unem­
ployment rate for young men and 
that for young women in 1990 — 
which had persisted for some years 
— had been reduced to one of less 
than 2% by May 1994. 
The rate of youth unemployment in 
the Community as a whole, at 
around 21% in May 1994, therefore, 
remains over double the adult rate 
of only around 9%. The marked re­
duction in the youth unemployment 
rate relative to that of older people 
which occurred between 1985 and 
1990 consequently came to an end 
with the onset of recession and the 
decline in employment. Since the 
number of young people of working 
age has continued to fall in the Com­
munity over this period, as noted 
below, the failure of the unemploy­
ment rate to come down with it 
emphasises the employment diffi­
culties which they — and young 
men in particular — have faced. 
The youth unemployment rate is 
significantly higher than the adult 
rate in all Member States, apart 
from Germany where it was over 2% 
lower in May 1994, but especially in 
Greece and Italy, where the youth 
rate was around 23% in the former 
case and 33% in the latter, giving a 
144-
Chapter 7 Unemployment and labour market policy 
difference in relation to the adult 
rate of more than 4 to 1 (Graphs 167 
and 168). Despite the scale of youth 
unemployment, in both Spain, 
where some 38% of the labour force 
under 25 was unemployed, much 
more than anywhere else in the 
Community, and Ireland, where the 
figure was around 27% — the third 
highest — the gap between youth 
and adult unemployment rates was 
less than the Community average. 
Though youth unemployment re­
mains a serious problem in many 
parts of the North of the Com­
munity, it is still in the South where 
the problem is most acute, the rate 
rising to 40% or more in many Span­
ish and Italian regions (Map 1). 
Changes in 
youth unemployment 
and the labour force 167 Unemployment rates of young people (<25) in the 
Member States, 1985,1990 and May 1994 
% labour force 
50 r 
40 
30 
20 
10 1 1985 
• 1990 
• May 1994 
GR June 1991. NLApri! 1994 -l 50 
A 40 
30 
20 
10 
D L DK P UK NL EUR12 B F GR IRL 
The trend in youth unemployment 
in recent years needs to be judged 
in the light of the change in num­
bers of young people which has 
occurred. Over the Community as 
a whole, the number of young 
people of 15 to 24 — ie those of 
working age — declined by around 
1% a year between 1985 and 1992 
— the latest year for which data 
are available (at a slightly higher 
rate for women than for men). The 
decline has been most marked in 
Germany, where the number of 
young people in this age group fell 
by an average of around 3% a year 
over this period, while in the UK, 
it fell by over 2% a year (Graph 
169). By contrast in Italy, Spain, 
Greece and Ireland, the number 
increased, though by a relatively 
small amount, while in France, it 
declined only marginally. 
As a result, the proportion of work­
ing-age population (15 to 64) 
represented by young people of 168 Unemployment rates of people over 25 in the Member 
States, 1985,1990 and May 1994 
20 
15 
10 % labour force 
1985 
• 1990 
• May 1994 
GRJune 1991, NL April 1994 I 20 
145 
Chapter 7 Unemployment and labour market policy 
169 Changes in population and labour force (15-24) in the 
Member States, 1985 to 1992 
Annual change (%) 
3 r 
2 r 
1r 
-3 h" 
-4 h i 3 
H 2 
H 1 
H -1 
-2 
H -3 
H -4 
-5 
D UK B L NL DK RJR12 P F IRL E GR 
170 Youth unemployed in relation to labour force and 
population (15-24) in the Member States, May 1994 
% labour force (15-24) 
40 r 
30 f-% population (15-24) 
-i 40 
30 
20 }-
10 20 
10 under 25 fell from 23% in 1985 to 
21% in 1992 over the Community as 
a whole. In Germany, however, it 
fell from 23% to 18% and in the UK, 
from 24% to 21%. Only in Italy was 
there no decline in the proportion 
over this period, though in Greece, 
Spain, Ireland and Portugal — ie 
the less developed countries of the 
Community — the reduction was 
less than 1 percentage point. 
At the same time, rates of participa­
tion of both men and women in this 
age group have also tended to fall, 
as noted above, resulting in a reduc­
tion of some 2% a year in the 
numbers of people under 25 in the 
labour force between 1985 and 
1992. The fall in participation was 
such as to offset the expansion in 
population in countries where this 
occurred. In Italy, the labour force 
under 25 declined by 10% over this 
period, in Portugal, by 20%, in 
France, by 23% and in Belgium by 
24%. Only in the Netherlands, 
where there was a substantial 
growth in participation did the la­
bour force in this age group increase 
(in this case, by 17% over the 
period). 
The result of the fall in the number 
of young people who are economi­
cally active is a decline in the 
proportion of young people under 25 
in the labour force. In the Com­
munity as a whole, this fell from 
20% in 1985 to 16% in 1992, with all 
Member States showing a reduc­
tion. In Germany, the fall was from 
20% to 14%, in France, from 17% to 
12% and in the UK, from 24% to 
19%. Even in the Netherlands, 
where the youth labour force in­
creased, there was a reduction of 1 
percentage point over this period. 
This is not necessarily an unfa­
vourable development if it is 
associated with an increasing pro­
portion of young people staying 
146 
Chapter 7 Unemployment and labour market policy 
longer in education or receiving 
more extensive basic training. To 
the extent that the fairly general 
decline in participation is a reflec­
tion of this, then it may mean that 
these people bring a higher level of 
skills to the workforce when they 
eventually enter the labour mar­
ket. On the other hand, the 
reduction in participation may 
merely reflect the shortage of jobs 
available for young people to move 
into. 
There is some difficulty from the 
data available to identify which of 
these two possibilities best de­
scribes what has been happening, 
partly because of differences be­
tween Member States in defining 
what is meant by education and 
training and, accordingly, in class­
ifying the status of young people in 
the Labour Force Survey. This dif­
ficulty also extends to the figures 
on the number of young people 
counted as being in the labour 
force. In particular, the large vari­
ations between countries in-
participation rates of young people 
may reflect differences in the treat­
ment of casual work by students 
and/or the way unemployment is 
defined in respect of those 
under 25. 
These difficulties mean that both 
participation rates in respect of 
young people and rates of youth un­
employment need to be treated with 
a good deal of caution when drawing 
policy conclusions. 
Though it is by no means ideal, it 
may be better — or at least as in­
structive — given the problems of 
identifying the number of young 
people who are economically ac­
tive, to consider unemployment 
of those under 25 in relation to 
population of this age group rather 
than — or as well as — in relation 
to the labour force. (Ideally, the need is for a consistent breakdown 
between Member States of the 
young people who are in full-time 
education and training, in training 
or education combined with em­
ployment, in full-time and in 
part-time employment and who 
are doing none of these and are, 
therefore, genuinely economically 
inactive.) 
This shows a somewhat different 
picture from unemployment rates 
as usually defined. It shows, in 
particular, that although Spain 
and Italy still had the highest le­
vels of unemployment relative to 
working-age population in May 
1994 — at 20% and 17%, respec­
tively — the difference between 
these and other Member States 
was significantly reduced, with 
Ireland having a rate of around 
15% and Greece, France, the 
Netherlands and the UK having 
rates of around 10% (Graph 170). 
Moreover, whereas because of the 
small numbers counted as part of 
the labour force, youth unemploy­
ment rates in France and Belgium 
were above those in the Nether­
lands and the UK — markedly so 
in the case of France — in relation 
to population, they were at much 
the same level or below. Which of 
the two rates better reflects the 
problem of youth unemployment 
remains an open question until 
more detailed data are available. 
Youth unemployment 
in relation to total 
unemployment 
The decline in the numbers of young 
people is reflected in the proportion 
of the unemployed who are under 
25. In the Community as a whole, 
around 32% of the total numbers 
out of work in May 1994 were young 
people, some 2 percentage points lower than in 1990 and some 10 
percentage points lower than in 
1985, when the figure was 43% and 
the problem of youth unemploy­
ment was most acute (Graph 171). 
In this sense, the problem of unem­
ployment has become less of a 
problem of youth unemployment 
over this period, though this is 
largely because of the decline in the 
number of young people in the la­
bour force. 
The importance of youth unemploy­
ment and the extent to which it has 
changed vary markedly between 
Member States. It remains most 
acute in Italy, where just over half 
of the unemployed were under 25 in 
May 1994. This, however, was con­
siderably less than in 1985, when it 
was over 60%. The only other Mem­
ber State where the figure 
approaches that in Italy is Greece, 
where some 45% of the unemployed 
were under 25 at the latest count — 
which in this case is 1991 (there are 
problems with Greek data after this 
date) — above the proportion in 
1985. In Italy and Greece, therefore, 
the problem of unemployment is 
much more a problem of young 
people than anywhere else in the 
Community. 
Of the other Member States, only in 
Ireland, where the figure was 
around 36% in May 1994, was the 
share of young unemployed in the 
total more than a third. Here, more­
over, the proportion had increased 
since 1990, the only country apart 
from the Netherlands and Luxem­
bourg where this was this case. 
At the other extreme, those under 
25 accounted for only just over 
10% of the total unemployed in 
Germany, where the proportion had 
come down from almost 30% in 
1985. In no other Member State 
apart from Denmark was the figure 
less than 20%. 
147-
Chapter 7 Unemployment and labour market policy 
171 Youth unemployed (<25) as a share of total unemployed 
ir. the Member States, 1985, 1990 and May 1994 
% total unemployed 
1 70 
GR 1991; NL April 1994 
172 Long-term unemployment (>1 year) in the Member 
States, 1985 and 1992 
70 % total unemployed 
1985 • 1992 
J- E&P 1986, IRL 1991 T 70 
1- DK P F UK D EUR12 E NL GR I B IRL Long-term 
unemployment 
. Long-term unemployment, which 
rose significantly during the first 
half of the 1980s, seems to have 
become less of a problem in recent 
years, though it is one which 
remains serious. Moreover, since 
no data are available since 1992, 
when unemployment was lower 
than at the time of writing, it is a 
problem which may well have in­
creased in 1993 and 1994. 
Between 1985 and 1992, the propor­
tion of the unemployed who had 
been out of work for one year or 
more declined from 52% to 43% 
(Graph 172). The reduction was 
particularly marked in Portugal, 
where the proportion of long-term 
unemployed was reduced from 53% 
to 30% over this period, and Spain, 
where it came down from almost 
60% to 45%. This reflects the high 
rate of employment growth which 
both these countries experienced in 
the latter part of the 1980s. 
In Greece, on the other hand, 
where employment grew by rela­
tively little, the proportion of the 
unemployed out of work for at least 
a year increased (from 43% to 
50%), the only Member State for 
which this was the case. Similarly 
in Ireland, where the rate of job 
creation was also low over this 
period, long-term unemployment 
declined only slightly. 
In the other Member States, how­
ever, the extent of the reduction in 
the share of long-term unemployed 
in the total is not very closely re­
lated to the growth of employment. 
In the Netherlands, in particular, 
where the rate of job creation be­
tween 1985 and 1992 was the 
highest in the Community, largely 
because of lower hours of work, the 
148-
Chapter 7 Unemployment and labour market policy 
importance of long-term unemploy­
ment declined by less than the 
Community average and in 1992 
the proportion at just below 50% 
remained above the average. Simi­
larly in Germany, where there was 
also a relatively high rate of job 
creation, long-term unemployment 
was also reduced by less than in 
other Member States. 
However, as these data relate to 
Spring of 1992 — when the Labour 
Force Survey was conducted — they 
do not reveal what has happened 
during the recent recession since 
the main increase in unemployment 
in most parts of the Community oc­
curred after the data were collected. 
On the experience of the previous 
economic cycle in the first half of the 
1980s when the peak rate of long-
term unemployment was not 
reached until 1986, some time after 
the recession began, the proportion 
of the unemployed out of work for a 
year or more can be expected to 
have risen since 1992 and still to be 
increasing significantly at the pres­
ent time. 
The proportion of the long-term un­
employed who are under 25 has 
come down as the relative numbers 
of unemployed in this age group 
have declined. In 1992, 26% ofthose 
who had been out of work for at least 
a year were young people under 25 
as opposed to 37% in 1985. In some 
countries, the decline has been 
much more pronounced, signifying 
a marked fall in the long-term rate 
of youth unemployment. In Luxem­
bourg, the proportion declined to 
zero, while in Spain, it fell from 
almost 50% to under 30%, in Portu­
gal, from just over 50% to just over 
30% and in France, from over 30% 
to 15%. Indeed, in all Northern 
Member States, except for the UK 
and Ireland, the proportion of the 
long-term unemployed who were 
under 25 was 15% or less in 1992 and less than 10% in Germany and 
Denmark. 
The problem of long-term unemploy­
ment in the North of the Community, 
therefore, seems now to have rela­
tively little to do with young people 
and is predominantly a phenomenon 
of older age groups. In the South of 
the Community, in contrast, a siz­
able proportion of the long-term 
unemployed are under 25 — over 
40% in Italy and just below this fig­
ure in Greece, while in Spain and 
Portugal, it remains around 30%. 
Youth unemployment and long-term 
unemployment are, therefore, still 
closely associated with each other in 
these parts of the Community. 
Methods of job search 
The methods used by the un­
employed to find a job vary 
significantly across the Community. 
In particular, while public employ­
ment offices play the major role in a 
number of Member States, in others 
more informal means of searching 
for work seem to be more important. 
As notedjn Chapter 1, by no means 
all the unemployed, and in some 
parts of the Community not even 
most of the unemployed — espe­
cially if they are women — are 
registered at employment offices. 
Those that are not, in the great ma­
jority of cases, have no contact with 
the public employment services and 
rely on other methods to find work. 
However, even when people are reg­
istered at employment offices, they 
do not necessarily use the services 
provided by these offices as the 
main means of job search. 
Nevertheless, where the proportion 
of the unemployed registered at em­
ployment offices is high, there is 
a tendency to rely on such offices 
to find a job. In particular, in Germany, France and Spain where 
the registration rate was over 85% 
in 1992, the great majority of the 
unemployed used the public service 
as the main method of searching for 
work — over 90% in Spain and close 
to 90% in Germany (which in both 
cases means all of those registered 
used this as their main method), 
while in France, over 80% did so 
(Graph 173). In all three of these 
countries, this was almost as true of 
women as of men (90% of unem­
ployed women in Spain, 84% in 
Germany and 78% in France). 
The one exception to this general 
tendency is Belgium. Here despite 
the fact that 91% of the unemployed 
were registered at employment of­
fices, only 38% of the unemployed in 
1992 (with little difference between 
men and women) used the public 
employment services as their main 
means offinding a job. 
In most countries where the regis­
tration rate is relatively low, 
comparatively few even ofthose reg­
istered use the public employment 
services as their main method of job 
search. As a result, only in the 
Netherlands — where the figure 
was 63% — in addition to the three 
^countries listed above, did a signifi­
cant majority of the unemployed 
rely on public employment services 
to find work. In the UK and Portu­
gal, the proportion was around 30%, 
in Ireland under 20% and in Greece 
as low as 8%. This, of course, does 
not mean that in these countries, 
the public employment services 
were not used as one of the methods 
offinding work, only that they were 
not the main method. 
In most countries, the proportion of 
women relying on contact with the 
public employment office to find a 
job was much the same as for men. 
The only exceptions were the 
Netherlands and Luxembourg, 
149-
Chapter 7 Unemployment and labour market policy 
173 Proportion of unemployed using employment offices as 
main method of job search in the Member States, 1992 
100 % unemployed 
1 100 
174 Proportion of unemployed using other means as main 
method of job search in the Member States, 1992 
% unemployed 
100 r -i 100 where some 12% more of the men 
unemployed than women used this 
as their main method, and the UK, 
where 8% more of the men did so. 
Only a very small proportion of the 
unemployed in any Member State 
rely primarily on private employ­
ment services to find work. In most 
countries, apart from Belgium and 
the Netherlands, where the figure 
was close to 10%, the proportion 
using these as their main method of 
job search was around 2% or less in 
1992. Although there is a general 
tendency for more women than men 
to use private agencies — only in 
Denmark and Italy was the propor­
tion of men higher than for women 
— the relative numbers doing so 
were still small. Private employment 
agencies, which have developed 
rapidly in a number of Member 
States, therefore, seem to cater pre­
dominantly for people who are 
already in employment rather than 
those who are unemployed. 
Of the other, less formal, methods of 
job search, looking through news­
paper advertisements or placing an 
advert is the most widely used across 
the Community as a whole. There 
are, however, wide variations be­
tween Member States. In the UK and 
Ireland, over 40% of the unemployed 
used newspapers as the main means 
of finding work, and in Belgium and 
Luxembourg, over 25%, whereas in 
Portugal and Denmark, where there 
was also a minority of the unem­
ployed using employment offices, the 
proportion was only around 15% 
(Graph 174). 
In all Member States, a higher pro­
portion of women used newspapers 
as their main method of job search in 
1992 than men — the difference 
being most marked in the UK and 
Ireland, where in each case more 
than half of all the women unem­
ployed (56% in the UK) relied 
150 
Chapter 7 Unemployment and labour market policy 
principally on newspapers to find 
work 
In countries where newspapers were 
not extensively used, in Portugal and 
Denmark as well as in Greece and 
Italy, applying to employers directly 
was the principal method of job 
search other than the public employ-
ment service for most of the 
unemployed. In Greece and Portu­
gal, however, for a significant 
proportion of the unemployed, 
asking friends, relatives and other 
people was almost as important a 
means offinding work. In these two 
countries, therefore, well over half of 
the unemployed — 55% in Portugal 
and 70% in Greece — relied on 
asking employers or people that they 
knew to find a job. 
Although there are some differences 
in the proportion ofmen and women 
using these two methods as their 
main means of searching for work, 
they are not large, nor do they vary 
systematically between countries. 
In summary, the evidence from the 
1992 LFS demonstrates clearly that 
there are marked variations across 
the Community in the way that those 
out of work search for employment 
and that, in general, less formal — 
and less organised — methods pre­
dominate. In only three Member 
States — Germany, Spain and 
France — do the public employment 
services play a dominant role, 
though the majority of the unem­
ployed also use them as their main 
method of finding work in the 
Netherlands and in Italy. In the 
other Member States, a variety of 
relatively informal means are used 
to a greater extent than the employ­
ment services by most of the 
unemployed. 
As noted above, however, this does 
not necessarily mean that the pub­
lic employment services are not used at all by most of those looking 
for work in these latter countries. It 
is possible that they were used ex­
tensively as a secondary means in 
many. Moreover, it is also possible 
that many of the unemployed in 
these countries took advantage of 
the valuable support provided by 
the public services in many coun­
tries, in the form of counselling and 
help in job applications, even if they 
relied on other avenues to find a job. 
Indeed the figures for expenditure 
on these per person unemployed 
was higher in 1992 in Belgium and 
the UK, for example, where a mi­
nority of the unemployed used them 
as the main means of job search, 
than in Spain or Italy where the 
majority did so (see below). 
Although data on a fully com­
parable basis do not exist for earlier 
years (the form of the questions 
asked was altered in the 1992 LFS), 
it is apparent that the use of public 
employment offices has declined in 
importance over recent years. This 
is partly because of the liberalisa­
tion of regulations governing 
employment services in Germany 
and Spain. It is also, partly, how­
ever, a reflection of the significant 
decline m the proportion of the un­
employed — as defined by the LFS 
— registered at employment offices, 
as shown in Chapter 1, which in 
turn in some countries reflects the 
tightening of rules on registration. 
As a result, it may be becoming 
more difficult to assist the unem­
ployed through improvements in 
the public employment services in 
many parts of the Community. 
Labour market 
policies 
Public expenditure on labour mar­
ket policies aimed at improving the 
functioning of the market, suppor­ting those who cannot find work or, 
more pro-actively, increasing their 
employability, amounted, in total, 
to around 3% of Community GDP in 
1992 for the Member States taken 
together. Over half of this sum went 
on paying income support to the un­
employed and another 10% on 
funding early retirement schemes, 
aimed at encouraging older people 
to stop working so as to increase the 
jobs available for younger people 
(Graph 175). 
Under 40% of public expenditure 
— not much more than 1% of 
Community GDP — went on active 
measures aimed at getting more 
people into work. Of these, training 
schemes and programmes specifi­
cally intended to tackle the problem 
of youth unemployment accounted 
for around half of total spending on 
active measures — around V2% of 
GDP altogether (not all Member 
States distinguish between these 
two items so it is difficult to separ­
ate them at the Community level)— 
while job subsidies, payments to the 
disabled and expenditure on the 
public employment services ac­
counted for the remainder. Of these, 
the public employment services, 
providing advice and assistance on 
placement, were responsible for 
around 15% of total active spending 
(under 0.2% of GDP). 
Between 1985 and 1992, public ex­
penditure on labour market 
policies changed by relatively little 
in relation to GDP over the Com­
munity as a whole. There was, 
however, some increase in the 
share of expenditure going to ac­
tive measures, which partly 
reflects the slightly lower level of 
unemployment in the later year 
and, therefore, a reduction in 
the need for income support. Ex­
penditure on training, youth 
programmes and job subsidies all 
increased significantly relative to 
-151 
Chapter 7 Unemployment and labour market policy 
175 Public expenditure on labour market policies in the 
Community (EUR11), 1985,1990 and 1992 
Early retirement 
Unemployment 
compensation 
Disabled 
Job subsidies 
Youth 
Training 
Public employment 
service 
0.5 1.5 2 
% GDP 
176 Public expenditure on active and passive labour 
market policies in the Member States, 1985 and 1992 
%GDP GDP over this period, though the 
total sums involved remained 
small as compared with unemploy­
ment compensation. 
Expenditure in 
Member States 
There is considerable variation in 
public expenditure on labour mar­
ket policy across the Community. 
At one extreme, spending in 
Denmark amounted to almost 7% 
of GDP in 1992 (and 1993), nearly 
twice as high as in any other 
Member State (Graph 176). 
Around 75% of expenditure went 
on unemployment compensation 
and early retirement schemes 
— so-called passive measures — 
reflecting the generosity of such 
payments relative to other coun­
tries rather than the number of 
unemployed. Nevertheless, while 
only 25% of spending was devoted 
to active measures, the sum in­
volved was still larger in relation 
to GDP than elsewhere in the Com­
munity (1.8% of GDP). 
Spending on active measures was 
also relatively high — around 1% 
of GDP or more in 1992 — in 
Germany, because of the increase 
following the inclusion of the 
new Lander, and in Ireland, re­
flecting the large sums devoted to 
training from the Community 
Social Fund. 
At the other extreme, public expen­
diture on active measures was only 
around V2% of GDP or less in the 
UK, Luxembourg, Spain and 
Greece, reflecting in the case of 
Luxembourg, the small numbers of 
unemployed, in Spain, the large 
sums spent on income support for 
the large numbers of unemployed, 
in Greece, a lack of resources and 
in the UK, an aversion to interven­
tionist policies. 
152-
Chapter 7 Unemployment and labour market policy 
Spending on passive measures re­
flects both the numbers out of work 
and the scale of compensation paid. 
It was high in Spain and Ireland in 
1992 — around 3% of GDP — be­
cause of high unemployment and in 
Belgium and the Netherlands — 
over 2% of GDP — as well as in 
Denmark, because of high average 
payments to the unemployed (a 
high proportion of the unemployed 
receiving benefits as much as a high 
level of benefit). 
Between 1985 and 1992, expendi­
ture on active measures increased 
relative to GDP in 8 of the 12 Mem­
ber States, most significantly in 
Germany, where it doubled as a 
share of GDP, because of the re­
sources devoted to tackling the 
substantial unemployment prob­
lem in the new Lander. In three of 
the other four Member States — 
the UK, Ireland and Luxembourg 
— spending on active measures 
was reduced relative to GDP, while 
in Belgium, it remained un­
changed. 
The distribution of public expendi­
ture between different kinds of 
active measure also varies mar­
kedly across the Community. 
Spending on training and youth 
measures dominates in Italy, 
Portugal, France and Ireland, 
while job subsidies are more im­
portant in Denmark Spain and 
Belgium, and have also become 
substantial in Germany, where, as 
a result of the unemployment prob­
lem in the former East Germany, 
expenditure on both training and 
job subsidies in 1992 was higher 
relative to GDP than in any other 
Member State (Graph 177). 
It should be emphasised, at the 
same time, that the distinction be­
tween youth measures and 
subsidies in certain cases is ex­
tremely blurred, since subsidies may be used as a means of encoura­
ging employment of young people 
(for example, in Belgium, a scheme 
was introduced at the end of 1993 
relieving employers from paying so­
cial contributions when taking on 
young people). 
Expenditure on public employ­
ment services amounted to less 
than 0.2% of GDP in all countries 
apart from Germany and Belgium, 
where it was only slightly above. In 
the four Southern countries — 
Greece, Italy, Portugal and Spain 
— as well as Denmark, spending 
on the employment services ac­
counted for only around 0.1% of 
GDP or less and in France and 
Ireland, it was not much higher. 
In the case of Greece, Portugal, 
Denmark and Ireland, the low 
level of spending is partly explic­
able by the fact that in all of these 
countries, as noted above, the pub­
lic employment services are not the principal means used by the unem­
ployed to find work. In Spain and 
France, however, they are used by 
a large majority of the unemployed 
and the low level of expenditure is, 
therefore, more difficult to explain. 
Expenditure per 
unemployed person 
The figures for spending in relation 
to GDP are difficult to interpret 
without taking account of the vari­
ations in the numbers of people 
receiving assistance between 
Member States. Collecting consist­
ent information on this is not easy; 
moreover, other aspects such as 
the length of training courses are 
also relevant. The most straight­
forward approach is to adjust for 
the numbers unemployed, even 
though by no means all expendi­
ture goes on these — most 
obviously, job subsidies are a 
177 Public expenditure on active labour market policies in 
the Member States, 1992 
% GDP 
I Training 
I Youth 
I Job subsidies 
- Û Public employment 
service 0.75 H 0.75 
0.5 
0.25 0.25 
L GR E UK 
DK, P 1986; F, IRL. L 1991 NL 
153 
Chapter 7 Unemployment and labour market policy 
means of keeping those in work 
from becoming unemployed, while 
part of expenditure on training in 
a number of Member States goes to 
those in employment as well as the 
unemployed. Despite such con­
siderations, estimates of spending 
per person unemployed provide a 
broad indication of the scale of ef­
fort devoted to labour market 
policies in the various Member 
States. 
They do necessarily, however, indi­
cate the effectiveness of this effort, 
which is likely to depend on other 
factors as well, such as the design 
of programmes, the efficiency with 
which they are targeted on those 
requiring support and the reper­
cussions on other groups in the 
labour market who do not receive 
assistance (ie evidence shows that 
many schemes have helped the 
unemployed find work largely at 
the expense of those already in employment). These factors are not 
considered here, though they are 
crucial to an overall evaluation of 
policy. 
In terms of this measure, there are 
enormous variations across the 
Community in the level of expendi­
ture. So far as spending on passive 
measures are concerned (income 
support plus early retirement), the 
average level per person registered 
as unemployed (which is the appro­
priate indicator of unemployment 
to use in this context) varied from 
around 27,000 ECU in Luxem­
bourg in 1992, and 18,000 ECU in 
Denmark and the Netherlands, to 
only just over 5,000 ECU in Ireland 
and Spain, around 3,000 ECU in 
Greece and 1,500 ECU in Portugal 
(Graph 178 — note that the figures 
for Italy exclude payments made to 
the unemployed and are, therefore, 
not comparable with those for 
other countries). 
178 Passive labour market expenditure per unemployed 
person in the Member States, 1985,1990 and 1992 
Expenditure (ECU 000s at 1992 prices and exchange rates) 
25 
20 
15 
10 -i 30 
W 1985 
• 1990 
• 1992 
EUR11 excludes I; DK, P 1986; F, IRL, L 1991 In broad terms, this variation is 
in line with differences in GDP 
per head, though the average level 
of expenditure in France in 
1992 was below what would be ex­
pected in these terms and in the 
Netherlands, somewhat higher 
(GDP per head in ECU in France is 
significantly above that in the 
Netherlands). 
Between 1985 and 1992, the aver­
age level of passive expenditure per 
person unemployed in the Com­
munity as a whole changed by very 
little in real terms (at constant GDP 
prices and constant exchange rates, 
which it should be noted gives only 
an approximate indication of the 
change in the real value of pay­
ments in terms of purchasing 
power). Only in France and Ireland, 
however, was there any significant 
reduction in real expenditure per 
person, though in the case of 
France, this was entirely due to a 
decrease in early retirement pay­
ments. At the same time, only in 
Spain, Germany and Belgium was 
there any significant increase in 
average spending, though for Ger­
many, this was wholly the result of 
more money going on early retire­
ment schemes, especially in the new 
Lander. 
Average expenditure on active 
measures per person unemployed 
varies in a very similar way to that 
on passive measures. The level of 
spending in Luxembourg, Denmark 
and the Netherlands is much higher 
than the Community average, that 
in the Southern Member States 
much lower (Graph 179). In this 
case, however, it is Spain with its 
large numbers of people out of work 
which spends the least on active 
measures per person unemployed. 
Ireland, it should be noted, which 
has a much higher than average 
level of expenditure on active 
measures in terms of GDP, has a 
154-
Chapter 7 Unemployment and labour market policy 
significantly lower level in terms of 
the numbers unemployed. 
As with passive expenditure, active 
spending per person unemployed 
varies broadly in line with GDP per 
head, though again the level in 1992 
was lower in these terms in France 
and higher in the Netherlands, re­
flecting the greater effort devoted to 
active measures in the latter than 
the former. 
Between 1985 and 1992, average 
spending per person unemployed 
increased in real terms across the 
Community as a whole. Indeed, all 
Member States showed a rise over 
this period with the exception of 
Greece, where there was a very 
small fall. Again the increase was 
particularly marked in Germany, 
though spending per person unem­
ployed also doubled in real terms in 
Spain and Portugal, even though 
remaining low, largely as a result of 
Community funding. 
Focusing on the active measures 
directed specifically at the unem­
ployed (training and the public 
employment services) the level 
of spending per person in 1992 
averaged 2,000 ECU across the 
Community as a whole — half 
the expenditure on total active 
measures — with expenditure on 
the public employment services 
averaging only around 500 ECU. 
Expenditure on these measures was 
significantly higher in Germany 
than in any other Member State, at 
around 5,500 ECU per person un­
employed, and significantly lower 
in the Southern countries of the 
Community — at below 500 ECU 
per person in Spain, Greece and 
Portugal (Graph 180). 
For this more narrowly defined 
group of active measures, the tend­
ency for expenditure to vary with 
GDP per head — or the ability to 179 Active labour market expenditure per unemployed 
person in the Member States, 1985,1990 and 1992 
. _ Expenditure (ECU 000s at 1992 prices and exchange rates) 15 r 
1985 
1990 
10 J- -1992 
EUR11 excludes I; DK, P 1986; F, IRL, 11991 
180 Active labour market expenditure on the unemployed 
per unemployed person in the Member States, 1985, 
1990 and 1992 
Expenditure (ECU 000s at 1992 prices and exchange rates) 
5 r 
Public employment 
service 
HI Training on youth 
unemployed 
H Training on unemployed 
EUR11 excludes I; DK, P 1986; F, IRL, L 1991 
1 h -l 5 
E P GR I UK IRL F EUR11 B DK D NL L 
Left bar 1985; middle bar 1990; right bar 1992 
- 155 
Chapter 7 Unemployment and labour market policy 
fund such action — is less marked. 
Not only was the level of spending 
in the Netherlands higher than in 
France, but also it was higher in 
Germany than in Luxembourg or 
Denmark and in Ireland than in 
either Belgium or the UK 
In the four Southern countries, 
the level of spending on public em­
ployment services per person 
unemployed was well below half the 
Community average, as it was in 
Ireland, while in Denmark, it was 
not much higher. In all these coun­
tries, apart from Spain and, to a 
lesser extent, Italy, these services, 
as noted above, were not used by 
most of the unemployed as the main 
means offinding a job. In Germany, 
Luxembourg and the Netherlands, 
by contrast, average expenditure 
per person unemployed was well 
over 1,000 ECU, over twice the 
Community average, while in Bel­
gium it was slighty above average 
and in France and the UK, slightly 
below. 
Between 1985 and 1992, expendi­
ture on these active measures per 
person unemployed increased in 
real terms across the Community, 
though this was largely the result 
of the substantial expansion in 
spending in Germany, especially on 
training. There was also a rise in 
Belgium, Spain, France, Luxem­
bourg, the Netherlands and the UK, 
though in all of these countries, 
apart from the Netherlands, the in­
crease occurred in the period 1985 
to 1990, and between 1990 and 
1992, real expenditure fell, if only 
slightly in most cases. The fall, how­
ever, was particularly pronounced 
in the UK, where spending on train­
ing per person unemployed halved 
in real terms in these two years. So far as the public employment 
services are concerned, there was 
only a small rise in real expenditure 
per person between 1985 and 1992, 
though this was concentrated in the 
period 1985 to 1990, after which 
there was a small reduction. In­
deed, only in the Netherlands and 
Luxembourg, does real spending on 
these services seem to have risen 
between 1990 and 1992, and in most 
countries, it appears to have de­
clined. 
In summary, though it is sometimes 
hazardous to equate differences in 
expenditure levels with differences 
in the assistance given to the unem­
ployed, the extent of the variations 
in the level of spending which exist 
across the Community suggest that 
the unemployed receive signifi­
cantly more help from the public 
authorities to find work or to im­
prove their marketability through 
training in some countries than 
others. While the scale of effort is 
broadly related to GDP, this cannot 
explain many of the differences 
which exist and which, therefore, 
appear to reflect markedly different 
policy approaches in different coun-
tries. (See Box for a wider 
discussion of differences in employ-
ment systems across the 
Community.) 
In terms of changes over time, 
though there was some increase 
in real expenditure on active 
measures to help the unemployed in 
the early 1990s at the Community 
level, this was almost entirely due 
to the expansion in Germany. In 
most other countries, expenditure 
per person unemployed fell. 
-156-
Chapter 7 Unemployment and labour market policy 
Employment systems in Member States 
Member States have broadly similar employment objectives, which can be summarised as: 
• to achieve employment creation on a scale sufficient to maintain low levels of unemployment 
• to ensure compatibility, and to avoid mismatch, between the employment opportunities offered by firms and the 
needs and capacities of those who wish to work 
• to ensure open access to, and continued contact with, the labour market on a lasting basis for those who wish to 
work 
• to ensure a degree of income support for those who lose their jobs and do not quickly obtain another 
• to ensure special assistance for those facing particular labour market difficulties, and risk of exclusion, because 
of personal or social disadvantages 
• to raise the productivity and adaptability of individuals by enabling them to maximise their potential through 
vocational education and training 
However, the complex nature of labour markets, and their central role in fulfilling social as well as economic 
objectives, means that there is considerable diversity between Member States in the institutional, legislative, 
financial and contractual arrangements that are in place. 
The way employment objectives are pursued, the priorities given to different issues or concerns and the use made of 
different types of instruments will reflect a number of factors: 
• economic and social circumstances — the level of economic development and degree of industrialisation; the 
openness to other economies; the level of education and age structure of the working-age population; the respective 
roles and importance of private and public enterprise and enterprises; the extent of collective insurance against 
job loss and other social risks; the treatment of the disadvantaged; 
• cultural and historical traditions regarding the organisation of society and the economy — including the nature 
of the legal systems; the relative weight given to legal and financial instruments as ways of providing incentives; 
industrial relations traditions and practices, and so on. 
Such differences determine, for example: 
• the extent to which firms use the open labour market to remain dynamic and adjust to changes in demand as 
opposed to restructuring their existing workforce; 
• the extent to which vocational training is integrated not only with transition from school to work, but with wider 
factors, such as industrial relations systems or productive systems as a whole; 
• the way in which social protection systems interact with the employment creation process and the way they are 
funded. 
Member State policies with regard to employment and unemployment are most often compared in terms of: 
• their outcomes — the level of unemployment, the importance of long-term unemployment, the extent of part-time 
working or self-employment and so on; 
• the form or content of measures — such as schemes to help the long-term unemployed or to help young people 
into jobs; 
• the effectiveness of individual systems — such as systems of vocational training or employment placement 
services. 
However, in order to make meaningful comparisons of the relative performance of different Member States, such 
outcomes or measures need to be seen, and understood, not in isolation, but within the context of individual Member 
State employment systems as a whole. 
While Member State systems need to be understood as integrated systems, this does not mean that they are always 
consistent or coherent. In reality, they are often under strain, and always in transition. They are frequently buffeted 
by swings in attitude as well as by changes of government and prevailing political philosophies. 
157 
Chapter 7 Unemployment and labour market policy 
Acceptance of diversity between Member States does not mean either that all systems have to be 
judged as equally good in achieving broad common objectives. Nor does it mean that there are no 
grounds for taking account of wider, notably Community-wide, policy considerations. 
While respecting Member State choices or preferences, therefore, it is legitimate to: 
• assess the efficiency of different national systems in terms of their ability to achieve national and 
Community employment objectives, including the negative as well as positive effects of certain 
policies; 
• consider whether it is possible to mix different elements from different national systems to improve 
overall performance or whether systems are essentially self-contained and mutually exclusive; 
• encourage Member State to cooperate in policy development in order to minimise the costs and 
maximise the benefits of research and development on policies and measures, as well as to ensure 
compatibility between different national systems where they need to interact across the Com­
munity. 
While diversity within the broad European tradition is long-standing and deep-rooted, the process of 
economic convergence within the Community may tend to encourage convergence between Member 
State labour market systems. Notable elements in this respect are: 
• the opening up of the Internal Market, the further globalisation of markets and the break-up of 
public or semi-public monopolies — all of which strengthen market forces and thereby limit the 
possibilities, or raise the cost, for governments seeking to intervene in pursuit of employment or 
social objectives; 
• the increasing participation of women in paid employment in the Southern Member States as their 
societies develop, which is increasing the demand for more varied patterns of working hours, 
including part-time work. 
On the other hand, convergence along such lines may create divergences in policy action as Member 
States (and within them regions, localities, enterprises, workers) explicitly or instinctively position 
themselves in relation to the new economic circumstances and develop new strategies and policies 
(diversification, rationalisation, customisation, etc) to improve employment and/or income prospects. 
The Community has an important role to play in providing a framework within which Member States 
can freely choose the means they use to pursue employment objectives. The Community has a 
particular responsibility to ensure: 
• that national systems do not produce results or operate in ways which conflict with overall 
employment objectives elsewhere in the Community, 
• that systems do not operate in ways which conflict with universally agreed standards — such as 
using child labour or denying trade union rights; 
• that Member States do not seek to create or maintain employment within their borders either by 
introducing measures distorting the conditions of competition through a reduction in agreed 
standards, notably social standards, or by seeking to provide financial incentives outside those 
allowed by competition rules on State aid; 
• that, just as there is free movement of capital, goods and services, there should also be effective 
free movement oflabour between Member States — ultimately so that workers have an effective 
choice of environments or systems within which to work This means, in practice, that the 
Community has a responsibility to contribute to improvements as regards the health and safety 
of workers, especially in the working environment, and has an objective of harmonising conditions 
in this area while maintaining improvements made. 
In this respect, an appropriate balance needs to be struck between respect for Member State 
employment systems — within which they seek to achieve national goals — and respect for Com­
munity-wide objectives and standards as agreed in the Treaty and in various policy commitments 
taken through time by the Council. 
-158 
Chapter 8 Where has job growth and decline occurred? 
Chapter 8 Where has job growth and decline occurred? 
The structure of employment in the Community is changing 
rapidly. While many services are increasing in importance 
everywhere, there are significant differences in the relative 
numbers employed in particular activities, which makes it 
difficult to generalise about future areas of job creation. 
Introduction 
The broad sectoral shifts which 
have occurred in employment in 
the Community over the long-term 
are well known. As a result, service 
sector activities now account for 
some 64% of total employment and 
provide some 82 million jobs in the 
Community. Nevertheless, em­
ployment in industry remains 
important, being responsible for 
just over 30% of the total, or 
39 million jobs overall, while agri­
culture now accounts for under 6% 
of employment, or around 7 million 
jobs. 
These broad changes — driven by 
changes in demand as well as in 
technology and productivity — 
have been associated with growth 
of employment in areas as diverse 
as health and care provision, arts 
and culture, tourism, and environ­
mental protection. These areas, 
which in many cases involve a com­
plex interaction between private 
and public interests, have become 
among the most important sources 
of new job creation. 
Moreover, with the changing inter­
action between family and working life, and the increasing participa­
tion of women in the labour 
market, a much broader range of 
activities are available to be under­
taken on a paid rather than unpaid 
basis. 
At the same time, the nature of 
work is in continuous transition — 
with, for example, an increasing 
need for inter-personal communi­
cation skills rather than physical 
dexterity — all under the perva­
sive influence of information 
technologies which are now an in­
tegral part of much of modern 
economic activity. 
However, despite their import­
ance, there is a lack of detailed, 
comparable, information about 
these changes. In particular, there 
is a dearth of information about 
the new, emerging sectors and jobs 
compared with the details about 
employment in areas of decline, 
such as agriculture and the iron 
and steel industries. Moreover, 
much of the data that are available 
comes with a delay of at least a 
year or two and sometimes much 
more. 
Redressing the balance of data 
availability as between different sectors, and improving informa­
tion about areas of employment 
development, remain top 
priorities. However, new data have 
recently become available which 
throw light on these issues, not­
ably on changes in employment 
that have taken place since 1985. 
This chapter exploits these new 
data and compares the findings 
with other, more aggregated, data 
available over a longer period, in 
order to present preliminary evi­
dence on: 
• the scale of employment in dif­
ferent activities across the 
Community; 
• the main areas of employment 
growth in recent years in the 
Community; 
• the extent to which structural 
differences in employment be­
tween Member States persist, 
or are converging, as the Com­
munity integrates; 
• whether employment growth in 
different sectors is affected by 
changes in the economic cli­
mate, or whether trends persist 
through good years and bad; 
-159 
Chapter 8 Where has job growth and decline occurred? 
Data on employment 
The data on employment in detailed sectors of activity -2-
NACE 2-digit — are derived from the Community Labour 
Force Survey and are, therefore, based on only a sample 
of those in employment. The figures are likely, for this 
reason, to give less reliable results the finer the level of 
disaggregation. This applies particularly to sectors in 
which the numbers employed are small. (More detailed 
and more reliable figures are available for employment 
in industry, but these are less up-to-date, do not cover all 
Member States in equal detail and, of course, leave 
services out of account where most of the job creation has 
occurred.) 
For the Community as a whole, however, the margin of 
error is likely to be reduced since the absolute size of 
sample is much larger and since any errors at the Member 
State level may well tend to offset each other. For one 
major country, Italy, however, no comparable data are 
available at this level of detail, while for Portugal, 
although data exist, for a number of sectors they vary by 
so much from year to year that there are serious doubts 
about their reliability as indicators of changes over time. 
In order to have a complete set of data covering the 
Community as a whole for 1992, however, the figures for 
Italy at the NACE 2-digit level have been imputed from 
the NACE l-digit figures (for 11 sectors) which are avail­
able, on the basis of the average distribution of 
employment within NACE l-digit sectors which applies 
for the rest of the Community. Although this assumption 
is unlikely to be valid in most cases, the error which this 
implies for the Community totals ought to be relatively 
small — and certainly smaller than most previous esti­
mates which have been made at this level of 
disaggregation. 
For Portugal, the 1992 data have been incorporated into 
the Community totals for 1992, though these should be 
regarded perhaps as more indicative than for the other 
countries. 
The analysis of employment growth is, therefore, for the 
most part restricted to 10 Community countries. 
The data used to compare the structure of employment in 
the Community with that in the US, Japan and the EFTA 
countries, are taken from the series published by OECD 
based on the ISIC (international standard industrial 
classification) division of activities into broad sectors. 
This has involved some estimation to adjust for breaks in 
the series in respect of a number of countries, especially 
a few Member States and the EFTA countries. Neverthe­
less, the figures ought to give a reasonably reliable 
indication of the comparative changes which occurred 
over the period 1970 to 1991. • the extent to which the much-
discussed shift in demand from 
low to high skilled jobs is ac­
tually happening; 
• whether there is a marked dif­
ference between the jobs which 
men and women do. 
The chapter presents the available 
evidence, first, on the relative im­
portance of different sectors as 
sources of employment in 1992 and 
the differences which exist between 
Member States. Secondly, it exam­
ines the detailed structural changes 
in employment which took place in 
the Community between 1985 and 
1992, looking separately at periods 
of high and low growth. Thirdly, 
it compares long-term sectoral 
changes in employment in the 
Community with those in other 
developed parts of the world. 
Fourthly, it examines the evidence 
on occupational changes and the 
changing demand for skills. 
Structure of 
employment in the 
Community in 1992 
While it is well known that services 
are now the major source of jobs in 
the Community, less well known, 
primarily because consistent data 
have not been available before, 
is the relative scale of employ­
ment in different activities within 
services — or even within industry 
— and how this compares between 
Member States. This section, there­
fore, examines the numbers of 
people employed in different acti­
vities in 1992 and how this varies 
across Member States. 
At the broad sectoral level, the de­
cline in agriculture is illustrated by 
the fact that it now accounts for 
significantly less employment in 
160 
Chapter 8 Where has job growth and decline occurred*: 
the Community as a whole than 
the construction sector — which 
employed some 772% of the work­
force in 1992. Moreover, this is true 
in all Member States except Greece, 
Ireland, Portugal and Spain, where 
the numbers working in each of 
the two sectors was about the 
same, at around 10% of the total 
(Graph 181). 
At the other end of the spectrum, 
business services, the fastest grow­
ing activity in the Community over 
the past decade, now employ almost 
as many people — nearly 7 million 
in 1992 (over 5% of total employ­
ment) — as agriculture, and 
significantly more than mechanical 
and electrical engineering com­
bined (see Table et the end of the 
chapter). This is true in all Member 
States, apart from Germany where 
engineering is much more import­
ant than in the rest of the 
Community. At the same time, em­
ployment in business services is 
higher in the more developed coun­
tries than in the less developed 
ones, accounting for over 7V2% of the 
total numbers in work in the 
Netherlands in 1992, for around 6% 
of the total in France and the UK, 
but for under 3V2% in Spain, Greece 
and Portugal. 
Other, rapidly developing, services 
have become important providers 
of jobs. Over 2 million people were 
employed in leisure, arts and cultu­
ral activities in the Community in 
1992 — as many as in the entire 
motor vehicle industry, and more 
than in the production of clothing 
and footwear. Travel and transport 
agencies employed over 1V2 million 
people, nearly twice as many as of­
fice machinery and instrument 
engineering combined, while al­
most as many were employed in 
sanitary services. 4V2 million people 
were employed in social and collec­
tive services — which does not include education and healthcare, 
but includes religious organisa­
tions, employers' associations and 
trade unions — one million more 
than in the food, drink and tobacco 
industry. Moreover, 50% more were 
employed in personal services, such 
as hairdressing or dry cleaning, 
than in iron and steel production. 
Differences in the structure of activ-
ity, even between countries 
at similar levels of economic devel-
opment, emphasise both the 
difficulties of generalising about 
potential areas of job creation and 
the apparent influence of institu­
tional, cultural and social factors as 
well as specific economic strengths 
and weaknesses. 
Thus a prominent feature of the 
economic strength of Germany is 
the high share of employment in 
engineering. The proportion of the 
workforce employed in the mechan­
ical and electrical engineering and 
motor vehicle industries was over 
50% higher in Germany in 1992 
than in other Member States. As a 
result, almost 40% of all those em­
ployed in these industries in the 
Community worked in Germany, 
excluding the new Lander, and well 
over 40% if these are included. 
This dominance in engineering, 
however, also results in a relatively 
high share of the workforce being 
employed in iron and steel produc­
tion and the manufacture of metal 
products — again over 50% more 
than in the rest of the Community. 
By contrast, engineering industries 
account for only a very small pro­
portion of employment in the less 
developed Member States. This is 
particularly the case in Greece, 
where only 1% of the total workforce 
were employed in the engineering 
and motor vehicle industries in 
1992 as against over 6% in the rest of the Community, and in Portugal, 
where they employed only 2% of the 
total. This compares with over 5% 
employed in textiles, clothing and 
footwear in Greece and 8V2% in 
Portugal, both considerably higher 
than the figure of only just over 2% 
in the rest of the Community. 
Within services, the importance 
of employment in retailing, as with 
clothing and footwear, seems 
inversely related to the level of 
economic development, accounting 
for a comparatively small propor­
tion of jobs in Denmark and France 
— 7% and 8V2%, respectively — as 
against over 10% in the rest of the 
Community, and over 11% in Spain, 
Italy and the UK Part of the expla­
nation for this difference — but only 
part — may lie in the fact that a 
relatively high proportion of the 
population are in employment in 
Denmark and France and, there­
fore, a given number of people 
working in retailing to service local 
needs will represent a smaller 
share of the workforce here than in 
Spain and Italy. In the UK, the high 
level of employment in this sec­
tor might be partly explained by 
the extensive use of part-time 
workers, average hours worked per 
person being over 10% lower than 
the Community average. 
Nevertheless, while retailing has 
made a major contribution to job 
growth in the past, there are clearly 
limits on it as a source of future 
employment creation as economic 
development takes place and more 
efficient ways of selling spread. 
Employment in other basic services, 
such as hotels and restaurants, also 
varies between countries, partly be­
cause of variations in employment 
rates and partly because of the com­
parative importance of tourism. 
The share in this sector was, there­
fore, relatively- high in 1992 in 
-161-
Chapter 8 Where has job growth and decline occurred? 
181 Distribution of employment by NACE 2-digit sector in the Member States, 1992 
Agriculture 
% total 
EUR12 B DK D GR E F IRL 
Energy and water 
% total 
Electricity, gas, water 
Mining, 08 refining. 
EUR12 B DK D GR E F IRL I L NL P 
Mineral extraction, chemicals 
% total 
Chemicals, man-made ffcres 
Non-met aKc mineral 
products 
Metal production 
EC12 B DK D GR E F IRL L NL P 
Metal manufacture, engineering 
% total 
instrument engineering 
Other transport 
Motor vehicles and parts 
Electrical engineering 
Office machinery 
Mechanical engineering 
Metal products 
EUR12 B 
Other manufacturing 
% total 
Other manufacturing 
Rubber and plastics 
Paper and printing 
Timber, wooden tumlture 
Leather, footwear, dothing 
Textles • 
Food, drir*, tobacco 
EUR12 B DK D GR E F IRL I L NL P 
Construction 
% total 
EUR12 B DK D GR E F IRL I L NL P 
162-
Chapter 8 Where has job growth and decline occurred? 
Distribution, hotels, catering 
% total 
Repair of consumer 
goods and vehicles 
Hotels and catering 
Retal distribution 
Wholesale distribution, 
scrap deaSoçj. agents 
EUR12 B DK D GR E F IRL I 
Transport and communications 
Communications • 
Transport support services? 
travel agents 
Airtransport 
Inland water, sea transport 
Other land transport-
RaBways EUR12 B 
Finance and business services 
% total 
Renting and teasing 
Business services, real-estate 
Insurance (except social 
insurance) 
Banking and finance — 
Other services 
Domestic services 
Personal services 
Recreational, cultural 
services 
Other pubic services 
Heath and veterinary. 
services 
Research and development 
Education 
Sanitation, cemetries EUR12 B 
% total 
30 r NL P 
EUR12 B 
Public administration 
15 
10 •••••••••IllJ 
EUR12 B DK D GR E F IRL I L NL P UK 15 
10 
- 163 
Chapter 8 Where has job growth and decline occurred? 
Employment in 
services in Germany 
Germany has a somewhat anoma­
lous position in respect of 
employment in services. The pro­
portion of the workforce employed 
in the service sector is much lower 
than would be expected given the 
advanced nature of the German 
economy and its level of income per 
head. Whereas on this basis, Ger­
many (excluding the new Lander) 
ought to be well above the Com­
munity average in terms of the 
share of employment in services, it 
is, in fact, below. It is sometimes 
suggested, however, that this is 
simply a statistical illusion and 
that much the same jobs are ac­
tually performed in Germany as 
elsewhere, but that they are lo­
cated in industrial firms rather 
than in specialised services. 
The data suggest otherwise. They 
suggest that, in a real sense, fewer 
service activities aie performed in 
Germany than in ether com­
parable European countries — or, 
at least, that fewer people are em­
ployed which might possibly be the 
result of higher productivity in ser­
vices in Germany than elsewhere. 
The major differences in the secto­
ral division of employment 
between Germany and the latter 
are not so much in business ser­
vices — where the jobs performed 
may be hived off from industry, but 
where the share of employment is 
only slightly below the Community 
average — but in such sectors as 
education, leisure, arts and cultu­
ral activities and hotels and 
restaurants. 
In the former two sectors, how­
ever, Germany showed a larger 
expansion in employment between 
1985 and 1992 than in the rest of 
the Community, so narrowing the 
structural employment differences 
between itself and other developed 
Community economies. Spain, Greece and Ireland — 5% or 
more of total employment, as 
against just over 3V2% in the rest of 
the Community — and under 3% in 
Belgium, Denmark, Germany and 
the Netherlands. 
Employment in domestic service 
follows a similar pattern with the 
share of people employed far higher 
in Spain and Portugal — accounting 
for over 2V2% of the workforce in 
1992 — than in other Member 
States. Apart from Spain and 
Portugal, only in France does do­
mestic service employment account 
for over 1%. In most of the more 
developed countries, it is V2% or 
less. The number of domestic ser­
vants was well over one million in 
the Community in 1992, almost 
40% of these being employed in 
Spain and Portugal and another 
20% in France. 
Social services show the opposite 
pattern, with employment propor­
tionately much more important in 
the more developed parts of the 
Community than in other parts, 
representing 8% of the total in 
Denmark and almost 7% in the 
Netherlands in 1992 as opposed to 
only around 1% in Greece and Spain 
and only V2% in Portugal. 
Healthcare is similar, though the dif­
ferences are less extreme. Over 8% 
of the workforce in the Netherlands 
were employed in this sector in 1992 
and over 6% in Denmark and France 
as well as in Ireland, whereas the 
figures in Greece and Spain were 
under 4%. Education shows a more 
mixed pattern. Here the proportions 
employed varied from almost 11% in 
Denmark and 9% in Belgium to 
around 5% in Greece, Spain and 
Italy, with, somewhat surprisingly, 
the figure in Germany apparently 
being under 4Va% (see Box for a 
general discussion of the low employ­
ment in services in Germany). 
-164-
Chapter 8 Where has job growth and decline occurred? 
In other service activities, apart 
from transport, there is also some 
relationship of employment to the 
level of economic development, but 
with important exceptions. In both 
banking and insurance, the share 
of employment was, not unsur­
prisingly, below the Community 
average in Greece, Spain and 
Portugal. However, it was also 
below the average in France, and 
above the Community average in 
Ireland. In leisure, arts and cultural 
activities, the relative numbers em­
ployed were relatively high in 
Denmark and the Netherlands, but 
most especially in the UK, and low 
in Belgium and Germany as well as 
in Portugal, while in Greece and 
Spain, they were around the Com­
munity average. In travel agencies, 
employment was relatively high in 
Belgium and Germany, but also in 
Greece, and relatively low in Spain 
and Portugal as well as in France. 
In estate agencies, employment 
is also low in Spain and Portugal as 
well as in Greece and Ireland, but it 
is similarly low in Germany and 
Belgium. On the other hand, it is 
high in France and, most especially 
in the UK Indeed, this country had 
over 300,000 people employed in 
this activity in 1992, as much as in 
the rest of the Community put 
together and almost as many as 
were employed in the whole of 
the air transport industry in the 
Community. Such differences 
clearly reflect institutional and 
market differences, as well as dif­
ferences in patterns of home 
ownership. 
Areas of job growth 
in recent years 
Changes in employment over the 
period 1985 to 1992 reflect well es­
tablished, long-term, structural 
changes which have resulted, in the Community as in other developed 
parts of the world, in services ac­
counting for the major share of total 
employment and agriculture and 
industry a progressively smaller 
share. 
In order to compare net job creation 
during periods of economic recovery 
and periods of recession, the change 
is analysed first, between 1985 and 
1990 when the total numbers em­
ployed in the Community as a whole 
grew by almost 2% a year and, 
secondly, between 1990 and 1992 
when numbers employed remained 
virtually unchanged. 
It should be emphasised, however, 
that the scale of relative rates of 
net job creation in these two 
periods varied significantly be­
tween Member States, partly 
reflecting differences in the timing 
of the economic cycle. The difference 
between the two periods was much more marked, for example, in the 
UK, where the downturn started 
earlier and was more pronounced 
than in other countries, than in 
Germany or Belgium, where there 
was significant growth in 1991. 
Most of the growth in the number 
of jobs between 1985 and 1990 
occurred in services. Numbers em­
ployed in services went up, on 
average, by over 2V2% a year, while 
in the rest of the economy they rose 
by less than 72% a year — a small 
increase in industry being more 
than offset by the decline in agricul­
ture. However, there were large 
variations in the rate of change 
within industry and services as a 
whole, as well as between different 
parts of the Community. 
In half of the Member States, ser­
vices accounted for all, or more than 
all, of the total increase in employ­
ment between 1985 and 1990. In 
182 Contribution of broad sectors to employment growth in 
the Member States, 1985 to 1990 
Average annual change (% total employment in 1985) 
2 h -l 4 
EUR12 B DK GR 
- 165 
Chapter 8 Where has job growth and decline occurred? 
183 Changes in employment in NACE 2-digit sectors in the Community, 
1985-90 and 1990-92 
Water transport 
Mining elc. 
Mela' :xoduc*jon 
Railways 
Agrcurtym 
Testes 
Leather, footwear, clothing 
Other transport 
Repatr (pods, verges 
Food, dnnk, tobacco 
Electrlcrîy. gas, water 
Chemicals, men-mad* f.br« 
Personal serves* 
Instrument enoineenng 
Metai products 
Other manufacturing 
Commun icatfon 
Non-metafcc mtnara' prods 
Education 
Electrical engineenng 
Heath, veterinary 
Paper, printing 
Timber, furniture 
Domestic services 
Ratal d«trtoutk>n 
Public edmjntstraiton 
Banking and finance 
Motor vehicles 
Insurance 
Wholesale distribution 
Construction 
HoteJ and catering 
Airtransport 
Rubber, plasics 
Diplomate services 
Mechanical engineering 
Other tend transport 
Research & develop mem 
Offace machinery 
Recreation servces 
Other pubte servces 
Travel services 
Renting, leasing 
Sanitation services 
Business servces 
-4 4 8 
Average annual change {%) 
166 
Chapter 8 Where has job growth and decline occurred? 
Ireland and the UK, services were 
responsible for around 90% or more 
of net job creation, in Germany, the 
Netherlands and Portugal, for 80% 
and in Spain for 70% (Graph 182). 
These last two countries, were the 
only ones, apart from Germany, in 
which over 30% of the new jobs cre­
ated were in industry — in 
Portugal, 35%, in Spain, 44%. 
Over the Community as a whole, 
business services showed the lar­
gest rate of increase in employment 
between 1985 and 1990 — 7V2% a 
year — and made the largest con­
tribution to employment growth. 
On average, almost one in five new 
jobs were created in this sector with 
all Member States experiencing 
substantial gains. Similarly, the 
numbers employed in social service-
s in sanitary services, and in the 
arts, leisure and cultural sector in­
creased by around 5% a year (Graph 
183). 
Other service activities experien­
cing high employment growth over 
this period included travel agents 
and estate agents — with rates of 
over 5% a year on average — re­
search and development institutes 
and road transport (buses, coaches 
and lorries) — with rates of around 
3V2% a year. Together, these service 
sectors were also the one which 
showed relatively high growth of 
employment in each of the Member 
States over this period, the only ex­
ception being in Greece (Graph 
184). 
On the other hand, the largest sec­
tor of employment decline over this 
period was also in the services area, 
namely in sea and inland water 
transport where the numbers em­
ployed fell by almost 6% a year 
between 1985 and 1990. Similarly 
there was a general fall in employ­
ment in railways, even in countries 
like Denmark, the Netherlands and France where there was significant 
construction of new lines, with the 
decline averaging 3% a year over 
the Community as a whole. Num­
bers employed in the repair of cars 
and consumer goods also went 
down, if by much less — the decline 
averaging V2% a year — though falls 
in the more developed countries 
were offset by increases in Spain 
and Greece. 
The rate of job loss in the two trans­
port areas was comparable with 
that in mining, iron and steel pro­
duction and agriculture, all of which 
showed falls of 3% a year or more 
over the Community as a whole dur­
ing this period with few countries 
escaping significant job losses. Not 
all Member States followed this pat­
tern, however, and in both the 
Netherlands and the UK, employ­
ment in agriculture went up 
between 1985 and 1990. Indeed, the UK was the only country to show a 
rise in employment in iron and steel 
(which may partly reflect the 
massive fall which occurred in ear­
lier years). 
Other industries showing job losses 
over the 1985 - 1990 period of high 
overall employment growth were 
clothing and footwear — though not 
in Spain and Greece where employ­
ment rose considerably (by 4% and 
5% a year, respectively), textiles 
(though not in Ireland) and the 
manufacture of ships and trains 
(though not in Greece, Ireland and 
the UK). 
These, together with food, drink 
and tobacco — where the fall in 
numbers of jobs was far from 
general — however, were the only 
industrial sectors where the num­
bers employed decreased over this 
period. In no less than 14 out of the 
184 Change in employment in high» medium and low growth 
service sectors in the Member States, 1985 to 1990 
Average annual change (%) 
9 r 
mh Low Medium High 
5 r 
m& T 9 
167 
Chapter 8 Where has job growth and decline occurred? 
185 Change in employment in high, medium and low growth 
industrial sectors in the Member States, 1985 to 1990 
Average annua) change {%) Low fa Medium • High 
n 8 
A 4 
186 Contribution of broad sectors to employment growth in 
the Member States, 1990 to 1992 
Average annual change {% total employment in 1990) 
Agriculture • Industry H Services 
3 \-
1 h 
-1 r-
-3 r -i 5 
A 3 
-\ 1 
H -3 
-5 
EUR12 B DK D GR E F IRL I L NL P UK 22 industrial sectors, employment 
increased. Indeed, the rate of 
net job creation in office machin­
ery and mechanical engineering 
averaged 3% a year across the 
Community — more than in many 
services — and the rubber and 
plastics and construction industry 
averaged only just under this 
figure. Ireland was the only 
country which experienced a signi­
ficant decline in construction 
employment. 
Together with the motor vehicle, 
paper and printing and wood and 
timber industries — in all of which 
the numbers employed rose by over 
2% a year between 1985 and 1990 
— these 7 high employment growth 
industries were responsible for 
almost a quarter of the total in­
crease in employment in the 
Community during the recovery 
years. Construction alone was re­
sponsible for over IGv of the 
increase for the Community as a 
whole and accounted for almost 
25% of the substantial expansion in 
jobs which occurred in Spain, and 
for around 20% of the relatively 
small rises in employment that oc­
curred in France and Belgium. 
Greece and Ireland apart, the 
relative pattern of employment 
change across industries, as for ser­
vice sectors, was broadly similar in 
all Member States over this period 
(Graph 185). 
Taking together all the 14 indus­
trial sectors where employment 
rose, their contribution to employ­
ment growth over this period 
averaged 30%. In Germany and 
Spain it was over 40%. Although 
this is clearly less than the 
contribution of services, it is 
nevertheless a significant ele­
ment in job creation, the extent 
of which tends to be under-
recognised. 
-168 
Chapter 8 Where has job growth and decline occurred? 
1990-1992 
recession period 
A major change in the relative con­
tribution of industry and services, 
took place, however, in the post-
1990 recession. Between 1990 and 
1992, while the total numbers em­
ployed remained visually constant 
over the Community as a whole, 
employment in industry fell signifi­
cantly, reinforcing the continued 
decline in agriculture. The two sec­
tors together were responsible for a 
reduction in employment of almost 
1% a year over these two years, off­
setting all of the net job creation in 
services during the period (Graph 
186). 
Only Belgium, Germany, Luxem­
bourg, Ireland and Italy showed 
any employment growth at all in 
industry over this period. Only in 
the first three countries was this 
large enough to compensate for the 
loss of jobs in agriculture. Only in 
Belgium, where the overall rate of 
employment growth was actually 
higher during these two years than 
it had been over the preceding five 
— the only country apart from 
Luxembourg where this was true 
— did the increase in industrial 
jobs average more than V2% a year. 
Only five of the 22 industrial sec­
tors showed any increase in 
employment at all between 1990 
and 1992, and two of these — iron 
and steel and food, drink and to­
bacco — were industries which had 
shown a loss of jobs during the 
growth period. All of the industrial 
sectors in which employment rose 
by over 2% a year over the pre­
ceding five years (apart from 
mechanical engineering where em­
ployment continued to increase) 
experienced substantial job losses. 
This was particularly so in the pro­
duction of office machinery, where the numbers employed fell sharply 
— by an average of 6% a year. 
While most industrial sectors 
showed a reduction in employment 
between 1990 and 1992, the rever­
sal of fortunes was most marked in 
what had been the high employ­
ment growth sectors between 1985 
and 1990 (those with annual 
growth of over 2%). These sectors 
experienced an average decline in 
employment of 1V2% a year in the 
later period, as compared with an 
average growth of over 2V2% a year 
during the years of high economic 
growth. By contrast, the medium 
employment growth industrial sec­
tors (all others with positive 
employment gains) went from an 
average growth of 1% a year to a 
fall of just under 1V2% and the de­
clining sectors from an average 
reduction of 2V2% a year to one of 
over 3%. In half of the 10 Member States for 
which comparisons over time are 
possible — Belgium, Germany, 
Spain, Ireland and, above all, 
Luxembourg — employment in 
what had been the high growth in­
dustrial sectors during 1985 to 1990 
continued to increase between 1990 
and 1992 (Graph 187). Only in 
Belgium and Luxembourg, how­
ever, did the rise average more than 
1% a year, while employment in 
Germany grew by more over this 
period in the slow employment 
growth industries — in iron and 
steel, in particular — than in the 
high growth ones. 
Among the other five Member 
States in which employment in high 
growth industries fell, the UK and 
the Netherlands registered a de­
cline of over 5% a year in these 
sectors — more than in other indus­
tries in which over the preceding 
187 Change in employment in high, medium and low growth 
industrial sectors in the Member States, 1990 to 1992 
Average annual change (%) 
8 r 
4 r Medium 
-4 r 
-8 1 8 
H 4 
-169 
Chapter 8 Where has job growth and decline occurred? 
five years there had been much less 
of an increase in employment or a 
reduction. 
Unlike the industrial sectors, em­
ployment in services continued to 
increase in the Community be­
tween 1990 and 1992. Only 9 of the 
25 service activities showed a fall 
in employment over this period, 
and two of these — sea and inland 
waterways transport and railways 
— had also shown a decline during 
the growth period. On the other 
hand, three of these 9 sectors — 
estate agents, travel agents and 
research and development in­
stitutes — had been among the 8 
fastest growing sectors in terms of 
jobs between 1985 and 1990. More­
over three more of the 9 — retail 
distribution, insurance and domes­
tic services — had experienced 
employment growth of more than 
2% a year over the preceding five 
years. The remaining area of ser­
vice activity in which employment 
in the Community fell — communi­
cations — is of particular note, 
given the significance of the infor­
mation technological revolution for 
long-term employment prospects. 
As in industry, the change in em­
ployment experienced between the 
period of growth and period of re­
cession was most pronounced for 
what had been the fastest growing 
services. Those activities where 
employment rose by at least 3% a 
year between 1985 and 1990 
showed a reduction in employment 
growth from an average of over 
5V2% a year to one of under 2V2% 
between the two periods (Graph 
188). In contrast, however, the low 
growth service activities — where 
employment rose by 2% or less 
between 1985 and 1990 — still 
maintained average growth of 
close to 1V2% a year. This latter 
group of activities includes such 
services as education, healthcare and personal services (where the 
growth in demand is likely to be 
relatively stable over time — un­
less governments choose to vary 
their expenditure as part of fiscal 
policy). 
The pattern of change among differ­
ent Member States shows a mixed 
picture. In most countries, what 
had been the fastest growing acti­
vities between 1985 and 1990 
showed the largest fall in the rate of 
job creation between 1990 and 1992. 
However, three of the countries 
where services are relatively under­
developed — Spain, Greece and 
Germany — experienced a conti­
nuing increase in employment in 
these activities on a significant 
scale (by 2V2% a year in Greece, over 
3% in Germany and 4% in Spain). 
Such services continued to increase, 
however, in Belgium and France 
where services are already highly 
developed. At the same time, in most Member 
States — the exceptions being 
Ireland, Luxembourg and the UK— 
there was a continuing increase in 
employment in what had previously 
been low growth services. In five 
Member States, the increase was 
1V2% a year or more. 
In most Member States, business 
services continued to be an import­
ant area ofjob growth between 1990 
and 1992, though in the two coun­
tries where such activities had 
developed by most in the past, the 
Netherlands and the UK, employ­
ment fell. By contrast, retailing, 
which had been the second largest 
provider of jobs between 1985 and 
1990, suffered a reduction in 
employment in half of the coun­
tries and an overall decline in all 
Member States taken together, 
presumably reflecting the slow­
down in consumer spending. On the 
other hand, employment in public 
188 Change in employment in high, medium and low growth 
service sectors in the Member States, 1990 to 1992 
Average annual change (%) 
7 r 
5 r Medium 
3 r-
-1 r 
-3 
-170 
Chapter 8 Where has job growth and decline occurred? 
administration, education, health­
care and communal services — 
together responsible for around 
30% of net job creation in the earlier 
period — continued to expand in 
most parts of the Community, 
with only few exceptions (public ad­
ministration in Belgium, Germany 
and Denmark, education in 
Luxembourg, Ireland and the UK, 
communal services in Greece and 
Ireland). 
Employment growth 
1970 to 1991 in the 
Community and 
elsewhere 
It is not possible to compare employ­
ment developments between the 
Community and other parts of the 
world at the same level of detail as 
above. However, broader sectoral 
data suggest that the general areas 
ofjob growth have been much the 
same in the Community as in the 
US and Japan as well as in the 
EFTA countries and, indeed, that 
the pattern of employment change 
is very similar in these different 
economies. 
The most striking difference be­
tween the Community and the 
other economies — specifically the 
US and Japan — is not in terms of 
the sectors in which employment 
has risen or fallen, but in the scale 
of the job losses which have 
occurred in declining sectors. 
Between 1970 and 1991, growth of 
employment in the Community 
averaged just over V2% a year. This 
was marginally below the growth 
rate in EFTA countries, only 
slightly above half the rate in Japan 
and a third of the rate in the US. 
All of the net addition to jobs, and 
more, in the Community over these 21 years was in services, which 
alone added over 1% a year to total 
employment (Graph 189). This, 
however, was precisely the same in 
the EFTA countries and Japan, 
where other sectors were respon­
sible for a small decline in 
employment. In the US, services 
were an even larger contributor to 
the rise in employment (adding 
almost 2% a year to the total in 
work), but there was also a slight 
increase in employment in the rest 
of the economy. 
Of the additional jobs created in 
services in the Community, half 
were in communal and personal 
services — education, healthcare 
and public administration as well 
as such jobs as hairdressing or 
cleaning (labelled "non-market ser­
vices" in the graph). This was also 
the case outside the Community. In 
the US, they alone added almost 1% 
a year to total employment growth over the period, in the EFTA coun­
tries and Japan, around V2% a year, 
as in the Community (Graph 190). 
How far the fact that a higher pro­
portion of such jobs are performed 
in the public sector in the Com­
munity and the EFTA countries 
than in the US has contributed to 
the difference in employment 
growth is a matter of debate. In 
Japan, the public sector is an even 
less important supplier of these ser­
vices than in the US, yet growth of 
employment was marginally lower 
in this area than in Europe. 
Employment in private health ser­
vices expanded particularly fast in 
the US, while jobs in personal and 
domestic services also grew much 
more than in Europe. 
As well as the scale of the additional 
employment created in services, 
there are equally important 
189 Contribution of broad sectors to employment growth in 
the Community and elsewhere, 1970 to 1991 
Average annual change (% total employment in 1970) 
1.5 hi 
1 h 
0.5 
-0.5 h 1.5 
H 1 
0.5 
-0.5 
EUR12 EFTA US Japan 
-171 
Chapter 8 Where has job growth and decline occurred? 
differences in other areas contribut­
ing to the higher rate ofjob creation 
in the US than in Europe. In par­
ticular, whereas employment in 
agriculture, which was already 
relatively low, remained broadly 
unchanged over the last two de­
cades, it fell significantly and 
continuously in both the Com­
munity and the EFTA countries — 
in the former case, causing an aver­
age loss of jobs of over 400 thousand 
a year or well over 8 million over the 
21 years as a whole. In Japan, the 
decline in agriculture was even 
more significant, equivalent to a re­
duction in total employment of 
almost 72% a year. 
In Japan, however, employment in 
industry expanded by almost as 
much as that in agriculture fell. In­
dustrial employment also 103e in 
the US. In the Community, how­
ever, as in the EFTA countries, 
employment in industry declined to add to the jobs lost in agriculture. 
In these two sectors combined, 
therefore, the overall job loss in the 
Community averaged some 
750 thousand a year, making a total 
reduction of almost 16 million be­
tween 1970 and 1991. Although 
there was an increase in service jobs 
averaging almost 1.4 million a 
year, which more than offset this 
reduction, this still left overall em­
ployment growth in the Community 
lower than in Japan and markedly 
less than in the US. 
Job losses in agriculture and indus­
try have, therefore, been a major 
cause of low employment creation in 
the Community over the past 20 
years or so. The fact that such jobs 
were predominantly private sector 
ones has been responsible, in an 
arithmetic sense, for the observed 
tendency for the public sector to 
become the main source of net job 
creation. However, employment 
190 Contribution of sectors to employment growth in the 
Community and elsewhere, 1970 to 1991 
-1 -0.5 0.5 
Non-market services 
Distribution services, hotels 
Financial services 
Transport and communications 
Electricity/gas/water 
Construction 
Mining 
Manufacturing 
Agriculture 
-0.5 0 0.5 1 
Average annual change (% total employment in 1970) growth in services emanating from 
the private sector — in financial 
and business services and distribu­
tion and catering, in particular — 
has been more significant in both 
the Community and the US than 
the growth in communal services. 
Changes in sectoral 
growth between 
1970 and 1991 
Dividing the years between 1970 
and 1991 into three sub-periods, 
1970 to 1980,1980 to 1985 and 1985 
to 1991, provides further insight 
into employment growth under dif­
ferent economic conditions. The 
overall rate ofjob creation in the 
Community was negative in the 
period 1980 to 1985 and almost 
twice as high between 1985 and 
1991 (1V2% a year) as between 1970 
and 1980. 
The importance of communal and 
personal services as a source of em­
ployment growth between 1970 and 
1991 was common throughout the 
Community. In the more developed 
countries, in particular, this was 
the main area of net job creation. In 
each of the three periods, moreover, 
communal and personal services 
generated much the same expan­
sion of employment (Graph 191). 
In both the US and the EFTA coun­
tries, where employment growth 
was more stable over the period as 
a whole than in the Community, 
there was slightly more variation in 
the contribution of communal and 
personal services to the overall rise 
in employment — in the US, it 
ranged from just over V2% a year in 
the first half of the 1980s to 1% a 
year in the 1970s. 
Financial and business services also 
represented a relatively consistent 
172-
Chapter 8 Where has job growth and decline occurred? 
191 Contribution of sectors to employment growth in the Community, 
EFTA, Japan and US, 1970 to 1991 
Apiculture 
Mining 
Manufacturing 
Electricity, gas, water 
Construction 
Distribution services, hotels 
Transport, communications 
Financial services 
Non-market services 
AgriculUire 
Mining 
Manufacturing 
Electricity, gas, water 
Construction 
Distribution services, hotels 
Transport, communications 
Financial services 
Non-market services 
Agriculture 
Mining 
Manufacturing 
Electricity, gas, water 
Construction 
Distribution services, hotels 
Transport, communications 
Financial services 
Non-market services -0.5 0.5 
•1 -0.5 0 0.5 
Average annual change (% total employment in base year) 
173 
Chapter 8 Where has job growth and decline occurred? 
source of employment creation in 
each of the three sub-periods in the 
Community. As in Japan, it was 
more important between 1985 and 
1991 than earlier, while in the US, 
its main contribution to growth oc­
curred between 1980 and 1985. 
Distribution and catering also gener­
ated jobs in each of the sub-periods 
in all of the countries, though, like 
financial services, the increase was 
larger in the Community in the 
period 1985 to 1991 when the overall 
rate ofjob creation was higher. 
However, the major difference for 
the Community between the last 
period and the earlier ones was the 
change in employment in industry. 
Between 1985 and 1991, it was a 
source of employment growth, al­
beit relatively small, whereas in 
both the earlier periods it was a 
source ofjob loss. Indeed, some two-
thirds of the overall difference in 
net job creation between the first 
and second halves of the 1980s can 
be explained by this turn-around as 
can over half of the difference be­
tween the second half of the 1980s 
and the 1970s. 
This applies equally to individual 
Member States. In all cases — ex­
cept the Netherlands, where 
employment growth accelerated 
significantly in the latter part of the 
1980s, partly for statistical reasons 
— the major source of the increase 
was a higher rate of net job creation 
(or a lower rate of net job destruc­
tion) in industry, rather than 
increased employment growth in 
services. In Italy and the UK, the 
improved performance of industry 
in the later period explains all of the 
difference in employment growth 
(even though industrial employ­
ment still fell in the UK) and in the 
other countries, more than half of 
the difference. In the Netherlands 
— the only exception to this general 
pattern — employment in industry also contributed significantly to the 
overall acceleration in job creation, 
but the numbers employed in ser­
vices, many of them working 
part-time, jumped even more. (The 
growth in employment in the 
Netherlands, however, is partly a 
consequence of the change in the 
method of defining employment in 
1987.) 
This has implications for future em­
ployment developments. While 
industry cannot be regarded as a 
major direct source of employment 
growth in future years, changes 
in this sector are, nevertheless, 
likely to make a significant con­
tribution to the net rate of overall 
job creation. In other words, al­
though services will continue to 
provide most, if not all, of the new 
jobs, the extent of the increase in 
total employment will also depend 
on whether or not jobs are being lost 
elsewhere in the economy. 
This implies, in turn, that policy 
needs to focus on all sectors of activ­
ity when attempting to identify and 
encourage the generation of jobs. 
Indeed, even within industry, there 
are substantial differences in the 
potential for generating employ­
ment between growing and 
declining sectors. 
Industry, moreover, should not be 
equated solely with manufacturing, 
even though it is the major element. 
A significant part of the difference 
in the change in employment be­
tween the two halves of the 1980s 
was due to construction, which shed 
jobs between 1980 and 1985 but 
which was a source ofjob creation 
in the following six years. Indeed in 
Spain, the turn-round in construc­
tion accounted for a difference in 
the growth of total employment of 
over 1% a year between these two 
periods, almost as much as the 
turn-round in manufacturing. Changing skill needs 
in the Community 
Analyses of changes in the occupa­
tional structure of employment 
which have occurred in the Com­
munity in the past are possible only 
in broad terms. Differences in the 
structure of jobs between Member 
States cannot, as yet, be reliably 
identified. 
Data on occupations are limited, 
and difficult to develop, partly be­
cause many jobs, especially those 
involving multiple tasks, cannot be 
easily categorised. Moreover, jobs 
which did not exist before are 
emerging all the time, while the na­
ture of many existing jobs changes 
as production techniques alter, and 
as new goods and services are cre­
ated. Making comparisons between 
countries adds an additional diffi­
culty, not only because of problems 
of comparability between classifica­
tion systems, but also because 
perceptions of particular jobs may 
not be the same, even between coun­
tries with similar systems of 
production. 
What is possible given the data 
available is to examine changes 
over the period 1983 to 1991 in the 
relative importance of broad groups 
of occupations in Member States. 
Although these data are based on 
an old system of classification 
(ISCO 68), which has since been 
replaced, and are not very com­
parable between countries, they, 
nevertheless, give some indications 
of shifts within countries. They also 
enable comparisons to be made of 
the occupational distribution of 
men and women. 
Between 1983 and 1991, the num­
bers of people classified as 
professional and technical workers 
in the Community expanded by over 
-174-
Chapter 8 Where has job growth and decline occurred? 
2V2% a year. This compares with a 
growth of total employment of just 
over 1% a year and is significantly 
more than for any other broad occu­
pational group. During the same 
period, employment of agricultural 
workers fell by some 2V2% a year, 
while the number of production and 
transport workers increased by only 
V2% a year. 
Professional and technical jobs, 
which accounted for only 15% or so 
of the total number of jobs in 1983 
were, accordingly, responsible for 
around 40% of the overall rise in 
employment over the period. By 
contrast, production and transport 
jobs, comprising the largest single 
occupational group — a third of the 
total — accounted for under 15% of 
the rise. 
The implied shift in occupational 
structure was, therefore, significant 
and conforms with expectations—in 
the sense that there was a marked 
growth in more skilled relative to 
less skilled jobs. A further dimension 
to the picture, however, is revealed if 
the period is divided into sub-periods 
according to the overall growth of 
employment — specifically, the low 
growth years between 1983 and 1985 
and again between 1990 and 1991 
and the high growth years between 
1985 and 1990. 
In both periods of low employment 
and output growth, the shift in jobs 
towards professional and technical 
workers was much more pro­
nounced than in the high growth 
years. Between 1983 and 1985, the 
increase in numbers in this occupa­
tional group occurred at only a 
slightly lower rate than in the sub­
sequent five years and accounted 
for 65% of all the additional jobs 
created in the Community. In 1991, 
this group was responsible for all of 
the increase in employment and 
more, the numbers expanding by almost 2% as against only a margi­
nal rise in total employment. By 
contrast, production and transport 
jobs declined in both periods (Graph 
192). 
Between 1985 and 1990, on the 
other hand, while professional and 
technical jobs increased at a faster 
rate than for other groups, the dif­
ference was much less marked. 
Professional and technical workers 
accounted for only just over 30% of 
the overall increase in employment 
in this period — about the same 
proportion as clerical and related 
jobs. Moreover, jobs for production 
and transport workers expanded by 
1% a year over this period and were 
responsible for over 20% of all addi­
tional jobs created. At the same 
time, the employment of both sales 
and service workers increased at a 
higher rate than the total. The shift 
in occupational structure towards 
higher skilled jobs was, therefore, significantly less pronounced in the 
high growth years than in the low 
growth years. 
Much the same pattern is evident 
within most individual Member 
States. With the exception of 
Ireland and the Benelux countries, 
the relative expansion of profes­
sional and technical jobs was far 
larger in periods of low employment 
growth than between 1985 and 
1990 (Graph 193). In both the two 
low growth periods, a substantial 
majority of the jobs created in 
Germany and France, for example, 
were for professional and technical 
workers whereas in the high growth 
period, they accounted for well 
under 40%. Similarly, employment 
among production and transport 
workers fell in most countries in 
both low growth periods, but in­
creased between 1985 and 1990 in 
all but Denmark, France and 
Luxembourg — where, in each case, 
192 Employment growth by occupation in the Community 
(EUR9), 1983 to 1991 
-0.5 -0.25 0 0.25 0.5 
EURO • B, DK. D, GR F, iRL, L, NL. (x Average annual change (% total employment in base year) 
-175 
Chapter 8 Where has job growth and decline occurred? 
193 Employment growth by professional/technical/managerial 
and other occupations in the Member States, 1983 to 1991 
Average annual change (% total employment in base year) 
•4 r 
3 r 
2 r 
•i 1 
-1 r 
-2 
B DK t I» E F A t NI P I» 8 DK D OR E F HL L NL P UK fl D« H « E F H. I M. P K 
194 Employment growth of men by occupation in the 
Community (EUR9), 1983 to 1991 
-0.5 -0.25 0 0.25 0.5 0.75 1 
EUR» « B, DK. o, GR, F «i, L NL uK Avera9e annual change {% total male employment in base year) employment growth was much less 
than the Community average. 
Two main points appear to emerge 
from this evidence. First, that in 
periods of low levels of economic 
activity, and low or no employment 
growth, it is the lower grade jobs 
which tend to be cut back and con­
sequently the less skilled workers 
who most suffer job loss. By con­
trast, in such periods, the most 
highly skilled jobs are little affected 
and continue to expand in numbers. 
Secondly, in periods of economic 
recovery and high rates of employ­
ment creation, lower skilled jobs 
account for a relatively high propor­
tion of overall employment growth 
and less skilled workers benefit 
most. The scale of the change in the 
occupational structure of jobs and of 
the shift towards higher skilled oc­
cupations, therefore, seems to 
depend greatly on the economic cli­
mate and the overall rate of net job 
creation. 
Thus, while it is the case that struc­
tural changes are likely to increase 
the demand for highly skilled 
workers in the Community in future 
years, the volume of lower skilled 
jobs is likely to be greatly affected by 
economic growth and the overall rate 
ofjob creation. If growth is low, then 
the problems faced by less skilled 
workers of remaining in employ­
ment, or of finding new jobs, will 
become more acute. 
Conversely, if rates of growth simi­
lar to those attained over the period 
1985 to 1990 could be achieved in 
the future, there may be fewer prob­
lems of mismatches between the 
skills demanded of workers and the 
jobs available on the labour market 
than is sometimes claimed. 
This assessment should be tem­
pered by the fact that, with the data 
- 176 
Chapter 8 Where has job growth and decline occurred? 
available, it is only possible to ana­
lyse changes in broad categories of 
occupation. Within these broad 
groups, the specific skills offered 
and demanded may vary substan­
tially, leaving room for greater 
mismatch. 
Occupational shifts 
for men and women 
The shift towards more highly 
skilled jobs and the variation be­
tween high and low growth periods 
is evident for both men and women, 
though it is particularly pro­
nounced for men. 
In both the low growth periods, 
1983 to 1985 and 1990 to 1991, pro-
fessional and technical jobs 
accounted for all the increase in em­
ployment of men which occurred in 
the Community. In the high growth 
period, between 1985 and 1990, 
they accounted for under a third of 
net job creation. Indeed, the in­
crease in such jobs was less than 
over the preceding two years and 
less than for production and trans­
port workers, who experienced a 
significant decline in employment 
in the other years (Graph 194). 
This pattern is repeated in all Mem­
ber States, except Belgium, where 
according to LFS data, employment 
ofmen actually declined slightly be­
tween 1985 and 1990. The most 
extreme case is the UK, where em­
ployment of professional and 
technical workers contributed only 
just over 20% of the total jobs cre­
ated for men over the high growth 
period, while employment of pro­
duction and transport workers was 
responsible for over a third and 
clerical workers for almost 40% 
(Graph 195). 
For women, the growth in profes­
sional and technical jobs was 195 Employment growth of men by professional/technical/ 
managerial and other occupations in the Member States, 
1983 to 1991 
Average annual change (% total male employment in base year) 
6 r 
Other 
Prof/tec rvmanag 
H -2 
B OK 0 <9H I F R I «. P Ul BDKOGRE F «. L M. P UK 8 DK D 0« E FIBLLMLPUK 
196 Employment growth of women by occupation in the 
Community (EUR9), 1983 to 1991 
-0.5 -0.25 0.25 0.5 0.75 
Production & related 
Agricultural & 
related 1983-85 
1985-90 
1990-91 
-0.5 -0.25 0 0.25 0.5 0.75 1 
EUR9-B,DK.D.QR.F. iRL.L.NL.UK Average annual change {% total female employment in base year) 
177-
Chapter 8 Where has job growth and decline occurred? 
197 Employment growth of women by professional/technical/ 
managerial and other occupations in the Member States, 
1983 to 1991 
6 r Average annual change (% total female employment in base year) 
-2 -l 6 
H 4 
1983-85 1985-90 1990-91 -2 
DKDOBEFH.tM.PUK BDKDGAEFBLLNLPUK BDKDGREFWLl.Nt.PUK relatively stable over the whole 
period, contributing around V2% a 
year to the overall increase in em­
ployment in the Community. 
Although such jobs accounted for a 
higher proportion of employment 
growth between 1983 and 1985 
than over the succeeding five years, 
the difference was only small (36% 
as against 32%). Moreover in the 
earlier, lower growth period as well 
as in the higher growth period, 
clerical jobs made the largest con­
tribution to the overall expansion in 
the employment of women — over 
40% in both cases (Graph 196). 
In 1991, however, when the employ­
ment of women rose by only V2% in 
the Community and fell in the UK, 
Greece and Denmark, almost all of 
the net addition to jobs was for pro­
fessional and technical workers. At 
the same time, employment of cleri­
cal workers — the largest area of 
new job creation in previous years 
— declined. 
198 Employment by occupation in the Community (EURIO), 
1992 
Craft & related trades 
Clerks 
Technicians 
Service workers 
Professkxiais 
Elementary occupaSons 
Plant & machine operators 
Legislators and managers 
Agriculture & Fisheries 
Armed forces 
EUR10 = B, DK. D, E. F, I. L. NL, P, UK 10 15 20 
% total employment This decline was especially marked 
in tne UK and Denmark, though in 
the latter, unlike the former, jobs for 
professional and technical workers 
were also reduced. In each case, the 
loss of jobs among clerical workers 
was responsible for a reduction of 
over V2% in the total employment of 
women in 1991, a substantial rever­
sal of the growth over the preceding 
5 years (Graph 197). In Greece, on 
the other hand, where employment 
of women also fell in 1991, this occu­
pational group was the only one to 
show any increase. 
Unfortunately, the change in the 
system of classification, however 
beneficial for other purposes, 
means that it is not possible to 
examine whether the shifts in the 
occupational structure of employ­
ment evident in 1991 continued 
in 1992 when employment in the 
Community declined. 
178-
Chapter 8 Where has job growth and decline occurred? 
Occupations of 
men and women 
The state of the data does not enable 
the occupational structure of the 
workforce to be compared reliably 
between Member States. Apparent 
substantial differences between 
economies with similar sectoral di­
visions of employment are likely to 
be at least partly explained by stat­
istical inconsistencies. For the 
Community as a whole, however, 
these inconsistencies may offset one 
another, so that there is more 
chance of the apparent distribution 
of employment between occupa­
tions being closer to reality. 
On the basis of the new international 
standard system of classifying occu­
pations (ISCO 88), it is possible to see 
that, in 1992, 8% ofthose in employ­
ment were legislators or managers, 
more than half of them self-em­
ployed, 11% were professionals and 
12% technicians. These three 
categories together, therefore, ac­
counted for almost a third of the total 
number of people in work (Graph 
198). 
At the other end of the scale, 10% of 
those employed were in so-called 
elementary occupations, 3% were 
agricultural workers or fishermen, 
9% plant or machine operators and 
15V2% craft and related workers. 
The rest were classified as clerks 
(1372%) or service workers (11V2%). 
Although the proportion of jobs 
classified as managerial, profes­
sional or technical was around 
the Community average in most 
Member States, the figure was 
only around 20% in Italy and 
Spain, while in France and the 
Netherlands it was over 40%. It is 
hazardous to read much into these 
differences until further investiga­
tion has been undertaken, or until the basic data have been made more 
comparable between countries. 
Cautious comparisons of the dis­
tribution of men and women 
between occupations in the differ­
ent parts of the Community can, 
however, be made, since differences 
in classification between countries 
can be expected to apply to both 
sexes. While the absolute propor­
tions of men and women in the 
various broad occupational groups 
may, therefore, be subject to a wide 
margin of error, the figures for the 
relative proportions are likely to be 
more reliable. 
Over the Community as a whole, a 
significantly higher proportion of 
men than women were classified as 
managers or legislators in 1992 — 
972% as against 6% (Graph 199). 
Moreover, if the self-employed are 
excluded, differences in the position 
of men and women are relatively similar in all Member States, except 
the UK, with men more than twice 
as likely as women to fill such jobs. 
In the UK, the difference between 
the two proportions is slightly less 
than two to one. 
For professionals, the proportions 
for men and women were broadly 
the same in 1992. Only in Denmark, 
Germany and France, was the pro­
portion of men classified to this 
occupational category higher than 
for women, while in Belgium, Spain 
and Italy, the figure for women was 
almost twice that for men. In the 
case of technicians, on the other 
hand, these three countries, 
together with the UK, were the only 
ones where the proportion ofmen in 
such jobs was higher than that of 
women. 
Over the Community as a whole, 
taking these three categories of oc­
cupation together, about the same 
199 Occupations ofmen and women in the Community (EURIO), 
1992 
10 20 
Craft & related trades 
Plant! machine operators 
Professionals 
Technicians 
Legislators and managers 
Elementary occupations 
Clerks 
Service workers 
Agriculture & Fisheries 
Armed forces 
Craft & related trades 
Plant & machine operators 
Professionals 
Technicians 
Legislators and managers 
Elementary occupations 
Clerks 
Sen*» vwrkers 
Agriculture & Fisheries 
Armed forces Men 
Employed 
Employees 
Women 
EUR10 = B, DK, D, E, F. i, L, NL, P, UK 10 20 
% employment men/women 
179 
Chapter 8 Where has job growth and decline occurred? 
200 Broad occupations of men and women in the Member 
PateS, 1992 •Legislators. 
professionals, 
technicians 
% employment n ^,ural e1eTOritary 
100 r—ii—i 
80 I Oerks. services I Crafts, plan! operators 
60 
40 
20 100 
80 
60 
40 
20 
P L D EH 8 IK DK F NI 
Men E I P L D E10 B UK DK F NL 
Women 
201 Employment in SMEs by employment size-class in the 
Member States and Japan, 1991 
80 r 
60 h Vo total employed in enterprises 
40 
20 -i 80 
i 60 
40 
20 
B D UK L F EUR9 P DK I E Japan proportion of women as men were 
employed in these relatively high 
grade jobs in 1992 (Graph 200). 
In other activities, the differences 
are much more pronounced. Much 
higher proportions of women than 
men were employed as clerks and 
service workers — on average about 
three times higher in all Member 
States — while the proportion of 
women in elementary jobs was 
also much higher throughout the 
Community (over 40% higher on 
average). The reverse is true of craft 
and related workers and plant or 
machine operators, where men 
predominate. 
Small and 
medium-sized firms 
Most of the people employed in the 
Community in the private sector 
work in small firms. These also ac­
count for many of the new jobs 
created, though the lack of reliable 
and consistent data makes it diffi­
cult to quantify their importance for 
employment growth across the 
Community. The evidence for one or 
two countries, however, suggests 
that they have been responsible for 
a significant part of the net job cre­
ation which has occurred in the 
private sector over the past decade. 
The fact that small firms account 
for much of the employment in the 
service activities in which a major 
part ofjob creation took place — 
distribution and catering, where 
they are predominant, other ser­
vices and finance and business 
services — serves to confirm their 
importance. 
In 1991, some 55% of those em­
ployed in enterprises in the 
Community (ie essentially exclud­
ing the public sector) worked in 
firms with less than 100 employees, 
almost 30% in those with under 
-180-
Chapter 8 Where has job growth and decline occurred? 
10 employees (Graph 201). This is 
about the same proportion as are 
employed in small firms in Japan 
(where the data are for slightly dif­
ferent size-classes and for 1992 
rather than 1991). 
There are, however, significant dif­
ferences in the importance of small 
firms between Member States, with 
the Southern countries tending to 
have a much higher proportion of 
their workforce in small firms — 
especially very small firms — than 
the Northern countries, with the ex­
ception of Denmark. Thus in Spain, 
74% of those employed in enter­
prises in 1991 worked in firms with 
under 100 employees and over 46% 
in firms with under 10 employees, 
while in Italy, the proportions were 
only slightly lower (69% and 43%, 
respectively). The share of employ­
ment in small firms was also above 
the Community average in Portu­
gal, where 60% ofthose employed in 
enterprises worked in firms of less 
than 100 employees (Moreover, 
this figure is likely to be an under­
estimate of the actual percentage 
since it relates solely to employees 
and leaves out of account the self-
employed who tend to work 
disproportionately in small firms — 
see Box on the data used.) 
Apart from Denmark, however, 
where 64% were employed in firms 
of less than 100, the share of em­
ployment in small firms in each of 
the Northern Member States for 
which comparable data are avail­
able was below the Community 
average. In Belgium and Germany, 
only 46% of those employed in en­
terprises worked in firms of less 
than 100 employees (17-18% in 
firms of less than 10), while in the 
UK and Luxembourg, the figure 
was also less than a half. (In Bel­
gium, however, the data are 
confined to employees and, there­
fore, as with Portugal are likely to Data on small firms 
The data on which the analysis of small firms is based is derived 
from the European Statistical System on SMEs, first created by 
Eurostat in 1990 and constructed from data supplied by national 
statistical institutes wherever possible, but supplemented from 
other sources in a number of cases. The database classifies enter­
prises by size and NACE category. Since there are some differences 
in definition between countries (as regards the definition of an 
enterprise, for example) and only a limited degree of harmonisation 
is possible, there are difficulties in making direct comparisons 
between Member States. The analysis in the text should, therefore, 
be regarded as indicative only of the position in each country. 
The division of enterprises between employment size-classes in­
volves a certain amount of estimation in some cases to allow for 
missing figures. The latest available data have been used for each 
country, which are for 1991 in most cases, 1990 in others and even 
1989 for Italy. The fact that the data relate to different years ought 
not to affect the comparisons materially since the size distribution 
of enterprises is unlikely to change significantly over a year or two. 
For the Netherlands, the lack of data for the different size classes 
and for a number of NACE categories do not allow this country to 
be included in the analysis. Since there are no data for services in 
Greece and Ireland, the analysis is, therefore, for 9 Member States 
for this sector and for 11 for manufacturing. 
Total manufacturing is the sum of NACE categories (2-23)+ 3 + 4 
Total services is the sum of NACE categories 6 + 7 + 8 + 9. 
Employment is total person engaged in enterprises classifed to the 
sector. For more details on the data, see Enterprises in Europe, 
Third Report, Eurostat, 1994. 
For Japan, the data are taken from the Year Book of Labour 
Statistics, 1992, published by the Ministry of Labour in Japan. 
Country specific notes are as follows: 
Belgium: data are for employees only; size-class 0-9 includes 1-9 
only. 
Denmark: for NACE 7 no data available for 50-99 size-class 
Germany: data are for 1990. 
Greece: no data for size-class 0-9 and NACE classes 5,7,8 and 9. 
France: data are for 1990. 
Ireland: data are for 1990; size-class 0-9 includes 3-9 only; no data 
for NACE 5,6,7,8 and 9. 
Italy, data are for 1989; no data for NACE 9; size-class 0-9 includes 
1-9 only. 
Luxembourg: data are for employees only, size-class 0-9 includes 
1-9 only. 
Portugal: data are for employees only, size-class 0-9 includes 1-9 
only. 
Japan: data are for 1992; size classes are 1-4, 5-29 and 30-99. 
181 
Chapter 8 Where has job growth and decline occurred? 
202 Employment in SMEs in manufacturing and services by 
employment size-class in the Member States and Japan, 
1991 
% total employed in enterprises BO r" 
60 b 
40 
20 80 
60 
40 
20 
D UK L F £11 P OK I ! 51 a 
Manufacturing 
203 Employment in SMEs by NACE l-digit and by employment 
size-class in the Community, 1991 
20 40 60 80 100 
Building, civil engineering 
Distributive trades, hotels 
Other services 
Other manufacturing 
Banking, finance. 
Insu ranee 
Transport, 
communications 
Metal manufacture 
Mineral extraction, 
chemicals 
20 40 60 80 100 
% total employed in enterprises understate the importance of small 
firms.) 
Small firms in 
manufacturing 
and services 
Small firms are much more import­
ant in the service sector in the 
Community than in manufacturing. 
In 1991, just under 40% of people 
employed in manufacturing worked 
in firms with under 100 employees 
in the Community as a whole 
(though excluding the Netherlands, 
for which no comparable data are 
available) and only 12% in firms 
with less than 10 (Graph 202). By 
contrast, 60% of those employed in 
service enterprises worked in firms 
with less than 100 employees and 
36% in firms with less than 10. 
The same phenomenon is also ap­
parent in Japan, though the 
difference between manufacturing 
and services is less pronounced. In­
deed in Japan, small firms are more 
important in manufacturing than 
in the Community— those with less 
than 100 employees accounting for 
45% of employment in the sector in 
1992 — and slightly less important 
in services — where they accounted 
for 56% of enterprises employment. 
Given the apparent dominance of 
large corporations in Japan, espe­
cially in international trade, the 
significance of small firms in manu­
facturing may seem surprising. It 
is, however, a reflection of the pre­
valence of the practice on the part of 
large industrial concerns to sub­
contract substantial parts of the 
manufacturing process to small 
companies. By this means, the 
large concerns are able to achieve 
the flexibility in production and 
innovation which comes from small-
scale operation whilst retaining the 
-182 
Chapter 8 Where has job growth and decline occurred? 
cost advantages of large-scale as­
sembly plants as well as those of 
large-scale marketing and advertis­
ing — together with the long-term 
benefits of promoting a particular 
brand-name and image. This combi­
nation of flexibility in production 
and stability in marketing and the 
pursuit of a corporate strategy has 
proved highly successful in main­
taining Japanese competitiveness 
on world markets, in the face of the 
significant cost disadvantage im­
posed by a strong currency. 
Small firms are also important in 
manufacturing in a number of Com­
munity countries, predominantly in 
the South. In Italy, Spain, Greece 
and Portugal, firms with less than 
100 employees accounted for over 
half of employment in the sector on 
the latest data available — in Italy 
and Spain for around 60%. Those 
figures, however, do not necessarily 
reflect the same kind of organisa­
tion of production as in Japan — 
though there are some similarities 
in the Italian case — but more the 
less developed nature of manufac­
turing in these countries and the 
relative weight of industries such as 
clothing and footwear, where large-
scale operation is not so crucial as 
in engineering. 
By contrast, small firms are much 
less important in manufacturing 
in Northern Member States, where 
large firms predominate. In 
Germany, only 28% of those em­
ployed in manufacturing worked in 
firms with less than 100 employees 
in 1990 and in Luxembourg, only 
22%, while in the UK, the propor­
tion was less than a third. 
In services, however, over half of 
employment in enterprises was in 
small firms with under 100 em­
ployees in all Member States except 
Belgium (where, as noted above, the 
figures relate only to employees and, therefore, understate the 
share working in small firms). In six 
of the 9 countries for which data are 
available — the exceptions being 
the UK and Luxembourg as well as 
Belgium — the proportion was 60% 
or above, in two — Spain and Italy 
— over 75%. 
Within services, small firms, as 
might be expected, are particularly 
important in distribution and cater­
ing, where those employing under 
100 accounted for over 70% of total 
employment in the sector in the 
Community as a whole in 1991, 
with very small firms of under 10 
employees accounting for almost 
half of the total (Graph 203). In the 
two major growth sectors, "other 
services", which in this case ex­
cludes health and education, and 
finance and business services, 
small firms are also significant em­
ployers, providing 60% of jobs in the 
former and 50% in the latter, with 
30—35% being employed in very 
small firms of under 10. 
Within manufacturing, in contrast, 
very small firms are of minor im­
portance. Even in the other 
manufacturing sector, which in­
cludes clothing and footwear as well 
as food processing, under 20% of 
employment in 1991 was in firms 
with less than 10 employees, while 
in metal manufacture and engin­
eering, the proportion was well 
below 10%. In the latter two sectors, 
large firms tend to dominate the 
industries concerned, 70% of em­
ployment or more being in 
companies with 100 or more em­
ployees. 
On the other hand, even if very 
small firms are of minor signific­
ance, small firms of under 100 
employees provided more than half 
the jobs in the other manufacturing 
sector in 1991. Nevertheless, the 
shift towards service activities is, therefore, in itself likely to be asso-
ciated with an expansion of 
employment in small firms. 
Small firms are most important, 
however, in construction where 
those with under 10 employees 
were responsible for over 40% of 
employment in the Community in 
1991 and those with under 100 for 
almost 80%. 
- 183 
Chapter 8 Where has job growth and decline occurred? 
Numbers employed in NACE 2-digit sectors in the Member States, 1992 (thousands) 
1992 
Total employment 
Agriculture 
Energy and water 
Mining, oil refining, nuclear fuels 
Electricity, gas, water 
Mineral extraction, chemicals 
Metal production 
Non-metallic mineral products 
Chemicals, man-made fibres 
Metal manufacture, engineering 
Metal products 
Mechanical engineering 
Office machinery 
Electrical engineering 
Motor vehicles and parts 
Other transport 
instrument engineering 
Other manufacturing 
Food, drink, tobacco 
Textiles 
Leather, footwear, clothing 
Timber, wooden furniture 
Paper and printing 
Rubber and plastics 
Other manufacturing 
Construction 
Distribution, hotels, catering 
Wholesale dstribuion, scrap dealing, agent 
RetaJ distribution 
Hotels and catering 
Repair of consumer goods and vehicles 
Transport and communications 
Railways 
Other land transport 
inland water, sea transport 
Airtransport 
Transport support services, travel agents & brokers 
Communication 
finance, business services 
: Banking and finance 
insurance (except social insurance) 
Business services, real estate 
Renting and leasing 
Other services 
Pubic administration 
Sanitation, cemeteries 
Education 
Research and development 
Health and veterinary services 
Other public services 
Recreational, cultural services 
Personal services 
Domestic services 
Diplomatic services 
Not stated 
Afote.- Figures tor Gaiwany exdude tf» new Under EUR12 B OK 0 GR E F IRL I L NL P UK 
133347.1 3770.3 2636.6 29715.0 3680.0 12457.7 22021.4 1133.9 21015.1 164.6 6613.9 4509.1 25629.6 
7810 J 
1877.4 
788.4 
1033.2 
4826.1 
919.2 
1088.9 
1884.1 
13399.4 
2727.2 
2709.4 
405.0 
2603.8 
1766.8 
8115 
413.4 
13113.3 
2857.1 
1059.6 
1660.3 
1634.7 
2105.6 
988.0 
507.4 
9977.5 
25346.8 
5209.6 
11103.2 
41055 
1408.3 
7909.1 
761.2 
2159.7 
188.1 
296.8 
1351.9 
1978.1 
1161841 
2559.7 
1052.5 
5932.2 
570.8 
3704141 
8677.1 
1167.0 
6855.2 
369.7 
6393.6 
3901.4 
1791.1 
1330.3 
1108.4 
123.8 
503.7 109.2 
44.2 
14.6 
32.6 
1945 
55.4 
37.3 
94.1 
322.9 
90.4 
48.8 
15.7 
75.1 
67.9 
14.9 
10.0 
356.3 
115.7 
50.2 
39.0 
52.0 
54.2 
32.0 
12.3 
246.6 
«70.8 
129.6 
367.6 
111.7 
61.8 
269.1 
40.2 
795 
7.8 
145 
57.0 
70.1 
327.5 
97.9 
47.9 
174.2 
6.6 
1230.2 
353.3 
34.8 
335.6 
7.7 
212.3 
148.7 
45.4 
59.8 
19.1 
135 
5.8 135.9 
21.5 
25 
185 
55.6 
8.3 
21.1 
24.1 
202.0 
54.9 
68.3 
0.0 
495 
4.7 
18.1 
4.8 
272.9 
102.2 
7.9 
22.3 
45.9 
575 
19.3 
16.6 
163.0 
403.4 
1255 
178.6 
67.6 
27.3 
185.0 
21.7 
54.2 
16.3 
9.8 
34.3 
48.8 
240.7 
69.3 
23.1 
135.4 
10.6 
950.8 
165.3 
32.9 
284.9 
4.6 
172.1 
210.0 
50.4 
18.8 
11.7 
010 
18.1 1044.O 
463.6 
244.6 
274.4 
1612.1 
463.1 
3155 
772.5 
5533.3 
1170.3 
1240.9 
75.3 
1076.8 
8185 
156.0 
193.6 
2852.7 
622.9 
2695 
348.9 
506.9 
667.9 
334.1 
102.4 
2059.0 
4965.5 
1018.0 
2817.2 
765.3 
365.0 
1654.0 
253.1 
270.9 
35.0 
62.9 
499.2 
532.9 
2578.4 
751.5 
335.6 
1459.4 
31.9 
7754.5 
2473.8 
273.9 
1305.4 
86.5 
1754.3 
963.7 
333.1 
382.0 
121.3 
60.4 
5.6 804.3 
30.2 
27.7 
36.6 
87.3 
16.7 
30.6 
25.0 
111.7 
46.8 
14.4 
0.0 
19.2 
4.6 
25.1 
0.0 
438.2 
109.1 
42.6 
144.5 
65.6 
38.6 
20.3 
174 
245.9 
752.2 
117.2 
387.4 
181.3 
65.5 
250.4 
13.0 
1055 
31.7 
6.4 
46.0 
47.8 
200.0 
535 
22.2 
120.0 
3.9 
739.9 
246.9 
155 
188.8 
4.3 
126.0 
34.3 
56.4 
42.4 
24.4 
0.0 
4.6 1256.9 
119.4 
77.1 
79.3 
418.6 
59.1 
185.1 
136.8 
933.6 
351.7 
129.1 
15.8 
1475 
192.3 
74.9 
22.4 
1387.8 
383.0 
132.6 
293.4 
241.2 
197.6 
99.8 
40.2 
1215.9 
2766.1 
4795 
1403.0 
665.7 
218.2 
734.5 
57.7 
388.8 
16.9 
30.5 
84.4 
156.2 
737.6 
235.9 
78.0 
403.8 
19.9 
28874 
785.0 
192.4 
616.4 
10.9 
466.2 
128.4 
1835 
141.4 
362.0 
0.0 
1.7 1301.5 
253.3 
106.1 
188.9 
662.4 
115.0 
173.6 
331.2 
1958.0 
545.0 
318.3 
71.0 
477.6 
301.9 
176.0 
68.2 
1947.9 
646.8 
210.8 
228.2 
220.6 
349.1 
196.1 
96.3 
1678.8 
3783.5 
1035.7 
1900.0 
715.0 
132.8 
1346.8 
196.7 
423.1 
17.6 
50.2 
190.5 
465.2 
2098.9 
466.7 
160.3 
1314.7 
157.2 
6959.1 
2024.8 
196.6 
1558.0 
112.9 
13575 
853.0 
317.7 
228.7 
293.0 
17.1 
38.8 158.2 
13.6 
7.0 
14.0 
35.1 
1.9 
15.2 
14.2 
73.4 
17.3 
12.0 
8.3 
205 
25 
3.9 
8.8 
118.8 
43.7 
11.0 
14.0 
16.2 
17.4 
9.2 
55 
85.4 
221.3 
40.9 
108.9 
57.0 
9.9 
83.2 
4.4 
19.1 
22 
5.1 
9.3 
19.4 
182.8 
265 
11.3 
57.1 
1.6 
279.7 
65.1 
7.7 
63.4 
35 
72.1 
16.6 
21.1 
155 
55 
05 
4.2 1856,9 
288.3 
876,8 
1957.8 
2298.2 
1743.7 
4430.8 
1165.1 
1491.8 
5389.4 
1571.7 
0.0 105 
2.3 
0.0 
15 
10.4 
7.9 
2.0 
0.0 
5.1 
15 
2.1 
0.0 
0.0 
0.0 
0.0 
0.8 
1U 
3.2 
0.0 
0.0 
05 
1.9 
55 
0.0 
17.7 
33.3 
72 
15.9 
85 
1.1 
11.2 
3.2 
2.7 
0.0 
1.7 
0.0 
35 
20.4 
135 
1.0 
6.0 
0.0 
42.2 
16., 
2.4 
7.1 
0.0 
7.1 
3.4 
15 
1.6 
0.0 
25 
3.1 246.9 
584 
50.6 
41.5 
1724 
0.0 
37.4 
99.1 
406.7 
102.9 
105.3 
0.0 
1095 
30.4 
47.1 
11.6 
580.7 
172.1 
18.7 
24.3 
40.5 
168.1 
37.0 
98.7 
373.4 
12274 
395.9 
576.2 
176.8 
78.2 
489.1 
31.2 
151.7 
19.3 
32.1 
63.2 
111.6 
676.7 
129.0 
59.1 
479.1 
9.. 
2189., 
485.8 
113.1 
418.9 
28.9 
517.1 
427.3 
122.6 
63.3 
10.8 
0.0 
298.5 517.2 
415 
23.4 
33.2 
152.8 
29.9 
58.2 
44.6 
190.3 
70.6 
30.9 
0.0 
41.9 
20.2 
21.8 
4.1 
716.4 
115.5 
1305 
251.7 
106.6 
65.1 
19.5 
27.4 
367.6 
882.4 
146.2 
468.9 
199.7 
875 
2194 
23.3 
82.2 
7.8 
18.3 
32.3 
54.3 
271.7 
90.6 
25.7 
146.7 
8.0 
1129.7 
324.6 
2.7 
340.3 
10.8 
193.6 
20.7 
46.3 
69.3 
119.6 
0.0 
9.8 569.8 
520.8 
234.9 
312.8 
748.9 
162.1 
2124 
342.6 
2506.7 
2755 
739.4 
218.9 
586.3 
323.9 
273.8 
89.0 
2155.1 
542.9 
185.7 
293.9 
338.4 
488.2 
2155 
905 
17834 
81934 
796.2 
2879.7 
11565 
361.0 
18824 
116.9 
582.0 
33.6 
655 
335.8 
468.6 
2871.6 
625.6 
288.4 
1635.9 
321.6 
7589.8 
1735.7 
295.2 
17365 
99.9 
1515.2 
1095.4 
613.3 
3075 
141.3 
29.9 
113.4 
184-
Graphs 
Graphs 
1 Employment rates in the Community and elsewhere 1971 to 1993 27 
2 Unemployment rates in the Community and elsewhere 1971 to 1993 29 
3 Unemployment in the Member States 1985, 1990 and May 1994 29 
4 Unemployment ofmen and women in the Member States 1990 and May 1994 31 
5 Unemployment rates in the Member States on alternative definitions 1986 and 1993 31 
6 Proportion of LFS unemployed who are registered as unemployed 1986 and 1992 32 
7 Proportion of registered unemployed declared to be unemployed in the LFS 1986 and 1992 33 
8 GDP 1992 to 1995 34 
9 Investment 1992 to 1995 35 
10 Consumption 1992 to 1995 35 
11 Inflation 1992 to 1995 35 
12 Trade balance 1992 to 1995 36 
13 Employment 1992 to 1995 36 
14 Unemployment 1992 to 1995 36 
15-18 Factors influencing changes in the labour force in the Community, EFTA countries, Japan and the US 1961 to 
1992 44-45 
19-22 Participation rates ofmen by age group in the Community, EFTA countries, US and Japan 1960 to 1992 47 
23—26 Participation rates of women by age group in the Community, EFTA countries, US and Japan 1960 to 1992 48 
27-38 Participation rates ofmen by age group in individual Member States 1960 to 1992 52-53 
39-50 Participation rates of women by age group in individual Member States 1960 to 1992 54-55 
51 Activity rates ofmen aged, over 55_in the Member States 1980, 1986 and 1992 56 
52 Activity rates of women aged over 55 in the Member States 1980, 1986 and 1992 56 
53 Activity rates ofmen aged under 25 in the Member States 1980, 1986 and 1992 57 
54 Activity rates of women aged under 25 in the Member States 1980, 1986 and 1992 57 
55 Changes in employment and the labour force in the Community 1985 to 1993 59 
56-59 Growth of employment and GDP in the Community, US, Japan and EFTA countries 1962 to 1993 62 
60-63 Growth of employment and GDP in Germany, France, UK and Italy 1962 to 1993 65 
64—69 Growth of manufacturing and non-manufacturing value-added and employment in the Community, US and 
Japan 1962 to 1993 67 
70-77 Growth of manufacturing and non-manufacturing value-added and employment in Germany, France, Italy and 
UK 1962 to 1993 70-71 
78 Growth ofproductivity and real labour costs in manufacturing in EUR7 1970 to 1991 73 
79-84 Growth ofproductivity and real labour costs in manufacturing in Germany, France, Italy, UK, US and Japan 
1970 to 1991 74 
85-88 Nominal unit labour costs in national currency and ECU in the Community, US and Japan 1970 to 1991 77 
89 Rates of entry into and exit from employment and employment growth in the Community (EUR8) 1984 to 1992 84 
90 Rates of entry into and exit from employment ofmen and women in the Community (EUR8) 1984 to 1992 85 
91 Rates of entry into employment in the Member States average 1984-87, 1987-90 and 1990-92 86 
92 Rate of entry into employment by broad sector in the Community (EUR8) average 1984-87, 1987-90 and 1990-92 88 
93 Rate of entry into employment by broad sector in the Member States average 1984-92 88 
94 Rate of entry into employment by NACE l-digit sector in the Community (EUR8) average 1984-92 89 
95 Rate of entry ofmen and women into employment by NACE l-digit sector in the Community (EUR8) average 
1984-92 90 
96 Rate of movement between NACE l-digit sectors and employment growth in the Community (EUR8) 1984 to 1992 96 
97 Rate of movement between NACE l-digit sectors in the Member States average 1984-87, 1987-90 and 1990-92 92 
98 Rate of inter-sector movement by broad sector in the Community (EUR8) average 1984-87, 1987-90 and 1990-92 92 
- 185 
Graphs 
99 Rate of inter-sector movement by broad sector in the Member States average 1984-92 93 
100 Rate of entry into NACE l-digit sectors from other sectors in the Community (EUR8) average 1984-92 94 
101 Rate of inter-sector movement ofmen and women in the Member States average 1984-92 94 
102 Rate of inter-sector movement ofmen and women in industry in the Member States average 1984-92 95 
103 Rate of inter-sector movement ofmen and women in services in the Member States average 1984-92 95 
104 Rate of inter-sector movement by age group in the Member States average 1984-92 96 
105 Rate oflabour turnover and emploient growth in the Community (EUR8) 1984 to 1992 96 
106 Rate oflabour turnover in the Member States average 1984-92 97 
107 Rate oflabour turnover by broad sector in the Member States average 1984-92 98 
108 Rate oflabour turnover ofmen and women in the Community (EUR8) 1984 to 1992 98 
109 Rate of labour turnover of men and women in the Member States average 1984-92 99 
110 Persons changing job since previous year in the Member States 1992 100 
111 Change in hours usually worked per week in the Member States 1983 to 1992 103 
112 Effect of structural changes on changes in hours usually worked per week in the Member States 1983 to 1992 104 
113 Male employees in industry and services by usual weekly hours in the Community 1983 and 1992 106 
114 Men and women employees working 48 hours a week or more in the Member States 1983 and 1992 106 
115 Female employees in industry and services by usual weekly hours in tne Community 1983 and 1992 107 
116-127 Distribution of male employees in industry and services by hours usually worked in individual Member 
States 1983 and 1992 108-109 
128-139 Distribution of female employees in industry and services by hours usually worked in individual Member 
States 1983 and 1992 110-111 
140 Self-employed men and women working 48 hours a week or more in the Member States 1983 and 1992 114 
141 Self-employed men in industry and services by usual weekly hours in the Community 1983 and 1992 114 
142 Self-employed women in industry and services by usual weekly hours in the Community' 1983 and 1992 115 
143 Comparison of part-time employment of women with those working part-time hours in the Member States 1992 116 
144 Comparison of part-time employment ofmen with those working part-time hours in the Member States 1992 118 
145 Men and women working part-time hours (10-29) in the Member States 1983 and 1992 145 
146 Women with second jobs by hours worked in main job in the Community 1992 120 
147 Women with second jobs by hours worked in main job in the Member States 1992 120 
148 Men with second jobs by hours worked in main job in the Community 1992 121 
149 Men with second jobs by hours worked in main job in the Member States 1992 121 
150 Employees working nights by sector in the Community 1992 123 
151 Employees working nights in the Member States 1992 123 
152 Employees working Saturdays by sector in the Community 1992 124 
153 Employees working Saturdays in the Member States 1992 125 
154 Employees working Sundays by sector in the Community 1992 126 
155 Employees working Sundays in the Member States 1992 126 
156 Tax on pay and social contributions (single male worker in manufacturing) in the Member States 1985 and 1991 131 
157 Tax on pay and social contributions (couple with two children, one salary) in the Member States 1985 and 1991 133 
158 Division of monthly labour costs in the Member States 1991 134 
159 Tax on pay and social contributions at 80% and 125% of average earnings in the Member States 1991 135 
160 Average labour costs of women compared to those ofmen in the Member States 1991 136 
161 Comparison of tax and social contributions for a couple and two single people on average earnings in the Member 
States 1991 137 
162 Marginal tax rates in the Member States 1985 and 1991 138 
163 Households with expenditure below the poverty line by number of members employed in the Member States 1988 139 
164 Households in poverty by socio-economic group in the Member States 1988 141 
165 Households in poverty where the head of household is unemployed in the Member States 1988 141 
166 Unemployment rates by sex and age in the Community 1983 to May 1994 144 
167 Unemployment rates of young people 145 
168 Unemployment rates of people over 25 in the Member States 1985, 1990 and May 1994 145 
169 Changes in population and labour force (15-24) in the Member States 1985 to 1992 146 
170 Youth unemployment in relation to labour force and population (15-24) in the Member States May 1994 146 
171 Youth unemployed (<25) as a share of total unemployed in the Member States May 1994 148 
186-
Map 
172 Lonf-term unemployment (>1 year) in the Member States 1985 and 1992 ; 148 
173 Proportion of unemployed using employment offices as main method ofjob search in the Member States 1992 150 
174 Proportion of unemployed using other means as main method ofjob search in the Member States 1992 150 
175 Public expenditure on labour market policies in the Community 1985,1990 and 1992 152 
176 Public expenditure on active and passive labour market policies in the Member States 1985 and 1992 152 
177 Public expenditure on active labour market policies in the Member States 1992 153 
178 Passive labour market expenditure per unemployed person in the Member States 1985,1990 and 1992 154 
179 Active labour market expenditure per unemployed person in the Member States 1985,1990 and 1992 155 
180 Active labour market expenditure per unemployed person in the Member States 1985,1990 and 1992 155 
181 Distribution of employment by NACE 2-digit sector in the Member States 1992 162-163 
182 Contribution of broad sectors to employment growth in the Member States 1985 to 1990 165 
183 Changes in employment in NACE 2-digit sectors in the Community 1985-90 and 1990-92 166 
184 Change in employment in high, medium and low growth service sectors in the Member States 1985 to 1990 167 
185 Change in employment in high, medium and low growth industrial sectors in the Member States 1985 to 1990 168 
186 Contribution of broad sectors to employment growth in the Member States 1990 to 1992 168 
187 Change in employment in high, medium and low growth industrial sectors in the Member States 1990 to 1992 169 
188 Change in employment in high, medium and low growth service sectors in the Member States 1990 to 1992 170 
189 Contribution of broad sectors to employment growth in the Community and elsewhere 1970 to 1991 171 
190 Contribution of each sector to employment growth in the Community and elsewhere 1970 to 1991 172 
191 Contribution of sectors to employment growth in the Community, EFTA, Japan and US 1970-80,1980-85, and 
1985-91 173 
19? Employment growth by occupation in the Community (EUR9) 1983 to 1991 175 
193 Employment growth by professional/technical/managerial and other occupations in the Member States 1983 to 
1991 176 
194 Employment growth ofmen by occupation in the Community (EUR9) 1983 to 1991 176 
195 Employment growth of men by professionalAechnical/managerial and other occupations in the Member States 
1983 to 1991 : 177 
196 Employment growth of women by occupation in the Community (EUR9) 1983 to 1991 177 
197 Employment growth of women by professional/technical/mt.aagerial and other occupations in the Member States 
1983 to 1991 178 
198 Employment by occupation in the Community (EUR10) 1992 178 
199 Occupations ofmen and women in the Community 1992 179 
200 Broad occupations ofmen and women in the Member States 1992 180 
201 Employment in SMEs by employment size-class in the Member States and Japan 1991 180 
202 Employment in SMEs in manufacturing and services by employment size-class in the Member States and Japan 
1991 182 
203 Employment in SMEs by NACE l-digit and by employment size-class in the Community 1991 182 
Map 
Ml Youth unemployment rates 1993 144 
187-
Sources 
The main source of data used is the Statistical Office of the European Communities (Eurostat) and, in particular, 
the Community Labour Force Survey (LFS). This is the only source of data on employment, unemployment and 
related variables which is comparable and complete for all Member States. Since it is based on a survey of households 
and uses a common coding and methodology, it abstracts from national differences in definitions, methods of 
classification and administrative procedures and regulations. 
Data from national sources may, therefore, differ from the figures presented in this report. This is particularly so 
for unemployment statistics, which in individual countries are based largely on registrations at labour offices (see 
Chapter 1 for a comparison of the two sources). 
The LFS was carried out once every two years between 1973 and 1981 and since 1983 has been conducted annually. 
The results of the surveys before 1983, however, are not strictly comparable with those conducted since. Moreover, 
because of the sample nature of the survey, year-to year changes derived from comparing successive surveys tend 
to be subject to greater error than changes over longer periods of time. 
The 1992 results are available for all the Member States, though at the time this report was being prepared, certain 
data had not been received for Ireland. In some of the graphs, therefore, no data for Ireland could be included or 
the data are for 1991 instead of 1992. 
In a great many cases, the data presented have been specifically extracted from the LFS and, in some cases, from 
other databases, by statisticians at Eurostat who have given considerable help and advice in the preparation of the 
report. 
The short-term forecasts summarised in Chapter 1 were prepared, on the same basis as those published in the 
Annual Economic Report, by the Directorate General for Economic and Financial Affairs, which also provided the 
basic data for the analysis in Chapter 3. The sources used for each of the graphs and the map are listed below. 
Where appropriate, a more detailed description of the data is presented in the Boxes in the relevant chapters. 
Most of the data used in the preparation of Employment in Europe can be made available in machine-readable form 
in a number of standard file formats. Requests for data should indicate the graph or map for which the data are 
required and should be addressed to: 
Commission for the European Communities 
DGV/B/1 
200 rue de la Loi 
B-1049 Brussels 
In some cases, a small fee may be charged to cover the preparation costs. 
Note 
Except where explicitly stated to the contrary, data for Germany presented in this report relate to the former 
Western part of Germany (ie the Federal Republic as it was before 3 October 1990). 
Acknowledgements 
Graphs and map: Alphametrics Ltd. 
Page layout: Edition & Technology 
Graphs 
1- 2 OECD Labour Force Statistics, (1993 growth rates OECD Economic Outlook and Directorate General for 
Economic and Financial Affairs (DGII)); Eurostat, Harmonised unemployment statistics 
3—4 Eurostat, Harmonised unemployment statistics 
5 Eurostat, Harmonised unemployment statistics; National registered unemployment statistics 
6 Eurostat, Community Labour Force Survey 
-188 
7 
8-14 
15 
16-18 
19 
20-22 
23 
24-26 
27-54 
55 
56-88 
89-155 
156-162 
163-165 
166-171 
172-174 
175-177 
178-180 
181-188 
189-191 
192-200 
201-202 
203 Eurostat, Community Labour Force Survey; National registered unemployment statistics 
Directorate General for Economic and Financial Affairs (DGII), Economic Forecasts 1994-1995 
ILO/UN (Yearbook of Labour Statistics); Eurostat, Community Labour Force Survey" 
ILO/UN (Yearbook of Labour Statistics) 
ILO/UN (Yearbook of Labour Statistics); Eurostat, Community Labour Force Survey 
ILO/UN (Yearbook of Labour Statistics) 
ILO/UN (Yearbook of Labour Statistics); Eurostat, Community Labour Force Survey 
ILO/UN (Yearbook of Labour Statistics) 
ILO/UN (Yearbook of Labour Statistics); Eurostat, Community Labour Force Survey 
Directorate General for Economic and Financial Affairs (DGII); Eurostat, Harmonised unemployment statistics; 
Eurostat, Community Labour Force Survey 
Directorate General for Economic and Financial Affairs (DGII) 
Eurostat, Community Labour Force Survey 
Eurostat, Net earnings of manual workers in the manufacturing industry in the Community, 1993; Eurostat, 
Labour Costs, Updating 1989-1991; Directorate General for Employment, Industrial Relations and Social 
Affairs, MISSOC, Social Protection in the Member States 
Hagenaars, de Vos, Zaidi, "Poverty statistics in the late 80s: research based on micro-data", study for Eurostat 
Eurostat, Harmonised unemployment statistics 
Eurostat, Community Labour Force Survey 
OECD 
OECD, Eurostat, National registered unemployment statistics 
Eurostat, Community Labour Force Survey 
OECD Labour Force Statistics, 1971-1991 
Errostat, Community Labour Force Survey 
Eurostat, Enterprises in Europe, Third report, preliminary version; Ministry of Labour, Japan, Year Book of 
Labour Statistics, 1992 
Eurostat, Enterprises in Europe, Third report, preliminary version 
Map 
Ml Eurostat, REGIO database 
189-
The following topics were analysed in previous issues 
of Employment in Europe : 
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 — z social as well as a labour market problem 
11 Black economy 
12 Technological change — z 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 
Employment in Europe 1993 
3 The Community in the world economy 
4 Towards an integrated European labour market? 
5 Labour market developments in assisted regions 
6 Women in employment 
7 Employment protection and labour force adjustment in the Member States 
190-
BSN 0254-1475 
COM(94) 381 final 
DOCUMENTS 
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Catalogue number : CB-CO-94-418-EN-C 
ISBN 92-77-80666-4 
Office for Officiai Publications of the European Communities 
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