EUROPEAN COMMISSION Brussels, 24.11.2021 COM(2021) 743 final PROPOSAL FOR A JOINT EMPLOYMENT REPORT

FROM THE COMMISSION AND THE COUNCIL





Table of Contents KEY MESSAGES OVERVIEW OF LABOUR MARKET AND SOCIAL TRENDS AND CHALLENGES IN THE EUROPEAN UNION 1.1 Labour market trends 1.2 Social trends 1.3 The revised Social Scoreboard: overview of challenges related to Pillar principles 1.4 EU headline targets by 2030 EMPLOYMENT AND SOCIAL REFORMS – MEMBER STATES PERFORMANCE AND ACTION 2.1. Guideline 5: Boosting the demand for labour 2.1.1 Key indicators 2.1.2 Policy response 2.2 Guideline 6: Enhancing labour supply and improving access to employment, skills and competences 2.2.1 Key indicators 2.2.2 Policy response 2.3 Guideline 7: Enhancing the functioning of labour markets and the effectiveness of social dialogue 2.3.1 Key indicators 2.3.2 Policy response 2.4 Guideline 8: Promoting equal opportunities for all, fostering social inclusion and fighting poverty

2.4.1 Key indicators 2.4.2 Policy response



KEY MESSAGES The Joint Employment Report (JER) by the European Commission and the Council monitors, on a yearly basis, and in line with Article 148 of the TFEU, the employment situation in the Union and the implementation of the Employment Guidelines. It provides an annual overview of key employment and social developments in the European Union, and of Member States’ recent policy measures, in line with the Guidelines for the Employment Policies of the Member States . It also identifies related priority areas for policy action. The Commission’s proposal for the report is part of the European Semester Autumn package; following exchanges between the Commission and its preparatory bodies the final text will be adopted by the Employment, Social Policy, Health and Consumer Affairs (EPSCO) Council. The 2022 edition of the JER has a stronger focus on the implementation of the European Pillar of Social Rights, in line with the commitments of the Action Plan of March 2021 and by the EU Leaders in the 8 May Porto Declaration. Its implementation will strengthen the Union’s drive towards a green, digital and fair transition and contribute to achieving upward social and economic convergence, addressing the demographic challenges. It will also contribute to the achievement of the Sustainable Development Goals. This report reinforces the monitoring of the Social Pillar, notably via thematic boxes covering key challenges in the three areas of equal opportunities and access to the labour market, fair working conditions and social protection and inclusion. The report also integrates the three new 2030 EU headline targets on employment, skills and poverty reduction of the Pillar Action Plan, which were welcomed by the EU leaders at the Porto Social Summit and by the June European Council. The EU committed to the following EU headline targets by 2030: ·at least 78% of the 20-64 population should be in employment; ·at least 60% of people aged 25-64 should participate in learning activities each year; and ·the number of people at risk of poverty or social exclusion should decrease by at least 15 million compared to 2019. Together with cohesion funds, the implementation of the reforms and investments foreseen in Member States’ recovery and resilience plans (RRPs) will promote a fair, inclusive and sustainable recovery. The Recovery and Resilience Facility shall promote the Union’s economic, social and territorial cohesion by improving the resilience, crisis preparedness, adjustment capacity and growth potential of the Member States. In this way, the Facility also contributes to the implementation of the European Pillar of Social Rights, with particular attention to addressing the challenges identified in the country-specific recommendations. Four of the six pillars that define the scope of the Facility are relevant in this regard, namely: (i) smart, sustainable and inclusive growth; (ii) social and territorial cohesion; (iii) health, and economic, social and institutional resilience, and (iv) policies for the next generation, children and the youth. As part of the policy response analysis, the Joint Employment Report also includes a selection of measures supported by the RRF and other EU funding sources, including the European Social Fund Plus, the European Regional Development Fund and the Just Transition Fund. The revised Social Scoreboard underpins the analysis in the 2022 JER, more comprehensively covering the Pillar principles. As part of the Social Pillar Action Plan of March 2021, the Commission proposed a revision of the Social Scoreboard, to allow for a better monitoring of the Pillar with a revised set of headline indicators, which EPSCO endorsed in June 2021. The 2022 JER therefore assesses Member States’ performance on the revised set of headline indicators . These now include indicators that allow to capture important dimensions like adult learning, the labour market integration of persons with disabilities, the risk of poverty and social exclusion for children, and the housing cost overburden. The evidence from the revised Social Scoreboard, together with country-specific analysis of evidence and policy context, allows a more accurate identification of key employment, skills and social challenges in the EU and in the Member States (see Figure 1). This would allow to undertake a closer monitoring of social developments and divergences. The EPSCO Council’s advisory committees will reflect on a proposal made by Spain and Belgium for a Social Imbalances Procedure (SIP) based on Article 148 of the TFEU in the context of the European Semester. Figure 1: Employment, skills and social challenges across EU Member States by headline indicators in the revised Social Scoreboard Notes: 1) data for the indicator on adult participation in learning is not yet available; 2) indicator on digital skills refers to 2019 data; 3) Data is missing for some countries in some indicators: the legends for all indicators are presented in the Annex to the Report. The labour market impact of the COVID-19 crisis has been cushioned by the swift and decisive policy action at Member State and EU level. The labour market recovery is taking hold, yet employment and total hours worked are not yet back to pre-crisis levels. After reaching a low point of 71.6% in Q2-2020, the employment rate has recovered partially to 72.8% for those aged 20-64 in Q2-2021, below the peak of 73.3% reached in Q4-2019. While the economic recovery will sustain job creation, getting back to pre-crisis employment levels is not expected before 2022. As reflected in the employment rate EU headline target, a high level of employment is a key priority for 2030 to ensure that everyone can participate fully in the economy and society, and to help reduce the number of people at risk of poverty. Overall, the increase in unemployment has remained below what could have been expected given the magnitude of the COVID-19 impact on the economy. This is due to the policy measures introduced by the Member States, also with support from EU funding (notably the European instrument for temporary Support to mitigate Unemployment Risks in an Emergency, SURE, and the Recovery Assistance for Cohesion and the Territories of Europe, REACT-EU), and to a lesser extent to the fact that some people moved at least temporarily into inactivity when finding work became more difficult. The labour market recovery is taking hold 72.8% employment rate in Q2-2021 (1.2 pps higher than one year earlier) 6.7%

unemployment rate in September 2021 (1 pps lower than one year earlier) 17.4%

youth unemployment rate in Q2-2021 (0.6 pps higher than in Q2-2020) +13.3%

hours worked per worker in Q2-2021 compared to

Q4-2020 (yet, 2.7% lower than in Q2-2019) Rates of activity, unemployment and the share of young people neither in employment nor in education and training in the EU-27, % Total hours worked per worker and absences from work, EU-27 Note: Break in series in quarterly unemployment rates since Q1-2021. Source: Eurostat database [une_rt_q], [une_ltu_q] and Labour Force Survey [lfsi_emp_q], [lfsq_argan], [lfsi_neet_q]. Seasonally adjusted, not calendar adjusted data.

The COVID-19 crisis put a halt to the positive trend in the activity rate observed in recent years. The EU-27 activity rate for the 20-64 age group decreased slightly as a result of the pandemic, but has already recovered its pre-crisis value in quarterly terms. This was largely driven by the labour market participation of women and of the 55-64 age group. In absolute terms, the EU’s working-age population has nonetheless been shrinking over the last decade, which is also a determinant of increasing labour shortages. In this context, policies that bring more people into the labour market, enable longer and healthier working lives and improve productivity in the medium- to long-term are important. Improving working conditions and better adapting them to the changing needs of workers over their life time would have a positive impact on labour supply and thus potentially support higher employment rates. COVID-19 impacted differently across sectors and types of workers Highest employment growth rates since Q2-2020 in construction, public administration and ICT activities Lowest employment growth rates since Q2-2020 in wholesale and retail trade, arts and entertainment and agriculture 1.6 million fewer employees (20-64) on temporary contracts in Q2-2021 compared to Q2-2019 Employment changes by economic activity (domestic concept, seasonally and calendar adjusted data), EU-27 Source: Eurostat database [tec00109]. Note: *NACE Rev.2 activities. As the economy recovers from the COVID-19 shock, not all jobs are likely to be reinstated, and support to job transitions is becoming particularly important. Since Q2 2020, the highest employment growth rates are in construction, public administration and ICT activities, whilst the lowest growth rates are in wholesale and retail trade, arts and entertainment and agriculture. For some of the impacted companies, the pandemic will have represented only a transitory shock. For others, it may lead to profound changes in business models, partly triggered by a shift in consumer preferences (for instance, a wider use of e-commerce) and firms’ organisation and work practices (including digitalization and the push to more sustainable production methods). In this perspective, some tasks may become redundant, requiring restructuring in terms of working methods and labour input, with a greater need for policy-makers and businesses to support job transitions, along the lines of the Commission Recommendation on Effective Active Support to Employment (EASE). The recovery also provides an opportunity to steer towards a more sustainable socio-economic system with new business models and wide-reaching implications for the types of jobs offered and the skills needed. A rapid reallocation of labour supported by effective active labour market policies and upskilling and reskilling measures are needed to address labour shortages, help boost productivity, wages and social cohesion, and facilitate the green and digital transitions. Short-time work schemes can play a useful role in this regard, by facilitating and supporting restructuring processes. They should remain part of the policy toolbox beyond the crisis, and refocus on helping the modernisation of the economy (via associated skills development measures, for instance) without delaying structural adjustments. The crisis has underlined the more difficult labour market situation of young people 13.7% young NEETs (age 15-29) in 2020 +1.3 pps youth unemployment rate between 2019 and 2020 Twice more young people that are on involuntary temporary employment than people aged 25-64 Young people neither in employment nor in education and training

(%, 15-29, 2020) Note: Some administrative units on islands and outermost regions are not represented. Source: Eurostat, Labour Force Survey [edat_lfse_35]. © EuroGeographics for the administrative boundaries. The COVID-19 crisis impacted more strongly young people, in particular job starters, calling for swift and decisive policy action. The youth unemployment rate (15-24) in the EU showed initial signs of recovery by mid-2021 but still stood at 17.4% in Q2-2021, nearly triple the unemployment rate of the population aged 25-74. The COVID-19 shock reversed the six-year trend of declining numbers of young people not in employment, education or training (NEET), partially as a result of the precarious labour market positions of young people. This calls for decisive policy action to prevent risks of longer-term negative effects on their wellbeing and career prospects. Reducing the numbers of NEETs is indeed one of the complementary EU ambitions put forward by the European Commission in the Social Pillar Action Plan. The reinforced Youth Guarantee strengthens action to provide good quality offer of employment, continued education, apprenticeship or traineeship within a period of four months of becoming unemployed or leaving formal education . The ALMA (Aim, Learn, Master, Achieve) initiative will help disadvantaged young NEETs gain professional experience abroad, including also the necessary social support, with the objective of integrating them into education, vocational training or quality employment. Given the uneven impact of the crisis on different groups of workers, tailor-made active labour market policies are important to ensure an inclusive recovery. Workers in non-standard employment have been hit hard, particularly those on fixed-term contracts in Member States with larger shares of temporary employment . Non-EU born have experienced larger employment losses than the native population. Additionally, there is considerable potential to increase employment among persons with disabilities: the gap between the employment rate of persons with disabilities and others was at 24.5 pps in the EU in 2020. The pandemic further highlighted long-standing challenges related to women labour market participation. While evidence does not show a stronger negative impact on female employment rates compared to men, women experienced a steeper fall in working hours than men during the confinement periods. Behind these developments, there are differences in the representation of women and men in sectors and occupations affected by the crisis, gender differences in the use of telework, and the fact that women took on the larger share of caring responsibilities. Moreover, during the crisis single women with children experienced larger employment losses than those without. This highlights the importance of childcare and long-term care services to increase the labour market participation of women. Also, in this regard the Work-Life Balance Directive, which needs to be transposed by Member States by 2 August 2022, aims to provide an equal access and balanced use of leave arrangements by men and women. It will allow parents with children or workers with dependent relatives to better balance caring and professional responsibilities. At the same time, the design of the tax systems continues to discourage the labour market participation of the second earners (which are most often women) in a number of Member States. Gender differences in the labour market remain wide Differences in the employment rate between persons with and without children under the age of 6 in 2020 (in pps, by gender, age 25-49) Source: Eurostat, Labour Force Survey [lfst_hheredch]. The employment rate of women with small children in the EU is 11.8 pps lower than of women without children Hours worked fell more for women often as a result of care obligations (6.1 points for women vs 4.3 for men) Large differences in participation in childcare services among Member States While there is potential to increase employment among certain groups, rising labour shortages in many Member States point at the key importance of a more general need for upskilling and reskilling. The COVID-induced decline in economic activity led to a drop in labour shortages in almost all Member States. In 2021, following the easing of the lockdown measures and the gradual economic recovery, job vacancies started rising again in most Member States. Sectors such as construction, health, and long-term care, as well as information and communication technologies, reported the biggest labour shortages, fuelled, by long-lasting skills shortages, among other causes. Also as a result of the green and digital transitions, increased labour demand can be expected in sectors related to renewable energy, construction, agriculture and forestry, and will mostly be in the middle-skill group. Labour shortages have been on the rise with the economic recovery 2.1%

vacancy rate in Q2‑2021, 0.5 pps higher than in Q2-2020 and just 0.1 pps below Q2-2019 Skills shortages of long-standing nature drive the trend in construction, health, long-term care and ICT sectors Job vacancy rate and unemployment rate (15-74) in the EU-27 Note: NACE Rev. 2 activities B-S. Unemployment rate, quarterly data, seasonally adjusted data. Source: Eurostat, Labour Force Survey [jvs_q_nace2] and [une_rt_q] A job does not always provide for a decent living income. In-work poverty has increased from 8.5% in 2010 to 9% in 2019 in the EU-27. In general, workers on temporary contracts face a much higher risk of in-work poverty than those on permanent contracts (16.2% vs 5.9%), as do low-skilled workers compared to high-skilled ones (19% vs 4.9%). In addition, non-EU born workers are much more likely to experience in-work poverty than the native-born. Despite recent minimum wage increases in many Member States, statutory minimum wages often remain low compared to other wages in the economy. In line with the Commission proposal for a directive on adequate minimum wages, collective bargaining plays a key role in achieving adequate minimum wage protection across the Union. Fixed-term employment is decreasing since the start of the pandemic, reflecting higher fixed-term job losses than among permanent employees, though it remains significant in several Member States. Temporary contracts continue to be particularly widespread among women, the young and non-EU born employees. Temporary contracts that serve as ‘stepping stones’ towards more permanent jobs are key to improving overall job quality. In some Member States, the first reason for workers to have a fixed-term contract remains the difficulty to find a permanent job. Workers in involuntary temporary contracts often report lower levels of job satisfaction, which can affect their performance and skills acquisition. The share of part-time employment in the EU decreased in 2020 compared to the previous year, but involuntary part-time work still affects a sizeable percentage of employees. The sudden significant increase in telework has shown both the advantages and the challenges associated with remote working. During the health emergency, teleworking has proven important for many firms to ensure business continuity and safeguard the health of their employees. In normal times, it also allows reduced commuting time, greater flexibility and work-life balance opportunities for employees, and improved efficiency and productivity for firms. Nonetheless, telework can sometimes blur existing lines between work and private life, implying higher work intensity and difficulties ensuring collective representation and participation in workplace decision-making and training in certain cases. Digital technologies have enabled the scale up of teleworking and supported a better matching between labour demand and supply, while presenting challenges for certain groups, notably the low-skilled or the elderly, to fully participate in the labour market and society. This may in turn increase the risks of digital divides and labour market and social exclusion, hence the importance of equipping everyone with the digital skills needed for benefitting from the digital shift. The pandemic has accelerated ongoing trends in digitalisation, including by boosting work via platforms, which calls for policy action to manage related transformations – notably as concerns working conditions and access to social protection. Digital technologies bring new ways to learn and work, as well as new opportunities for businesses and consumers. On the labour market, they create employment opportunities and can contribute to a better matching between employers and employees. However, they may also entail risks to existing jobs and to quality of employment, in particular for those in activities that are routine-intensive and for the low skilled. In parallel to the reallocation of labour towards occupations requiring digital skills, there may be a reallocation to those linked to the digital labour platform economy. The demand for online labour has been rapidly growing during the pandemic (with revenues increasing fivefold in the last five years), bringing more to the fore the importance of clarifying the legal status and improving conditions for platform workers. In several Member States the use of part-time and of non-standard forms of employment has an important involuntary component 13.3%

employees in temporary contracts in the EU in 2020 (1.5 pps lower than in 2019; 15-64) Among which 6.8%

in involuntary temporary employment with large prevalence of youth 17.2%

of employed persons working part-time in the EU in 2020 (1.2 pps lower than in 2019) 25%

in involuntary part-time employment in the EU in 2020 Temporary contracts as a percentage of total employment (15-64) in 2020. Involuntary temporary employment (15-64) in 2020, EU-27 Part-time employment contracts as percentage of total employment (15-64) in 2020. Involuntary part-time employment (15-64) in 2020, EU-27 Source: Eurostat database [tesem190] and labour force survey [lfsi_pt_a], [lfsa_eppgai] and [lfsa_etpgan].

The transition to the green economy and the commitment to achieve climate neutrality by 2050 represent a unique opportunity to relaunch the EU economy in a sustainable, inclusive and resilient manner. Provided the right accompanying policies are put in place, the transition towards climate neutrality could create up to one million additional jobs by 2030, though impacts are expected to vary across occupations, sectors and regions. Jobs will be created mostly in the middle-skill group and can thereby help mitigate labour market polarisation trends. However the green transition will not affect all Europeans equally and will have a negative impact for some, implying job losses and restructuring in certain sectors (notably extractive resources sectors and high energy-intensive sectors), as well as increasing pressures on household incomes. Also, in many sectors existing jobs will require learning of complementary skills to support the green transition. These changes can be challenging, especially for the most vulnerable, and for some regions, notably those affected by the industrial transition or changes in consumption patterns, and coal mining regions. At the same time, many activities related to the transition to a more circular economy have significant potential to contribute to the social economy and the creation of local jobs. Upskilling, reskilling and support to job transitions will be essential to overcome these challenges. They can provide people with the right skills and foster a rapid reallocation of labour that contributes to efficiency gains, productivity and wages. As announced in the European Skills Agenda, the monitoring of the greening of the professions and the identification of the type of skills adaptation needed in specific occupations and sectors will be strengthened. Energy poverty is an increasing form of poverty, calling for targeted measures Energy poverty affects up to 34 million people in the EU today, with about one in five people with an income below the poverty threshold reporting inability to keep their home adequately warm. In October 2021, the Commission adopted a Communication on Tackling rising energy prices , which highlighted fair tax-benefit systems, targeted income support measures and inclusive renovation policies as key elements of a toolbox to mitigate energy poverty and address the immediate impact of recent price increases. A socially fair green transition requires accompanying employment, skills and social policy measures that address the challenge. The Commission intends to propose a Council Recommendation to address the social and labour aspects of the climate transition in December 2021. High-quality and effective social partners’ involvement is a prerequisite for the good functioning of the European social market economy, ensuring more sustainable and inclusive policy outcomes. More than half of all measures in the domains of active labour market policies and income protection enacted since the pandemic outbreak either agreed by or negotiated with social partners’ organisations. The Employment Guidelines call upon Member States to ensure the timely and meaningful involvement of the social partners in the design and implementation of employment, social and, where relevant, economic reforms and policies, including by supporting their increased capacity. In line with national practices and institutional frameworks, the engagement with social partners at all levels aims to improve the design and ensure ownership of reforms. Overall, the quality of the involvement of the social partners in the national employment and social policies has remained stable or slightly improved over the past years, but still differs significantly across Member States. The involvement of civil society organisations is also important and instrumental to this. This is particularly important at a time when strong consensus is needed to ensure a strong recovery and support to the green and digital transitions. Going forward, an adequate involvement of social partners and civil society organisations in the implementation of the Recovery and Resilience Plans will be important to ensure a successful delivery on the measures planned. Social partners have played a key role in the recovery strategy

from the COVID-19 crisis Form of involvement of social partners in the design of policy measures enacted in 2021 More than half of all measures in the areas of business continuity, employment protection and retention, adaptation of workplaces and income protection enacted in 2021 were agreed by or negotiated with social partners Quality of the involvement differs significantly across Member States Notes: The figure shows 184 cases of legislation or recommendations and tripartite agreements between 1st January 2021 and 13th September 2021. Source: Eurofound (2021), COVID-19 EU PolicyWatch database. Educational outcomes remain strongly correlated with the socio-economic background. COVID-19 has put the Member States’ education and training systems under strong pressure. The share of early leavers from education and training has continued to decrease during the pandemic, although at a slower pace, and there are still significant differences across countries. First studies and surveys from the Member States indicate a substantial learning loss during the pandemic, with students from a lower socio-economic background or with a non-EU migrant background being particularly affected. Besides unequal access to online digital education, having a less supportive learning environment at home, for instance, hampered their learning. Unrelated to the pandemic, the pupils’ socioeconomic or migrant background remains also a strong predictor of their level of digital skills. In terms of basic skills, after some progress in the past, the share of underachieving 15-year-old pupils is again on the rise. This underlines the importance of providing quality education from the earliest years. Despite the increase in the tertiary educational attainment rate, in the majority of Member States social differences in participation in tertiary education tend to persist across generations. Existing skills mismatches also underline the need to strengthen the labour market relevance of education and further increase participation in tertiary education, in particular in sectors with growing demand, such as information and communication technology (ICT), and science, technology, engineering and mathematics (STEM). Preventing and reducing inequalities in educational outcomes linked to socio-economic or migrant backgrounds is key to providing equal opportunities to everyone, with beneficial effects on individual skills levels and the growth potential of the economy. Educational inequalities can determine different starting positions in the labour market, as well as career prospects A 26.6 pp gap in reading skills between pupils in the bottom and top quarters of the economic, social and cultural status index Pupils’ socioeconomic or migrant background is a strong predictor of their level of digital skills Young people born outside the EU are almost three times more likely to leave school before completion Early leaving from education and training (age 18-24, 2020) Note: Some administrative units on islands and outermost regions are not represented. Source: Eurostat LFS EDAT_LFSE_02. © EuroGeographics for the administrative boundaries. Adult skills development remains far from standard practice throughout the EU, with wide cross-country differences and a severe impact from the pandemic; the EU headline target by 2030 will support further efforts needed on this dimension. Ensuring that the workforce has the skills for the labour markets of the future therefore remains a major challenge. Skills forecasts point to a shift in the labour market skills profiles in light of rapid technological change, including due to the green and digital transitions, and a further decline in the low-skilled occupations. This creates an urgent need for upskilling and reskilling. Against this background, the EU headline target on adult learning (over the previous year) was set at 60%, compared to the 2016 rate of 37.4%. The adult learning participation among the low-qualified and migrants remained significantly below the average. Increasing adult learning participation requires an integrated approach that tackles the various barriers in a coherent manner, including through skills intelligence and forecasting in partnerships with relevant stakeholders. This implies combining financial support for direct costs, such as individual training entitlements, with paid training leave and career guidance services, as well as an overview of quality assured training opportunities and information on the validation and certification of skills. Upskilling and reskilling of the workforce is key to ease job transitions and support the green and digital transformation 9.2%

of adults participated in learning (over the previous 4 weeks) in the EU in 2020 Among which only 3.4% of low qualified adults 89%

of EU adults agree that better financial conditions would encourage participation in training Participation rate in adult learning of the total population and the unemployed in 2020 (in %, 25-64, last 4 weeks) Source: Eurostat LFS [trng_lfse_02] EU Member States have recorded limited progress in providing basic digital skills for adults, and significant further efforts are needed on advanced digital skills. The pandemic has substantially increased the demand for digital skills at all levels as a transversal requirement across many occupations and sectors. The latest available data for the Social Scoreboard headline indicator, from 2019, show that only 56% of adults had at least basic digital skills. The indicator also suggests a lack of convergence across Member States, and very slow progress since 2014. Digital skills are required (at the appropriate level) in over 90% of current jobs and in nearly all sectors of the economy. Progress in this area is essential if the EU is to meet the rising need for digital skills for the daily participation in society, as well as the economy’s specific need for ICT specialists. In spite of the COVID-19 crisis, aggregate household incomes remained broadly stable on average across EU Member States in 2020, thanks to the exceptional swift policy response at the Member State and EU level. As the pandemic struck, household income fell sharply in the second quarter of 2020, but recovered by the end of the year and overall remained stable between 2019 and 2020. The drop in compensations of employees was the greatest, and that of the self-employed and net property income saw large declines too. Over 2020, net social benefits contributed strongly to overall income, and played a major role in mitigating the overall drop in household incomes in the second quarter, also supported to some extent by adjustments to taxes on income and wealth. Against the background of a fall in real GDP by 6% year-on-year, this stability of aggregate household incomes in 2020 witnesses the effectiveness of the exceptional discretionary policies put in place to mitigate the social impact of the crisis but also of the automatic stabilising impact of social protection and tax systems. In Q2‑2021, both real GDP and compensation of employees’ grew rapidly, at about the same rate as they contracted a year before. Overall, real gross disposable household incomes (GDHI) grew more in this quarter than it had contracted a year before, also thanks to net social benefits decreasing at a slower pace than other income sources. In spite of the COVID‑19 crisis, aggregate household incomes remained broadly stable on average in EU Member States in 2020 Income inequality (S80/S20) slightly decreased or remained stable in the majority of Member States Share of people at risk of poverty or social exclusion (AROPE) was stable at around one in five persons in 2020 in the EU GDP growth, growth in real gross disposable household income and its main components (EU-27) Source: Eurostat, National Accounts [ nasq_10_nf_tr ] and [ namq_10_gdp ]. Notes: see body of the Report. Social protection systems helped weather the COVID-19 crisis without substantial increases in poverty risks or income inequality. The at-risk-of-poverty or social exclusion rate (AROPE) and each of its components as well as overall income inequality remained broadly stable between 2019 and 2020 in most Member States. This reflects the impact of the tax and benefit systems, as well as of the large public support, including via short-time work schemes and other job retention measures, introduced or extended during the COVID‑19 crisis, in particular for vulnerable groups. Early estimates of social protection expenditures in 2020 for 19 Member States point to unprecedented levels and large increases compared to 2019. Despite some temporary measures to improve access to (adequate) social protection, gaps remain in many countries, in particular for non-standard workers and the self-employed. Some structural reforms are announced in the national plans submitted by the Member States to implement the 2019 Council Recommendation on access to social protection for workers and the self-employed . Poverty and social exclusion risks remain nonetheless high for certain population groups, and notably families with children, persons with disabilities, non-EU born and Roma. Poverty among housheholds with very low work intensity has increased over the last decade. In most Member States children are more exposed to poverty (including persistent poverty) than the adult population. Children growing up in poverty or social exclusion are less likely to do well in school, enjoy good health and realise their full potential later in life. The Action Plan on the European Pillar of Social Rights put forward a complementary ambition to the 2030 EU headline target on poverty reduction, which is to reduce by at least 5 million the number of children at risk of poverty or social exclusion by 2030. In some Member States, the AROPE rate for children raised by a single parent or in families with more than 3 children or with a migrant or Roma background is up to three times higher than that of other children. The Council Recommendation of 14 June 2021 established a European Child Guarantee precisely to prevent and combat social exclusion of children by guaranteeing access to a set of key services. Non-EU born people are also more at risk of poverty or social exclusion. A large majority of Roma live under the national poverty threshold. The housing cost overburden rate continued to decline EU-wide before the crisis, but the situation remains critical for people below the poverty threshold. In 2020, around one tenth of the EU population lived in households that spent 40% or more of their (equivalised) disposable income on housing. Within the population at risk of poverty, the rate of housing cost overburden was significantly higher, with important differences between Member States. The impact of social transfers on poverty reduction has been stable in the EU-27 since 2015 but has shown divergence just before the crisis. On average in the EU social transfers (excluding pensions) reduced the at-risk-of-poverty rate by about a third. However there are significant differences across Member States, ranging from about 16% to above 50%. Between 2019 and 2020, differences between Member States widened. There is considerable variation in terms of social protection coverage, in particular among non-standard workers and the self-employed, while minimum income benefits as a percent of the poverty threshold fell in almost all Member States in 2019. Minimum income levels lie significantly below 60% of the poverty line for 12 Member States. The Commission intends to propose in 2022 a Council Recommendation on minimum income to effectively support and complement the policies of the Member States. The adequacy of social safety nets differ across Member States Minimum income benefits as percentage of the poverty threshold decreased in 16 Member States between 2018 and 2019 Minimum income benefits at less than half of the poverty threshold in one third of Member States in 2019 The impact of social transfers on poverty reduction varies between 16% and 52% across Member States Net income of minimum income recipients as percent of at-risk-of-poverty threshold (smoothed over three years) and of the income of a low wage earner (income year 2019) Source: DG EMPL computation from EU-SILC microdata. Note: For IE data reflects income year 2020 for MI benefits. For IE, IT, LU and LV, AROP SILC 2020 threshold not yet available. The chart concerns single childless persons. Net income of a minimum income recipient may also include other types of benefits (e.g. housing benefits) than minimum income. The low wage earner considered earns 50% of the average wage and works full time. Notwithstanding the pandemic, initial evidence suggests that self-reported unmet needs for medical care were broadly stable in most Member States in 2020, but variation is substantial across them. Some groups, like people living in low-income households or people with a migrant background, are more likely to be vulnerable due to unmet medical needs, though the extent of the gaps with the overall population differs across Member States. There could still be challenges related to postponement of medical procedures and a significant interruption of routine patient care, linked also to unmet medical needs that were more substantial at the outset of the COVID-19 crisis. The need to strengthen the resilience, quality and accessibility of health care has been brought to the fore by the pandemic outbreak.

Population ageing is expected to lead to a strong increase in the demand for long-term care (LTC) services. On average, 26.6% of people aged 65 or more living in private households were in need of long-term care in 2019 in the EU. Strengthening access to formal LTC is important to ensure social fairness and gender equality, and also provides an opportunity for job creation. Good quality homecare and community-based LTC services are important to provide an accessible alternative to residential care for all. Households in need of LTC often have limited access to formal homecare services as they are not affordable or simply not available. In 2019, 46.5% of people aged 65 or more with severe difficulties in personal care or household activities in the EU reported that they had an unmet need for help in such activities. This lack of help was significantly more pronounced for those in the lowest income quintile. The lack of access to formal care can translate into unmet care needs or burden on informal carers (mostly women), who provide the largest share of care. In general, the adequacy of social protection in relation to long-term care needs varies considerably across Member States, and persons in need can face very high out-of-pocket payments for formal long-term care, even after receiving social benefits. Demographic change continues to pose long-term challenges to pension systems. Pension adequacy remained generally stable in 2020. The gender gap in pensions remains large, despite a gradual decrease over the last ten years. Reforms should aim at building inclusive pension systems, providing adequate access for men and women alike and for people in different types of contracts and economic activities, while ensuring adequate income in old age, and preserving the sustainability of public finances. ************* Member States should take action to address the employment, skills and social policy challenges identified in this Joint Employment Report. The analysis presented in the report highlights a number of priority areas for policy actions. These should aim to promote an inclusive recovery by fostering job creation, easing transitions from unemployment into employment and across sectors, improving economic and social resilience and ensuring that the green and digital transitions are fair, while progressing towards the 2030 EU headline targets on employment, skills and poverty reduction. In line with the Employment Guidelines, Member States are invited to: ·Gradually transition from emergency to recovery measures in labour markets, and take measures to promote higher labour market participation and the reactivation of the workers most affected by the pandemic; ·Develop coherent policy packages of hiring and transition incentives, upskilling and reskilling measures and enhanced support by employment services for job transitions, in line with the EASE recommendation; ·Strengthen the efficiency and effectiveness of active labour market policies and public employment services, including by investing in digital infrastructure and services (while ensuring accessibility); skills forecasting and intelligence (also related to the green and digital transitions); profiling systems; and adequate training of staff; ·Enhance the labour market prospects of young people by promoting inclusive and quality vocational education and training and tertiary education; offering targeted employment services’ support (including mentoring, guidance and counselling) as well as supporting quality apprenticeships and traineeships (in particular in SMEs), in line with the reinforced Youth Guarantee; ·Ensure gender equality and strengthen the labour market participation of women, including through work-life balance policies; access to affordable, quality long-term care and early childhood education and care services; and ensuring that parents and other people with caring responsibilities have access to family leave and flexible working arrangements, while promoting a balanced use of those entitlements between women and men; ·Improve learning outcomes and reduce inequalities in education and training; expand access to tertiary education (particularly for disadvantaged groups); prevent early school leaving; further increase participation and labour market relevance of tertiary education, with special focus on sectors such as ICT and STEM, including through micro-credentials; ·Invest in reskilling and upskilling of adults, notably in skills needed for the digital and green transitions, by strengthening the provisions on individual training entitlements, notably delivered through individual learning accounts, supporting large-scale public private multistakeholder partnerships under the Pact for Skills and the Digital Skills and Jobs Coalition, providing greater incentives to businesses and workers to engage in upskilling and reskilling, investing in infrastructure and equipment, including digital; ·Boost the digital competences of pupils and adults and increase the digital talent pool in the labour market by developing digital education and training ecosystems supported by key enablers such as high-speed connectivity for schools, equipment, and teacher training; support institutions with know-how on digitalisation with a special focus on inclusion and on reducing the digital divide; ·Reform labour market regulations and tax and benefit systems, to ensure that labour market segmentation is reduced and quality job creation fostered; make sure that workers in non-standard forms of work and the self-employed have access to adequate social protection in line with the Council Recommendation on Access to Social Protection; ·Ensure that working environments are safe and well adapted to the post-pandemic requirements, and that flexible working arrangements are available; ·Ensure a socially fair transition process; ·Promote collective bargaining, social dialogue and social partners’ involvement, including in relation to the implementation of the recovery and resilience plans; ·Provide all children at risk of poverty or social exclusion with free and effective access to healthcare, early childhood education and care, education and school-based activities, effective access to healthy nutrition and adequate housing, in line with the Recommendation establishing a Child Guarantee; ·Invest in adequate and sustainable social protection systems for all, including minimum income schemes, supporting reforms to maintain and reinforce levels of protection, and improving the protection of those who are not or not sufficiently covered; improve of adequacy of benefits, transferability of rights, access to quality services and support for the labour market integration of those who are able to work; strengthen the provision of quality, affordable and sustainable long-term care services; assess the distributional impacts of policies; ·Ensure inclusive and sustainable pension systems, providing adequate access for men and women alike and for people in different types of contracts and economic activities, while ensuring adequate income in old age.

·Address homelessness as the most extreme form of poverty; promote the investment in the renovation of residential and social housing; ease access to quality and affordable housing, social housing or housing assistance, where appropriate; ·Invest in healthcare system capacity including primary care, coordination of care, healthcare staff and eHealth. Reduce out-of-pocket payments, improve healthcare coverage and promote up-skilling and reskilling of health workers. EU funding, including via the European Social Fund Plus, the European Regional Development Fund and the Recovery and Resilience Facility, supports Member States to step up policy action in these domains. A full and ambitious implementation of the reforms and investments in the national recovery and resilience plans will be key to ensure an effective support to the recovery and to fair green and digital transitions. It will importantly contribute to addressing employment, skills and social policy challenges indentified in the country-specific recommendations in the context of the European Semester. Measures linked to these policy areas, in the national plans already approved by the Council, amount to approximately EUR 135 billion, around 30% of the total financial allocations of these approved plans, which will provide an important contribution to the implemenation of the European Pillar of Social Rights.



OVERVIEW OF LABOUR MARKET AND SOCIAL TRENDS AND CHALLENGES IN THE EUROPEAN UNION 1.1 Labour market trends The labour market recovery is taking hold, but employment is not yet back to pre-crisis levels. In the second quarter of 2021, the total number of people in employment in the EU reached 207.5 million. This is 4.1 million more than in Q2-2020, but still 2 million below the peak of Q4-2019. After reaching a low point of 71.6% in Q2-2020, the employment rate (20-64) has recovered partially, to 72.8% in Q2-2021, which is still below the peak of 73.3% of Q4-2019. On a yearly basis, the employment rate stood at 72.5% in 2020 in the EU, 0.7 pps below the 2019 value. In some economic activities employment levels remain significantly lower than before the crisis. In particular, wholesale and retail trade, transport, accommodation and food service activities have still 2.3 million fewer employed people in Q2-2021 compared to Q4-2019 (a reduction by 4.5%), followed by manufacturing (a decrease by 2.5%). To the contrary, sectors like construction and information and communication have already recovered their pre-pandemic employment levels. Overall, employment is projected to increase by 0.8% in 2021 and by 1% in 2022, before moderating slightly to 0.6% in 2023. The EU target of at least 78% of the population aged 20-64 in employment by 2030 reflects a joint commitment to an inclusive and job-rich recovery (see section 1.4). At the same time, after its initial decline in the context of the COVID-19 crisis, the job vacancy rate has by now increased to almost record levels. Before the crisis, in Q2-2019, the vacancy rate stood at 2.4% in the EU-27. Containment measures to respond to the pandemic and the related halt or slow down in economic activities drove a decline in the job vacancy rate. The rate dropped to 1.6% in the EU-27 in Q2-2020, the lowest since Q1-2016. Since then, it has been rising, reaching 2.3% in Q2-2021, almost completely reabsorbing the impact of the COVID-19 shock. While it is normal that vacancies react faster than unemployment to cyclical swings, the trends and survey information (i.e. Eurofound) point to the need to carefully monitor potential labour shortages (see Section 2.1). The swift policy response helped contain the labour market impact in the context of the COVID-19 crisis. The pandemic triggered a public health crisis with widespread effects on economic activity, labour markets and society. The unemployment rate (15-74) increased from 6.6% in Q4-2019 (the lowest level ever recorded in the EU-27) up to 7.6% in Q3-2020. In the euro area, the unemployment rate was slightly higher at 8.5% in Q3-2020 (1.1 pps above its value in Q4-2019). More recently, the easing of containment measures and the roll-out of vaccination campaigns helped put the EU economies back in motion and contributed to reduce the unemployment rate to 7.3% in Q2-2021 (8% in the euro area). Overall, the increase in unemployment remained below what could have been expected given the magnitude of the COVID-19 impact on the economy. This is thanks to the policy measures introduced by the Member States, including with support from EU funding (notably SURE but also REACT-EU and the Coronavirus Response Investment Initiative, CRII and CRII plus), and also the result of people leaving the labour market into inactivity as finding work became more difficult, causing many to cease their job search. Recent monthly data show that the unemployment rate has further decreased, down to 6.7% in the EU in September 2021 (7.4% in the euro area), getting closer to pre-crisis levels. However, there is significant heterogeneity across Member States (see Section 2.1). Also, the long-term unemployment rate reached 2.9% of the active population in Q2-2021 in the EU, showing a moderate though steady increase compared to its record low in Q2-2020 (2%). Total hours worked have partially recovered from the sharp decline following the pandemic outbreak, but they are still below pre-crisis levels. In Q2-2021, their number stood at 82.8 billion. This is 9.7 billion hours more than the record low in Q2-2020 (73.1 billion), largely due to the improved labour market conditions, the extension of the possiblities of remote work and the reduction in the weekly absences from work (from 19.4% of total employment in Q2-2020 to 10.5% in Q2-2021). However, this is still nearly 2.5 billion hours less than the peak reached in Q1-2019, still highlighting the role that short-time work and temporary lay-off schemes have or had for many workers, together with dismissal restrictions imposed by several Member States to help preserve employment (see Section 2.1). The number of hours worked per employed person had been on a slow but steady decline over the past decade in the EU, with the expansion of part-time work and other flexible working arrangements (i.e. zero-hour contracts or on-demand work in the context of platform work) as the main determinants. The outbreak of the COVID-19 pandemic put a halt to the positive trend in the activity rate observed in recent years. The EU activity rate for those aged 20-64 stood at 77.8% in 2020, 0.5 pps lower than in 2019. Yet, in Q2-2021 it had recovered to 78.3%, in line with values seen before the crisis. Behind the aggregate, an increase is observed for women (to 72.7%, 0.3 pps more than in Q4-2019) while a decrease is recorded for men (to 84%, 0.3 pps below the Q4-2019 value). The 55-64 age cohort showed the most positive performance with only a slight decline at the peak of the crisis and Q2-2021 figures above pre-pandemic levels. While the employment rate of women has decreased, under the impact of the COVID-19 crisis, slightly less than that of men, significant gender differences persist. In 2020, the employment rate of women (age 20-64) went down to 66.9%, 0.5 pps lower than in 2019, while for men it decreased to 78%, 0.9 pps below its value in the previous year. In quarterly terms, the employment rate of women fell from 67.4% in Q4-2019 to 66.1% in Q2-2020, but had recovered to 67.2% by Q2-2021. The employment rate for men stood at 78.3% in Q2-2021, 0.8 pps below Q4-2019. These developments translated into a slight reduction in the gender employment gap, at 11.1 pps in Q2-2021 compared to 11.6 pps in Q4-2019 (in yearly terms, respectively 11.1 pps and 11.5 pps in 2020 and 2019). The crisis has heavily impacted labour market outcomes of young people, though their situation is improving since late 2020. The youth unemployment rate (15-24) reached 17.1% in 2020 in the EU, 1.8 pps higher than in 2019. In Q2-2021, the youth unemployment rate stood at 17.4%, i.e. 2.6 pps higher than in Q4-2019, but 1 pps below the peak reached in the third quarter of 2020. Overall, some 3.2 million young people (15-24) were unemployed in the EU in Q2-2021, reaching 5.1 million when all those neither in employment, nor in education or training (NEET) are considered, and 9.4 million for the larger age bracket of 15 to 29. The quarterly NEET rate for this age group stood at 13.2% in the EU in Q2-2021 (0.7 pps higher than in Q4-2019, but 1.5 pps below the peak of Q2-2020). Older workers have weathered the labour market impact of the COVID-19 crisis better than other groups. The employment rate of older workers (55-64) has remained relatively stable since the COVID-19 outbreak. It reached 60.2% in Q2-2021, 0.4 pps above the level observed in Q4-2019 and with a steadily increasing trend over the past decade. The employment rate of adults aged 25-54 stood at 80.3% in Q2-2021, still slightly below the pre-pandemic level (80.8% in Q4-2019). The EU unemployment rate of those aged 55-74 has increased moderately, from 4.7% in Q4-2019 to 5.3% in Q2-2021. Figure 1: The employment impact of the crisis has differed across age groups Employment rates by gender and age group in the EU-27, seasonally adjusted data, not calendar adjusted (in %)

Note: Break in time series from Q1-2021. Source: Eurostat, Labour Force Survey [lfsi_emp_q]. Workers in non-standard forms of employment and the self-employed were particularly affected by the crisis. Over the total number of employees (aged 20-64) in the EU in 2020 (161.6 million), some 19.9 million (12.4%) had a fixed-term employment contract (1.3 pps below the figure observed for 2019). Some 21.3 million workers (20-64, seasonally adjusted) were on temporary contracts in Q2-2021, still 0.8 million fewer people compared to Q4-2019. The share is much higher among the youth (15-24) than for the rest of the population, and significantly higher for the low skilled compared to the medium- and high-skilled. The share of involuntary temporary employment continued to decrease (by 1.1 pps) compared to 2019, reaching 6.8% in 2020. The proportion of temporary contracts in total employment (20-64) has increased from the Q2-2020 low (10.1%), up to 11.3% in Q2-2021. The number of people working part-time increased steadily over 2020. As a result, the proportion of part-time workers (20-64) in total employment reached 17.7% in Q2-2021 (0.6 pps below the Q4-2019 value). The share of involuntary part-time workers went down to 25% in 2020 (1.5 pps less compared to 2019). Since the start of the pandemic in Q1-2020, the number of self-employed decreased by 0.7 million people (from some 25.8 million to 25.1 million in Q2-2021. Figure 2: There is a different incidence of temporary contracts by age group and level of qualification Share of employees on temporary contracts by age and education level in the EU-27 (2020) Source: Eurostat, Labour Force Survey [lfsa_etgar], [lfsa_etpgan] and [lfst_r_e2tgaedcu]. Labour market outcomes of non-EU born people have been strongly impacted by the crisis. In 2020, the employment rate (20-64) of people born outside the EU stood at 65.3%, 2.4 pps below the 2019 value, and 8.2 pps lower than for the native-born. The unemployment rate (15-74) of non-EU born stood at 12.3% in 2020, up from 10.8% of the previous year. Unemployment figures also show an increase from 13.5% in Q2-2020 to 13.9% in Q2-2021. 1.2 Social trends In spite of the COVID‑19 crisis, household incomes remained broadly stable on average across EU Member States in 2020, thanks to the swift policy response. As the pandemic struck, real gross disposable household income (GDHI) fell sharply, by 3.3% (year-on-year) in Q2-2020, but recovered by the end of the year and overall remained stable between 2019 and 2020 (with a decrease of 0.25%). The drop in compensations of employees was the largest (‑5.5%), but compensation of the self-employed (‑1.4%) and net property income (‑3.3%) saw large declines too – see Figure 3. Over 2020, net social benefits contributed strongly to overall income, and played a major role in mitigating the overall drop in household incomes in the second quarter, also supported to some extent by adjustments to taxes on income and wealth. This trend continued in Q2 and Q3-2020 as well as in Q1-2021, with growth in income from social benefits more than offsetting the declines in compensation of employees and the self-employed (much reduced compared to the decline in the second quarter) and the fall in net income from property. Against the background of a fall in market income and real GDP by 6% year-on-year, this stability in aggregate household incomes witnesses the support provided by the exceptional discretionary policies put in place to mitigate the social impact of the crisis and the automatic stabilising effects of social protection and tax systems. Changes in Q2-2021 marked a turning point: both real GDP and compensation of employees grew rapidly, approximately at the same rate as they contracted a year before, in Q2-2020. Overall, real GDHI grew more than it had contracted a year before, also thanks to net social benefits decreasing at a slower pace than other income sources. Figure 3: Broad stability in aggregate households’ income on average in the EU in the context of the COVID‑19 crisis resulted from the unprecedented policy response GDP growth, growth in real gross disposable household income and its main components (EU-27) Notes: DG EMPL calculations. Nominal GDHI was deflated using the price index of household final consumption expenditure. The real GDHI growth for the EU is estimated as a weighted average of Member States’ values for those with avilable quarterly data based on the ESA2010 (overall 95% of EU GDHI). Source: Eurostat, National Accounts [ nasq_10_nf_tr ] and [ namq_10_gdp ]. Data are non-seasonally adjusted. Overall, income inequality remained broadly stable in the majority of Member States. According to Eurostat’s flash estimates, the average income quintile share ratio (S80/S20) in the EU remained stable or registered a slight drop in 2020. This was again the result of the massive public support put in place and the strong automatic stabilisation that alleviated the consequences of the crisis, in particular for vulnerable groups. While employment incomes are estimated to have dropped by 10% for the first income quantiles and 2% for the fifth, the overall impact on disposable incomes was largely contained across the whole income distribution, thanks to the beneficial smoothing effect of the tax and benefit systems, and the operation of short-time work and other job retention schemes. The share of people at risk of poverty or social exclusion remained broadly stable in the first year of the COVID-19 crisis. In 2020, about one in five persons was at risk of poverty or social exclusion (AROPE) in the EU (21.9%). All three components of the AROPE indicator were stable for most Member States year-on-year. According to the flash estimates of Eurostat, the at risk of poverty (AROP) rate was unchanged in at least half of the Member States in comparison to 2019. These estimates show that the newly introduced policy measures, in combination with the tax and benefit systems, cushioned the impact of the COVID‑19 crisis, stabilised incomes, and significantly contributed to preventing an increase in poverty risks. This resulted also in a broad stability of the material and social deprivation rate (6.8%, only a 0.2 pps increase). The share of people living in quasi-jobless households also remained stable (at 8.2%, only a 0.1 pps increase), mirroring the contained impact in terms of job losses, also a result of short-time work and other job retention measures. Energy poverty is an increasingly important form of poverty. On 13 October 2021, the Commission adopted a Communication on Tackling rising energy prices , which highlighted fair tax-benefit systems, targeted income support measures and inclusive renovation policies as key elements of a toolbox to mitigate energy poverty and address the immediate impact of price increases. The at-risk-of-poverty or social inclusion rate (AROPE) for children was also stable but with larger cross-country differences and an increase in monetary poverty. There was more variation in the AROPE rate for children across Member States: four Member States registered values over 30%, while four others are under 15%. In addition, monetary poverty was less contained, as it increased substantially in a third of the Member States in 2020. Single parents and large families were significantly more at risk of poverty or social exclusion than families with 1-2 children (42.1% and 29.6% on average in the EU, respectively).

Poverty among people in employment remains a challenge. In-work poverty in the EU-27 increased by 0.5 pps (from 8.5% to 9%) between 2010 and 2019. While the data for 2020 is not yet fully available, the situation does not appear to have changed significantly since 2019. In general, vulnerable workers face more difficult circumstances: those on temporary contracts face a higher risk of in-work poverty than those on permanent contracts (16.2% vs 5.9%), as do low-skilled workers compared to high-skilled ones (19% vs 4.9%), and non-EU born compared to the native-born (20.1% vs 8.1%). Despite social resilience at the aggregate level, vulnerable groups were more negatively affected by the COVID‑19 crisis. Confinement measures have had a disproportionate impact on persons with disabilities, for instance, notably in terms of access to healthcare, education and other on-line support services, also aggravating pre-existing limitations in access to employment. People with a migrant background have been experiencing AROPE rates that are sometimes double those for the native-born. The pandemic lockdowns cut many Roma living in segregated settlements from any source of income and (formal or informal) economic activity, leading to a further deepening of their poverty rates. 1.3 The revised Social Scoreboard: overview of challenges related to Pillar principles The analysis in the 2022 Joint Employment Report relies on a revised set of Social Scoreboard headline indicators endorsed by the Council. The European Pillar of Social Rights Action Plan, published in March 2021, presented a proposal for a revised Social Scoreboard, which was then discussed with the Employment Committee (EMCO) and the Social Protection Committee (SPC) and endorsed by the Employment, Social Policy, Health and Consumer Affairs (EPSCO) Council on 14 June 2021. The revision aims at covering the Pillar Principles more comprehensively, reinforcing the role of the Social Scoreboard as the main quantitative tool to monitor progress towards the implementation of the Pillar in the context of the European Semester. The revised Scoreboard will also help complement the existing monitoring tools, in particular the Employment Performance Monitor and the Social Protection Performance Monitor. Headline indicators in the revised Social Scoreboard support the monitoring of 18 out of the 20 Pillar principles (four more than under the previous version), contributing to assessing key employment and social challenges in the Member States. The set of headline indicators was revised according to the principles of parsimony, availability, comparability, and statistical robustness. The indicators, linked to each of the three Pillar chapters, are as follows (new indicators are marked with **, revised ones with *): ·Equal opportunities oAdult participation in learning during the last 12 months (age 25-64)** oShare of early leavers from education and training (age 18-24) oShare of population with basic overall digital skills or above (age 16-74) oYoung people neither in employment nor in education or training (NEET rate) (age 15-29)* oGender gap in employment rate (age 20-64) oIncome inequality measured as quintile share ratio (S80/S20) ·Fair working conditions oEmployment rate (age 20-64) oUnemployment rate (age 15-74) oLong-term unemployment rate (age 15-74) oGross disposable income of households in real terms, per capita ·Social protection and inclusion oAt-risk-of-poverty or social exclusion rate (age 0+) (AROPE 0+)

oAt-risk-of-poverty or social exclusion rate for children (age 0-17) (AROPE 0‑17)** oImpact of social transfers (other than pensions) on poverty reduction oDisability employment gap (age 20-64)** oHousing cost overburden rate** oChildren aged less than 3 years in formal childcare oSelf-reported unmet need for medical care (age 16+). The ‘Disability employment gap’ headline indicator temporarily uses EU-SILC as the statistical source, but will switch to the EU-LFS for improved accuracy as of 2022, providing data in 2023. The Commission services, including Eurostat, will continue to monitor its quality and will review the indicator in the medium term, once LFS-based data become available (2023), and will support further steps to improve cross-country comparability and explore the development of additional indicators in this area. The headline indicator ‘Adult participation in learning during the past 12 months’ will also use the EU-LFS from 2022 onwards. The Commission will monitor the indicator together with Eurostat and conduct a thorough analysis of the data from the two survey sources when they will become available (2023) in order to ensure data quality and comparability. To ensure the monitoring of the Employment Guidelines 6 and 7, including in regard to active labour market policies, this Joint Employment Report 2022 will exceptionally use the indicator on adult participation in learning in the past 4 weeks (age 25-64). Headline indicators are analysed using the common methodology agreed by the EMCO and SPC (see Annex 4 for more details). This methodology evaluates the situation and developments in Member States by looking at levels and changes with respect to the preceding year of each of the headline indicators included in the Social Scoreboard. Levels and changes are classified according to their distance from the respective (unweighted) EU averages. Member States’ performances on levels and changes are then combined using an agreed rule so that each Member State is assigned to one out of seven categories (‘best performers’, ‘better than average’, ‘on average/neutral’, ‘good but to monitor’, ‘weak but improving’, ‘to watch’ and ‘critical situations’). On this basis, Table 1 provides a summary of the readings of the scoreboard according to the latest figures available for each indicator. The Social Scoreboard headline indicators point at key challenges in EU Member States across the three areas of equal opportunities and access to the labour market, fair working conditions and social protection and inclusion. In terms of ‘critical situations’ (red in Figure 4), a relatively large number of Member States still face significant challenges in relation to the labour market situation of women and the participation of children in formal childcare (with five red flags for both indicators). Labour market outcomes of other groups also raise concerns in a relatively large number of Member States, with the disability employment gap and the youth NEETs rate flashing red for six and four countries respectively. Early leavers from education and training also remain critical for four Member States. Finally, in the area of social protection and inclusion, the impact of social transfers (other than pensions) on poverty reduction is critical in a high number of Member States (6), and as many as four face critical challenges in relation to both poverty risks in general and child poverty in particular. Income quintile ratios are also ‘critical’ in four Member States. When extending the view to cover also the ‘to watch’ situations, on top of the ‘critical’ ones, the three indicators of youth NEETs, the impact of social transfers on poverty reduction, and children aged less than 3 in formal childcare flag most problematic cases with ten countries for the first two and eleven for the last one. A detailed analysis of the sixteen indicators, including longer-term trends, and additional indicators where relevant, is presented in Chapter 2. EU financial and technical support to employment, skills and social policy measures Significant EU funding is provided via different financial tools to support the implementation of the European Pillar of Social Rights. With around EUR 500 billion (including national co-financing) for the period 2021-2027, EU cohesion policy funds (notably the European Social Fund Plus, ESF+, and the European Regional Development Fund, ERDF) aim at reducing socio-economic disparities, supporting upward economic and social convergence and fostering structural change. In May 2020 the Commission proposed NextGenerationEU (EUR 807 billion in current prices, embedded in the 2021-2027 EU Multiannual Financial Framework) to mitigate the economic and social impact of the crisis, strengthen economic and social resilience and make the EU’s economies and societies better prepared for the challenges and opportunities of the green and digital transitions, including in relation to their fair dimension. The new Recovery and Resilience Facility (RRF) is at the heart of NextGenerationEU (more details further down). The impact of EU funding is further reinforced via technical assistance financed through the Technical Support Instrument. Aim of the latter is to support – upon demand – national authorities with cutting-edge policy advice and tailor-made capacity building in priority areas for reform, including in the labour market, skills and social policy domains. Technical support can be offered on a bilateral or multi-country basis. The Recovery and Resilience Facility (worth EUR 723.8 billion in current prices) provides large-scale financial support to reforms and investments in the Member States that support sustainable and inclusive growth and job creation, with particular attention to those addressing the challenges identified in the Country-Specific Recommendations in the European Semester context. As many as four of the six pillars that define the remit of the Facility are relevant for the implementation of the European Pillar of Social Rights: smart, sustainable and inclusive growth; social and territorial cohesion; health, and economic, social and institutional resilience, and policies for the next generation, children and the youth. As a result, due attention is provided to employment, skills and social policy areas in the recovery and resilience plans put forward by the Member States, endorsed by the Commission and approved by the Council. With a budget of almost EUR 99.3 billion for the period 2021-27, the ESF+ will support, complement and add value to Member States’ policies in the employment, skills and social policy domains. The Fund will finance measures that ensure equal opportunities, equal access to the labour market, fair and quality working conditions, social protection and inclusion, in particular focusing on quality and inclusive education and training, lifelong learning, investment in children and young people and access to basic services. At the start of the COVID-19 crisis, cohesion funds provided a rapid response under the Coronavirus Response Investment Initiative and the Coronavirus Response Investment Initiative Plus (CRII and CRII+), resulting in a net increase of over EUR 11 billion for employment and healthcare measures by November 2021. An additional EUR 50.6 billion Recovery Assistance for Cohesion and the Territories of Europe (REACT-EU) contributed to strengthening crisis-repair capacities in Member States. Finally, EUR 100 billion in loans have been made available through the Temporary Support to mitigate Unemployment Risks in an Emergency (SURE) in favour of short-time work schemes and similar job-retention measures, in particular for the self-employed. As part of the European Green Deal Investment Plan, the Just Transition Mechanism (JMT) was set up to help support a just transition towards climate-neutrality. The first pillar is the Just Transition Fund (JTF) , established in the framework of cohesion policy, which provides EUR 19.3 billion to mitigate the adverse effects of the transition process to a climate-neutral economy by supporting the most affected territories. Figure 4: Employment, skills and social challenges across EU Member States by headline indicator in the revised Social Scoreboard Notes: 1) data for the indicator on adult participation in learning is not yet available; 2) indicator on digital skills refers to 2019 data; 3) Data is missing for some countries in some indicators: the legends for all indicators are presented in the Annex.



Table 1. Social Scoreboard headline indicators: overview of challenges across Member States Year Best performers Better than average Good but to monitor On average / neutral Weak but improving To watch Critical situations Equal opportunities Early leavers from education and training

(% of population aged 18-24) 2020 EL, HR, IE, SI EE, LV, PL, PT LT AT, BE, DE, DK, FR, NL, SK ES, MT CY, CZ, FI, LU, SE BG, HU, IT, RO Individuals' level of digital skills 2019 DE, DK, FI, NL, SE AT, CZ, EE, EL, HR, IE LU BE, ES, FR, LT, MT, PT, SI, SK CY, HU, PL BG, LV, RO Youth NEET rate

(% of total population aged 15-29) 2020 DE, LU, NL, SE AT, BE, DK, FI, HR, MT, SI CZ, EE, FR, LV, PL RO CY, HU, IE, LT, PT, SK BG, EL, ES, IT Gender employment gap 2020 FI, LT, LV, SE DE, DK, EE, FR, LU, PT, SI AT, BE, BG, CY, ES, IE, NL, SK MT CZ, HR EL, HU, IT, PL, RO Income quintile ratio (S80/S20) 2020 CZ, SI, SK AT, BE, DK, FI, NL, PL, SE CY, EE, EL, FR, HR, HU, LU, PT RO ES, MT BG, DE, LT, LV Fair working conditions Employment rate

(% population aged 20-64) 2020 CZ, DE, NL, SE DK, FI, LV, MT, PL EE, LT AT, CY, FR, HU, LU, SI, SK HR BE, BG, IE, PT, RO EL, ES, IT Unemployment rate

(% active population aged 15-74) 2020 CZ, PL BG, DE, FR, HU, MT, NL, RO, SI AT, BE, CY, DK, FI, HR, IE, LU, PT, SE, SK EL, IT EE, LT, LV ES Long-term unemployment rate

(% active population aged 15-74) 2020 CZ, DE, DK, HU, MT, NL, PL, PT, SE AT, BE, BG, CY, FI, FR, HR, IE, LV, RO, SI EL, IT EE, LT, LU, SK ES GDHI per capita growth

(2008=100) 2020 HU, LT, PL CZ, IE, LV, MT, SI, SK DE, DK, FI, HR, LU, NL, PT, SE AT, BE CY, EL, ES, IT Social protection and inclusion At risk of poverty or social exclusion rate 2020 CZ, SI, SK AT, CY, DK, FI, NL, PL, SE BE, EE, FR, HR, HU, LU, MT, PT LV DE, LT BG, EL, ES, RO At risk of poverty or social exclusion rate for children (0-17) 2020 CZ, DK, FI, SI EE, LT, NL, PL, SE, SK AT, BE, CY, FR, HR, HU, LU, LV, MT, PT DE BG, EL, ES, RO Impact of social transfers (other than pensions) on poverty reduction 2020 BE, DK, FI, FR CZ, HU, LU, SE, SI, SK AT CY, EE, NL, PL DE, EL, LT, PT BG, ES, HR, LV, MT, RO Disability employment gap 2020 AT, DK, EE, FI, PT ES, LT, LU, SI FR CY, CZ, EL, NL, SK MT, RO, SE BE, BG, DE, HR, HU, PL Housing cost overburden 2020 SK CY, FI, HR, LT, MT, PT, SI AT, BE, CZ, ES, HU, LU, LV, NL, PL, RO, SE EL BG, DK, EE DE Children aged less than 3 years in formal childcare 2020 BE, DK, FR, LU, NL, PT, SE SI ES EE, FI, LV, MT HR AT, BG, CY, DE, EL, LT CZ, HU, PL, RO, SK Self-reported unmet need for medical care 2020 AT, CY, CZ, DE, ES, HU, LU, MT, NL BE, BG, DK, FR, HR, LT, PT, SE, SI, SK EE, EL FI, LV, RO PL Note: update of 28 October 2021. Income quintile ratio, At risk of poverty or social exclusion rate, At risk of poverty or social exclusion rate, for children, Impact of social transfers on poverty reduction, Housing cost overburden, Children aged less than 3 years in formal childcare and Self-reported unmet need for medical care not available for Ireland and Italy. GDHI growth not available for Bulgaria, Estonia, France, Romania. Disability employment gap not available for Ireland, Italy and Latvia. Breaks in series and flags are reported in Annexes 1 and 2. 1.4 EU headline targets by 2030 The EU set three headline targets for 2030 on employment, skills and poverty reduction, as presented in the European Pillar of Social Rights Action Plan. The headline targets were welcomed by the EU Leaders in the 8 May Porto Declaration and by the June European Council and endorsed by the June EPSCO Council. Together with the complementary goals that are presented below, they reflect the three chapters of the Pillar, i.e. equal opportunities and access to the labour market, fair working conditions, and social protection and inclusion. The three targets will help steer action towards a job-rich recovery and growth model, with lifelong learning supporting workers in making the most of economic and societal transformations, while fighting poverty and social exclusion in the EU and contributing to achieving the Sustainable Development Goals. They are set at ambitious though realistic levels, taking into account the socio-economic context, wider trends and the planned reforms and investments, including under the Recovery and Resilience Facility. Based on the agreed targets, by 2030 in the EU: ·At least 78% of the population aged 20 to 64 should be in employment. ·At least 60% of adults (25-64) should participate in training every year. ·The number of people at risk of poverty or social exclusion should be reduced by at least 15 million. Member States are now in the process of setting their own national targets in line with the ambitions embedded in the EU headline targets. The Porto Social Commitment of 7 May 2021 (signed by the Presidents of the European Parliament and the European Commission, the Portuguese Prime Minister, EU social partners and the Social Platform) called on the Member States to set ambitious national targets which, taking due account of the starting position of each country, constitute an adequate contribution to the achievement of the European targets. In July 2021, the Commission invited the Member States to send their initial proposals for 2030 national targets. Both the EU headline targets and the national targets will be monitored in the context of the European Semester. As reflected by the employment rate headline target, a high level of employment is a key priority for 2030 to ensure that everyone can participate fully in the economy and society. Participation in the labour market is important to support sustainable and inclusive growth potential, foster active participation in society and contribute to the adequacy and fiscal sustainability of social protection systems, also in the light of population ageing. Progress in green and digital labour market transitions will be important for the achievement of this target. The EU-wide employment rate stood at 72.5% in 2020, 5.5 pps below the 2030 78% ambition embedded in the headline target (see Figure 5). Complementary goals were set by the European Pillar of Social Rights Action Plan to increase the labour market participation of women and young people, thus supporting the overall employment rate target. The complementary ambitions aim at halving the gender employment gap, increasing the provision of formal early childhood education and care (ECEC), and decreasing to 9% the share of young people (15-29) who are neither in employment, nor in education or training (NEETs). Increasing the labour market participation of women is important to raise growth potential, and respond to the challenge related to an ageing population and a shrinking workforce. Supported by formal ECEC, stronger participation of women in the labour market can also contribute to the reduction of poverty and social exclusion, including among children, through the positive impact on households’ incomes. Similarly, reducing the NEET rate means activating the untapped potential of young people as key to ensure their full participation in society. Figure 5. Employment rate of the 20-64 years old in 2020 Source: Eurostat, indicator [ tesem010 ] The 2030 headline target on adults’ participation in learning reflects the need to ensure adaptation and the capability to reap benefits in a context of rapidly changing labour market needs, following the COVID-19 shock and in light of the green and digital transformations. The impact of the pandemic on the economy and society as well as structural changes ahead highlight the need for career-long requalification and lifelong skills development. This is more important than ever, as the digital and green transitions are expected to fundamentally change the skill requirements of many jobs and create new ones. Against this background, the EU headline target on adult learning was set at 60%, compared to the 2016 rate of 37.4% (see Figure 6). The 2030 target was thus set at an ambitious level, with reinforced EU and Member States’ efforts triggered by the European Skills Agenda, as well as significant additional EU funding made available for training, including under the Recovery and Resilience Facility (see Chapter 2.2). Reaching the adult learning target is possible only with solid foundations in education and training systems, while skills acquisition needs to respond to the labour market needs of the future. Educational attainment is a major factor in determining the employment prospects of young people, also setting the foundations for learning later in life. Despite this, as many as 9.9% of young people in the EU had not attained at least upper secondary education in 2020. For this reason, the Pillar Action Plan set the complementary goals of further reducing early school leaving and increasing participation in upper secondary education. Moreover, the complementary goal of at least 80% of those aged 16-74 having at least basic digital skills recognises the key role of these to ensure full participation in the labour markets and societies of the future. Action in this area is particularly urgent given the slow EU-wide progress made since 2015 (from 54% in 2015 to 56% in 2019). Figure 6. Adult participation in learning during the past 12 months (%, 2016) Source: special extraction, available online from Eurostat . Achieving an ambitious decline in poverty and social exclusion is essential to ensure inclusive growth and upward social and economic convergence in the EU. The 2030 target entails a reduction of 15 million fewer people at risk of poverty or social exclusion (AROPE) by 2030. In 2020, the EU-wide AROPE rate stood at 21.9% (see Figure 7). To achieve the ambition embedded in the EU poverty reduction target, Member States will need to take action along the three dimensions of income support, access to goods and services and labour market integration.

The European Pillar of Social Rights Action Plan has set as a complementary goal the reduction in the number of children at risk of poverty or social exclusion. Focussing on children is key to break the intergenerational cycle of poverty and contribute to equal opportunities in the EU. To commit to this ambition, this complementary goal proposes to reduce the number of children AROPE by at least 5 million by 2030. Figure 7: AROPE rate for the whole population in 2020 (%) Source: Eurostat indicator [ tepsr_lm410 ]. The 2030 target of a reduction of 15 million persons by 2030 would correspond to an AROPE rate of 17.6% according to the base value in 2019 and the central demographic scenario of Eurostat for the 2020 decade. Benchmarking frameworks supporting analysis and policy making The 2017 Communication on establishing the European Pillar of Social Rightsproposed benchmarking as a tool to support structural reforms and foster upward convergence in the employment and social fields. As a multilateral exercise, benchmarking frameworks combine quantitative indicators (on performance and outcomes) with the qualitative analysis of policy design features and policy levers that affect good policy making. In addition to supporting policy making, the benchmarking frameworks, together with the Social Scoreboard indicators, help inform the analysis in the European Semester and the Joint Employment Report. Since 2017, benchmarking frameworks have been developed by the Commission and discussed with Member States in several areas, in line with a common approach agreed by the Employment Committee (EMCO) and the Social Protection Committee (SPC). The frameworks addressed the areas of 1) unemployment benefits and active labour market policies, 2) adult skills and learning, and 3) minimum income. The main results of these exercises were reported in the previous Joint Employment Reports. The Commission has also started working on additional frameworks for possible use in the future Semester cycles, notably in cooperation with the Employment Committee on benchmarking minimum wages and on mapping collective bargaining, and with the Social Protection Committee on pension adequacy and on childcare and support to children. The framework on childcare and support to children has been agreed by the Social Protection Committee in October 2021. It identifies outcome indicators (on early childhood education and care attendance, child poverty and child specific deprivation) and performance indicators (the gap in childcare attendance for children along income quintiles, the impact of social transfers on child poverty, gaps in housing cost overburden and housing deprivation rate for children, the impact of parenthood on employment in the age bracket 25-49 and the share of population, aged 25-49, inactive or working part-time due to care responsibilities, by gender). To assess the adequacy of income support, two indicators were agreed relating to the income of a non-working couple with two children and that of a low-wage, single-earner couple with two children, both as a share of the poverty threshold. A range of contextual information is provided for better accounting for Member States’ situations in monitoring trends. Some areas are also highlighted for further work, especially on policy levers. By strengthening the common understanding of the pertinent indicators and policy levers in a policy area, benchmarking frameworks make a strong contribution to the implementation of the European Pillar of Social Rights. Following the adoption of the European Pillar of Social Rights Action Plan, future benchmarking frameworks will be adjusted to the revised Social Scoreboard. The main results of these exercises are reported in the Joint Employment Report.



EMPLOYMENT AND SOCIAL REFORMS – MEMBER STATES PERFORMANCE AND ACTION 2.1. Guideline 5: Boosting the demand for labour This section looks at the implementation of the employment guideline no. 5, which recommends Member States to create the conditions that promote labour demand and job creation, in line with Pillar principles 4 (active support to employment) and 6 (wages). Subsection 2.1.1 focuses on key labour market developments, also reflecting the impact of the COVID-19 crisis. Subsection 2.1.2 reports on the measures implemented by the Member States in these areas, with a special focus on those that preserved employment in the COVID-19 crisis and support job creation. 2.1.1 Key indicators After the initial shock from the COVID-19 crisis, labour market outcomes have stabilised in 2021. Despite a year-on-year decline in EU GDP by 6% in 2020, the unemployment rate only rose by 0.4 pps, from an average 6.7% to 7.1% over the same period (with an increase of 1.4 pps in monthly figures from the pre-crisis low of 6.3% in March 2020 to the peak of 7.7% in September 2020). Support measures in the form of short-time work and other job retention schemes contributed to the relatively limited increase in unemployment. A lower participation in the labour market, mainly due to fears of contagion and reduced chances to find a job given subdued economic activity, also mitigated the increase in the unemployment rate. While the economic recovery will sustain job creation, getting back to pre-crisis employment levels is not expected before 2022. This is despite the fact that the unemployment rate approaches the pre-crisis level (6.7%) in September 2021. The number of workers benefiting from short-time work and similar job-retention schemes remained high until mid-2021. All EU Member States either introduced or strengthened short-time work and/or similar job-retention schemes in the COVID‑19 crisis. During the first wave of the pandemic (April-May 2020), the use of such schemes reached unprecedented levels (up to 40% of total employees in up to 60% of all companies in Member States such as France and Italy, see Figure 2.1.1). Albeit at lower levels, the use of these schemes remained significant in the second half of 2020 and the first half of 2021. These support measures contributed significantly to limiting the labour market impact of the pandemic, notably in terms of employment rates and in particular for workers on lower incomes (Eurostat, 2021). In some Member States (e.g. Estonia and Latvia) the schemes were closed and then subsequently re-introduced to deal with the resurgence of the pandemic. As part of the EU response to the pandemic, in 2020 19 Member States, for a total of approximately 31 million people and 2.5 million firms, received support from SURE . It will be important to make sure that short-time work schemes facilitate and support restructuring processes and do not delay structural adjustments. For this the exceptional emergency measures should be phased out once time is ripe.

Figure 2.1.1: The proportion of employees and companies supported by short-time work and other job retention measures decreased gradually

The coverage of job retention measures varied among Member States (in %, Q1-2020 to Q2-2021) Note: No data available for Czechia and Romania. Source: Eurostat, COVID‑19 statistics Unemployment in most EU Member States worsened in 2020 compared to 2019. In 2020 the unemployment rate increased in all but four Member States compared to 2019 (see Figure 2.1.2), with the peak for the EU (7.7%) reached in September 2020. The Social Scoreboard situation remains ‘critical’ in Spain, which recorded an increase in 2020 from an already high unemployment rate, while Greece and Italy are ‘weak but improving’. The unemployment situation in the Baltic States worsened significantly in the course of 2020, though recent data indicate that a rebound has taken place in 2021. In the first nine months of 2021, the strongest decreases in unemployment were recorded in Cyprus (-3.5 pps), Greece (-3.1 pps) and Austria (-2.1 pps). Over the same period smaller improvements, but still higher than 1 pp, were recorded in Ireland, Denmark, Slovenia, Estonia and Spain. Figure 2.1.2: Unemployment rose in most Member States in 2020 Unemployment rate (age 15-74) and yearly change from 2019 to 2020 (Social Scoreboard headline indicator) Note: Axes are centred on the unweighted EU average. The legend is presented in the Annex. Source: Eurostat, [ une_rt_a ] LFS. According to the Social Scoreboard indicator, employment in almost all EU countries decreased in 2020 compared to 2019. As shown in Figure 2.1.3, Greece, Italy and Spain are still in ‘critical situations’ according to the Social Scoreboard methodology, due to further decline in employment which left rates at around or below 65%. On the other hand, Sweden, Germany, Czechia and the Netherlands are ‘best performers’ (with rates close to or above 80% in 2020). Overall, the EU employment rate (age group 20-64) dropped to 72.5 in 2020 (-0.7 pps compared to 2019). Employment rates have started recovering in Q3-2020. Still, the EU employment (employees and self-employed) was 1% lower in Q2-2021 (according to national accounts data) than at the peak in the last quarter of 2019, with persistent regional differences (see Annex 3). The EU employment rate gap between cities and rural areas was not affected by the COVID-19 crisis and stood at 0.9 pps in 2020 for the population aged 20-64 (a decline of 0.1 pps from 2019). National accounts data show that from Q1 to Q2-2021, the employment growth was positive in all Member States except for Estonia and Spain. In nine Member States (Belgium, Denmark, France, Luxembourg, Hungary, Malta, the Netherlands, Poland and Portugal) the employment rate in Q2-2021 had overtaken pre-crisis levels (Q4-2019). Figure 2.1.3: The employment rate dropped in almost all Member States in 2020 Employment rate (age 20-64) and its yearly change from 2019 to 2020 (Social Scoreboard headline indicator) Note: Axes are centred on the unweighted EU average. The legend is presented in the Annex. Source: Eurostat [ lfsi_emp_a ], LFS. All but two Member States experienced a fall in hours worked per employed person since the start of the COVID-19 crisis. As a result of measures to contain the immediate employment impact of the crisis, the reduction in total hours worked shows a more severe decline than may have been suggested by changes in aggregate employment rates (Figure 2.1.4). The degree to which employment losses could be avoided also depended on occupational characteristics, including the critical nature and the degree of ‘teleworkability’ of occupations and required social interaction. After spiking in Q2-2020, the number of workers absent from work fell to pre-pandemic levels in most Member States. Since the start of the recovery, hours worked have remained below pre-pandemic levels in all countries except for Denmark and Poland. Low levels of hours worked may reflect the use of short-time work in light of the still reduced activity; yet, it is also unclear when hours worked per employee will return to pre-crisis levels. A breakdown by gender of the developments on hours worked is presented in section 2.2.

Figure 2.1.4: Most Member States recorded a significant fall in employment and total hours worked Change in total employment and total hours worked between Q4-2019 and Q2-2021 (in %) Note: seasonally and calendar adjusted data, except only seasonally adjusted for CZ, EL, FR, MT, PL, PT, SK (employment) and MT, SK (hours worked). Data on hours worked for BE is not available. Data on LU and IE are for Q1-2021. Source: Eurostat [namq_10_a10_e] National accounts Employment declined more strongly in sectors more affected by the lockdowns and the necessary containment measures introduced to combat the pandemic. The highest declines in employment were registered in the sectors most severely affected by the lockdowns, such as accommodation, food, travel agency activities, culture and household services. On the contrary, manufacture of basic pharmaceuticals, insurance, computer programming and telecommunications are among the activities that experienced the highest increases in employment in 2020 (compared to the previous year). Most impacted sectors were also among the main beneficiaries from short-time work arrangements. Self-employment dropped more than total employment, with some differences across countries. In 2020, the number of self-employed in the EU fell by 1.5% representing a share of 14%; this decrease was most pronounced among the self-employed with employees (-4.7%). Particularly hit were the self-employed in Germany and Italy. Eleven Member States however recorded growth in the number of self-employed, particularly Poland, France, the Netherlands and Hungary. In the second quarter of 2021, the number of self-employed in the EU went down by 2.6% compared to the same quarter of one year before, with a 5% decrease among the solo self-employed. The largest declines in 2021 were recorded in Romania, Italy, Portugal and the Netherlands. Between Q1-2021 and Q2-2021, while total employment has been recovering in the EU, self-employment has not. The COVID-19 crisis temporarily reduced the historically high levels of labour shortages reached before, but in most Member States they are again on the rise. Labour shortages occur when employers cannot find the workers they need to fill open vacancies. Before the crisis, in Q2-2019, the vacancy rate stood at 2.4% in the EU-27. The job vacancy rate dropped to 1.6% in Q2-2020, and has been rising since then to reach 2.3% in Q2-2021, almost completely reabsorbing the impact of the COVID-19 shock. According to the European Business and Consumer Surveys (EU-BCS), prior to the pandemic labour shortages were at their historical peak in 15 Member States (Austria, Belgium, Bulgaria, Czechia, Estonia, Greece, France, Hungary, Ireland, Italy, Latvia, Lithuania, Poland, Portugal, Romania and Slovakia – see Figure 2.1.5) . The COVID-19-induced decline in economic activity led to a drop in labour shortages in almost all Member States. In 2021, following the easing of the lockdown measures and the gradual economic recovery, labour shortages have started rising again in most Member States. In sectors such as construction, health and long-term care, as well as information and communication, long-lasting skills shortages drive t