Employment in Europe 1989.
Date: 1990-09-19
Institutions: Directorate-General for Employment, Social Affairs and Inclusion, European Commission
Subjects: EU Member State, employment policy, employment structure, unemployment, vocational training

føyftøm  U^ 

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Commission  of the 

Directorate-General  for  Employment, 
Industrial  Relations  and  Social  Affairs 

COM(89)399final 

Commission of the European Communities 

Employment  in 
EUROPE 

1989 

Directorate  -  General 
Employment,  Industrial  Relations and Social Affairs 

This publication is also available in the following languages: 

DE  ISBN 92-825-9768-7 
FR  ISBN 92-825-9770-9 

Cataloguing data can be found at the end of this  publication 

Luxembourg: Office for Official  Publications of the European Communities,  1989 

ISBN 92-825-9769-5 

Catalogue number:  CE-55-89-366-EN-C 

Reproduction is authorized, except for commercial purposes, provided the source is acknowledged. 

Printed in Belgium 

2-

F o r e w o rd 

by Vasso  Papandreou 

Member  of  the  Commission  of  the  European 
responsible  for  employment, 
relations,  human  resources  and 
industrial 
training, 
relations  with  the  Economic  and  Social  Committee. 

Communities 
social  affairs,  education  and 

e m p l o y m e nt 

Reports  of  many  kinds  have  dis 
c u s s ed 
a nd 
unemployment 
in  the  European 
Member  States.  However,  this  is 
the  first  report  produced  by the  Eu-
r o p e an 
w h i ch 
C o m m i s s i on 
considers  employment  in  the  Com 
munity  as  a  whole.  It  is  a  report 
which  will  play  a  central  role  in 
developing  the  social  dimension  of 
the  Community  and  which  should 
be  read  in  conjunction  with  the 
Economic  Report  published  by  the 
Commission.  It  is  the  intention  of 
the  Commission  to  publish  such  a 
report  once  a  year  and  to  focus  on 
particular  issues  relating  to  em 
ployment  and  the  labour  market. 

The report treats the Community  as 
a  whole,  albeit  a  "heterogeneous 
whole" with  great  diversity  of living 
standards,  as  well  as  a  rich  variety 
of  cultures.  There  is,  however,  a 
common  destiny  in  a  Community 
that  is advancing  and  converging  in 
promoting  'throughout  the  Com 
munity  a  harmonious  development 
of economic  activities,  a  continuous 
in 
and  balanced  expansion,  an 
crease  in  stability,  an  accelerated 
raising of the  standard  of living  and 
closer  relations  between  the  States 
belonging  to  it.'  (Article  2  of  the 
Treaty).  The  integration  of  the  Eu 

ropean  economies  has  proceeded 
apace  and  is  accelerating  under  the 
impulsion  of  the  completion  of  the 
Internal  Market.  That  integration, 
and  the  supporting  policy  actions  to 
help  the  catching-up  process  of  the 
less favoured  regions, will boost  em 
ployment,  but  we  must  ensure  t h at 
the benefits  are distributed  fairly  to 
all  parts  of  the  Community  and  to 
all  social  groups. 

The  report  is  wide-ranging,  looking 
at  the  global  context  within  which 
employment  developments  in  the 
Community  are  taking  place,  as 
well  as  at  sectoral  and  other  trends 
w i t h in  M e m b er  S t a t e s.  A  wide 
range  of policy issues  are  addressed 
a nd  w h e r e v er  possible  r e l e v a nt 
data  are  presented  and  analysed  in 
an  attempt  to  improve  our  under 
s t a n d i ng  a nd  identify  potential 
courses  of action.  Nevertheless,  the 
task  we faced  was vast and  this  first 
report  could  not  expect  to  cover  all 
relevant  aspects  of  employment. 
Whilst  it  looks  at  many  aspects  of 
the  quantity  and  quality  of  jobs 
being  created,  it  does  not  cover  fin 
ancial  issues  -  wage  and  salary 
policy, or the  effects  on  employment 
of the way social security systems  or 
continuous  training  schemes  are 
financed  - in  any  detail.  Nor  do  we 

Foreword 

e m p l o y m e nt 
s ay  m u ch  a b o ut 
policies  pursued  by  companies,  or 
about  the  role of the  social  economy 
and  co-operatives.  These  issues, 
and  wider  concerns  such  as  for  the 
environment  and  their  consequen 
ces  for  employment,  are  ones  that 
we  intend  to  address  in  future  re 
ports. 

r e m a i ns 

Three  points in particular  strike  me 
in  this  first  report.  Firstly,  despite 
considerable  improvements  in  the 
economy  and  in  employment  in  the 
recent  past,  the  European  Com 
m u n i ty 
s u b s t a n t i a l ly 
under-employed.  I  do  not  refer  just 
to  those  who  are  unemployed,  al 
though their plight, especially  those 
who have  been  out  of work  for  more 
than  a year,  is  particularly  serious. 
I  mean  also  that  many  more  people 
than  those  at  present  in  employ 
ment  would  wish  to  work,  if  work 
were  available.  This  is  especially 
t he  case  for  l a r ge  n u m b e rs  of 
r e m a i ns 
women.  Unemployment 
unacceptably  high  and  the  rate  of 
employment  in  the  Community, 
c o m p a r ed  w i th 
t he  n u m b er  of 
people  of  working  age,  is  substan 
t i a l ly 
o t h er 
industrialised  parts  of  the  world, 
the  United  States,  J a p an  and  the 
Scandinavian  countries. We are  the 
poorer  in  consequence. 

below 

t h at 

in 

Secondly,  it  is  still  the  case  that 
unemployment  and  work  oppor 
tunities  in  the  Community  vary 
considerably  from  region  to  region 
and  from  locality  to  locality.  It  is 
unfortunate  but  true,  that  a  per 
son's  chances  of  finding  a job  which 
suits  their  particular  skills  and  tal 
ents depends to an important  extent 

on  where  they  live  or,  indeed,  on 
where  they  happen  to  have  been 
born. 

Thirdly,  we know  the  Community's 
future  depends  on  the  quality  of 
what  we  produce, but  we have  been 
slow to recognise that  quality  in  the 
market  place  depends  on  quality  at 
work.  Better  jobs  =  better  workers 
=  b e t t er  products  and  services. 
Higher  standards  - whether  they  be 
to  do  with  training,  working  condi 
tions,  or  workers'  rights  -  pay  off. 
Jobs  do not  need  to be bought  at  the 
expense  of  working  conditions  or 
basic  social  rights.  In  this  context 
one  can  see  already  some  serious 
mis-matching  occurring  with  re 
spect  to the  demand  and  supply  for 
highly  qualified  people. 

by 

This  report  will  be  discussed  at 
r e p r e 
C o m m u n i ty 
level 
sentatives  of  business  and 
trade 
unions  and  by  government  Minis 
ters,  and  the  Council  of  Ministers 
will  be  asked  to  agree  policy  gui 
delines  arising  from  it.  However, 
Community  support  for  employ 
ment is both multi-dimensional  and 
interwoven  with  policies  developed 
at  national, regional  and  local level. 
Hence,  I  believe  that  this  report 
should  also  be  widely  read  in  the 
Member  States  by  all  those  con 
cerned  with  employment.  The  facts 
and issues raised,  and  presented,  in 
this  report  can  be the  basis  for  sub 
stantive  debate.  I  hope  t h at 
the 
report, and its successors, will  make 
a  significant  contribution  to  develo 
ping  the  social  dimension  of  the 
Internal  Market  and  improving  the 
employment  performance  of  the 
Community. 

Vasso  Papandreou 

- 4-

Table  of  Contents 

Summary  and  Conclusions 

Part  I  Economic  and  Employment  Prospects 

Chapter  1 

Employment  in  the  E u r o p e an  Community 
Sectoral  Changes  in  Employment 

Chapter  2 

Short-Term  Outlook 

Part  II  Structural  Employment  Issues 

Chapter  3 

Community  Employment  a nd  t he  World  Economy 

Chapter  4 

The  Employment  Content  of  Growth 

Chapter  5 

Sectoral  Employment  Impact  of  1992 

Chapter  6 

J ob  Quality  - For  Better  or  Worse? 
SME  a nd  the  Self-Employed 

Chapter  7  Women's  Employment 

Chapter  8 

The  Demographic  Time  Bomb 

Chapter  9 

Vocational  Training  a nd  Employment 

Chapter  10  Unemployment  - A Social  as  well  as  a  Labour  Market  Problem 

Chapter  11  Black  Economy 

Chapter  12  Technological  Change  - A Strategic  Challenge  for  Employment 

Chapter  13  New  P a r t n e r s h i ps  in  Employment  Creation  - Local  Development 

Chapter  14  Mobility  a nd  the  E u r o p e an  Labour  Market 

Part  III  Community  and  National  Policies 

Chapter  15  National  Labour  Market  Policies 

Chapter  16  Community  Policies 

Summary  and  Conclusions 

Summary  and  Conclusions 

Introduction 

This  1989  Employment  in  Europe 
Report  is  the  first  of a  series  which 
will  be  produced  annually.  It  is 
aimed  at  a  broad  readership  in  the 
Member  States  covering  business, 
trade  unions  and  interest  groups  as 
well  as  governments. 

Employment  and its shadow,  unem 
ployment  plays  a  central  role in  the 
lives  of  the  Community's  popula 
tion. This report takes  a broad  view, 
covering  many  aspects  of  employ 
ment.  It  aims  to  provide  a  sound 
basis  for  debate  a nd  discussion 
about the future  development of em 
ployment  in  the  Community. 

In  the  report,  the  Community  is  re 
garded  as  a  'heterogeneous  whole'. 
This approach recognises that  while 
the  Member  States  have  a  great 
diversity  of living standards  and  le 
vels  of  economic  development  as 
well  as  a  rich  variety  of  cultures, 
their  common  stake  in  the  future  of 
a  more  integrated  Europe  is  para 
obvious 
m o u n t.  B e h i nd 
differences,  there  are  common  in 
terests. While cultural  diversity will 
remain,  the  process  of  social  and 
economic integration  has the  poten 
tial  for raising living standards  and 
opportunities,  particularly  for  the 
most  disadvantaged  groups  of  the 
population  and  areas  of  the  Com 
munity. 

t he 

Community  employment  needs  to 
be  analysed  as  a  whole.  The  inter 
r e l a t i o n s h i ps  b e t w e en  M e m b er 
States  are  becoming  more  import 

e m p l o y m e nt  of 

ant  almost  daily.  This  Report  fo 
cuses  on  the  effects  of this  growing 
interdependency,  including  the  im 
p a ct  on 
t he 
completion  of  the  Internal  Market 
by  1992. It  also considers the  effects 
inter-rela 
on  employment  of  the 
tionship  between  the  Community 
and  the  rapidly  changing  wider 
world  economy. 

Employment  cannot  be  viewed  in 
isolation.  Policies  for  employment 
and  the  labour  market  need  to  be 
integrated  into,  and  be  coherent 
with, the Community's  overall  econ 
omic and  social policies. This  Report 
gives  a  new  emphasis  to  employ 
m e nt  policies 
a nd  m e a s u r es 
throughout  the  Community.  Such 
policies  must  build  on  the  existing 
motors  of  economic  growth  -  the 
completion  of the  Internal  Market, 
better  economic  co-operation,  and 
continued  progress  towards  econ 
omic and  monetary  union  - and  they 
must be grounded in a  strengthened 
Social  Dialogue  and  in  the  develop 
ment  of the  social  dimension  of  the 
Community  and  the  Internal  Mar 
ket.  It  is  particularly  necessary  to 
ensure  that  the  structural  policies 
t h at  h a ve  b e en  p ut  into  place 
achieve greater  cohesion  and the re 
duction  of  regional  disparities  by 
ensuring  an  equitable  distribution 
of the  benefits  of the  Internal  Mar 
ket  to  all  parts  of  the  Community 
and  all  social  groups. 

Achievements 

The  memory  of the  crisis in  employ 
ment  of the  early  1980s, from  which 
it  took  t he  C o m m u n i ty  several 
years  to  recover  and  from  which  a 
high  level of unemployment  still  re 
mains,  can  easily  obscure  the  very 
real  achievements  of  the  Member 
States  since  the  inception  of  the 
Community.  The  Community  has 
maintained  its position  as one of the 
pre-eminent  economic  forces  of  the 
world. Over the past 30 years,  living 
standards  have  doubled  and  there 
has  been  a  three-fold  expansion  in 
its  capital  base. 

Since  the  full  employment  days  of 
the  1960s and  early  1970s gave  way 
to  the  recession  of the  mid-70s  and 
the  first  half  of the  1980s,  however, 
the  Community's  economic  perfor 
m a n ce  h as  b e en  well  below 
potential. Even in the more  success 
ful  areas, there has  been  a failure  to 
translate  positive  economic  perfor 
mance  into sufficient  job creation  to 
prevent  a  sharp  rise  in  unemploy 
ment. 

The  restructuring  of the  economies 
forced  on the  Member  States  by  the 
increasing  competition  from  both 
e s t a b l i s h ed  a nd  n e w ly 
i n d u s 
trialised  nations  and  by  economic 
recession  brought  serious  losses  in 
industrial  employment  to the  Com 
munity.  Unemployment  rose  each 
year  after  1973,  most  sharply  be 
tween  1974  and  1977  and  between 
1981  and  1986.  Many  major  indus 
tries  went  into  serious  decline,  the 
poorer,  often  agricultural,  areas 

Summary  and  Conclusions 

saw  their  hopes  of  economic  ad 
vance halted  or reversed,  and  many 
urban  areas  suffered  serious  depri 
vation. Older workers who lost  their 
jobs  found  themselves  seemingly 
unemployable  ten  or more years be 
fore  they  had  expected  to  retire, 
while the young seeking to enter  the 
world  of work  had  to  compete  for  a 
trickle  of  jobs  where  previously 
there  had  been  plentiful  choice. 

Those  momentous  upheavals,  and 
the  social  impact  that  they  have 
had,  are  the  ever  present  backdrop 
to  the  issues  raised  in  this  Report. 
They  affect  virtually  every  Member 
State,  every  area,  every  trend  and 
every  statistic  covered  by  this  Re 
port.  They  provide  the  context  in 
which  the  Report  is  firmly  rooted. 

Over  the  past  four  to  five  years  the 
process  of  recovery  h as  begun  -
slowly  at  first  but  increasing  in 
strength  over  the  last  two  years. 
This  has  made  it  possible  to  more 
than  repair  the  damage  to  employ 
m e nt  b r o u g ht 
t he 
recession,  but  it has  still  a long  way 
to go if it  is  to bring  unemployment 
back  to the  sorts  of levels which  are 
considered  socially  acceptable. 

a b o ut  by 

It  has  still  not  begun  to  make  any 
impression  on  the  problem  of  long-
t e rm  u n e m p l o y m e nt  which  h as 
grown  in  scale  over  the  past  five 
years  and  it  will  not  of itself  eradi 
cate  pockets  of  acute  regional  or 
local  unemployment. 

Trends 

Several important  themes  illustrat 
ing the current  state of  employment 
in the Community recur  throughout 
this  Report. 

Firstly  the  economic  conditions 
which gave full  employment  prior to 
1973  - at  least  in  northern  areas  of 

the  Community  - will  not  recur,  at 
least  in  the  form  that  they  took 
then.  The  days  when  whole  econ 
omies or regions could be  dependent 
on  heavy  industry  with  vast  work 
forces  in  individual  factories  are 
gone.  Either  the  products  or  the 
technology  of  the  industry  have 
changed,  so  that  the  pattern  and 
content  of  the  work  remaining  is 
totally  different,  or the  work  is  now 
done  elsewhere  in  the  world  where 
the  countries  are in  an  earlier  stage 
of development,  where  labour  costs 
are  substantially  lower  and  where 
plants  are  often  more  modern  than 
in  the  Community. 

Replacing  these  jobs  on  the  scale 
required  has  proved  difficult.  Com 
petition  between  Member  States  to 
attract  international  investment  -
such  as  vehicle  production  plants  -
or  to  win  international  orders  for 
existing  industries  by  going  to  the 
limits  of  subsidy  allowed  within 
C o m m u n i ty  competition  regula 
tions  have  been  one  line  of  attack. 
Valuable  as  such  investment  is, 
there  should  be  no  illusions  about 
the limited  extent to which this  sort 
of  strategy  can  compensate  for  the 
jobs  lost  and  play  a  central  role  in 
ensuring  recovery.  Much  employ 
ment  growth  in  the  future  will  be 
more  home-grown,  with  an  import 
ant  component  coming  from  new 
and  expanding  small  and  medium-
factories 
sized  b u s i n e s s e s.  New 
employing  10,  15  or  20,000  people 
are  a  feature  of  China  and  the  Pa 
cific  Basin,  not  of Europe  today. 

Nor is the long-term  decline in  agri 
cultural  employment  likely  to  be 
reversed.  Increased  environmental 
that 
concerns  and  the  possibility 
very  different  production  methods 
may  need  to  be  developed  over  the 
coming  years  could  well  alter  the 
content  and  structure  of  agricultu 
ral work,  and  may  even  slow the job 
losses.  Answers  to  the  problems  of 

rural  depopulation  are  not  seen  to 
lie very much  in this direction,  how 
ever.  R a t h er  there  is  a  need  to 
create  more  vigorous,  diversified 
local  rural  economies  which  can  ex 
ploit human  or physical resources in 
seeking  new  employment  oppor 
tunities. 

t he  E u r o p e an  Com 
S e c o n d l y, 
munity  is  currently  at  an  exciting 
but  also  uncertain  point  in  its  his 
tory.  Several  years  of  economic 
growth  and  three  years  of  slowly 
d e c l i n i ng  u n e m p l o y m e nt  h a ve 
brought renewed confidence  and op 
timism.  Indeed  the  functioning  of 
the  Community  economy  has  fun 
d a m e n t a l ly 
improved.  This  h as 
been  due to a number  of factors:  the 
prospects  opened  by  the  Internal 
Market;  the  structural  policies  im 
plemented  for  almost  a  decade;  the 
increased  profitability  of  invest 
ment.  But  there  are  now  concerns 
about  inflation  and  about  diverging 
in  e x t e r n al  a nd 
d e v e l o p m e n ts 
budgetary  balances  between 
the 
Member  States.  These  problems 
will  have  to  be  solved  rapidly  to 
ensure  a  continuation  and  streng 
thening  of  the  current  favourable 
performance. From the point of view 
of employment  and  the  reduction  of 
unemployment,  the  recovery  is  still 
in  its  early  stages  and  care  is  need 
to  ensure  t h at  it  continues  and 
flourishes. 

These  concerns  are balanced  by  the 
positive  aspect  of  uncertainty  -  the 
impact  of  the  completion  of the  In 
ternal  Market  by  1992  and  its  re 
lated  social  a nd  e n v i r o n m e n t al 
dimensions. The effects  of the  Inter 
nal  Market  should  be  growth-en 
h a n c i ng  and  job-creating  if  t he 
correct  m a c r o - a d j u s t m e n ts  a re 
made  in  order  to  cope  with  the  in 
creased  efficiency 
t h at  it  should 
bring,  but  the  detailed  impact  that 
it  will  have  on  different  sectors  or 
a r e as  of  the  Community  is  less 

clear.  It  should  increase  the  wealth 
of the  Community  but  it should  also 
be  recognise  that  the  benefits  will 
not automatically percolate  through 
to  the  most  deprived  countries  and 
regions  of  the  Community.  Policies 
to  assist  the  catching  up  process  of 
the  less  developed  regions  need  to 
be fully  implemented  in order  to en 
sure  that  divisions  within  the  Com 
munity  diminish. 

Thirdly,  two  general  and  inter-re 
lated  trends  can  be  extracted  from 
the  evidence  in  this  Report  -  the 
growth in the relative importance of 
employment  in  the  service  sector  or 
service-type jobs, and  the rise in  the 
number  of part-time  and  temporary 
workers. The  service  sector  now  ac 
counts  for  over  60% of  employment 
in  the  Community,  compared  with 
little  more  than  40%  twenty  years 
ago.  While  part  of  this  shift  is  a 
'statistical  illusion'  -  the  result  of 
industry  increasingly  contracting-
out business  services  such  as  clean 
ing and  computing  to  firms  who  are 
classified  in  the  service  sector  -  the 
changes are far more extensive  than 
this  and  reflect  a  major  restructur 
ing  of the  way  we  live  our  lives,  as 
well  as  the  way  we  work.  Services  -
whether  these  are  to  households  or 
to businesses  - will  be  the  source  of 
the 
new  employment  growth  in 
Community  in  the  coming  years. 
This  will  bring  many  changes  in  its 
wake  since  the  nature  of  much  of 
service  employment  is  very  differ 
ent from  that  of industry  - there  is  a 
greater  concentration  of small  busi 
nesses, the  skill  mixes  are  different 
and  the  work  content  can  change 
rapidly  as  technology  enters  into 
what  are  still,  in  many  cases,  rela 
tively  low productivity  activities. 

Many  of the jobs  created  as  a  result 
of  the  recent  upturn  in  the  Com 
m u n i ty 
been 
part-time  and  temporary jobs in  the 
service  sectors,  t he  majority  of 

economy 

h a ve 

Summary  and  Conclusions 

which  have  gone  to  women.  While 
this has  helped  bring greater  access 
to  e m p l o y m e nt  for  women, 
t he 
quality  of  many  of  these  jobs  has 
been  questioned.  It  can  also  be 
asked  whether  they  can  be  seen  as 
a  main  household  income  or  simply 
as  a  supplement,  given  t h at  many 
are  relatively  lowly paid.  Moreover, 
it  has  not  done  much  to  reduce  un 
employment  since  many  of  those 
new  jobs  have  been  out  of  reach  of 
those, especially men, who lost  their 
jobs  as  a  result  of  the  structural 
upheavals  of the early  1980s. As  the 
maps  in  Chapter  5 show clearly,  the 
service  sector  job  gains  have  often 
been  in  areas  well  away  from  those 
where  industrial  jobs  have  been 
lost. 

F o u r t h l y,  t he  proportion  of  t he 
population  of  working  age  who  are 
actually in employment is  markedly 
lower  in  the  Community  economies 
than  in comparably developed  coun 
tries  such  as  the  United  States, 
Japan,  and  other  non-EC  European 
countries.  This  low  overall  Com 
munity  employment  both  reflects 
and  contributes  to  the  poorer  over 
all  economic  performance  of  the 
Community. Until recently, the  rate 
of employment  had  declined  almost 
continuously  from  1970, with  a  par 
ticularly  sharp  fall  from  1980  to 
1984.  Since  then  the  Community 
has  started  to pull back, but the  gap 
is  wide  -  Community  employment 
rates  are  currently  well below  60%, 
whereas in the other countries  men 
tioned  they  are  over  70%. 

Increasing  employment  rates,  both 
by bringing the  unemployed  back  to 
work  and  by  attracting  women  and 
possibly  older  former  workers  back 
into the labour force, has a  stimulat 
ing  effect  throughout  the  economy 
which  enhances  growth  and  pros 
perity.  While  the  importance  of  the 
ratio  between  the  number  of  work 
ing  and  non-working  members  of 

the  population  seems  to  have  ob 
vious implications  for the  European 
economy and society as a whole, this 
aspect has been largely neglected  in 
previous explanations for the  poorer 
performance  of  t he  C o m m u n i ty 
economies.  For  example,  average 
income per head of population in  the 
United  States  is  some  50%  higher 
than  in  the  Community  of  12.  Part 
of  that  difference  can  be  explained 
by  higher  United  States  productiv 
ity and  part  by the  presence  of some 
very  poor  areas  in  the  Community. 
However, some half of the  difference 
in  income  per  head  of  population 
between  the  United  States  and  the 
Community  can be explained  by  the 
fact  that  a  far  lower  proportion  of 
the  Community  population  of work 
ing  age  is  actually  working  and 
generating  income. 

This relates  strongly to the  fifth  and 
final  point.  Demographic 
trends 
predict  that,  by  the  mid  1990s,  the 
number  of  older  workers  retiring 
each  year  will  be  higher  than  the 
number  of  young  people  entering 
t he  labour  m a r k e t.  This  demo 
graphic  'time  bomb'  has  major  im 
plications for the labour market  and 
for social policies in general. It  could 
prove  a  constraint  on  growth  with 
skills  and  labour  shortages,  or  it 
could become a major  opportunity  to 
take  a  more  positive  approach  to 
e x p a n d i ng  e m p l o y m e nt  and 
in 
comes  and  to  reducing  unemploy 
ment,  particularly  if  appropriate 
training  is made  available. 

Policy 
considerations 

This Report brings together  materi 
al  from  a  wide  range  of  sources. 
From these  various  strands,  a  num 
ber  of  lessons  can  be  drawn  which 
should be used  as a basis  for  develo 
ping  the  employment  aspects  of 
Community  policy. 

- 9-

Summary  and  Conclusions 

The  Community  is  a  political,  econ 
omic,  social  and  e n v i r o n m e n t al 
entity,  and  membership  involves  a 
recognition  of  common 
interests 
and  a  commitment  to  pursue  com 
mon  goals  for  the  collective  benefit 
of  all  Member  States.  Hence,  prob 
lems  raised  by  the  very  different 
stages  of  economic  development  of 
t he  M e m b er  S t a t es  need  to  be 
tackled. A balance needs to be main 
tained  between  the  pursuit  of  high 
economic  growth,  the  more  equit 
able distribution ofthat  growth,  and 
wider social and environmental  con-
c e r n s.  T he  e m p h a s is  on 
t he 
catching-up  process  for  the  poorer 
countries  and  regions  is intended  to 
e n s u re  t h at  a  d i s p r o p o r t i o n a te 
amount  of  new  jobs  are  created  in 
those areas, but it should be done  in 
a  way  which  does  not  impose  unac 
ceptable  adjustment  costs  on  the 
more  prosperous  areas  of the  Com 
munity,  and  which  does  not  involve 
reducing  accepted  social  standards. 

Community  Employment 
a nd  the  World  Economy 

As  we  see  in  Chapter  3,  European 
employment is increasingly  affected 
by  economic  and  social  develop 
ments in the world  at large.  Factors 
which  are  largely  out  of the  control 
of Member  States  can  be  important 
determinants  of  the  Community's 
level of activity.  Global  markets  are 
developing but  geographical  factors 
can  still  play  a  role.  Employment 
growth in the Community  may  have 
been  restricted,  for  example,  not 
only  by  its  own  poor  economic  per 
i ts 
f o r m a n ce  b ut  by 
geographically  proximate 
trading 
partners  such  as  the  Middle  East, 
Africa  and  Eastern  Europe.  The 
United  States  and  J a p an  have  done 
comparatively  well,  in  contrast, 
thanks  partly  to  the  increasing  im 
portance  globally  of  the  Pacific 

t h at  of 

basin  to  which  they  have  natural 
geographical  links. 

The  Community  is  one  of  the  most 
important  actors on the  world  econ 
omic  stage.  It  plays  a  key  role  in 
achieving economic growth  through 
liberalisation,  both  in  Europe  itself 
and  in  the  world  trading  system. 
Employment  depends  heavily  on 
the  competitiveness  of industry.  To 
achieve  this,  the  Community  aims 
at  creating  the  most 
favourable 
economic  conditions.  The  policy  it 
follows  and  develops  within 
its 
boundaries  is  an  important  deter 
m i n a nt  of  g r o w th 
e l s e w h e r e, 
particularly  for  some  weaker  and 
less  developed  economies.  Protec 
tionist  pressures  which  serve  to 
impoverish  all  sides  in  the  world 
economy are being resisted,  and  the 
Community  must  exploit  the  bene 
fits  of trade  especially  with  respect 
to  services,  and  be  aware  of the  im 
p l i c a t i o ns 
C o m m u n i ty 
for 
role 
e m p l o y m e nt  of  t he  world 
played  by  the  newly  industrialised 
countries. 

The  Employment 
Content  of  Growth 

E m p l o y m e nt  s t r a t e g i es  of  com 
panies  will,  over  the  longer  run, 
reflect  the  availability  and  relative 
costs  of  capital  and  labour.  Part  of 
the  pressure  to  cut  back  on  labour 
during  the  years  of recession  came 
from  the  continued  high  growth  of 
real  wages  but,  in  recent  years, 
these  pressures have  subsided. As a 
consequence  of  this,  and  other  fac 
tors,  the  employment  content  of 
growth has increased  substantially. 

Chapter 4 demonstrates  how  labour 
intensive growth has become a posi 
tive  force  whereas,  in  the  past,  it 
h ad  been  linked  with  concerns 
about low productivity and  competi 
tiveness.  Now  economic  growth  of 

4% a year is likely result in a 2% rise 
in  employment,  whereas  the  same 
rate  of economic growth  would  have 
resulted  in  employment  stagnation 
. 15  years  ago.  This  is  a  healthy  de 
velopment  at the  present  time  since 
the  potential  Community 
labour 
force  is  seriously  under-employed. 
C o n t i n u ed  m o d e r a t i on 
t he 
growth  of  real  labour  costs  is  an 
essential  component  for  the  main 
tenance  of  this  high  employment 
content  of  growth. 

in 

Sectoral  Employment 
Impact  of  1992 

Chapter  5  presents  a  first  overall 
analysis of the sectoral  employment 
consequences  of  1992,  and  shows 
how  the  removal  of  trade  barriers 
should  allow  the  exploitation  of 
economies  of  scale  and  strengthen 
competitiveness. An industry  by  in 
dustry  analysis  of the  impact  of  the 
1992  changes  demonstrates 
that 
the  scope  for  growth  and  increased 
profitability  is  enormous  but  that 
different  sectors  face  different  chal 
i n d u s t r i al 
l e n g e s.  H a lf 
employment in the Community is in 
sectors  which  are  potentially  sensi 
tive  to  the  impact  of  1992.  Various 
categories  are  identified  - the  com 
petitively  weak  industries  (which 
include high technology  industries), 
industries  where  rationalisation  is 
likely  (including  pharmaceuticals 
and  drinks)  and  those  (including 
m a ny  c o n s u m er  goods)  w h e re 
changes  in  distribution  could  be 
considerable. 

of 

Preliminary  indications  also  sug 
gest  t h at  some  service  sectors  -
particularly  market  services  - could 
be  p a r t i c u l a r ly  sensitive  to  t he 
opening  of  frontiers.  Maximising 
the  beneficial  effects  of  the  1992 
changes  will  require  positive  and 
sustained  action from  all parties  in 
volved  in  the  economic  process, 

1 0-

Summary  and  Conclusions 

ing to  attract  more  women  to  work. 
Companies  are  likely  to  have  to 
make much better  use of their  exist 
ing  labour  force  by  improving  their 
skills  and  abilities  through  train 
ing,  and  to  make  it  more  attractive 
for  existing workers  to remain  with 
the  firm  when  family  or  other  com 
mitments  create  pressures  to  leave, 
for  example  by  providing  child  care 
and  other  facilities. 

Vocational  t r a i n i ng  a nd 
employment 

in 

t he  C o m m u n i t y, 

Education  and  training  are  at  the 
heart  of  Member  States'  responses 
to  the  structural  changes  taking 
p l a ce 
as 
presented  in  Chapter  9.  However, 
there  are  serious  doubts  about  the 
extent  to  which  the  current  educa 
tion  a nd 
t r a i n i ng  s y s t e ms  a re 
sufficiently  geared  up  to  meeting 
the needs of the  1990s and  following 
decades. 

Standards  of  qualification  among 
school  leavers  are  often  low,  the 
Community  compares  badly  with 
similarly  industrialised  countries 
with  regard  to  the  numbers  of  stu 
d e n ts  recruited 
technology 
courses, and much of training is  still 
not adapted to labour market  needs. 

into 

At  national  level,  many  new  forms 
of  co-operation  between  govern 
ment  at  all  levels  and  the  two  sides 
of industry,  and  new patterns  of fin 
ancing  are  developing  with 
the 
growing  recognition  t h at  urgent 
and  extensive  action  is  needed.  At 
Community  level  increasing  co 
t he  Member 
operation  between 
S t a t e s,  p a r t i c u l a r ly  w i t h in 
the 
framework  of a  series  of action  pro 
grammes  and  with  the  support  of 
the  European  Social  Fund,  is  bring 
ing positive results, both  in terms of 
the  scale  and  quality  of  vocational 
training.  Despite  these  develop-

to  e n s u re 

including  efforts 
t h at 
problems  of  social  dumping  which 
threaten  social  standards  do  not 
arise. 

J ob  Quality  - For  Better 
or  Worse 

An  important  debate  is  emerging 
over  the  issue  of the  quality  of jobs, 
outlined  in  Chapter  6.  The  shift  of 
employment  away  from  heavy  in 
dustry with its dirty and  unpleasant 
factories  to  lighter  manufacturing 
and  services  can  be  said  to  have 
created  more  pleasant  work  envi 
ronments.  However,  there  has  also 
been  an  increase  in  unskilled,  part-
time  and temporary jobs which  may 
be  in  offices  rather  than  factories, 
but  which  may  offer  little job  satis 
faction  or  scope  for  personal  devel 
opment.  It  is  difficult  to  get  to  the 
bottom  of  many  of  these  issues  be 
cause  information 
is  limited  or 
patchy.  However,  the  Report  points 
out  that  the  unchecked  growth  of 
alternative contractual forms of em 
ployment  could  result  in  large  pro 
portions  of the  workforce  not  being 
properly protected by existing legis 
lation.  The  Report  also  brings  out 
the  importance  of  small  and  me 
dium-sized  businesses  and  of  self-
employment  in  total  employment. 

Women's  Employment 

The position of women on the  labour 
market,  examined  in  Chapter  7,  is 
still  much  inferior  to  that  of  men. 
Despite progressive legislation,  and 
15 years  of work  by the  Community 
in  promoting  equality,  women  re 
main  concentrated  in  a  lower  and 
more  limited  range  of  activities,  in 
inferior  grades  of job  and,  above  all, 
in  part-time  work.  Yet,  demand  for 
their  labour  has  never  been  higher. 
To  ensure  that  women  are  adequ 
ately  protected  in  their  new  jobs, 
more  comprehensive  legislation  on 

part-time  and temporary working is 
needed  in  many  Member  States,  as 
are  improvements  such  as  better 
child-care  arrangements.  The  new 
position  of  women  as  an  integral 
part  of the labour  force, and  not just 
occasional  earners  of  secondary  in 
comes,  needs  to  be  recognised  by 
both  changes  of  attitude  and  legis 
lation. 

The  Demographic  Time 
Bomb 

The  analysis  of  the  demographic 
'time bomb' in  Chapter  8 raises  con 
cerns over possible labour  shortages 
in  the  1990s  and  beyond.  Falling 
b i r th  r a t e s,  combined  with 
in 
creased  longevity  of the  population, 
means  that  the  Community  popula 
tion is ageing and  the number  of net 
entrants  to the labour  market  could 
fall  to close  to  zero by the  time  that 
the  Internal  Market  becomes  a  re 
ality. Labour shortages  are  unlikely 
to  be  filled  by  renewed  migration. 
L a r ge  scale  l a b o ur  m o v e m e n ts 
across the Community  are a thing of 
the  past  -  even  the  extent  of  the 
moves  from  the  countryside  to  the 
towns  h as  dwindled.  Moreover, 
d e m o g r a p h ic 
h a ve 
changed  dramatically.  Southern 
European  countries  no  longer  have 
high  rates  of population  growth  and 
there  is  thus  little  likelihood  that 
such  countries  will want,  or be  able, 
to fill labour  shortages in the  North. 

p a t t e r ns 

Employers in many Member  States, 
who  are  looking  to  expand  their  la 
bour  force  in  the  years  ahead,  are 
going to have to adjust  to a  situation 
where  there  will  be  many  fewer 
young  people  joining  the 
labour 
market  each  year  from  whom  they 
can  pick  and  choose.  They  will  be 
obliged  to  consider  other  options  -
recruiting  older  workers,  re-inte 
t h o se  who  h a ve  b e en 
g r a t i ng 
unemployed  for a long time, or  seek 

11 

Summary  and  Conclusions 

ments,  the  Community's  current 
rate  of  investment  in  its  people 
looks  to  be  well  below  t h at  needed 
to match  its  economic  and  social  as 
pirations. 

Unemployment  - A  Social 
as  well  as  a  Labour 
Market  Problem 

Unemployment,  covered in  Chapter 
10, has been  an unwelcome and  per 
sistent  feature  of  the  European 
labour  market  for  over  a  decade. 
While  the  long  period  of  increasing 
unemployment  has  at  last  ended, 
the  statistics  show  that  there  is  a 
large  pool of long term  unemployed, 
effectively  excluded  from  new  job 
prospects  because  of  where  they 
live, their  lack  of skills  or  a  general 
inability  to  cope  with  the  require 
ments  of  getting  into  a  new  job  or 
way  of  working.  Help  is  needed  to 
avoid  the  development  of a  two-tier 
society. 

The  problems  of  youth  unemploy 
m e nt  have  not  gone  away  j u st 
because the unemployment  rate  has 
fallen  slightly  and  because  fewer 
young  people  will  enter  the  labour 
market  in  the  coming  years.  Those 
under 25 have a significantly  higher 
rate  of  unemployment,  generally 
double  those  over  25. These  people 
represent  a  substantial  percentage 
labour 
of  the  Community's  future 
force  and  policies  catering  to  their 
needs  must  be  implemented,  par 
ticularly through better  educational 
and  training  support  for  both  the 
existing  and  forthcoming  gener 
ations  of young  people. 

U n e m p l o y m e nt  h as  also  con 
t r i b u t ed  to  serious  problems  of 
poverty  among  middle  and  younger 
age  groups  in  t he  C o m m u n i t y, 
counteracting  advances  made  in  re 
ducing  poverty  among  older  people 
through 
in  many  Member  States 

the  s t r e n g t h e n i ng  of  r e t i r e m e nt 
pensions. A worsening of the  income 
d i s t r i b u t i on 
in  m a ny  M e m b er 
States  is,  similarly,  a  reflection  of 
the divisive effect  of the recession on 
the  structure  of European  societies. 

Black  Economy 

In  Chapter  11, the  role  and  growth 
of  the  black  economy  is  examined. 
The  previously  sharp  division  be 
tween  those  in  work  and  those  out 
of  work,  when  most  people  worked 
for  a  large  employer,  is  breaking 
down. The  exact  definition  of'work' 
is  fuzzier  in  the  context  of the  new, 
looser  contractual  forms  of  employ 
ment  and  as  more  people  work  as 
self-employed.  Labour  market  flex 
ibility  and  the  growth  of these  new 
forms  of work  pattern  have  encour 
aged  a  new  type  of  black  economy. 
Older  forms  of  black  work  -  espe 
cially in economically  marginal  and 
agricultural  areas  -  persist,  but 
largely  as  a  survival  strategy.  More 
black  work  seems  to  be  carried  out 
by people already employed, doing a 
similar job outside working hours  or 
employing  some  additional  skill  to 
earn  extra  income,  than  by  the  un 
employed  who  generally  lack  the 
skills and  capital  to undertake  such 
work,  and  live  in  depressed  areas 
where  there  is  little  demand  for 
such  work  anyway.  While  the  black 
economy is undesirable  and  socially 
divisive,  it  may  at  times  be  a  re 
sponse  to  inflexible 
legislation 
(multiple  job  holding,  for  example, 
is  difficult  to  incorporate  in  many 
social  security  systems)  and  can  be 
an  outlet  for  embryonic  entrepre 
neurial  initiatives  which  may  later 
result  in  the  creation  of  legitimate, 
and  job  creating,  business  enter 
prises. 

Technological  Change  - A 
Strategic  Challenge  for 
Employment 

Chapter  12  suggests  that  fears  of 
technological  change  have  been 
exaggerated.  While  many  workers 
tradi 
have  been  displaced  from 
tional industries, the overall  impact 
of new  technology has  been  employ 
m e n t - c r e a t i n g. 
T e c h n o l o g i c al 
changes have spread throughout  in 
d u s t ry  a nd  service  sectors.  The 
impact on the volume and content of 
jobs  has  been  substantial.  Struc 
tures  of  employment  at  company, 
sectoral  and  overall  level  will  con 
t i n ue 
to  be  a d a p t e d. 
Co-operation  between  the  two  sides 
of  industry  may  need  to  be  streng 
thened  in  consequence.  The  future 
development  of  employment  in  the 
face  of  technological  change  is  in 
creasingly  dependent  on  strategic 
factors  such  as  the  competitiveness 
of  European  companies  in  the  con 
t e xt  of  t he  c o m p l e t i on  of 
t he 
Internal  Market. 

to  n e ed 

New  P a r t n e r s h i ps  in 
Employment  Creation  -
Local  Development 

In  Chapter  13,  the  growth  of  new 
types  of  initiatives  to  promote  jobs 
is  illustrated.  Local  development 
strategies  have  arisen  out  of  the 
need  of  localities  to  reverse  their 
economic  decline.  While  their  pri 
mary  aim  is  to  combat  unemploy 
ment,  they  have  often  focused  on 
new  business  creation  or  on  econ 
omic  development  as  the  principal 
means to that  end. Training,  includ 
ing  the  development  of  entrepre 
neurial  and  managerial  skills,  has 
been an important tool in  equipping 
the  local  labour  force  to  create  and 
develop  new  opportunities  in  the 
face of the drastic changes that  have 
taken  place  in  their  communities. 

12 

Summary  and  Conclusions 

of 

t he 

The  medium-term  outlook  can  be 
considered  optimistic  if  economic 
policies  can  successfully  tackle  cur 
r e nt  macro-economic 
imbalances 
and  build  on  the  underlying  struc 
tural  improvements.  Employment 
growth  has  become  an  established 
feature  of  the  Community's  econ 
omy  and  employment  now  exceeds 
the  pre-recession  level.  Neverthe 
l e s s, 
t he 
p r o p o r t i on 
population  of working  age  which  is 
in  employment  is  still  below  the 
level  achieved  at  the  end  of  the' 
t he 
1 9 7 0 s.  F u r t h e r m o r e,  w i th 
growth  of  part-time  employment, 
the  overall  volume  of  employment 
has  grown  much  less,  if  at  all.  In 
deed,  many  of the  new jobs  created 
over  the  past  three  or  four  years 
have  been  in  the  nature  of  a  catch 
ing-up  by  those  Member  States 
which  lost  employment  most  heav 
ily 
t he  e a r ly  1980s.  T he 
importance  of achieving a  sustained 
improvement  in  the  long-term  em 
ployment  performance  cannot  be 
over-stressed. 

in 

The  employment  problems  of  the 
t a c k l ed 
C o m m u n i ty  c a n n ot  be 
m e r e ly  by  s t r o n g er 
economic 
growth.  Nor  can  growth  be  pursued 
as  an  end  in  itself.  Environmental 
and  social  objectives  need  to  be  re 
spected,  and  the  Community  may 
promote  employment  and 
income 
growth  in  the  developing  countries 
of the  world  by  its  trade  and  exter 
nal  policies. 

Structural  policies, including  train 
ing  and  actions  to  develop 
t he 
entrepreneurial  capacities  of  the 
C o m m u n i t y 's  h u m an 
resources, 
have a vital role in ensuring that  the 
opportunities of 1992 are  translated 
into employment  benefits.  The  com 
pletion of the Internal  Market  offers 
the  right  economic  environment, 
but  this  opportunity  needs  to  be 
grasped  and  built  on. 

These  initiatives  have  grown  in 
sophistication  in  recent  years  and 
now  often  involve  more  formalised 
links  and  closer  co-operation  be 
tween  the  partners  in  the  economic 
process  - local  authorities,  national 
government,  local  industry,  the  co 
operative  movement,  the  voluntary 
sector and trade unions. Such  initia 
tives  are  not  a  low-cost  alternative 
to  infrastructure 
investment,  but 
rather  a  complement  designed  to 
maximise  the  use  and  potential  of 
local  human  talents  and  resources 
which,  combined  with  finance  and 
investment,  can  provide  the  impe 
tus  for  recovery  in  such  areas. 

Mobility  a nd  E u r o p e an 
Labour  Market 

c o u n t r y.  Yet 

Chapter  14 shows  that  labour  mar 
i n t e g r a t i on  a nd  m o b i l i ty 
ket 
between  t he  M e m b er  S t a t es 
is 
rather low. Less that  2 million  Com 
munity  citizens  are  working  on  a 
permanent  basis  in  another  Com 
m u n i ty 
over 
t h r e e - q u a r t e rs  of  t he  E u r o p e an 
population  sees  the  possibility  of 
working  in  another  country  as  an 
important  advantage  of  being  part 
of the  Community.  This means  that 
if  the  right  conditions  are  brought 
about  by  the  Community, 
there 
could  be  an  increase  in  mobility, 
although  non-legislative  barriers 
such  as  language  and  housing  re 
main.  The  likely  outcome  is  a 
in 
gradual 
crease  in  t he  g e n e r al 
level  of 
Community  wide  mobility,  led  by 
the  more  highly  skilled  who  have 
the  most  to gain  from  a  move. 

t h o u gh  progressive 

Commission 
Objectives 

The Commission  wishes to see a Eu 
ropean  C o m m u n i ty  with  much 
higher  rates  of  employment,  and 

much lower rates  of  unemployment. 
The  achievement  of these  objectives 
does  not  require  new  policies  but  it 
does  require  a  much  more  effective 
co-ordination  of  existing  policies 
around  a  clearer  recognition  of  the 
importance  of  achieving  an  early 
improvement  in  the  Community's 
employment  performance,  and  a 
that 
recognition  of  the  obstacles 
need  to be  overcome. 

Interdependence  is  growing  and 
greater  convergence  is  being  pur 
sued  in  the  Community.  Social  as 
well as economic differences  need  to 
be  addressed  together  in  order  to 
allow  a  European  labour  market  to 
become  a  reality. 

The  Commission  is  adopting  such 
an  approach  with  respect  to its  own 
responsibilities  - the development of 
the  Internal  Market  including  its 
social  dimension; the  reinforcement 
of  its  role  as  a  partner  in  world 
trade;  the  use  of  the  Community 
Structural  Funds,  particularly  in 
the  context  of  the  catching-up  pro 
cess  of  the  less  developed  areas; 
specific  action  programmes  which 
pursue  certain  policy  objectives; 
general  policy  orientations;  infor 
mation  systems. 

Prospects 

Recent  improvements  in  economic 
performance  are  encouraging.  For 
several  years  economic  growth  has 
accelerated  year  by  year  to  reach 
more  than  3.5%  in  1988  with  an 
employment  growth  of  1.5%.  This 
year,  despite  some  fears  regarding 
inflation,  economic  growth  should 
also  be  well  above  3% and  the  em 
s h o u ld 
p l o y m e nt  p e r f o r m a n ce 
continue  to  be  favourable.  The  em 
ployment  content  of  growth  -  the 
number  of jobs  created  per  unit  of 
economic  growth  - remains  high. 

13 

14 

Part  I - Economic  and Employment  Prospects 

Chapter  1 

Employment  in the European  Community 
Sectoral Changes in  Employment 

Chapter  2 

Short-Term  Outlook 

15 

16 

Chapter  1  Employment  in  the  European  Community 

Chapter  1  Employment  in the  European  Community 

Employment  has  been growing  by  well  over  1 million  jobs  a 
year  over  the  last  two  years.  How  rapidly  will  this  bring 
down  unemployment?  What  are  the  major  changes 
employment? 
place  in  the  structure  of  Community 

taking 

Introduction 

Since  its  inception,  the  European 
C o m m u n i ty  h as  m a i n t a i n ed 
its 
place  among  the  most  successful 
economies  in  the  world.  Over  the 
past  30  years,  it  has  doubled  its 
living standards, it has expanded  its 
capital  base  three-fold  and  it  has 
used  its  additional  wealth  to  im­
prove  the  quality  of  life  through 
better  environmental,  health  and 
safety  standards. 

However,  the  Community's  econ­
omic  performance  h as  for  many 
years  been  well  below  its  potential. 
Moreover,  it  has  been  less  success­
ful  than  some  other  countries  and 
economic  groupings  in  translating 
its  economic  performance  into  em­
ployment.  In  the  past  two  years 
there  has  been  a  substantial  im­
provement.  However,  this  progress 
is  still  not  fully  assured  and  the 
legacy  of the  past  remains. 

The  proportion  of  the  potential 
working  population  actually  in  em­
ployment  in  the  Community  is  well 
below the United  States, J a p an  and 
many  non-EC  European  economies 
(Graph  1)  and  lack  of job  growth  is 
reflected  in continuing high levels of 
unemployment  (Graph  2). 

This  is  both  a  social  and  an  econ­
omic  problem.  Problems  of  poverty 
have  been  severely  aggravated  by 
unemployment  and  social  advances 
have  been  halted  or  even  reversed. 
Low  living  s t a n d a r ds  persist 
in 
many  places,  particularly  in  south­
ern  and  peripheral  areas but  also in 

many  urban  communities.  Young 
people  in  particular  have  suffered 
from  the  lack  of job  opportunities. 
At  the  same  time,  the  output  lost 
due  to  this  under-utilisation  of  the 
Community's  productive  potential 
and the  financial  costs of unemploy­
ment  (in  terms  of  transfers  and 

E m p l o y m e nt  Share  of  Working-Age  P o p u l a t i on 
in  t he  C o m m u n i ty  a nd  E l s e w h e re  1968-1988 

% 

/D 

Non  EC  Europe 

70 

Japan 

^***y 

^ 

/ 

65 

'· 

60 

USA 

EC 

-, 75 

70 

65 

60 

1968 

ι 

. 

ι 

: 

1978 

55 

1988 

17 

Chapter  1  Employment  in  the  European  Community 

2 

Unemployment  Rates  in  the  Community  a nd 
1968-1988 
Elsewhere 

%  Labour  Force 

3 

Employment  and  GDP Growth  Trends 
in  the  Community 

1968-1988 

Annual  %  Change 

G D p/ 

/ 

Employment 

\y 

I  1 
\  / 

V 

1968 

1978 

1988 

1 8-

losses  of  tax  revenues  and  social 
security  contributions)  has  been  a 
s e r i o us  h a n d i c ap  for  t he  Com 
m u n i ty 
economic 
relationships  with  the  rest  of  the 
world. 

i ts 

in 

Historical 
Developments 

Some  countries  managed  to  keep 
unemployment  rates  consistently 
low throughout the  1970s and  1980s 
(e.g.  Japan,  Switzerland,  Sweden). 
O t h e rs  saw  u n e m p l o y m e nt  rise 
quickly after the two oil price  shocks 
but  were  able to recover  sufficiently 
to  be  able  to  reduce  unemployment 
to  more  or  less  previous  levels  (e.g. 
the  USA,  Canada,  Australia).  The 
Community  achieved  neither  and 
was  unable  to  prevent  unemploy 
ment from  doubling both  in  1974/76 
and  again  in  1981/85. 

The large increase  in the  number  of 
people  - young  people  and  women  -
entering  the  labour  market  in  the 
Community  in  the  late  1970s  and 
early  1980s did not make the task of 
reducing  unemployment  any  easier 
b ut  it  did  not  justify 
munity's  poor  performance  either. 
In  many  other  industrialised  coun 
tries,  the  labour  force 
increased 
considerably  faster  t h an  in  t he 
Community,  and  it  did  not  prevent 
them  from  keeping their  unemploy 
ment low or bringing it back to a low 
level. 

t he  Com 

The  explanation  of  continued  high 
levels of unemployment  in the  Com 
munity lies not so much in an  excess 
supply  of  labour  but  rather  in  an 
inadequate  rate  of new job  creation. 

Since  the  1960s, both  the  USA  and 
J a p an  have  consistently  created 
more jobs  than  the  Community.  In 
both  countries,  in  the  period  since 
1973,  a  major  reason  has  been  the 

higher rates of economic growth 
achieved, in the US by internal ex­
pansion, in J a p an by export success. 
Both countries managed to increase 
employment creation per unit of 
extra output over this period as 
compared with the earlier post­war 
years. In the Community a similar 
trend is evident (Graph 3), but the 
rate of growth in too many years 
was not enough to prevent employ­
ment from declining. 

Recent Developments 

Over the past two years, the labour 
market situation has improved con­
siderably. The improvement in the 
economic climate and the expecta­
t i o ns c r e a t ed by t he I n t e r n al 
Market are bearing fruit. 

The rate of economic growth in the 
Community has moved above 3% a 
year and Community employment ­
which currently stands at over 125 
million ­ has been growing by al­
most 1% a year more than could be 
expected from the past relationship 
between output and employment 
(Graph 3). 

New jobs and new patterns of em­
ployment are developing and there 
is considerable confidence for the 
future. While this is a very positive 
d e v e l o p m e n t, i ts significance 
should not be over­exaggerated. 

The growth in the volume of em­
p l o y m e nt ­ n u m b er of j o bs χ 
average hours ­ has increased much 
l e ss t h an t he n u m b er of j o bs 
(Graphs 4 and 5) because much of 
employment growth since 1983 has 
been in part­time working, particu­
larly in the service sector. With only 
one or two exceptions, this is a com­
mon trend in all Member States. 

Graphs 6­9 show the changes in em­
ployment, working­age population, 

Chapter 1 Employment in the European Community 

4 Change in t he Number of Persons Employed 

a nd Full­Time Equivalents in the Member 
States 1979­1988 

Millions 

G Total Employment 

Full-Time Equivalents 

j 

r 

-■5 h 

Β DK D F IRL 

L NL UK 

5 Volume of Employment ­ Full­time Equivalents 
in Relation to the Number of J o bs in t he 
Member States 1979/1983/1987 

100 

FTEs as % Total Employment 

1979 Ξ 1983 ■ 1987 

90 

100 

90 

80 

NL UK DK D 

.il ! : -L 
Β IRL Ρ L 

Ε GR I 

30 

19 

Chapter 1 Employment in the European Community 

output and productivity in the two 
periods 1979­84 and 1984­88 in the 
Member States. No common pat­
tern is evident. 

The largest increases in jobs have 
not necessarily been in countries 
where the need for more jobs has 
been greatest because of population 
growth. In the period 1979­84 when 
working­age population grew most 
rapidly, employment fell in half the 
Member States (Graph 6). Though 
employment h as generally risen 
since then, the employment growth 
over the last decade as a whole has 
fallen well short of the increase in 
people coming onto the job market 
which has contributed to the rise in 
unemployment. 

The bulk of employment growth 
since 1984 is accounted for by three 
Member States (the Federal Repub­
lic of G e r m a n y, S p a in a nd t he 
United Kingdom) which have, in ef­
fect, been largely making up for 
substantial job losses suffered in 
the preceding five years. Those 
Member States which managed to 
maintain employment during that 
period have experienced only a 
s m a ll i n c r e a se in e m p l o y m e nt 
since. 

M e m b er S t a t es w h i ch h a ve 
achieved the highest rates of output 
growth have not necessarily suc­
ceeded in creating the most new 
jobs. (The excess of GDP growth 
over productivity growth in Graphs 
7 and 9 indicates the growth of em­
ployment.) Equally, countries with 
the highest rates of productivity 
growth have not thereby assured 
themselves of high output growth, 
still less of a high rate of job cre­
ation. The countries which achieved 
the highest productivity growth be­
tween 1979 and 1984 did so at the 
expense of employment. Similarly, 
c o u n t r i es which have achieved 
above average productivity growth 

6 Employment a nd Working­Age Population 
Growth in the Member States 1979­1984 

Millions 

Π Population 14-64 ■ Total Employment 

i  i  IJ _ Ü a 

J ! I L 
Β DK D GR E F IRL I L NL Ρ UK 

7 GDP a nd Productivity Growth in the Member 

States 1979­1984 

Annual % Change 

GDP Productivity 
EC GDP EC Productivity 

-2 

-i 5 

- 4 

Β DK D GR E F IRL 

L NL Ρ UK 

20 

Chapter 1 Employment in the European Community 

8 Employment a nd Working­Age Population 

Growth in the Member States 1984­1988 

Millions 

□ Population 14-64 

Total Employment 

J 

DK D GR 

: 

F IRL 

L NL Ρ UK 

9 GDP and Productivity Growth in the Member 

States 1984­1988 

Annual % Change 

Β DK D GR E F IRL I L NL Ρ UK 

21 

since 1984, Italy, Portugal, Ireland 
and France, have h ad among t he 
lowest rates of job creation, t he 
United Kingdom being an excep­
tion. 

The extent of the Community's un­
employment problem should not be 
under­estimated. Unemployment 
has become deeply rooted ­ half the 
p r e s e nt n u m b er of unemployed 
have been out of work for more than 
one year. Even if the present econ­
omic performance continued into 
the medium term it would still only 
bring unemployment down by 0.5% 
a year, which would mean the un­
employment rate in 1995 still being 
above the 1980 level. 

That unemployment is falling at all 
does, however, reflect a major im­
provement. It partly results from a 
significant change in t he relation­
ship between economic growth and 
employment creation. In the 1960s 
and early 1970s, 4.8% annual GDP 
growth resulted in an employment 
increase of only 0.3% (see Graph 3 
above and Chapter 4). If the same 
relationship still applied today's 3% 
economic growth would be accompa­
n i ed by s t a g n a t i on or even 
reduction of employment. 

Structural Changes 
in Employment 

The past two decades have seen 
m a j or s t r u c t u r al c h a n g es 
throughout the Community. 

In t he period from 1960 to 1987, 
e m p l o y m e nt in a g r i c u l t u re fell 
steadily from 23% to only 8% of the 
total numbers in work, while em­
ployment in services has gone from 
37% to 60%. Employment in indus­
try remained constant at around 
40% of the total, b ut had fallen to 
33% by 1987 (Graph 10). A section 
at the end of this chapter presents 

Chapter 1 Employment in the European Community 

Equally, trends towards shorter 
working hours, albeit at a lower rate 
than often imagined (Graph 12), 
and shorter working lives, have 
combined with increasing female 
participation in the labour market 
and changing employment prac­
tices by firms to change the pattern 
of working hours. 

with children. For many it repre­
sents an opportunity to work hours 
that suit them. For many others it 
reflects a failure to find a full­time 
job. The EC Labour Force Survey 
suggests close to 30% of those work­
ing part­time are doing so because 
they cannot get full­time work (see 
Chapter 7). 

the developments in more detail 
and looks, in particular, at the Com­
m u n i t y ­ w i de i m p a ct of t h e se 
changes. 

At the same time, there has been an 
increase in the importance of smal­
ler firms. Although this tendency 
has sometimes been exaggerated, 
small firms nevertheless account 
for a significant and growing pro­
portion of employment across the 
Community, a nd a p a r t i c u l a r ly 
large proportion in some of the 
smaller economies (see Chapter 6 
and Graph 11). 

Along with these changes have 
come other structural changes, in 
the age­composition of the labour 
force, in the pattern of hours worked 
and, most notably, in the employ­
ment of women. Fluctuating birth 
rates have brought uneven popula­
tion growth of particular age groups 
t h r o u g h o ut t he C o m m u n i t y. 

The number of women in employ­
m e nt h as i n c r e a s ed in all 
Community countries (Graph 13). 
Female participation rates have 
risen by 6% over the last 15 years. 
Women now account for 38% of all 
those in work in the Community, 
but only some 35% of the total vol­
ume of employment (Graph 14). 
This reflects the fact t h at many 
more women than men work part­
time. 

Indeed, part­time working is largely 
a female phenomenon, especially in 
older age groups and among women 

As far as future labour supply is 
concerned, wide divergences in the 
pressure of population growth are 
likely to r e m a in between Com­
munity countries. In a number, 
employment growth is still insuffi­
cient to compensate for the growth 
of working­age population and the 
rise in activity rates. 

Though far removed from immedi­
ate concerns about there being too 
many people in relation to the jobs 
available, demographic trends are 
set to change in the longer term 
causing quite different kinds of 
problem. In the northern parts of 
the Community, the working popu­
lation is likely to decline over the 
next 30­40 years, but since little 
growth is foreseen in the south, 
countries like the Federal Republic 
cannot look to southern countries to 
be a source of labour to compensate 
for their own prospective shortfalls. 

The content of the jobs being cre­
ated, the context in which they take 
place, the sort of people who per­
form them and the type of goods and 
services which are produced have 
also varied considerably. 

These movements are less easy to 
analyse statistically. Because of the 
speed of change in economic life 
and/or relative slowness in under­
s t a n d i n g, c o n c e p t u a l i s i ng a nd 
describing such changes, there is 
little hard data about new areas of 
employment growth or new types of 
jobs compared with the wealth of 
material on older and declining ac­

10 Sectoral Employment Trends in the 

Community 1960­1987 

Millions 

150 

UJ Agriculture ■ Industry 

Services 

100 

1960 

1965 

1970 

1975 

1980 

1985 

22 

tivities. Statistics on employment in 
the coal and steel industry, for in­
stance ­ which now only employs 
650,000 people ­ are far more de­
tailed t h an t h o se for b u s i n e ss 
services which employ over 4 mil­
lion people within the Community. 

It is important to develop better 
data on such matters as job quality 
(Chapter 6) and also to seek to 
examine t he more f u n d a m e n t al 
changes taking place both in the 
European Community and in the 
rest of the world (Chapter 3). Since 
the Community is such an import­
ant part of the global economy, it is 
necessary to consider prospective 
developments in a wider context. 

Unemployment a nd 
Equality 

Insufficient economic growth ac­
c o m p a n i ed by c o n t i n u i ng 
structural change, has had a very 
uneven effect on European society. 
U n e m p l o y m e nt h as become in­
creasingly concentrated and it has 
been accompanied by a significant 
worsening of the distribution of in­
come and of economic opportunities. 
Those at the bottom of the social 
ladder have often borne the brunt of 
the adjustment in the form of lower 
incomes, less access to good jobs, 
less opportunity for upward mo­
bility and increasing periods of 
unemployment. Many of them ­ not­
ably the unskilled and the young ­
have found themselves outside, or 
on the margins of, the legitimate 
labour market. 

Female access to employment may 
have increased considerably but 
progress in achieving equality, both 
in access to particular types of jobs 
and in ensuring equal treatment at 
work has been slow. 

Chapter 1 Employment in the European Community 

11 Distribution of Employment in Manufacturing 
by Size of Firm in the Member States 

(circa 1980/83) 

% Employment 

100 

100 Employees Π > 100 Employees 

80 

60 

40 

20 -

I 

D L UK Β NL DK E Ρ F IRL GR 

-

12 Change in Usual Weekly Working Hours in t he 

Member States 1975­1987 

□ 1975 ■ 1987 

50 Hours 

45 

40 -

100 

80 

60 

40 

20 

50 

45 

40 

35 

30 

NL DK UK 

IRL GR 

23 

Chapter 1 Employment in the European Community 

13 Changes in the Female Share of Total 
Employment in the Member States 

1977­1987 

D 1977 ■ 1987 

TC 1987 - 38.5% 

EC 1977 - 35.5% 

% Total Employment 

50 

4 b 

40 h 

35 

30 -

25 

DK UK F Ρ D Β NL GR L I IRL E 

14 Female Share of Total Employment a nd of t he 
Volume of Employment in the Member 
States 1987 

50 

45 

40 

35 

30 

25 

Female Share (%) 

Total Employmenl 

Π Volume of Employment 

EC Total - 38.5 % 

EC Volume - 35.2 % 

24-

DK UK F 

Ρ D 

Β NL GR L I IRL E 

Unemployment remains a serious 
problem and is still over 9% of the 
labour force across the Community 
as a whole. Over half those now 
unemployed have been without 
work for longer than a year and over 
30% for more than two years (Graph 
15). Prospects for improvement will 
depend largely on reducing overall 
unemployment and the effective­
ness of specific measures. 

Unemployment rates among young 
people below the age of 25 have de­
c l i n ed from t h e ir 1984 p e a k. 
However, although unemployment 
is falling more rapidly among young 
people than in the labour force as a 
whole, and may be expected to con­
tinue to do so in the short term, 
unemployment rates for this age 
group still remain high relative to 
those adults (Graph 16). 

There are wide divergences in youth 
u n e m p l o y m e nt r a t es b e t w e en 
Member States, more now t h an 
when they were at their peak. In 
May 1989 unemployment rates for 
young people were in excess of 30% 
in Italy, Greece and Spain and 
around 20% in Belgium, France and 
Ireland. In the Federal Republic of 
Germany, however, the unemploy­
ment rate for young people, at 5.5%, 
is now lower than the overall rate, 
and those aged under 25 now ac­
c o u nt for only 17% of t he 
unemployed compared with over 
45% in Italy, Spain and Portugal. 

The failure to reduce unemploy­
ment has been the cause of consid­
erable tension and much debate in 
the Community about alternative 
strategies and policies. There re­
mains an urgent need to adapt and 
equip the Community labour force 
with the skills necessary to face the 
challenge of the coming years. 

As the pace of economic growth has 
quickened, progress in reversing 

50 

45 

40 

35 

30 

25 

50 

45 

40 

35 

30 

25 

these trends has begun but many of 
the benefits have not gone to those 
most in need. Much more effective 
action ranging across the breadth of 
society will be needed if many of 
those hit hardest by economic reces­
sion a re n ot left behind in t he 
recovery process. 

Opportunities and 
Challenges 

All Member States of t he Com­
munity, and all citizens in Member 
States, must be able to see potential 
benefit from t he o p p o r t u n i t i es 
which now exist and from respond­
ing to the challenges they face if 
they are to make the necessary ef­
forts to a d a pt a nd grow. 
Unfortunately, the long periods of 
recession or slow growth during the 
past decade or more have not made 
this easy. 

Despite these negative aspects, 
much was achieved in the difficult 
years of the early 1980s ­ through 
both collective n e g o t i a t i on a nd 
legislation ­ in bringing greater 
adaptability to the Community's 
economy and to its labour markets. 
Many of the changes achieved were 
overdue and are to be welcomed. 
However, change h as often taken 
place in a haphazard and erratic 
way. 

The new, more 'employment­intens­
ive' p a t t e rn of g r o w th t h at is 
emerging in the Community will 
need to be strengthened. Dealing 
with run­downs and closures in the 
1970s and early 1980s h as left be­
hind attitudes towards the use of 
human resources whereby labour 
saving economic growth had become 
enshrined as a good thing. Such at­
titudes are inappropriate for facing 
the future. 

Chapter 1 Employment in the European Community 

15 Long­Term a nd Very Long­Term 

Unemployment in Relation to Total 
Unemployment in the Community 1987 

% Labour Force 

25 

> 2 Years D 1 - 2 Years < 1 Year 

20 

15 -

10 

..■.ml li 

L DK D GR Ρ NL F Ι Β UK IRL E 

16 Youth Unemployment a nd Total 

Unemployment in the Community 
(Seasonally Adjusted) May 1989 

% Labour Force 

40 

Π All Ages 

< 25 Years 

30 

20 

EC < 25 Years - 17 8 % 

^Q EC All Ages - 9.3 % 

L D UK DK Ρ NE Β F IRL GR I F 

25-

40 

30 

20 

10 

Chapter  1  Employment  in  the  European  Community 

a nd 

Certainly,  the  process  of capital  ex-
p a n s i on 
t e c h n o l o g i c al 
development  must  continue  since 
this  is  the  basis  for  much  economic 
advance.  However,  this  process  has 
been  distorted  in  the  past  by  a  lack 
of adjustment  of wages, by  financial 
subsidies  to capital,  and  it has  been 
dominated  by short-term  thinking. 

Such  attitudes  overlook  the  new 
patterns  of growth  that  are  emerg 
ing,  which  will  be  very  different 
from  the mass  production  models of 
the  past,  and  which  will  reflect 
much  greater  concern  about  the 
quality  of life,  about  cultural  devel 
opment  and  about  respecting  and 
defending  the  environment. 

The Community  has  a population  of 
working  age  which  needs  to  be  em 
ployed  - if  people  cannot  work  they 
have  difficulty  in  contributing.  If 
people  c a n n ot  c o n t r i b u t e, 
t h ey 
become  an  economic  cost  to  Euro 
pean  society.  Minimising  that  cost 
by  a  gradual  erosion  of  unemploy 
ment  and  social  security  benefits  is 
not  a  positive  response  to  the  chal 
lenge  t h at  Europe  faces.  Europe 
needs  to  invest  in  such  people  so 
that  they  can  contribute  to  their 
maximum  ability and not be  written 
off. 

The  f u n d a m e n t al  conditions  for 
growth  and  employment  creation  in 
the Community have improved.  The 
economic  and  social  policies  de 
veloped and pursued  in recent  years 
are  bearing  fruit.  The  past  three 
years have  shown  a progressive  and 
significant 
t he 
economic  climate,  with  an  atmos 
phere  of  renewed  confidence  and 
investment. 

i m p r o v e m e nt  in 

the  pursuit  of  policies  to  achieve 
this have  strengthened,  a process  to 
which  the  European  Monetary  Sys 
tem  has  contributed  considerably. 
Budgetary policies directed  towards 
reducing  public  deficits  have  been 
largely,  but  not  wholly,  successful. 
The  rate  of  return  on  capital  has 
recovered  significantly,  boosting  in 
vestment  although  the  Community 
average  is  still  well  below  its  1960s 
level. 

Possible  Scenarios 
for  Future  Economic 
and  Employment 
Growth 

A  faster  reduction  in  unemploy 
m e nt  r e q u i r es  an  even  b e t t er 
performance  in  increasing  employ 
m e nt  t h an  t h at  currently  being 
achieved.  If  it  were  possible  to  in 
crease  employment  by  1.5%  a  year, 
for  e x a m p l e,  it  would  m a ke 
it 
possible both to absorb the  expected 
increase in the labour force  - arising 
from  the  increase  in  the  population 
of working  age  and  to  the  probable 
rise  in  the  participation  rates  -  and 
to  reduce  unemployment  signifi 
cantly. 

The  i m p l i c a t i o ns  of  s e e k i ng 
to 
achieve  a  net  1.5%  a  year  increase 
in  employment  are  illustrated  in 
Table  1. This provides an  extrapola 
tion  of present  trends  - employment 
growth  of  1%  a  year  (example  'a') 
and  an  alternative  scenario  of  em 
ployment  growth  of  1.5%  a  year 
(example  'b').  On  the  former  basis 
unemployment  would  be  down  to 
7%  by  1995.  On  the  latter  it  would 
be  down  to  5%. 

There  has  also  been  a  marked  re 
duction  in  social and  labour  market 
tensions,  reflected  in  lower  rates  of 
inflation.  The  consensus  on  the  ob 
jective  of monetary  stability  and  on 

The  increase  in  the  active  popula 
tion  resulting  from  the  growth  of 
population  of  working  age  is  likely 
to  slow  down  from  its  current  rate 
of 0.7%  a  year  to  0.1% a  year  in  the 

first  half  of  the  1990s.  The  demo 
graphic  p r e s s u re  on  the 
labour 
markets  will  thus  be  slightly  re 
duced. 

On  the  other  hand,  a  more  favour 
able  economic  and  employment 
scenario  will  probably  result  in  fur 
i n c r e a s es  in  p a r t i c i p a t i on 
t h er 
rates. It could turn  out, for  example, 
that  the  increase in the labour  force 
attributable  to  a  higher  participa 
tion  rate  is  around  0.5%  a  year  in 
the  first  half of the  1990s, instead  of 
0.3%  a  year  in  the  period  1980  to 
1990. 

Compared  with  the  USA,  J a p an  or 
the  Scandinavian  countries,  the 
average  participation  rate  in  the 
Community  - especially  of women  -
is still low. There therefore  remains 
a potential for large increases in  the 
participation  rate  in  the  coming 
years. 

If this  were  the  case,  an  unemploy 
ment  rate  of  5% by  1995  could  still 
be  achieved  even  with  Community 
labour  force  growth  of  0.6%  a  year 
(0.1% due to growth  of population  of 
working  age  plus  0.5%  due  to  in 
c r e a s ed 
if 
employment  grew  at  around  1.5%  a 
year. 

p a r t i c i p a t i o n) 

An  increase  in  net  employment  of 
1%  a  year  between  1990  and  1995 
would  mean  6.5  million  net  addi 
tional jobs, whereas an  employment 
increase  of  around  1.5%  a  year 
would  create  10.5  million  net  addi 
tional jobs. 

An  increase  in  employment  of  1.5% 
a  year  would  seem  to  be  necessary 
therefore  in  order  to  reduce  unem 
ployment  significantly  during  the 
next  few  years.  If  it  were  achieved, 
it  is  likely  to  mean  higher  growth, 
increasing  wealth  and  a  reduction 
of the burden  on public budgets  and 
social  security  systems. 

26 

Chapter  1  Employment  in  the  European  Community 

In  this  scenario,  the  dependency 
ratio  (the  ratio  of inactive  people  of 
all  ages  including  the  unemployed, 
to  the  total  in  employment)  would 
revert  to  the  level  of  the  1960s 
(Table  1). This would help the  Com 
munity  cope  with  the  pressures  on 
social security from  an  ageing  popu-
l a t i o n,  a l t h o u gh 
g r e a t er 
proportion  of  part-time  workers  in 
total  employment  would  reduce  the 
beneficial  effects  of a  fall  in  the  de 
pendency  ratio. 

t he 

Achieving a medium-term growth of 
employment  of  1.5%  per  year  may 

not  be  easy,  however.  Labour  pro 
ductivity  is  currently  increasing  at 
a  trend  rate  of around  2% a  year  in 
the  Community  as  a  whole.  This 
rate  could  increase  to  say  2.5%  a 
year  during  the  next  few  years  as  a 
result of the completion of the  Inter 
nal  M a r k et  (Chapter  5)  and  an 
accelerated  catching up  of the  Com 
munity's  less  favoured  countries 
and regions. In t h at case, a  medium-
term  GDP  growth  rate  of  4%  or 
higher  would  be  needed  in  order  to 
give  a  1.5%  growth  in  employment. 

Table  1 

Population,  Active  Population  a nd 
in  the  Community 

Employment 

Average annual 
% change 

1960 
1970 

1970 
1980 

1980 
1990 

1990 
1995 

Population 

Active population 

0.8 

0.2 

0.5 

0.6 

- due to the  increase  in 

the  population  of 
working  age 

0.5 

0.7 

- due to the  change  in 

the  participation  rate  -0.3 

Employment 

0.2 

-0.1 

0.2 

0.3 

0.8 

0.7 

0.1 

0.3 

a 

0.2 

0.4 

0.1 

0.3 

1.0 

b 

0.2 

0.6 

0.1 

0.5 

1.6 

Levels 

1960 

1970 

1990 

1995 

Unemployment  rate 

Dependency  ratio 

2.5 

1.32 

2.0 

1.46 

10.0 

1.51 

7.0 

1.41 

5.0 

1.34 

-27 

28 

Sectoral  Changes  in  Employment 

Sectoral  Changes  in  Employment 

Throughout  the  last  two  decades  a 
series  of  basic  structural  changes 
have  taken  place in the  Community 
economy.  These  are  in  line  with 
similar  changes  in  other 
indus 
trialised  countries. 

a nd 

Employment  in  agriculture  has  de 
clined  a l m o st  c o n t i n u o u s ly 
-
although  it  still  accounts  for  8%  of 
in  t he  Com 
t o t al  e m p l o y m e nt 
of 
to  h a lf 
up 
m u n i ty 
employment  in  many  rural  areas. 
Map  19  shows  the  distribution  of 
agricultural  employment  across  the 
Community.  It  is  heavily  concen 
in  t he  s o u t h e rn  zones  -
t r a t ed 
Greece,  southern  Italy,  northern 
Portugal  and  Spain,  but  also  well 
represented  in  southern  Germany, 
the  Netherlands  and  north-west 
France. 

Industrial  employment  has  also  de 
clined,  although  in  this  case the  fall 
only  began  in  1973.  Before  then, 
there  was  a  small  rise  during  the 
1950s  and  1960s.  Since  1973,  how 
ever,  it  has  declined  from  over  40% 
to  some  33% in  1987  although  over 
the past two years it appears to have 
stabilised  and  even  shown  some 
modest  growth.  Within  this  overall 
picture,  the  decline  in  some  tradi 
tional  sectors  (such  as  coal,  steel, 
shipbuilding, textiles) has been  par 
ticularly  strong. Employment in  the 
coal  and  steel  industries  alone,  for 

example, has fallen by around  1 mil 
lion  since  the  early  1970s. 

The  decline  in  agricultural  employ 
ment  since  1960  and  in  industrial 
employment  since  1973  has  been 
offset  by the  growth  in  employment 
in  the  service  sector.  Services  en 
compass  a  wide  range  of  activities 
from  business  services  -  essentially 
services to industry or to other  parts 
of  the  service  sector  -  services  to 

household  and  personal  services  as 
well  as  banking  and  insurance  and 
health  care. 

In  c o m m on  w i th  o t h er 
i n d u s 
trialised  countries,  the  European 
Community  has  seen  the  share  of 
service  employment  grow  from  less 
t h an  40%  in  t he  early  1960s  to 
around  60% of all  employment. 

17 

Sectoral  Employment  Trends  in  t he 
Community 

1960-1987 

Services 

.__  Millions 
loU  r~ 

100 

2 9-

Sectoral  Changes  in  Employment 

18 

Total  Employment 

o 

1986 

1  Dot  =  10,000  Employed 

19 

Employment  in  Agriculture 

1986 

a 

1  Dot  =  1,000  Employed 

E g g^ 

CiC^á 

30 

Sectoral  Changes  in  Employment 

20 

Employment  in  Industry 
o 

1986 

1  Dot  =  5,000  Employed 

21 

Employment  in  Services 

C <^ 

1986 

1  Dot  =  5,000  Employed 

C ^^ 

31 

Sectoral Changes in Employment 

Gains = 

Losses = 

22 

Total  Gains  a nd Losses 
o 

1975 - 1986 

1 dot =  1,000 Losses/Gains 

G ^ £ 24 

23 

Gains a nd Losses in  Agriculture 

1975 - 1986 

o 

1 dot =  500 Losses/Gains 

ï£=£2d 

32 

Sectoral Changes in Employment 

24 

Gains a nd Losses in Industry 

1975 ­1986 

Ω 

Gains = 

Losses 

1 dot = 500 Losses/Gains 

25 

Gains and Losses in Services 

1975 -1986 

1 dot = 500 Losses/Gains 

ΓτΝ­gæi 

33 

34 

Chapter  2  Short-term  Outlook 

Chapter  2  Short-term  Outlook 

Investment 

Investment  has  picked  up  over  the 
last  few years,  contributing  signifi 
cantly to the higher  growth  in GDP. 
While  investment  growth  may slow 
down  this  year  and  in  the  short-
term,  it  is  forecast  to  remain  rela 
tively  strong  as  compared  with  the 
performance  over the past  15 years, 
especially  in  new  equipment.  As 
with  GDP growth,  Spain  and Portu 
gal  seem  to be  showing  the  largest 
increases  and the  United  Kingdom 
and  Denmark  among  the  smallest, 
with  expenditure  on  construction 
being  especially  depressed. 

27 

I n v e s t m e nt 

Annual  %  Chango 

The  Economic 
Outlook 

Economic  Growth 

Growth  of real  output  in  the  Com 
munity  in  1988  at  3.7%  was  the 
highest for 12 years. With the excep 
t i on  of  D e n m a r k,  w h e re  G DP 
a c t u a l ly  fell  s l i g h t l y,  a nd  t he 
Netherlands,  growth  rates  in  Mem 
ber States were between  3% and 5%. 
In  1989, growth  seems  to be  easing 
off  slightly  but  is  still  likely  to  be 
over  37r  for  the  year.  The  Com 
mission's  services  estimate  t h at  the 
short-term  prospect  is for some  fur 
ther  moderation  to  2.5  -  3%,  with 
Spain,  Portugal  and  Ireland,  three 
of the poorest Member States,  show 
ing the strongest  performance  (with 
growth  at around 4%) and  Denmark 
and  the  United  Kingdom  the  wea 
kest  (with  growth  at  around 2%). 

26  GDP 

Annual  %  Chango 

depressed  state  of  which  made  a 
major  contribution  to  low  inflation 
in  the recent  past,  are now exercis 
ing  t he  r e v e r se  effect,  boosting 
growth  by adding to export  demand 
from  primary  producing  countries 
but  pushing  up  prices  at  the  same 
time. 

Labour  costs  are  also  edging  up, 
though  at a slower  rate  than  prices, 
with little sign as yet of any  resump 
tion  of the  wage-price  spiral  which 
was  a  pronounced  feature  of  the 
period  of high  inflation  in the  1970s 
and  early 80s. 

While  inflation  is  rising  in  most 
Member  S t a t e s,  c u r r e nt  a n n u al 
rates  are  little  different  from  their 
level in the 1960s, at around  3 to 4%. 
The  exceptions  are Greece  and  Por 
tugal, where inflation  has remained 
in  double  figures 
throughout  the 
1980s (except in the case of Portugal 
for  a  brief  period  recently)  and  the 
UK,  w h e re  inflation  h as  r i s en 
sharply  over  the past  year. 

28 

Inflation 

Inflation 

Higher  growth  rates  in  the  Com 
munity  have  been  accompanied  by 
some rise in inflation,  stimulated by 
increases  in import  prices  as  global 
demand  for  primary  products  has 
revived  and  European  currencies 
have  fallen  against  the  US  dollar. 
External  factors,  in  the  shape  of 
commodity  market  conditions,  the 

- 3 5-

Chapter  2  Short-term  Outlook 

The  present  rise  in  inflation  is  fore 
cast  to  moderate  in  the  short-term 
in  almost  all  Community  countries, 
as  growth  of  internal  demand  and 
output  slows  down.  Apart  from  un 
expected  external  developments, 
which the Community can  influence 
but  not  control,  the  main  risk  is  of 
an  upsurge  in  wage  costs  since  the 
labour market is expected to tighten 
further,  though  not  by  much. 

External  Balance 

The  t r a de  balance  of  the  Com 
munity  with  the  rest  of  the  world, 
which  registered  a  surplus  of over  1 
per  cent  of  Community  GDP  in 
1986, has  deteriorated  over the  past 
three  years,  but  is  still  expected  to 
be  in  small  surplus  in  1989.  It  is 
forecast  to  remain  in  small  surplus 
in the  next  two years, the  more  so if 
GDP growth  falls  by more than  pre 
dicted. 

The  major  potential  external  con 
s t r a i nt  on  growth  in 
individual 
Member  States  comes  not  from  a 
deteriorating  balance  with  coun 
tries  outside  Europe,  but  from  a 
widening  trade  imbalance  within 
the  Community  itself.  The  risk  is 
that  the  German  surplus,  already 
over  6%  of  GDP,  will  increase  fur 
ther,  making  it  more  difficult  for 
other  Member  States  to  sustain 
present  growth  rates  although  a 
certain  external  surplus  may  be 
natural  for  highly  developed  areas. 

A  further  problem  for  some  coun 
tries  is  the  continuing  high  level  of 
government  borrowing  required  to 
finance  budget  as well as trade  defi 
cits. In  the  case of Greece  and  Italy, 
in  particular,  where  government 
borrowing  h as  exceeded  10%  of 
GDP  for  some  time,  this  severely 
limits  the  scope  for  demand  expan 
sion.  Indeed,  the  liberalisation  of 

capital  markets  planned  as  part  of 
the  1992  programme  puts  added 
pressure  on  these  countries  to  cut 
deficits  and  reduce  borrowing. 

numbers  in work not going up at  the 
present  time,  though  in  most  coun 
tries  the  rate  of increase  along  with 
GDP  growth  is  tending  to  slow 
down. 

29 

Trade  B a l a n ce 

Unemployment 

As  employment  has  increased,  so 
the  numbers  unemployed  in  the 
Community  have  come  down  grad 
ually, from  nearly  11% of the  labour 
force  in  1986  to  10% in  1988  and  to 
9.3% in mid-1989. This fall has  been 
assisted  by  demographic  factors  as 
the  number  of young people  coming 
onto  the  labour  market  each  year 
has  declined.  Nevertheless,  the  un 
at 
r a te 
e m p l o y m e nt 
around  18%  in  Spain  and  Ireland 
and  over  14%  in  Italy,  and  in  all 
countries,  apart  from  Luxembourg, 
the rate is still several times  greater 
than  the  levels  experienced  in  the 
1960s. 

r e m a i ns 

The  forecast  is  for  a  continuing  fall 
in  unemployment  over  the  short-
term,  though  at  a  slower  pace  than 
during  the  past  two  years  if  GDP 
growth  moderates  as  expected.  The 
prospect  is  for  the  rate  across  the 
Community  as  a  whole  to  remain 
close  to  10%  of  the  labour  force  at 
the  end  of  1990,  on  the  basis  of  na 
tional  definitions  (see  Box  page 
125). 

Employment  Outlook 

Employment 

With  higher  output  growth,  new 
jobs  have  been  created  in  the  Com 
munity  and  employment  has  been 
rising. It is likely to go on  increasing 
this  year  and  next,  at  a  rate  of 
around  1%  a  year,  so  long  as  GDP 
grows  at  the  rate  forecast.  If  this 
happens,  some  2  to  3  million  new 
jobs will be created  in  the two  years 
1989  to  1990,  adding  to  the  similar 
number  created  over  the  past  two 
years.  Only  in  Denmark  are  the 

30 

E m p l o y m e nt 

31 

U n e m p l o y m e nt 

,  %  Labour  Force 

36 

Part II Structural  Employment  Issues 

Chapter  3 

Community  Employment  a nd  the  World  Economy 

Chapter  4 

The  Employment  Content  of  Growth 

Chapter  5 

Sectoral  Employment  Impact  of  1992 

Chapter  6 

J ob  Quality  - For  Better  Or  Worse? 
SME  a nd  the  Self-employed 

Chapter  7  Women's  Employment 

Chapter  8 

The  Demographic  Time  Bomb 

Chapter  9 

Training  a nd  Employment 

Chapter  10  Unemployment  - A Social  as  well  as  a  Labour  Market  Problem 

Chapter  11  Black  Economy 

Chapter  12  Technological  Change  - A Strategic  Challenge  for  Employment 

Chapter  13  New  P a r t n e r s h i ps  in Employment  Creation  - Local  Development 

Chapter  14  Mobility  a nd  the  E u r o p e an  Labour  Market 

37-

38 

Chapter 3 Community Employment and the World Economy 

Chapter 3 Community Employment and the World Economy 

Employment in the Community is significantly affected by 
the growth of world trade, the buoyancy of geographically 
proximate markets and the strength of competitors. What 
does the future hold in store? 

The prospect of completing the 
Community's Internal Market in 
1992 has brought greater aware­
ness of the Community's place in 
the world economy. It h as also 
drawn attention to the interaction 
between the level and structure of 
employment in the Community and 
external developments in world 
markets. 

Though economic growth in the Eu­
ropean C o m m u n i ty h as slowed 
down appreciably since the early 
1970s, there has been a substantial 
improvement in recent years and it 
remains one of the richest parts of 
the world. It accounts for 18% of 
total global income and output, yet 
only 7% of the world's potential la­
bour force ­ t h o se people aged 
between 15 and 64 ­ live in Com­
m u n i ty c o u n t r i e s. T h o u gh t he 
average level of income per head in 
the Community is only two­thirds 
that of the United States, it is never­
theless three times higher than in 
Latin America and ten times higher 
than in the developing countries of 
Africa (see Maps 32, 33 and 34). 

The Community's importance in 
world trade is even greater. It ac­
counts for over 35 % of total world 
exports and imports, or for some 
20% excluding trade internal to the 
Community ­ far in excess of either 
the United S t a t es or J a p a n. In 

manufacturing, which is by far the 
largest element of trade, its share of 
world exports is some 27%. 

While the Community has declined 
in importance as a manufacturing 
zone since the early 1970s, it still 
produces around 25% of all indus­
trial goods produced by the world 
economy and exports a similar 
share of these (Map 35). For motor 
cars, the piOduction of which is a 
major indicator of economic ad­
v a n c e m e n t, t he C o m m u n i ty 

remains by some way the world's 
leading manufacturer, accounting 
for 3 5% of all c a rs p r o d u c ed 
(Map 36). 

Some 10% of the Community's out­
put of goods and services goes to 
world markets. A similar percent­
age of e m p l o y m e nt in t he 
Community depends directly on 
this external trade and more is in­
directly dependent upon it. 

32 Shares of World Income 

1988 

^\ 2% / „ 

/ X——£> 
( 21% z' 

vCV. 

\ 8% 

< 5 X \ f 

5 - 10 X \ì 

A ¿e 

18%* 

14% 

^X 8% 

y tf 
< ?^ 8% 

3% y 

\Jú 

>\ 

10% 

1% 

π > 

<? 

10 - 15 % 

> 15 Χ 

h 

39 

Chapter  3  Community  Employment  and  the  World  Economy 

Changes  in  the  pace  of  economic 
activity in the rest  of the world  thus 
have  an  important  effect  on  econ 
omic and  employment  growth in  the 
C o m m u n i t y.  E q u a l ly  t he  Com 
munity  is  such  a  large  market  for 
goods  and  services  produced 
in 
other  countries  t h at  the  r a te  of 
Community growth significantly  af 
fects  how  rapidly  the  rest  of  the 
world  can  expand.  Years  of  high 
growth  - such  as  1988,  when  world 
trade  grew  in'  real  terms  by  9%  -
provide  a  stimulus  to  the  Com 
munity's  growth  and  employment 
prospects.  Equally,  the  predicted 
decline in  the growth  of world  trade 

this  year  to  under  7%  and  around 
6% next year will have  an impact  on 
t he  e c o n o m i es  of  t he  M e m b er 
States. 

ral markets  of  Scandanavia,  Africa, 
the  Middle  East  and  Eastern  Eu 
rope  has  grown  much  more  slowly 
or  even  declined. 

A  major  difficulty  for  the  Com 
munity  has  been  the  fact  that  its 
geographically  proximate  markets 
have  recently  been  among  the  slo 
west  growing  parts  of  the  world 
economy. Income in the Pacific  mar 
kets,  on  which  both  J a p an  and  the 
United  States  are  increasingly  fo 
cusing  attention,  has  been  growing 
at  an  a v e r a ge  of  5-6%  a  y e ar 
throughout  the  1980s.  By  contrast, 
demand  in  the  Community's  natu 

The  greater  efficiency  and  activity 
brought  about  by  the  completion  of 
the  Internal  Market  will  improve 
the  Community's  competitiveness. 
Coupled with the implementation  of 
the  Community's  economic  growth 
strategy,  this  could  not  only  im 
prove European  growth  rates  in  the 
immediate future  but, by  promoting 
demand  for imports  from  the  rest of 
the  world,  help  ensure  growth  in 
Europe's  export  markets. 

33  World  Labour  Force 

1988 

1  Dot  =  500,000 

40 

Chapter  3  Community  Employment  and  the  World  Economy 

More of the world  is seeking to  raise 
living standards. The task is consid 
erable.  The  world  population  of 
working  age  outside  the  European 
Community  and  the  United  States 
is  expected  to  grow  by  700  million 
between  1980 to the year  2000. This 
is  on  top  of  the  fact  that  some  950 
million  people  are  estimated  to  be 
living  in  absolute  poverty  in  the 
world  today. 

Global  Markets  -
Mobile  Capital  a nd 
Immobile  L a b o ur 

Global  markets  for  food  products 
and  raw  materials  have  existed  for 
decades,  even  centuries,  because  of 
the  relative  homogeneity  of the  pro 
ducts  and  because  the  location  of 
production  was  largely  determined 
by natural  advantages.  Global  mar 
t he  s t a n d a r d i s a t i on  of 
k e t i n g, 
products  and  economies  of  scale  in 
production  have  altered  the  basic 

parameters  of  international 
trade 
for  manufactured  goods - a  prospect 
faced,  too, by the  services  sector. 

This  has  led  to  the  growth  of  new 
production  locations  outside  tradi 
tional industrial  areas  (see Maps  35 
and  36).  Multinational  companies 
have  had  increasing  choice  as  in 
creasing  n u m b e rs  of  Asian  and 
South  and  Central  American  coun 
tries  have  achieved  the  minimum 
conditions  necessary  for  modern 
production.  Developing  countries 
which  have  progressed  the  most 
have  assisted  this  process  by  en-

34  World  Income  p er  Head  in  Relation  to  t he  Community 

1988 

100% 

27% 

41 

Chapter 3 Community Employment and the World Economy 

couraging sub­contracting to their vantages to the Community's con­
less developed neighbours. sumers in the form of lower prices. 

T he r e m o v al of p r o d u c t i on to investors and new market oppor­
cheaper locations has brought ad­ tunities, especially for the export of 

It has also created profit income for 

35 S h a r es of World M a n u f a c t u r i ng P r o d u c t i on 

1988 

^ ^\ 1% f rs. f fKy 

I \-^£> 24% < fΤ cÆ> 
( 19% y (¿/"y'csrrr^w^. 
VV^. ( V> 
χ ^ — χ^ \ ^_ 1% y 

V \JÚ 

I ( 1% 

< 2 X 

2 - 10 X 

10 - 20 X 

> 20 X 

_ 

19% <C V) 

J 5% <sS^5 12% 

\^>S 

v^ > 
a> 

36 Shares of World Production of Motor Cars 

1988 

- 4 2-

capital goods. Nevertheless the em­
p l o y m e nt c o n s e q u e n c es of t he 
transfer of production, in certain 
sectors, were negative for the Com­
munity. There was a widespread 
failure of Member States either to 
exploit fully the opportunities of­
fered by the changed patterns of 
world production and consumption 
or to adopt appropriate strategies 
and responses. 

The global economy is a reality, but 
the market is far from perfect. New 
financial capital for investment is 
highly mobile as there are fewer 
r e s t r i c t i o ns on m o v e m e n t, low 
transaction costs and greater se­
curity for international lenders. 
Equally, the technological know­
how for many established products 
which is not already embodied in 
equipment is easily available and 
rapidly diffused. 

On the other hand, restrictions on 
trade abound. Labour is largely im­
mobile in a global sense, being 
unable to move between countries 
due to the severe restrictions most 
countries apply to foreign national 
immigrants. This even goes as far as 
inhibiting trade in certain service 
sectors which require temporary 
movements of personnel. 

Community Markets 
and Competitiveness 

Over the past two decades, the Com­
munity share of a number of global 
markets and of a range of product 
areas, particularly those in which 
demand h as been growing most 
rapidly, has declined. The competi­
tive s t r e n g th of J a p an and t he 
emergence of newly­industrialising 
countries have been important fac­
tors but it should also be noted that 
intra­Community trade has been 
growing over this period.The Com­
munity has suffered from relatively 

Chapter  3  Community  Employment  and  the  World  Economy 

low  industrial  productivity  which, 
in  turn,  is  a  result  of  low  rates  of 
investment.  The  fragmented  Euro 
pean  market  has  also  contributed 
by limiting the  achievement  of scale 
economies. 

It  is  also  related  to  the  changes  in 
the economic  fortunes  of geographi 
cally  proximate  zones  -  E a s t e rn 
Europe,  Africa,  the  Middle  East  -
which have traditionally been  major 
markets  for  European  goods. 

The  secular  downward  t r e nd 
in 
commodity prices has  depressed  de 

two 

i n to 

t h e se 

mand  for  manufactures  in  Africa 
and  the  Middle  East.  Between  1980 
and  1986,  the  dollar  value  of  im 
p o r ts 
r e g i o ns 
declined  by  25%. By  contrast,  mar 
kets  in  Asia  and  the  United  States 
have  expanded  significantly  over 
the  same  period  - by 40% in the  case 
of  Asia  and  by  125%  in  the  case  of 
the  United  States  (see  Map  37  and 
Graph  38). 

Eastern  Europe  with  its  geographi 
cal  proximity,  should  be  a  natural 
market  for  the  EC. Despite  the  cur 
rent  difficulties  being  experienced 

by  countries  of  this  region,  which 
have  resulted  in  a  decline  in  East-
West  trade,  the  economic  reforms 
currently  under-way  should  offer 
the  Community  the  prospect  of  im 
proved  trade  in  the  future. 

Significantly,  however,  the  Com 
m u n i t y 's  s h a re  of  t r a de  is  now 
smallest  and  has  declined  most  in 
the  technologically  advanced  sec 
tors  of  machinery  and  electrical 
equipment  and  t r a n s p o rt  equip 
ment,  which  have  also  experienced 
the  most  rapid  rates  of  growth.  By 
contrast, in chemicals, for which  the 

37  Community's  Share  of Imports  into  Different  World  Markets 
1986 

(Manufactured  Goods) 

68% 

23% 

D 

/ 

56% 

43 

Chapter 3 Community Employment and the World Economy 

market is much smaller, the Com­
munity is dominant in trade and 
has held onto or increased its share 
in most parts of the world. 

Key to 
Abbreviations 

L.Am 
Aus/NZ 

ME 
SA 
Non EC 

Latin America 
Australia and 
New Zealand 
Middle East 
South Africa 
Non­EC Europe 

The Challenge of the 
Newly Industrialised 
Economies 

In the past, the Community has 
often sought to preserve employ­
ment in mature industries where 
demand was stable or declining and 
where there was frequently world­
wide excess capacity due to the 
entry of newly­industrialising econ­
omies ­ NIEs ­ into these markets. 
This has been at the expense of 
making more effort in higher tech­
nology growth sectors. 

The growth of these newly indus­
t r i a l i s ed e c o n o m i es b r o u g ht 
considerable competitive pressure 
on E u r o p e an Community based 
companies with consequent losses 
of production a nd employment. 
Change has been rapid and the geo­
graphical location of production has 

38 Community Share of Different World Markets 

for Manufactured Goods 1986 

% Market Share 

80 

Π 1965 m 1975 ■ 1986 

1965 Total 1975 Total —1986 Total 

Γ 

60 

40 

20 

80 

60 

40 

20 

Non-EC EC Africa S.A 

. u 
USSR 

■ b nm . .,» . . 0 

ME Aus/NZ L Am Japan USA Asia China Canada 

44· 

shifted eastwards on the world map. 
Global economics has traditionally 
been dominated by Europe or the 
United States. The new balance 
gives a major role to the countries of 
the Pacific Basin. 

Within the Pacific area, the main 
source of competition has shifted 
from country to country. J a p an ­
which was the prototype newly in­
dustrialised competitor ­ has long 
since given way to the next wave of 
NIEs ­ South Korea, Taiwan, Hong 
Kong and Singapore. They, in turn, 
have since shed many of the estab­
l i s h ed p r o d u c ts a nd sectors to 
another wave ­ China, Indonesia, 
P a k i s t a n, T h a i l a n d, M a l a y s i a, 
India and The Philippines. 

The newly industrialised economies 
(NIEs) a re b e g i n n i ng to adopt 
strategies which are less dependent 
on exports to stimulate growth and 
are starting to turn their attention 
to other developing countries. 

The new competitors have taken 
growing shares in the United States 
and Japanese markets in particular 
(see Graph 39). They are also mak­
i ng i n r o a ds into t he E u r o p e an 
market. Their share of total Com­
munity imports of manufactures is 
10% and growing. It is particularly 
high in some sectors, notably con­
sumer goods. 

Employment 
C onsequences 

Sectors where labour costs are an 
important component of production 
and where there is easy access to 
the technology have been particu­
larly vulnerable to competition. 
Traditional product sectors ­ tex­
tiles and clothing, footwear and 
leather ­ have declined consider­
ably. So have shipbuilding and steel 
and more sophisticated goods such 

as areas of mechanical  engineering. 
lost 
In  t o t a l, 
1.4  million  jobs  in  these  areas  over 
the  six years  1980-86  alone. 

t he  C o m m u n i ty 

h a ve 

l o s s es 

The  social  consequences  of the  em­
ployment 
b e en 
particularly  serious  where  the  im­
pact  h as  b e en  g e o g r a p h i c a l ly 
concentrated  - for  example  in  areas 
dependent  on  a  declining  industry  . 
The  severity  of  the  problems  in 
some  regions  has  been  exacerbated 
by  the  slowness  of  the  Community 
in  a d j u s t i ng 
to  t h e se  e x t e r n al 
changes  through  the  development 
of  new  employment-creating  pro­
ducts  and  services. 

Given the levels of absolute  poverty 
throughout  the  world  and  the  ex­
tent  to  which  real  wages  in  most 
developing  countries  have  declined 
in recent  years  - by up  to  20 to  30% 
- Europe  cannot  hope  to  compete  in 
terms  of  wage  rate  for  the  produc­
tion  of  basic  manufactured  goods. 
Europe  has,  however,  had  a  com­
p a r a t i ve 
h i gh 
a d v a n t a ge 
technology  products  and  its  future 
lies  in  cashing  in  on  this.  Unfortu­
nately,  although  Europe  appears  to 
have  the  ability  and  know-how  to 
design  innovative  products,  it  has 
been  less  successful  in  developing 
large  scale  production  and  markets 
for these  products. 

in 

f o r t h c o m i ng 

Even  this  advantage  could  be lost  if 
expenditure  on  research  and  devel­
opment  is  not  increased,  and  when 
the 
d e m o g r a p h ic 
changes  - the  1970s' babies  slump  -
lead  to  a  shortage  of highly  trained 
young  people  who  will  be  expected 
to be  in  the  vanguard  of  high  tech­
nology  development,  production 
and  marketing. 

In  the  area  of  services,  the  Com­
munity  has  fared  better.  Including 
intra Community trade, the EC  cur­
rently  provides  40%  of  the  world 

Chapter  3  Community  Employment  and  the  World  Economy 

m a r k e t.  H o w e v e r, 
t he  r a te  of 
growth  of  world  trade  in  services 
has  been  slow.  In  the  Community's 
domestic  economy,  services  now  ac­
count  for  some  60% of  employment. 
By  contrast,  services  account  for 
less than  a  quarter  of total  interna­
tional  trade.  While  the  catch-all 
category  of  'other  services'  h as 
grown  as  a  share  of  total  interna­
tional  t r a d e,  the  s h a re  of  other 
service activities - notably  transport 
and  tourism  - has  actually  declined. 
While  many  growing  services  will, 
by their nature, remain  non-traded, 
it is hoped that the current  Uruguay 
round  of  multi-lateral  negotiations 
will  achieve  a  breakthrough  in  de­
for 
veloping  t he  world  m a r k et 
services. 

Community 
Responses 

Responses  by  industrialised  coun­
tries  to  rapid  import  penetration 
have  included  measures  to  soften 
the  impact  by  restricting  imports, 
p a r t i c u l a r ly 
t h r o u gh  non-tariff 
measures. 

Indeed  limitations  or  trade  restric­
tions  survive  in  many 
industrial 
sectors.  The  extent  of  non-tariff 
measures  is  closely  related  to  the 
degree of import penetration,  except 
where  there  is  considerable  intra-
i n d u s t ry 
t r a d e,  often  b e t w e en 
multinational  companies with  oper­
ations  both  in  industrialised  and  in 
developing  countries. 

In  the  case  of the  Community,  how­
ever,  its  trade  policies  have  been 
accompanied  by  a  series  of  sectoral 
restructuring plans - which have  in-

39 

Pacific  NIE's  Share  of Different  World  Markets 
for  Manufactured  Goods. 

1986 

80 

60 

40 

20 

0_  %  Market  Share 
ou  r~ 

1965 

1965  Total 

1975 

1975  Total 

1986 

1986  Total 

60 

40 

20 

10  % 

rJ  ΊΛ  · - J  r-fit  J 

:TI  [J  :1 

Non-EC  USSR  L.Am 

EC 

SA  Africa  Canada  ME  Aus/NZ  Asia  USA  China  Japan 

45 

Chapter  3  Community  Employment  and  the  World  Economy 

e l u d ed  specific 
l a b o ur  m a r k et 
measures  such  as  early  retirement 
or  voluntary  redundancy  - in  order 
to ensure  that  the  necessary  degree 
of  s t r u c t u r al  adjustment 
in  the 
economy  and  labour  market  took 
place. This  occurred  despite  the  dif 
ficulties  caused  by  low  r a t es  of 
economic growth  and  investment  at 
that  time. 

There  is  little  long-term  future  in 
the preservation  of jobs in  declining 
s e c t o r s. 
i n t e r n a t i o n a l l y - t r a d ed 
Member  States  recognise  that  their 
future  lies  in  the  pursuit  of  excel 
lence  and  quality  in  all  sectors  and 
in  the  development  of domestic  ser 
vices  and  activities  which  are  not 
traded  internationally. 

Historically,  the  Community  has 
had  the  advantage  of a high  level  of 
education  and  training  among  its 
labour  force, but  this will be  rapidly 
eroded  without  increased 
invest 
ment  in  human  resources.  Europe 
possesses  a  high  proportion  of  the 
highest  skills in  the world  although 
not  so much  those  with  a  direct  ap 
plication in industry  and  commerce. 
An  awareness  of  the  risk  of  losing 
this  advantage  has  stimulated  the 
Community  into making new  policy 
i m p r o v i ng 
i n i t i a t i v es  aimed  at 
t r a i n i ng  s t a n d a r ds  and  co-oper 
ation  in  education. 

social 

Such  actions  are  necessary  since 
many  newly  industrialised  coun 
tries  have  learnt  that  their  past 
economic  failures  were  less  a  result 
of  inherent  weaknesses  than  ad 
p o l i t i c al 
v e r se 
developments.  They  have  found 
that  in  the  right  conditions,  their 
citizens  a re  capable  of  moving 
rapidly  from  low  levels  of  develop 
ment  to cope with  the  requirements 
of high  quality  physical  or  intellec 
tual  work. 

or 

minimum  social standards  and  wor 
kers  rights  in  developing  countries 
by  including  these  requirements  in 
t r a de  a g r e e m e n t s.  These  senti 
m e n ts  have  been  echoed  in 
the 
Community.  The  Commission  pro 
posed  social  clauses  prior  to  the 
Lome  negotiation  round  although 
these  were  rejected  by  the  Council. 
And  in  1983  and  1986,  the  Euro 
pean  Parliament  pressed  similar 
demands  for  trade  in  general. 

The  proposed  content  of such  social 
clauses,  the  mechanisms  to  ensure 
their  establishment  and  to  impose 
sanctions  in  the  case  of  non-observ 
ance  have  varied  but  success  in 
advancing  them  has  been  limited. 
Pressures  from  developed  countries 
for  the  establishment  of  minimum 
or  'fair'  international  social  stand 
ards  are  open  to  the  criticism  that 
they  are  being  imposed  for  protec 
tionist  rather  than  moral  motives. 
While  this  may  at  times  be  the  mo 
tivation  behind  support  for  these 
measures,  the  widespread  concerns 
a b o ut  s t a n d a r ds 
in  developing 
countries  are  real  and  heightened 
by an awareness  that,  many  develo 
ping  countries  have  undemocratic 
regimes  which  impose  widespread 
restrictions  on  basic  human  rights, 
particularly  the  right  of workers  to 
organise. 

Trade  Expansion, 
Future  Growth  and 
Employment 

Trade  interdependence,  at  world 
level,  and  the  importance  of  that 
trade  for  Member  States  has  made 
the  participation  of the  Community 
in  the  processes  of  international 
trade  negotiations,  and  the  world 
management  of economic  and  mon 
e t a ry 
i n c r e a s i n g ly 
important. 

a f f a i rs 

in 

There are lessons from  recent  devel 
t he  w i d er  world 
o p m e n ts 
economy  and  in  the  NIEs  for  the 
Community.  When  successful  NIEs 
put  their  future  in  quality,  technol 
ogy  and  efficiency,  it  shows  how 
little  scope  there  would  be  for  the 
Community  to maintain  its  employ 
ment  through  low  wage  strategies. 
The  ultimate  maintenance  of living 
and  employment  standards  in  the 
C o m m u n i ty  depends  on 
invest 
ment,  whether  it  be  in  physical 
capacity  or  education  and  training. 

It  depends  moreover  on  developing 
an integrated European market  and 
on  maintaining  an  open  multilat 
e r al  t r a d i ng  s y s t e m.  It  is  also 
contingent  on the Community  being 
in  a  position  to  encourage  favour 
able  world  market  developments 
and  to  keep  itself  in  a  position  to 
supply  those  markets  where 
the 
economic  returns  and  employment 
potential  are  greatest. 

C o m m u n i ty  growth 
is  a  major 
determinant  of  the  rate  of  world 
growth  and  demand.  Aid  and  debt 
relief  policies  towards  the  develo 
ping  countries  also  have  a  bearing 
on  the  future  growth  of  Europe's 
export  markets. 

Differing  Social 
Standards 

Fears  that  the  industrialisation  of 
developing  countries  might 
lead 
simply  to exploitation  and  impover 
i s h m e nt 
t h an 
greater  wealth  and  employment 
have  led  to  pressures  for  the  intro 
d u c t i on  of 
in 
'social  c l a u s e s' 
international  trade  agreements. 

in  t h o se  r a t h er 

The  ILO  Ohlin  report  in  the  1950s, 
the  Brandt  Commission  in  1980, 
and  the  Council  of  Ministers  of 
OECD  meeting  in  1987  all  stressed 
the  need  to  ensure  a  respect  for 

46 

Chapter  3  Community  Employment  and  the  World  Economy 

to 

is  f u n d a m e n t al 

T r a de 
t he 
achievement  of  the  Community's 
employment  goals.  Effective  inter 
national  economic  co-operation  is 
also needed  to ensure  a reduction  in 
in 
u n s u s t a i n a b le 
other countries which  create  protec 
tionist  pressures. 

t r a de  deficits 

Of  particular  importance  for  the 
Community  are  the  on-going  Uru 
guay  round  negotiations  in  which 
the  Community  is  seeking  to  fur 
ther  liberalise  trade,  to  strengthen 
and  extend  the  GATT  system,  and 
to bring new  areas like services  into 
the framework  of the  GATT. 

is 

for 

i m p o r t a nt 

T he  e x p a n s i on  of  t r a de  oppor 
t he 
t u n i t i es 
Community  because  its  historical 
and  geographically  proximate  mar 
kets - in Africa,  the Middle East  and 
Eastern  Europe  - have  grown  slow 
ly,  if  at  all, 
in  r e c e nt  y e a r s. 
Moreover, the Community is having 
to  concede  markets  to  newly  indus 
b o th 
c o u n t r i es 
t r i a l i s i ng 
traditional  sectors  and  new  growth 
areas. 

in 

Growth  in  international  trade  in 
services, in which the Community  is 
competitive,  but  which  has  been 
limited  by  barriers,  could  provide 
one  significant  area  of expansion  of 
employment. 

47 

4 8-

Chapter  4  The Employment  Content  of  Growth 

Chapter  4  The  Employment  Content  of  Growth 

The  overall  relationship  between  economic  growth  and 
employment  creation  has fundamentally 
altered  in  the 
Community 
needed  in  order  for  employment 
case for  thirty  years. 

in  recent  years.  Less  economic  growth  is  now 

to expand  than  has  been  the 

Economic  Growth 
and  Employment 
Creation 

The  relationship  between  economic 
growth  and  employment  can  be 
looked  at in two ways: 

as  the  rate  of  economic  growth 
employment 
beyond 
growth  becomes  positive  -  the 
"employment  threshold" 

which 

as  the  amount  of  employment 
created  per  additional  percent 
age  point  of  economic  growth  -
the  "marginal  employment  in 
tensity  of growth". 

40 

E m p l o y m e nt  a nd GDP Growth  Trends  in t he 
1961-1989 
C o m m u n i ty 

Annual  %  Change 

Introduction 

Employment  levels  in  t he  Com 
munity have been stimulated  by the 
recovery  in  economic  growth  since 
1982 (see Graph 40). 

Although  t he  a n n u al  economic 
growth  in the Community  was  only 
a  modest  2.5% between  1983  and 
1987, this  has been  sufficient  to en 
sure that  employment  grew  by over 
0.5% a  year. 

From  1988 to  1990, forecasts  indi 
cate  annual  GDP  growth  of  above 
3%,  p r o d u c i ng  an  e m p l o y m e nt 
growth  well  in  excess  of 1% a  year. 

Although this is insufficient  to bring 
about  a  rapid  reduction  in  unem 
ployment,  it  is  high  in  comparison 
with past  performance.  The 4.5 mil 
lion  additional  jobs  created  in  the 
Community  in  t he  u p t u rn  since 
1983 have  more  than  compensated 
for the 3.2 million jobs  lost  between 
1981 and 1983. 

1960 

1965 

1970 

1975 

1980 

1985 

1990 

49 

Chapter  4  The  Employment  Content  of  Growth 

These  points  are  illustrated  by 
Graphs  40  and 41. 

Graph  40  shows  a n n u al  growth 
rates  of  Community  GDP  against 
those  for  employment.  There  was  a 
fairly  stable  relationship  between 
growth  and  employment  over  the 
period  1960-1973  but  GDP  growth 
rates  over  4.5%  were  needed  to 
generate  any  increase  in  employ­
ment. 

This  stable  relationship  between 
growth  and  unemployment  levels 
was  upset  by  the  first  oil  shock.  A 
new  ratio  was  established  between 
1977  and  1980,  but  again  was  al­
tered  by  the  second  oil  price  shock. 
The period  since  1981 suggests  that 
a  third  constant  relationship  be­
a nd 
economic  g r o w th 
t w e en 
employment  creation  has  developed 
and  the  current  employment  thre­
shold  is  now  2%  -  in  other  words, 
GDP  growth  nowadays  only  needs 

to be above 2%, rather  than  4.5% as 
in  the  1960s,  for  employment  to 
grow. 

to 

Graph  41  illustrates  how  the  rela­
tionship  between  employment  and 
GDP  growth  has  changed  over  the 
period  1960  to  1989.  It  shows  how, 
for  the  period  since  1980,  a  GDP 
growth  rate  of 2% generates  no  net 
employment  increase  (this  corre­
s p o n ds 
e m p l o y m e nt 
t he 
threshold)  but  that  growth  rates  of 
3% and 4% correspond to 1% and 2% 
employment  growth,  respectively. 
Consequently,  in  order  to  reach  an 
employment  growth of 1.5%  or more 
which  -  given  demographic  factors 
and  increasing  activity rates  - is  the 
rate  needed  to  significantly  lower 
the  unemployment  rate,  an  annual 
GDP  trend  growth  rate  of  at  least 
3.5%  is  now  required. 

Macroeconomic 
Analysis  of  t he 
Employment  Content 
of  Growth 

The  increase  in  the  employment 
content  of growth  is  due  to  changes 
in  the  behaviour  of  key  economic 
variables  - e.g.  wages,  productivity, 
profitability  - and  important  struc­
tural  changes  -  e.g.  in  the  sectoral 
composition,  in  working  time. 

Two  main  macroeconomic  develop­
ments  have  affected  employment 
performance: 

•  a  sharp  upturn  in  investment, 
in  particular  in  plant  and  ma­
increased 
chinery  which  has 
the  growth  potential  of 
the 
economy,  and 

•  an  appreciable  slowdown  in  the 
rate  at  which  capital  has  been 
substituted 
(see 
for 
Graph  43),  which  has  increased 
the 
content  of 
growth. 

employment 

labour, 

41  Relationship  between Employment  and  GDP 
1960-1989 

Growth in the  Community 

Employment  Growth  (%) 

b 

4 

3 

2 

1 

0 

-1 

y 

1980  to  1989 

-

yS 

^r 

1973  to  1980.. 

" Γ · · " * *" 

..." 

r 

1961  to  1973'" 

ι 

I 

ι 

Ι 

ι 

GDP  Growth  (%) 

- 5 0-

Chapter  4  The  Employment  Content  of  Growth 

Between  the  first  oil  shock  of  1973 
and the  early  1980s, investment  de 
clined  in  real  terms  whereas  real 
GDP  grew  at  an  average  of  2%  a 
year. As a result,  the ratio of invest 
ment  to output  fell  from  over 23.5% 
in  1973  to  under  19%  in  1986.  A 
decade  of  depressed 
investment 
produced  an  " i n v e s t m e nt  g a p" 
which,  in  itself,  explains  much  of 
the  shortage  of  jobs  in  the  Com 
munity. 

Since the early  1980s, the  behaviour 
of  real  investment  levels  has  mir 
rored,  but  lagged  behind,  the  slow 
level  of  GDP  growth.  Construction 
investment  in  particular  remained 
subdued.  In  1986, international  un 
c e r t a i n ty  a nd 
t he  difficulties 
involved  in  switching  from  export-
led  growth  to  i n t e r n al  growth, 
impeded  investment.  In  1987,  how 
ever,  and  to  an  even  greater  extent 
in  1988,  investment  became 
the 
most  dynamic  component  of  de 
mand  in  the  Community.  The  real 
increase  in  total  investment  of over 
7.8%  in  1988  was  the  highest  for 
twenty  years.  This  dynamic  rate  of 

investment  is  expected  to  continue 
in  1989 and  1990. 

The  revival  of  investment  in  the 
Community  is  a  result  of  increased 
profitability  and  expectations  of 
stronger  demand.  Early  reactions 
by  the  business  sector  to  the  ap 
p r o a c h i ng 
t he 
Internal  Market  are  also  boosting 
private  investment. 

c o m p l e t i on  of 

age  - i.e.  real  wages  rose  much  less 
than  labour  productivity.  Reduc 
tions  in energy  prices  and  increases 
in  c a p i t al  p r o d u c t i v i ty  d ue 
to 
greater  utilisation  have  also  con 
tributed  to higher  profitability.  The 
gains  in  capital  stock  profitability 
have  more  t h an  compensated  for 
the fact  t h at  long-term  real  interest 
rates  are  higher  today  than  in  the 
1970s. 

Profitability  has  steadily  improved 
since  the  early  1980s  (see  Graph 
42). The rate  of return  on  fixed  capi 
tal  in  the  Community  has  risen  by 
almost  30%,  and  has  now  climbed 
back to 85% of the rates of the  period 
1960 to  1973, when  the  Community 
effectively  enjoyed  full  employment. 

Improved  profitability  h as  been 
linked  to  the  moderate  real  wage 
growth  of  recent  years.  Real  unit 
labour  costs  have  fallen  by  nearly 
7% compared to the  1973/1981 aver 

Demand  in  recent  years  has  also 
strengthened,  and  is expected  to re 
main  buoyant.  Up  to  1984,  growth 
in demand  was primarily  export-led 
but  since  1985  additional  demand 
h as  been  increasingly  generated 
from  within.  The  improvement  in 
the  terms  of trade,  due to the  fall  in 
oil prices  and  the  devaluation  of the 
US  dollar,  stimulated  private  con 
t he  C o m m u n i t y, 
s u m p t i on 
although  part  also  come  out  of  sav 
ings.  Since  1987  investment  itself 
has  accelerated  the  growth  of  de-

in 

42 

Profitability  of Capital  in  t he  Community 

1965-1989 

110  1960  =  100 

51 

Chapter 4 The Employment Content of Growth 

mand. Dynamic demand has re­
sulted in a continually increasing 
rate of capacity utilisation in the 
manufacturing sector, now higher 
than at the previous cyclical peak of 
1979. 

productivity (see Graph 43) suggest 
that wage moderation in the 1980s 
has also played an important part 
in curbing the process by which 
capital was being substituted for la­
bour. 

Thus improved profitability and 
stronger demand have stimulated 
investment with potential benefits 
for production and employment. 
However, this would not have been 
sufficient to expand employment as 
much as it has, if capital intensity 
(capital stock per person employed) 
were not now increasing more slow­
ly than in the past. 

The change in the relationship be­
tween employment and the capital 
stock is explained by increased capi­
tal utilisation and by structural 
employment changes, notably the 
expansion of part time work. The 
level of real wage costs per em­
ployee a nd of t o t al factor 

Total factor productivity is the 
weighted average of labour and 
capital productivity. Its r a te of 
growth indicates the expansion of 
production potential with given fac­
tor i n p u t s, and t h us takes into 
account technical progress as well 
as increased efficiency in the use of 
all factors of production. When la­
bour costs grow faster than total 
factor productivity, there is an in­
centive to replace labour with other 
factors of production in order to 
maintain the rate of return on capi­
tal. 

During the 1960s, and until the first 
oil price shock, real per capita wage 
costs increased faster than total fac­

43 Real Wages, Capital Intensity a nd Total Factor 

Productivity in the Community 1965­1989 

Annual % Change 

·

.

· ■ * ·

·. 
.· · · · · · ·. Real Wagos 

·

-

-

V Total Factor Productivity \ 

\ *. Capital 

Intensity 

• • 

\ >-i^ 

1965 

1 

1970 

1975 

1980 

1985 

1990 

52-

tor productivity, t h us favouring 
more capital intensive forms of pro­
duction, accompanied by a high 
investment ratio. However, because 
labour supply increased little at the 
time this was not prejudicial to full 
employment. 

During the 1970s until 1983, the 
productivity of capital declined, 
particularly sharply in the years 
immediately following the two oil 
price shocks. A reduction in the an­
nual operating hours of the capital 
stock was a factor and the growth of 
labour productivity also slowed 
down. As a result, total factor pro­
ductivity growth fell appreciably 
and after a delay it was followed by 
an equivalent fall in real costs per 
head, continuing the process of capi­
tal/labour substitution. 

In recent years improved growth 
rates, better terms of trade and in­
creases in t he r a te of capacity 
utilisation have ended the decline in 
productivity of capital which has 
even begun to rise again. The 
growth in labour productivity has 
stabilised at an annual rate of about 
2%. Real wage costs per head are 
now, for the first time since the 
early 1960s, increasing at a rate 
lower than that of total factor pro­
d u c t i v i t y. T h is is c u r b i ng t he 
process of capital/labour substitu­
t i on a nd t h us i n c r e a s i ng t he 
employment content of growth (see 
Graphs 47, 48, 49, 50). 

The Role of Sectoral 
Changes 

The relationship between economic 
growth and employment creation 
differs greatly between sectors and 
activities. Among other things it 
depends on the capital intensity of 
the production process, on company 
size and on the availability and im­
plementation of technical progress. 

While such  structural  features  may 
change  over time,  some  sectors  dis 
play in  the  long term  a  much  closer 
link  between  growth  and  employ 
ment  creation  i.e.  a  lower  rate  of 
labour  productivity  growth  -  than 
othei'S. To the  extent  that  these  sec 
tors  expand  as  a  proportion  of  the 
economy,  the  overall  employment 
content  of growth  rises. 

in 

Activities  with  low  rates  of  labour 
productivity  growth  exist  in  all  sec 
t he 
tors  b ut  p r e d o m i n a n t ly 
service  sector.  Productivity  growth 
of market  services  has  always  been 
significantly  lower  than  t h at  of  the 
total  C o m m u n i ty  economy  (see 
Graph  44). Between  1982 and  1986, 
for  example,  market  services  pro 
ductivity  growth  was  1.5%  a  year 
compared  with  2% in the  total  econ 
omy. 

The  relative  expansion  of  the  ser 
vice  sector  has  therefore  been  the 
main  source  of  the  recovery  of  em 
ployment  after  1983.  Only  since 
1988  has  manufacturing  employ 
ment  started  to  recover.  Market 
services  grew  at  an  annual  rate  of 
nearly 2.5% between  1983 and  1986 
while  non-market  services  -  which 
provided the biggest contribution  to 
employment  creation  in  the  1970s -
expanded  at  a  significantly  lower 
rate. 

The  Role  of  Working 
Time  Reductions 

Another  factor  which  h as  linked 
employment  creation  more  clearly 
to  economic  growth  has  been  the 
reduction  in  the  average  working 
time  per  person  employed,  which 
has  spread  the  demand  for  labour. 
Reductions in average working  time 
have  come  about  in  two  ways: 

Chapter  4  The  Employment  Content  of  Growth 

lower  contractual  weekly  work 
ing  hours,  leading  to  reductions 
in  real  or  effective  hours,  and; 

•  growth 
ment. 

in  part-time  employ-

in 

Contractual  weekly  working  hours 
d e c r e a s ed  s i g n i f i c a n t ly 
t he 
1970s.  In  the  1980s  the  downward 
trend  had  slowed,  until  some  major 
industrial  disputes  (German  metal 
working industry  in  1984 and  1987) 
or  government  initiatives  (France 
1982)  restarted  the  process.  In  the 
Federal  Republic  of  Germany,  con 
tractual  weekly  working  hours  in 
some  sectors  will  go  down  to  37 
hours  (metal  working,  printing  in 
d u s t r i e s)  a nd  36.5  hours  (steel 
industry)  in  1989.  In  Portugal  a  35 
hour  working  week  has  been  nego 
In 
t i a t ed  for  t he  civil  service. 
general,  however,  the  margins  for 
contractual  weekly  working  time 

p r e s s u r es 

reductions have been limited by em 
r e s t o re 
p l o y er 
profitability,  and  by  the  desire  of 
those  who  are  in  employment  to 
maintain  growth  in  real  wages. 

to 

In  the  1980s  it  has  been  the  growth 
of  part-time  employment  that  has 
principally  reduced  the  average 
working  time  in  the  Community 
economy.  P a r t - t i me  employment 
has grown much more strongly  than 
full-time  e m p l o y m e n t.  Between 
1983  and  1987,  70%· of  all jobs  cre 
a t ed 
t he  C o m m u n i ty  w e re 
part-time. In Denmark,  the  Nether 
lands  and  the United  Kingdom  over 
20%  of  total  employment  is  now 
part-time  (see  Chapters  1 and  6). 

in 

The  aggregate  importance  of  the 
growth  of  part-time  employment 
can  be  estimated  since  the  EC  La 
bour  Force  Survey  estimates  t h at 
part-time  employees  worked  19.4 

100 

10 

44 

Productivity  in Agriculture,  Manufacturing 
a nd  Market  Services  in  the  Community 

1960-1986 

1,000  ECU  per  Employee 

100 

Market  Services. 

Manufacturing^»  -

10 

A g r i c u l t u r e . . · ·· 

1960 

1965 

1970 

1975 

1980 

1985 

53 

Chapter 4 The Employment Content of Growth 

hours per week in 1987 as compared 
with the 40.6 hours of full­time em­
ployees (effective working time, 
which includes overtime work). 
Two part­time employees therefore 
supply about the same labour vol­
ume ­ if not necessarily the same 
labour "value" ­ as a full­time em­
ployee. If the new part­time jobs 
were thus converted to "full­time 
equivalents", annual employment 
growth between 1983 and 1987 
would have been 0.4% instead of the 
0.6% achieved by counting full­time 
and part­time jobs equally. The 
growth of part­time employment 
h as t h us contributed about one 
sixth of the reduction in labour pro­
ductivity growth between the late 
1970s and the 1980s. Alternatively, 
if only full­time jobs had been cre­
ated in the recovery since 1983, 
there would be at least one million 
fewer j o bs a nd u n e m p l o y m e nt 
would still be rising (Graph 45). 

Other Factors 

The shift towards the service sector 
and the reduction in average work­
ing time are not the only factors 
which have made growth more em­
p l o y m e nt c r e a t i ng in t he 
Community. Others are: 

• a slow­down in the incorpora­

tion of technical progress into 
the capital stock. Depressed in­
vestment levels between the 
mid­1970s and the early 1980s 
slowed down the introduction of 
technology in the Community 
production process. 

• Special efforts by virtually all 

Member States in the 1980s to 
provide jobs in the non­market 
services sector targeted on the 
unemployed, which have lower 
productivity levels. 

Prospects and 
Policies 

The employment content of growth 
is difficult to predict as it is the 
outcome of a variety of economic 
processes. On the one hand, the 
trend towards the service sector will 
continue. As female participation in 
many parts of the Community is 
still comparatively low, there may 
well be further increases in part­
time employment. On the other 
hand, the recent investment growth 
should accelerate the implementa­
tion of new production technologies. 
The completion of the Internal Mar­
ket should also improve efficiency 
and labour productivity. Moreover, 
as unemployment declines, low­pro­
ductivity jobs in the public sector 
targetted on the unemployed are 
liable to be reduced. 

45 Volume of Employment ­ Total Employment 
a nd Full­Time Equivalents in the 
Community (EUR9) 1979­1987 

Millions 

■ Total Employment 
Π Full-time Equivalents 

1979 - 1983 

1983 - 1987 

54 

Chapter  4  The  Employment  Content  of  Growth 

A number  of policies could help  sus 
tain the high employment content of 
growth: 

•  Relative 

factor 

price  move 
ments  which  discourage  capital 
substitution  for  labour  and  sus 
tain  the  moderate  growth  level 
of  real  wages.  This  would  be 
helped  if  any  margins  of  ma 
noeuvre  which 
governments 
acquire  from  growth  are  used  to 
reduce  non-wage  labour  costs, 
in  particular  by  lowering  direct 
taxes, 
than  providing 
subsidies  which  encourage  the 
use  of capital  (See  Graph  46). 

rather 

•  Actions  to  ensure  that  sectoral 
change,  especially  the  growth  of 
services,  is  not  inhibited  by  re 
strictive 
price 
practices 
distortions.  At  the  moment,  ac 

or 

tivities  remain  highly  regulated 
in  some  service  sectors,  (e.g.  fin 
ance,  insurance,  transport  and 
telecommunication) 
and  may 
not  be  able  to  expand  to  their 
full  potential  because  of  these 
restrictions.  The  Community's 
implementation  of  the  Internal 
Market  programme  addresses 
and 
many 
should  provide  a  new  impetus 
to 
regulatory 
framework. 

reforming 

issues 

these 

the 

of 

stock 

The  strategy  of  enhancing  the 
employment  content  of the  capi 
tal 
economic 
and  of 
growth  by  forms  of  shift  work 
in 
ing 
individual  working  time  which 
expand  of  operating  hours  of 
equipment.  When  capacity  utili 
at 
sation 

is  very  high,  as 

reductions 

linked 

to 

present,  an  expansion  of  opera 
ting  hours  would  contribute  to 
the  growth  of  production  poten 
tial  and  provide  more  jobs  with 
the  given  capital  stock. 
The 
employment  effect  would  be 
strongest  when  the  resulting  re 
ductions 
in  unit  capital  costs 
were  used  to  negotiate  reduc 
individual  working 
tions 
time. 

in 

These  policies would  contribute  to  a 
more employment intensive  pattern 
of  economic  growth  in  the  Com 
munity.  However,  such  structural 
changes  take  time  to  have  their  ef 
t h e ir  a c c e p t a n ce  a nd 
fect  a nd 
smooth  implementation  is  at  least 
p a r t ly  d e p e n d e nt  on  t he  Com 
munity  continuing  to  achieve  high 
overall  rates  of economic  growth. 

46 

Real  Wages  a nd  Labour  Productivity  in  the 
Community 

1965-1989 

Annual  %  Change 

Real  Wages 

1965 

1970 

1975 

1980 

1985 

1990 

55 

Chapter 4 The Employment Content of Growth 

Economic Developments in t he Community in t he 1980s. 

47 GDP and Productivity Growth in the 

Community 1981-1989 

48 GDP Growth and the Role of 

Investment in the Community 

1981-1989 

Annual % Change 

GDP Β Productivity 

Annual % Change 

GDP 

■ Investment - Construction 
Q Investment - Equipment 

ir ! ■ 

-

m 

! 1 1 

1381 1982 1983 1984 1985 198Θ 1987 1988 1989 

49 Consumer Price Inflation and its 

Determinants in the Community 

50 Government Borrowing and the Trade 

Balance in the Community 

1981-1989 

1981-1989 

Annual % Change 

-' 

■ Labour Costs 
□ Imports (goods and services} 

—— Consumer Prices 

1 I 

- Gove'nmant Borrowing 

Trade Balance 

1 1 1 1 1 

1 1 1 

1982 1983 1984 1986 198Θ 1987 1988 

2 I I I I I L 

1982 1983 1984 1985 1986 1987 '988 1989 

56-

Chapter  5  Sectoral  Employment  Impact  of  1992 

Chapter  5  Sectoral  Employment  Impact  of  1992 

The  opportunities  and  challenges  unleashed  by  the 
completion  of  the  Internal  Market  are  multiple.  What  can  we 
currently  predict  about  its  effects  on  employment 
particular  sectors  and  areas  of  the  Community? 

in 

Introduction 

The completion  of the Internal  Mar­
ket  by  1992  has  already  begun  to 
give  an  impetus  to  growth  and  em­
t he 
ployment 
in 
c r e a t i on 
Community.  By  removing 
t r a de 
barriers and exploiting economies of 
scale,  it  stands  to  strengthen  com­
e m p l o y m e nt 
p e t i t i v e n e ss  a nd 
growth.  It  should  provide  a  margin 
of  manoeuvre  for  the  creation  of 
s e l f - s u s t a i n ed 
b a l a n c ed 
growth,  especially  when  supported 
by related  policies  in  such  areas  as 
research  and  technology,  environ­
ment  and  competition.  While  the 
overall  impact  will  be  positive  for 
employment,  the  free  movement  of 
goods,  services,  labour  and  capi­
tal that the Internal  Market  implies 
could lead to a considerable  restruc­
turing  of  the  European  economy 
and  labour  market. 

a nd 

These effects  will have  an  impact  on 
a  Community  already  undergoing 
major  structural  transformation  as 
a  result  of  changes  in  the  world 
economy (as discussed in Chapter  3) 
and  of  other  changes  taking  place 
internally  -  notably  the  continuing 
growth  of the  service  economy. 

The  overall  macroeconomic  envi­
a 
r o n m e nt 

d e t e r m i n e s, 

to 

considerable  extent,  the  ease  and 
s t r u c t u r al 
s p e ed  w i th  w h i ch 
the 
changes  are  absorbed.  Thus 
ability of the  Community  to  achieve 
and  maintain  higher  rates  of  econ­
in 
omic  growth  is  a  key  factor 

ensuring t h at  the economic  benefits 
of  1992  are  translated  into  employ­
ment  gains. 

Other  policies  can  also  assist.  For 
example,  the  completion  of  the  In-

51 

S h a r es  of  Intra-  a nd  Extra-Community  Trade 
1960-1987 
as  a  % of  GDP  - EUR12 

%  GDP 

30 

ntra-Community  Trade 

Π  Extra-Community  Trade 

1960 

1965 

1970 

1975 

1980 

1985 

57 

Chapter  5  Sectoral  Employment  Impact  of  1992 

52 

Interdependence: Intra- and  Extra-
Community Trade  as a % of GDP 

1960 

%  GDP 

50 

Intra-trade 
EC  Intra-trade 

D  Extra-trade 
-  EC  Extra-trade 

40 

30 

20 

10 

B/L 

IRL 

NL 

Ρ 

D 

DK 

F 

UK 

GR 

Ι 

E 

53 

Interdependence: Intra- and  Extra­
Community Trade  as a % of GDP 

1987 

50  %  G DP 

Intra-trade 
EC  Intra-trade 

03  Extra-trade 
-  EC  Extra-trade 

40 

30 

20 

10 

B/L 

IRL 

NL 

Ρ 

D 

DK 

F 

UK 

GR 

Ι 

E 

5 8-

50 

40 

30 

20 

10 

50 

40 

30 

20 

10 

ternal  Market  at  a  high  level  of  en­
vironment  protection  could  also 
provide  a  stimulus  to the  growth  of 
the  environmental  protection  in­
dustry  which  currently  provides 
employment  for  more  than  1.5  mil­
lion  people,  a  number  which  could 
double  by the  end  of the  century. 

Community 
Economic 
Interdependence 

The  Community  is characterised  by 
a  high  degree  of  economic  interde­
pendence,  with  a large  and  growing 
level  of trade  between  the  Member 
States.  In  1960,  Community  trade 
b e t w e en  M e m b er  S t a t es  repre­
sented  only  40%  of  total  trade.  By 
the  mid-1960s,  when  the  original 
c u s t o ms  u n i on  was  completed, 
intra-Community  trade  equalled 
extra-Community  trade  in  value. 
Today  it  represents  60%  of  Com­
munity  trade  (Graph  51). 

For  some Member  States  this  inter­
dependence  is  even  greater:  for  the 
three Benelux countries  and for  Ire­
l a n d, 
t r a de 
i n t r a - C o m m u n i ty 
represents  over  70%  of  total  trade 
and  more  than  one-third  of  GDP 
(Graphs  52  and  53). 

However,  the  growth  of  intra-Com­
munity  trade  has  slowed  somewhat 
since  1973  as  a  result  of  non-tariff 
b a r r i e rs  and  the  small  share  of 
Community  production  in  growth 
sectors. The completion  of the  Inter­
nal  Market  is  expected  to  have  a 
positive  effect  with  respect  to  both 
these  factors. 

Structural  Shifts  in 
Employment 

The completion  of the Internal  Mar­
ket  will  impact  on  a  Community 

already experiencing major  changes 
in  the  structure  of  its  employment 
(see  Graph  54).  Agricultural  em 
ployment  has  continued  to  decline, 
now  representing  less  than  8%  of 
jobs  in  the  Community.  Employ 
ment  in  industry  declined  sharply 
in the  period  after  the  first  oil  shock 
in  1973-74,  although  it  has  picked 
up  in  recent  years.  Manufacturing 
employment  is  expected  to  main 
tain  the  slow  rate  of  growth  begun 
in  1988 after  many  years  of decline. 
It  now  seems  that  the  substitution 
of capital for labour in the  manufac 
turing sector is slowing down  as  the 
availability  of labour  has  increased 
and  its  cost has  declined  (see  Chap 
ter 4). 

The  major  growth  area  for  employ 
ment  continues  to  be  the  service 
sector  which  now  accounts  for  over 
60%  of  total  number  employed  in 
the  Community.  Part  of the  appar 
ent  job  creation  in  services  is  a 
result  of  a  shift  in  activities  from 
manufacturing  to  services  through 
the  contracting  out  service  work 
previously  u n d e r t a k en 
in-house 
(see  Chapter  6).  This  exaggerates 
both  the  decline  in  manufacturing 
employment  and  the  rise  in  service 
employment.  Nevertheless,  there  is 
no  reason  to  expect  a  slowdown  in 
the  increase  in  employment  in  ser 
vices in  the  immediate  future. 

1992 - The  Impact  on 
Employment 

The  impact  of  1992  on  employment 
will not be felt  evenly. There  will  be 
an  overall,  positive,  effect  in  the 
long-run  but  there  will be  disparate 
effects  on  different  sectors,  indus 
t he 
tries  a nd 
structure  of  employment  within 
them. 

r e g i o ns  a nd  on 

It is obviously  impossible  to  foresee 
all  the  possible  changes  that  1992 

Chapter  5  Sectoral  Employment  Impact  of  1992 

will  bring  or  to  predict  the  particu 
lar  effects  it  will  have  on  specific 
narrowly  defined  sectors  or  individ 
u al  firms.  A  g r e at  deal  of  t he 
analysis  that  is  underway  remains 
to be completed. Moreover,  forecast 
ing  e x e r c i s es  of  t h is  k i nd  a re 
hazardous. Nevertheless,  some  pre 
l i m i n a ry 
b e en 
completed  and  this  chapter  exploits 
this  initial  work  in  order  to  provide 
a  first  assessment  of  the  possible 
impact  of  1992  on  employment  (see 
Box  on  1992  monitoring). 

s t u d i es 

h a ve 

One  reason  for  the  difficulty  in  as 
sessing  the  impact  of  1992  is  the 
complexity  of  the  different  pro 
cesses  involved.  The  abolition  of 
frontiers  will  encourage  the  exploi 
tation  of  economies  of  scale  in  the 
search  for  greater  competitiveness, 
affecting  both  the  structure  of  in 
dustry  and  of employment.  Greater 
efficiency  will  in  t u rn  reduce  costs 

and  prices  and  increase  demand 
and  production,  which  will  in  turn 
induce  additional  growth. 

The  effect  on  different  sectors  will 
depend  on  the  extent  to  which  they 
previously  enjoyed  protection  and 
on  the  realisation  of potential  econ 
omies  of  scale  through  merger  and 
a  reduction  in  the  number  of  estab 
lishments. The abolition  of  frontiers 
will  increase  competition  between 
producers  in  different  countries,  ac 
celerating  adjustments  in  certain 
sectors.  It  will  also  offer  oppor 
tunities  to build  on  the  strengths  of 
particular  localities: those  with,  for 
example,  good communications  and 
a  reserve  of  highly-skilled  workers 
will  be  in  a  good  position  to  move 
into  new  markets  after  1992,  thus 
bringing  about  shifts  in  the  struc 
ture  of  production. 

54 

Change  in  Sectoral  Employment  in  the 
Member  States 

1974-1987 

Millions 

Agricultura 

Industry 

Services 

- 5 9-

Chapter  5  Sectoral  Employment  Impact  of  1992 

These  likely  developments  are  not 
necessai'ily  all  desirable.  Concern 
has  already  been  expressed  that  ef 
forts  m u st  be  m a de 
to  avoid 
allowing  the  1992 process  to  aggra 
i m b a l a n c e s.  The 
v a te  r e g i o n al 
Community  comprises  regions  at 
very  different  levels of economic de 
velopment  and  while  the  backward 
regions have  very  competitive  wage 
levels,  they  mostly  lack  good  infra 
s t r u c t u re  a nd  c o m m u n i c a t i o n s. 
There  is  a  balance  to  be  struck.  On 
the  one  hand,  concerns  have  been 
expressed  t h at  the  more  peripheral 
regions would lose out against  more 
central areas in the Community.  On 
the  other  hand,  the  northern  coun 
tries  fear  that  competition  from  the 
south  will  bring  pressure  on  their 
higher social standards  and risk 'so 
cial  dumping'. 

completion  of  the  Internal  Market 
will  have  substantial  beneficial  ef 
fects  on  employment  levels  in  both 
the  medium  and  long  terms.  How 
ever, the  immediate  impact  is  more 
uncertain  and depends in  particular 
on  the  extent  to  which  economic 
growth  takes  up  the  slack  achieved 
from  the  increased  productivity  re 
sulting from  rationalisation. 

announced  in  the  Internal  Market 
White Paper  would be  implemented 
simultaneously.  In  practice,  im 
plementation  is  likely  to  be  more 
g r a d u a l,  with 
t he  e m p l o y m e nt 
changes  spread  over  time  and  the 
J-curve  effect  therefore  much  less 
pronounced  (Graph  55).  In  both 
cases, the  eventual  net job  creation 
is the  same. 

It has been suggested  that the  trend 
in employment  would  take  the  form 
of  a  "J-curve",  with  employment 
losses  in  the  first  year  being  off-set 
by  employment  gains  from  the  sec 
ond  year  onwards.  The  net  effect 
has  been  estimated  at  1.5%  of  em 
p l o y m e nt  or  at  l e a st  2  million 
potential  new  jobs  in  the  medium-
term. 

This  J-curve  effect,  even  in  its  flat 
ter form,  is enhanced  by the  current 
high  rate  of  output  growth  in  the 
Community,  as  enterprises  react  in 
anticipation  of the completion  of the 
Internal  Market.  This  anticipation 
is  taking  the  form  of higher  domes 
tic  and  foreign  investment  and  an 
increase  in  the  number  of  mergers 
and  concentrations. 

Estimates  by  the  Commission  ser 
t he 
vices  h a ve  s u g g e s t ed 

t h at 

These  first  estimates  of the  employ 
ment  effect  were based, however, on 
an  assumption  that  all  measures 

55 

Effect  of the  Internal  Market  on  Employment 
Alternative  Scenarios 

Millions  Employed 

While the  exact  employment  effects 
of the  Internal  Market  will  depend 
on the  outcome  of a large number  of 
inter-dependent factors, the  various 
alternative  calculations made  so  far 
all show positive  employment  bene 
fits. 

Some Sectors  more 
'Sensitive'  than 
Others 

The  overall job creation  potential  of 
the  Internal  Market  will  be  dis 
tributed  across  a  variety  of  sectors 
of  activity. 

However,  while  it  is estimated  that 
all  sectors  will  be  affected  by  1992, 
the  greatest  impact  is  likely  to  be 
felt in those currently  characterised 
by low market  penetration  and  high 
non-tariff  barriers.  Three  broad  ca 
tegories  are  considered: 

• 

Industrial  sectors  'sensitive'  to 
the  1992  changes 

1988 

1989 

1990 

1991 

1992 

1993 

1994 

1995 

60 

Chapter  5  Sectoral  Employment  Impact  of  1992 

strategic  effects,  principally  the 
result  of  changes  in  the  beha 
viour  of 
the 
expansion  of  European  trade  or 
global  trade. 

linked 

firms 

to 

The completion  of the  Internal  Mar 
ket  essentially  involves  a  process  of 
provoking  changes  in  behaviour. 
The Internal  Market  will reveal  the 
strengths  and  weaknesses  of  each 
sector  in  the  international  competi 
tion  environment  and  accentuate 
the  changes  already  under  way. 

One  of  the  principal  factors  deter 
mining  the  sensitivity  of  industrial 
sectors is the  character  of  non-tariff 
barriers.  On  the  basis  of a  survey  of 
11,000  European  firms,  industrial 
sectors  (broken  down  into  20  areas 
of activity ) were classified  according 

to  the  overall  impact  of  non-tariff 
b a r r i e r s.  The  box  indicates  how 
these  issues  were  seen  by the  firms 
who  were  interviewed. 

The  current  dispersion  of  prices  in 
different  parts  of  the  Community, 
the  scope for  economies  of scale,  the 
degree of concentration  and the  pre 
vailing  and  p o t e n t i al  e x t e nt  of 
i n t e r n a t i o n a l i s a t i on  a re  o t h er 
determinants  of the  impact  of  1992 
on  different  sectors. 

The  analysis  of  sensitive  sectors 
which  follows  is  exploratory,  and  is 
intended  to give an  overall  impress 
ion.  In  practice,  t he  impact  on 
individual  sectors  may  vary  be 
tween  Member  States  and  may  be 
influenced  by  off-setting  effects  of 
the  strategies  of  enterprises. 

• 

Industrial 
'non-sensitive' 
changes 

sectors 
to 

relatively 
1992 

the 

• 

• 

the  Service  sector. 

'Sensitive'  Industrial 
Sectors 

Sensitive  sectors  are those in  which 
the completion  of the  Internal  Mar 
ket  could be  significant. 

Changes  will  arise  as  a  result  of  a 
series of effects  which  can  be  classi 
fied into three  groups: 

•  direct  and  indirect  effects  of  the 
White 
measures, 
Paper 
whether  they  apply  specifically 
to  certain  sectors  or  to  all  sec 
tors 

induced  effects 
from 
changes  in  relative  prices,  mar 
ket  shares  or  overall  demand 

arising 

The Importance  of Non-Tariff  B a r r i e rs  as seen  by 
Business 

The removal of non-tariff barriers in the Community market will  affect 
sectors  differently.  A Community-wide  survey of 11.000  firms  identi 
fied  a series  of barriers  to trade  in different  sectors: 

1  Technical  standards  and  regulations: plastics,  non-metal 

minerals,chemicals,  mechanical  engineering,motor  vehicles 

2  Administrative  barriers: textiles, clothing,  paper,  metals,  rubber, 

food 

3  Frontier  formalities:  wood,  leather,  man-made  fibres 

4  Freight  transport  regulations:  metals,  oil products,  paper 

5  Value-added  tax  differences:  motor  vehicles, clothing,  leather 

6  Capital  market  controls: computers,  textiles 

7  Government  procurement  restrictions:  electrical  engineering, 

transport  equipment,  computers 

61 

Chapter  5  Sectoral  Employment  Impact  of  1992 

40  sectors,  representing  50%  of  industry  by  value-added 
the  Community,  have  been  identified  as  particularly 
"sensitive"  to  the  impact  of  1992  by  the  Commissions 
Directorate-General 
These  sectors  have  been  classified 

for  Economic  and  Financial  Affairs. 
into  four  broad  groups. 

in 

Group  1 

E c o n o m ic  Characteristics: 

High  non-tariff  barriers  (public  procurement  and  standards) 

High intra-EC  import  penetration  rates  and  high  degree of 
openness to third  countries 

Little price  disparity 

Strong growth in  demand 

High technology  content 

Moderate  or substantial  economies of scale 

High  degree  of  concentration 

Relatively  poor productivity  of European  firms  compared  with 
American  or Japanese  competitors 

E m p l o y m e nt  Indicators: 

Employment 
as  % of total 
manufacturing 
Employment 

1975-83 

Annual  Change  wage  costs 
1983-86  per  person 
(1,000  ECU) 

Group  1 

330  Computers 

344  Telecom equipment 

372  Medical equipment 

1.3 

4.2 

0.5 

-1.2 

-0.4 

10.5 

4.1 

2.4 

2.5 

28.7 

21.1 

19.2 

The  computer,  office-equipment  and  medical  equipment  industries 
are  currently  experiencing  a rise in  employment. 

Telecommunications  equipment  suffered  falling  employment  over 
many  years  as  the  introduction  of electronic  and  digital  technology 
led to continued increases in productivity. In recent years, these losses 
have been reversed  and  employment  is expected to remain  relatively 
stable  in  the medium  term. 

Effects  of  the  Internal  Market: 

Restructuring 

Cooperation  (on Research  & Development) 

Improved  competitiveness  at  world  level 

Internal market provides opportunity to become a force at world level. 

62 

Group  1 :  Competitively 
Weak  Industries 

For  the  high  technology  industries 
with  growing demand,  such  as  com 
puters,  office  equipment,  medical 
a nd  t e l e c o m m u n i c a t i o ns  equip 
ment, the Internal  Market  offers  an 
opportunity  to regain  ground  lost  to 
Japanese  and  American  competi 
tors.  In  these  industries,  Japanese 
and US  firms  currently have a  large 
productivity  advantage  over  their 
European  counterparts  because  of 
the  considerable  economies  of  scale 
they  are  able  to  realise.  These  are 
truly global markets, in terms of the 
homogeneity  of  consumer  demand 
t h r o u g h o ut 
i n d u s t r i a l i s ed 
world,  the  nature  of  the  players  in 
the market  and the universal  role of 
technology. 

t he 

in 

in  R&D  s i n c e, 

The  opening-up  of  the  Community 
market  could  be  an  opportunity  for 
European  firms  to lower  their  costs 
by greater exploitation  of economies 
of scale, often  through  merger.  This 
will  strengthen  their  ability  to  in 
t h e se 
v e st 
industries,  companies  need  to be  of 
a  certain  minimum  size  in  order  to 
finance  product  development.  The 
Single  Market  could  also  improve 
the industries' performance  in  pion 
e e r i ng 
i n n o v a t i o n,  by  m a k i ng 
research  staff  more mobile, increas 
ing  the  speed  of  take-up  of  new 
technologies,  and  encouraging  co 
operation  between  firms.  Thus,  the 
Single  Market  is an  opportunity  for 
these  industries  to  become  world, 
rather  than  local,  players. 

Group 2 Industries 
Facing  Rationalisation 

The  potential  for  restructuring  is 
high  in  sectors  where  trade  is  pres 
ently  limited  and  where  there  are 
many  European  producers  relative 
to the  size  of the  market  as  in  rail 
way equipment  and  boilermakers. 

t e r m, 

For  railway  equipment  and  boiler-
making  the  impact  of  the  Internal 
Market  could  be  considerable.  In 
the  s h o r t - t o - m e d i um 
the 
freeing  of  restrictions  on  govern 
ment  procurement  could  provide  a 
boost to  the  most  competitive  Com 
munity  suppliers  and  lead  to  an 
increase  in  i n t r a - EC  t r a de  and 
lower  prices.  The  change  in  public 
purchasing  behaviour  could  set  off 
major  rationalisation  in  these  in 
d u s t r i es  as  p r o d u c e rs  seek 
to 
establish  production  facilities  of op 
timum  size  to  serve  an  integrated 
EC  market. 

In the drinks industry, some  further 
concentrations  could  occur,  conti 
nuing a strategic  process  which  has 
been under  way  for  some  time. 

Changes in approval procedures  are 
likely to cause  changes  in  the  phar 
maceutical industry in future  years. 

to 

t he 

forsee 

Alliances  between  European  firms 
are  already  proliferating.  It  is  diffi 
cult 
exact 
consequences  of this, but the  ration 
a l i s a t i on 
see 
p r o c e ss 
m e d i u m - s i z e d,  n o n - s p e c i a l i s ed 
firms  disappear,  leaving  fewer  but 
larger  integrated  groups  operating 
on a  European  scale. 

could 

Chapter  5  Sectoral  Employment  Impact  of  1992 

Group 2 

E c o n o m ic  Characteristics: 

High  non-tariff  barriers  (public procurement  for  sectors 315  and 
362  and  standards  for  sectors  257, 425 - 8) 
Rather  low intra-EC  import  penetration  rates  and  little  openness  to 
third  countries 
Wide price  dispersion 
High  degree  of  concentration 
Substantial  economies of scale 

E m p l o y m e nt  Indicators: 

Employment 
as  % of total 
manufacturing 
Employment 

1975-83 

Annual  Change  wage  costs 
1983-86  per  person 
(1,000  ECU) 

Group  2 

257  Pharmaceuticals 
315  Boilermaking 
362  Railway  equipment 
425  Drinks 
427  Drinks 
428  Drinks 

1.6 
1.1 
0.4 
0.1 
0.6 
0.3 

-0.4 
-2.6 
-2.4 
-1.2 
-4.3 
-2.34 

-1.2 
-2.3 
-9.7 
-4.7 
-8.2 
-4.8 

25.8 
20.7 
20.0 
23.6 
24.9 
21.3 

The  pharmaceutical  industry  has  a  workforce  of  approximatively 
300.000  and  overall  employment  was  relatively  stable  but  there  has 
been  a  slight  drop  in  recent  years.  However,  if indirect  employment 
generated  upstream  and  downstream  is  taken  into  account,  the  in 
dustry  provides  employment  for  a  total  of  1.2  million  people 
throughout  the  EC. 

In boilermaking,  a significant  fall  in employment  of around  2.4% per 
year  over the  period  1975-86 has  accompanied  a slight fall  in  output. 
The decline is partly caused by a stagnation  in investment within  the 
Community  Internal  Market  and  the  arrival  of  more  competitive 
imports.  Employment  levels  have  also  been  affected  by  the  appear 
ance of new techniques  and  higher  skill  requirements. 

The employment  situation in railway equipment  has changed  greatly 
over the last few years. As in some other sectors, there  are close  links 
between  jobs  and  orders  on  the  one  hand  and  investments  to  boost 
productivity  on the  other. 

In  drinks  there  is a trend  towards  concentration  with  the  number  of 
producers  decreasing. 

Effects  of  the  Internal  Market: 

Growth  in  intra-EC  trade 
Restructuring  (boilermaking and locomotive  industries) 
Technical  efficiency  gains 
Narrowing  of price  disparities 

Impact of the internal  market  likely to be most marked  in this group, 
but  adjustments  will occur  at  different  rates. 

63 

Group 3 Industries 
Liable To Some 
Rationalisation 

In  a  rather  disparate  group  of  in 
dustries,  including  shipbuilding, 
electrical equipment, pasta and cho 
colate,  t h e re  is  some  scope  for 
efficiency  gains  from  rationalisa 
tion. 

In  some  of the  industries  (e.g.  ship 
building  and  electrical  equipment) 
imports  from  outside  the  EC  are 
s u b s t a n t i a l,  w i th  c o m p e t i t i on 
mainly  from  newly  industrialising 
countries.  This  overseas  competi 
tion  explains  why  price  differences 
within  the  Community  are  low  des 
p i te 
i n t r a-
Community  trade  and  why the  bulk 
of  the  restructuring  has  already 
taken  place. 

level  of 

low 

t he 

While  technical  efficiency  gains 
could  certainly  still  occur,  they  are 
probably  less  than  those  to  be  ex 
pected  in the  industries  in  groups  1 
and  2.  In  the  agri-food 
industry, 
however,  the  wave  of  mergers  and 
acquisitions  now  taking  place  is  al 
most  certainly  a  strategic  response 
to the  prospect  of  1992. 

Chapter  5  Sectoral  Employment  Impact  of  1992 

Group  3 

Economic  Characteristics: 

Identical  to those of group 2 except that  price dispersion  is low (less 
than  10 %) and  extra-EC  trade  plays  a greater  role than  intra-EC 
trade in the  shipbuilding  and  electrical  engineering  industries. 

E m p l o y m e nt  Indicators: 

Employment 
as  % of total 
manufacturing 
Employment 

1975-83 

Annual  Change  wage  costs 
1983-86  per  person 
(1,000  ECU) 

Group  3 

341  Cables 

342  Electrical machinery 

361  Shipbuilding 

417  Pasta 

421  Chocolate 

0.4 

3.6 

1.0 

0.1 

0.7 

-0.6 

1.7 

4.7 

0.2 

3.4 

0.7 

-1.4 

-13.0 

-1.0 

-6.8 

19.4 

18.9 

20.6 

23.5 

20.2 

The production  of cable is essentially  a capital intensive  activity.  The 
pace  of technological  development  in both  the  cables  themselves  and 
the  methods  of producing  them  is  such  that  employment  is  likely  to 
fall  rather  than  rise. Changes  in employment  will be mainly  affected 
by strategic  effects  which would  have occured  in  any  case. 

The same applies to employment in shipbuilding which has fallen  with 
the  decline  in  activity.  Restructuring  has  gone  ahead  but  continued 
excess  capacity  in  the  Far  East  has  maintained  pressures  on  the 
European  industries. 

Effects  of  the  Internal  Market: 

Restructuring 
Technical  and  economic efficiency  gains but  less marked  than  those 
for  group 2 

Relative importance  of Community  external  trade  policy. 

64 

Chapter  5  Sectoral  Employment  Impact  of  1992 

Group  4  Industries 
Where  Distribution 
Networks  May  Change 

includes 
This  group  of  industries 
many basic consumer  goods  (radios, 
TV, household electrical  appliances, 
clothing,  shoes  and  toys)  and  a  few 
intermediate  and  investment  goods 
(motor vehicles,  machinery,  glass). 

Here  the  structure  of  production  is 
unlikely  to  alter  much  but  existing 
price differentials  provide  scope  for 
significant  changes  in  distribution 
systems.  If  such  d e v e l o p m e n ts 
occur,  the  major  beneficiaries  are 
likely to be  consumers. 

Examples  of  existing  administra 
tive barriers are frontier  formalities 
imposed  by  certain  Member  States 
on  products  imported  from 
third 
countries  but  which  enter  freely 
into  other  Member  States.  This  af 
fects major  areas  of consumer  goods 
such  as  radio,  television,  electrical 
appliances, clothing, shoes and toys. 

At the production level, there is like 
ly  to  be  a  move  towards  increased 
cooperation  b e t w e en  E u r o p e an 
firms  which  may  lead  to  technical 
efficiency  gains  in  some  industries. 
In the  motor  industry,  for  example, 
the  establishment  of  the  Single 
Market  could  allow  economies  of 
scale  to  be  reaped  through  produc 
tion agreements  between  European 
motor  groups.  At  the  same  time,  it 
could  intensify  competition  by  en 
ding  the  present  segmentation  of 
the EC market  due  to differences  in 
technical  regulations,  tax  rates  and 
manufacturers'  pricing  policies. 
These  production  effects,  should, 
however,  be  fairly  limited. 

Group  4 

E c o n o m ic  Characteristics: 

Moderate  non-tariff  barriers  (standards  and  administrative 
barriers) 
High import  penetration  rates 
Price  dispersion  above  10 % or 
Substantial  economies of scale 

E m p l o y m e nt  Indicators: 

Employment 
as  % of total 
manufacturing 
Employment 

1975-83 

Annual  Change  wage  costs 
1983-86  per  person 
(ECU) 

Group  4 

247 
248 
251 
256 
321 
322 
323 
324 
325 
326 
327 
345 
346 
347 
351 
364 
431 
432 
438 
451 
453 
455 
481 
491 
493 
494 

Glass 
Ceramics 
Industrial  chemicals 
Other  chemicals 
Agrie,  machinery 
Machine  tools 
Textile  machinery 
Food  machinery 
Mining  machinery 
Transmissions 
Wood  machinery 
Audiovisual 
Consumer  electricity 
Electric  lamps 
Motor  vehicles 
Aerospace 
Wool 
Cotton 
Carpets 
Footwear 
Clothing 
Household  textiles 
Rubber 
Jewellery 
Photography 
Toys 

1.0 
1.1 
3.0 
0.7 
0.8 
1.4 
0.5 
1.3 
1.9 
0.9 
0.8 
1.8 
1.0 
0.4 
6.3 
2.0 
0.7 
1.0 
0.2 
1.2 
3.5 
0.3 
1.6 
0.2 
0.2 
0.3 

-2.8 
-3.2 
-2.0 
-0.7 
0.1 
-4.3 
-8.1 
-2.4 
-2.2 
-6.8 
-2.0 
-3.2 
-3.4 
-4.2 
-1.5 
-0.1 
-6.4 
-5.7 
-3.2 
-1.7 
-4.1 
-2.3 
-2.3 
-2.6 
1.5 
-4.8 

-6.5 
-2.6 
-5.6 
-5.8 
-10.3 
-0.1 
0.2 
-1.1 
-3.3 
-2.6 
1.1 
-2.5 
-3.7 
3.1 
-1.9 
-0.7 
-5.4 
-9.1 
-10.4 
-6.6 
-5.2 
-1.7 
-5.7 
-8.4 
-2.8 
-5.1 

20.9 
17.4 
27.0 
24.0 
20.0 
21.1 
20.9 
22.4 
21.8 
20.5 
21.6 
19.8 
17.5 
18.3 
23.0 
25.1 
16.9 
16.7 
18.3 
14.4 
12.3 
13.3 
19.7 
17.4 
16.9 
15.5 

Effects  of  the  Internal  Market: 

Importance  of Community  external  trade  policy 

Sectors where "something is likely to happen", particularly  as a result 
of changed  distribution  networks. 

65 

Chapter  5  Sectoral  Employment  Impact  of  1992 

Relatively 
'Non-Sensitive' 
Industrial  Sectors 

Some 70 other industrial  sectors  are 
considered  to  be  relatively  "non-
sensitive"  to  the  Internal  Market. 
One group, including cement,  build 
ing  m a t e r i a ls  a nd  b a k i n g, 
is 
primarily  based  on national  or  even 
local  markets.  Physical  or  structu 
in 
ral  factors  may  inhibit  trade 
these  goods  rather  than  non-tariff 
barriers  which  tend,  in  any  case,  to 
be  weak  or  non-existent. 

A  number  of industries  where  non-
tariff  barriers  are  weak  are  already 
open  to  international  competition. 
Some,  such  as  steel  and  paper,  are 
suffering  from  strong  competition 
from 
t he  n e w l y - i n d u s t r i a l i s i ng 
countries  which  use  the  same  tech 
nology  but  have  lower  labour  costs. 
For  these  industries,  it  is  the  Com 
munity's trade policy as much as the 
Internal  Market,  which  will  deter 
mine  their  ability  to  face  up  to  this 
competition. 

In  industries  with  moderate  non-
tariff  barriers, high import  penetra 
tion  and  low  price  dispersion  the 
effect  of  the  Internal  Market  is  ex 
pected  to be  small. 

Service  Sectors 

The  sensitivity  of service  sectors  to 
the  Internal  Market  depends  on  a 
different  set  of  criteria  from  those 
applicable  to manufacturing  indus 
try. Some of the factors  involved  are 
the  degree  to  which  the  service  is 
already  traded  between  countries, 
the  extent  to  which  they  have  been 
"externalised",  the  number  of  wor 
k e rs  and  t h e ir  skill  level,  a nd 
productivity  and  cost  levels. 

Employment  in insurance  is  around 
1  million,  or  0.8%  of  total  employ 
m e nt 
service 
1.3% 
employment. 

a nd 

of 

The  world-wide  nature  and  open 
n e ss  of  t h e se 
i n d u s t r i es  a n d, 
particularly  in  non-regulated  acti 
vities,  t he  i n t r o d u c t i on  of  new 
to 
technologies  make  it  difficult 
quantify  the  effect  of  the  Internal 
Market,  but  a  number  of  factors 
likely  to  influence  the  level  of  em 
ployment  can  be  identified. 

One  large  group  of  sectors,  repre 
senting  15%  of  total  value-added 
and  over  half  of  market  services, 
could  be  particularly  sensitive  to 
the  opening  of  frontiers  insofar  as 
existing  regulations,  or  lack  of  har 
n a t i o n al 
m o n i s a t i o n,  p r o t e ct 
markets.  These  are  the 
financial 
services, business services, telecom 
m u n i c a t i o ns 
t r a n s p o rt 
industries. 

a nd 

The  level  of activity  and  the  rate  of 
introduction  of new  services  are  im 
portant  in  this  regard:  all  banks 
which  foresee  increased  activity  ex 
pect  their  work-forces  to  grow.  The 
potential  loss  of  jobs  through  the 
productivity gains made  possible by 
computerisation  is  substantial  but 
this  could,  equally,  be  compensated 
by an  expansion  of labour  intensive 
specialised  services. 

Financial  Services: 
Banks and  Insurance 

in 

in 

b a n k i ng 

There  are  2.3  million  people  em 
ployed 
t he 
Community,  representing  1.9%  of 
total  employment  and  3.2%  of  the 
market  service  sector.  The  increase 
in  employment  between  1975  and 
1985 was  420,000,  a  rise  of  22.5%. 

Transport 

Around  3.8  million  people  work  in 
the transport  sector, 3% of total  em 
ployment  and  5.2%  of  employment 
in  services. 

l i b e r a l i s a t i on 

The employment effects  are likely to 
vary between  the  different  modes of 
transport  (road,  rail,  air,  sea,  river) 
in  line  with  existing  disparities. 
Freedom  to  set  up  in  national  and 
international  markets  and  the  har 
m o n i s ed 
of 
international  road  transport  could 
have  a  significant  effect  on  employ 
ment  through  the  restructuring  of 
supply,  an  intensification  of compe 
t i t i on  a nd  a  s t r e n g t h e n i ng  of 
inter-firm  cooperation.  Whether 
employment  will  increase  or  de 
crease  as  a  result  is hard  to  predict 

Close  scrutiny  of  the  operation  of 
the market, particularly road  trans 
port,  may  be  needed  in  order  to 

EC  Telecom  Services 

Employment  in  000's 

Network  operators 

Subsidiaries  & competitors 

New telematic  firms 

EC  end  users 

Total 

1980 

919 

490 

1,418 

1987 

1992 

924 

32 

41 

513 

1,510 

921 

45 

63 

527 

1,556 

-66 

Chapter 5 Sectoral Employment Impact of 1992 

ensure that Community regulations 
on social and technical issues are 
respected in the new more competi­
tive atmosphere. 

Telecommunications 

Telecommunications play an in­
creasingly m a j or role in t he 
competitiveness of the European 
economy and the sector has enor­
mous potential for further growth. 

Diversification and an enhanced 
role for the private sector have 
major implications for future em­
ployment, which will be affected in 
particular, by the growth of tele­
c o m m u n i c a t i on traffic, n ew 
services, increased productivity 
from new technology, and regula­
tory changes (see box opposite). 

The implementation of the propo­
sals in the Internal Market White 
Paper and in the Telecommunica­
tions Green Paper on harmonised 
standards for telecommunications 
and the opening up of public pur­
chases will h a ve an i m p o r t a nt 
impact. 

Sectoral Forecasts 

Taking into account the existing 
trends as well as the likely effects of 
the Internal Market, it is possible to 
make a tentative forecast of future 
output growth in certain industrial 
and service sectors. 

Graph 56 shows that overall growth 
in the Community is expected to 
increase in the short term and will 
be based on the stronger perfor­
mance of certain sectors, reinforced 
by the completion of the Internal 
Market. Half the 20 sectors ana­
lysed a re e x p e c t ed to a c h i e ve 
growth rates equal or superior to 
their current performance. 

The Regional Impact 
of 1992 

Regional disparities in the Com­
munity have increased since 1973, 
reversing the trend towards conver­
gence t h at was a p p a r e nt in the 
1950s and 1960s. 

Measures to complete the Internal 
Market will have a regional impact. 
To the extent that 1992 improves 
the economic climate and stimu­
lates growth, it provides one of the 
necessary conditions to restart the 
process of convergence between re­
gions. However, e v a l u a t i ng t he 
specific regional distribution of the 
effects of 1992 is clearly extremely 
difficult at this stage. The conse­
quences for particular regions will 
depend on the extent to which their 
existing structure of economic activ­
ity and employment is sensitive to 

56 

Sectoral Output Growth 1979 ­1987 and 
Forecasts 1987 ­ 1993 in t he Community 

■ 1 9 8 7 - 93 
Π 1 9 7 9 - 87 

Business Services 

S e c t or 

This sector covers a wide range of 
activities ranging from advertising 
and public relations to cleaning and 
security, travel services and R & D. 

It h as e x p e r i e n c ed very r a p id 
growth due both to the contracting 
out of previously in­house activities 
from the manufacturing sector and 
a growth in demand. It now employs 
over 4 million people. The abolition 
of non­tariff barriers (recognition of 
qualifications, technical standards, 
and opening­up of public markets) 
offers scope for expansion in all of 
these activities, particularly for me­
dium­sized enterprises. 

Coal 

Oil & Gas 

Housing 

Steel 

Textiles 

Cars 

Food 

Trans Ser 

Men Too s 

Electr'y 

Plastics 

Cons Elee 

Pharm'ls 

Tel Equip 

Aerospace 

Tel. Serv 

Audio-Vis 

Semicond 

OP Fquip 

DP. Serv 

10 
% G r o w th 

15 

20 

2 Γ) 

67-

Chapter  5  Sectoral  Employment  Impact  of  1992 

Factors Influencing  the Location  of  Firms 

Market  potential 
° 
°  potential  for  economies  of scale ; 

local market  demand,  growth  potential ; 

Macro-economic  context / economic  policy 
•  growth  rate  of the  economy, its  capacity  to absorb  shocks; 
•  exchange rates, credit rates, taxation  (income/company  taxes); 
° 
o  commercial  policy: import  constraints, non-tariff  barriers. 

industrial  policy: R & D,  subsidies, energy  policy; 

Labour  market 
• 
labour  costs; 
•  qualification  of the  Work-Force; 
° 
" 

labour  market  legislation: working-time, redundancy  legislation; 
social climate: industrial relations, flexibility, trade union activity. 

Geographical  situation 
•  proximity  of clients,  suppliers; 
• 

transport  costs (and  communications). 

Infrastructure 
•  energy  costs (electricity,  gas, water); 
• 
»  services  (banks, insurance, ...); 
0  educational  institutions  (universities, research  institutions, etc.). 

industrial  sites (costs and  expansion  potential); 

Type  of  activity 
°  product  life-cycle; 
labour  intensity. 
» 

O t h er  factors 
• 
0  quality  of living  environment 

social, cultural  and  language  factors 

1992,  and  the  capacity  of  both  the 
private and public sectors to react to 
the  changes  that  occur. 

These  effects  are  both  complex  and 
uncertain.  In  certain  sectors,  acti 
vities  may  be  displaced  to  other 
t h e se  effects 
regions,  a l t h o u gh 
could  be  counter-balanced  by  other 
movements.  In  general,  the  Inter 
nal  Market  can  be  expected  to  lead 
to  greater  specialisation  and  con 
centration of export-based  activities 

in  areas  of  "greater  economic  ad 
vantage"  because  it  may  be  easier 
and  more  cost-effective  to  serve  the 
Single  Market  from  fewer  sites. 
However,  companies'  location  deci 
sions  will  be  based  on  a  complex  of 
factors  (see  Box) which  will  include 
infrastructure,  geographical  loca 
tion  and  product  market  potential 
as  well  as  labour  market  factors 
such  as  training  facilities  and  skill 
levels. 

- 68 

Assessing the  regional  impact  is ex 
tremely  difficult,  therefore.  Hence 
the  Commission  is  undertaking  ex 
tensive  research  into  these  issues 
including  the  potential  effects  of 
Community  support from the  Struc 
t u r al  F u n ds  a nd 
t he 
Community's  borrowing  and  lend 
ing  i n s t r u m e n ts  (see  Box:  1992 
monitoring). 

t h r o u gh 

"Social Dumping"  in 
the  Internal  Market -
Fact  or Fiction  ? 

Since  the  creation  of  the  Internal 
Market  will accentuate  competition 
across  the  Community,  any  signifi 
c a nt  differences 
in  w o r k i ng 
conditions  -  wages,  levels  of  social 
protection,  social  benefits,  etc. - be 
tween the Member States raises  the 
possibility  t h at  such  differences 
could  distort  competition  and  give 
rise to concerns of "social  dumping". 

"Social  dumping",  in  these  terms, 
can  be  defined  as  the  use  of  low 
levels of working  conditions  and  so 
cial  standards  -  below  that  which 
the  productivity  of  the  economy 
would  normally justify  - to  improve 
m a r k et  shares  and  competitive 
ness.  It  can  work  in  two  ways. 
C o m p a n i es 
in  M e m b er  S t a t es 
where working conditions are  signi 
ficantly  lower  than  elsewhere  may 
attempt  to  increase  their  market 
share  and  attract  investment,  dis 
placing  employment  from  regions 
with  higher  standards  of  working 
conditions. At the  same  time,  Mem 
ber  S t a t es  with  b e t t er  working 
conditions  could  come  under  press 
ure  to  reduce  them  or,  at  least,  not 
to continue  to make  improvements. 

to  a s s e ss 

While  there  is  not  sufficient  evi 
d e n ce 
t he  p o t e n t i al 
seriousness  of the  problem,  the  fac 
tors  which  might  give  rise  to  social 

dumping can be considered under 
three broad headings; 

• direct labour costs 

• health and safety 

• other aspects of working condi­

tions. 

Social Dumping a nd 
Labour Costs 

While the lower wage costs and 
cheaper social security systems of 
less­developed regions reflect a so­
cial disadvantage, they may also 
offer a comparative economic ad­
vantage. 

Differences in labour costs can be 
important in sectors where wages 
represent a significant proportion of 
total costs and in sectors which have 
previously been well protected and 
are suddenly exposed to competi­
tion by the Internal Market. 

However, the differences in wage 
costs per head between Member 
States also reflect different produc­
tivity levels, which, in general, 
offset part of the comparative ad­
vantage of low w a ge a r e a s. 
Graph 57 gives an indication of the 
difference between labour costs and 
unit labour costs in Community 
countries. Comparisons between 
costs in Member States are made 
difficult by variations in tax regimes 
and, on occasions, by exchange rate 
movements as well as by wider 
problems of measurement. 

Chapter 5 Sectoral Employment Impact of 1992 

Moreover, international competi­
tiveness does not depend only on 
wage costs. Other factors, such as 
product quality, reliable delivery 
and after­sales service are also im­
p o r t a n t. E q u a l l y, c o m p a ny 
decisions regarding the location of 
their production units depends on a 
variety of factors ranging from the 
availability of sub­contractors to the 
quality of financial and administra­
tive services. 

Social Dumping a nd 
Health a nd Safety at 
Work 

Health and safety conditions in the 
work place are factors which affect 
labour costs, albeit indirectly. Exist­
i ng wide d i s p a r i t i es could 
encourage social d u m p i n g. The 

Commission proposes to reinforce 
its activities in the field of supervi­
sion over health and safety at work 
on the basis of Article 118A of the 
EEC Treaty. 

Social Dumping a nd 
Working Conditions 

The completion of the Internal Mar­
ket, which includes the eventual 
development of a European wide la­
bour market, should lead to the 
improvements in the living and 
working conditions of workers as 
laid down in Article 117 of the EEC 
Treaty. If differences in working 
conditions between Member States 
are not to lead to distortions of com­
petition, then standards may need 
to be brought closer into line across 
the Community. 

57 Labour Costs a nd Unit Labour Costs in the 

Member States 1987 

40 

20 

-20 

-40 

-60 

-80 

Déviation from EC Average (%) 

Labour Costs 

Unit Labour Costs 

GR 

F NL D IRL UK Β DK L 

. 

69 

40 

20 

-20 

-40 

-60 

-80 

Chapter 5 Sectoral Employment Impact of 1992 

The Impact of 1992 on Men and Women 

Though women account for some 38% of the Community labour force, 
the proportion of employees in sensitive sectors who are women varies 
from less than 10% in heavy industries like shipbuilding to 75% in 
textiles (see graph 58). 

Whether the Internal Market will have any differential impact on the 
employment of women depends on a number of factors, notably 
whether current trends continue with regard to the following: 

• a high proportion (73%) of female employment is concentrated in 
the service sector. The expected growth in this sector is therefore 
likely to be beneficial to women. Indeed, 75% of newly created jobs 
in recent years have been for women; 

• temporary and part­time jobs are principally undertaken by 

women and increases in this type of employment should maintain 
present growth rates of female employment or even increase them; 

• on the other hand, female employment is concentrated in jobs 

requiring few qualifications. The Internal Market will stimulate 
competition and productivity,perhaps resulting in the substitution 
of capital for less qualified workers. At the same time, demand for 
less qualified female workers is likely to remain constant, or even 
increase, in services linked to social development (for example, 
domestic work and child care). 

58 Share of Female Employment in Sensitive 

Sectors 1986 

G r O Up 1 ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■1 Hi-Tech Eqiipmont 

| BoiorYRailwey Engríes 

G r O Up 2 ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■I Drinks 

= 

G r O Up 3 ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■! Pasta 

= 

■I Electrical Eqiicment 

Curs 

Plant» 

Maclthfl'y Manulactire 
■ ■I ChcmicelG 
■ ■ ■I Gloss 
■ ■ ■H Rubber 
■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■i Capots 

G r O Up 4 ■

■

■

■

■

■

■

■

■

■■ Ceramica 

■ ■ ■ ■ ■ ■ ¡ ■ HH ElftCtrical Goods/ E tictro nies 

■ Woolen & Canon 

I Jew Bile ry 
■ Pruno 

■ ■ ■ ■H Tens 
■ ■ ■ ■ Mi Shoes 

20 40 60 80 

Female Employment (%) 

70 

Chapter  5  Sectoral  Employment  Impact  of  1992 

1992  Monitoring 

The  Commission  and  other  Community  bodies,  particularly  the  Eu 
ropean  Parliament,  have  underlined  the  importance  of  observing 
employment  trends  and  changes  in  order  to  ensure  the  successful 
completion  of the  Internal  Market. 

The  task  of  observation  is  complex,  but  a  range  of  activities  have 
begun  or are  planned. 

The Commission's  initiatives  consist  of: 

•  Programmes  of analysis  and  research 

•  A European  employment  documentation  system 

Study  programmes 

Following on the study on the "Cost of Non-Europe" (Cecchini Report), 
more  than  sixty  studies  dealing  directly  or indirectly  with  the  social 
dimension  have been  launched  in various  Commission  departments. 
Many of these studies will be completed by the end of 1989. The results 
will afford  a clearer understanding of the mechanisms  and impacts of 
the completion  of the  internal  market  in the  social  and regional  field. 

For  example,  one  of  these  studies  will  provide  information  on  the 
position and strategy of the industrial sectors sensitive to 1992 in each 
country. 

These  studies  fall  into  three  categories: 

•  Studies  dealing with  regions. 

These  studies  examine  the  problems  of various  l'egions  of the 
Community  ranging  from  the traditional  industrial  regions to  the 
regions  of the  south  and  islands. 

•  Studies  dealing with  sectors. 

These  studies  examine  the  problems  of particular  sectors  such  as 
telecommunications,  transport  or  financial  services. They  also 
analyse  groups of sectors in  relation  to a common  theme,  such  as 
those  sectors  dependent  on public markets,  or the  position  and 
strategy  of sectors which  are 'sensitive' to the  completion  of the 
Internal  Market. 

•  Studies  on a particular  issue. 

These  studies  look  at  such  issues  as mergers  and  concentrations  of 
enterprises; regulations  governing working conditions;  women's 
employment; or employment  in  small  and  medium  sized 
enterprises.  Many  of these  studies  also have  a  sectoral  and/or 
regional  dimension. 

European  employment  documentation  system 

Before  the  end  of  1989, the  Commission  will have  set up  a  European 
employment  documentation  system.  This  system  will  be  responsible 
for assembling, processing ( analysis and synthesis ) and  disseminating 
the  data  available  in  the  Commission  and  in  the  Member  States  on 
employment  trends.  Sources  will  include  public  authorities,  private 
bodies, universities,  etc. 

71 

-72 

Chapter 6 Job Quality ­ For Better or Worse? 

Chapter 6 Job Quality - For Better or Worse? 

The issue of job quality is a growing debate. Has the shift 
from industry to services brought an improvement or a 
deterioration in job quality? Is the increased importance of 
small and medium-sized firms in creating new jobs, and the 
increase in part-time jobs, leading to a better or worse 
working environment? 

Introduction 

The current structural transforma­
tion of the European economy and 
labour market, which will be accen­
tuated after 1992, is causing major 
changes in the content and quality 
of jobs as well as their quantity and 
distribution. There has been consid­
erable debate in the United States, 
and to a lesser extent in Europe, on 
the relationship between changes in 
the number and type of jobs and in 
their quality. A key question has 
been whether the new jobs being 
created are better or worse than the 
ones they replaced. 

The increase in total employment, 
and the shift from manufacturing to 
services, may be seen as generally 
positive factors which have created 
new working conditions and in­
creased flexibility. On the other 
hand, these changes may also be 
seen as h a v i ng b e en a c h i e v ed 
through the extension of part­time 
working and the development of 
low­skilled and low­paid jobs. 

The issues are not easy to handle. 
There is no unambiguous, quantifi­

able, concept of job quality and 
hence no overall measure. Thus 
the debate tends to t u rn around a 
series of measurable indicators of 
quality such as the contractual rela­
t i o n s h i p, t he skill c o n t e n t, t he 

w o r k i ng e n v i r o n m e n t, t he re­
muneration and the age and sex 
structure of the changing labour 
force. Balanced judgements are dif­
ficult to make. Indeed, because the 
factors on which emphasis is now 

60 Full Time a nd Part-Time Work in the Member 

States 1987 

% Total Employment 

100 

Full-Time □ Parl-Time 

80 

60 

40 

20 

NL DK UK 

IRI 

GR 

73 

Chapter  6  Job  Quality  - For  Better  or  Worse? 

placed  concern  characteristics  of 
the  contemporary  labour  market, 
they  may  well  overlook  other  fac 
tors,  for  example,  the  extent  to 
which  the  physical  and  environ 
m e n t al  a s p e c ts  of  j o bs  h a ve 
improved  over  time. 

The Growth  of 
Alternative 
Contractual  Forms 

to 

Much  of the  debate  on new  forms  of 
employment  and increased  mobility 
has  been  concerned  with  the  need 
for  more  flexible  labour  market  re 
s p o n s i v e n e ss 
i n c r e a s ed 
international  competition,  in  the 
context  of  economic  crisis  and  of 
new  opportunities  for  organisa 
tional  and  technological  change.  In 
particular,  debate  has  focused  on 
the growth of new contractual  forms 
of  employment  and  their  implica 

tions  for  labour  market  behaviour 
and  policy. 

The  most  common  forms  of employ 
m e nt  c o n t r a c t,  o t h er  t h an 
for 
traditional full-time  and  permanent 
jobs, are for  part-time  or  temporary 
work.  Graph  60  shows  the  distribu 
tion  of full-time  and  part-time  work 
in  the  Member  States.  Part-time 
employment  is  very  much  concen 
trated  among  women  in  the  middle 
and  older  age-groups  (see  Graphs 
62 and 63). With the exception of the 
young  in  Denmark  and  the  Nether 
l a n d s,  levels  of  p a r t - t i me  work 
among  men  are  still  very  low  and 
show  no signs  of  increasing. 

This  pattern  is the  outcome  of indi 
vidual  decisions  to enter  the  labour 
m a r k e t,  mostly  on  t he  p a rt  of 
women,  and  reflects  the job  options 
open  to  them.  While  women,  espe 
cially  married  women  returning  to 
work  after  having  children,  have 

61 

Distribution  of Temporary  Employment  in  the 
Member  States 

1987 

%  Employees 

20 

Full-Time 

D  Part-Time 

1b 

10  -

GR 

D 

DK 

NL 

IRL 

UK 

74 

perhaps  the  greatest  choice  about 
how  much  they  work,  they  are  not 
usually  the  only  breadwinner  and 
often  have the least choice about  the 
form  of contract  to  accept. 

The  search  for  flexibility  by  firms 
has  led  to the  creation  of many  new 
part-time and temporary jobs  which 
require  little  skill  or  work  experi 
ence. This  has  led  to the  emergence 
of a secondary  labour market  along 
side  the  primary  one,  but  without 
the  same  restrictions  on  employers 
or  forms  of  protection  for  workers. 
The  number  of jobs  in  manufactur 
ing traditionally  performed  by  men 
working  full-time  has  declined  sig 
n i f i c a n t ly 
r e c e nt  y e a rs  as 
demand  for the goods they  produced 
has  slumped. As a result,  those  who 
were  previously  employed  in  the 
primary  market  have  become  un 
employed  or  have  been  forced  to 
seek  work in the  secondary  market, 
in  jobs  which  do  not  demand  the 
same  level  of skills. 

in 

Part-time  work  and  temporary  con 
t r a c ts  offer  firms 
two  ways  of 
increasing  the  flexibility  of their  la 
bour force. The former enables  them 
to vary the hours  worked,  the  latter 
the  number  of people  they  employ. 

w i t h o ut 

Trade  unions  in  Europe  are  con 
c e r n ed  at 
in  which 
t he  w ay 
management  use  these  new  con 
tractual  forms  to increase  flexibility 
for  their  convenience  and  profita 
b i l i t y, 
n e c e s s a r i ly 
considering  the  effects  on the  work 
force.  This  is  less  the  case  with 
part-time  jobs  as  such,  than  with 
short-term  contracts  and  forms  of 
quasi-self  employment  which  may 
allow the  employers  to avoid  taking 
on  the  usual  obligations  to  em 
ployees. 

The  growth  of  part-time  and  tem 
porary jobs  could  potentially  reflect 
e i t h er  t he  operation  of  m a r k et 

forces or workers increasingly exer­
cising their choice to work fewer 
hours or for a smaller part of the 
year. In other words, the key ques­
tion is whether it is the workers who 
are pushing for these new forms of 
employment, whether it is the em­
ployers, or w h e t h er it is an 
arrangement which suits both of 
them. 

Research indicates that while many 
people have part­time jobs from 
choice, a significant proportion (see 
Graph 76 in Chapter 7 ) do so be­
cause they cannot find suitable 
full­time work. The position varies 
considerably b e t w e en M e m b er 
S t a t es a nd b e t w e en m en a nd 
women. Across the Community, be­
tween 5% and 50% of men are doing 
part­time jobs because they cannot 
find a full­time one, while the range 
for women is from 5% to 30%. The 
averages are 24% for men and 11% 
for women. 

More striking is the evidence on the 
proportion of workers on short­term 
contracts who would rather be in 
permanent jobs. The importance of 
temporary working across the Com­
munity is shown in G r a ph 6 1. 
Graph 77 in Chapter 7 shows how 
50% of women and 70% of men doing 
temporary jobs are doing so because 
they could not find a permanent job. 

The trend towards part­time and 
temporary work has been furthered 
by more women looking for jobs and 
by pressure from the large number 
of unemployed. It is important to 
assess whether these forms of work 
are replacing permanent full­time 
jobs or are additional to them. 

Chapter 6 Job Quality ­ For Better or Worse? 

62 Part­Time Employment of Young Women and 
all Women in the Member States 1987 

60 

40 

20 

60 

40 

20 

% Working Part-time 

D All Ages ■ Young 

EC All Ages EC Young 

60 

40 

20 

DK D GR E F IRL I L 

NL Ρ UK 

63 Part­Time Employment of Young Men a nd all 

Men in the Member States 1987 

% Working Part-time 

60 ,-

□ All Ages ■ Young 

EC All Ages EC Young 

40 

20 

Γβ  l i l i lí 

Β DK D GR E F IRL 

L NL Ρ UK 

.J 

75-

Chapter 6 Job Quality ­ For Better or Worse? 

Already the pressure from com­
p a n i es s e e k i ng t h is t y pe of 
flexibility h as had an impact on 
legislation restricting or promoting 
such forms of work. In several Mem­
ber States, institutional provisions 
restricting part­time work have 
been modified or legislation govern­
i ng s h o r t ­ t e rm c o n t r a c ts a nd 
temporary work agencies has been 
relaxed. 

Skill Content and Job 
Quality 

People's perceptions of the quality 
of their job are determined by a var­
iety of factors including the skills 
required, payment, tenure, hours 
and the physical working environ­
ment. These factors, taken together, 
will lead people to describe their job 
as "good" or "bad". 

In practice, positive characteristics 
tend to go together. High­skilled 
jobs with good pay tend to be accom­
p a n i ed by good e m p l o y m e nt 
conditions and a pleasant working 
environment. 

Changes in job quality which have 
resulted from recent structural de­
velopments in the labour market 
are principally associated with two 
phenomena: the shift to services 
and the introduction of new techno­
logies. The nature of work changes 
most as a result of organisational 
and technological innovation. New 
tasks emerge as technology advan­
ces and old tasks are taken over by 
machines or disappear as innova­
tion occurs and new products are 
developed. Both these factors alter 
the skill­structure of employment 
which can be used as an indicator of 
the changing content of jobs. 

64 

Temporary Employment by Full­Time a nd 
Part­Time Status in t he Member States 

% Full-Time / Part-Time Employment 

■ Full-Time 
Π Part-Time 

EC Full-Time 
EC Part-Time 

40 

30 

20 

10 

1987 

- 40 

r 

30 

20 

Ό 

Ρ  GR 

D 

DK  NL 

IRL 

Β 

UK 

I 

II 

-76 

As  tasks  become  increasingly  com­
plex,  more  skills  are  required  to 
perform  them.  When  machines  are 
introduced  to  perform  low  grade 
tasks,  unskilled  workers  can  be  re­
placed  or  down-graded.  This  may 
lead  to  a  polarisation  of  excess  la­
bour  and  over-qualification  in  some 
occupations  and  skill shortages  and 
under-qualification  in  others. 

At  a  time  of persistent  high  unem­
ployment,  firms  may  use 
t h e ir 
power in  the  labour  market  to  raise 
job requirements  and  increase  com­
petition  among  workers.  Formal 
education  and  training  is  used  as  a 
requirement  not  only  in  relation  to 
the  tasks  to  be  performed,  but  also 
as an  indicator of behaviour,  loyalty 
to the  firm,  adaptability  and  capac­
ity  to  learn  - a  screening  device  for 
potential  workers. 

Evidence  from  a number  of Member 
States  suggests  that  differences  in 
job  content  between  occupational 
groups  is  related  to  differences  in 
formal  qualifications. The use of for­
mal  qualifications  as  a  means  of 
selecting  workers  is  a  function  of 
economic  conditions  and  h as  in­
c r e a s ed  w i th 
from 
over-employment  to  under-employ-
ment  in  the  mid-1970s. 

t he  s w i t ch 

w i th 

c o m p a r ed 

The  evidence  is  often  surprising.  A 
Dutch  survey  of  occupations  and 
qualifications  shows that  managers 
have  a relatively  low level of educa­
t i on 
t he 
requirements  of  their  job  and  lack 
specialised  education,  a  charac­
teristic  they  share  with  unskilled 
and  semi-skilled  production  wor­
kers.  Bookkeepers  and  cooks  also 
seem  to  lack  "appropriate"  formal 
training. Professional  and  scientific 
workers,  however,  show  the  ex­
pected  relationship  between  job 
content  and  the  level,  and  length 
and  type  of education.  The  link  be­
tween  complexity  of tasks  and  type 

Chapter  6  Job  Quality  - For  Better  or  Worse? 

of  education  also  seems  to  be  par 
in  public 
ticularly  p r o n o u n c ed 
service  occupations  such  as  health 
and  education. 

In  some  countries,  it  is  suggested 
that the  polarisation  of skills is  pri 
marily  due  to  supply-side  factors. 
The  rise  in  the  number  of  highly-
skilled  workers  is  associated  with 
two trends: the  number  of  qualified 
people is  rising  faster  than  the  jobs 
needing  t h e m,  while  t he  more 
skilled  jobs  have  tended  to  require 
even  higher  levels  of  qualification. 
As a result,  competition  crowds  out 
less  qualified  workers  who  are  re 
placed  by  skilled  workers  who,  in 
terms  of  their  qualifications,  are 
under-employed. 

In other  countries,  the  explanation 
is to  be  found  primarily  on  the  de 
mand-side.  High  levels  of  demand 
for higher  qualifications  is  induced 
by  technical  and  organisational 
change  and  efforts  to  improve  pro 
ductivity.  When  unemployment  is 
high,  better  qualified  workers  can 
exploit their  labour  market  advant 
ages. 

for 

Different  policy  responses  are  re 
quired 
c o n t r a s t i ng 
t h e se 
situations. If supply-side factors  are 
the main  cause,  the  solution  lies  in 
the  creation  of  additional  employ 
ment  to  absorb  the  excess  labour: 
the  provision  of vocational  training 
to  the  lower  skilled  will  simply 
make  the  problem  worse. 

If  demand-side  factors  are  respon 
t r a i n i ng 
sible,  t h en  vocational 
targeted on specific occupations  and 
labour  market  groups  will  have  the 
greatest  impact. 

In  practice  it  is  likely  that  both  de 
mand  and  supply-side  factors  are 
present,  necessitating  a  strategy  of 
employment-intensive  growth  ac 

companied  by  specific  employment 
and  training  policies. 

precariousness of a growing  number 
of jobs. 

The  polarisation  of  skills  in  the 
structure  of  employment  has  been 
accompanied  by  a  deepening  of  the 
division  between  internal  and  ex 
ternal  labour  markets.  Both  the 
form  of  the  internal  organisation 
chosen  by  a  firm  and  the  nature  of 
its relationship  to the external  envi 
ronment  are  compromises  between 
the  need  for  flexibility  and  the  need 
to  keep  a  core  of  experienced  wor 
kers. 

The  failure,  so  far,  to  meet  these 
objectives  is  shown  by  the  relation 
ship  between  qualifications  and 
unemployment.  The  incidence  of 
unemployment  is related  directly  to 
the  level  of qualification  and  to  sex. 
In  Spain  and  Holland,  70%  of  the 
unemployed  have  only  primary  or 
lower  education.  In  the  U n i t ed 
Kingdom,  unemployment  rates  for 
males  with  no  qualifications  are  al 
most  twice  as  high  as  the  average. 

Internal  flexibility 
is  achieved  by 
varying  the  tasks  of  the  regular 
workforce  to meet the changing  pro 
duct  demand.  This  involves 
the 
integration  of  tasks  into  a  smaller 
number  of  jobs  and  fewer  produc 
tion units  which  are less rigidly  and 
hierarchically  organised.  Added 
flexibility  is  gained  by  recourse  to 
subcontractors  and  employment 
agencies in the external labour  mar 
ket. 

In  this  way,  the  complex  relation 
ship  between  the  need  for  skilled 
workers  and  the  search  for  flexi 
bility  tends  to intensify  the  division 
of  the  labour  market  into  two  seg 
ments.  But  this is a result  and  not  a 
cause, of the  changes  in  the  content 
and  quality  of jobs. 

The  policy  message  is  again  am 
biguous.  Increased  flexibility 
in 
labour markets  is considered  a posi 
tive  result  of  the  changes  in  job 
content.  Segmentation  of the  labour 
market, with  a greater proportion of 
the  labour  force  in  precarious  mar 
ginal jobs, often  at  low  rates  of  pay, 
is  not.  E m p l o y m e nt  policy  will 
therefore  need  to  recognise  two  ob 
jectives:  the  need  for  flexibility  in 
the  interests  of  productivity  and 
competitiveness,  and  the  introduc 
t he 
tion  of  m e a s u r es  to  reduce 

Income  a nd 
Employment 

Income is a crucial  factor  in  people's 
assessment  of  job  quality.  Higher 
income  jobs  are  normally  regarded 
as  "good" jobs,  involving  the  use  of 
most  skills  and  offering  the  best 
career  prospects. 

German  evidence,  relating  to  em 
ployment  and  income  trends  in  a 
number  of sectors, provides  a  tenta 
job 
tive  i n d i c a t i on  of  w h e t h er 
quality  is  increasing  or  decreasing. 
Income  levels  in  manufacturing 
were  10%  higher  than  in  services, 
although  some  service  sectors  such 
as  financial  and  business  services 
were at the top of the earnings  scale. 
Service  occupations,  such  as  per 
a nd 
s e r v i c e s,  c l e a n i ng 
s o n al 
security  guards,  were  also  at  the 
bottom  end  of the  earnings  scale. 

Low paid sectors did not  necessarily 
generate  the  most  new  jobs,  al 
though  employment  increased  in 
production-related  services  such  as 
cleaning  and  manpower  services 
which  have  a  high  proportion  of 
part-time  working  and  low  skilled 
workers.  Falls  in  employment  oc 
curred  in low income sectors such  as 
household  related  services. 

77-

Chapter 6 Job Quality ­ For Better or Worse? 

On the other hand, employment in­
c r e a s ed in p r o d u c t i o n ­ r e l a t ed 
services where income levels were 
higher than average, such as busi­
ness advisory services, which tend 
to be occupations with high skill 
levels. Nor did there seem to be 
much relation between the level of 
pay rises in a sector and employ­
ment growth. 

These findings indicate that the 
main determinant of the growth of 
employment in both high income 
and low income service occupations 
is demand for the product. The 
trend to service employment has 
therefore caused an increase in both 
"good" jobs and "bad" jobs if income 
is used as the indicator. But on bal­
ance, employment h as increased 
more in occupations where income 
growth had been below average. 

Job Content and the 
Service Sector 

Changes in job content and the 
growth of new forms of employment 
are both closely related to trends in 
the service sector where new types 
of job are most widespread ­ from 
information technology based office 
jobs to fast­food outlets. 

Two developments in particular 
have contributed to the massive ex­
pansion of the service sector in 
recent years. The first is the shift of 
existing jobs from the manufactur­
ing sector to services t h r o u gh 
companies contracting out their ser­
vice activities. The second is the 
creation of completely new types of 
service activity. Clearly to the ex­
tent t h at the first development has 
been a major factor, the emergence 
of the so­called service economy 
might in some degree be regarded 

65 

Sectoral Distribution of Part­Time 
Employment in the Member States 1987 

% Total Employment 

30 

EH Agriculture ■ Industry Services 

20 

10 

11 

NL DK UK 

IRL 

GR 

­ 7 8­

as a statistical mirage, though it 
might nevertheless be associated 
with fundamental changes in the 
way that labour markets operate. 

It also carries important policy im­
plications. In the first place, if the 
growth of services is merely a reflec­
tion of relocation of employment 
from one sector to another, it may 
offer little hope of solving the unem­
ployment problem. In the second 
place, if such shifts in employment 
involve no change in where an em­
ployee is actually working but only 
a change in who is employing him or 
her ­ e.g. office workers or cleaners 
continuing to work in the same 
building but for a contractor rather 
than the company for which work is 
being done ­ then there may be im­
portant implications for industrial 
relations. This is particularly the 
case if such employees are working 
side by side with the client com­
pany's staff. 

The effect that this kind of shift has 
on job quality may well be part of 
the motivation behind the move, as 
the firm seeks to increase flexibility. 
For example, a manufacturing firm 
may contract out its catering to an 
outside contractor, so causing the 
activity to shift from manufacturing 
to services and a corresponding 
change in the form of contractual 
relationship. In order to remain 
competitive, the specialist contrac­
tor may have to employ the workers 
on a weaker, more tenuous contrac­
tual basis. The shift in job between 
sectors may therefore lead to a re­
duction in quality. 

Indeed, firms may pursue a strate­
gy of contracting out less essential 
work and confining the workforce 
they employ to the most central ac­
tivities. Low quality jobs might, 
therefore, be externalised while the 
good jobs involving high levels of 
human capital will be retained. This 

Chapter  6  Job  Quality  - For  Better  or  Worse? 

these  new  types  of job with  possible 
implications  for  job  quality  and  la 
bour  market  segmentation  are  well 
established.  These  trends  could  be 
a c c e n t u a t ed 
1992.  For 
a f t er 
example,  a  firm's  decision  to  re 
s t r u c t u re 
to 
externalise  or to relocate an  activity 
within  another  enterprise  within 
one  Member  State  may  possibly  be 
the  first  step  towards  deciding  to 
relocate  in  another  Member  State 
(see  Chapter  5). 

its  operations  a nd 

This  raises  the  issue  of the  need  for 
general  protection  of these  different 
forms  of work.  If the  threat  of social 
dumping  were  to  become  a  reality, 
then  competitive  forces  could  bring 
p r e s s u re  across  the  Community 
leading to the  more  widespread  use 
of  more  precarious  forms  of  con 
tract. 

tendency  will  be  reinforced  if  many 
of the  skills  are  specific  to  the  firm 
and  are  continuously  being  de 
veloped 
on-the-job 
training. 

t h r o u gh 

of 

In the longer-term,  as the  externali-
sation 
a c t i v i t i es 
c e r t a in 
increases,  the  market  for  them  will 
expand,  providing  opportunities  for 
specialisation  and  economies  of 
scale.  On  the  other  hand,  techno 
logical  c h a n ge  m ay  h a ve 
t he 
opposite  effect,  making  the  inter-
n a l i s a t i on  of  an  a c t i v i ty  b o th 
feasible  and  attractive  - such  as,  for 
example, the  emergence  of desk-top 
publishing  and  the  possibility  it 
opens  up  for  firms  to  produce  their 
own presentational  material. 

l a r ge 

As well  as  sub-contracting,  another 
feature has been the development of 
"paternalistic"  or  "foster"  relation 
ships  w h e r e by 
firms 
encourage  small  firms  to  be  set  up 
under  t h e ir  p a t r o n a g e.  By  t h is 
means they  are  able to exercise  con 
trol  over  w h at 
t h ey  do,  while 
transferring  some  of  the  risks  at 
tached to the venture concerned  and 
avoiding upsetting their internal  or 
ganisation. 

The  results  of  a  recent  survey  of 
services  provided  to  French  busi 
nesses  show  that  there  seems  to  be 
a  threshold  effect  in  operation,  de 
mand  initially  increases  with  size, 
then  levels  off,  and  finally,  for  large 
businesses,  decreases  (see  Box). 

Job  Quality  and 
Legislation 

Both  supply-side  and  demand-side 
factors  are  affecting  the  changes  in 
job content  and job  quality.  Supply-
side  changes  are  contributing  to 
greater  flexibility  in the labour  mar 
in 
k e t, 
participation  rates,  particularly  of 
women,  and  in  more  flexible  use  of 
time. 

c h a n g es 

t h r o u gh 

Demand-side  factors,  which  tend  to 
down-grade  the  value  of work  asso 
ciated  with  c e r t a in  c o n t r a c t u al 
forms,  are  contributing  to  an  inten 
l a b o ur  m a r k et 
sification 
segmentation  as  more  and  more 
jobs with  precarious  contractual  ar 
rangements,  which  often  demand 
little in the way of skills, are  pushed 
into  the  secondary  labour  market. 

of 

An  important  factor  affecting 
the 
pattern  of  employment  contracts 
has  been  the  degree  of  legislative 
intervention by governments. While 
contractual  forms  are  frequently 
the  subject  of collective  negotiation, 
governments  generally  have 
the 
means  to  promote  or  prevent  the 
growth  of new  contractual  forms,  or 
to influence  the  conditions  in  which 
they  occur.  Government  action  in 
this  area  is  commonly  judged  ac 
cording  to  how  far  it  promotes  or 
restrains  the  creation  of skilled jobs 
with  terms  which  are  flexible  but 
which  do not  exploit  the  worker. 

It  also  shows  that  externalisation 
and  polarisation  go  together.  Most 
of  the  functions  which  are  con 
tracted  out  are  those  which  are 
either  low income, low-skill  occupa 
tions  such  as  cleaning  and  security 
or high-skill,  high-income  activities 
such  as  advertising  and  computing. 

There  are  wide  divergences  be 
tween  Member  States  in  terms  of 
the  growth  of new  forms  of  employ 
ment,  changes  in  job  content  and 
flexibility.  The  preoccupations  of 
governments  and  of employers  and 
trade  unions  often  differ,  but  the 
trends  towards  the  wider  use  of 

79 

Chapter  6  Job Quality  - For Better  or Worse? 

Recourse  to  External  Services  - A Survey  of F r e n ch  Businesses 

The  main  determinants  of intermediate  demand  for  services  are  the  nature  of the  function  contracted  outside 
and  the  size of the  business. 

Effect  of Size 
on  Externalisation 

Percentage  of Compan  es Using  External 
Services for the  Functions  Indicated 
below 15% 

25 to 50% 

No  Relation 

Frequency  of Use 
Increases  with 
Size 

Frequency  of Use 
Decreases  with 
Size 

Frequency  of Use 
Increases  to 
Threshold 
Then  Decreases 

Maintenance 
Management 
Control 

Supervisory 
Recruitment 
Security 
Catering 

General 
Accounting 
Translation 

Computer 
Maintenance 
Studies 
Marketing 
Specialised 
Equipment 
Testing 

Payments 
Analytical 
Accounting 

Security 
Warehouses 
Transport  of 
Personnel 
Non-supervisory 
Recruitment 
Representation 
Computerised 
Management 

Leasing 
Computer  Studies 
Handling 
Prototypes & 
Models 
Software 
Organisation 
of Work 
Research 
Infrastructures 
Financial 
Management 
Methods 

over 50% 

Transport  of 
Merchandise 
Foreign  Trade 

Cleaning 

— 

Legal  Problems 
Cadre  Training 
Taxes 
Advertising 
Non-  Supervisory 
Training 
Litigation 
Patents  & Trademarks 

-80 

SMEs  and  the  Self-Employed 

SMEs and  the  Self-Employed 

Job  Creation  in  Small 
and  Medium-Sized 
Enterprises 

Small  and  medium-sized  enter­
prises  (those  with  fewer  than  100 
employees)  are  increasing 
t h e ir 
share  of employment  in  most  Com­
munity  countries  and  creating  jobs 
at  a  more  rapid  rate  t h an 
large 
firms. 

The  relative  importance  of  small 
and  medium-sized  firms  in 
t he 
Member  States  is  shown  in  Graph 
66. There  are wide variations  in  the 
contribution  of  SMEs  to  total  em­
ployment. They provide around 20% 
of the manufacturingjobs  in the  UK 
and Luxembourg,  30-45% in  France 
the  Netherlands,  Belgium,  Spain, 
Portugal, Ireland  and Denmark  and 
over half  the  manufacturingjobs  in 
Greece and  Italy. 

The evidence  also  suggests  that  the 
share  of employment  accounted  for 
by  SMEs  is  increasing,  although 
this  needs  to  be  interpreted  with 
care since  it  may  simply  mean  that 
they  are  losing  employment  less 
rapidly  than  other  firms.  This,  in­
deed,  was  often  the  case  in  the 
1970s  and  early  1980s  (see  Graph 
67). 

SMEs  are  more  important  in  the 
service  sector  where  they  provide 
over half  of all jobs  in  that  sector. 

SMEs  are  becoming  more  import­
ant  employers  of  the  workforce  in 
most  Member  States,  except  in  the 

Netherlands  where  their  share  has 
remained  relatively  constant  and  in 
Greece where  it has  declined  slight­
ly, although  remaining amongst  the 
highest.  Only  in  the  United  King­
dom  has  there  been  a  substantial 
increase  in  the  share  of  SMEs  in 
manufacturing  employment. 

time  when  large  enterprises  have 
been  reducing  employment.  This  is 
particularly  true  of  firms  with  less 
t h an  20  employees.  In  t he  UK, 
France  and  the  Federal  Republic  of 
Germany,  the  extent  of job  creation 
is small  for  firms  with  more than  20 
employees. 

Small  and  medium-sized  enter­
prises  have  been  creating  jobs  at  a 

However,  the  creation  of  jobs  in 
SMEs  occurs  in  a  relatively  small 

66 

Distribution  of Employment  in  Manufacturing 
by  Size  of F i rm  in  t he  Member  States 

%  Employment 

100 

circa  1980/83 

<  100  Employees  Π  >  100  Employees 

80 

60 

4 0 

20 

D 

L 

UK 

Β 

NL 

DK 

E 

Ρ 

F 

IRL 

GR 

I 

- 8 1-

SMEs and the Self­Employed 

67 Employment Growth in Small a nd Medium 

Sized Enterprises in some Member States 

Annual % Change 

Small Enterprises [..] Large Enterprises 

1973-80 

1978-83 

1971-85 1980-84 

1960-80 1971-82 

Β DK D F IRL I NL UK 

68 Change in the Distribution of 

Self­Employment by Sector in t he 
Community (EUR9) 1979­1987 

% Total Employment in Sector 

D 1979 ■ 1987 

50 % 

60 

40 

20 -

13 % 

Agriculture 

Industry 

rev 4 . 1­ 12.07 

82 

number of firms. Not all small firms 
are creating jobs and not all large 
firms are losing jobs. Only some 
10% of firms grow out of the smal­
lest size category, and only 1% 
manage to become large firms, even 
over a period as long as twelve 
years. 

Similar differences can be noted 
with regard to the life of new firms, 
A majority fail within ten years oi 
opening, most of the rest remain 
small, and few grow big enough to 
make a noticeable contribution to 
employment. 

The jobs created by small firms are 
often different from those in larger 
enterprises. They tend to have a 
higher concentration of "new" jobs 
and reflect the trends in job content 
and job quality more closely than do 
large firms. 

SMEs tend to employ a greater pro­
p o r t i on of f e m a le w o r k e r s, 
p a r t i c u l a r ly p a r t ­ t i me females 
than their larger counterparts. In 
the Netherlands, 37% of employees 
in small firms are women compared 
with 26% in large firms. In the 
Federal Republic of Germany, firms 
with less than 20 workers employee 
40% of all female part­time wor­
kers. 

Employment in small firms tends tc 
be more unstable t h an in large 
firms. Small firms experience mud" 
higher levels of turnover than large 
firms which have a hard core o: 
"permanent" workers who tend te 
be better paid than their counter 
parts in small firms. In France, foi 
example, wages in large firms are 
up to 60% higher t h an in smal 
firms. 

This suggests t h at jobs in smal 
firms maybe of a lower quality thar 
jobs in larger firms, although thii 
may be linked to the structure anc 

60 

40 

20 

organisation of the industry. Lower 
job quality is associated with high 
rates of sub­contracting and the use 
of various forms of'flexible' employ­
ment contracts. 

On the other hand, the skill level of 
employees, particularly in manu­
facturing, tends to be higher in 
small than in large firms. In the 
Federal Republic of Germany, 76% 
of male manual workers in small 
firms are categorised as skilled, 
compared with 60% in large firms. 

S e l f ­ E m p l o y m e nt 

The expansion of self­employment 
is often cited as an example of the 
positive employment effects result­
ing from the encouragement of new 
contractual forms. 

There are considerable differences 
in the incidence of self­employment 
as between sectors, and partly re­
flecting this, as between countries. 

The number of self­employed is hig­
hest in the service sector, the figure 
exceeding 8 m i l l i on in 1987 
throughout the Community as a 
whole (Graph 69). Moreover growth 
of self­employment has been much 
more marked in services over the 
1980s than in other parts of the 
economy, the number increasing by 
almost a million. However both fea­
tures reflect the growing overall 
importance of service activities in 
the EC economy rather than any 
tendency for the self­employed to 
gravitate towards this sector. 

On the other hand, although only 
some 20% of the self­employed work 
in agriculture, these account for 
nearly 50% of the total number 
working in this sector (Graph68). 
This compares with a figure of 
around 14% in services. While the 
numbers of self­employed in agri­

SMEs and the Self­Employed 

69 Changes in Self­Employment by Sector in t he 

Community 1979 ­ 1987 

Millions 

10 

α 1979 ■ 1987 

10 

Agriculture 

Industry 

Services 

70 Changes in Self­Employment in t he Member 

States 1979 ­1987 

% Total Employment 

40 

D 1979 ■ 1987 

30 

20 

10 

40 

30 

20 

10 

DK L D NL UK F Β IRL E I Ρ GR 

­ 83 

rev 4 . 1­ 12.07 

SMEs  and  the  Self-Employed 

culture  have  tended  to  decline  dur 
ing the  1980s, the  fall  has  been  less 
than  the  decline  in  overall  employ 
m e nt  a nd 
t he  p r o p o r t i on  h as 
therefore  gone  up. 

In view of the importance of self-em 
ployment in agriculture, it is not too 
surprising to  find  that their  relative 
numbers  are  greatest  in  the  less 
industrialised  parts  of  the  Com 
munity.  In  Greece,  self-employed 
workers  represented  over  35%  of 
the  number  of  people  in  employ 
ment  in  1987,  by  some  way  the 
highest  figure  in  the  Community 
( G r a ph  70).  In  P o r t u g a l,  Italy, 
Spain  and  Ireland,  all  countries 
with  large  agricultural  sectors,  the 
proportion  was  over  20%.  By  con 
trast  in  the  northern  Community 
countries, with the exception of Bel 
g i u m, 
self-employed 
represented only around  10% or less 
of total  employment. 

t he 

The trend  towards  self-employment 
which  is  evident  at  a  Community 
level  is by  no  means  uniform  as  be 
tween countries. In three of the  nine 
countries  for  which  historical  data 
are  available,  Denmark,  Luxem 
bourg  and  Ireland,  there  was  a  fall 
in  the  proportion  of  self-employed, 
while  in  two others, France  and  the 

Federal  Republic  of  Germany,  the 
growth  in  the  proportion  has  been 
minimal. 

In part, this is explained  by the  con 
tinued  shrinking of the  agricultural 
sector  in  these  countries,  and  it  is 
notable  that  only  the  UK,  where 
agriculture  was  already  very  small, 
has  shown  any  significant  increase 
in  the  importance  of  self-employ 
ment.  Here  the  large  rise  which 
occurred  during the  1980s might  re 
flect  a  process  of  coming  into  line 
with  the  position  in  other  parts  of 
the  Community  (in  1979  the  UK 
proportion  was,  by  some  way,  the 
lowest of all Member  States)  as well 
as  a  response  to  unemployment. 

a l l o w a n ce 

Though  m e a s u r i ng  self-employ 
ment  accurately  is difficult  because 
of the  statistical  problems  involved 
-  the  changes  described  here  are 
based on only a small sample  survey 
and  do not necessarily  make  adequ 
a te 
t h o se 
self-employed  in the less formal  sec 
t o rs  of  t he  economy  -  it  would 
appear  from  the  evidence  available 
that  the  trend  towards  self-employ 
m e n t, 
is  n ot  a 
transitory  phenomenon  and  is  like 
ly to  continue. 

t h o u gh  s m a l l, 

for 

84 

Chapter  7  Women's  Employment 

Chapter  7  Women's  Employment 

The place  of  women  in  the  Community 
changed  dramatically.  A pronounced 
and prospectively 
for  the  1990s,  is  the 
growth  in jobs  for  women.  Have  attitudes,  social  security 
systems,  protective  legislation  and  child  care provisions  kept 
pace? 

labour  market  has 
feature  of  the  1980s, 
disproportionate 

Introduction 

By  1990,  a  decade  and  a  half  will 
have  passed  since  the  adoption  of 
the  first  Community  Directive  to 
provide  equality  of  t r e a t m e nt  of 
men and  women  in  the  labour  mar 
ket,  and  the  second  Community 
Action  Programme  for  Equal  Op 
portunities  for  women  will  have 
come to  an  end. 

Despite these legal and  social  initia 
tives, progress in achieving  equality 
has  been  slow  and  women  still  re 
main largely  confined  to  traditional 
low 
occupations  with  relatively 
level jobs. This  segregation  persists 
despite 
e x t e n s i ve 
r e c e nt 
changes  in  the  structure  of  the  la 
bour  m a r k et  and  the  sustained 
increase  in  the  labour  force  partici 
pation  of women. 

t he 

Both  supply  and  demand  factors 
have  contributed  to  increased  par 
ticipation.  Smaller  families, 
the 
narrowing  gap  between  the  ages  of 
children,  and  a  readiness  to  work 
part-time  are  some  of  the  domestic 
and  social  factors  which  have  en 
couraged  t he  e n t ry  of  m a r r i ed 
women  into  the  labour  market.  In 
deed,  in  some  countries  there  has 

been  a  definite  shift  in  the  cycle  of  Most women in employment work in 
the  service  sector  - 73% of the  total 
women's working lives, with  women 
in  the  Community  as  a  whole  -
establishing  themselves  in  employ 
where  their  numbers  are  now  al 
a  m a n n er  w h i ch 
m e nt 
most  as high  as men  (Graph  71). By 
i n c r e a s i n g ly 
r e s e m b l es  m e n 's 
contrast,  only  20%  of  women  work 
career  patterns. 

in 

71 

Distribution  of  Male  a nd  F e m a le  E m p l o y m e nt 
across  Sectors  in  t he  C o m m u n i ty 

1987 

Millions 

50 

40 

30 

20 

10 

D  Men 

Women 

50  % 

42  % 

50 

40 

30 

-  20 

10 

Agriculture 

Industry 

Services 

85 

Chapter 7 Women's Employment 

72 Growth of Female Employment in the Member 

States 1977­1982 

Average Annual % Change 

: I Men 

EC Men 

Total 
EC Total 

□ Women 

EC Women 

I 

-1 

υ 

; ι 

- 2 

1 

r 

-2 

Β DK D GR E F IRL I L NL Ρ UK 

1 

I 

L 

J_ 

± 

73 Growth of Female Employment in the Member 

States 1982­1987 

Average Annual % Change 

Β DK D GR E F IRL I L NL Ρ UK 

­ 8 6­

in industry, less than half the pro­
portion of men employed in this 
sector. 

The overall rise in the labour force 
participation of women embraces 
different categories of women in the 
M e m b er S t a t e s, from m a r r i ed 
women over 25 years old in the 
Netherlands to women under 25 
years old in Spain. This surge of 
women onto the labour market has 
been reflected in a relative growth 
of employment of women. Graph 72 
shows that from 1977­82, annual 
employment growth for women was 
higher than overall rates of growth 
in virtually all Member States. 
Even in the period 1982 to 1987, 
when employment growth slowed or 
was negative, women continued to 
do better (Graph 73). 

There are, however, limits to the 
increased labour force participation 
of women in different age groups. 
Employment rates of women are 
heavily influenced by child care. In 
a majority of countries, the propor­
tion of women in the labour force is 
higher for those without children 
than for those with ­ the exceptions 
are: Belgium, Denmark, Greece, 
France and Portugal (Graph 74). 
With the exception of Denmark, ac­
tivity rates decrease as the number 
of children under 10 years old rises. 
Part­time activity rates, however, 
are less affected than full­time ac­
tivity rates. Thus the employment 
rate of women with three children 
working part­time can be higher 
than that of full­time women wor­
kers with two children under ten. 

In most countries, having a third 
child causes the chances of being 
employed to fall by about the same 
extent as having a second child. In 
France, Belgium and Denmark, 
however, a third child has a much 
greater impact on the mother's em­
ployment rate than a second child. 

In  France,  for  example,  a  woman 
with  two  children  has  an  employ­
ment  rate  78%  of  that  of  a  woman 
with one child,  while  a woman  with 
three  children  has  an  employment 
rate  of only  34% ofthat  of a  woman 
with one  child. 

Women  have  fared  better  in  the  re­
cession than  men, in part because of 
the  concentration  of  their  employ­
ment  in  the  expanding  services 
sector  which  has  been  less  hit  by 
cutbacks and closures than  big male 
employing  industries  such  as  ship­
building,  steel  and  car.  In  France, 
for example,  redundancies  have  af­
fected  large  employers  more  than 
small  businesses,  in  which  women 
are disproportionately  represented. 
Women have  also benefitted  dispro­
portionately  from  the  expansion  of 
public  sector  employment  in  some 
Member  States. 

The  P e r s i s t e n ce  of 
Sex  S e g r e g a t i on 

Sex segregation persists both  across 
broad  sectors  of  economic  activity 
and between  occupations  within  in­
dustries.  Nearly  three  quarters  of 
European  women  in  employment 
are  in  the  services  sector  rather 
than  agriculture  or  industry  (see 
Graph  71). Women  are  also  concen­
trated  in  a  restricted  number  of 
lower-paying,  less  prestigious  occu­
pations.  In  the  Federal  Republic  of 
Germany,  for  e x a m p l e,  90%  of 
women  are  employed  in just  twelve 
occupational  g r o u p s,  g e n e r a l ly 
those  with  lower  skills,  despite  the 
greater  success  of girls  at  school. 

Research  on  the  implementation  of 
including 
the  equality  directives 
studies on women's attitudes  to jobs 
as  well  as  data  on  education  and 
training  d e m o n s t r a t es  how  men 
and  women  are  prepared  for  differ­
ent occupations from  an  early  stage. 

Chapter  7  Women's  Employment 

More  evidence  is needed  on  the  em­
ployment  of  women  as  compared 
with  men  in  newly  emerging  occu­
pations  in the  service  sector. As  yet, 
e v i d e n ce 
to 
whether  segregation  will  decrease 
with  the  changing  structure  of  job 
content. 

is  i n c o n c l u s i ve  as 

N ew  or  Not-So-New 
F o r ms  of  E m p l o y m e nt 

A  recurring  theme  of debate  on  the 
contemporary  labour  market  is  the 
changing  quality  of jobs  -  an  issue 
addressed  in  Chapter  6. One  strand 
of this  debate  suggests  t h at  the  in­
creased  flexibility  of  employment 
contracts  has  had  a  greater  nega­
tive 
w o m e n 's 
employment.  The  proliferation  of 
casual,  marginal  or  atypical  forms 
of  employment  is  often  linked  with 
the  decline  in  the  traditional  model 

i m p a ct 

on 

i m p e t us 

Industries  which  have  expanded  -
like  food  processing,  electronics, 
printing  and  publishing  - have  pro­
v i d ed  an 
to  w o m e n 's 
recruitment.  Another  possible  rea­
son  for  persistent  sex  segregation 
arises  from  attempts  to  raise  pro­
ductivity  and  competitiveness 
in 
these  industries  by lowering  labour 
costs  r a t h er  t h an  by  increasing 
capital  investment.  This  involves 
using more  flexible  labour  practices 
by  the  recruitment  of  a  mainly  fe­
male  workforce  in  unskilled  jobs. 

It would  be misleading,  however,  to 
concentrate  solely  on  the  growth  of 
u n s k i l l ed  jobs  as  t he  source  of 
women's  employment.  Many  tasks 
of  a  repetitive  nature  traditionally 
performed  by  women,  like  office-
based  data-processing  or  industrial 
circuit-board  assembly  in  electro­
n i c s, 
by 
electronic  or  automated  processes. 

a re  b e i ng 

r e p l a c ed 

74  Activity Rates for Women over 40 Years  with 
and  without  Children  of any Age in  the 
Member  States 

1987 

100  % 

80 

60 

40 

20 

Without  Children 

With  Children 

100 

30 

60 

40 

20 

Β  DK  D  GR 

UK 

87 

Chapter 7 Women's Employment 

of full­time, guaranteed, single­em­
ployer jobs. When these forms of 
employment first appeared they 
were explained away as supply­side 
factors such as women's preferences 
for working part­time. It was not 
until such atypical employment pat­
t e r ns ­ s u ch as t e m p o r a ry or 
part­time work ­ began to affect sig­
nificant numbers of men, that the 
issue surfaced as a problem to be 
taken seriously. 

Jobs which are part­time or tempor­
ary or both are not the only forms of 
non traditional patterns of working 
of interest to women. Putting­out 
systems of work ­ homeworking, 
selling to friends and neighbours, 
and sub­contracting ­ all generate 
correspondingly atypical employ­
ment relationships. Family helpers 
are a prominent category for women 
in Italy, Spain and Greece. There is 
nothing new about homeworkers or 
family helpers as labour market 

members but with the growth of the 
newer forms of temporary working 
and part­time work (such as job­
s h a r i n g ), t h ey c o n t r i b u te to a 
complex picture. 

Part­time work has clearly played a 
role in the mobilisation of women on 
to the labour market as demon­
strated by the fact that countries 
such as Denmark, the United King­
dom and France which have the 
highest rates of female labour force 
participation are also those where 
part­time employment is high. By 
contrast, in the less industrialised 
Member States ­ Italy, Ireland and 
Greece ­ t he p r o p o r t i on of t he 
women's labour force accounted for 
by part­time work actually fell be­
tween 1975 and 1985. This is partly 
due to the fall in part­time agricul­
ture­related jobs for women and to 
the growth of other forms of atypical 
employment, such as temporary, 

75 Distribution of Male a nd Female Employment 

by B r a n ch in t he Community 1987 

io 

20 

30 

40 

D Men 
■ Women 

l-r-Energy and Water 

Mineral Extraction.Chemicals 

] Metal Manufacture. Engineering 

I Other Manufacturing Industnes 

ZI Building and Civil Engineering 

I Distributive Trades. Hotels 

I Transport and Communication 

Banking, Finance. Insurance 

Public Administration 

Ind. 

S e r v. 

but full time, employment in tour­
ism or homeworking. 

Part­time working is predominant­
ly, but by no means exclusively, a 
female phenomenon. In the Federal 
Republic of Germany, part­time 
working rose from being 86% to 90% 
female over the decade up to 1985 
but, interestingly, in Belgium, the 
figures for this period were exactly 
reversed ­ going down from 90% to 
86%. 

Like other forms of atypical employ­
m e n t, p a r t ­ t i me w o r k i ng is 
concentrated in specific sectors ­ ag­
r i c u l t u re for women in I t a l y, 
Greece, Portugal and Ireland and 
commerce and other services else­
w h e re in t he Community. This 
concentration heightens sex segre­
gation since part­time work has 
attracted women into a restricted 
range of non­industrial sectors of 
economic activity (Graph 75). This 
is all the more noteworthy as part­
time work constitutes over 20% of 
women's employment in six Mem­
ber States ­ Belgium, France, F.R. 
Germany, Denmark (42%), United 
Kingdom (44%) and the Nether­
lands (57%) (Graph 62). 

In four Member States, the public 
sector has played a strategic role in 
the expansion of part­time working 
­ France, Belgium, the United King­
dom and, to a lesser extent, Italy. 
Thus the movement to regularise 
and provide greater social protec­
tion for part­time workers has had 
to face the apparent legitimisation 
of atypical kinds of working. 

Temporary Work a nd 
Women 

I Other Services 

T e m p o r a ry w o r k i ng t a k es four 
main forms: 

10 

20 
% Total Employed 

30 

40 

8 8­

Fixed-term 
ment 

contract 

employ-

• 

Interim  or  agency-based  em­
ployment 

ployed. Job insecurity  as  a 'cause' of 
unemployment  has  risen  for  both 
women  and  men  between  1983  and 
1987. 

•  Seasonal  and  casual  employ­

Choice  or  Necessity 

ment. 

Chapter  7  Women's  Employment 

Leave  entitlements  that  are  unpaid 
or attract  only low benefit  payments 
will  be  irrelevant  to  many  families. 
Part-time  work may  only be on  offer 
if  a  parent  is  prepared  to  look  for 
and  accept  a  poorer job". 

If  acceptance  of  part-time  work  is 
necessitated  by  factors  largely  out 
of women's  control,  such  as the  lack 
of  suitable  child-care  or  the  school 
schedule,  then  the  issue  of choice  is 
spurious.  This  point  can  be  exam­
ined  by  looking  at  the  reasons  for 
men  and  women  being  in  part-time 
or  temporary  jobs. 

Graph  76  shows  the  proportion  of 
men  and  women  working  part-time 
involuntarily  -  averaging  30%  and 
10%  respectively  - according  to  the 
1987 Community  Labour Force  Sur­
vey. 

Graph  77  shows  the  proportion  of 
t e m p o r a ry 
employees  occupying 

The concept of "choice" is  frequently 
introduced  into discussions of atypi­
cal  employment  and  of  women's 
position  on  the  labour  market.  This 
implies  that  women  voluntarily  opt 
to  take  less  well  paid  part-time  or 
casual jobs to maintain  their  role  at 
home  as  mothers  or  caring  for  de­
pendent  relatives. 

Commission  research  on  child-care, 
completed  in  1988, concluded  that: 

"At present, most parents have  little 
freedom  of  choice  with  respect  to 
how  they  organise  child-care  and 
the  relationship  in  their  lives  be­
t w e en  family  a nd  e m p l o y m e n t. 

76 

Part-Time  Workers  in  the  Member  States  who 
could  not  find  a  Full-Time  J ob 

1987 

%  Part-time  Workers 

60 

Men 

D  Women 

40 

20 

EC  Women 

60 

40 

20 

•  Other  temporary  work  in 

the 

widest  sense 

The  European  Labour  Force  Sur­
veys  sheds  some  light  on  the  num­
ber  of  temporary  women  workers. 
In  1987,  a  majority  of  the  Member 
States had more than  10% of women 
employees  in  temporary  jobs,  the 
exceptions  being  Belgium,  France, 
Italy, Luxembourg  and  the  UK. 

As  with  part-time  work,  the  com­
merce  and  other  services  sectors 
were  the  principal  employers  of 
women on a temporary basis,  whilst 
agriculture,  the  building  industry 
and  manufacturing  were  the  main 
sources  of  temporary  employment 
for  men. 

Part-time  and  temporary  work  for 
women  overlap  a  great  deal.  Given 
the  concentration  of women  among 
part-time  workers,  it  can  be  as­
t h ey  a re  e q u a l ly 
t h at 
sumed 
predominant  a m o ng 
t e m p o r a ry 
part-timers. In three countries - Ire­
land,  I t a ly  a nd  L u x e m b o u rg  -
of 
between 
part-timers  also  work  on  a  tempor­
ary  basis.  Reforms  to  reduce  the 
vulnerability  of  women  part-time 
workers  may  also  have  to  encom­
pass measures  to protect them  from 
the  vulnerability  of  the  temporary 
nature  of  their  employment  where 
these  aspects  coincide. 

4 3% 

47% 

a nd 

This  vulnerability  is  illustrated  by 
the extent  to which  the  termination 
of short  term  contracts  is  given  in­
creasingly  as  the  explanation  for 
loss of job by people becoming  unem­

L 

DK 

D 

NL 

Ρ 

UK 

E 

GR 

Β 

I 

IRL 

89 

Chapter 7 Women's Employment 

77 

Employees with Temporary J o bs in the 
Member States because they could not find 
a P e r m a n e nt J ob 1987 

% Workers with Temporary Jobs 

100 

Men 

□ Women 

80 

60 

40 

20 

0 -

GR 

IRI 

UK NL Β DK L 

100 

80 

EC Men 

- 60 

PC Women 

40 

20 

0 

jobs in the Member States because 
they could not find a permanent job. 
No data is available for the Federal 
Republic and France, but, for the 
remaining 10 countries, the propor­
tions averaged nearly 70% for men 

and 50% for women. For Spain and 
Greece, around 85% of employees 
with a temporary job would have 
preferred a permanent one while, 
for Portugal, Ireland and Italy, the 

Minimum Estimates of Homeworkers 
Member States 

in Selected 

Country 

Year 

Number 

Italy 

France 

Portugal 

Spain 

U.K. 

Greece 

1985 

1985 

1983 

1986 

1981 

1986 

700,000 

59,600 

50,000 

490,000 

229,000 

225,000 

Proportion 
of women % 

over 90 

82 

over 90 

75 

70 

over 90 

90 

proportions were between 60% and 
70%. 

Outwork a nd 
Homework 

In contrast to the more visible char­
acter of temporary and part­time 
working, outworking, including 
homework, has a lower profile in the 
labour market. Despite the increase 
in salaried employment in Europe, 
various forms of outwork have per­
sisted, or, in Greece and Portugal, 
even increased. 

Outworking encompasses work at 
home or outside the employer's or 
organiser's premises. It can take the 
form of piecework or the combina­
t i on of p i e c e w o rk a nd fixed 
payments, frequently found in Italy. 
Intrinsic to outwork, however, is the 
dependent, subordinate and iso­
lated economic position of the ­
almost always female ­ worker, sep­
arated from the sale or marketing of 
her output, be it pottery for tourists 
or shoes for the fashion market. The 
table shows estimated numbers of 
h o m e w o r k e rs in some M e m b er 
States. 

Homeworking is highly concen­
trated in clothing, textiles, leather 
goods, shoes, fur, toys and novelty 
goods. In the United Kingdom and 
the Federal Republic of Germany, 
branches of manufacturing in metal 
and electrical goods use homewor­
k e r s. T he h i gh p r o p o r t i o ns of 
women in homeworking, combined 
with its suitability for labour in­
tensive industry, serves to reinforce 
t he sex s e g r e g a t i on of women. 
Homeworking is regionally concen­
t r a t e d, notably in u r b an a r e as 
associated with the textile industry 
and in peripheral and less indus­
trialised regions of the Community. 
It is also found in north west Ire­
land, the Madeira Islands, southern 

Chapter  7  Women's  Employment 

as well as northern  Italy, and  north 
ern  Portugal. 

The  existence  of  homeworking  -  be 
it legal or in the black economy - has 
the  advantage  of  offering  women 
the opportunity  to become  economi 
cally  active  in  regions  devoid  of 
waged  work  or  where  service  em 
ployment  is  as  yet  undeveloped. 
However, homeworking is one of the 
least  protected  types  of  employ 
ment.  This  is  sometimes  because 
there  is  an  absence  of  legal  protec 
tion  for  homeworkers  compared 
with  s a l a r i ed  employees  (as 
in 
Greek villages) or because the  exist 

ing  laws  and  regulations  are  infre 
quently  enforced  (Ireland,  Belgium, 
Netherlands).  In  other 
instances 
(Italy  and  France)  social and  labour 
law  protection  exist  but,  for  a  com 
plex  of  reasons,  homeworking  and 
homeworkers tend to disappear  into 
the  black  economy  or  "instant  self-
employment"  at  the  first  sign  of 
regulatory  enforcement. 

Homeworking  is  an  example  of  one 
of the  more  unchanging  features  of 
the  position  of women  in  the  labour 
market.  Interestingly  it  has  proved 
extremely  adaptable  to  contempor 
ary  conditions  of  production.  The 

recruitment  of  women  into  home-
working  serves  as  a  substitute  for 
capital investment,  with the  domes 
tic  premises  of  the  homeworkers 
substituting  for  the  costs  of  factory 
premises,  and  reduces  the  social 
costs  of employing  labour. 

Family  Helpers  or 
Unpaid  Workers  ? 

Family  helpers  share  with  home-
workers  many  similarities  in  their 
position  on  the  labour  market,  des 
pite  their  concentration  in  different 
sectors. The  term  "family  helper"  is 

78 Activity  Rates  of Women  across  t he  Community 

1987 

Û 

<  30 % 

30  -  40 % 

40  -  50  % 

>  50 % 

- 91 

Chapter  7  Women's  Employment 

generally  used  to  cover  three  ca 
tegories  of  economically  active 
people: 

•  wives  working 

in 

their  hus 

bands'  enterprise; 

• 

relatives  working  in  family  en 
terprises; 

•  assistants  who  work  with 

the 
self-employed  without  a  con 
tract  of  employment. 

form 

s m a ll 

s h a re 

These  forms  of  non-waged  employ 
m e nt 
(and 
a 
diminishing)  percentage  of  total 
employment  in the  Community,  ex 
cept  in  three  countries: Italy,  Spain 
and  Greece  where  they  are  an  im 
p o r t a nt 
of  w o m e n 's 
employment - 35% in Greece. Not all 
family  helpers  are  women  and  the 
Member  States  can  be  divided  into 
two  broad  groups:  the  Federal  Re 
p u b l ic  of  G e r m a n y,  B e l g i u m, 
D e n m a rk  a nd  t he  N e t h e r l a n ds 
where  over  83%  of  family  helpers 
are women; and  Greece, Spain,  Por 
tugal,  Ireland  and  Italy  where  the 
proportion  of women  among  family 
helpers  is  less  high,  ranging  from 
52%  to  78%. The  strength  of  small 
businesses  and  a r t i s a n al  enter 
prises  as  well  as  small  agricultural 
enterprises  managed  by couples  ac 
counts  for  the  greater  number  of 
male  family  helpers  in  this  second 
group. 

l a w s,  u n l e ss 

Like  homeworkers,  family  helpers 
are  poorly  protected  by  social  or  la 
t h ey  claim 
b o ur 
self-employed  status  (as  allowed  in 
Portugal)  or unless  they  acquire  so 
t h e ir 
cial  s e c u r i ty  r i g h ts  from 
in 
h u s b a n d 's  e m p l o y m e nt 
Greece). 

(as 

a m o ng 

w o m e n. 

pay.  They  constitute,  in  some  re 
gions,  a  buffer  against  emigration 
and  against  large  scale  unemploy 
m e nt 
As 
home-based  types  of  employment, 
however,  they  reinforce  traditional 
stereotypes  of women  as  occasional 
and  marginal  visitors  to  the  world 
of work.  The  demand  for  part-time 
and  temporary  workers  attracts 
women  into  sectors  like  clothing, 
where  women  are  already  well  rep 
resented,  thus  reinforcing  the  sex 
segregation  of women  on the  labour 
market. 

The  structural  sexual  segregation 
outlined  above  has  implications  for 
the  vocational  training  orientation 
and  education for women. These  are 
the  means  that  will  enable  women 
to  enter  occupations  outside  their 
traditional  areas.  Given  this  segre 
gation, however, it has  often  proved 
easier  for  women  to  improve  their 
opportunities by progressing to non-
traditional  occupations  within  al 
ready  female-dominated  sectors, 
rather  than  attempt  to move to sec 
tors  where  they  are  under-repre 
sented. 

The  confinement  of  women  to  a 
limited  range  of sectors  and  occupa 
tions,  often  in  atypical  forms  of 
employment,  also  has  implications 
for  wage  segregation  and  wage  le 
vels. 

I m p r o v ed  social  p r o t e c t i on  for 
everyone  in  atypical  employment 
would  particularly  benefit  women. 
Stronger  regulation  of  precarious 
types  of employment  might  equally 
play  a  part  in  combatting  tenden 
cies  to  still  consider  women  as  a 
casually  employable  section  of  the 
labour  force. 

Helping  out  a husband  or a  relative 
in  a  family  business,  like  accepting 
irregular  homework  or  seasonal 
employment  in  tourism,  is  a  survi 
t he 
val  s t r a t e gy  for  women  in 
fragmented  labour  markets  of  the 
less  developed  regions.  It  has  little 
in common with the situation of full-
time family helpers in enterprises of 
N o r th  E u r o p e an  c i t i es  or,  for 
example, the full-time  skilled home-
workers  in  the  silk  i n d u s t ry  of 
northern  Italy.  And  with  the  conti 
nuing  fall  in  the  numbers  engaged 
in  agriculture,  family  helpers  will 
correspondingly  decline. 

Future  Concerns 

For  the  immediate  future,  women 
are  likely  to  provide  the  major  pro 
portion  of  any  i n c r e a se  in 
t he 
Community's  economically  active 
population.  The  decentralisation  of 
production,  the  smaller  scale  of 
businesses, the growth of service ac 
tivities  have  all  contributed 
to 
employers'  changing  requirements 
for  labour.  Shorter  lead  times  in 
production  processes have created  a 
need  for  adaptable,  flexible  work 
forces.  Various  forms  of  atypical 
e m p l o y m e nt  a re  called  fór  and 
women's labour is often  the  answer. 
Map  78  illustrates  that  female  ac 
tivity rates vary significantly  across 
the  Community  and  there  is  thus 
scope  for  substantial  increases  in 
certain  areas. 

More  traditional  forms  of  marginal 
employment  such  as the  family  hel 
p e r,  t he  s e a s o n al  a g r i c u l t u r al 
worker  or  the  homeworker  play  a 
somewhat  different  role  in  the  la 
bour market. They permit women  to 
be  economically  active  at  no  or  low 

92 

Chapter  8  The  Demographic  Time  Bomb 

C h a p t er  8  T he  D e m o g r a p h ic  T i me  B o mb 

Fewer young  people  to enter  the  labour  market  and  an 
ageing population 
to 
unemployment  and  an  era  of labour  scarcity?  How  will 
companies  cope  with  a  very  different  labour  force  structure? 

- does  this  mean  an  early  solution 

Introduction 

Most  of  the  European  Community 
faces  a  medium  term  demographic 
problem  of  a  declining  but  ageing 
population. 

The problems of  financing  pensions, 
health  care,  and  social  services  has 
been  the  subject  of  much  debate. 
There  has  been  much  less  discus 
sion  of  the  short  term  problem  of 
labour  shortages.  Because  of  a  re 
duction  in  the  birth  rate  in  the 
1970s,  Europe  faces  a  sharp  reduc 
tion  in  the  number  of young  people 
entering  the  labour  force  over  the 
next few years. Shortages  of labour, 
especially  skilled  labour,  are  al 
ready  beginning  to  affect  some 
areas and sectors but there has  been 
little  in  the  way  of policy  response. 

One benefit  of demographic  changes 
will  be  a  fall  in  youth  unemploy 
ment.  It  is  possible  too  that  labour 
shortages  could  bring  about  the  re 
entry  into  the  labour  market  of 
many 
u n e m p l o y ed 
adults.  However,  one  worry  is  that 
many  of  these  long-term  unem 
ployed  a nd  m a ny  of  t he  young 
entering  the  labour  market  for  the 
first  time  lack  suitable  skills  and 
training. 

l o n g - t e rm 

The  way  in  which  these  short-term 
problems  of  labour  shortages  are 
tackled  will  have  implications  for 
the longer term  problem  and  its  sol 
ution.  There  are  several  possible 
strategies  which  companies  and 
governments  can  adopt.  Companies 
may  invest  in  new  technology  to  in 
crease  productivity  and  reduce  the 
need for labour but the scope for  this 
will  vary  considerably  between  sec 
tors.  Companies  and  governments 
may  attempt  to increase  the  labour 
force  participation  rates  of  women 
by  providing  more  creche  facilities 
and  parental  leave,  paid  for  either 
by  the  companies  or  the  govern 
m e n t.  There  may  be  policies  to 
increase  the  labour  force  participa 
tion  of  older  workers,  for  example, 
by  moving  or  raising  the  statutory 
retirement  age  and  by  encouraging 
flexible  retirement  systems. 

The  d e m a nd  for  education  a nd 
training facilities  on the part of both 
companies  and  individuals  is  likely 
to  increase. 

Demographic 
Developments 

At  the  beginning  of  1987, the  popu 
lation  of the  European  Community 
was  323  million,  34% more  than  in 
the  USA  and  15% more  than  in  the 
USSR.  After  peaking  in  2005,  by 
2010  the  population  of  Europe  will 
be  only  2%  more  than  now  -  com 
pared  with  an  expected  increase  in 
t h at  period  of  19% in  the  USA,  7% 
in  Japan,  20%  in  the  USSR  and  a 
massive  39%  globally.  The  Com 
t he  w o r l d 's 
m u n i ty 
population  is  expected  to  fall  from 
6.4%  to 4.7% by  2010. 

s h a re  of 

By  2025,  there  will  probably  be 
about  2%  fewer  people  in  Europe 
than  at  present.  The  cause  of  this 
decline is the fall  in the fertility  rate 
in  all  countries  (except  Ireland)  to 
well  below  2.1 children  per  woman, 
the rate  needed  to sustain  the  exist 
ing population  level. 

However,  since the rate of decline in 
fertility  rates  has  varied  across  the 
Community,  the  consequent  popu 
l a t i on  c h a n g es  will  also  be  of 
differing  magnitude  and  occur  at 
different  times.  Conventional  wis-

- 93 

Chapter  8  The  Demographic  Time  Bomb 

79 

Population  S t r u c t u re  Trends  in  the 
Community 

1961-2025 

Millions 

400 

D  <  14  Years 

14  -  64  Years  Ώ  >  64  Years 

300 

200 

100 

1965 

1975 

1985 

1995 

2005 

2015 

2025 

80 

Life  Expectancy  at  Birth  in  the  Community 

80 

Years 

□ 1950 

1980/85 

1950-1980/85 

- 80 

dorn suggests t h at the Mediter­
ranean countries ­ Spain, Greece 
and Portugal ­ together with Ire­
l a n d, a re e x p e c t ed to h a ve 
expanding populations while the 
countries of the north will have de­
clining populations. This is an 
over­simplification. 

While the Mediterranean countries 
and Ireland did have relatively high 
rates of population growth between 
1965 and 1985, the Netherlands, 
France and Luxembourg experi­
enced higher growth rates than 
either Portugal or Italy during that 
period. 

Much attention has been paid to the 
e x p e c t ed d r a m a t ic decline in 
Germany's population ­ which is 
expected to fall by over 15% from its 
1975 peak of 62 million to 52.5 
million by 2025. However, it is less 
well known that Italy ­ which in the 
n o r th h as some of t he lowest 
f e r t i l i ty r a t es in E u r o pe ­ is 
expected to experience a drop in its 
population of 9% between 1995 and 
2 0 2 5. F u r t h e r m o r e, by 2 0 2 5, 
Belgium will probably have almost 
6% l e ss people t h an now a nd 
D e n m a r k, whose p o p u l a t i on is 
already shrinking, 7% less. The only 
c o u n t r i es w h o se p o p u l a t i on is 
expected to be still growing by 2025 

7b 

70 

65 

60 

Men 

Women 

­ 94 

are t he U n i t ed K i n g d om a nd 
Greece. 

Better diet, housing, and medical 
care have reduced infant mortality 
throughout this century. This, com­
bined with increased longevity in 
recent years, means that the num­
ber of o l d er p e o p le h as b e en 
increasing. As life expectancy for 
women has increased faster than for 
men, there is a growing proportion 
of women in this older group. 

Increased life expectancy, coupled 
with declining b i r th r a t e s, h as 
meant that populations are "ageing" 
since there is a greater proportion of 
the population over 65 years old and 
many more of these are expected to 
survive beyond t he age of 7 5. 
Graphs 81 and 82 illustrate the 
changing age structure of the popu­
lation over the next 35 years or so. 
For all countries there is an ex­
pected o v e r a ll d e c l i ne in t he 
proportion of young people in the 
population and an increase in the 
proportion of elderly people. 

By 2025, over 20% of the population 
of the European Community will be 
over 65 years old. However, the po­
sition will vary widely from country 
to country, ranging from 24% in 
Germany to 17% in Ireland. 

Chapter 8 The Demographic Time Bomb 

81 Predicted Population Changes by Age­Groups 

in the Member States 1990­2025 

Millions 

a < 14 Years ■ 14 - 64 Years I . > 64 Years 

n j^ 

Β DK D GR E F IRL I L NL Ρ UK 

-12 

82 Predicted P e r c e n t a ge Changes in Age­Groups 
of the Population in the Member States 

1990­2025 

% Change in Age-Group 

Π < 14 Years 
■ 14 - 64 Years 
Ζ > 64 Years 

50 

Β DK D GR E F IRL I L NL Ρ UK 

95 

Chapter  8  The  Demographic  Time  Bomb 

Changing Patterns of 
Dependency 

As  Graph  83 shows,  the ageing of 
the  population  h as significant im­
p l i c a t i o ns  for  t he  p a t t e rn  of 
dependency.  The  dependency  ratio 
of  old people  is  rising  throughout 
Europe  and  the  dependency  ratio of 
young  people  is  falling.  This ob­
viously  h as implications  for  direct 
government  spending on items  such 
as  health  care,  which  will  rise,  and 
family benefits  and education  which 
may  fall. 

Since overall dependency is only ris­
ing  slowly,  it  h as been  suggested 
that  there  will  simply  be a  transfer 
of government expenditure from  the 
young  to the  old.  However,  curren­
tly  social  expenditure  per head on 
those  aged  over  65 is up to  three 
times  the  public  expenditure  per 

head  on the  non-elderly.  This is not 
necessarily because the actual  econ­
omic cost of a  child is only a third  of 
the  economic  cost  of an  elderly  per­
son  but  because  most  costs  of  child 
rearing,  apart  from  education, are 
borne by the  parents  and  not  direct­
ly  by the  state.  The problem  of 
increasing  age dependency is  there­
fore  a  p o l i t i c a l, 
t h an 
economic  one  -how  does  society  tax 
workers  who have  fewer  dependent 
children to pay for the support of the 
elderly? 

r a t h er 

The  financial  viability  of  pension 
and  social  security  schemes  in  the 
future  h as  been  extensively  dis­
cussed.  Not  only  are pension  costs 
rising  because  ageing  populations 
lead  to an  increase in the number  of 
old  people  eligible  to claim  a  pen­
sion,  but also  because  many  state 
pension  schemes have become  more 
generous  and  greater  life  expec-

83 

Dependency  Ratios: Trends in the  Share  of 
Young a nd  Old  Relative to the  Working-Age 
1961-2025 
Population  in the  Community 

%  Working-Age  Population 

1Θ  % 

21  % 

60 

40 

<  14 Years  D >  64  Years 

31  % 

1965 

1975 

1985 

1995 

2005 

2015 

2025 

96 

tancy  and  lower  retirement  ages 
mean  t h at  pensions  are  paid  for 
longer.  Possible  solutions  include 
r a i s i ng  c o n t r i b u t i o n s, 
lowering 
benefits,  raising  retirement  ages 
and  increasing  personal  savings. 

In  countries  with  rapidly  ageing 
populations, the cost of maintaining 
current  levels  of benefit  could put 
an  unacceptably  high  tax burden  on 
those  in  work.  In the Federal Re­
public,  for  example,  it  h as  been 
estimated  t h at  the  marginal  tax 
r a t io  for  m a ny  m i d d l e - i n c o me 
families  would  need  to  rise  above 
80%  if  benefits  were  to  be  main­
t a i n e d.  On  t he  o t h er  h a n d,  if 
contributions remained  at their  cur­
r e nt  share  of  earnings,  the  real 
value  of the  state  pension  would  be 
halved  by  2030. 

Provisional German legislation  sug­
gests  a  compromise  solution  with 
moderate  increases  in  contribu­
tions,  a  tightening  of benefits and 
the  raising  of the  official 
flexible 
early  retirement  age of 60 by  the 
year  2000. In the  United  Kingdom, 
the  government  has switched  the 
emphasis  from  state  to  private  pro­
vision  of  pensions.  Although  this 
helps  solve the problem for the  pub­
lic purse, the problem for  companies 
and  individuals  will  still  remain. If 
demographic  changes  are not fully 
taken  into  account  by  companies in 
their  pension  calculations  then the 
necessary  financial  resources may 
not  be  available. 

to 

In other Member  States, studies  are 
being  carried  out  but  policy  conclu­
s i o ns  a re 
e m e r g e. 
slow 
Governments  may feel  that  fairly 
dramatic changes in policy are  more 
easily  implemented  when  the  crisis 
is  seen  to be biting.  On the  other 
hand,  short  term  labour  market  de­
velopments  and  the  policies  used to 
deal  with  them  may  help  alleviate 
the  long term  problem. 

Chapter  8  The  Demographic  Time  Bomb 

Labour  Force 
Implications 

The  demographic  trends  outlined 
above  suggest  that  most  European 
countries  will,  sooner  or  later,  need 
to think seriously about their  ability 
to  provide  income,  goods  and  ser 
vices  for  the  non-working  elderly 
population.  Dependency  ratios  cal 
culated  purely  on  the  basis  of  the 
age  profile  of  the  population  may 
overstate  the  problem,  however, 
since  the  ratio  of  the  population  of 
working  age  to  the  "dependent" 
population  tells  us  little  about  the 
"real"  dependency  ratio  -  namely, 
how many  people will be working  to 
support  those  who  are  not. 

A falling  birth  rate  has  its  most  im 
mediate  effects  on  the  numbers  of 
people  entering  the  labour  market. 
On the basis of demographic  factors 
alone, and  assuming that  participa 
tion  rates  remain  constant  at  their 
1985  level,  the  E u r o p e an  Com 
mission's  S t a t i s t i c al 
Service 
Eurostat has calculated the  number 
of  labour  force  entries  and  depar 
tures  for  each  year  until  2025.  This 
shows  net  entrants  to  the  labour 
market  in  nine  Member  S t a t es 
numbered just  under  half  a  million 
a year  twenty  years  ago,  but  rising 
to  a  peak  of  968,000  in  1981.  In 
1989, the  number  of net  entrants  in 
the  nine  is  forecast  at  just  over 
350,000, falling  to  a  mere  11,000  in 
1993 by the  time  the  Internal  Mar 
ket  is  completed.  By  the  year  2000 
net  entry  will  be  negative,  with 
300,000 more  people  leaving  the  la 
bour market  than  are  entering.  The 
inclusion of the new Member  States, 
Spain,  Portugal  and  Greece,  in  the 
overall calculations makes the prob 
lem  look  less  i m m e d i a te  since 
labour  shortages  will  not  be  felt  so 
early in  those  countries. 

It  is, of course,  simplistic  to  assume 
constant participation  rates  and  the 
Eurostat  figures  should  be  treated 
as  a  "worst  case"  scenario.  Activity 
rates  (the proportion  of people in,  or 
seeking,  employment  as  a  propor 
tion  of  the  adult  population)  are 
difficult  to forecast  even in the  short 
term,  since  they  depend  on  many 
factors,  including  the  growth  and 
s t r u c t u re  of  economic  activity. 
Moreover,  activity rates  themselves 
influence  the  level  and  strength  of 
the  economy  as  the  increased  pur 
chasing power of additional  workers 
s t i m u l a t es  demand.  A  E u r o s t at 
study  ('Demographic  and  Labour 
Force  Analysis  based  on  Eurostat 
t he 
D a ta  B a n k s ') 
possible  magnitude  of  error  when 
making  assumptions  about  partici 
pation  rates. 

i l l u s t r a t es 

For  example,  between  1975  and 
1985,  the  number  of  males  in  the 
European  labour  force  would  have 
risen  by  5.5  million  on  the  basis  of 
population  changes  had  pai-ticipa-
tion  rates  remained  at  their  1975 
levels.  In  fact,  male  participation 
rates fell, so that  the number of men 
in  the  labour  force  rose  by  only  3.1 
million. For women, the picture  was 
reversed.  While  with  a  constant  fe 
male  participation  rate, a rise  of  3.2 
million  in  the  number  of  women  in 
the  labour  force  would  have  been 
expected,  a rapidly  rising  participa 
tion  rate  led  to  an  increase  of  9.8 
million. 

Most  of  the  decline  in  male  labour 
force  participation  rates  occurred  in 
the  older  age  groups  - from  55 to  69 
- as retirement  ages have fallen  and 
more  men  have  taken  early  retire 
m e n t.  The  figures  in  G r a ph  84 
illustrate the changes between  1975 
and  1987. 

Equally  dramatic  changes  have  oc 
force 
c u r r ed 
participation  rates,  where  most  of 

in  f e m a le 

l a b o ur 

the  increase  has  occurred  in the 25-
49  age  band.  Graph  85  highlights 
the  wide  spread  in  womens'  labour 
market  activity  across  Europe. 

in  female 

Almost 60% of Danish  women  are  in 
the  labour  force,  more  than  double 
the  proportion  in  Spain.  These  dif 
ferences 
labour  force 
participation  account for most of the 
difference 
in  total  participation 
rates  across  Europe  since  there  is 
much  less variation  in male  partici 
t he 
pation  r a t e s.  I n t e r e s t i n g l y, 
variation  in  the  male  participation 
rates  mirror  those  in  the  female 
ones.  Thus  not  only  does  Denmark 
have  high  female  participation,  its 
male  rates  are  also  the  highest  in 
Europe.  Conversely,  Spain  has  low 
rates  for  both  sexes.  In  the  more 
northern  European  countries,  many 
of the  women  who  contribute  to  the 
high  female  participation 
r a t es 
work part-time  and  the  lack  of avai 
lability  of  part-time  work  in  the 
s o u t h e rn  c o u n t r i es  of  G r e e c e, 
Spain,  Portugal  and  Italy  may  be  a 
factor  in  their  low  female  activity 
rates  (see  Map  78). 

Coping  with  L a b o ur 
Shortages 

The  last  few  years  have  been  char 
acterised by large numbers  of school 
leavers  and  increasing  numbers  of 
women  coming on to the job  market. 
Because  of  low  overall  lack  of  de 
mand  in the economy and  a  regional 
and  skills  mismatch  of jobs  and  la 
bour in many  Member  States,  many 
of  these  young  people  and  women 
h a ve  s p e nt  long  periods  unem 
ployed  (see  Chapter  10). 

With  far  fewer young people  coming 
onto  the  labour  market  in  the  next 
few  years,  the  picture  is  likely  to 
change  and  there  could  well  be  la 
bour  s h o r t a g es  in  t he  n o r t h e rn 
Member  States. 

- 97 

Chapter 8 The Demographic Time Bomb 

84 Trends in Male and Female Labour Force 
Participation Rates in the Community 

1975­1987 

There are a number of ways in 
which companies and governments 
can be expected to react to the pro­
jected shortages of labour. 

% Working-Age Population 

Vcn 

-, 80 

Technology to Reduce 
Labour Needs 

80 

70 

60 

50 

40 

30 

1975 1977 

1979 

1981 

1983 

1985 1987 

85 Male a nd Female Labour Force Participation 

Rates in the Member States 1987 

% Working-Age Population 

Men □ Women 
EC Average EC Average 

80 

70 

60 

50 

40 

30 

20 

DK UK F Ρ D NL Β L GR IRL I E 

98 

70 

60 

50 

30 

- 80 

70 

60 

- 50 

40 

Hn 30 

20 

Companies may invest in new tech­
nology to increase productivity and 
reduce the need for labour. This pol­
icy was effectively pursued in the 
1960s but there is less scope for 
saving labour in the short run in 
many of the growing service indus­
t r i e s. C o m p a n i es m ay also be 
constrained by shortages of highly 
skilled young people to design, im­
plement and r un t he necessary 
technology (see Chapter 12). 

Employing the 
Long­Term Unemployed 

Companies may recruit from the 
pool of the unemployed. However, 
50% of the unemployed are long­
term unemployed and there is a fear 
that many of these people may have 
'missed the boat', as they are not 
equipped to benefit from the new 
demand for labour. Many have little 
formal education and training and 
are concentrated in poorer areas 
where demand for labour may be 
slow to pick up (see Chapter 10). 

T u r n i ng to Women 

Companies may seek to attract ever 
more women into employment. Fe­
male participation rates have riser 
rapidly in recent years and it is 
possible that they will continue tc 
do so. However, many of the womer 
c u r r e n t ly not working are con 
s t r a i n ed by h a v i ng to care foi 
children or infirm relatives. For fe 
male labour force participation tc 
continue to rise, more provisions foi 
child care, h e a l th care and jot 

breaks  may  need  to  be  provided 
(see Chapter  7). 

The Member  States  have  varied  in 
their  response  to  these  problems. 
Denmark,  for  example,  has  a  high 
level of state  provision  of child  care 
facilities  whereas  the  UK  has  very 
little.  Where  governments 
insist 
that this is the responsibility of com­
panies,  the  taxation  treatment  of 
such  provisions  may  be  important 
determinants  of their  supply. 

Taking on  Older  Workers 

Participation  rates  of older  workers 
have  declined.  This  trend  has  been 
encouraged  by higher  levels  of  pen­
sions and  early retirement  schemes 
promoted  by governments  to  create 
space  so  t h at  young  unemployed 
workers  could  find  jobs. 

A  policy  of  flexible,  r a t h er 
t h an 
early,  retirement  as  a  way  of  com­
batting  labour  s h o r t a g es  while 
simultaneously  easing  pressure  on 
social security  systems  has been  de­
veloped  by  some  governments.  For 
example, Denmark  has followed  the 
Swedish  example  by  introducing 
legislation  on  partial  retirement. 
This allows  employees  and  self-em­
ployed  people  between  60  and  67  to 
reduce  their  working  time  and  re­
ceive a partial pension.  Participants 
in  the  s c h e me  m u st  h a ve  con­
tributed  to  a  pension  fund  in  a  full 
time job for  at  least  ten  years.  They 
must  work  at  least  nine  hours  less 
a  week  than  before  but  for  over  a 
quarter  of  their  average  working 
hours  over  the  previous  9  months. 
They must  work  between  15 and  30 
hours every week  and  on at  least  20 
days in  every  quarter. 

At  the  beginning  of  1988,  France 
introduced  a  gradual 
retirement 
scheme  for  those  over  60  and  Italy 
also has  a  scheme  so  that  workers 
within  two  years  of  retirement  age 

Chapter  8  The  Demographic  Time  Bomb 

can  work  part-time  and  start  to  re­
ceive  pensions.  However,  there  are 
some costs for older workers  as  final 
pensions  can  be  adversely  affected 
by their being based on the last  peri-
t he 
od  of  e a r n i n g,  r a t h er 
highest. 

t h an 

To  encourage  the  employment  of 
older  workers,  pension  plans  would 
need  to  be  portable  and  neutral  as 
far  as  full-time  and  part-time  work 
is  concerned. 

A  change  in  company  cultures  and 
attitudes  may  be  required  if  older 
workers  are  taken  on  or  retained 
because  they  are  often  regarded  as 
s l o w er  a nd 
to 
change.  Studies  of the  performance 
of older workers do not actually  sup­
port  this  view. 

l e ss  a d a p t a b le 

can  include  lower  voluntary 
tur­
nover  rates,  greater  loyalty  to  the 
employer  and  b e t t er 
familiarity 
with  business  practices. 

S e v e r al  schemes  in  t he  U n i t ed 
States  use  the  concept  of a job  bank 
for  retired  people.  The  law  allows 
retired  people  to  work  for  less  than 
1000 hours  per  year  without  affect­
ing  pension  and  health  benefits. 
Hence  companies  are  able  to  hire 
ex-employees  for  part-time  or  tem­
porary  assignments.  This  reduces 
recruiting  and  training  costs  and  is 
a  substitute  for  the  temporary  wor­
kers  who would  normally be used  to 
cope  with  the  flexibility  of the  com-
s c h e d u l e. 
p r o d u c t i on 
p a n y 's 
C o m p a n i es  h a ve  also  found 
it 
worthwhile  to  continue  to  provide 
training  for  these  older  workers. 

Experience  in  the  United  States 
suggests that the benefits  to the  em­
ployer  of  employing  older  workers 

Although  the US schemes  obviously 
benefit  the  companies  concerned, 
there  is  a  risk  for  public  pension 

86 

Share  of Women  in  Employment  Working 
Part-time  in  the  Member  States 

1987 

%  Total  Employment 

Ρ 

GR 

E 

IRL 

L 

F 

Β 

D 

DK  UK  NL 

99 

Chapter  8  The  Demographic  Time  Bomb 

funding  schemes.  Early  retirers 
who  work  less  than  1000  hours  a 
year  do  not  have  to  make  pension 
contributions  and  the  existence  of 
the scheme may encourage full  time 
workers  to take  early retirement  as 
they  know  there  is the  potential  for 
earning  extra  income when  needed. 
This  both  reduces  the  revenue  base 
for  pension  schemes  and  increases 
expenditure.  Thus  Member  States 
seeking to promote the  employment 
of  older  workers  in  this  way  would 
need  to  examine  the  longer  term 
pension  funding  implications. 

in  u s i ng 

While  there  can  be  an  economic  ad 
t he  h u m an 
v a n t a ge 
r e s o u r c es  of  older  w o r k e rs  for 
longer,  care is needed  to avoid  crea 
ting  situations  where,  in  effect, 
older  workers  are  obliged  to  work 
longer. Although  retirement  is, his 
torically  a  fairly  new  concept  and 
"early"  retirement  a  very  recent 
phenomenon,  both  are  firmly  en 
trenched  in  people's  expectations 
about  the  trade  off  between  work 
and  leisure  over  their  life.  As  with 
the  policy  of encouraging  women  to 
work,  a  policy  goal  of  increasing 
freedom  of  opportunity  and  flexi 
bility  would  seem  appropriate. 

Skill  Shortages 

Within  the  overall  labour  shortage 
problem,  t h e re  are  likely  to  be 
p a r t i c u l ar  s h o r t a g es  of  c e r t a in 
skills. This  problem  will  be  intensi 
fied  unless  a  higher  proportion  of 
young  people  are  prepared  to  re 
main  in education  longer in order  to 

gain  professional  or  vocational 
qualifications. 

t h ey  will  n e ed 

In  recent  years,  young  people  have 
been encouraged  to undertake  addi 
tional  education  and  training  as  a 
response  to  unemployment.  In  fu 
t u r e, 
to  g a in 
qualifications,  not  in  order  to  avoid 
the  dole queue, but  in  order  to  meet 
the  demand  for  skilled  labour.  Em 
ployers  m ay  h a ve  to  offer 
t he 
inducement  of  higher  wages  for 
skilled  labour  to  ensure  that  young 
people  are  prepared  to  forego  the 
i m m e d i a te  p r o s p e ct  of  a  wage 
packet  while  they  remain  in  educa 
tion  or  are  trained.  Women  and 
older  workers  may  also  need  train 
ing if they  are  to meet  this  demand 
and avoid being pushed into low pay 
and  low  skill jobs. 

It  is  unclear  to  what  extent  these 
extra  costs would be met by  govern 
ments  or  companies.  The  savings 
made  by governments  on  education 
as  a  result  of  the  lower  birth  rates 
of  the  1970s  could  be  used  for  this 
purpose  but  these  same  resources 
may need to be channelled  into  sup 
port  for  the  increasing  numbers  of 
elderly.  Investment  in  training  for 
young  people,  unemployed  women 
and  older  workers  and 
indirect 
measures  such  as  better  child  care 
and health  services, will provide  the 
Member  States  economies  with  the 
vital  necessary  resource  for  growth 
-  a  larger  and  more  skilled  labour 
force.  Higher  economic  growth  and 
a  broader  tax  base  would  diminish 
the problem  of  financing  the  elderly 
population. 

100 

Chapter  8  The  Demographic  Time  Bomb 

Recruiting  a nd  Keeping  Women  in  the  Work-
Force  - Some  Company  Responses 

European  companies are increasingly providing creche facilities.  Mid 
land  Bank  in  the  UK  plans  to  set  up  300  workplace  nurseries,  for 
example. IBM has  pioneered  a nationwide  system  to provide funds  to 
recruit,  train  and  licence  new  day-care  providers.  In  the  first  year  of 
the programme, IBM was responsible for creating 4000 new  child-care 
programmes. 

But  provision  of creche  facilities  is  not  the  only  response.  Increasing 
opportunities  for  career  breaks  and  job-sharing  are  also  important. 
Many  career-break  schemes,  eg.  Barclays  Bank  (UK),  apply  only  to 
staff in managerial positions or with management potential but Lloyds 
Bank  (UK)  has  made  all  staff  eligible  for  a  five  year  career  break  to 
enable  them  to care for  pre-school  children. 

Denmark Radio has introduced  a 24 week parental leave scheme  with 
pay,  and  ten  of these  weeks may be taken  by the  father. 

Marks  and  Spencer,  the  retail  chain,  where  85% of the  workforce  is 
female  is employing more  part-time  managers. 

J. Sainsbury, the supermarket  group, has relaxed the requirement  for 
managers  to move between  regions. 

British Telecom is about to introduce a job sharing scheme for  200,000 
people. Employees  in the job share  scheme working a minimum  of 16 
hours a week will be paid on the same basis as their full-time  counter 
parts  and  have  the  same  sick-pay,  maternity  leave  and  pension 
benefits. 

Messerschmitt, BASF and Audi have introduced re-employment  guar 
antees 
leave  because  of.  domestic 
responsibilities.  Opportunities  to  maintain  skills  is  provided  by  en 
couraging these  women  to stand  in  at work for  colleagues who are  ill. 

female  workers  who 

for 

Esso  UK  has  a  career  break  scheme  for  male  and  female  employees 
which can be used for various family reasons, eg. looking after  children 
or elderly parents. The company also runs awareness raising  seminars 
to help  combat  discrimination  against  women  and  ethnic  minorities. 

The  Amsterdam  police  force  has  lowered  its  height  requirement  to 
encourage  the  recruitment  of more  women. 

In  the  United  States,  companies  with  child-care  schemes  have  lower 
labour turnover, lower 'absenteeism, fewer interrupted careers and can 
attract  bright  women  more  cheaply. 

"In tighter labour markets  employers cannot afford  to ignore workers' 
obligations  to  family.  Employers  who  do  will  simply  lose  out  to  em 
ployers who  don't." 

Elizabeth  Dole, US Secretary  of  Labour 

101 

102 

Chapter  9  Vocational  Training  and  Employment 

C h a p t er  9  V o c a t i o n al  T r a i n i ng  a nd  E m p l o y m e nt 

Vocational  education  and  training  systems  are  developing 
rapidly  to meet  the  new  demands  of Europe's 
labour  market.  But  is  the  rate  of  investment 
resources sufficient 

to  meet  the  changing  needs? 

converging 

in  human 

Introduction 

Vocational  education  and  training 
measures  have  assumed  a  central 
position in the responses of Member 
States to the  structural  changes  ex 
perienced  over  the  past  decade. 

However, while there is now a broad 
consensus  within  the  Community 
over  the  positive  effects  of  voca 
tional  education  and  training  on 
employment,  policy  responses  have 
been extremely diverse and  perhaps 
not always timely or  comprehensive 
enough to deal  with  the rapid  devel 
opments 
by 
economic,  t e c h n i c al  a nd  demo 
l a b o ur 
graphic  c h a n g es  on  t he 
market. 

b r o u g ht 

a b o ut 

Traditional  employment  and  career 
patterns  have  changed  with  fun 
damental  consequences  for 
t he 
qualities,  aptitudes  and  skills  now 
required  to  enter  and  stay  in  work. 
In such  a  climate,  the  role  of  initial 
and  continuing  vocational  training 
in meeting these  requirements,  and 
in  providing  an  adequately  skilled 
workforce  to  satisfy  the  demand  of 
both  current  and  future  economies, 
is  crucial,  and  wholly  justifies  the 
increased  priority  which  Member 
States are now placing on the  devel 
v o c a t i o n al 
t h e ir 
opment 
education  and  training  provision. 

of 

The  trend  recently  has  been  to 
w a r ds  an  extensive  revision  of 
education  and  training  policies  to 
m e et  c u r r e nt  needs.  Frequently 
progress in Member  States has  been 
h i n d e r ed  by 
t he  b a g g a ge  of 
measures  introduced  in  the  early 
1980s, based  on the  perception  t h at 
the  exceptionally  high  unemploy 
ment  was  a  cyclical  rather  than  a 
structural  phenomenon.  Measures 
therefore  focussed  on  'make-work' 
schemes  for  the  supposedly  tempo 
r a r i ly  u n e m p l o y e d,  a nd  on 
t he 
removal  of  surplus  labour  from  the 
active  labour  market  via  early  re 
tirement  schemes. 

Such  m e a s u r es  were  essentially 
short-term.  They  ignored  warnings 
of the  'demographic  time-bomb'  (see 
Chapter  8)  and  the  equally  clear 
indications that the demand for  new 
types  of skills  and  the  development 
of  new  working  patterns  would  re 
quire  t he  existing  workforce 
to 
adapt  and  retrain  if  further  unem 
ployment  were  to be  avoided. 

The  current  situation  across  Mem 
ber States sees vocational  education 
and  training  as  an  accepted  part  of 
policy  responses  to  changes  which 
are  clearly  identified  as  structural. 
H e re  too,  m e a s u r es  h a ve  been 
short-term,  characterised  by  the 
proliferation  of  training  schemes 
aimed  particularly  at  the  long-term 

u n e m p l o y ed  a nd  young  people. 
Such  schemes  were generally  based 
on  limited  analyses  of  labour  mar 
ket  needs,  and  the  provisional  and 
f r a g m e n t ed  n a t u re  of  r e s u l t i ng 
training  provision  has  made  effec 
tive  Community-level  analysis  and 
evaluation  extremely  difficult. 

The  situation  is  improving  grad 
u a l ly  as  M e m b er  S t a t es  m a ke 
training 
greater  efforts  to  adjust 
systems  to  the  demands  of  accel 
erated  economic  development,  but 
the  signs  are that  this is again  tend 
ing  towards  short-term  action  to 
stop  the  gaps  rather  than  the  com 
prehensive  investment  in  future 
training needs t h at will have to take 
place  if  the  Community  is  to  con 
tinue  competing  successfully  on  a 
world  market  (see  Chapter  3). 

Identifying  Training 
Needs 

Recent studies have highlighted  the 
main  factors  defining  current  train 
ing  needs: 

• 

technological 
progress  which 
has  created  new  potential  for 
automation; 

•  changes 

in  the  functions  and 
skills  required  of  workers,  as  a 

103 

Chapter  9  Vocational  Training  and  Employment 

result  of  these  technological  ad 
vances; 

•  new  industrial  strategies  in  re 
sponse  to  a  developing  market 
and  the  resulting  new  demands 
placed  on  the  workforce; 

•  demographic  changes 

in 

the 

workforce; 

• 

the  development  of  new  Euro 
industrial  and  economic 
pean 
for 
in  preparation 
structures 
1992  and  the  Internal  Market; 

•  new  developments, 

as 
stand 
stricter  environmental 
ards,  which  need 
specialist 
skills for  their  implementation; 

such 

• 

the  mobility  of workers,  and  the 
skills  and  qualifications  curren 
tly  available  on 
labour 
market. 

the 

The  requirements  which  these  de 
velopments  place  on  the  workforce 
will obviously have to be met  largely 
by  the  existing  population  since 
they  will  make  up  the  majority  of 
the  active  workforce  until  the  year 
2000.  The  European  Community 
will have to rely largely on its  exist 
ing  human  resources  in  competing 
in  the  evolving world  economy. 

This  gives  particular  emphasis  to 
the need  to exploit the full  potential 
of  all  members  of  the  workforce, 
particularly women, and to re-equip 
older  workers  with  new  skills. 

Yet,  the  signs  are  that  the  working 
population of the Community  is cur 
rently  unprepared  to  meet  such 
challenges,  implicit  in  the  paradox 
in  the  Community's  labour  market 
-  continuing  high  levels  of  unem 
ployment,  especially  among  the 
young  (see  Chapter  10)  contrasted 
with  severe  skills  s h o r t a g es 
in 
many  sectors  of industry.  The  rela 

nature  or  level  of  their  academic 
qualifications.  The  German  situ 
ation,  where  over  a  third  of  girls 
choose  from  only  five  occupational 
options,  is  indicative  of  the  overall 
Community  position. 

The  situation  is  no  more  encoura 
ging  for  higher  level  qualifications. 
In  all  Member  States,  industry  is 
reporting  shortages  of young  people 
with  a p p r o p r i a te  qualifications, 
particularly  in  electronics,  engin 
eering,  computer  science,  logistics, 
chemistry,  information  technology. 

Educational  institutions  still  seem 
to  find  it  h a rd  to  attract  young 
people  into technical  studies  rather 
than  the  humanities.  Only  39  new 
students  per year  are recruited  into 
technology  per  100,000  inhabitants 
in  Europe,  compared  with  77 in  the 
United  States  and  76 in  Japan. 

New  Developments, 
New  P a r t n e r s h i ps 

t r a i n i ng  w h i ch  a i ms 

Given this  scenario, Member  States 
have  aimed  to  develop  more  com 
prehensive  vocational  education 
and  training  programmes.  In  par 
t i c u l a r, 
t h e re  h as  been  a  vast 
expansion  in  pre  and  initial  voca 
t i o n al 
to 
integrate  young  people  into  the 
world  of  work.  The  problem  has 
initial 
been  for  educational  and 
training  systems  to  identify 
the 
needs  of  industry.  It  is  especially 
difficult  for the educational  world to 
anticipate  technological  develop 
m e nt  or  to  f o r e c a st 
t he  skills 
requirements  for  which  education 
and  training  have  to  cater. 

The  emphasis  in  future  will  no 
longer  be  on  the  need  to  adapt 
people  to  the  application  of  new 
technologies  by  training  (reactive 
training),  but  on  preparing  people 
for  a  society  in  which  new  techno-

tionship  between  levels  of  unem 
p l o y m e n t,  p a r t i c u l a r ly  chronic 
long-term  unemployment,  and  the 
level  of  educational  and  vocational 
qualifications  has  now  been  widely 
accepted. Certainly, people with low 
or  no  relevant  qualifications,  are 
the  majority  among  those  with  em 
ployment  difficulties. 

P r e p a r a t i on  of  Young 
People 

Youth  unemployment  has  been  a 
significant  feature  of  the  labour 
market  in  the  1980s. Although  un 
employment  is falling  overall  in  the 
Community,  unemployment  among 
people  under  25,  at  20%  in  April 
1989, is  still  high  (see  Chapter  10). 

Socio-economic  and  individual  cir 
cumstances  of  young  people  vary 
enormously  across  the  Community, 
but  certain  trends  can be  identified: 

•  a 

significant 

proportion 

of 
young  people  abandon 
their 
studies  before  the  end  of  com 
pulsory  schooling,  or  leave  with 
no  diploma  or  qualifications 
(between  10-30%); 

•  access  to  training  is  usually  de 
nied  to  young  people  without  a 
school  leaving  certificate; 

tend 

•  young  people  without  training 
qualifications 
to  experi 
ence  far  greater  job  instability 
as  they  get  older  than 
those 
and 
with  some  qualification, 
are  also  more  likely  to  become 
long-term  unemployed. 

At the same time, young people  who 
undergo  initial  t r a i n i ng  tend  to 
choose  a  very  limited  range  of  op 
tions. This is particularly  noticeable 
among  girls,  the  vast  majority  of 
whom  go for  secretarial,  catering  or 
'caring-type' jobs,  regardless  of  the 

-  104 

logies  will  be  universal  (pro-active 
training). 

Vocational  training  should  be  seen 
as a  strategic  weapon.  It  must  lead 
to achieving  skill  profiles  that  will 
help  people  to  adapt  to  permanent 
change in work activities and  stimu 
late  the  process  of 'learning  how  to 
learn'. 

In  all  Member  States,  education 
and training  systems  have  begun  to 
be  adapted  to  suit  these  require 
ments.  Four  main  fields  of  action 
can  be  identified  from  the  range  of 
so-called  'transition'  projects  for 
young people moving into the  labour 
market; 

• 

forging  closer 
links  between 
schools  and  the  economic  world, 
including  the  development  and 
implementation  of  more  varied 
forms  of  work  experience,  the 
use  of  the  world  of  work  as  a 
initia 
learning  resource,  and 
tives  to  foster  a  more  pro-active 
spirit 
and 
'entrepreneurial' 
among 
and 
schools; 

people 

young 

• 

improved  guidance  and  coun 
selling to meet  new  needs; 

•  measures  designed  to  remedy 
failure  and  to  provide  fairer  op 
portunities  for  poorly  attaining 
young 
and 
people; 

disadvantaged 

•  help  for  teachers  to  cope  with 

new tasks  and  new  roles. 

In  most  cases,  programmes  have 
adopted  a  comprehensive  approach 
encompassing  all  facets  of  their 
work  with  young  people's  transi 
tion.  T h is  p h i l o s o p hy 
is  now 
beginning  to  have  a  real  influence 
on  the  provision  of  m a i n s t r e am 
training  and  education. 

Chapter  9  Vocational  Training  and  Employment 

In  all  Member  States  attempts  are 
being  made  to  foster  new  forms  of 
partnership  between  the  various 
agencies  responsible  for  youth  edu 
cation  and  training  (Ministry  of 
Education,  Ministry  of  Employ 
ment,  individual  firms,  schools  and 
training  institutions). 

• 

• 

include 
These  new  p a r t n e r s h i ps 
new  forms  of  linked  work  experi 
ence  and  training  in initial  training 
or  integration  schemes,  involving 
educational  and  industrial  circles. 

in  Spain,  nearly  10,000  stu 
dents  in  Andalusia  were  given 
in  1988  as 
work  placements 
train 
part  of  their  vocational 
ing,  with  over  4,000 
firms 
involved; 

several  Member 

States, 
in 
United  States  style 
'compacts' 
between  schools  and  local  in 
dustries 
urban 
renewal  and  regional  develop 
ment 
up, 
introducing  'industrial  tutoring' 
and  'enterprise  education'. 

promote 

have 

been 

set 

to 

The  picture,  across  Europe,  and 
p a r t i c u l a r ly  between  n o r th  and 
south,  is  not  uniform.  In  northern 
Europe  industry  is  increasingly  co 
operating  with  schools  providing 
compulsory  (i.e. up  to  about  age  16) 
or general  education.  In  other  parts 
of  Europe,  the  picture  is  different: 
there,  firms  are  just  beginning  to 
develop  ways  of  supporting  techni 
cal  and  vocational  training  but  are 
rarely  involved  with  compulsory  or 
general  education  schools.  Yet  in 
c r e a s i n g ly 
to 
distinguish between general and vo 
vocational 
cational  education,  as 
training becomes more general,  and 
many  compulsory  or  general  cours 
es 
p r e - v o c a t i o n al 
character. 

is  difficult 

a s s u me 

it 

a 

The  range  of  projects  being  intro 
duced  is  extremely  varied,  as  the 
examples  below  demonstrate: 

• 

• 

the 

in  U.K., 
two-year  Youth 
Training  Scheme,  incorporating 
vocational  study  and  work  ex 
perience, 
the 
normal  route  for  young  people 
into  employment; 

increasingly 

is 

in  Germany,  50%  of  all  school-
age  pupils  have  an  apprentice 
firm  as  part  of  a 
ship 
programme  of  introduction 
to 
the  world  of  work; 

in  a 

- 1 0 5-

These  examples  are  only  a  small 
selection  from  the  wide  diversity  of 
initiatives  across  Member  States  at 
national,  regional  and  local  level 
but they illustrate the  opportunities 
for  greater  collaboration  between 
parties  with  an  interest  in  training 
and  education. 

Continuing  Training 

People  already  in  the  workforce  are 
finding  increasingly t h at their  skills 
are  no  longer  relevant.  The  Com 
munity  already  experienced,  in  the 
late  1970s  and  early  1980s,  large 
scale  redundancies  of (mainly)  men 
with  obsolete  skills  in  traditional 
industries  such  as  coal,  steel,  ship 
building. 

In the face  of the current  difficulties 
in  r e c r u i t i ng  a  suitably  skilled 
workforce,  it  is  unlikely  that  the 
Community  will  experience  a  simi 
lar  scale  of  redundancies  in  the 
1990s.  A  new  approach  to  re-skill-
ing  is  emerging,  with  companies 
treating  their  workforce  as  part  of a 
p e r m a n e nt  investment  to  be  de 
veloped  and  trained  in  a  continuing 
process.  Changes  in  attitude  are 
nevertheless  proceeding only slowly 
and  an  examination  of  the  current 
for 
s i t u a t i on  offers  m u ch  food 
thought. 

Chapter  9  Vocational  Training  and  Employment 

labour  market  have  only 

the 
completed  primary  education. 

The factors  which  determine the  ex 
i s t e n ce  a nd  e x t e nt  of  on-going 
training  include: 

Current  Situation 

d a ta 

It-is extremely  hard  to establish  ac 
at 
c o m p a r a b le 
c u r a t e, 
Community  level  on  the  in-service 
training  of  employees.  Statistical 
records  are incomplete, and  in  some 
Member  States  no  statistics  are 
available. 

Further,  Member  States  differ  over 
the fundamental  principles  relating 
to continuing training and  their  im 
plementation.  There  are  debates 
over  the  relative  importance  of  the 
roles  of  public  authorities  and  the 
two  sides  of industry,  and  over  who 
foots  the  bill. 

However, just  as Member  States  all 
face  the  same  economic  and  social 
pressures,  so their  policy  responses 
are tending to converge. In all Mem 
ber  States,  the  need  for  on-going 
training  to  provide  employees  with 
skills  that  allow  enterprises  to  de 
velop  flexibility  in  the  face  of  new 
challenges  is  now  widely  acknow 
ledged. 

An  examination  of  the  levels  of  in 
itial  t r a i n i ng  among  t he  active 
populations  of  the  Member  States, 
reveals  the  enormity  of such  aims: 

•  75%  of  employees 

in  Greece 
have  attained  only  a  basic  edu 
cation  certificate; 

•  50%  of  employees 

in  France, 
and  30%  in  the  Federal  Repub 
no 
of  Germany 
lic 
vocational  qualifications; 

have 

Skills  acquired  on  the  job  must  of 
course  be  taken  into  account,  but  a 
minimum  level  of  education  is  be 
coming  an  essential  prerequisite  of 
the training needed  in a knowledge-
based  economy. 

• 

• 

Despite  acceptance  that  skills  are 
increasingly a condition for  mobility 
and  adaptability  and  for raising  the 
vocational  and  social  level  of  wor 
kers,  in-service  training  of  workers 
still  tends  to be in  the  form  of  short 
courses focused on updating of skills 
not  leading to any recognised  quali 
fications. 

In  countries  such  as  D e n m a r k, 
France  or  Luxembourg,  where  suf 
ficient  data is available, the  average 
is about two weeks training per year 
with  no significant  upward  trend,  a 
pattern  likely to be found  across  the 
Community. 

The  establishment  of  longer  train 
ing  courses  tends  to  be  limited  to 
certain  types  of  large  firms  (in  the 
electricity  and  electronics  sectors, 
banking, processing industries)  and 
some  small  or medium-sized  indus 
tries  in  advanced  technology  areas 
(computers,  services). 

The  Federal  Republic  of  Germany 
appears to be an exception  although 
the  proportion  of  vocational  train 
by 
ing 
companies  is  considerably 
lower 
than,  for  example,  in  France  (29 
hours  as  against  52 hours  in  1984). 

e x c l u s i v e ly 

f i n a n c ed 

•  8%  of  the  economically  active 
population  in  Portugal  is  illite 
rate,  while  over  75%  have  no 
educational  or  vocational  quali 
fications; 

•  28%  of  young  Spaniards  be 
tween  16-24  currently  entering 

On  the  whole,  these  short  training 
periods  are  mainly  short-term  re 
sponses  to  immediate  needs,  and 
are  rarely  p a rt  of  a  continuous 
training  process  intended  to  de 
velop  new  capabilities  and  qualifi 
cations. 

106 

the  size  of  the  company  with 
larger 
providing 
more  in-service  training; 

companies 

almost 

the  level  of  initial  training  al 
ready 
adage 
acquired.  The 
'money  goes  to  money'  can  be 
accurately  applied  to  in-house 
everywhere. 
training 
The  disparities  between  em 
ployees  with  or  without  initial 
training  tends  to  be  further  ac 
centuated  by  in-house  training 
procedures,  particularly  in  big 
ger  companies. 

New  Developments 

A new feature  is the  development of 
training  undertaken  by certain  sec 
the 
t o rs  of  i n d u s t r y,  m i r r o r i ng 
increased  involvement  of  industry 
in  the  training  of young  people,  de 
scribed  above.  This  has  happened 
more  in  certain  countries  (Den 
m a r k,  Federal  Republic,  United 
Kingdom)  than  in  others  (France, 
Portugal,  Spain,  Italy)  and  is  char 
acterised  of common  factors: 

• 

• 

individual  sectors  are  involved 
increasingly  in  negotiations  on 
then  en 
training  which  are 
shrined 
agree 
in 
ments  (Ireland,  France,  Italy, 
Netherlands,  Federal  Republic, 
Denmark). 

collective 

individual  sectors  are  increas 
ingly  determining  the  content 
and  practical  implementation  of 
training  schemes.  The  fact  that 
the  concept  of 
to 
training'  has  already  emerged 
and  is  being  applied  well  ahead 
of any  legislative  or  other  provi 
sions is  significant. 

'right 

the 

Chapter  9  Vocational  Training  and  Employment 

• 

industry 

individual  sectors  are  producing 
forecasts  of  qualification  and 
training  requirements  e.g.  the 
joint  Committee  in  the  chemi 
cals 
the  Federal 
in 
Republic  of  Germany;  forecasts 
in  the  transport, 
textiles  and 
trade  and  distribution  sectors 
in  France;  organisation  of  for 
ward  planning  of  skills  in  the 
metalworking  and  electronics 
sectors in  Denmark. 

In the countries of southern  Europe, 
where  the  role  of  the  State  has  al 
ways  been  clearly  established,  both 
as  a  source  of  financing  and  as  an 
organiser of training through  bodies 
such  as  IEFP,  INEM  or  OAED,  the 
trend  is  somewhat  reversed  in  t h at 
Spain  and  Greece  alike  have  re 
minded  firms  of  t h e ir  responsi 
bilities  and  made  it  mandatory  for 
employers  to  participate  in  worker 
training. 

The Relationship  of 
State  a nd  E n t e r p r i se 

In  most  Member  States,  the  usual 
division  of  roles  involves  State  re 
sponsibility  for  initial  vocational 
training,  occupational 
integration 
and unemployment,  while  firms  are 
responsible  for  the  training  of  their 
own  workers.  This  simple  view  of 
things  is  tempered  by  a  detailed 
analysis  of the  situation  in  individ 
ual  countries. 

Although  in  the  Federal  Republic, 
the  Netherlands,  France  and  Den 
mark  there  is  a  sharp  delineation 
between  the  various  areas  of  re 
sponsibility,  the  actual  situation 
reveals  a  more  complex  picture,  in 
cluding; 

• 

the  responsibility  for 
training 
skilled  and  semi-skilled  wor 
kers  in  Denmark  assumed  by 
governmental  authorities; 

•  financial 

the 
incentives 
Netherlands  in  key  areas  of  em 
ployment, 
and 
technological  growth; 

economic 

in 

•  a  drive  to  promote  the  acquisi 
the 
tion  of  qualifications 
Federal  Republic  of  Germany, 
with  government 
for 
training  in  priority  areas. 

financing 

in 

t he  d i f f e r e nt 

The  development  of  the  respective 
roles  of  the  State  and  of  firms  re 
flects 
t y p es  of 
financing  of  worker  training.  The 
concept  of  'co-investment'  by  the 
various  parties  or  partners  respon 
sible  for  t r a i n i ng  is  now  widely 
accepted.  The  relative  contribution 
of the various providers of  finance  in 
some  Member  States  can  be  ex 
pressed  as  follows: 

• 

• 

• 

financing  50%/50%  State  or  Re 
in  Denmark, 
gion/Firms 
France; 

as 

financing  40%/60%  State  or  Re 
Federal 
as 
gion/Firms 
Republic, United  Kingdom; 

in 

financing 

three-way 
Firm/State/European 
munity  as 
Portugal,  Italy. 

Com 
in  Greece,  Spain, 

The individual  worker is an  increas 
ingly  significant  element  in 
the 
financing 
of  training.  There  are, 
however,  no  reliable  figures  of  the 
amount  of time  each  worker  spends 
on  training  outside  working  hours 
or  the  travel  and  personal  costs  in 
curred. 

The  changing  approach  to who  pro 
vides  training  is  demonstrated  in, 
for  example,  tax  incentives  for 
t r a i n i ng  in  Netherlands,  United 
K i n g d om  or  F e d e r al  R e p u b l i c. 
While  worker  training  remains  pri 

107 

marily  a  matter  for  the  firms  con 
cerned,  new  financial  partnerships 
are  emerging  in line with  the  recog 
nition  of  co-responsibility. 

A  Community 
Response 

to  new  develop 
The  references 
ments  both  in  initial  and  in-service 
training  suggest  that  new  forms  of 
partnerships  are  being  developed. 
This  response  is  a  recognition  that 
training  provision  cannot  be  con 
sidered  in  isolation  from  the  local, 
regional  or  national  socio-economic 
environment,  and  the  needs  of  the 
economy; nor  can  initial  training  be 
divorced  from  continuing  training, 
since  the  two  are  closely  linked. 

Gradually  Member  States  are  mov 
ing  away  from  a  purely  national 
approach  to their  training  and  edu 
c a t i on 
t o w a r ds 
p r o b l e ms 
partnership  at  Community  level. 
This  is  a  r e s u lt  of  t he  growing 
awareness  t h at  the  European  Com 
munity  is  a  single  if  heterogeneous 
unit,  experiencing  very  similar  so 
cial  and  economic  pressures. As  the 
Community  develops  into  a  single 
market, new trans-European  indus 
trial  and  economic  structures  are 
being  created  which  will  reinforce 
the  sense  of a  shared  experience. 

The  increased  mobility  of  workers, 
made  possible by the  wider  recogni 
t i on  of  q u a l i f i c a t i o ns 
f u r t h er 
reinforces  the  need  for  a  common 
approach  to  meeting  future  man 
power  requirements.  It  also  raises 
i s s u es  r e g a r d i ng  i n v e s t m e nt 
in 
training  carried  out  in  one  Member 
State but  which  subsequently  bene 
fits  others  Member  States  because 
of migration  (see  Chapter  14). 

At Community  level, much has  been 
done  to  improve  training  provision 
throughout.  Following  two  exten-

Chapter 9 Vocational Training and Employment 

sive 'Transition Programmes' run 
by the Commission (1977­82 and 
1983­87) to complement activity 
within Member States on improv­
ing the education and training of 
young people, Member States gave 
a commitment, in the Council Deci­
sion of December 1987, to offer all 
young people at least two years 
training after the end of compulsory 
education. 

The Council Decision also set up the 
PETRA Programme for European 
Youth Training to further the devel­
opment of youth training policies in 
Member States. Through the devel­
opment of a European network of 
s e l e c t ed i n n o v a t i ve p r o j e c t s, 
PETRA aims to develop a European 
partnership in the vocational train­
ing of young people, as well as 
emphasising the value of links at 
national, regional and local level. In 
particular the Programme stresses 
the value of new forms of active 
l e a r n i ng a nd t he promotion of 
g r e a t er initiative among young 
people. 

The development of partnerships at 
all levels is also a major feature of 
the Commission's policy on conti­
n u i ng t r a i n i n g. Of p a r t i c u l ar 
interest has been the development 
of relationships between social part­
n e rs a nd public a u t h o r i t i es at 
regional level and at enterprise or 
sector level. 

In all training, (including that of 
unemployed people, whose particu­
lar situation it has not been possible 
to explore here) there are two focal 
features. First, the need to remove 
administrative rigidities and com­
p a r t m e n t a l i s a t i o n, which h a ve 
impeded the t r a n s l a t i on of new 
policies into effective action. The 
Commission has a key facilitating 
role to play here. Secondly, there is 
the need to develop a commitment 
throughout the Community to life­

87 Social F u nd Budget 

1977 ­ 1993 

6000 

4 0 00 

2 0 00 

1988 

4 00 

3 00 

2 00 

- 100 

Million ECU 

6 0 00 

4 0 00 

2 0 00 

1977 1979 1981 1983 1985 1987 1989 1991 1993 

88 Number of Persons Assisted by Social F u nd 

1000s 

4 00 

Π Women ■ Men 

3 00 

2 00 -

rao 

UK E I GR Ρ F IRL D NL Β DK L 

108 

89 Number of Persons Assisted by Social F u nd 

as a P r o p o r t i on of Labour Force 1988 

% Labour Force 

D Women ■ Men 

15 

10 

ami! 

D NL DK Β F I L UK Ε Ρ GR IRL 

Chapter 9 Vocational Training and Employment 

20 

15 

10 

long training and learning, to create 
a more flexible, adaptable work­
force capable of responding to new 
skills needs. Again, the Commission 
h as a role to play in promoting 
awareness and influencing training 
provision through the dissemina­
tion of new ideas, and by promoting 
linkages and dialogue between the 
providers of initial and continuing 
training. 

In relation to these issues, there is 
now the opportunity for Member 
S t a t es to revise t h e ir t r a i n i ng 
strategies in the light of pressing 
future needs, and to reflect on the 
m e a ns of d e v e l o p i ng effective, 
coherent vocational training and 
education systems, at both initial 
and continuing levels. 

This challenge must be met to en­
sure that Europe can respond, with 
a qualified and able workforce, to 
the economic and social demands 
ahead in the 1990s. 

90 Targetting of t he Social F u nd 

1988 

200 

400 600 

800 1000 

; 

1200 

Β ' Women 
■ Men 

f 

Uneripl 

0 200 400 600 800 1000 1200 

Thousands 

109 

E u r o p e an Social 
F u nd ­ Support for 
Training, Guidance 
and Recruitment. 

The European Social Fund 
is the principle source of 
Community funding for vo­
cational training and 
employment creation. Com­
munity funds are generally 
matched by national funds. 
The budget has increased 
considerably since the late 
1970s with a planned in­
crease up to 5,200 million 
ECU in 1993. The operation 
of the Community structu­
ral funds has been 
completely revised from 
1990 onwards as presented 
in Chapter 16. The charts 
show the use of Community 
funds in 1988, under the 
current rules. 

Chapter  9  Vocational  Training  and  Employment 

Community  Education  a nd  Vocational  Training  Programmes 

ERASMUS  Programme 

1st phase  on-going  1988-1990 
2nd phase  planned  for  1991-1993 

People Involved: 

Students  in higher  education.  Participation  of 43,000  students  and 
1,500  higher  eduction  institutions  in the first  phase. 

Objective: 

Activities: 

Increase the  mobility  of students in higher  education  in the  Community 
and  add  a European  dimension  to their  initial  training. 

European  network  of inter-university  co-operation.  Grants  for  students 
to spend  a period  of training  in  another  Member  State. Measures  to 
develop the  academic recognition  of diploma. 

COMETT  Programme 

1st phase  on-going  1987-1989 
2nd  phase  planned  for  1990-1994 

People Involved: 

Students  in higher  education  and  staff  from  enterprises  participating 
in  1987-1988.  1,320  projects  and  1,400  students. 

Objective: 

Activities: 

Stimulate  university-industry  co-operation  in order to improve  high 
level training linked  to new  technologies. 

University-industry  partnerships. Transnational  placements  for 
students  in enterprises. Joint  continuing training  projects. 

Youth  for Europe  programme 

1st phase  on-going  1989-1991 
2nd  phase  planned  for  1992 

People Involved: 

Young people from  15 to 25 years  old. Participation  in the  first  phase: 
80,000 young people. 

Objective: 

Activities: 

Improve, develop  and  diversify  young peoples exchanges  in  the 
Community. 

Support  for young people's exchanges  of at  least  1 week.  National 
agencies for  information  and  co-ordination  of the  programme.  Study 
visits  and  assistance  for training  courses for  the organisers  of youth 
exchange. 

Exchange  of young workers  programme 

3rd  phase  on-going  1985-1990 
4th  phase  planned  for  1991 

People Involved: 

Young workers  or job seekers  of 18 to 28 years  old. Participation  in 
1987-1988. 7,000 young people. 

Objective: 

Activities: 

Offer  training  or work  experience  for young people in  another 
Member  State. 

Support  for  short  (up to 3 months)  or longer  (up to  16 months)  periods 
of work or training for young people in  another  Member  State.  Ex 
change  network. 

PETRA  Programme 

1st phase  on-going  1989-1992 

People Involved: 

Young people in vocational  training following  full-time  compulsory  edu 
cation.  154 training initiatives  in  1989. 200 youth  projects. 

110 

Chapter  9  Vocational  Training  and  Employment 

Objective: 

Activities: 

Support, with  a Community  added-value, the implementation  of the 
Council  Decision  of the vocational  training  of young  people. 

European  network  of vocational  training initiatives  in the form  of 
transnational  partnerships  Initiatives  and  information  projects 
managed  by young people themselves. Co-operation  in the  research 
field. 

IRIS  Programme 

1st phase  on-going  1988-1992 

People  Involved: 

Women  in vocational  training.  71 projects  in  1989. 

Objective: 

Activities: 

Develop the  access of women to vocational  training. 

Network  of innovative  projects  in vocational  training for  women. 

EUROTECNET  Programme 

1st phase  on-going  1985-1989 
2nd  phase  planned  for  1990-1994 

People Involved: 

Young people and  staff  of enterprises  in initial  or continuing  training. 
135 demonstration  projects  in  1989. 

Objective: 

Activities: 

Dissemination  throughout  the  Community  of innovations  in the  area 
of vocational  training linked  to new  technologies. 

European  network  of demonstration  projects  in initial  and  continuing 
training.  Co-operation  in the  research  field. 

ARION  Programme 

Activities began  in  1978 

People Involved: 

Education  policy-makers  and  experts.  3,200  study  visits  since  1978. 

Objective: 

Activities: 

Improve  mutual  understanding  of the  education  systems. 

Study  visits  of one week's  duration. 

LINGUA  Programme 

1st phase  planned  for  1990-1994 

People  Involved: 

Pupils  and  teachers  from  secondary  and  higher  education. Whole of 
the  current  workforce. 

Objective: 

Activities: 

Improve  the  quantity  and  quality  of language  training  for  the  citizens 
of the  Community. 

Support  for initial  and  continuing  training  of teachers  (linked  with 
ERASMUS). Drawing up  of teaching  materials. Pupil  exchanges. 
Diagnosing the  language  needs of the  business  world. 

Education  of migrant  workers  children  programme 

Activities began  in  1977 

People  Involved: 

Primary  and  secondary  schools with  migrant  children.  15 pilot  projects 
in  1988. 

Objective: 

Activities: 

Improve  the  integration  of migrant  children  at  all levels of the 
education  system. 

Pilot  projects  relation  to the  teaching  of the  mother  tongue.  Teacher 
training.  Education  for  returning  migrants. 

I ll 

Chapter  9  Vocational  Training  and  Employment 

The  Commission's  Environmental  Training 
P r o g r a m me 

In  1982 the  European  Parliament  entered  a  new  budget  heading  in 
the  Community  budget  for  actions  concerned  with  the  broad  field  of 
employment and environment. In particular the Parliament called for 
in the first  instance "descriptive analyses in respect of training  needs 
for  environmental  specialists  to  conserve  and  improve  the  environ 
ment".  This request  resulted  from  the  Parliament's  concern  that  the 
implementation  of Community  environmental  legislation  was  being 
hindered  by the lack of suitably  qualified  personnel. 

In  1985  the  Parliament  received  a  first  report  which  provided  a 
detailed  descriptive  analysis  of the training needs in the  Community 
and confirmed that the implementation  of Community  environmental 
policies was inhibited by the lack of adequately trained  personnel. On 
the basis of the  descriptive  analysis, a series of more concrete  actions 
has  now been undertaken  covering a wide range  e.g.: 

• 

• 

• 

• 

training for operators  of pollution  control in  industry; 

training and advice for public agencies concerned with waste water 
treatment; 

training in environmental  impact  assessment; 

training in environmentally  friendly  agricultural  practice. 

During  the  European  Year  of  the  Environment  (21.3.87-20.3.88) 
emphasis was laid on actions - courses and seminars - that would have 
an  impact  on  public  awareness  and  improve  environmental  good 
practice  within  the  Community.  The  Commission  plans  to  present 
shortly  a  synthesis  report  on  all  activities  undertaken  to  date, 
together  with  a strategy  for  future  action. 

- 1 1 2-

Chapter 10 Unemployment ­ A Social as well as a Labour Market Problem 

Chapter 10 Unemployment - A Social as well as a Labour 

Market Problem 

Unemployment has begun to fall, but a decade or more of 
high unemployment has left a legacy of problems. Those out 
of work for a long time are still hav mg great difficulty 
getting back into jobs. 

Unemployment in the European 
Community has been falling since 
1986. However, it still stands at 15 
million, or 9.3 % of the working 
population on the latest Community 
definition (see Box) and has been an 
unwelcome but persistent feature of 
the European labour m a r k et for 
over a decade. 

Unemployment rose each year be­
tween 1973 and 1986, with the 
sharpest increases in the periods 
following the two oil price shocks ­
rising from 2.4% to 5.0% between 
1973 and 1976 and from 5.8% to 
11.1% between 1980 and 1986. Be­
tween the summer of 1986 and 1988 
u n e m p l o y m e nt s t a b i l i s ed a nd 
eventually b e g an to fall (see 
Graph 2 in Chapter 1). 

From 1960 up to the early 1970s, 
when Community unemployment 
averaged between 2% and 3%, only 
Ireland and Italy faced unemploy­
ment much above those levels, the 
rate rarely falling much below 5%. 

The experience of the late 1970s and 
the 1980s have been rather differ­
ent. Ireland still remains well above 
the Community average (with a 
rate of around 17%), but it has been 
passed by Spain which, since the 
mid­1970s (when it had one of the 

lowest recorded u n e m p l o y m e nt 
rates in Europe), has experienced a 
massive increase in unemployment 
to over 20% in the mid­1980s. It is 
still around 18%. 

In most other countries, unemploy­
ment followed a similar upward 

path from 1975 to 1985, with two 
countries, the United Kingdom and 
Portugal, showing the most signifi­
c a nt r e d u c t i o ns in r e c o r d ed 
unemployment between 1986 and 
1989. 

91 Trends in U n e m p l o y m e nt R a t es in t he 

C o m m u n i ty - Average, H i g h e st a nd L o w e st 

1964-1988 

Va Labour Force 

25 

20 

1b 

10 

/ 

• 

- RL DK i S 

H L/ / 

1 

5 

■ DK DK 

RL 

s / ^/ GR 

Ρ 

D DK , · ' "" 

2b 

E 

20 

15 

10 

D 

\DK DK ρ 

1964 1968 1972 1976 1980 1984 

1988 

­ 1 13 

Chapter 10 Unemployment ­ A Social as well as a Labour Market Problem 

Currently the Member States can 
be grouped as follows: Luxembourg 
on its own with less than 2%; the 
United Kingdom, Portugal, Greece, 
the Federal Republic of Germany 
and Denmark with rates between 
5% and 10%; Belgium, the Nether­
lands, France and Italy around 
10%; and Ireland and Spain with 
17% and 18% respectively. 

The Effects of P a st 
Recessions 

In the 1960s it was normal to think 
of labour markets in terms of the 
flow of people into and out of jobs, 
with some occasionally spending 
short periods of time unemployed 
prior to returning to work. In those 
c i r c u m s t a n c e s, u n e m p l o y m e nt 
rarely featured in most people's 
working lives with the exception of 
certain disadvantaged groups who 

may have found themselves out of 
work for longer periods. 

The 1974 oil crisis and the recession 
of 1981 hit the economies of Member 
States so hard that at times their 
impact on labour forces was redol­
ent of the 1920s and 1930s. At the 
height of these crises, few people 
were completely immune from the 
t h r e at of u n e m p l o y m e n t. Even 
those who were normally stable and 
permanent members of the labour 
force suddenly found themselves 
out of work, often for long periods, 
simply because they were in the 
wrong place, in the wrong job at the 
wrong time. Equally, those entering 
the labour market were frequently 
unable to find any work at any price. 

Some groups, especially the young, 
and some areas, especially where 
traditional industry was concen­
t r a t e d, w e re c l e a r ly m o re 
vulnerable than others. However, 

92 Unemployment Rates in the Member States 

1979­1985­1988 

2b 

20 

15 

- 10 

% Labour Force 

2b 

1979 1985 ■ 1988 
EC Average EC Average EC Average 

20 

15 

IO 

5 

~ 

E IRL Β 

I NL F UK GR DK D 

Ρ L 

114 

everybody in e m p l o y m e nt from 
management to the shop floor was 
at risk of becoming unemployed 
through their jobs disappearing and 
new ones being impossible to find. 
During those difficult times, few 
new jobs were created and divisions 
in society were sharpened by the 
opening up of a gap between the 
employed and the unemployed. 

Since the last crisis, the recession of 
the early 1980s, the steady improve­
ment in economic conditions has 
brought the labour market back to 
life again. The rate of job losses, 
especially in manufacturing, has 
slowed or even halted, and recruit­
ment h as picked up again. The 
unemployed who are better placed, 
either by virtue of location or skill 
level, have found their way back 
into employment and new entrants 
­ the young or women ­ have man­
aged to enter the labour market, 
although often by lowering their job 
expectations and increasing their 
qualifications. 

This rosier picture does not hide the 
fact that the intervening years of 
recession and persistent unemploy­
ment in many areas have left their 
marks by changing the working of 
the economies and labour markets 
of the Member States. Unemploy­
m e nt h as become increasingly 
concentrated among those at the 
bottom of the labour market anc 
among the poorer sections of society 
in general. It has contributed signi 
ficantly to the creation of new forms 
of poverty and it has become associ 
ated with a widening of incorni 
d i s t r i b u t i on in some Membe: 
States. The growth of long­term un 
employment has become an issue o 
particular concern. 

Unemployment  - t he 
Standard  L a b o ur 
Market  B r e a k d o w ns 

The degree to which  unemployment 
is  experienced  across  the  Com 
munity  v a r i es  widely  b e t w e en 
areas, age  groups  and  the  sexes. 

In  geographical  terms,  the  rate  of 
unemployment  ranges  from  a  mere 
2 % in  Luxembourg  to  over  30  % in 
areas  such  as  Andalusia  or  Extre 
madura  (see  Maps  93  and  94).  In 
general,  recorded  unemployment 
rates in  industrial  areas  are  higher 
than  in  rural  ones  because  it  is  ea 
sier to define  exactly who is or is  not 
in  employment,  while  in  r u r al 
areas,  various  forms  of  unrecorded 
under-employment  are  common. 
Figures  may  also  be  unreliable  due 
to the spread,  throughout  the  Com 
munity,  of  the  black  economy  (see 
Chapter  11) which  sometimes  blurs 
distinctions  between  employment, 
unemployment  and  under-employ 
ment.  C r i t e r ia 
for  m e a s u r i ng 
unemployment  may  also  have  been 
'tightened  up'.  Indeed,  some  Mem 
ber States now only include those  in 
receipt  of unemployment  benefit  in 
their jobless totals - a practice  which 
may also  be  combined  with  actions 
to reduce eligibility for such  benefits 
(see Box  on  Measuring  Unemploy 
ment). 

While the  overall  state  of the  econ 
omy and  the  specific  local  economic 
situation  are  the  two  most  signifi 
cant  factors  determining  anyone's 
likelihood of being unemployed,  the 
risk  still varies considerably  accord 
ing 
i n d i v i d u al 
characteristics.  Age is  a  particular 
ly strong  determinant,  with  those 
under 25 generally having twice  the 
rate  of  u n e m p l o y m e nt  of  older 
people  (see  Graph  95).  In  areas  in 
the  South  of  the  Community,  such 

to  a  p e r s o n 's 

Chapter  10  Unemployment  - A Social  as  well  as  a  Labour  Market  Problem 

93  Where  are  the  Unemployed  ? 

1987 

1,000  Unemployed 

E^C^1 

94 

Unemployment  Rates  in  the  Community's 
Regions 

1987 

<  5  % 

5  -  10 X 

10  -  15  X 

>  15  X 

'^ 

C CÜ 

115-

Chapter  10  Unemployment  - A Social  as  well  as  a  Labour  Market  Problem 

95  Age Distribution  of the  Unemployed  in  the 

Community 
%  Total  Unemployed 

1987 

30 

20 

10 

14-19  20-24  25-29  30-34  35-39  40-44  45-49  50-54  55-59  60-64  65-70  70++ 
Agc  Group 

96  Age Distribution  of Unemployment  in  the 

Member  States 

1987 

%  Labour  Force 

30 

14-24  Years 

D  25-49  Years  D  50-64  Years 

20 

10 

E 

IRL 

III  In...  . 

Ρ 

GR 

D 

Β 

UK 

DK 

NL 

F 

I 

L 

116 

as Pais Vasco, Extremadura,  Anda­
lusia  or  Sardegna,  up  to  50%  of 
people  under  25  are  unemployed 
(see  Map  97). 

Workers  at  the  other  end  of the  age 
scale  also  face  problems.  The  chan­
ces of people  who  lose  their job  as a 
result  of closure  or lay-off  obtaining 
a new  one of equivalent  quality  and 
pay declines sharply  after  the  age of 
50/55,  unless  they  possess  scarce 
skills. 

of 

In  some  respects,  women  may  face 
more  serious  employment  problems 
than  men,  particularly  in  certain 
Member  States.  It is not just  a  mat­
t er 
c o m p a r i ng  women's 
employment  rates  with  those  of 
men  (see  Chapter  7). Womens'  offi­
cial  unemployment  rates  can  be 
heavily  influenced  by  their  eligi­
b i l i ty 
for  social  s e c u r i ty  and 
unemployment  benefits,  as  well  as 
by  labour  market  and  social  con­
siderations  - the  availability  of local 
jobs  and  whether  it  is  normal  for 
women to work. Women may also be 
more  willing  to  avoid  unemploy­
ment by accepting lower rates of paj 
or  poorer  conditions  of  employment 
- trade-offs  that  men are more  likelj 
to  resist. 

Long-term 
Unemployment 

While youth unemployment was  th 
major  feature  of the  mid  1980s, it i 
the  growth  in  the  number  of  long 
t e rm  unemployed,  encompassin 
both  young  people  and  adults,  tha 
is  now  the  cause  of  most  concerr 
Half  those  presently  out  of work i: 
the  Community  are  long  term  ur 
employed,  defined  as  being  jobles 
for  over  a  year.  While  a  proportio 
of  the  unemployed  have  alwaj 
found  it  difficult  to  return  to  wor 
quickly,  the  proportion  of  the  tot< 
unemployed  who  have  been  out ι 

Chapter  10  Unemployment  - A Social  as  well  as  a  Labour  Market  Problem 

work for  over  a  year  has  risen  from 
45%  in  1983  to  55%  in  1988  (see 
Graph 98). In  comparison,  the  equi 
valent  figure  in the United  States  is 
around  10%. 

Until  about  1980,  long-term  unem 
ployment  tended  to  r e p r e s e nt  a 
reasonably  constant  proportion  of 
total unemployment.  Some  Member 
States  were  already  familiar  with 
the  problem  as  it  affected 
rural 
areas,  particularly  in  the  Mediter 
ranean  region.  As  the  recession 
persisted  and  worsened,  however, 
the  number  of  long-term  unem 

ployed  grew  as  a  proportion  of  total 
t he 
u n e m p l o y m e nt 
Community. 

t h r o u g h o ut 

d e v e l o p ed 

Worsening  long-term  unemploy 
the 
m e nt  was  broadly  speaking 
result  of the  decline  in  the  demand 
for labour  and  of structural  changes 
which  had  occurred  as new  technol 
t he 
ogy 
international  pattern  of  production 
changed  u n d er  the  influence  of 
relative  costs.  The  phenomenon 
was  undoubtedly  exacerbated  by 
the  fact  that  certain  features  of  the 
labour market become factors  of rig 

a nd 

as 

idity.  The  combined  effect  was  to 
place  the  burden  of  adjustment  on 
those  in  the  weakest  position,  par 
ticularly low-skilled workers,  young 
people  and  women. 

Substantial  changes  also took  place 
in  the  regional  distribution  of long-
term  unemployment  (see  Map  99). 
In  c e r t a in  M e m b er  S t a t e s,  for 
example  France  and  the  United 
Kingdom,  the  rate  of  increase  in 
long-term  unemployment  had  been 
considerably  higher  than  the  na 
tional  r a te  of  increase  in 
those 
regions  or  areas  dependent  on  a  de-

97  Youth  Unemployment  Rates  in  t he  Community's  Regions  1987 

<  10 % 

10  -  20 % 

20  -  30 % 

>  30 % 

(£ a 

c^c^1 

117-

Chapter  10  Unemployment  - A Social  as  well  as  a  Labour  Market  Problem 

dining  single  industry,  and  in  cer 
tain  urban  areas.  Regions 
t h at 
were  predominantly  agricultural, 
such  as  parts  of  Italy  and  Ireland, 
had  equally  experienced  growing 
l o n g - t e rm  u n e m p l o y m e nt  as 
it 
emerged  out  of  earlier,  more  dis 
guised,  under-employment. 

The  effect  of  long-term  unemploy 
ment  on  those  directly  affected  was 
considerable.  Prolonged  unemploy 
confidence 
m e nt  u n d e r m i n ed 
resulting  in  pessimism  and,  for 
many,  a  fatalistic  acceptance  of 
never  finding  a job  again. 

The  experience  of  being  unem 
ployed  over  a  long  period 
t h us 
brought  changes  in  attitude  and 
motivation  which  further  reduced 
the  chances  of  finding  a  job  and 
which  turned  long-term  unemploy 
ment  into  a  problem  which  was 
different  in  kind  from  the  problem 
of  unemployment  in  general.  This 
was  confirmed  by evidence  t h at  the 
probability  of  unemployed  people 
leaving  the  unemployment  register 
decreased  the longer they  remained 
on  it. 

Over the past five years the  Member 
States have  shown growing  concern 
about  the  problem  and  a  variety  of 
b e en 
s p e c i al  m e a s u r es  h a ve 
a d o p t ed 
em-
to  m a i n t a in 
- 
t e m p o r a ry 
ployability,  to  create 
jobs,  to  provide  specific  training,  to 
finance  private  sector  recruitment, 
and  to  encourage  early  retirement. 
Through  time,  such  measures  have 
been  increasingly  focused  on  help 
ing  t he  l o n g - t e rm  u n e m p l o y ed 
overcome  their  specific  difficulties. 
A particular  emphasis  has  been  put 
on  local  level  actions  involving  a 
variety  of groups  and  agencies.  The 
style  and  content  of  vocational 
training  programmes  for  the  long-
t e rm  unemployed  h as  also  been 
made  relevant  to their  needs. 

Despite  these  initiatives,  long-term 
unemployment  has  continued  to re 
main  at  a high  level.  Notwithstand 
ing  the  combined  efforts  of  the 
Community,  the  Member  States 
and  many  different  groups,  it  re 
mains  true  that  employers  gener 
ally  seem  to  prefer  to  recruit  a 
person who is already in a job  rather 
than  choose an  unemployed  person. 
The  biggest  disadvantage  for  any 
unemployed  person  in  seeking  a job 
is the very fact  of being  unemployed 
and  t h at  d i s a d v a n t a ge  worsens 
rapidly  as  the  period  of  unemploy 
ment  lengthens.  While  current  pol 
icy  is  paying  increased  attention  to 
preventive  measures  - to  ensuring, 
as  far  as  possible,  that  temporary, 
short-term  unemployment  does  not 
denigrate into long-term  unemploy 
ment  - the  problem  of getting  those 
already  in  difficulties  back  into  the 
labour  market  remains. 

Unemployment  -
Socially  Concentrated 

is 

for  an 

g r e a t e s t. 

i n d i v i d u al 

Although  national  figures  for  unem 
ployment  rates  provide  a  broad 
assessment  of the risk  of unemploy 
m e nt 
in  a 
locality,  these  global 
p a r t i c u l ar 
statistics  mask  the  existence  of  a 
heavy  concentration  of  unemployed 
people  where  the  risk  of  unemploy 
T h e se 
m e nt 
concentrations  are  to  be  found  in 
urban  areas.  In  such  areas,  even  in 
major  cities  where,  as  is  common, 
the  overall  unemployment  rate  is 
low,  there  can  be  dense  patches  of 
u n e m p l o y m e nt 
in  s m a ll  a r e as 
which,  combined  with  a  poor  physi 
cal  e n v i r o n m e n t,  c r e a t es  a c u te 
social  problems.  Map  93  shows  the 
geographical  distribution  of the  un 
employed  in  absolute  terms  and 
Map  99 shows the  percentage  of the 
labour  force  which  is  long  term  un 
employed  across  the  Community. 

Labour  market  statistics  generally 
treat the unemployed  as discrete in 
dividuals  because  of  the  way  the 
statistics  are  compiled.  While  this 
provides detailed information  about 
the unemployed  - their previous sec 
tor  of  activity,  the  region  they  live 
in, their  age, sex  and  degree  of skill 
or qualification  - these details do not 
always  help  policy-makers  under 
stand  the  nature  of  unemployment 
in  particular  areas. 

It can lead them to look at  strategies 
to  reduce  the  numbers  of  unem 
ployed  rather  than  facing  up  to  the 
wider  social  problems  which  often 
confront  the  people  concerned. 

For  example,  it  is  easy  enough  to 
establish  that  a  high  proportion  of 
the unemployed  lack  skills, but  this 
does  not  necessarily  mean  that  the 
provision  of  training  will  automat 
ically  give  the  unemployed  person 
all  that  he  or  she  needs  in  order  to 
get  into  employment.  Being  un 
skilled  may  simply  be  part  of  a 
much  wider  set  of social  disadvant 
ages  which  need  to  be  overcome  in 
equipping  a person  for  a new  or bet 
ter  job.  Such  problems  are  often 
inherited. The circumstances  which 
deprived  the  person  concerned  of 
the  chance to acquire  skills - failure 
at  school  or  insufficient  support  to 
permit  the  time  consuming  invest 
m e nt 
in  a c q u i r i ng  s k i l ls  and 
qualifications  at  an  earlier  age  -
m ay  a l r e a dy  h a ve  b e g un  to  be 
passed  on  to  younger  members  of 
the  same  family. 

In  short,  concentrating  on the  char 
acteristics  of  the  unemployed  as 
individuals  can tend to divert  atten 
tion away from  the social and  familj 
context by virtue  of which  they  live 
It  overlooks  the  links  between  un 
employment  and  poverty  and  thi 
cycles  of  deprivation  in  which  un 
employed  a d u l ts  p a ss  on 
thei 
disadvantages  to  their  children.  Ii 

118 

recent  years  this  spread  of  unem­
ployment  h as  r e v e r s ed  p a rt  of 
earlier  s u c c e s s es  in  a c h i e v i ng 
greater  equality  of opportunity. 

Ignoring  the  social  linkages  may 
also have  raised  excessive  expecta­
tions  about  the  extent  to  which 
labour  market  policies  could  reme­
dy  unemployment  problems.  This 
may  partly  explain  why  policies  to 
combat unemployment  or long-term 
unemployment  and  which  have  fo­
t he 
cused 
competitiveness  of  individuals  in 
the  current  labour  market,  rather 
than  on  b u i l d i ng  s t r a t e g i es  to 
t he  s i t u a t i o ns  of 
s t r e n g t h en 
families and social groups, have had 
only  a  limited  success  in  reducing 
unemployment  and  in  preventing 
the widening  of social  differences. 

i m p r o v i ng 

on 

In  order  to  better  understand  the 
events  of  t he  last  decade,  it  is 
necessary  to  step  outside  the  rela­
tively  tidy  world  of  unemployment 
statistics  into  the  realm  of  poverty 
and income  distribution  indicators, 
even though  these  are  conceptually 
untidy  and  less  comprehensive. 
Despite  these  limitations,  they  can 
be used to draw certain  conclusions. 

Unemployment  a nd 
Poverty 

The definition  of poverty  is the sub­
ject of much  political  and  academic 
dispute.  The  main  arguments  re­
volve  around  the  issue  of  relative 
and  absolute  poverty,  the  extent  of 
both  within  and  between  Member 
States, the  role  of subjective  as op­
posed  to  objective  measures,  and 
the  relevance  of income  as  an  indi­
cator of quality  of life. 

One  common  national  measure  of 
poverty is expressed  in terms  of the 
number  of  households  where  the 
disposable  income,  adjusted  for 

Chapter  10  Unemployment  - A Social  as well as a  Labour  Market  Problem 

household  size, is less  than  half the 
average  for  the  country  concerned, 
adjusting  for  household  size.  On 
that  basis,  the  number  of people  in 
p o v e r ty  in  t he  C o m m u n i ty  in­
c r e a s ed  m a r g i n a l ly  from  38.5 
million  in  1975  to  39.5  million  in 
1980  but  climbed  to  44  million  in 
1985. 

Another  indicator  of poverty  is  the 
number  of households  dependent on 
social assistance, which is generally 
accepted  to  be  set  at  subsistence 
level.  There  has  been  a  sharp  in­
crease  in  such  dependence  across 
the  Community  with  a  doubling  in 
the  n u m b e rs  since  the  1970s  in 
many  Member  States. These  statis­
tics  are, of course,  not  always  easy 
to  interpret.  Governments  natu­
rally  complain  t h at  a t t e m p ts  to 
tackle poverty by raising the level of 
benefit  payment  has  the  perverse 
effect  of  increasing  the  number  of 
people  who are eligible  and  thereby 

making  it  appear  that  the  propor­
tion  of  poor  in  the  population  h as 
grown.  However,  apart  from  some 
pensions,  social  assistance  levels 
have  mostly  not  increased  in  real 
terms.  Moreover,  there  is a  sizeable 
population  of hidden  poor  who  fail 
to claim  all their  entitlement. 

On  both  bases,  there  is  no  dicho­
t o my  b e t w e en  w h i ch  M e m b er 
States  have  the  greatest  absolute 
poverty  and  the  most  heightened 
social  differences  -  Greece,  Portu­
gal,  I r e l a nd  and  Spain  a re  t he 
poorest. 

Of  the  many  factors  which  create 
poverty,  old  age  has  traditionally 
been  the  most  important  common 
cause but, in recent years, there has 
been  a  substantial  decline  in  the 
proportion of the poor who are elder­
ly  people  (measured  on  the  two 
criteria  - relative  income  and  social 
assistance).  Now  it  is  unemploy-

98  The Growth of Long-Term Unemployment  in 
1983-1987 

the Member  States 

80 

%  Total  Unemployed 

Π  1983 

1987 

60 

40 

20 

80 

60 

40 

20 

DK 

L 

NL  GR 

F 

UK  D 

Ρ 

E 

[RL 

I 

119 

Chapter  10  Unemployment  - A Social  as  well  as  a  Labour  Market  Problem 

ment,  rather  than  old  age,  which 
has  begun  to  be  the  most  common 
cause  of  becoming  poor,  greatly 
changing  the  composition  of  the 
poor. For example, in the UK 60% of 
poor families  were  elderly  people  in 
1979  but  only  46% in  1983. In  Ger 
many,  40% of households  receiving 
social  a s s i s t a n ce  w e re  e l d e r ly 
people in  1970 but only  13% in 1985. 
During  the  same  period,  the  per 
centage  of  households  receiving 
social  assistance  in  Germany  be 
cause  of  'loss  of  employment'  rose 
from  under  1% to  26%. Similarly  in 
Belgium,  the  extent  to  which  pov 

erty  in households  was  attributable 
to  unemployment  rose  from  8%  to 
17%  between  1976  and  1985,  and 
the  proportion  in  Ireland  rose  from 
12% to 23% between  1973 and  1980. 

Other  trend  changes  in  the  compo 
sition  of the poor must  be taken  into 
any  analysis  of  the  growing  in 
fluence  of  u n e m p l o y m e nt  on 
poverty levels. For example, in more 
rural  areas  such  as  southern  Italy 
and  Portugal,  the  percentage  of  the 
poor  belonging  to  large  families 
seems  to  be  declining.  In  Italy  35% 
of poor families  had  5 or more  mem 

bers  in  1978  compared  to  20%  in 
1983.  In  Portugal  16.5%  of  house 
holds in absolute poverty were  large 
in  1980  compared  with  29.5%  in 
1974.  These  countries  seem  to  be 
moving  closer  towards  the  pattern 
of  northern  Community  countries 
where  only  a  very  small  proportion 
of the  poor or those  on  social  assist 
ance  belong to large  families. 

For  other  groups  of the  population, 
the  limited  data  available  suggest 
that  in  some  countries  an  increas 
ing  proportion  of  the  poor  or  those 
on  social  a s s i s t a n ce  are  single 

99  Long-term  Unemployment  in  the  Community's  Regions  1987 

û 

<  1 % 

1  -  5 % 

5  -  10  % 

>  10  % 

£ ^ 24 

120 

Chapter  10  Unemployment  - A Social  as  well  as  a  Labour  Market  Problem 

people  and  that  the  absolute  num 
ber  of  poor  employed  people  and 
single  parent  families  h as  been 
growing. 

trends 
While  there  are  long-term 
involved,  the  changing  pattern  of 
poverty  in  recent  years  is  largely  a 
result of the sharp rise in  unemploy 
ment  since  the  mid-1970s  and  the 
associated  changes  in  the  labour 
market.  In  its  Communication  on 
the Social Dimension  of the  Internal 
Market,  the  Commission  declared 
that  growing  unemployment  was 
the main  reason  for  social  exclusion 
and  marginalisation  and  the  most 
the 
important  factor  explaining 
worsening  income  distribution  and 
appearance  of new forms  of poverty. 

Not only have the  differing  fortunes 
of  those  in  and  out  of  work  con 
tributed 
social 
to  w i d e n i ng 
divisions, but  there  is  also  evidence 
of a  growing  gap  between  different 
sections of the  unemployed.  The  se 
lectivity  w h i ch 
in 
u n e m p l o y m e nt 
c o m p e n s a t i on 
policies  encourages  these  divisions 
since protection  provided  by  unem 
ployment  i n s u r a n ce  schemes 
is 
restricted  in  all  Member  States  to 
those who have made  sufficient  con 
tributions  in  the  past  end  have 
appropriate  employment  records. 

is  i n h e r e nt 

Those  who  do  not  qualify  therefore 
become  doubly  disadvantaged.  The 
rapid growth  of recurrent  as well  as 
long-term  unemployment  and  the 
higher  r a t es  of  u n e m p l o y m e nt 
among  young  people  and  women 
who have  not  managed  to  build  up 
qualification  for  insurance  schemes 
has  meant  that  these  schemes  are 
now  failing  to  protect  the  majority 
of  the  unemployed  in  many  Com 
munity countries. As a result,  many 
unemployed  no longer  receive bene 
fits and  depend  on more basic  forms 
of social  assistance,  often  providing 
no more  than  poverty  line  income, 

or  on  support  from  families  or  vol 
untary  agencies. 

A l t h o u gh  u n e m p l o y m e nt 
h as 
become  a  major  source  of  poverty, 
finding  a  job  does  not  necessarily 
remove  the  unemployed  or  his  or 
her  family  from  poverty  in  all  cir 
cumstances.  A  growing  segmenta 
tion or dualism  in the labour  market 
would  seem  to have  reduced  the  se 
curity  and  stability  of  employment 
for  a  part  of the  labour  force.  Many 
of  those  with  jobs  may  still  find 
themselves  with  low  wages,  poor 
working  conditions,  little  job  se 
curity,  and  low  standards  of  social 
assistance  and  welfare.  This  serves 
tradi 
to  reproduce  and  reinforce 
tional  links  between  low  pay  and 
poverty. 

More  generally,  high  unemploy 
labour 
ment  and  changes  in  the 
m a r k et  h a ve  u n d e r m i n ed 
t he 
ability  of  societies  to  protect  their 
weaker  members,  such  as  people 
with  disabilities  and  single  parents. 
It  has  also  affected  some  ethnic  mi 
nority  groups  who, in  countries  like 
the UK, experience  a  disproportion 
ate  share  of  the  deprivation  of  the 
older  urban  industrial  areas  where 
t h ey  a re  c o n c e n t r a t e d.  Y o u ng 
people  are  also  at  risk,  particularly 
those  who  are  unable  to  remain  in 
their  families  and  become  chroni 
cally dependent  on social  assistance 
and  basic  welfare. 

Unemployment  and 
Family  Situation 

The  extent  to which  unemployment 
or an  insecure  position in the  labour 
market  leads  to  poverty  also  de 
family 
p e n ds  upon  t he  specific 
situation.  If  the  family  has  other 
sources of employment  income or its 
members  are  entitled  to  additional 
s t a te  benefits,  poverty  may  be 
avoided.  On  the  other  hand,  the  ap 

plication  of  household  means  tests 
can  mean  that  young  people  and 
women  who  would  otherwise  be 
eligible  to  receive  social  assistance 
in their own right  are forced  instead 
to rely  on their  families. 

T h e se 
i n e q u a l i t i es  h a ve  b e en 
exacerbated  in  the  1980s  by  the  in 
the 
crease  in  m e a n s - t e s t i ng  for 
u n e m p l o y ed 
in  some  M e m b er 
States,  which  has  created  "unem 
ployment  t r a p s"  t h at  discourage 
other  family  members  from  seeking 
work. The  pattern  of poverty  is  also 
being  reshaped  by the  rapid  growth 
in  t he  n u m b er  of  single  p a r e nt 
families,  especially  since  the  late 
1960s.  In  some  countries,  employ 
ment  opportunities  for  this  group 
have  been  restricted  by  a lack  of,  or 
cuts  in,  child  care  facilities. 

The  overall  effect  of these  trends  is 
a marked  shift  in the composition  of 
the  poor  away  from  elderly  house 
holds  and  towards  younger  ones, 
assisted  on  the  positive  side,  by 
more  effective  national  pensions 
and  welfare  policies  for  the  elderly. 

This  pattern  may  change  as  today's 
unemployed  become  tomorrow's  el 
derly.  Their  interrupted  work  and 
contribution  records  resulting  from 
the  unemployment  which  afflicted 
them  during  their  working  lives 
may  turn  them  into  the  "new  poor" 
in  the  forthcoming  decades  when 
they  get  old. 

The  1992  measures,  coupled  with 
programmes  of structural  transfor 
mation  and  economic  development 
in the southern  Member  States,  can 
be expected  to accelerate  the pace of 
economic  and  social  change  and 
bring  overall  employment  benefits. 
However,  this  does  not  necessarily 
guarantee  the  social  distribution  of 
these benefits  since the  relationship 
between  unemployment  and  pov 
b o th 
d e p e nd 
e r ty  will 

on 

121 

Chapter  10  Unemployment  - A Social  as  well  as  a  Labour  Market  Problem 

entitlement  to  social  security  and 
the extent of family  solidarity.  How 
ever,  the  social  security  systems  in 
these  countries  are  generally  less 
well  developed  than  those  in  the 
north  of  the  Community  and  there 
is  much  reliance  on  the  family  an 
alternative  -  and  older  -  system  of 
"social  security".  Sections  of  the 
population  who  lose  the  security  of 
this  traditional  family  structure  in 
the  process  of  rapid  modernisation 
and  urbanisation  may  find  them 
selves  at  risk  at  times  of  labour 
market  difficulty  if  compensatory 
public  social  provisions  do  not  de 
velop  quickly  enough. 

- 1 2 2-

Chapter 10 Unemployment ­ A Social as well as a Labour Market Problem 

Unemployment a nd 
Income Protection 

The level of unemployment 
protection can be described 
in two ways: 

• unemployment coverage 
i.e. the proportion of the 
unemployed who receive 
unemployment benefits 

• replacement rates i.e. 

the level of unemploy­
ment benefits relative to 
average incomes that 
the unemployed would 
otherwise earn. 

The graph gives estimates 
of the two indicators for a 
number of Member States. 
Two categories of unem­
ployed are considered ­
those unemployed under 1 
year, and those unemployed 
for more than 2 years. 

100 Coverage of Unemployment Benefit Schemes 

in the Member States 1987 

Coverage (%) 

100 

a < 1 Year 
■ > 2 Years 

80 

60 

40 

20 

IRL UK Β NL D F E 

101 Replacement Ratios of Unemployment 

Benefit Schemes in the Member States 1987 

Replacement Ralio (%) 

□ < 1 Year ■ > 2 Years 

120 

100 

80 

60 

40 

20 

E DK L D IRL Β NL Ρ F UK GR 

123 

100 

80 

60 

40 

20 

120 

100 

80 

60 

40 

20 

Chapter  10  Unemployment  - A Social  as  well  as  a  Labour  Market  Problem 

ERGO 

Long-Term  Unemployment  - a  Commission  Action  P r o g r a m me 

ERGO is part  of the  European  Commission's  response to the  call from  the  Council of Ministers 
for  a  programme  to  "stimulate  successful  experience  which  can  form  part  of  national  pro 
grammes in favour  of the long-term unemployed".  It re-inforces  the work of the European  Social 
Fund  which  provides  financial  support  for  projects  and  programmes  (see Box, Chapter  9). 

The  Programme 

The  programme  has  several  facets. Through  a network  of correspondents  and  contacts  in  each 
of  the  Member  countries,  a  selective  inventory  of  programmes  and  projects  which  benefit 
long-term  unemployed  people is  identified. 

These will include  such  aspects  as: 

• 

• 

counselling 

re-training 

•  assistance  in job  search 

• 

• 

individual  and  family  welfare 

incentives to  employers 

•  basic, continuing  and  adult  education 

• 

social and  cultural  activities 

•  or a combination  of such  measures 

Criteria of good practice  are being worked out and applied  so as to identify  successful  examples 
in which there  are transferable  elements. 

In  addition  to  seeking  information,  the  programme  is  acting  as  a  catalyst  and  support  to  the 
projects  by  enabling  them  to  learn  from  each  other's  experience  and  by  encouraging  them  to 
adopt practical methods of monitoring and evaluation. At the same time, the lessons learnt  from 
the examples in the field are being fed back to those responsible for planning and  implementing 
national  programmes  aimed  at  assisting the  long-term  unemployed. 

Closely linked  to the  action  side of the  programme  is research  to improve the  existing  systems 
of exchanging information,  monitoring and  evaluating the impact of different  programmes  and 
projects. 

Timetable 

ERGO  will  run  for  three  years.  In  1989,  the  first  year  of  operation,  the  collection  of  basic 
information  about  what  is  happening,  in  the  form  both  of  national  programmes  and  of  local 
projects, governmental  and  non-governmental,  is being accompanied  by the  setting of parame 
ters for monitoring and evaluation. This in turn will lead to the definition  of'good  practice",  and 
the  use  of  these  criteria  to  select  transferable  models  of  good  practice.  A further  part  of  the 
programme  will  be 

• 

• 

to promote  support  for  selected  demonstration  projects 

to  disseminate  the  essential  elements  of  good  practice  through  publications,  audio-visual 
material  and  the  media 

• 

to establish  a programme  of seminars,conferences,  study visits  and  exchanges. 

124 

Chapter  10  Unemployment  - A Social  as  well  as  a  Labour  Market  Problem 

The  Measurement  of Unemployment  Rates 

The measurement of unemployment is both a conceptual problem and a matter of political debate. 
Hence  it  is  one  of  the  more  difficult  tasks  faced  by  statisticians.  For  the  implementation  of 
structural  policies  in  a  Community  striving  for  greater  economic  and  social  cohesion,  compara 
bility  between  areas  and  groups  is  important.  For  the  analysis  of trends  stable,long-run  series 
are  required. 
As yet,  these  requirements  cannot  both  be  satisfied  by  a  single  series.  In  practice,  either  some 
compromise  solution  has  to  be  found,  or  different  series  developed.  Given  these  statistical 
difficulties,  changes  in the  levels of unemployment  are  generally  considered  to be more  reliable 
indicators  than  measures  of absolute  levels of  unemployment. 
Because the number  of administrative  changes introduced  by governments  in recent years  have 
upset comparability  over time, there is a tendency  to give less attention  to unemployment  and  to 
concentrate  attention  on movements  in  employment,  despite  the  difficulties  in  obtaining  up-to-
date  statistics. 
The  main  indicator  of  unemployment  now  provided  by  the  Statistical  Office  of  the  European 
Communities for comparative  purposes is that based  on the Community  Labour Force Survey.  It 
aims at  providing a harmonised  unemployment  rate  for  comparison  between  Member  States. 

Comparable  Unemployment  Rates 

The comparable  unemployment  rates  are  based  on the  results  of the  Community  Labour  Force 
Surveys  (LFS), carried  out  in  the  Spring  of each  year.  The  definitions  of this  survey  conform  to 
the recommendations  of the  13th  International  Conference  of Labour  Statisticians. This  applies 
a restrictive  definition  of unemployment,  e.g.  a person  is only regarded  as unemployed  if he/she 
is  aged  14 or  over,  without  work,  actively  seeking  work  and  immediately  available  for  work.  It 
does not include, for  example, those  who no longer look for  work because  none is  available. 
The unemployment  rates  are  calculated  as  the  ratio  of the  estimated  number  of unemployed  to 
the civilian  labour  force  (armed  forces  excluded). The labour  force  comprises  persons  in  employ 
ment  and unemployed  persons. 
The LFS unemployment  data  are updated  using the trend  derived  from  national  unemployment 
indicators, in most cases the monthly numbers of registered unemployed. For Spain and Portugal, 
the  figures  are  updated  using  data  from  the  quarterly  national  LFS  in  conjunction  with  the 
number  of registered  unemployed.  No updating is done for  Greece. 
The updating of the number  of unemployed  is carried  out for persons  aged under 25 years  (males 
and  females)  and  persons  aged  over  25 years  (males  and  females).  The  totals  are  obtained  by 
additions of these  categories. 
Comparable  unemployment  rates  are  published  monthly  in  the  EUROSTAT  unemployment 
bulletin. 

National  Unemployment  Indicators 

For Community purposes, registered unemployment rates are based on national  figures  of persons 
registered as unemployed i.e. persons without a job and seeking work as employees through  public 
employment offices.  The data are standardised  to a certain  extent and may differ  from  those  used 
by individual  countries. 
These  statistics  have  been  affected  by  changes  in  criteria  for  registration,  for  example  in  the 
United Kingdom where there have been a large number of changes in recent years, and in Belgium 
and  the  Netherlands  where  major  groups  of people  have  been  removed  from  the  register.  They 
are nevertheless  generally  higher than  the  Community's  harmonised  statistics. 
In  principle,  registered  unemployed  are  persons  without  a job,  seeking  work  as  employees  and 
available  for  work. 
Belgium,  Denmark,  the  Federal  Republic  of Germany,  France,  Ireland,  Italy,  Luxembourg  and 
the  Netherlands  provide  data  on  registered  unemployed,  the  United  Kingdom  only  data  on 
persons  claiming  unemployment  benefit.  For  Spain  and  Portugal,  the  results  of  the  national 
quarterly  labour  force  surveys  are  considered  the  best  national  unemployment  indicator.  For 
Greece only annual  data  from  the  LFS are  available. 
Detailed explanatory notes are published by Eurostat in "Definitions  of Registered  Unemployed". 

125 

-  126 

Chapter  11  Black  Economy 

C h a p t er  11  B l a ck  E c o n o my 

Working  "in  the  black"  is  as  widely  condemned  as  it  is 
practised.  More  flexible  patterns  of  work  may  create  new 
opportunities.  Are  these  new  practices  worse,  or  merely 
different  from  more  traditional 

forms  of the  black  economy? 

Introduction 

Definitions 
White? 

Black  or 

social  security  system  or  reporting 
the  income  for  tax  purposes. 

There  are  a  variety  of  concerns 
about  the  effects  of  the  black  -  or 
hidden,  clandestine,  parallel  or 
underground,  as  it  is  variously 
known  - economy: 

•  exploitation  through  the  use  of 
la 
child  or  illegal  immigrant 
bour; 

• 

• 

tax  evasion  or  false  claims  for 
social  benefits  by  people  work 
ing  clandestinely; 

the  reduction  of  labour  market 
efficiency  as  it  perpetuates  low-
tech  marginal  activities  rather 
than  encouraging  new  employ 
ment  possibilities; 

•  unfair  competition  because  the 
use  of'black  labour'  by  some  en 
terprises  gives  them  an  unfair 
competitive  edge  over  legitim 
ate  enterprises; 

• 

the  distortion  of  economic  and 
social  measures  which  do  not 
take  into  account  'black'  jobs, 
thereby  providing  misleading 
indicators  to policy  makers. 

A  variety  of  concepts  and  termino 
logy are used in describing the  black 
e c o n o my 
in  d i f f e r e nt  M e m b er 
States.  The  definition  developed  by 
the  ILO  -  'professional  activity, 
whether  as a sole or secondary  occu 
pation,  exercised  gainfully  and 
non-occasionally  on  the  limits  of,  or 
outside,  legal,  regulatory  or  con 
tractual  obligations' - may be a legal 
mouthful,  but  it  is  comprehensive 
and  raises  the  main  issues. 

What  is  seen  to  be  'black  work'  de 
pends on the definition  of legitimate 
work.  'Black  work'  would  not  exist 
in  a totally unregulated  system  and 
w h at  may  be  legitimate  in  one 
country  or historical  period may  not 
be  so in  another. 

Borderlines  are  difficult  to  draw. 
Child  labour  is  illegal  but  it  is  pre 
valent  in  sectors  such  as  tourism. 
On  the  other  hand,  most  countries 
accept  children  performing  domes 
tic  work  or,  to  a  lesser  extent, 
helping  in  a  family  shop. 

Equally,  in  most  countries  casual 
work  below  a  certain  number  of 
hours  per  week  is  permitted  with 
out  the  requirement  of  joining  a 

Older  and New  Forms 
of'Black  Work' 

The  sharp  delineation  made  these 
days between  legitimate  and  illegit 
i m a te  work,  or  indeed  between 
employment  and  unemployment,  is 
a  relatively  recent  phenomenon  -  a 
product of the development  of large-
s c a l e, 
p r o d u c t i on 
industrialised  processes.  The  con 
comitant  growth  of  welfare  state 
systems  serves  further  to  accentu 
ate  differences  between  paid  and 
unpaid  work  and  between  income 
from  employment  and  from  public 
funds. 

m a ss 

The  regulated  labour  market  and 
the 
social  protection  systems  in 
Member  States  grew  up  around  the 
existence  of  large  factories  and, 
more  recently,  offices  and  chain 
stores. They  are  designed  primarily 
to  cope  with  the  employment  of 
large numbers  of people by a  limited 
number  of  employers  and  were  de 
veloped  in  parallel  with  systems  to 
cope with  the  self-employed. 

T he  social  p r o t e c t i on  s y s t e m s, 
based  on  the  universal  availability 
of  benefits,  were  dependent  on  the 

- 1 2 7-

Chapter  11  Black  Economy 

smooth  operation  of  this  regulated 
labour  market. 

Greece,  p a r ts  of  the  South  and 
mountain  regions  in  France. 

The 'black economy'  simultaneously 
encompasses  some of the most back 
ward  and  some of the most  dynamic 
areas  of  activity.  On  the  one  hand, 
the  spread  of  these  modern  mass 
production  systems  has  progress 
ively squeezed  out many  traditional 
activities which, in order to  survive, 
have  'gone  into  the  black'. 

On the  other,  current  economic  and 
social  changes  are  reversing  the 
process  - weakening  the  sharp  dis 
tinction  between  being  employed 
and  being  unemployed.  New  pat 
t e r ns  of  p r o d u c t i on  a nd 
t he 
development  of the  service  economy 
have  brought  about  much  greater 
flexibility  and  a 
labour  m a r k et 
much  more  'untidy'  pattern  of  em 
ployment,  which  has  created  new 
opportunities  for  the  development 
of'black  work'. 

The  Sectoral 
Composition  of  t he 
'Black  Economy' 

Irregular  employment  in  agricul 
ture  is  found  in  several  European 
countries  for  two  reasons  - the  high 
levels of under-employment  of agri 
c u l t u r al  w o r k e rs  a nd  t he  h i gh 
temporary  demand  for  cheap  un 
skilled  labour  during  the  short 
harvest  period. 

This  has  forced  both  small  farmers 
and  under-employed  agricultural 
workers  to  look  for  other  part-time 
work,  often  in  the  black  economy. 
Building,  the  retail  trade,  street 
trading,  tourism,  industrial  home 
work  and  traditional  manufactur 
ing  are  the  industries  which  make 
u se  of  t h is  type  of  l a b o u r,  for 
example  in  southern  Italy,  a  large 
part  of  Spain,  Portugal,  Ireland, 

These  forms  of  irregular  work  are 
declining  in  tandem  with  the  de 
cline  in  the  rate  of  agricultural 
unemployment  and  the  ageing  and 
féminisation  of  agricultural  wor 
kers.  Women  and  the  elderly  are 
less  likely  to  complement  low  agri 
culture income with irregular  work. 
At  the  same  time  temporary  work 
during the peak  season is  declining, 
because  of  mechanisation  in  re 
sponse  to  the  absence  of  pools  of 
local  labour. 

Building,  including  repairs  and  re 
building,  provides  an 
important 
supply  of  irregular  forms  of  work 
throughout  the  Community.  The 
highest  levels  of  such  employment 
are  in  regions  where  agricultural 
employment  is  still  prevalent  and 
where  building  remains  labour  in 
tensive.  Elsewhere,  the  decline  in 
'black  work'  on  large  building  sites 
in  periods  of  slow  down  of  urban 
development has been  compensated 
for  by  a  substantial  wave  of  self-
b u i l d i n g, 
t he 
construction  of  second  homes.  Or 
ganised  'black  economy'  wage  work 
is  being  replaced  by  more  complex, 
temporary  and  irregular  forms  of 
'black  work'. 

r e b u i l d i ng  a nd 

T o u r i sm  also  p r o v i d es  oppor 
tunities  for  irregular  employment, 
notably  in  the  Mediterranean.  The 
rapid expansion  of tourism offers  an 
example  of the  increasing  complex 
i ty  a nd  d i v e r s i ty  of  t he  black 
economy  and  its  parallel  develop 
ment with legitimate  activities.  The 
growth  of  hotels,  restaurants  and 
other  establishments  catering  for 
tourists provides a rich and  growing 
source of irregular seasonal  employ 
ment  for  many  people,  including 
i n d u s 
y o u ng  f o r e i g n e rs 
trialised  countries. 

from 

is  not  a  major 
M a n u f a c t u r i ng 
source  of irregular  forms  of work  in 
t he  Community  today.  In  some 
areas  -  such  as  the  so-called  'third 
Italy' of small  industrial  businesses 
-  where  irregular  employment  in 
manufacturing  was  important  in 
the  late  1960s  and  early  1970s, 
these forms  of employment  have de 
clined  markedly. 

Competitive  restructuring  has  led 
manufacturing  companies  to  sub 
contract. For cheapness,  sometimes 
they  resort  to  local,  possibly  'black' 
suppliers. While irregular  suppliers 
to  the  Spanish  manufacturing  sec 
tor  are  to  be  found  in  the  same 
country,  counterpart  suppliers  to 
German  industry  generally  work  in 
other  countries.  The  United  King 
dom  appears  to  have  less  irregular 
forms  of  manufacturing  employ 
ment in part because the  ownership 
of  capital  is  more  highly  concen 
trated  than  in,  say,  Italy  or  Spain 
and  also  because  the 
legislation 
r e g u l a t i ng  industrial  homework 
and  part-time  employment  is  more 
flexible. 

c o n c e n t r a t ed 

Although  irregular  work  is not  par 
t i c u l a r ly 
in 
there  have  been 
manufacturing, 
examples  of  large  and  persistent 
concentrations  of  industrial  'black 
work':  the  shoe  industry  in  the 
Valencia  region,  the  glove  industry 
in  Naples  and  illegal  garment  and 
clothing  workshops  u s i ng 
third 
country  immigrant  labour  in  the 
Paris  region. 

In  sectors  w h e re  t h e re  are  or 
ganised  large  scale  frauds  -  illegal 
factories  or multi-level  subcontract 
ing such as in the clothing or  leather 
working  trades  -  they  can  involve 
buyers  as  well  as  producers.  The 
uniforms  of  the  armies  of  some 
Member  States  are  alleged  to  be 
made  up  by  undeclared  workers  in 
other  Member  States.  Contrary  to 

128 

Chapter  11  Black  Economy 

National Variations -
Regulation  and 
C ircumst ance 

N a t i o n al  differences  are 
r a t h er 
marked  and  vary  according  to  both 
the  history  of  development  of  the 
economy  as  well  as  the  regulatory 
system  in  operation. 

c o u n t r i es 

Even  though  much  of  Italy  is  now 
highly  developed,  it  still  retains 
relatively  high  levels  of  irregular 
work  which  compare  with  less  in 
d u s t r i a l i s ed 
l i ke 
P o r t u g a l,  I r e l a nd  a nd  G r e e c e. 
T r a d i t i o n al  i r r e g u l ar  work  con 
trasts  with  the  presence  of  massive 
industrial  complexes. The  break-up 
of  these  industries  has  encouraged 
the  traditional  ways  of  irregular 
working  to  spring  up  in  new  acti 
vities. 

In  Spain,  Portugal,  Greece,  Ireland 
southern  Italy  and  some  agricultu 
ral  and  mountainous  regions  of 
France  irregular  work  is  often  typi 
fied  by  mixtures  of  agriculture, 
tourism,  'black  work'  in  building 
and  manufacturing  home  work. 

A  country  may  have  relatively  low 
levels of'black  work' simply  because 
of  the  degree  of  regulation.  The 
United Kingdom, for example, has  a 
relatively  flexible  approach  to  non 
s t a n d a rd  work  such  as  work  at 
home,  different  kinds  of  part-time 
employment,  and  self-employment. 
In consequence, there is less need  to 
evade  the  system. 

In the  central  and  northern  areas of 
the  Community  (Germany,  Holland 
and  Denmark)  regulatory  systems 
are  less  accommodating  to  non 
s t a n d a r d, 
' u n t i d y'  s y s t e ms  of 
working.  Mixing  self-employment 
with  part-time  paid  employment  or 
casual  work  may  be  difficult  to  do 

the experiences in the United  States 
and the  Pacific  Basin,  the  develop 
ment  of  the  electronics  industry  in 
Europe  does  not  seem  to  have  pro 
duced a high  rate  of informal  'black 
work'. 

workers  are  increasingly  foreigners 
from  poor  Third  World  countries  or 
'second  job  workers'  who  supple 
ment  their  main  income  or  obtain 
temporary  income  while  hoping  for 
other  opportunities. 

The service  sector  is  the  area  of ac 
tivity  where  i r r e g u l ar  forms  of 
activity  are  most  widespread  and 
where  they  are  expanding.  Three 
factors  have  encouraged  this:  the 
sub-contracting  of  specialist  acti 
vities by larger  firms;  the  growth  in 
demand for  personal  and  household 
services; and the  financial  problems 
of  national  welfare  state  systems 
which have obliged families  to  make 
their  own  private  provisions  -  say, 
private babysitting instead of public 
child care. 

Irregular  forms  of  employment  in 
the services  are  generally  polarised 
between  highly  qualified  jobs  (for 
example  in  high  technology,  ac 
p r o f e s s i o n al 
counting, 
consultancy  or  dentistry  and  medi 
cal  services)  and  very  low  skilled 
and  badly  paid  jobs  (cleaning  and 
other  personal  services  to  house 
holds). 

l a w, 

Self-provisioning  -  do-it-yourself 
household  or car  repairs  - has  led  to 
the acquisition  of skills  and  created 
opportunities  for  irregular  second 
job activities  for  cash.  Multiple  job 
holding can  thus  result.  This  is  par 
ticularly  common  in  less  developed 
regions,  particularly  those  in  the 
South  which  are  still  dependent  on 
old fashioned  agricultural  methods, 
where  many  people  need  several 
jobs merely  to  survive. 

Even  in  the  central  and  northern 
areas  of  the  Community,  irregular 
employment  exists  in  the  family 
help and  paid  housework  sector,  as 
long as there  is  a  supply  of  workers 
willing  to  do  the  work  under  such 
conditions.  In  every  country  these 

Self-Employment. 

The  self-employed  professions  and 
activities  have  traditionally  been 
open  to  tax  evasion  through  under 
declaration  of  income.  In  countries 
where the labour market  legislation 
permits  it,  increased  flexibility  has 
induced  a  rapid  increase  in  t he 
number of self-employed  particular 
ly in  services  (see  Chapter  6)  which 
has  led  to  a  similar  increase  in  the 
opportunity  for  part  of  t h at  work 
being  paid  for  'in  the  black'. 

New  forms  of  'black  work'  can  be 
linked  to other  major  developments 
of  the  1970s  -  the  search  for  more 
flexible  forms  of  work  in  manufac 
turing  industry  and  the  growth  of 
private  service  activities.  Since  the 
existing  regulatory  systems  were 
devised  for  regular  employment, 
flexible  industrialisation  and 
the 
new  forms  of tertiary  activity  have 
created  new  areas  of  opportunity 
and  demand  for  employment  that 
may  be  described  as  'fragments  of 
work'  -  more  or  less  casual,  part-
t i m e,  of  v a r y i ng  i n t e n s i ty  a nd 
recompense.  While  greater  labour 
market  adaptability  has  been  en 
couraged  by  many  Member  State 
governments,  the  regulatory  sys 
tems  have  not  always been  adapted 
to keep pace with the  consequences. 

In  some  parts  of  southern  Europe, 
the  combination  of  relatively  low 
wages  and  loose  control  over  work 
ing  times  has  contributed  to  the 
widespread  growth  of  second  jobs 
among  many  working  in  both  the 
public  and  private  sectors. 

129 

Chapter  11  Black  Economy 

legally,  and  the  penalties  for  doing 
them  illegally  are  severe.  This  has 
limited  irregular  forms  of  work 
largely  to  areas  such  as  personal 
and  family  services.  France  and 
Belgium  resemble  more  the  British 
model  except t h at  traditional  forms 
of activity  also  persist. 

Workers  in  t he  Black 
Economy 

O u t s i de  t he  r u r al  a g r i c u l t u r al 
areas,  the  most  common  forms  of 
'black  work'  are  performed  by  an 
employed  person  (employee  or  self-
employed)  who  works  'in  the  black' 
after  normal  working  hours  or  who 
fails  to  declare  part  of their  income 
for tax  purposes.  Such  work may  be 
done  for  conventional  employers 
(but  'off-the-books')  or  'in  the  black' 
for  households  or  individuals. 

'Black  work'  tends  to  be  done  by 
younger  rather  than  older  people 
and  more  by men  than  women.  The 
much  publicised  cases  of  unem 
ployed  people  having  jobs  on  the 
side  may  attract  the  most  public 
and  political  wrath,  but  in  practice 
they  are  relatively  uncommon  and 
cases  of  flagrant  abuses  of  public 
funds  a re  m i n i m a l.  The  unem 
ployed  generally  work  less  in  the 
'black  economy'  than  the  employed 
since  they  lack  opportunities  -  liv 
ing in  poor localities, lacking  skills, 
transport  and  capital.  They  also 
fear  losing  their  social  security  in 
come if discovered. The  unemployed 
are  most  likely  to  be  found  doing 
some  work  in  the  'black  economy' 
where: 

•  unemployment  benefits  or  other 
social  security  transfers  are  low 
or  unavailable  -  as  in  southern 
Community 
-  and 
where  many  of  those  actually 
unemployed  may  not  be  regis 
tered; 

countries 

however,  been  much  lower  and 
closer to those based on direct meas 
urement  and  enquiry. 

On the  other  hand,  in many  regions 
of the  Community,  the  'black  econ 
omy' 
is  a  r e g u l ar  fact  of  life 
involving  a  large  proportion  of the 
population.  Surveys  suggest  that 
30%  of  people  do  some  'black  work 
on  a  regular  basis,  and  a  further 
20%  occasionally.  However,  the 
amount of'black  work' performed by 
each  individual  is  generally  very 
small  since  it  involves  only  occa 
sional  hours  of  work.  This  makes 
the  total  value  of  'black  work'  low 
compared with the value of declared 
work.  In  most  northern  parts  of the 
Community  it  is  probably  around 
5%  or  less,  s o m e w h at  more  in 
France  and  Belgium  and  possibly 
reaching  10-20%  in  the  southern 
countries. 

Will  1992 Worsen  the 
Problem? 

Since  the bulk  of'black  work' in the 
Member  States  is  concentrated  ir 
non-traded  activities  -  the  servici 
industries,  building  and  the  crafts 
the  effects  of  trade  liberalisatioi 
will  be  limited.There  are,  however 
two  possible  areas  of activity  whicl 
could  give  rise  to  concern.  First, ii 
some Member  States  illicit teams o 
construction  workers  have  beei 
hired 'in the black' either from  othe 
EEC  countries  or even  from  outsid 
the Community. The  disappearanc 
of border controls in  1992 may mak 
it more  difficult  to restrict  the  opei 
ations  of  such  teams  if  natiom 
administrative  controls  are  inade 
quate.  The  second  exception  is  th 
use  of black  labour  in  the  manufa« 
t u r i ng  i n d u s t r y. 
'Undergrouni 
factories  in  the  south  of  the  Con 
munity  producing  labour  intensiv 
good  -  shoes,  textiles,  agricultun 
products  -  could  increase  compet 

•  controls  over  employment, 
come, 
taxation 
security  frauds  are  weak; 

and 

in 
social 

• 

cultural 

attitudes 

see 
local 
working  'in  the  black'  as  an  ac 
ceptable  way  of 
often 
because  the  depressed  state  of 
local  economy  makes  de 
the 
clared  work  difficult  to  obtain 

life, 

There  is  often  confusion  between 
cases  where  the  unemployed  do 
'black work' and where those  receiv 
ing  u n e m p l o y m e nt  benefits  do 
'black  work'.  In  s o u t h e rn  Com 
m u n i ty 
w h e re 
c o u n t r i es 
unemployment  benefits  and  cover 
age  are  often 
low,  unemployed 
people may be working in the  'black 
economy'  without  drawing  any  un 
employment  benefits  as  part  of  a 
basic  survival  strategy. 

In fact, the labour market  and  wider 
social  consequences  of  'black  econ 
omy'  are  more  serious  t h an 
the 
social  security  and  fiscal  fraud  as 
pects.  While  these  are  harmful  to 
the  fabric  of the  social  security  and 
taxation  systems,  the  extent  of loss 
suffered  by  governments  due  to 
non-payment  of taxes  by those  who 
undertake  'black  work'  or  through 
the unjustified  payment  of social se 
curity  is considered  to be  much  less 
t h an  t h at  r e s u l t i ng  from  other 
forms  of  fraud. 

The  Size  of t he  'Black 
Economy' 

on 

The  scale of the  'black  economy'  has 
been  a  subject  of  much  attention. 
Many wild estimates have been pro-
of 
t he 
d u c ed 
back-of-the-envelope  calculations of 
monetary  and  fiscal  aggregates. Es 
timates  deduced  from  divergencies 
in  national  income  accounts  (i.e. es 
timates of expenditure being  higher 
t h an  estimates  of  income)  have, 

b a s is 

130 

tive  pressures  on  the  north  if  they 
are allowed  to continue  to  flourish. 

A Complex  Problem 

it 

c o u n t r i e s, 

'Black'  work  is  generally  undesir 
able and  divisive. Within  a  country, 
it distorts the distribution  of income 
by absolving those concerned  of con 
tributing fully  to the cost of publicly 
provided services, and it distorts  the 
workings  of the  labour  market.  Be 
tween 
b r i n gs 
competitive  problems  through  'so 
cial  d u m p i n g'  w h e n e v er 
'black 
economy' activities enter  into  trade, 
directly  or  indirectly.  On  the  other 
'black 
hand,  the  existence  of  the 
economy'  may  also  reflect  rigidities 
in  legislative  or  taxation  arrange 
ments,  m a k i ng  it  p a r t i c u l a r ly 
difficult  for  work  to  be  organised 
legitimately  in  less  conventional 
ways, 
t h r o u gh 
e x a m p l e, 
multiple-job  holding  or  part  em 
ployee 
p a rt 
c o m b i n ed  w i th 
self-employment. 

for 

Policy  reactions  towards  the  'black 
economy' reflect  this  complexity.  To 
some extent  there  seem  to  be  three 
parallel  tendencies: 

• 

to ignore  it 

• 

to seek  to reduce  its  scale 

• 

to  transform 
work. 

it 

into  declared 

In practice,  all  Member  States  seek 
to ensure the  payment  of taxes,  and 
respect  for  employment  legislation, 
through appropriate  systems of con 
trol.  Some  h a ve 
specifically 
strengthened  these  controls  in  re 
cent years, in particular to deal  with 
large-scale  frauds  by  enterprises  oi 
to  reduce  false  social  s e c u r i ty 
claims. 

Additional  legislation  to tackle  spe 
cific  aspects  of  'black  work'  has 
mostly  been  limited  to  certain  ca 
tegories  of workers  - notably  illegal 
immigrants  or  legal 
immigrants 
employed  illegally  - and  certain  sec 
tors,  notably  construction.  Little 
has been  done to deal with the  tend 
ency  of the  growing  'flexible'  labour 
market to stimulate the 'black  work' 
sector. 

The  varied  nature  of  the  problem, 
and  the  relative  lack  of  success  in 
tackling  the  issues  raises  a  number 
of question.  For  example; 

• 

Is  it  possible  to  eliminate  to 
tally  'black  work'?  Would  that 
require  a  major  increase  in  the 
level  of  control?  Could 
that 
prove  counter-productive  in  any 
way? 

•  How  can  'black  work'  organised 
in  a  systematic  way,  with 
its 
high  social  and  economic  costs, 
best  be  combatted? 

Chapter  11  Black  Economy 

To  what  extent  does  individual 
'black  work'  done  on  a  more  or 
less  regular  basis  reflect 
the 
complexity  of  taxation  and  so 
contribution 
cial 
to, 
regimes?  Is  action  needed 
say: 

security 

strengthen  the  enforcement 
of  taxation  payment  systems 
for  categories  of  workers  or 
the  self-employed  who  are 
systematically 
'at 
the  payment  of 
avoiding 
part,  at  least,  of their  taxes? 

risk'  of 

so 

contribution 
they 

simplify,  or  make  more  flex 
ible,  the  taxation  and  social 
sys 
security 
tems 
can 
that 
encompass  rather  than  poss 
ibly  exclude  or  deter  people 
traditional 
working  in  less 
ways  -  those  who  have 
ir 
regular  work  patterns;  those 
who  combine  paid  work  with 
self-employment;  those  who 
are  part-time  workers  or 
multiple  job-holders? 

102  Estimates  of the  Size  of the  Black 

Economy  as  % of  GDP 

<  5  % 

5  -  10  % 

>  10  % 

ù 

- 1 31 

-132 

Chapter 12 Technological Change ­ A Strategic Challenge for Employment 

Chapter 12 Technological Change - A Strategic Challenge for 

Employment 

Nowadays, technological change seems to raise demands for 
more training as much as fears of job losses. What are the 
prospects for the future? 

From the Luddites of Lancashire to 
the Canuts of Lyon, workers have 
historically been presented as sus­
picious of new technology through 
fear that it will make them redun­
dant. 

Since 1945, there have been two 
periods when such concerns have 
peaked. The first was in the 1960s, 
when the power of the computer and 
the potential of automation first be­
came visible. Commissions and 
working parties sprang up to look 
into the impact of automation on 
society, and particularly on work 
and employment. While their find­
ings confirmed that there was cause 
for concern, the rapid economic 
growth of the period ensured that 
the result was an abundance of 
negotiated claims for more pay and 
shorter working hours rather than 
opposition to automation. 

The second period was at the end of 
the 1970s, when a time of high and 
rising u n e m p l o y m e nt coincided 
with the widespread introduction of 
information technologies in offices 
and factories. 

Technological change is a phenome­
non of crucial importance, which 
has now taken on an international 
dimension. Its social impact, as re­
gards both employment and skills, 

is considerable. In order to assess 
the overall consequences of the 
spread of the new technologies, es­
pecially for employment, direct 
short­term effects (substitution of 
capital for labour) and longer­term 
indirect effects (overall factor pro­
ductivity gains leading to increased 
value added and competitiveness) 
must be considered simultaneously. 

The New 
Technologies 

Of the new technologies such as bio­
technology, a nd t h o se covering 
materials, space, the nuclear indus­
try and information technology, it is 
the latter that is pre­eminent be­
c a u se i ts a p p l i c a t i on is so 
widespread and enabling. 

103 E m p l o y m e nt in t he N ew Technologies 

1981-1987 

XIOOs 

300 

**■*> Software 

^^ ^ ,, Telecommunications ^^ 

Information Technology # mmm. — · ^- ■ * * ^ ^ ^^ 

200 

100 

3 00 

> 

H 200 

100 

n 

1 1 1 1 1 1 

1980 

1981 

1982 

1983 

1984 

1985 

1986 

1987 

133 

Chapter  12  Technological  Change  - A Strategic  Challenge  for  Employment 

There  are  virtually  no  sectors  or 
o c c u p a t i o ns  which 
i n f o r m a t i on 
technology  has  not  already  affected 
-  or  will  not  affect  in  the  future. 
Forecasts  indicate  that  by  the  year 
2000,  two  out  of  three  jobs  will  be 
affected  by  information  and  com 
munications  technology.  Its  impact 
on  economies  and  societies  has  also 
been  more  researched  than  any  of 
the  other  new  technologies. 

In  a  broad  sense,  information  tech 
nology  includes  micro-electronics 
and  components  (memory  chips, 
micro-processors),  computer  pro 
g r a m m i ng  a nd  d a t a - p r o c e s s i ng 
systems. Its  areas  of application  ex 
tend  to  the  office,  the  factory  and, 
more  and  more,  to the  home. 

The  use  of  information  technology 
itself has  been  constantly  enlarged, 
the  machinery  has  become  increas 
ingly  accessible  and  its  potential 
applications  wider. 

Both the manufacturing  and  service 
sectors  are  therefore  experiencing 
radical  changes  in  the  structure  of 
employment,  the  extent  of  change 
depending  on  how  intensively  dif 
ferent  activities  make  use  of  these 
new  technologies. 

Impact  on 
Employment 

There  have  been  several  studies  on 
the  impact  of the  new  technologies 
on employment  in  firms,  industries, 
sectors  and  the  economy  as  a  whole 
in  several  countries  (particularly 
France,  Germany,  the  UK  and  the 
USA). 

But  the  studies  available  tend  to 
give an incomplete view of the  prob 
l e m.  A  1982  G e r m an 
s t u dy 
estimated  that  installing  the  infra 
structure  for  cable TV would  create 
21,000 jobs outside the  Bundespost; 

104  E x p e n d i t u re  on  Research  a nd  Development 
1972-1983 

in  Selected  Sectors 

1975  ECUs  (Millions) 

800 

600 

400 

200 

1000 

4 

800 

600 

400 

200 

0 
1972  1973  1974  1975  1976  1977  1978  1979  1980  1981  1982  1983 

I 

L 

L 

J 

J 

I 

-1  0 

six  years  later,  some  13,500  had 
been  created. And of those jobs, 62% 
were  in  engineering,  12.5%  in  the 
telecommunications  industry  and 
only  2.5% in  the  cable  industry.  A 
'banking  experts'  group  set  up  by 
the  Commission  reported  in  1987 
that  "Despite  sometimes  pessimis 
tic  forecasts,  notably  in  the  FRG, 
France  and  the  UK,  employment 
growth  has  increased  overall  (and 
everywhere) by an  annual  3% in  the 
mid-1970s  and  1-2%  in  the  mid-
1980s". 

t he 

A  series  of  German  studies  have 
attempted  to  assess  the  impact  of 
new technologies on different  indus-
t r i e s.  O n e,  on 
i n s u r a n ce 
industry,  concluded  that  new  tech 
nologies  have  had  little  impact  on 
productivity  and,  hence,  have  not 
caused  any  significant  drop  in  em 
p l o y m e n t,  w h i ch 
d e c r e a s ed 
annually  by  only  0.5%.  The  most 
significant  impact  was  on  the  type 
of  r e c r u i t m e n t,  w h i ch 
shifted 
sharply  towards  people  with  higher 
qualifications.  Another  study  (by 
the  Berlin  Science  Centre)  indi 
cated  t h at  technology  is  not  an 
important  factor  in  explaining  the 
decline  in  the  number  of jobs. 

a nd 

e n v i r o n m e nt 

Because  of  the  changing  interna 
t i o n al 
the 
completion  of  the  internal  market, 
the  relationship  between  employ 
m e nt  a nd 
t he  e m e r g e n ce  and 
diffusion  of  the  new  technologies 
has  become  a  priority  field  for  ana 
lysis. 

The  Commission's  services  are  di 
information 
r e c t i ng  a  study  on 
t e c h n o l o g y,  b e g i n n i ng 
the 
in 
Autumn  of  1989,  which  has  three 
objectives: 

•  at  the  micro-economic  level,  to 
study  factors  in  the  spread  of 
(in-
information 

technologies 

134 

vestment,  work  organisation, 
etc..) 

•  at  the  sectoral  level,  to  analyse 
the  consequences  of  this  diffu­
sion  for  employment,  skills  and 
qualifications,  and 
identify 
possible  skill  shortages  and  im­
balances; 

to 

•  at  the  macro-economic  level,  to 
examine  alternative  scenarios 
of  the  potential  impact  of  new 
technologies  on  total  and  secto­
ral  employment  in  1992  and,  in 
the  longer  term,  up  to  the  year 
2000. 

the 
A  further  aim  is  to  analyse 
qualitative implications  of these  de­
velopments  for  education,  training 
and  working  conditions.  At  this 
to 
stage, 
prejudge  the  results  of  this  wide-
ranging  study. 

it  would  be  u n w i se 

The Need  to  Adapt 

The  introduction  of  new  technolo­
gies changes  the  skills  structure  of 
the  workforce.  The  types  of  skills 
and qualifications  in demand  are (to 
quote  a  1986  Commission  report) 
those  "with  i n c r e a s i ng  require­
ments  involving  mental 
flexibility, 
responsibility  and  planning  skills 
and  basic  understanding  of  new 
technologies". 

Companies  are  today  much  more 
likely than  a  decade  ago to  draw  on 
the  European 
international 
and 
pool of skills  to  fill  their  vacancies. 
Although  this  has  led  to  some  com­
plaints of exporting jobs, the  overall 
outcome has  been  to develop  higher 
value-added  employment  in  Eu­
rope. 

Training and  re-training  initiatives 
are  essential  to  the  rapid  and  suc­
cessful  introduction  of  information 

Chapter  12  Technological  Change  - A  Strategic  Challenge  for  Employment 

of 

a nd 

duce  a  bureaucratically  tidy,  but 
practically useless, catalogue of pro-
j e c t i o ns 
skill 
job 
requirements.  Instead,  it  resulted 
in  a  campaign  to  bring  teachers 
throughout  the  Dutch  secondary 
and  technical  education  and  train­
ing  system  closer  to those  in  charge 
of recruiting and  developing  human 
resources  in  i n d u s t r y.  This  h as 
helped  teachers  understand  how 
they  can  prepare  pupils  for  higher 
quality jobs  in  industry. 

technology.  One key lesson from  the 
1980s  is  that  the  potential  for  com­
panies  to  develop  by  increasing  the 
skills  of  their  existing  employees 
has  proved  much  greater  than  pre­
viously  thought. 

It  is  not just  a  question  of  adapting 
the  existing  labour  force  but  also  of 
developing  the  future  one.  A  study 
in  the  Netherlands  examined  the 
potential  impact  of 
information 
technology  on jobs  within  eight  key 
sectors: banking,  travel,  insurance, 
processing  i n d u s t r i es  (food  and 
chemicals),  engineering  (including 
m a c h i n e ry  and 
t r a n s p o r t a t i o n ), 
e l e c t r i c al  e n g i n e e r i n g,  d e s i g n/ 
architecture  and  health  services. 
The  study  avoided  seeking  to  pro­

Turnover,  Productivity  and  Employment  Trends 
for  Innovative  and  Non-Innovative  Firms  in  the 
Federal Republic  of  Germany 

average  annual  change 

1979/1985 

Type of  firm 

turnover 

productivity 

employment 

innova LOIS 

of which  : 

product  innovators 

process  innovators 

combined  product  a nd 

z.u 

1.3 

1.4 

process  innovators 

2.4 

non-innovators 

-0.8 

Δ.;ί 

2.3 

2.6 

2.5 

1.5 

-υ.o 

-1.0 

-1.2 

-0.1 

-2.3 

In the period between  1979 and  1985 innovative firms achieved  higher 
productivity  growth  than  non-innovative  ones.  While  the  former  also 
experienced  a fall in employment, the fall was much greater in non-in­
novative  firms,  a  fact  which  can  be  ascribed  to  the  more  favorable 
turnover  figures  for  innovative  firms. 

135 

Chapter  12  Technological  Change  - A Strategic  Challenge  for  Employment 

Role  of 
Labour-Management 
Cooperation 

The  introduction  of new  technology 
h as  been  much  s m o o t h er 
t h an 
feared,  largely  because  of  close  co 
operation  between  m a n a g e m e nt 
and  trade  unions.  The  few  notable 
well-publicised  conflicts  are  the  ex 
ceptions  which  prove  the  rule. 

The  late  1970s  were  characterised 
by  the  defensive  stance  adopted  by 
the  trade  unions  towards  the  new 
technologies  in  general  and  infor 
mation  technology  in  particular. 
They  considered  t h at  the 
t h r e at 
posed  by  information  technology  to 
existing  jobs  would  result  in  less 
employment. 

As  the  use  of  information  technol 
ogy  has  become  more  widespread, 
union  positions  have  generally 
changed  but  the  fears  have  not  en 
tirely  disappeared.  Even  in  early 
1989,  German 
t r a de  unions  ex 
pressed  reluctance  to  participate 
fully  in  the  "humanisation  of  work 
action  programme",  recently  re 
named  "Work  and  technology". 

. 

The  sharp  rise  in  unemployment  in 
the early  1980s affected  the  balance 
of forces at the negotiating table  and 
employers  and  management  in  in 
d u s t r i es  w i th  h i gh 
levels  of 
unionisation  began 
formulating 
than 
their  own  demands,  rather 
j u st  reacting  to  union  pressure. 
Company  strategies  often  focussed 
on  the  concept  of  "flexibility"  to 
which  information  technology  has 
contributed. 

Operation  1000 = 1000:  Merlin-Gerin 

Merlin-Gerin is a large French electrical and electronic equipment  and 
systems manufacturer  employing some 16,000 worldwide.  From  1970 
to 1985, its unskilled workers dropped by 80% whereas the number of 
engineers  doubled  and  skilled  workers remained  constant. 

Because of continuing technological change, it became clear that while 
the total workforce would remain constant,  1,000 fewer workers would 
be  required  at  its  Grenoble  plant.  Rather  than  forcing  mass  redun 
dancies, the  company undertook  to train  its unskilled  workforce. 

Various  types  of training  were  developed.  A  four  months  full-time 
course  enabled  the  transfer  of workers  from  obsolete  to  new jobs  at 
the  same  level.  Subsequent  two month  long upgrading  programmes 
gave  workers  more  basic  skills  in  essentially,  "reading,  writing  and 
arithmetic", and were followed with between 600 to 1,800  hours of full 
and part-time specialised courses.  The approach was welcomed by the 
trade  unions  because  it  pre-empted  the  effects  of the  introduction  of 
new technology. The initiative was tailored to the needs of the  majority 
of the  company's  workers  who had  few  formal  educational  qualifica 
tions. 

Although  the  initiative  doubled  the  company's  training  expenditure 
to 7% of the total wage bill, it was deemed  a success since it  improved 
the competitive position of Merlin-Gerin  without the company  suffer 
ing from  the  upheavals  caused  by mass  redundancies. 

136 

The  concept  of  "new  technology 
agreements" also emerged. Some 30 
such  agreements  were  signed in the 
UK  in  the  early  1980s,  although 
they  have  now  been  overtaken  by 
more  radical  approaches  aimed  at 
speeding up the application  ofinfor 
m a t i on 
Central 
t e c h n o l o g y. 
agreements  on  the  introduction  of 
new  technologies  were  introduced 
in  Belgium  (1983)  and  France  (the 
latter in  1988 with the dissent of one 
major  trade  union  confederation  -
the  CGT).  Typically,  new  technol 
ogy  a g r e e m e n ts  s a n c t i on  more 
flexible  working  practices  by  the 
workforce in exchange for longer ad-
better 
v a n ce  w a r n i n gs 
i n f o r m a t i on  from  m a n a g e m e nt 
about  impending  changes  through 
the  introduction  of  "new  techno 
have, 
logies".  M a n a g e m e n ts 
however,  been  vague  on the  specific 
nature  of  the  commitments  to  con 
s u lt 
when 
considering  significant  new  invest 
ments.  The  longest  pedigree  in  this 
respect  is  Denmark  where  national 
a g r e e m e nt  b e t w e en  t he 
trades 
unions'  and  employers'  confeder 
Joint 
e s t a b l i sh 
a t i o ns 
Co-operation  Board  dates  back  to 
1970. 

workforce 

a nd 

t he 

to 

a 

A  wide  variety  of  agreements  have 
also  been  concluded  between  indi 
vidual  firms  and  their  personnel, 
some of which by-pass trade  unions. 
A  few  are  Europe-wide  in  their 
coverage  such  as  that  of the  city of 
Nuremberg  (see  box). 

New  Strategic 
Challenges  at  t he 
E u r o p e an  Level 

At  a  time  when  the  European  and 
world economies are becoming more 
open,  the  new  technologies  have 
taken  on a strategic importance  and 
represent  a  major  factor  affecting 

Chapter  12  Technological  Change  - A Strategic  Challenge  for  Employment 

employment in the future.  Their  im 
pact will be  especially  critical  for: 

• 

• 

• 

the  current  and  future  competi 
tiveness  of  European  industries 
under  intense  competition  from 
American,  Japanese  and  South-
East  Asian 
the 
tendency  for  these  technologies 
to  spread,  the  majority  of  sec 
tors  exposed 
international 
to 
competition  will be  affected; 

rivals.  Given 

the  development  of  private  and 
public  services, where  the  appli 
cation  of  new  technologies  is  a 
factor 
in 
creasing  flexibility  and  adapt 
ing 
to  social 
needs; 

reducing  costs, 

to  demand  or 

in 

the  medium 

the  strengthening  of  employ 
ment 
and 
in 
long-term  from 
the  growth  of 
manufacturing  and  private  and 
public  services,  although 
the 
new  information  industries  and 
technology  have just  as  much  of 
a  qualitative  as  quantitative  ef 
fect  on  employment. 

The  relationship  between  employ 
ment  and  technological  change  has 
to  be  seen  in  the  context  of  new 
Community-level  s t r a t e g ic  con 
siderations  which  have  extremely 
important  implications  for  both  di 
rect and  indirect job  creation. 

•  The  growth  of  information 

in 
dustries  has  direct  and  indirect 
knock-on  effects 
for  employ 
ment.  Recent  estimates  indicate 
growth  in  the  world  market  for 
information  products  and  ser 
vices  averaging  around  17%-  a 
year,  which  means  a  doubling 
every  5  years.  The  information 
technology 
currently 
sector 
amounts  to  some  4.4%  of  GDP. 
It  has  the  potential  to  become 
the  largest  sector  in  GDP  terms 
(reaching  6.7%  of  Community 

GDP  in  1993  according  to  some 
forecasts)  but  everything  -  not 
least  employment  levels  in  the 
sector  -  depends  on  the  market 
share  of  European  companies. 
Failure  to  control  this  technol 
ogy  will  clearly 
jobs 
being  lost  in  the  sector.  But  it 
also  entails  potential  risks  for 
the  client 
in  all 
employment 
sectors,  particularly  manufac 
turing.  Cultural,  economic  and 
geographic  proximity  between 
the  producer  and  the  user  of  in 
formation  technology  is  crucial 

lead 

to 

to  its  diffusion  and  application. 
Any  dependency  on  foreign  im 
ports  would 
the 
competitiveness  of  productive 
client  sectors  and  as  a  result 
have  substantial  adverse  effects 
on  employment. 

damage 

The  expansion  of  the 
informa 
tion  and  communication  sectors 
depends  on  co-operation 
in  R 
and  D.  Together  with  the  sub 
stantial  growth  in  market,  op 
information 
the 
portunities, 
technology  and  communication 

Port Authority  of  Rotterdam 

In  line  with  most  major  ports,  Rotterdam  has  moved  from  being  a 
highly  labour-intensive  to  highly  capital-intensive  operation.  While 
this  was  initially  caused  by  the  switch  to  containerisation,  it  has 
brought in its wake a whole series of technological  developments  such 
as microchips  which handle the  complex flows  ofinformation  and  can 
enable  shippers  to track  their containers by satellite  across the  globe. 
These changes have brought  a revolution  in industrial  relations  prac 
tices. 

The Port of Rotterdam in Holland directly employs some 74,000 people 
and  a  further  10,000  workers  are  dependent  on  the  port's  supply 
business. Containerisation  led to a ten-fold  increase in labour  produc 
tivity.  Cargo  handling  increased  but  this  was  unable  to  compensate 
for the increase in labour productivity and the workforce fell by 10,000. 

There  were  several  major  industrial  disputes  but  ultimately  the  two 
sides  reached  a  series  of  agreements  enabling  employment  to  be 
reduced  without  compulsory  redundancies. 

Now  that  containerisation  and  the  decrease  in  employment  is  com 
plete,  the  port  is  concentrating  on  improving  its  logistic  services  -
transportation,  physical  distribution  and  stock-keeping  - which  can 
account  for  20% of the  total  costs of manufactured  products. 

Telematics  is indispensable  for  improving  logistics  and  a  new  system 
has  been  introduced  which  allows  for  the  electronic  interchange  of 
information  between  all  parties  involved  in  the  transport  of  goods 
through  the  port. 

The  port's  renewal  process  has  brought  considerable  changes  to  at 
least  15,000 jobs. A forum  for  employers  and  trade  unions  to  discuss 
emerging  threats  and  challenges  jointly  with  the  port  management 
and government  representatives  has been established.  It deals with  a 
wide variety  of issues such  as vocational training, technology  transfer 
services  for  smaller  firms,  the  design  of new  technologies  and  oppoi·-
tunities  for  new forms  of  employment. 

137 

Chapter  12  Technological  Change  - A Strategic  Challenge  for  Employment 

sectors  are  confronted  with  ac 
celerating  technological  innova 
tion,  rising  R &D 
costs  and 
shortening  product  life-spans. 

involved 

For  several  years  joint  R &D 
activities  between 
companies 
and  research  bodies  have  been 
strengthened  at  the  Community 
level 
(ESPRIT,  RACE,  etc.). 
The  structure  of R  and  D in  the 
European  groups 
in 
these  projects  is  now  stronger. 
technological 
The  European 
base  is  much  better  protected, 
and  positive  direct  and  indirect 
effects  in  terms  of  maintaining 
and  creating  highly-skilled  jobs 
in 
already 
emerged.  But  in  spite  of  what 
has  been  achieved 
in  certain 
there  are  still  serious 
areas 
weaknesses  which  could  lead  to 

Europe 

have 

worsening  prospects 
ployment  in  the  future. 

for  em 

automation,  production  technol 
ogy, etc...  ) must  be  avoided. 

• 

technology 
is 

in 
Mastering  new 
increasingly 
manufacturing 
vital  for  Europe,  in  economic, 
social  and  employment  terms. 
Against  a  background  of  rapid 
change  where  company  strategy 
is  of  the  utmost  importance,  no 
effort  must  be  spared. 

There  must  be  closer  industrial 
co-operation  in  order  to  assure 
better  long-term  control  of  the 
chain  of functions  running  from 
R &D  through  design,  produc 
to  after 
tion  and  distribution 
-sales  service. 

Significant  shortfalls  in  skilled 
office 
personnel 

(computing, 

between 

In  view  of  the  imminent  com 
pletion  of  the  Internal  Market, 
development  of  the  infrastruc 
ture  of the  Community  network 
of  telecommunication 
services 
is  crucial  to  the  Community's 
economic  and  social  integration. 
Competition  as  well  as  co-oper 
ation 
Community 
businesses  and  the  harmonious 
functioning  of national  adminis 
trations 
services 
and  public 
require  an  efficient  system  for 
transmitting  the  flows  of  infor 
for 
mation  which  are  vital 
integrating 
of 
the  markets 
Member  States.  Without  this, 
some  of  the  positive  economic 
and  employment  benefit  of  the 
completion  of the  Internal  Mar 
ket  could  be  lost. 

Guidelines  for  Introducing  New  Technologies  -
The  Case  of t he  City  of  Nuremberg. 

•  Get all decision-makers and their advisers to agree on a set of goals 
(such  as  improving  the  quantity/quality  of  service,  improving 
employees' working conditions, lowering costs). 

• 

Introduce  NT  when  and  where  there  are  needs  for  improving 
information  and  communication. 

•  Provide  broad  and  comprehensive  dissemination  of  information 

about  its introduction  beforehand. 

•  Draft  sensible and acceptable guidelines on the working conditions 

of all  employees. 

• 

Jointly  demonstrate  the  value  of change for  all  involved. 

•  When introducing new computer systems ensure that there are no 

hierarchical  distinctions in their  use. 

• 

Invest  in employees rather  than  in  equipment. 

•  Ensure total employee participation in implementing new systems. 

•  Develop  executives  into  information  and  communications  mana 

gers. 

•  Define  objectives  jointly  beforehand  and  take  up  "organisational 

slack". 

138 

is  n ot 

The  technological  changes  under 
way  now  involve  all  companies 
throughout  the  manufacturing  and 
service  sectors.  The  impact  on  em 
ployment  in  quantitative  as  well  as 
qualitative  terms  has  become  sub 
s t a n t i a l.  T h is 
j u st  a 
short-term  phenomenon  but  will 
continue  far  into  the  future.  Quan 
t h e se 
t i t a t i ve 
developments  is difficult  and  in  any 
event  it  is  evident  t h at  current 
trends  cannot  be understood  purely 
in  arithmetic  terms.  The  need  to 
adapt  structures  of  employment  at 
company,  sectoral  and  economy 
level  has  become  clear. 

a n a l y s is 

of 

The  future  development  of  employ 
ment  in  the  face  of  technological 
change  is  increasingly  dependent 
on new strategic factors,  such  as  the 
competitiveness  of  European  com 
p a n i es 
t he 
completion  of the  Internal  Market. 

t he  c o n t e xt  of 

in 

Chapter  13  New  Partnerships  in  Employment  Creation  - Local  Development 

Chapter  13  New  Partnerships  in Employment  Creation 

Local  Development 

Areas  and  regions  of  the  Community 
unemployment  problems  have  begun  to  develop  successful 
"home-grown"  solutions.  Local  development  actions  are 
transferable  but  they  require  the  involvement  of people  as 
well as  investment 

in  infrastructure  or  new  businesses. 

faced  with  serious 

What is Local 
Employment 
Development? 

In  a  general  sense,  local  employ 
ment development  is the  process  by 
which  a  local  economy  or  labour 
market  adjusts  to  changes  in  its 
economic  environment.  In  practice, 
local  development  h as  become  a 
in  which 
more  active  s t r a t e gy 
people  and  institutions  seek  to  cre 
ate  a d d i t i o n al  e m p l o y m e nt  by 
improving  the  performance  of  the 
local  economy.  At  its  best,  it  is  a 
dynamic process, not just  attracting 
jobs  from  other  areas  but  genera 
ting them  locally. 

Local  economic  concerns  came  to 
the  fore  in  industrialised  areas  in 
the  early  1980s  when  many  such 
areas saw  their  main  sources of em 
ployment  beginning  to  disappear 
because  of  economic  restructuring. 
Actions also began  in less  developed 
regions  where  tentative  economic 
or 
a d v a n c e m e nt  w as  h a l t ed 
reversed  by  recession. 

The principal  characteristic  of local 
employment  developments  at  that 
time - and  their  ultimate  limitation 

- was their reliance on  spontaneous, 
fragmented  local  initiatives.  Typi 
cally,  local  people  or  enterprises 
tried  to  salvage jobs  from  collapsed 
businesses  and  to  set  up  new  busi 
nesses  or  services  to  replace  those 
a b o l i s h ed  by  c a s h - s h o rt  public 
agencies  or  authorities.  These  in 
itiatives had  a positive effect  both  in 
terms  of  employment  creation  and 
as  an  example  to  follow.  Indeed,  in 
many  areas  at  the  height  of the  re 
cession  these  were  the  only  positive 
features  on  the  employment  scene. 

Positive  as these  initiatives  were,  it 
it  w as  n ot 
t h at 
b e c a me  c l e ar 
possible  to  rely  only  on  small-scale 
'local'  projects  to  reverse  economic 
declines.  The  concept  of  local  econ 
omic development began to widen so 
as to involve  all the initiatives  in  an 
area  to  stimulate  economic  activity 
whether  by  public  agencies  or  pri 
vate  companies  or  the  two  working 
in tandem.  It  also brought  back  into 
play  concepts  of local  forward-look 
ing manpower  policy. 

The  new  local  partnerships  and  al 
liances  that  have  been  forged  as  a 
result  of this  awareness  have  led  to 
many  changes,  including  changes 
away  from  the  old  'top  down'  ap 
proach  of  central  governments  and 

139 

have  increased  the  ability  of  local 
people  to  be  involved  in  decision 
m a k i ng  affecting 
t h e ir  area.  Of 
course,  this  has  been  a  patchy  pro 
cess  across  the  Community  but  the 
overall  trend  is  for  governments  to 
take  more  account  of the  expressed 
demands  of people  involved  in  local 
initiatives  and  to give support  to job 
creation  actions  at  the  local  level, 
whether  specifically  or  as  part  of 
wider  national  programme. 

i n c e n t i v es 

investment, 

Although  local  development  can  en 
c o m p a ss  m a ny  m e a s u r es 
finan 
infrastructure 
i n d u s t r i al 
cial 
relocation,  promotion  of the  locality 
-  the  newer,  pro-active  strategies 
focus  on managerial  and  human  as 
pects  of the  local  environment: 

for 

• 

• 

improving  the  entrepreneurial 
ability, 
knowledge,  manage 
ment  skills  and  "culture"  of  the 
local  people; 

and 

identifying 
commercially 
exploiting  local  resources,  such 
as  environmental  or  amenity 
assets; 

•  promoting  the  creation  and  de 
velopment  of  enterprises  from 
within  the  local  economy; 

Chapter  13  New  Partnerships  in  Employment  Creation  - Local  Development 

and 

•  creating  and  strengthening  net 
works 
partnerships 
between  people  and  institutions 
to  mobilise,  co-ordinate,  or  com 
and 
bine 
knowledge. 

energies 

their 

The  development  of  entrepreneu 
rial  skills  is  not  used  here  in  the 
n a r r ow  sense  of  developing 
t he 
ability  to  create  and  run  an  enter 
prise, but  rather  in  a  broader  sense 
of  promoting  creativity,  initiative, 
responsibility  and  risk-taking  -  all 
of  which  contribute  to  strengthen 
ing  the  economy  and  creating  jobs. 
In this  sense, entrepreneurship  can 
be found  and developed in all  groups 
of the  population  - employed  or  un 
employed  -  in  i n s t i t u t i o ns  and 
structures  in  the  public  and  volun 
tary  sectors,  as  much  as  in  private 
businesses. 

Types of Action 

Activities  and  initiatives  which 
have  been  developed  at  the  local 
level  reflect  local  priorities  which 
include: 

• 

• 

• 

• 

• 

the  need  to  create  new  skills 
and  to  adopt  new  attitudes; 

the  need  to  acquire  new  know-
how,  and  to  innovate; 

the  need  to  start  new  enter 
prises  and 
into  new 
to  get 
products  and  new  markets; 

the  disad 
to  reach 
the  need 
vantaged  people  in  the  labour 
market,  such  as  the  long-term 
unemployed,  women  and  youth; 

the  need  to  find  ways  of  tack 
ling  multiple  problems  which 
existing  specialised  organisa 
in  coping 
tions  find  difficulty 
with. 

1990s and beyond is difficult.  A long 
term  approach  is  required. 

This is particularly true where local 
economies  had  been  dominated  by 
one  type  of activity,  whether  indus 
t r i al  or  a g r i c u l t u r a l,  or  been 
dependent  on  one  or two  very  large 
employers.  It  also  applies  to  older 
workers  or the unskilled  in the local 
labour  market  who  are  unlikely  to 
be  able  to  benefit  from  newly  cre 
ated  opportunities  without  a  long 
and  gradual  transition.  As  a  result, 
step-by-step  approaches  have  been 
developed  for priority  groups  where 
straightforward  "training"  is  inter 
linked  with  work  experience,  job 
placement,  and  enterprise  creation 
(see  Box  on  page  145). 

Enterprise  Creation 
and  Development 

at 

some 

Most  localities  have  now  estab 
l i s h ed 
local 
l e a st 
employment  activities.  While  local 
government  is  often  the  instigator 
of  such  projects,  many  initiatives 
have  been  developed  in  conjunction 
with  the  private  sector,  agencies, or 
local educational  establishments. 

The  importance  attached  to  enter 
prise  promotion  for  development 
reflects  an  awareness  t h at  those 
concerned  with  local  and  regional 
development  can  no  longer  rely  on 
attracting  footloose  investment  by 
major  companies  and that,  anyway, 
there  are  serious  risks  in  becoming 
over dependent on such  investment. 

Local  small  and  medium  sized  en-
t e r p r i s e s ( S M E s ), 
w h e t h er 
conventional private businesses, co 
o p e r a t i v es  or 
'social  economy' 
enterprises, have come to be seen as 
the  principal  engines  of  local  econ 
omic  development. 

The  overall  result  has  been  a  signi 
ficant  widening  of the  areas  of local 
development  action.  The  prolifera 
tion  of  a c t i v i t i es  h as  seen 
t he 
haphazard  emergence of new  initia 
t i v es 
c o - e x i s t i ng  w i th  m o re 
traditional  forms  of action.  Only  re 
cently,  have  their  activities  begun 
to  evolve  in  a  more  strategic  way. 
Three  themes  stand  out: 

• 

training 

•  enterprise  creation  and  devel 

opment 

• 

innovation. 

Training 

With  its  strongly  local  focus,  train 
ing is naturally  a highly visible  part 
of  local  employment  development 
initiatives.  There  has  been  an  in 
creasing realisation  that  areas  have 
to  rely  on  their  indigenous  resour 
ces  and  t h at  the  skills  and  abilities 
of the  local labour  force, both  actual 
and  potential,  are  a  major  part  of 
those  resources. 

In  contrast  with  established  train 
to 
i ng  a p p r o a c h es  w h i ch  seek 
ensure  the  acquisition  of  specific 
technical  skills  to  meet  the  known 
needs  of  employers,  many  initia 
tives  now  reflect  a  broader  view. 
Greater  emphasis  is  placed  on  the 
development  of  general  skills  and 
more  flexible  attitudes  - what  could 
be  called  an  across-the-board  up 
grading  of  the  available  h u m an 
resources. 

As localities have  come to  recognise 
the  deep-seated  n a t u re  of  their 
problems,  they  have  realised  that  a 
rapid  switch  from  using  old  skills 
and  attitudes  - often  the  remnants 
of 19th century economic  structures 
- to developing those  needed  for  the 

140 

Chapter  13  New  Partnerships  in  Employment  Creation  - Local  Development 

Enterprise  promotion  activities  fall 
into four  principal  categories: 

•  creation  of  a  favourable  climate 
for  business  (e.g.  deregulatory 
and  fiscal  measures); 

•  provision  of  information,  coun 
selling  and  business  services; 

•  provision  of  physical  assistance 
(e.g. workspace,  equipment); 

•  provision  of  financial  assistance 
and  creation  of  mechanisms  for 
obtaining business  finance. 

Local  initiatives  for  the  promotion 
of  enterprises  are  often  seen  as 
being  largely  concerned  with  the 
start-up  of  new  small  enterprises  -
i.e.  micro  businesses,  community 
enterprises,  self  employment.  In 
d e e d,  m a ny 
c a t er 
extensively  for  SMEs  in  this  way. 
There  are  even  national  networks 
catering to the  demands  of  fledgling 
small  businesses  - for  example,  the 
'boutiques  de gestion' in France  and 
local  enterprise  agencies  and  trusts 
in  the  United  Kingdom. 

l o c a l i t i es 

However,  many  localities  have  de 
s o p h i s t i c a t ed 
veloped  m o re 

methods.  They  aim  not  merely  to 
promote  entrepreneurship  and  in 
crease  the  number  of start-ups,  but 
also  to  strengthen  particular  as 
pects  of  the  local  economy,  such  as 
exports  and  high-technology  busi 
nesses. 

Innovation 

An  increasing  number  of  localities 
now operate  projects  designed  to  at 
tract  or  to  develop  new  technology, 
to support  the  setting-up  of new  en 
terprises  in  high  technology  fields, 
and  to  promote  innovation  in  pro-

105 

L o c a t i on  of  P r o j e c ts  in  t he  LEDA  P r o g r a m me 

Connemara 

Aalborg 

Ú  « 

Lolland,  Storstrøm 

Hamburg 
û 

Mid—West  Region 

Bruaysis 

Leer  district,  Lower  Saxony 

Oberhausen,  North  Rhine  Westphalia 

Chaves,  Tras—os—Montes 

St  Etienne,  Gier 

Basilicata 

North  Alentejo 

Arcadia 

o 

û 

Province  of  Sitia 

r"1^  j f lj 

141 

Chapter  13  New  Partnerships  in  Employment  Creation  - Local  Development 

ducts  and  processes  in  local  busi 
nesses. 

These initiatives  are less closely  as 
than 
sociated  with  local  delivery 
training  and  enterprise  promotion. 
Rather, they reflect the pace of econ-
omic 
a nd 
r e s t r u c t u r i ng 
technological  change. 

The  range  of  innovation-related 
local schemes  is too extensive  to  list 
comprehensively  but  the  LEDA 
Programme  (see box) provides  some 
illustrations.  They  can  be  seen  as 
either  'hardware'  (science  parks, 
computers  etc) or 'software'  (resour 
ces and  management  processes).  At 
the  'hardware'  end  of  the  range, 
many  areas  have  created  science  or 
technical  p a r k s,  such  as  in  St. 
Etienne  (France)  and  in  Dundee 
(United  Kingdom). At the  other  end 
of the range, the Tilburg  Innovation 
Project  in  Tilburg  (Netherlands) 
trains  unemployed  university  grad 
uates  and places them  in local  small 
businesses  as  innovation  counsel 
lors. 

on 

p r o v i d i ng 

In  fact,  most  areas  have  now  recog 
nised that  is not sufficient  merely to 
provide  the  'hardware'  and  are  con 
c e n t r a t i ng 
a 
combination  of both  'hardware'  and 
'software'.  Examples  include  tech 
nology  centres  which  provide  a 
combination  of  specialist  facilities 
and  services  for  use  by  SMEs,  such 
as  the  one  being  created  by  the 
Nordtec  Programme  around  Aal 
borg  in  North  Jutland  (Denmark) 
and  the  R  & D  Centre,  ATTEX,  for 
t he  t e x t i l es  i n d u s t ry 
in  Alcoy 
(Spain). 

Strategies  for  Local 
Employment 
Development 

The  concept  of long term  strategies 
for  local  employment  development 
is  relatively  new.  Many  of  the  ear 
lier local  responses  - particularly  to 
the  restructuring  in  traditional  in 
dustries  of  the  late  seventies  and 
early eighties - were simply  reactive 
and  short-term  such  as  attempts  to 
avoid  plant  closures  or  schemes  to 
create temporary jobs for the  unem 
ployed. 

Most  of the  areas  in  the  LEDA  Pro 
gramme  - particularly  those  in  the 
northern  areas of Europe - have pro 
gressed  beyond  t h e se  defensive 
strategies.  This  shows  an  accept 
ance  of  the  inevitability  of  t he 
i m p a ct  of  t he  m a c r o e c o n o m ic 
changes  affecting  their  areas  by 
participants  in  the  local  economic 
development  process.  Their  focus 
has  turned  from  simply  seeking  to 
influence  the  decisions  of  those  re 
s p o n s i b le 
or 
international  funds,  to  developing 
the strengths of the area,  mobilising 
local  and  external  resources,  and 
promoting  new  economic  activity 
and jobs. The process involves  three 
stages. 

n a t i o n al 

for 

t he 

Stage  One  can  be  described  as "ac 
q u i r i ng 
d e v e l o p m e nt 
'know-how'".  This  is  essentially  a 
preparatory  stage  for  areas  lacking 
spontaneous  forms  of development -
which  include  a  large  part  of  the 
Community's  Objective  1 areas  and 
some  Objective  2  areas.  For  them, 
merely  providing  services  to  small 
businesses  or  better  infrastructure 
would  do little  to generate  new  em 
ployment  since  there  is  an  absence 
of entrepreneurial  skills.  Emphasis 
is needed on teaching potential  local 
participants  in  the  local  develop 

142-

ment  process  how  to  initiate  and 
run  projects  that  lead to wealth  cre 
ation  and  jobs. 

S t a ge  T wo  can  be  described  as 
"using  the  know-how  of  develop 
ment".  If  Stage  1  is  successful, 
Stage  2  starts  with  three  strong 
points: there  is a core of local  people 
and  institutions  leading  the  way 
(stimulating/  facilitating  projects); 
some  'software'  and  'hardware'  in 
frastructure  has  been  created;  and, 
projects  are  beginning  to  be  gener 
ated  spontaneously,  although not in 
sufficient  numbers  or  quality. 

At this  stage, areas  need to  improve 
the  effectiveness  of  their  activity 
such  as  developing  better  manage 
ment  and  evaluation 
techniques; 
developing programmes targeted on 
priority groups and sectors; upgrad 
ing  know-how  by,  for  example, 
emphasising  technological  innova 
larger 
t i on  a nd  e x p o r t i ng 
markets;  stimulating  inter-firm  co 
o p e r a t i on  a nd  t he  provision  of 
business  services,  initially  with 
public  support  if  necessary. 

to 

Stage Three  corresponds to a stage 
of self-sustained  development. 

a nd 

i n i t i a t i v es 

A successful  Stage  2 will mean  that 
there is now a "critical mass" of pro 
j e c ts 
coming 
forward,  as well as a  supporting en 
vironment  of  targeted  and  general 
business  services.  The  main  thrust 
in  this  stage  is  on  plugging  gaps  in 
service  provision  and  SME  finance 
mechanisms; building on strengths; 
and  exploring opportunities  such as 
new  markets,  new  industries  and 
new  forms  of  inter-firm  co-oper 
economic 
a t i o n.  Most 
development  activity should now be 
focused  on  "market"  provision. 

local 

Chapter  13  New  Partnerships  in  Employment  Creation  - Local  Development 

The  LEDA  P r o g r a m me 

Community  level recognition  of the importance  of the local level in employment  creation 
came in 1984 when the Commission issued a Communication on "The contribution of local 
employment  initiatives to employment  creation". 

That  Communication  estimated  that  these  initiatives  could result  in the  creation  of one 
million jobs  and  sought  to ensure  that  they  were  encouraged.  As a  result,  local  employ 
ment  initiatives  became  a priority  category under  the  European  Social Fund  in  1985. 

By  1986 it  was  clear  that  a  broader  view  was  needed  at  the  local  level  - combining  the 
'local  employment  initiatives'  approach  with  the  forward-looking  manpower  policy  ap 
proach  developed  since the late  1970s. 

The last two years have seen the development  of an action research programme  on Local 
Employment  Development  Action  (LEDA)  based  on  24  pilot  areas  and  several  other 
associated  areas  selected  because  of their positive experience  of innovative projects.  The 
24 areas vary greatly in size of population  and were chosen deliberately to cover all  parts 
of the Community. They include both rural  and industrial  regions but share one common 
characteristic  - high  unemployment. 

The  programme  has  two aims  - to help  the  areas  participating  in  the  programme  and  to 
draw out lessons that can be disseminated more widely. The programme does not provide 
funding  but  its  activities  include the  support  of pilot projects, the  analysis  of the  lessons 
from local approaches, the provision of technical support and the organisation of meetings 
of participants  from  different  LEDA areas  to exchange  experiences  and  'know  how'. 

The  programme  commissions  research  from  local  teams,  connected  to  a  local  higher 
education institute, and produces review reports which will be used as the basis for  debate 
and  for the  development  of further  employment  initiatives  in these  areas. 

The LEDA programme has already identified  a diversity of initiatives in its project  areas, 
examples  which  could  be  followed  elsewhere.  For  example,  in  terms  of  new  business 
development,  LEDA  has  identified  the  advanced  enterprise  programme  in  Shannon 
(Republic  of  Ireland)  based  on  the  concept  of  venture  teams;  the  Advanced  Business 
Centre in Nottingham (United Kingdom); the establishment of local venture capital  funds 
in  Lolland  (Denmark); the  promotion  in  Ravenna  (Italy) by a  number  of local  organisa 
tions of the concept of a university-level  management  centre as a major  stimulus for local 
business. 

The  LEDA  Programme  seeks  to  identify  the  key  factors  explaining  successful  local 
development  and  employment  creation  and  to make  this  "know-how" available  to  areas 
throughout  the  Community.  Among such  activities  at  the  moment  are  the  setting  up of 
a European  programme  of local employment  development  management,  and the  produc 
tion  of a workbook  of local  employment  development  'good  practice',  all based  on  LEDA 
experience.  More  generally,  a  Commission  policy  document  on  the  experiences  and 
conclusions  arising from  the  programme  is  planned. 

1 4 3-

Chapter  13  New  Partnerships  in  Employment  Creation  - Local  Development 

Variety  and 
Dynamism 

i n i t i a t i v es 

The variety  of local employment  de 
v e l o p m e nt 
is 
characterised  by the involvement  of 
a wide range  of participants. This  is 
because  it  consists  of  activities 
which  require  specialists  in  differ 
e nt  fields  (training, 
innovation, 
finance,  organisation  and  manage 
ment) and stimulates the creation of 
local  networks  which  encourage  co 
o p e r a t i on 
formal 
structures. 

w i t h o ut 

t h o se  who 

Such  an  environment  may  not  sat 
isfy 
t i d y, 
well-structured  and  hierarchical 
pattern  but  this  does  not  detract 
from  its  effectiveness. 

l i ke  a 

The  presence  of  many  participants 
can  reflect  dynamism,  but  it  can 
also  mean  fragmentation  of  action, 
arguments  over  objectives  and  re 
s o u r c e s, 
or 
duplicated  efforts.  However,  the  ar 
gument  t h at  democracy  is  more 
'inefficient'  than  dictatorship  is  no 
more  appealing  when  applied  at 
local  level  than  at  any  other. 

conflicting 

a nd 

While  it  is  possible  for  many  indi 
viduals  agencies  to take  the  lead  in 
local  development,  more  and  more 
local  government  authorities  have 
taken  on  a  pro-active  role  by  insti 
g a t i ng  new  activity,  supporting 
other bodies and taking on the co-or 
dinating  role for  local economic  and 
employment  development.  They 
have  thus  become  both  partner  and 
leader. 

At the  same  time there  is a  growing 
awareness  in  the  business  world 
that  there  are  links  between  the 
health  and  wealth  of  a  community 
and  the fortunes  of a  firm  operating 
within  it. 

Equally,  trade  unions,  both  at  the 
grass  roots  and  nationally,  are  in 
c r e a s i n g ly 
in 
d e v e l o p m e nt  a c t i o n s,  a l t h o u gh 
rarely  instigators. 

p a r t i c i p a t i ng 

Universities  and other research  and 
higher  education  institutions  have 
ceased  to  be  ivory  towers  without 
l i n ks  w i th  t he  c o m m u n i t i es 
in 
which  they  are  located.  The  growth 
of  the  importance  of  technological 
advance  in  all  industries  and  the 
increased  importance  of  access  to 
t h e o r e t i c al  a nd  ex 
t he 
perimental  h as  stimulated 
them 
into liaising and developing  projects 
with  local  firms. 

l a t e st 

Many  agencies in the voluntary  sec 
tor  now  see  economic  development 
and  employment  creation  as  the 
most  effective  means  of tackling  so 
cial problems. As a result, they  have 
been keen to see their role  expanded 
from  one of social  assistance  to  that 
of contributor  and participant in  the 
economic  and  social  development  of 
local  communities. 

- 

C o m m u n i ty 

Equally,  supra-local  structures  -
central  governments  and  the  Euro 
p e an 
h a ve 
increasingly  come  to  see  local  par 
ticipants  as  an  important  partner. 
New  contractual  relationships  be 
tween local authorities, regions  and 
central  government  in  France,  for 
example,  or  the  p a r t n e r s h ip  ar 
r a n g e m e n ts 
t he 
operation  of  the  reformed  Structu 
ral  F u n ds  (see  C h a p t er  16)  are 
typical  of this  new  form  of  relation. 

c o n c e r n i ng 

Local  Development 
Agencies 

The co-operation of all these  partici 
pants  does  not  necessarily  imply 
agreement.  However,  while  many 
conflicts  of  interest  between  part 
ners remain,  a spirit of  co-operation 

-  144 

a nd 

a t t i t u d es 

h as  replaced  conflict,  and  tradi 
t i o n al 
rigid 
ideological positions have given way 
to  more  p r a g m a t ic  approaches. 
Local economic and employment  de 
v e l o p m e nt 
this 
r e l i es 
mobilisation  of  a  large  number  of 
local  participants  and  on  tapping 
both  local  and  external  resources 
from  the  public  and  private  sectors. 
The need for co-ordination of all this 
activity  often  leads  to  the  creation 
of'local  development  agencies'. 

on 

Local development  agencies come in 
many  shapes  and  sizes.  They  may 
form part of the local authority  or be 
independent. They may  concentrate 
solely on defining policy or on imple 
menting  it  or  combine  both  roles. 
They  may  have  broad  functions 
covering  several  development  as 
pects  or  concentrate  on  just  one 
aspect. 

In  all  cases  they  represent  import 
ant  focal  points  in  local  networks 
and  play a crucial  role in  mobilising 
their  localities  through  their  close 
links  with  their  client  groups.  They 
create  new  capacity  in  their  areas, 
both  in  technical  and  managerial 
terms,  for  developing  and  imple 
m e n t i ng  e m p l o y m e nt  c r e a t i ng 
projects. 

The  European  Community  has  or 
ganised  exchange  programmes  for 
local  e m p l o y m e nt  development 
agents  for  the  last  three  years.  The 
Community  recognises  the  new  re 
ality  of  local  development  and  the 
need  for  partnership  at  all  levels. 
The  reformed  structural  funds  will 
thus  not  only  provide  financial  re 
sources  for  the  development  and 
restructuring  of  regions  and  local 
areas  but  they  will  also  seek  to  en 
sure  that  local  level  participants 
can  contribute  effectively  to the  de 
velopment  of  local  strategies  and 
that  programmes  are  built  on  ap 
propriate  analyses  of  the  areas' 

Chapter  13  New  Partnerships  in  Employment  Creation  - Local  Development 

Local  Development  Initiatives. 

Jugendberufshilfe,  Oberhausen 

The Jugendberufshilfe  (Youth Training and Employment Programme)  in 
the  City of Oberhausen  (Federal  Republic  of Germany)  is  an  example of 
a highly integrated  approach to youth training and employment  creation. 
It  is  targeted  on  disadvantaged  youth,  principally  those  who  left  school 
prematurely  and  have  few, if any,  skills 

The project  provides three  interlinked  programmes; 

•  vocational  training  which  includes  work  experience  in  local  busi 

nesses; 

•  work in building, renovation  and  gardening; 

• 

small business  creation  in the  service  sector. 

Funding bodies include the Federal and Lander governments, and  private 
and  voluntary  agencies. The  project  also generates  income  from  its  own 
activities. 

Work-Start  Ltd,  Dundee 

Work-Start  Ltd  was  initiated  in  1982  as  a  pilot  project  under  the  Euro 
pean  Social  Fund  and  aims  to  provide  "stepping  stones  to  real jobs"  for 
unemployed  people  through  counselling,  basic  skills  training,  work  ex 
perience  and  enterprise  development. 

The  project  is co-financed  by the  Scottish  Development  Agency,  the  City 
of  Dundee  District  Council  and  the  Community  Projects  Foundation. 
Work-Start Ltd runs Restart Courses, two Job Clubs for the  Employment 
Service,  provides  business  training  under  its  Private  Enterprise  Pro 
gramme,  and  gives  assistance  to  the  Dundee  Small  Business  Support 
Group  which  it  established  as  a  mutual  support  group  for  past  partici 
pants  of its business  start-up  courses. It has  recently  launched  a Women 
Creators  Project  which  aims  to  equip  women  with  the  necessary  con 
fidence,  vocational and managerial  skills to create successful  businesses. 

In 1987-88, it had a throughput of 2,300 unemployed people, of whom 45% 
found employment or took up further  education or training  opportunities. 

Advanced  Business  Centre  Nottingham 

The  Advanced  Business  Centre  in  the  city  of  Nottingham  is  a  joint 
public/private  sector  initiative  which  offers  access  to  modern  computer 
facilities  and  advanced  office  equipment  for  local  companies.  It  aims  to 
encourage  modernisation,  enhance  skill levels  and  improve the  competi 
tiveness  of local enterprises. The project  is sponsored  by Plessey  pic, one 
of the main UK manufacturers  of telecommunications equipment and  the 
City  Council  with  backing  from  central  government  though  the  Urban 
Programme.  The  availability  of  facilities  at  the  Centre  is  flexible  -  for 
instance, companies may  rent  premises  and  locate there, or the  facilities 
may be hired  by casual  short-term  or long-term  users. 

Over  40  firms  employing  approximately  120  people  are  based  at  the 
Centre.  In  the  future,  the  Centre  hopes  to  offer  access  to  its  computing 
facilities  by  remote  telephone  link.  With  this  aim,  the  City  Council  has 
announced  plans to establish  "linked" satellite  centres  with  community-
based  schemes  and  other  areas. 

- 1 4 5-

Chapter  13  New  Partnerships  in  Employment  Creation  - Local  Development 

needs,  strengths,  weaknesses  and 
potential. 

Future  Prospects 

A  successful  approach  to  develop 
ment  depends  on  the  existence  or 
creation  of  several  necessary  pre 
conditions,  in  both  'hardware'  and 
'software'  terms,  as  well  as  on  the 
presence  of people  able to  stimulate 
and  facilitate  the  developmental 
process.  Local  economic  develop 
ment  is not a low-cost alternative  to 
creating  the  necessary 
infrastruc 
ture  and  equipment. 

These  preconditions  are the  necess 
ary  but  not  sufficient  conditions 
needed  to  generate  employment. 
The  process  of  local  economic  re 
covery  can  be  a  long  one  and  local 
strategies  need  to recognise  this. 

Hardware  pre-conditions  typically 
include infrastructure,  housing  and 
educational  institutions.  Software 
pre-conditions  concern  people's 
skills,  a t t i t u d es  and  knowledge. 
They  can  also  extend  to  soft  cash 
types  of  finance  which  need  an  en 
trepreneurial  attitude  to  risk. 

New  participants  have  entered  the 
scene  of  economic  and  employment 
development  and  old  ones  have 
changed  their  roles. The  traditional 
view of employment  creation  is  that 
it  is  either  the  result  of  profit-in 
spired  entrepreneurs  creating  jobs 

a nd 

as  a  side  product  of pursuing  their 
main  goal,  or  it  is  the  result  of gov 
e r n m e n ts 
s e r v i c es 
p r o v i d i ng 
themselves  through  the  'public  sec 
economic 
t h e ir 
t o r' 
m a n a g e m e nt  policies.  T h at  was 
p r o b a b ly  n e v er  a 
r e p r e 
sentation  of reality  and  it  is  a  long 
way  from  the  experiences  observed 
in  the  Commission's  local  employ 
m e nt  d e v e l o p m e nt  p r o g r a m me 
LEDA  (see  Box). 

t r ue 

t he 

economic 

Although  local  development  can 
make  a  decisive  contribution  to  re 
b u i l d i ng 
a nd 
employment  base  of  local  areas,  it 
faces  many  obstacles  and  it  is  no 
panacea. Local authorities  and  local 
branches  of  national  government 
agencies,  for  example,  may  wish  to 
participate  more  actively  but  lack 
the institutional  or  financial  means. 

A successful  approach  needs  people 
or  institutions  who  act  as  facilita 
tors  in  the  locality.  They  can  be 
elected  local  politicians,  or  come 
from  the  public,  private,  or  volun 
tary  sectors.  Such  entrepreneurial 
leadership  is  commonly  absent  in 
less  developed  areas  or in  declining 
areas  previously  dominated  by  a 
few  large  employers.  These  areas 
are  also  often  marked  by  the  ab 
sence  of  any  adequate  evaluation 
system  for  local  labour  m a r k et 
skills  and  training  needs.  Effective 
local  development  strategies  need 
to  correct  for  all  of  these  deficien 
cies. 

146-

Chapter  13  New  Partnerships  in  Employment  Creation  - Local  Development 

Local  Employment  Development 
- it  Exists  in  Practice, b ut  Does  it  Exist  in  Theory? 

Employment  Analysis 

1 

Economics is a powerful  analytical discipline. Concepts like 'the circular flow of income' which 
demonstrate  how  expenditure  in  an  economy  is  transformed  into  income,  output  and  back 
into expenditure and 'economies of scale' which explain both the basis of productivity  growth 
and  the  tendencies  towards  concentration  of  production  provide  penetrating  insights  into 
the  workings  of our  societies. 

However,  the  clarity  and  appeal  is  partly  due  to  a  methodological  reliance  on  simplifying 
complex economic and  social relationships. The analysis often  assumes away such factors  as 
market imperfections  and the existence  of middle agents, such as wholesalers  and retailers,  , 
who  separate  producers  and  consumers,  making  their  relationship  an  indirect  one  rather 
than  the  direct trading  assumed  by economic  theory. 

In the  same way, local employment  and  economic  development  is generally  'assumed  away' 
in  economic  analyses  of  regional  or  local  development,  which  can,  in  consequence,  only 
attribute economic backwardness or poor performance to a lack of industrial or  infrastructure 
investment  or uncompetitive  wages. 

This is inevitable in a formal, generally static, model where  a common standard  of entrepre 
neurship  is assumed  to exist, where there  are only private  enterprises  (and no public  sector 
or public-private  partnership), where competition is generally perfect,  and where no account 
can be taken  of the  accumulated  social, political  and  economic history  of a  locality. 

In  reality,  of  course,  the  factors  assumed  away  can  be  among  the  major  determinants  of 
dynamic  economic  success  or  failure.  Economic  textbooks  have  begun  to  acknowledge  this 
by introducing  the  concept  of 'x-inefficiencies'  to cover  differences  in  economic  performance 
that  cannot be explained  away by differences  in labour/capital  costs or differences  in  capital 
intensity. 

While the  'x-inefficiency'  concept is commonly  applied  to comparisons between  enterprises, 
or between  similar  sectors  in  different  countries,  it  is  equally  applicable  in  explaining  why 
different  localities, with  perhaps  similar  natural, human  and  capital  endowments,  perform 
so  differently. 

In many ways, local development can be equated with the management of enterprises - where 
success  is  recognised  to  depend  on  differences  in  management  performance.  Management 
is, however,  not quite the right concept for local development  since notions of what it  means 
are  largely  derived  from  the  private  sector  where  it  operates  from  the  top  down  and  is 
measured  against  the  simple criterion  of  profitability. 

A local  economy  has  no  such  simple  structure.  It  serves  many  goals  and  has  many  varied 
participants. 

Nevertheless  the  tasks  that  need  to  be  performed  -  reconciling  conflicting  goals,  setting 
targets, ensuring  efficiency,  balancing longer term  against  shorter  term  issues - are  similar 
to those in  a  company. 

Some  of these  activities  can  be  dealt  with  by  market  forces  rather  than  management,  but 
many  cannot.  Local  partnerships  between  industry,  trade  unions,  action  groups  against 
unemployment,  local government  committees on economic development,  and the creation of 
local development  agencies  all reflect  the  need  for  institutions  or mechanisms  to tackle  the 
problems  of local  'management'. 

The techniques of local 'management' of employment creation are currently  under-developed. 
When they do become more formalised  and widely disseminated they will probably  highlight 
the importance  of human  factors  - leadership, motivation  and confidence-building  - as  much 
as  organisational  or  institutional  arrangements  in  ensuring  successful  local  employment 
development. 

147 

148 

Chapter 14 Mobility and the European Labour Market 

Chapter 14 Mobility and the European Labour Market 

Labour mobility across the Community is low, yet many see 
the possibility of working in another Community country as 
an important advantage. Will the European labour market 
ever resemble that of the United States? 

Introduction 

Of the many complex concerns re­
garding l a b o ur m o b i l i ty a nd 
migration in the Community, and 
which need to be balanced, three in 
particular stand out: 

Mediterranean into the Federal Re­
public and France ­ was a result of 
both demand and supply pressures. 
The growing manpower needs of 
m a ss production m a n u f a c t u r i ng 

systems in the north coincided with 
high levels of unemployment and 
under­employment in southern Eu­
rope, and the rural exodus which 
accompanied rising productivity in 

• to ensure individual rights of 

free movement as embodied in 
the Treaty and as developed in 
the Single Act; 

• to ensure sufficient occupa­
tional and geographical 
mobility in order to maximise 
the benefits of the development 
of the Internal Market; 

• to maintain social cohesion and 
regional balance across the 
Community and to avoid some 
of the negative effects of pre­
vious migrations, particularly 
by encouraging economic devel­
opment in the regions of 
emigration and underdevelop­
ment. 

Migration in t he 
1960s a nd 1970s 

The classic Community migration 
of the 1960s ­ from southern Italy 
and parts of Eastern Europe and the 

The Community as an Opportunity for Mobility 

Regular surveys of European opinion are organised by Eurobarometer. 
The December 1988 Report included responses to questions about the 
opportunity that Community membership could give for greater mo­
bility. 

Those surveyed were asked what they felt about the advantages of the 
Single Common European Market in 1992 in terms of residence and 
employment. ■ 

R e s i d e n ce 

The opportunity for. any citizen of a country within the European 
Community to go and live without limitation in any country of the 
Community, for instance, to retire there or to study there is an: 

Advantage 

Disadvantage 

Don't Know 

80 

12 

8 

Question C o n c e r n i ng Work 

The opportunity for any citizen of a country within the European 
Community to go and work in any other country of the European 
Community is an: 

Advantage 

Disadvantage 

Don't Know 

77 

14 

9 

149 

Chapter  14  Mobility  and  the  European  Labour  Market 

agriculture.  This  can  be  seen  in 
G r a ph  10  in  C h a p t er  1  which 
showed  how,  in  the  period  between 
1965  and  1985, the  decline  in  agri 
cultural  employment  was  initially 
offset  by  industrial  employment 
and  later  by  the  growth  in  the  ser 
vices  sector. 

While  these  rural  declines  are  con 
tinuing,  particularly  in  Portugal 
and  Greece,  the  demand  conditions 
of  the  past  are  unlikely  to  return, 
given  the  decline  in  manufacturing 
employment  and  the  change  in  the 
organisation  of production.  The  mi 
of 
g r a t o ry  m o v e m e n ts 

o ut 

agriculture  in  recent  years  have 
tended  to  be  into  nearby  towns  or 
even  villages  with  economic  devel 
opment  potential. 

Not  all  urban  centres  have  bene 
fitted.  Many towns and cities  linked 
to  major  industries  in  decline  have 
lost  population.  The  urban  centres 
which  have  grown  are  generally 
those  which  are  linked  to  branches 
of  government,  new  service  acti 
vities,  and  science  and  research, 
and  which  are  physically  attractive 
and  conveniently  located. 

Experiences  of 
Emigration  Countries 

Italy 

Southern  Italy, largely  agricultural 
and  with  little  industry,  was  the 
source  of  60%  or  more  of  Italian 
migrants  up to the end of the  1970s. 
They  were  mostly  unqualified  wor 
kers  from  a  rural  background.  The 
n u m b e rs  declined  considerably 
from  over  150,000  people  a  year  in 
the  1960s  to  less  than  10%  of  that 
amount  by  1979. 

106 

Inter-Regional  Mobility  within  the  Member  States 

1986 

û 

Net  Emigration  ( >  0.1  %) 

Little  Movement  (<  0.1  %) 

Net  Immigration  (>  0.1  %) 

No  Regional  Data 

O ^ ^1 

150 

By  the  early  1980s,  the  migratory 
flow had  ceased and the balance  had 
even begun  to  be  reversed  with  the 
return  of Italian  migrants  and  with 
the  arrival  of workers  from  outside 
the  Community.  A  new  phenome 
non  -  albeit  limited  in  scale  -  has 
been  the  emigration  of  the  more 
qualified  young from  northern  Italy 
into Germany  and  Switzerland. 

Mobility  within  Italy  is  reasonably 
high, and  considerably greater  than 
Italian  migration  - for  example,  1.2 
million  Italians  change  their  town 
each  year  as  against  50,000  who 
leave the  country. 

Greece 

to 

I t a l y: 

t h at  of 

Greek migratory  experience is simi 
s t r o ng 
lar 
emigration  - over  a  million  people  -
towards  northern  Europe  during 
the  1950s  through  to  the  1970s.  Of 
those, 80% went  to  the  Federal  Re 
public  of  Germany.  The  late  1970s 
saw a  decline  with  increasing  num 
bers  of returning  migrants  and  the 
arrival  of  illegal  workers  from  out 
side Europe. Construction  work  and 
other  economic  developments  acti 
vities in  the  Middle  East  have  been 
an off-setting  factor  to  some  extent, 
creating  some  emigration  of  quali 
fied workers. 

The  return  of  previous  migrants  is 
seen  as  a  positive  development. 
However,  to  prevent  the  pressures 
for  emigration  re-emerging,  there 
will  have  to  be  economic  develop 
ment  within  Greece.  However,  the 
country  does  not  have  the  highly 
diversified  economic  base  - both  in 
terms  of  sectors  and  geography  -
enjoyed  by  Italy.  Apart  from  At 
hens,  t h e re  are  few  c e n t r es  of 
economic  development  with 
t he 
potential  to  serve  as  a  base  for  fu 
ture employment growth other  than 
those related  to  tourism. 

Chapter  14  Mobility  and  the  European  Labour  Market 

areas  to  the  coast;  towards  more 
developed  areas  such  as Lisbon  and 
Porto; and  towards  the small  inland 
towns  which  have  provided  a  form 
of  local  urban  development  to  ab 
sorb  the  rural  exodus. 

The  current  state  of the  Portuguese 
economy could lead to further  major 
migratory  movements  within  the 
country,  or  between  it  and  other 
countries  in  the  Community.  There 
is  a  high  concentration  of  low  pro 
ductivity  agricultural  employment 
and  there  are  serious  unemploy 
ment  problems  in  the  coastal  areas 
caused  by the  crisis  of  shipbuilding 
and  steel  around  Lisbon.  There  is 
also  the  uncertain  future  for  many 
of  the  small  traditional  businesses 
in  the  northern  region. 

E x p e r i e n c es  of 
I m m i g r a t i on 
C o u n t r i es 

Federal Republic of 
Germany 

In  northern  Europe, 
immigration 
and  mobility  p a t t e r ns  have  also 
changed  during the last decade. The 
Federal  Republic  of  Germany  re 
ceived  many  Turkish,  Portuguese, 
Spanish  and  Italian  workers  during 
the  1950s and  1960s as well as  large 
numbers  of  refugees  from  Eastern 
Europe. These  migrants  also  moved 
within  the  Federal  Republic  during 
the  crisis  in  the  manufacturing  in 
dustry  in  the  1970s.  During  the 
1970s 
g e n e r a l ly 
ceased.  However,  given  the  decline 
in  the  population  of  working  age 
and  the  end  of  the  rural  exodus  to 
the cities, there was some  continued 
immigration,  principally  of  south 
ern  Asian  workers. 

i m m i g r a t i on 

Spain 

Spain  also  experienced  strong  emi 
gration  - a  million  workers  -  during 
the  1960s  and  early  1970s.  Since 
then, there has been a steady  return 
of  m i g r a n t s.  Between  1971  and 
1986 the  number  of Spaniards  leav 
ing  for  economic  reasons  fell  from 
130,000  a  year  to  9,000.  In  1986 
some  19,000  Spaniards  returned  to 
their  country,  of whom  over  10,000 
came  from  the  Community. 

A  new  phenomenon  has  been  the 
arrival  of workers  from  outside  the 
Community  and  even  from  inside, 
for  example,  from  the  United  King 
dom.  In  1986  17,000  work  permits 
were  granted  by  Spain  to  Com 
munity workers  most of whom  went 
into  the  services, tourism  or  leisure 
sectors. 

The  development  of  social  protec 
tion  systems  over  the  last  ten  years 
in  Spain  has  reduced  pressures  for 
emigration.  Migration  within 
the 
country  continues,  however,  par 
ticularly  towards  Madrid  and  the 
coastal  areas.  In  contrast,  the  main 
i n d u s t r i al  c e n t r es  w h i ch  h a ve 
undergone major restructuring - the 
Basque  region  and  the  Barcelona 
area  - no longer  attract  migrants. 

Portugal 

Portugal  had  experienced  consider 
able  emigration  - 2 million  workers 
leaving  during the  1960s  and  1970s 
- mainly  to the  Community  but  also 
to  the  United  States,  Switzerland 
and  the  Middle  East.  Of  those  emi 
grating  to  the  Community,  most  go 
to France  and  the  Federal  Republic 
of  Germany.  Portuguese  workers 
have  been  particularly  attracted 
into the  construction  industry. 

Internal  mobility  in  Portugal  has 
been  considerable,  and  marked  by 
three  movements:  from  the  inland 

151 

Chapter 14 Mobility and the European Labour Market 

107 Foreign Workers in the Member States 

1986 

EC D Non EC 

Millions 

16 

1.2 

D F UK Β NL L DK Ρ GR IRL 

108 Foreign Residents in t he Member States 

,- Millions 

Γ 1 

1986 

■ EC □ Non EC 

The most skilled jobs in the high 
technology centres such as Munich 
largely go to nationals. They could, 
however, begin to attract qualified 
people from other Community coun­
tries. 

Despite large differences in rates of 
unemployment, mobility from the 
north of Germany to the south has 
been limited to these highly skilled 
workers. As elsewhere, those with 
limited or no skills are becoming 
less mobile, concentrating on the 
local market and often in the infor­
mal economy. 

F r a n ce 

French experience is similar to that 
of the Federal Republic in respect of 
both the non­national labour force 
and internal migration. Immigra­
tion ended over a decade ago and 
internal mobility has diminished. 
Emigration from France has de­
clined and movements into urban 
areas have slowed. The Paris region 
is no longer growing, although it 
still attracts the young who tend to 
leave by their late 30s. 

In the 1960s, the north­eastern cor­
ner of France attracted employment 
and migration. Since then, the area 
has become a source of emigration 
with the crises in coal, steel and 
textiles. The new trend has been the 
growth of the previously poorly 
p o p u l a t ed s o u t h ­ w e st region of 
France which has attracted skilled 
labour to an area without an indus­
trial tradition. It h as prospered 
thanks to growth sectors such as 
high technology and the attractions 
of the good quality of life it offers. As 
elsewhere, in France it is the large 
towns which create the jobs requir­
ing high qualifications. 

D F UK Β NL E I GR DK L IRL Ρ 

HH _ — _ 

152­

Chapter  14  Mobility  and  the  European  Labour  Market 

Future Prospects  - A 
Genuine  European 
Labour  Market? 

t o w a r ds 

The European  labour market is  cur 
rently  more  of  a  concept  t h an  a 
reality. Some migration  movements 
continue  in  the  Community  -  not 
ably  from  I r e l a nd 
t he 
United  Kingdom  and  increasingly 
to  other  European  countries.  The 
general  pattern,  however,  has  been 
for migration  to fall,  and  for  some of 
the  migrants  from  traditional  emi 
gration  countries  - Spain,  Portugal, 
Greece  and  southern  Italy  -  to  re 
turn  to  their  countries  of  origin. 
Part  of  the  explanation  of  this  re 
duced  internal  mobility  may  reside 
in  the  mobility  of  non-EC  migrant 
workers. 

The  number  of  Community  nation 
als  working  on  a  more  or 
less 
permanent  basis  in  another  Com 
munity  country  is  relatively  low  -
under  2  million  with  a  further  2 
million  or  more  non-EC  migrant 
workers,  the  bulk  of  whom  are 
working  in  the  Federal  Republic, 
France and the UK (see Graph  107). 
The  mass  movements  of  labour  in 
the past  are now seen as a  reflection 
of  imbalanced  development  rather 
than  as  a model  of future  European 
mobility. 

Foreign  residents  -  including  mi 
grant  workers  and  their  families  -
total  12.5  million  of  which  5.5  mil 
lion  are  Community  nationals  (see 
Graph  108). 

Some specialised European-wide  la 
bour  markets  are  developing  but 
movement  w i t h in  p r o f e s s i o n al 
groups  has  been  small,  despite  the 
progress  being  made  to  encourage 
movement  by  ensuring  the  mutual 
recognition  of  qualifications. 

M u l t i - n a t i o n al  c o m p a n i es  com 
monly  treat  their  management  and 
senior  maintenance  personnel  as 
operating  within  a European,  or  in 
l a b o ur  m a r k e t. 
deed  w o r l d, 
t a ke 
Geographical  moves  which 
place  within  the  company's  'inter 
nal'  labour  market  are  currently 
concentrated  on  the  most  highly 
skilled  or  specialised  roles  but  the 
numbers  are  growing  and  raise  is 
s u es  s u ch  as  t he  c o - o p e r a t i on 
between  the  social security  systems 
of the  Member  States. 

Will  this  lack  of  mobility  between 
Member  States  continue  or  will  the 
combined  effects  of the  1992  market 
changes  and  the  completion  of  the 
legal  framework  to  ensure  genuine 
free  movement  create  an  entirely 
n ew 
t h an 
s i t u a t i o n?  R a t h er 
renewed  movements  from  poorer  to 
richer  parts  of the  Community,  will 
there  be a higher  level of mobility  in 
general  with  larger  n u m b e rs  of 
Community  nationals  - particularly 
the  more  highly  qualified  -  living 
a nd  w o r k i ng  in  o t h er  M e m b er 
States  either  temporarily  or  perma 
nently? 

In  short,  could  the  European  Com 
munity  labour  market  eventually 
become more like that  of the  United 
States  or  is  t h at  merely  a  pipe-
dream?  There  is  evidence  on  both 
sides  which  makes  it  hard  to  give  a 
definitive  answer.  There  are a  num 
ber  of  a r g u m e n ts  which  would 
imply greater  mobility, not least  the 
aspirations  of  Community  citizens 
which  are  in  sharp  contrast  to  the 
actual  low  levels  of  mobility  be 
t w e en  M e m b er 
S t a t e s.  T he 
possibility  of  being  able  to  move 
from  one Community  country  to  an 
other  in  order  to  work  is  seen  as  a 
major  a d v a n t a ge  of  Community 
membership  by  almost  80%  of  the 
people  interviewed  in  the  Euroba 
rometer  survey. 

153 

in 

t he  o b s t a c l es 

Secondly, there  are the  expected  re 
to 
d u c t i o ns 
mobility.  The  completion  of  the 
Community  legislation  (see  Box) 
could have  a major  effect.  The  Com 
mission  is  tackling  the  Catch  22 
administrative  obstacles which  per 
sist  in  some  Member  States,  but  it 
is  not  clear  to  what  extent  non-in 
stitutional  obstacles  -  language, 
ignorance  of the  opportunities,  cul 
ture,  climate,  and  housing  -  also 
deter  mobility. 

Thirdly, there are the imbalances  in 
demand  and  supply  of  specialists 
across  the  Community  with  appar 
c e r t a in 
e nt  e x c e ss  s u p p ly 
professions  in  some  countries  and 
shortages  in  others. Movements  be 
tween  Member  States  could  be  a 
reaction  to  the  needs  of  this  "mar 
ket". 

in 

F o u r t h l y,  increased  commercial 
and  economic  integration  will  ine 
vitably  bring  closer  contact  and 
co-operation  between  E u r o p e an 
citizens  and  in  turn  lead  to  employ 
ment  opportunities  being  offered 
and  sought. 

On  the  other  hand,  there  is  the  ar 
g u m e nt 
t h at  m o b i l i ty  b e t w e en 
Member  States  is low because  it  re 
flects  the  preference  of  European 
citizens in contrast  to their  counter 
parts  in  the  United  States. 

Even  the  established  cross-frontier 
labour  markets  -  between  France 
and  the  Federal  Republic,  and  the 
Benelux  countries  -  which  provide 
local models of possible future  Com 
munity  labour  market  development 
are  modest  affairs.  Hardly  more 
than  a  quarter  of  a  million  people 
currently  cross  frontiers  regularly 
to work and  over half are working in 
a  non-Community  country  -  Swit 
zerland. 

Chapter  14  Mobility  and  the  European  Labour  Market 

Although  mobility  in  t he  Com 
munity  is  low  compared  with  the 
United  States, there is a fair  degree 
of  mobility  within  national  boun 
daries.  This  is  concentrated  in  the 
north  of Europe  and  northern  Italy, 
and  is less  prevalent  in  the  south  of 
the  Community. 

Surprisingly,  unemployment  h as 
s t i m u l a t ed  few  moves  even 
in 
northern  Member  States.  In  the 
Federal  Republic  and  the  United 
Kingdom,  for  example,  there  has 
been  little  movement,  except  for 
highly  skilled  workers,  from 
the 
northern  regions  of high  unemploy 
ment  to  the  south  where  it  is  much 
lower.  Social  protection  systems 
which  permit  a  'survival  strategy' 
for  the  unemployed  and  housing 
shortages in the low  unemployment 
areas  are  the  most  common  expla 
nations  for  this  lack  of  migration. 

Similar  reasons  are  given  by  com 
m e n t a t o rs  for  t he  reduction 
in 
migration  from  southern  European 
countries.  Potential  migrants  may 
feel  that  even  inadequate  social  se 
curity  added  to  the  availabity  of 
housing,  the  proximity  of  t h e ir 
families  and  the  existence  of  some 
work,  either  legitimate  or  in  the 
black  economy,  makes  staying  put 
preferable 
in 
volved 
in  a n o t h er 
Member  State.  Policies  to  improve 

to  t he  u p h e a v a ls 

in  w o r k i ng 

the  quality  of life  in both  urban  and 
rural  areas,  and  to  stimulate  local 
development  and  improve  educa 
tion  and  training  opportunities  are 
equally  important  in  encouraging 
people  to  stay  in  the  more  deprived 
areas. 

On  balance  it  seems  clear  that  Eu 
ropean-wide  mobility  will  increase 
in  the  coming years,  but  the  extent 
ofthat  rise  is  dependent  on  a  num 
ber  of  complex  factors,  many  of 
which are linked to the  development 
of the  Internal  Market. 

Removal  of the remaining  obstacles 
to  free  movement  is  unlikely,  in  it 
self,  to  bring  forth  a  new  wave  of 
m i g r a t i o n.  However,  t h e re  un-
doubtably remains  a large  potential 
for  migration  from  many  areas  of 
southern  Europe  if  development 
strategies  and  local  initiatives  are 
not  able  to  generate  sufficient  new 
employment  opportunities  to  offset 
those  gradually  being  lost  through 
agricultural  decline. 

The  most  likely  prospect  would 
seem  to  be  a  gradual,  progressive 
increase in the general level of Com 
munity-wide  mobility,  led  by  the 
more  highly  skilled,  who  already 
have  a wider  concept of their  labour 
market,  and  who  will  thus  be  the 
first 
to  exploit  the  greater  oppor 
tunities  of free  movement. 

154 

Chapter  14  Mobility  and  the  European  Labour  Market 

Frontier  Workers 

Frontier  workers  are  defined  as  people  who  live  in  one  Member  State,  to  which  they  normally 
return  daily  or weekly, but  are  employed  in  another  Member  State. 

Statistics on migration  and mobility, particularly  on frontier  workers, are notoriously  difficult  to 
obtain.  The  issues  are  partly  conceptual  - the  frequency  of return  determines  whether  or  not  a 
person  is  a  migrant  or  a  frontier  worker.  Moreover,  data  is  either  non-existent  or  collated  in 
non-standard  ways. 

For  example,  cross-border  flows  between  the  UK  and  the  Irish  Republic  are  excluded  from 
statistics  on  frontier  workers  although  many  Irish  workers  do in  fact  return  regularly,  but  not 
weekly.  In other  cases - for  example  between  Portugal  and  Spain  - no reliable  statistics  exist.  In 
addition,  illegal workers  are  left  out  of official  data  sources. 

The  largest  volume  of  intra-Community  frontier  workers  is  between  the  Federal  Republic  of 
Germany and its neighbours, with the largest  single movement  of frontier  workers  - from  France 
to Germany  - numbering  35,000. Other  major  flows  are from  France, Belgium  and  the  FRG  into 
Luxembourg  (between  20,000  and  25,000)  between  Belgium  and  the  Netherlands  (20,000), 
between Belgium and France (nearly  15,000), and from the Netherlands to the FRG (over 10,000). 

However,  the  most  important  group  of  frontier  workers  in  the  Community  are  the  Germans, 
Italians and French who work in non-Community Switzerland - some 25,000 from the FRG, 40,000 
from  Italy  and  over 60,000 from  France. Most frontier  workers  - probably  70 per  cent - are  men. 

While  there  are  examples  of two-way  movements  of frontier  workers  - such  as between  Belgium 
and  Holland  - the  movement  is  mostly  one  way: from  the  lower  wage  countries  to  neighbouring 
states  where  wages  are higher  or job opportunities  greater. 

Policy  Concerns 

While  the  number  of frontier  workers  is  relatively  small,  the  issues  raised  by  the  phenomenon 
are important because they give an indication of the problems that may be faced as mobility within 
the  Community  increases.  Common  difficulties  include  access  to  vocational  training  and  treat 
ment  under  social  security  legislation. 

Frontier  workers  have  some  established  rights.  In  an  1985  communication  (COM(85)  529)  the 
Commission  stressed  that  Article  7  (2)  of  Regulation  1612/68  concerning  social  and  fiscal 
advantages  applied  directly  to frontier  workers.  In addition,  social security regulations  (1408/71 
and 574/72) apply fully to employees and the self-employed.  Furthermore, special provisions  apply 
to benefits  under  the  sickness  and  unemployment  insurance  schemes. 

These  regulations  ensure  that  frontier  workers  are  entitled  to  benefits  in  one  of the  countries 
concerned  and  even  apply  to members  of the  family,  provided  an  agreement  to this  effect  exists 
between  the two  countries. 

Nevertheless  there  are  still problems  in  particular  over: 

• 

• 

• 

taxation  such as assessing taxable income, tax exemptions, family tax allowances, etc.  In  1979 
the Commission proposed in a Directive that the country of residence be chosen as the  country 
of taxation  but  the  problem  has  not  been  resolved  since  the  Directive  is  still  pending  in  the 
Council; 

the  activities of some temporary  employment businesses in frontier  regions which have  given 
cause for  concern; 

the  absence  of  regulations  covering  the  validity  of  driving  licences  and  insurance  cover  for 
service vehicles temporarily  imported. 

155 

Chapter  14  Mobility  and  the  European  Labour  Market 

Freedom  of Movement  of Persons  a nd  E u r o p e an  Occupational 
Mobility  - The  Legal  F r a m e w o rk 

The Treaty  lays  down  as a general  and  fundamental  principle, the freedom  of movement 
of workers  (Articles  48 to 51) and  the  freedom  of establishment  (Articles  52 to 58): 

• 

freedom  of movement of workers 'shall entail the abolition of any discrimination  based 
on  nationality  between  workers  of  the  Member  States  as  regards  employment,  re 
muneration  and  other  conditions of work  and employment'  (Article 48(2)).  It  includes 
the right to accept offers  of employment, to move freely  within the Community for  this 
purpose, to stay  in  a Member  State  for  the  purposes  of employment  and  to remain  in 
a Member  State  after  having been  employed  there  (Article 48(3) (a) (b) (c) (d)). Article 
51  provides  that  the  necessary  co-ordination  measures  shall  be  taken  in  the  field  of 
social  security; 

• 

freedom  of establishment  'shall  include  the  right  to take  up  and  pursue  activities  as 
self-employed  persons  and  to set up and  manage  firms'  (Article 52). 

Certain  exceptions  and  limitations  to the basic  principle  of free  movement  are  set  out  in 
the  Treaty.  The  provisions  of Article  48  'shall  not  apply  to  employment  in  the  public 
service' (Article  48(4)) and  Article  55 lays  down  that  the  provisions  relating  to the  right 
of establishment 'shall not apply to activities which are connected, even occasionally, with 
the  exercise of official  authority'.  There  are  restrictions, too, on 'grounds  of public  policy, 
public  security  or public health' Articles 48(3) and  56(1). 

On the other hand, the reference in the Single Act to a frontier-free  area clearly  represents 
a willingness to go beyond the freedom  of movement of active persons and to establish  the 
freedom  of movement  for  people  as Community  citizens. 

In  order  to implement  the Treaty  objectives,  a  series  of Regulations  and  Directives  have 
been  adopted  to  guarantee  rights  on  geographical  and  occupational  mobility  and  social 
integration  in the  host Member  State for workers  and  members  of their  families. 

•  Geographical mobility:  any national of a Member State may leave his country of origin, 
enter  and  stay  in  another  Member  State  in  order  to  look  for  and  take  up  gainful 
employment,  whether  temporary  or  permanent,  and  to  subsequently  live there  after 
having worked  there. 

•  Occupational  mobility:  any national  of a Member  State  may enjoy  the  same  terms of 
employment  and  working  conditions  as  nationals  of  that  country,  enjoy  the  same 
training facilities  and  use the various public employment  facilities. 

•  Social integration:  migrant workers enjoy equal treatment in respect of social  facilities 
whether  or not such  facilities  are  directly related  to employment.  These rights  extend 
to  members  of  the  worker's  family  and  include  rights  to  grants  or  financial  aid  for 
access  to  general  education  and  vocational  training  on  the  same  terms  as  national 
students. 

Court of Justice judgements have defined, and frequently  extended, the field of application 
of such  Regulations  and  Directives  to cover, for  example,  part-time  workers, and  certain 
jobs  in  the  public  sector.  Rights  have  also  been  established  with  regard  to  re-uniting 
migrant  workers  with  their families  and  the rights  of these  families. 

The Commission has proposed a revision of these  Community Directives and  Regulations 
designed to enlarge their personal  and material  scope and to extend the period of validity 
of residence  permits  and  to  extend  the  conditions  on  family  reunification.  Regulations 
have  also  been  adopted  in  order  to  ensure  coordination  of national  legislation  on  social 
security, based  on the  following  basic  principles: 

156 

Chapter  14  Mobility  and  the  European  Labour  Market 

• 

• 

the  application  of a single  body of legislation  in  any  one case; 

the  retention  of acquired  rights  and  rights  being  acquired; 

•  equal  treatment  between  nationals  and  citizens  of other  Member  States. 

These principles ensure the provision of social protection (in the case of sickness, invalidity, 
old  age, industrial  accidents  and  occupational  diseases,  unemployment,  family  benefits, 
death) for employed workers (Community nationals, Stateless persons or refugees)  moving 
within  the  Community  and  for  members  of their  families  (regardless  of nationality). 

Officially  Community legislation  ensures freedom  of movement of  employees.  In practice, 
a  number  of obstacles  and  loopholes  remain.  A series  of legal  actions  has been  begun  by 
the  Commission,  which  has  in  some  cases  reached  the  Court  of Justice  of the  European 
Communities  to deal, in accordance with Community legislation, with national  situations 
created  by  legislation,  regulations,  circulars  and  administrative  practices  adopted  by 
various  Member  States  since  1968  seeking  to  restrict  access  to jobs  or  training  to  their 
own nationals. Many of these cases of discrimination arise as a result of unequal  treatment 
of nationals and employees from  another Member State due to a lack of conformity  between 
national  and  Community  law. 

The Commission has withdrawn its proposal on the right of non-active persons to mobility 
and  residence  within  the  Community  which  had  been  in  the  Council  since  1979. It  has 
presented  three  new  proposals  concerning  students,  pensioners  and  inactive  persons 
respectively. 

Qualified  Workers  and  Professionals 

In order for qualified  people to achieve genuine  freedom  of movement, their  qualifications 
must be recognised by other Member  States. Professionals  must  also have the  freedom  to 
provide  services  as well as to set  up their  own  businesses. 

The traditional Community approach to this problem has been through the  establishment 
of minimum  standards.  Community  rights  established  in  this  way concern  various  occu 
pations: 

•  commerce  and  crafts: the legislation  aims to recognise the  right to exercise an  occupa 
tion in another Member State provided that occupation has been exercised for a certain 
time in the  Member  State  of origin; 

•  medical and para-medical  professions:  minimum standards of training and the  mutual 
recognition  of  diplomas  have  been  achieved  for  doctors,  nurses,  dentists,  veterinary 
surgeons, midwives and  pharmacists; 

•  architects  are  covered  by a directive  on the  recognition  of diplomas,  and  lawyers  by a 

more general  directive. 

Because  progress was slow, a new approach has been  adopted, involving a general  system 
of recognition of education  diplomas, covering both employees and self-employed  workers. 

In  January  1989, therefore,  a  Directive  was  adopted  covering  persons  who  had  acquired 
a  qualification  through  no less than  three years  of training  after  secondary  education.  In 
this way, the worker has more chance of taking up an occupation in another Member  State, 
where access to this activity and/or its exercise are subject to qualifications  and conditions. 

Once in  force, the  system  should  give access to all the  occupations  covered by  regulations 
except  those  covered  by  specific  directives  and  those  entailing  the  exercise  of  official 
authority  (Article  55 of the  EEC  Treaty) or covered  by Article  48(4) of the  Treaty. 

157 

158 

Part  III  Community  and National  Policies 

Chapter  15  National Labour Market  Policies 

Chapter  16  Community  Policies 

159 

-160 

Chapter 15 National Labour Market Policies 

Chapter 15 National Labour Market Policies 

Labour market measures are flow well documented and 
much discussed among experts. Less clear is what the future 
objectives of national policies should be. 

Introduction 

Direct spending on labour market 
policies to reduce unemployment 
and promote employment probably 
accounts for 20­25% of total govern­
ment efforts to h e lp g e n e r a te 
employment. 

Until the recession of the mid­
1970s, labour market policies had 
tended to be passive and social, 
aimed at maintaining the incomes 
of the unemployed r a t h er t h an 
using the available resources to 
tackle fundamental labour market 
problems. Even though this has 
changed somewhat, it is unlikely 
that more than a third of the money 
e a r m a r k ed for l a b o ur m a r k et 
policies is spent on active measures. 

Restrictions on public budgets have 
brought pressure for employment 
measures to be managed more effi­
ciently and effectively. This has led 
governments to develop policies of 
"active unemployment" ­ encoura­
ging the unemployed to use their 
periods of unemployment to develop 
skills in demand on the labour mar­
ket. 

Such approaches were first adopted 
in the United Kingdom and Den­
mark, where m e a s u r es included 
actions to encourage the longer 
term unemployed to enter training 

courses or set up their own busi­
n e s s e s. At t he s a me t i m e, as 
training places increasingly out­
n u m b er a p p l i c a n ts a nd t he 
inducements for early retirement 
removed skilled people from the 
workforce, governments such as 
that of the Federal Republic have 
been anxious to use resources to im­
prove the skills of their workforces. 

Types of Measures 

The variety of measures adopted by 
governments have frequently been 
found to contain inconsistencies and 
duplication, as demands on them 
have increased and policy emphases 
have changed. As a result, Member 
States have started to: 

• simplify and reduce the number 
and nature of the measures; 

109 Labour Market E x p e n d i t u re in R e l a t i on to 

GDP in t he Member States 1987 

„ % GDP 

■ Income Maintenance Π Active Measures 

0 

Ρ GR I L D UK F E NL Β DK IRL 

161 

Chapter  15  National  Labour  Market  Policies 

• 

focus  on key  objectives; 

•  broaden  their  approaches  by  de 
signing  overall  policies  which 
can  be  adapted  to  local  condi 
tions. 

One  aim  is to  make  measures  more 
client-oriented:  the  jobless  should 
be  able  to  understand  the  implica 
tions  of  what  they  are  embarking 
on, and  employers  should  be  able  to 
assess the qualities  and  skills of the 
people  they  receive. 

Simplification  often  results  in  the 
c o n s o l i d a t i on  of  e x i s t i ng  pro 
grammes.  For  instance,  the  various 
UK  schemes  for  the  long  term  un 
employed  were  reduced  to  a  single, 
but massive (ECUs 4bn) measure  in 
1988:  the  "Training  Programme". 
T he  p l e t h o ra  of  w o r k - c r e a t i on 
schemes  in  the  public  sector  in  Bel 
gium have, in the  course of 1988-89, 
been  reduced  to  two. 

New  ideas  - such  as job  clubs  -  are 
increasingly  tested  through  pilot 
schemes  in  selected  areas.  These 
pilot schemes have been a feature  in 
including 
various  Member  States 
F r a n c e,  Belgium,  Lhe  U.K., 
the 
Netherlands  and Ireland, where  the 
Jobsearch  programme  went  nation 
wide  in  1988  after  a  two  year  local 
trial  period. 

Successful  national  measures  do 
not  necessarily  adapt  to  every  local 
situation. The application of policies 
may need to be tailored  to the  needs 
of particular  areas, often  in  co-oper 
ation  with  local  authorities  and 
v o l u n t a ry  o r g a n i s a t i o n s.  In 
the 
Netherlands,  for  example,  local  of 
fices  are now able to use  10% to 30% 
of  their  annual  budgets  in  ways 
most  suited  to local  circumstances. 

Schemes  which  offer  incentives  to 
private  companies to create jobs  are 
favoured  in  some  countries,  but  are 

in  decline  elsewhere.  Incentives  in 
the  form  of  exemptions  from  social 
security  contributions  (Belgium, 
France,  Spain,  Ireland  and  Italy) 
seem  to  be  more  p o p u l ar  with 
clients than  the provision  of  finance 
for  services  (Netherlands  and  the 
UK).  Exemptions  from  social  se 
curity  contributions  tend,  however, 
to  be  expensive  (ECU  5bn  in  Bel 
gium) and can lead to accusations  of 
promoting  unfair  competition  if  not 
designed  carefully.  These  measures 
generally  fall  into  the  category  of 
State  aids  which  are  subject  to  the 
provisions  of  Articles  92  and  93  of 
the Treaty requiring the prior  auth 
orisation  of  the  Commission  before 
being  implemented. 

New Approaches  to 
Training 

Training  has  assumed 
increased 
importance with higher  proportions 
of  both  government  and  company 
budgets being devoted to it. In  order 
to  encourage  businesses  to  under 
t r a i n i n g, 
t a ke 
governments have been  strengthen 
ing their  support  systems. 

a d d i t i o n al 

At  the  same  time,  governments 
have  begun  reforming  the  voca 
tional  t r a i n i ng  provided  by  the 
educational  system,  the  prototype 
being  the  German  dual  system.  In 
1988 the  French  government  intro 
duced  a  25% tax  credit  for  training 
subsequently  increased  to 35%.  The 
main  target  group  is  smaller  firms 
who can both improve their  training 
for  new  workers  and  retrain  their 
least  qualified  workers.  Similarly, 
Spain introduced  FlPlan,  a  national 
vocational  training  scheme  paid  for 
with  levies  on  employers,  in  1986. 

Approaches  to  learning  are  also 
t r a d i t i o n al 
c h a n g i n g.  W h e r e as 
training  methods  tended  to  consist 
of  either  classroom-style  passive 

162 

learning  or  on-the-job  apprentice 
ships,  now  more  programmes  bring 
together  both. 

a nd 

D u t ch 

Greater  differentiation  is  made  be 
tween  systems  for  "normal"  youths 
and  for  the  disadvantaged.  The  re 
v i s ed 
F r e n ch 
apprenticeship  systems  are  similar 
to those of the German  dual  system. 
Other  approaches  towards  disad 
vantaged  youths  such  as  the  Irish 
Youthreach  or the  Spanish  Escuela 
Taller  (workshop-schools)  place 
great  emphasis  on  teaching  basic 
numeracy  and  literacy,  as  well  as 
work  skills. 

Programmes  for  the  long-term  un 
employed  are  moving  away  from 
"make  work"  schemes  to  providing 
real  training  opportunities  while 
working.  Formal  classroom  train 
ing has  been  reduced  to a  minimum 
in  the  mainstream  programmes  for 
the  long  term  unemployed  in  most 
Member  States:  the  Danish  "job  of 
fers"  approach,  the  French  TUCs, 
the  German  ABM  and  the  UK  En 
terprise  Programme. 

Adaptability  a nd 
Self-Reliance 

An almost universal feature  of man 
power  measures  have  been  moves 
towards  schemes  which  prepare  or 
encourage  the  unemployed  to  re 
turn  to the  market. 

Since  the  mid-1980s,  considerable 
efforts  have  been  made  to  integrate 
young people, and  to a lesser  extent 
older  long-term  unemployed,  into 
working  life.  One  particular  ap 
proach  has  been  the  use  of  flexible 
contracts,  for  example,  fixed  term 
employment  or  employment-train 
ing  contracts,  generally  up  to  3 
years.  Although  governments  pro 
vide 
to 
employers for hiring people on open-

i n c e n t i v es 

f i n a n c i al 

ended contracts at the end of their 
three­year stint, the side­effects of 
this a p p r o a ch h a ve s o m e t i m es 
caused controversy because the re­
sulting job creation may be at the 
cost of making employment more 
precarious. In some countries legis­
l a t i o n, or s i m p ly p r e v a i l i ng 
practice, has enabled a plethora of 
contractual arrangements to be es­
t a b l i s h ed (such as "zero h o u rs 
contract" or "on call" employment 
contracts in the Netherlands). 

The success of schemes offering in­
ducements to the unemployed to set 
up their own businesses seems to 
depend largely on what they receive 
in the way of support. The UK "En­
terprise Allowance Scheme", which 
gives g r a n t s, currently provides 
nearly 200,000 places annually, 
whereas the loans scheme in Bel­
gium accommodates only 5,000. 

The trend to self­help has extended 
to those seeking training and care­
ers advice from the Employment 
Services offices ­ self­service sys­
tems now exist in t he F e d e r al 
Republic, the Netherlands and the 
U.K. 

Reducing Working 
Time 

Policies which seek to restrict work­
ing t i me in order to boost job 
creation are less favoured now than 
in the past but still used in some 
Member States: for example, the 
Belgian government has continued 
to provide inducements to com­
panies to reduce working time, 
rather than increasing wages; in the 
Netherlands, too, reducing working 
time is still considered an important 
method of stimulating employment. 
In countries such as the Federal Re­
public and Denmark, this is still 
considered a question for collective 
bargaining. 

Chapter 15 National Labour Market Policies 

Although much of the recent em­
p l o y m e nt c r e a t i on in s e v e r al 
Member States has been in the form 
of part­time work, little of the effort 
by governments has been aimed at 
specifically creating part­time jobs. 
Temporary work, on the other hand, 
h as s o m e t i m es been used as a 
means of initially integrating the 
disadvantaged into working life. In 
the Netherlands, START, the spe­
cial agency e s t a b l i s h ed by t he 
government in 1977 for the dis­
abled, has become a cost­covering 
organisation with 750 staff. In other 
Member States, temporary work 
tends to be in the form of short term 
unskilled work. 

Tightening t he Rules 
on Benefit Eligibility 

The right of the jobless to reject 
work offers because they do not suit 

t h e ir t r a i n i ng or p r e v i o us 
o c c u p a t i o n al b a c k g r o u nd h as 
become more restricted. In the UK, 
for example, encouragements for 
the jobless to take work which may 
pay less than previous jobs have 
been increased. Now the jobless are 
closely monitored and required to 
demonstrate that they have been 
active in searching for reasonable 
employment. Like their counter­
p a r ts in France and Spain, the 
jobless increasingly face the likeli­
hood of b e i ng s t r u ck off t he 
unemployment register for failing 
to meet eligibility conditions. 

As well as making it more difficult 
to register as unemployed, govern­
ments have increased checks on 
whether the unemployed are doing 
jobs "on the side". However, the ac­
t u al registration procedures are 
being eased. Registering as unem­
ployed is no longer required in the 

110 Labour Market E x p e n d i t u re in Relation to 

GDP if each Member State h ad Community 
Average Unemployment 1987 

% GDP 

lb 

10 

■ ■■ 

Ρ GR 

I D UK F E NL 

DK IRL 

­ 1 6 3­

Chapter  15  National  Labour  Market  Policies 

UK.  The  Belgian  government  is 
gradually  dismantling  its  system  of 
daily  registration  for  the  unem 
ployed with various groups of young 
and  older  unemployed  no  longer 
having  to  register  daily.  Instead,  it 
is  seeking  to  control  illegal  work, 
especially  in  the  building  and  other 
casual work sectors, through  the  in 
troduction  of  social  security  cards. 
The  German  authorities,  too,  are 
focusing  on  certain  industries  such 
as  building  and  hotels.  In  the  UK 
special  inspectors  have  been  cre 
ated. 

The  New  "Social 
P u r p o s e"  of 
Employment  Services 

Changes  in  labour  market  policy 
are  reflected  in  the  continuing  re 
views  of  the  role  and  function  of 
public  employment  services  being 
u n d e r t a k en 
in  m a ny  M e m b er 
States. The range of services  offered 
by  governments  varies  widely  be 
tween countries. There is no obvious 
trend  except  that  most  public  em 
p l o y m e nt  services 
i n c r e a s i n g ly 
focus  on the  disadvantaged. 

This  emphasis  arises  partly  be 
cause  the  traditional  focus  of  these 
services  has  been  on  finding  em 
ployment  for  job  seekers  r a t h er 
than  on  assisting  employers  to  fill 
jobs.  The  growth  of  private  sector 
e m p l o y m e nt  agencies  h as  been 
stimulated  by this narrow focus  and 
has  filled  gaps  left  by  the  public 
services. 

This  shift  needs  to  be  seen  in  a 
longer historical perspective.  Public 
employment  services  were  initially 
established  for  the  mass  working 
classes  when,  in  an  effort  to  ensure 
greater  equality  of access to the  few 
jobs available during the  depression 
of  the  1920s  and  1930s,  the  public 

s e r v i c es  w e re  given  monopoly 
rights.  These  continued  into  the 
postwar period, but have since grad 
ually  been  ignored  or  eroded. 

At  times  the  public  services  have 
sought  to  compete  with  the  emerg 
ing private  sector,  but  their  market 
share  of  total  placements  at  most 
reaches  20  or  30%'  and  is  usually 
barely into  double  figures.  The  pub 
lic  employment  services  with  the 
largest  "market  shares"  are  in  the 
Federal Republic and the U.K.;  next 
comes  Spain  with  one  fifth  of  all 
placements  and  then  France  (one 
sixth), The Netherlands  (one  tenth) 
and  down  to  Ireland  with  very  few 
placements. 

to 

t h em 

With  the  disadvantaged  constitut 
ing  the  main  client  group  of  all  the 
public  employment  services, the  ac 
t i v i t i es 
a re 
h e lp 
increasingly  similar  between  Mem 
ber  States: "friendly"  interviews  (at 
r e g u l ar  i n t e r v a ls  -  every 
t h r ee 
months)  followed  by  programmes 
tailored  for  the  individual  such  as: 
joining  job-clubs  to  encourage  and 
help  them  look  for  work;  training; 
a nd  j o i n i ng  " m a k e - w o rk  Com 
munity  programmes"  to  maintain 
or  regain  the  discipline  of  working 
life. 

Collaboration  between  voluntary 
bodies  and  government,  with  the 
latter  providing  the  finance,  have 
developed  in  some  Member  States, 
especially  in  urban  areas  of  high 
unemployment.  In  the  Federal  Re 
public, such  action  programmes  are 
not  used  but  areas  of  higher  than 
average  u n e m p l o y m e nt  may  be 
given  favourable  treatment  in  spe 
cial job  creation  projects. 

Italy, Ireland  and  Spain  maintain  a 
particular focus on youth as a  target 
group  in  their  labour  market  pro 
grammes. 

164-

Organisational 
Changes  in 
Employment  Services 

Many  countries  have  two  tier  sys 
tems  with  Employment  Ministries -
which  develop  policy  - and  Employ 
ment  Agencies  -  which  implement 
it.  Such  role  distinctions  are  not  al 
ways  so clear  in  practice. 

Changes  are under  way. The  Dutch 
Ministry  of  Social  Affairs  and  Em 
ployment  is  turning  its  Manpower 
Directorate  into  a  separate  Agency, 
with  its  own  budget,  a  tripartite 
governing  body  and  with  strong 
input  from  the  regions. The  British 
government,  on the  other  hand,  has 
t he  system, 
j u st  r e c e n t r a l i s ed 
b r i n g i ng  both  employment  and 
training  measures  back  into  the 
ministry  from  the  Manpower  Ser 
vices  Commission.  However,  it  is 
also  stressing  the  need  for  more  in 
fluence  at  the  regional  and  local 
levels  by  e m p l o y e rs  a nd 
trade 
unions. 

In  Belgium  régionalisation  has 
decentralised  responsibility  in  this 
field.  In  the  Federal  Republic,  the 
Lander  have  always  undertaken 
many initiatives, and in the  Nether 
lands,  the  local  employment  offices 
work  closely  with  municipal  auth 
to 
o r i t i e s.  T h e re 
streamline  services  in  Spain  with 
greater  government 
involvement 
and  in Denmark  the  placement  and 
training  services  are  being  brought 
into  a  single  directorate. 

is  a  move 

There  is a recognition  of the  import 
ance  of  better  information  about 
local  labour  market  trends.  Portu 
gal and  Italy have  developed  labour 
market "observatories" at local level 
to  detect  emerging  training  needs 
and  avoid  skill  shortages. 

Chapter  15  National  Labour  Market  Policies 

THE  MISEP  SYSTEM 

Coordination  of employment policies at the  Community level is backed up by a  regular 
exchange  of information  on  national  developments  through  the  "Mutual  Information 
System  on Employment  Policies" (MISEP). 

Aims 

The  overall  aim  of  the  system  is  to  gather,  synthesize,  translate  and  disseminate 
information  from  the  Member  States  which  can  serve  each  of the  national  ministries 
responsible  for  employment  measures  in their  daily  decision-making. 

The  system  functions  in three  ways : 

•  by regularly  collecting and  disseminating information  provided by Member  States; 

•  by acting  as a clearing house for  multilateral  questions  and  answers; 

•  by storing the information  and  providing  a base  for research  and  enquiries. 

Operation 

It  consists  of  a  group  of  national  representatives  ("correspondents")  who  meet  and 
exchange information  directly. They hold positions at the operational level within  their 
respective  national  administrations  responsible  for  employment.  They  are  appointed 
to  participate  in  the  system  by,  and  act  under  the  responsibility  of,  their  national 
administration. 

Basic  Information  Reports 

Comparable  information  on  labour  market  operations  and  policies  from  Community 
Member  States  is published  regularly.  These  reports  cover the  following  areas : 

•  Official  institutions  : ministries,  employment  services, training  agencies, etc. 

•  Legal  framework  and  procedures  : the  legal  system  governing  work  and  employ 
ment; main labour legislation; labour market institutions and processes; allowances 
for  the unemployed;  and  matching labour  supply  and  demand. 

•  Employment measures, categorised as overall measures, employment  maintenance, 
aids to the unemployed, training, retraining and occupational mobility, job creation, 
special  categories  of  workers,  working  time  and  placement.  For  each  measure, 
standard  information  is given on its  aim, legal basis, contents  and  effects. 

• 

Information  and  research. 

InforMISEP 

Since  1983  a  quarterly  bulletin  has  been  produced  on  the  latest  developments  in 
employment  policy.  Published  in  English,  French  and  German  InforMISEP  presents 
information  on  changing  measures  and  systems  in  Member  States.  The  information 
serves  to regularly  update  the basic information  reports. 

Access 

Information  available within  the system has been computerised  and the data base  has 
been transferred  to the Commission's  host organisation  ECHO. It is publicly  available 
through  Euronet-Diane. 

Future  Strategy 

During  the  five  years  of its  existence,  MISEP  has  enabled  those  directly  involved  to 
benefit  from  enhanced  information  flows. With  the  political  recognition  of its  import 
ance, the  products  arising from  the  information  will in the  future  be designed  to  meet 
the  needs  of its  users. 

165 

Chapter  15  National  Labour  Market  Policies 

is  being  intro 
Computerisation 
duced  universally  and  there  is  a 
strong  desire  by  national  agencies 
to learn from  the experience of other 
Member  States  and  to develop  com 
patible  systems. 

The  relationship  between  public 
and  private  services  is  changing. 
Even  in  Member  States  where  pri 
vate  services  are,  in  theory,  illegal 
there  is  increasing  contact  and  co 
t he  p u b l ic 
o p e r a t i on  b e t w e en 
authorities  and  the  private  sector. 
The  German  public  employment 
service  is  allowing  its  professional 
services  to be  by-passed  by the  new 
"SIS"  approach  which  involves  di 
rect  contact  between  job  seekers 
and  employers.  In  Greece,  a  new 
three  tier  system  is  being  intro 
the 
duced  in  an  effort 
private  sector.  The  UK  government 
is  pursuing  a  policy  of  privatising 
parts  of the  public  service  which  it 
considers  should  be  run  commer 
cially. 

to  reach 

The  involvement  of the  private  sec 
tor  r a i s es  o t h er  o r g a n i s a t i o n al 
questions  -  should  unemployment 
benefits  be  paid  by  employment  of 
fices  or  should  the  job  finding  and 
benefit  functions  be  separate? 

The purpose of the benefit  system  is 
increasingly  being  reviewed.  Is  its 
aim  to  replace  earned  income  or 
merely  to  tide  people  over  for  short 
periods?  Issues  of  'poverty  gaps' 
have  also  re-emerged. 

166 

Chapter  16  Community  Policies 

ment with lower inflation.  However, 
the  room  for  manoeuvre  created  by 
the  Internal  Market  needs  to be ac 
companied  by  increased  economic 
growth  in  order  to  achieve  higher 
employment  levels.  If  this  is  done, 
improved  macroeconomic  condi 
tions for growth  and the  completion 
of the Internal Market will  reinforce 
one  another. 

The  C o m m u n i t y 's  b l u e p r i nt  for 
economic  policy  -  the  Co-operative 
Growth  Strategy  for  more  employ 
ment  -  has  been  set  out  in  recent 
A n n u al  Economic  R e p o r t s.  Im 
plemented  in  full,  the  strategy  will 
enable  the  Community  to  provide 
an  economic  environment  for  sus 
t a i n a b le  n o n - i n f l a t i o n a ry  h i gh 
growth  rates. The aim is to  combine 
moderate  growth  of real  wages  per 
head  with  an  appropriate  increase 
in  demand.  Improved  profitability 
and  the  prospects  of  sustained  de 
mand  will  thus  boost  employment, 
create  investment  and  slow  down 
the  rate  of substitution  of labour by 
capital. 

This policy needs to be accompanied 
by  efforts  to  improve  the  adapta 
bility  of markets  in  goods,  services, 
labour  and  capital.  The  success  of 
this  strategy  requires  a  consider 
able contribution from  governments 
and  the  social  partners.  The  basic 
guidelines  of the  strategy  have  at-

Chapter  16  Community  Policies 

The  completion  of  the  Internal  Market  gives  a new  profile 
and  impetus  to Community  actions  to promote 
employment. 
However,  the  main  building  blocks  have  been  in place  for a 
long  time. 

The  achievement  of  high  levels  of 
employment  with  good  quality  jobs 
is  a  central  objective  of  the  Euro 
pean  Community  and  an  ultimate 
measure  of its  success.  This  task  is 
not  a  simple  one,  however,  and  is 
pursued  in  practice  through  a  wide 
variety of policies and actions  which 
extend  across  the  economic  and so 
cial  domain,  and  which  need  to  be 
balanced  and  developed  in the  pur 
suit  of  an  efficient  and  equitable 
Community. 

The  c o r n e r s t o n es  of  t he  Com 
s u p p o rt 
m u n i t y 's 
employment  are: 

a c t i o ns 

to 

• 

• 

the  completion  of  the  Internal 
Market  supported  by  the  econ 
omic  policies  contained  in  the 
Co-operative  Growth  Strategy; 

taking  account  of  the  Social 
Dimension  of the  Internal  Mar 
ket; 

•  actions  to  support  the  catching 
up  process  of  the  less  favoured 
countries  and  regions  through 
the  Structural  Funds; 

•  specific  employment  policy  ac 

tions  and  guidelines; 

• 

the  Social  Dialogue  at  Com 
munity  level. 

To  benefit  fully  from  these  policies 
the  co-ordination  of  national  and 
Community  policies  will  have  to be 
improved  and  strengthened  to  ar 
rive  at  a  b e t t er  convergence  of 
economic  performance  across  the 
Community  which  will  allow  the 
progressive  realisation  of the  Econ 
omic and Monetary  Union. 

The  Completion of 
the  Internal  Market 
and  Supporting 
Economic  Policies 

The completion  of the Internal  Mar 
k et  will  g e n e r a te 
s u b s t a n t i al 
productivity  gains  and  invigorate 
the  Community  economies.  Trans 
lating  these  productivity  gains  and 
the  new  dynamism  into  greater 
prosperity  and  higher  employment 
requires  the  right  macroeconomic 
e n v i r o n m e nt  a nd  a p p r o p r i a te 
policies. Any job losses  wrought  by 
the  structural  changes  can be  more 
than  offset  by net  new job  creation 
if appropriate  economic  policies  are 
followed. 

•  policies,  actions  and  co-oper 
ation  with  regard  to  vocational 
education  and  training; 

In the medium  term  the  completion 
of the Internal  Market  should  result 
in a higher level of GDP and employ 

167 

Chapter  16  Community  Policies 

t r a c t ed  t he  s u p p o rt  of  Member 
States governments  as well as of the 
Community's  institutions  and  the 
social  partners  within  the  frame 
work  of  the  Community's  Social 
Dialogue. 

The  Social  Dimension 

s h o u ld 

c o n t a in 

The  Community  is  a  political  and 
social, as well as an economic  entity. 
It  is  thus  natural  t h at  such  a  fun 
damental  and  far  reaching  step  as 
the  completion  of the  Internal  Mar 
k et 
social 
dimension.  The  Community  works 
to the  benefit  of all  and  the  advant 
ages that will undoubtedly  accrue to 
industry  through  the  removal  of 
barriers  must  also  be  matched  by 
t h at 
developments  which  ensure 
the  benefits  are  widely  spread. 

a 

In  one  sense,  the  Social  Dimension 
can be seen  as encompassing  all  the 
various  dimensions  of  employment 
and  social  policies  which  are  de 
scribed  in  later  sections  of  this 
chapter  -  including  such  basic  ele 
ments  as the  freedom  of  movement, 
equality  of  opportunity  or  the  de 
p l o y m e nt  of  t he  C o m m u n i t y 's 
Structural  Funds. 

However,  the  completion  of  the  In 
ternal  Market  presents  new  chal 
lenges  and  opportunities  which,  in 
many  ways,  transcend  and  extend 
the  scope  of  these  various  actions. 
The  Commission  sees  a  need  for  a 
new, wider declaration  and  commit 
ment to the basic principles of social 
justice  and  opportunity  as the  Com 
munity moves into this new stage of 
development.  Thus,  taking  into  ac 
count the February  1989 Opinion  of 
the Economic and Social  Committee 
as  well  as  the  Resolution  passed  in 
March  1989  by  the  European  Par 
liament  on  the  Social  Dimension  of 
t he  I n t e r n al  M a r k e t,  t he  Com 
mission  has  presented  in  May  1989 

the  preliminary  draft  of  a  Social 
Charter  which  is seen  as both  a dec 
laration  of  intent  on  the  part  of 
Member  State  governments,  and  a 
basis  for  the  future  development  of 
policy  initiatives  and  commitments 
at  all levels  in  the  employment  and 
social  field. 

The  Community  is  also  an  environ 
mental  entity,  with  a  commitment 
in  the  Single  European  Act  to  the 
achievement  of the Internal  Market 
with  a  high  level  of  environmental 
protection,  which  can  also  contrib 
u te 
s u s t a i n a b le 
economic  and  employment  growth. 

to  a c h i e v i ng 

Community  Support 
for  Countries  and 
Regions 

The  improvement  in  the  economic 
and  social  situation  of  the  less  de 
veloped parts of the Community  has 
been  a  primary  objective  since  the 
Community's  inception  when  some 
of the Community Structural  Funds 
were  created.  The  European  Social 
Fund  and  the  Guidance  Section  of 
the European Agricultural  Guaran 
tee  and  Guidance  Fund  (EAGGF) 
started in  1960 and  1962 respective 
ly.  The  European  Regional  Fund 
was  added  after  the  first  enlarge 
ment  of the  Community  in  1975. 

There  have  been  two  major  recent 
developments:  the  vastly  increased 
scale of the  Funds  and  the  moves  to 
improve  the  co-ordination  of  the 
Funds  and  to  concentrate  their  im 
pact. These two developments  came 
together  with  the  major  reform  of 
the  Funds  agreed  in  1988  and  now 
being  implemented. 

The  European  Council  meeting  in 
February  1988  decided  to  double 
the  budgetary  commitments  of  the 
Structural  Funds between  1987  and 

168 

1993.  A  parallel  increase  in  the 
Community's  borrowing  and  lend 
ing instruments  is  also  desired. 

The  importance  of  these  commit 
ments  to  the  catching-up  process 
can  be  shown  by  the  fact  that  the 
Community's  contribution  could 
represent  4-5% or even more of GDP 
in  Greece,  Portugal  and  Ireland.  In 
Spain  and  Italy  it  will  represent  a 
s m a l l er  p e r c e n t a ge  of  national 
GDP,  but  in  the  poorer  regions  in 
which  its  impact  is  concentrated,  it 
will  represent  a  similar  percentage 
of GDP. 

A  C o m m u n i t y - w i de 
d y n a m ic 
macro-economic  environment  is  es 
sential  for  the  acceleration  of  the 
catching-up  process.  However,  the 
countries  which  will  benefit  from 
Structural  Fund  support  will  need 
to  pursue  the  policies  set  out  in  the 
g u i d e l i n es  of  t he  Co-operative 
Growth  Strategy  so  that  they  can 
a c h i e ve 
e m p l o y m e n t - c r e a t i ng 
growth  above the  Community  aver 
age. 

The new  Regulation  concerning  the 
reformed  Structural  Funds  sets  out 
five  priority  objectives: 

•  promotion  of  the  development 
and  structural  adjustment  of 
the  regions  whose  development 
is lagging behind  (Objective  1); 

•  converting  the  regions,  frontier 
regions  or  parts  of  regions  (in 
urban 
cluding 
communities)  seriously  affected 
by 
(Objec 
tive  2); 

industrial  decline 

areas 

and 

•  combatting 

long-term 
ployment  (Objective  3); 

unem 

• 

facilitating  the  occupational  in 
people 
of 
tegration 
(Objective  4); 

young 

• 

in  the  context  of  the  reform  of 
the  Common  Agricultural  Pol 
icy,  speeding  up  the  adjustment 
of  agricultural  structures  (Ob 
jective  5a)  and  promoting 
the 
development  of rural  areas  (Ob 
jective  5b). 

The  European  Regional  Develop 
ment Fund  (ERDF) is  concentrating 
its  support  on  Objectives  1,  2  and 
5(b) with the aim of stimulating pro 
ductive  i n v e s t m e n t,  creating  or 
modernising  infrastructures  and 
supporting  development  schemes. 
Objective  1 areas  will  receive  up  to 
80% of ERDF  financial  support. 

The  European  Social  Fund  (ESF)  is 
providing  assistance  to: 

unemploy 
long-term 
•  combat 
the 
ment 
and 
occupational 
of 
young  people,  under  Objectives 
3  and  4; 

facilitate 
integration 

and 

stability  of  employ 
•  promote 
new 
develop 
ment 
employment  opportunities 
for 
people  threatened  with  redun 
dancy  or  already  unemployed  in 
the  rules  of 
accordance  with 
eligibility  and 
interaction 
with  the  other  funds,  under  Ob 
jectives  1, 2 and  5(b). 

in 

For  the  first  of these  aims,  the  ESF 
will  provide  backing  for  employ 
ment  policies  by  Member  States 
aimed at the long-term  unemployed 
and  young  people.  In  the  second 
area  of  its  operation,  the  ESF  can 
intervene  on  a  wider  scale,  espe 
cially  in  the  less  developed  regions, 
to  help  groups  of  people  who  con 
tribute  to  the  economic  develop 
ment  of  t he  regions  a nd  a r e as 
concerned  (see  Box  in  Chapter  9). 

The guidance  section  of the  Agricul 
tural  Fund  has  contributed  to  the 
adjustment  of  agricultural  struc 

Chapter  16  Community  Policies 

the  availability  of skilled  labour  by 
the provision of training can  encour 
age  firms  to  recruit,  expand  and 
seek  market  opportunities  just  as 
much  as  improved  order  books. 

For  other  actions,  the  dynamic, 
longer-run  effects  may  be  different 
from  the  more  immediate  effects. 
Employment  protection  measures, 
for  example,  which  may  be  seen  by 
some  employers  as  factors  discour 
aging them from  recruiting  workers 
in  the  short-run,  can  serve  to  raise 
the quality  of labour, improve  work 
ing  practices,  improve  productivity 
and  ultimately  increase  employ 
ment  in  the  longer  run. 

Equally,  legislation  on equal  oppor 
tunities  which  might  have  been 
seen as dampening some  employers' 
e n t h u s i a sm  for  recruiting  more 
women  into  their  labour  force,  has, 
in  practice  encouraged  women  to 
participate  more  fully  in  the  labour 
market,  which  has  in turn  created  a 
new  source  of  labour  from  which 
firms  can  recruit. 

The  pursuit  of  employment  objec 
tives  at  Community  level  through 
specific  policies  has  taken  a  variety 
of  forms: 

•  Community 

legislation,  gener 

ally  in  the  form  of  directives; 

•  policy  guidelines,  normally  con 
tained  in  communications  from 
the  Commission  to the  Council; 

•  direct 

actions 

through 

pro 

grammes; 

•  co-operation  between  Member 

States; 

• 

information  and  information  ex 
change  systems. 

tures throughout the Community  in 
view  of  the  reform  of  the  Common 
Agricultural  Policy.  With  the  other 
funds,  it has  supported  the  develop 
ment  and  structural  adjustment  of 
the  less  developed  regions  of  the 
Community  as  well  as  rural  devel 
opment  in  other  selected 
r u r al 
areas.  These  actions  are  designed 
not  only  to  assist  people  employed 
in agriculture by modernising  farm 
ing  and  supporting  agricultural 
incomes  but  also,  by  encouraging 
n o n - a g r i c u l t u r al  a c t i v i t i es  on 
farms, 
to  m a i n t a in  viable  com 
munities  in rural  areas  by means  of 
rural  development  measures  in 
cluding  forestry. 

These  programmes  and  actions  are 
carried  out  in  co-operation  with  the 
Member  States.  Their  role  is  not  to 
replace Member  States' own  actions 
but  to  provide  backing  or  encour 
agement  for  the  implementation  of 
policies  designed  to  promote  em 
ployment.  Community  policy  does, 
however,  seek  to  achieve  greater 
convergence  between  the  strategies 
implemented  in the Member  States, 
particularly  in  relation  to  Objec 
tives  3  and  4  of  the  S t r u c t u r al 
Funds  set  out  above. 

Specific  Employment 
Actions  a nd 
Guidelines 

A  distinction  is  commonly  drawn 
between  macro-economic  policies  -
which  affect  the  overall  level  of em 
ployment - and  specific  employment 
policies  - which  affect  the  structure 
or  distribution  of that  employment. 
In  practice,  there  is  a  great  deal  of 
inter-action  between  the  two  and 
contrast  between  supply-side  and 
demand-side  policies  are  now  seen 
as  an  exaggerated  dichotomy  be 
interdependent 
tween  essentially 
actions. For example, an  increase  in 

169 

Chapter 16 Community Policies 

Community Legislation 

Legislation is important in relation 
to certain aspects of employment 
policies covered by the Treaty. The 
principle areas concern the free 
movement of people, the assurance 
of equal opportunities between men 
and women, health and safety at 
work, and some aspects of contrac­
tual employment relationships. 

Free movement is enshrined in the 
Treaty but has required a consider­
able volume of legislation in order to 
be implemented in practice. At the 
moment, the freedom of movement 
of workers and members of their 

families is guaranteed, but there 
are a number of loopholes and a 
thorough updating of the basic in­
struments is under way. Freedom of 
movement for self­employed wor­
kers needs to enshrine the right to 
provide services as well as the right 
of abode. It is essential to establish 
a general system for the recognition 
of diplomas and a greater degree of 
conformity between Community 
law and national instruments and 
practices. 

The Council is currently conside­
ring a series of proposals which 
focus on these aims. 

1 

A Common Employment Policy in the Community 

Regular surveys of European opinion 
rometer. The December 1988 Report 
employment policy in the Community. 

are organised by Euroba­
included a question about 

The question "are you for or against creating between the 12 countries 
of the European Community by 1992 a common economic and social 
policy, particularly in the area of employment" produced the replies 
79% for, 9% against and 12% don't knows for the Community as a 
whole. The breakdown by country was as follows: 

For 

Against Don't know 

Β 

DK 

D 

GR 

E 

F 

IRL 

I 

L 

NL 

Ρ 

UK 

EC 

81 

41 

77 

69 

78 

85 

85 

92 

83 

78 

70 

70 

79 

9 

23 

10 

22 

18 

8 

12 

7 

10 

14 

27 

20 

12 

10 

36 

13 

9 

4 

7 

3 

1 

7 

■s 

3 

10 

9 

­170 

Equal pay between men and women 
is embodied in Article 119 of the 
EEC Treaty. Equality of oppor­
t u n i ty is p r o v i d ed for in five 
directives, based on Articles 100 
and 235 of the EEC Treaty, enacted 
between 1975 and 1986. Together 
these guarantee women equal treat­
m e nt in pay, employment, and 
social security. While this legisla­
t i on r e p r e s e n ts a m a j or s t ep 
forward, the volume of legal cases 
that arise each year, together with 
the evidence on income differences 
between men and women, clearly 
indicates that Community legisla­
t i on h as y et to be effectively 
implemented at national level and 
that accompanying concrete actions 
which address the root of the segre­
gated labour market need to be 
continued and extended. 

Labour law is also an area that has 
been the subject of Community 
legislation. The directive on collec­
tive redundancies, passed in 1975, 
has been an important instrument 
in assuring Community­wide pro­
tection for workers in the case of 
mass dismissals. 

The Commission has subsequently 
sought to extend social legislation 
with proposals for directives on 
part­time work and temporary work 
and on the information and consult­
ation of workers in the case of 
trans­national takeovers. 

While the majority of the Member 
States now have national legisla­
tion at least up to the level which 
t he C o m m u n i ty was proposing, 
t h e se proposals h a ve not been 
adopted. The development of the In­
t e r n al M a r k et a nd t he Social 
Dimension has revived these issues, 
particularly with the worries over 
social dumping. The Community is 
p r o p o s i ng t h at c e r t a in social 
clauses be included in the European 
Companies Statute and is also con­

Chapter  16  Community  Policies 

Co-operation  between 
the  Member  States 

The Commission  services hold  regu 
lar  meetings  with  the  Director-
Generals  of  Employment  of  t he 
Member  States  - involving  partici 
pants  from  the  Employment  Minis 
tries  and  the  Employment  Agencies 
- and  the  Director-Generals  respon 
sible  for  Vocational  Training.  This 
is  in  addition  to  the  work  of  the 
Tripartite  Consultative  Commit 
tees  on  Vocational  Training  and  on 
the  Free  Movement  of  Labour. 

These  meetings  provide  a  forum  for 
policy  discussion  and  the  exchange 
of information.  They  are  supported 
by  other  actions  -  for  example,  the 
exchange  programme  for  officials  of 
the  placement  services  of  the  Em 
ployment  Ministries  and  Agencies 
and  the  similar  programmes  which 
exist  in  the  field  of  education  and 
training. 

Information  Exchange 

The  transfer  of  information  be 
t w e en  M e m b er  S t a t es 
a b o ut 
successful  national  practices  with 
the  potential  of being  adopted  else 
where  and  which  can  be  supported 
by Community  information  co-ordi 
nation,  is  one  of  the  more  basic 
activities  of the  Commission. 

Information  exchange  systems  at 
Community  level  include  MISEP, 
ELISE,  EURYDICE,  and  SEDOC. 

n a t i o n al 

MISEP  is  an  information  network 
on 
l a b o ur  m a r k et 
measures.  It  publishes  a  quarterly 
r e p o rt  on  t he  r e c e nt  m e a s u r es 
adopted  in  each  of  the  Member 
States  and  a  basic  information  re 
port  on  the  employment  and  labour 
market  structures  in  each  Member 
State.  The  information  is  available 
in  report  form  but  it  is  also  ac-

sidering  within  the  framework  of 
the  Social  Charter  how it will  make 
proposals  for  ensuring  a  minimum 
protection  for  the  growing  number 
of  workers  who  fall  within  the  de 
finition  of  ' n o n - s t a n d a r d'  work, 
mainly  temporary  or  part-time. 

Community  Policy 
Guidelines 

Since  1975,  the  European  Com 
mission  h as  p r o d u c ed  some  20 
policy communications  to the  Coun 
cil  c o n c e r n i ng  t he  p r o b l e ms  of 
employment  and  unemployment, 
including  the  specific  difficulties  of 
young  people,  the  long-term  unem 
ployed  and  women  in  the  labour 
market. 

The  pattern  has  been  for  the  Com 
mission  to  prepare  analyses  and 
policy recommendations  in the  form 
the 
of  c o m m u n i c a t i o ns  and  for 
Council of Ministers to respond  with 
resolutions  or  conclusions  setting 
out  its  political  commitment  to  de 
velop overall policy frameworks  and 
undertake  specific  actions.  While 
Council  of Ministers  resolutions  are 
not  legally  binding,  they  represent 
a  useful  orientation  for  the  Com 
munity.  Hence the  Commission  will 
continue to present  its analyses  and 
policy recommendations  both  in  the 
context  of  the  Employment  Report 
or in communications  on  specific  to 
pics. 

Action  P r o g r a m m es 

Over  the  past  decade  or  more,  the 
C o m m i s s i on  a nd 
t he  M e m b er 
States  have  drawn  considerable 
benefit  from  u n d e r t a k i ng  Com 
munity-wide  programmes  which 
concentrate  on innovative aspects of 
policy  with  regard  to specific  issues 
of  concern  -  whether  this  be  dis 
ability,  poverty,  local  development, 
youth  training and  so on. These pro 

grammes  generally involve a combi 
nation  of  actions  -  most  commonly 
demonstration  projects  -  combined 
with  exchange  visits,  evaluations, 
conferences,  seminars,  and  publica 
tions.  These  actions  serve  to  bring 
people  and  experiences  face  to  face 
across  the  Community,  and  to  pro 
vide a body of research  which can  be 
used  for  analysis. 

-  t he 

This  work  has  generally  been  fin 
anced  by  budgets  in  addition  to 
those  made  available  to  the  Struc 
tural  Funds,  and  has  been  actively 
supported  by  the  European  Parlia 
ment.  A  range  of  programmes  has 
been  developed,  some  of  which  are 
concerned  directly  with  employ 
m e nt 
local  e m p l o y m e nt 
development  p r o g r a m me  LEDA 
(see  Chapter  13),  the  action  pro 
g r a m me 
l o n g - t e rm 
a g a i n st 
unemployment  ERGO  (see  Chapter 
10)  -  others  which  concentrate  on 
training and education  - such  as  Eu-
roTecNet,  COMETT,  ERASMUS, 
etc.  (see  Chapter  9)  -  and  some 
which  focus  on  other  issues  but 
which  are  linked  to  employment  or 
unemployment  concerns,  such  as 
the  Poverty  programme.  The  Com 
mission  is  also  proposing,  with  the 
support  of  the  European  Parlia 
ment  and  the  Economic  and  Social 
Committee,  a  demonstration  pro 
gramme  of projects  illustrating  how 
actions  in  the  environmental  field 
can  also  contribute  to  employment 
creation.  These  programmes  offer  a 
rich  source  ofinformation  on  a  wide 
range  of  experiences  which  are  al 
most  invariably  considered  to  be 
valuable  and  positive  by  those  who 
participate  in  them.  At  the  same 
t i me  the  r e s u l ts  from 
t he  pro 
grammes  contribute  to  developing 
both  n a t i o n al  a nd  C o m m u n i ty 
policies by  drawing  on  the  different 
national  experiences  and  by  build 
ing  more  harmonious  Community 
approaches  where  appropriate. 

171 

Chapter  16  Community  Policies 

cessible  through  the  ECHO  compu 
terised  database  (see  Chapter  15). 

to 

p r o m o te 

ELISE  was established  by the  Com-
local 
m i s s i on 
employment  development  and  in 
itiatives,  and  one  of its  major  tasks 
is to promote information  exchange. 
ELISE  has  an  extensive  database 
and  documentation  system  avail 
a b le 
a n d, 
on 
increasingly,  through  a  network  of 
computer  links. 

p a p er 

b o th 

EURYDICE  develops 
information 
on  the  education  systems  of  the 
Member  States  and  on  Community 
activities  in  the  field  of  education. 
It  provides  a  database,  a  question 
and  answer  system,  and  it  dissemi 
nates  its  information  through  bro 
chures  and  comparative  analyses. 

The  SEDOC  job  vacancy  informa 
tion  system  links  national  employ 
ment  agencies  so  as  to  ensure  a 
European-wide  exchange  of  infor 
mation  on  unfilled  vacancies. 
Its 
procedures  are being modernised  in 
the  run-up  to  1992,  exploiting  the 
possibilities of computer-based  data 
inter-change  systems  in  order  to  be 
able  to  provide  easily  accessible, 
Community-wide  information  on 
job opportunities and other  relevant 
information  about  living  and  work 
ing  conditions. 

CEDEFOP,  the  European  Centre 
for  the  Development  of  Vocational 
Training,  based  in  Berlin,  was  set 
up  in  1975.  Its  aim  is  to  encourage 
the  promotion  and  development  of 
vocational  training  and  in-service 
t r a i n i ng  at  C o m m u n i ty 
level 
through  the  exchange  of  informa 
tion  and  experience. 

The  European  Foundation  for  Liv 
ing  and  Working  Conditions,  based 
in  Dublin, undertakes  research  and 
analysis  into  employment-related 
issues,  as  part  of its  programme  of 

on  the  co-operation  already  estab 
lished. 

The  Commission  is  committed  to 
raising  the  level  of  training  stand 
a r d s, 
t h r o u gh 
continuing training and the  occupa 
tional  integration  of young  people. 

p a r t i c u l a r ly 

a re 

u p p e r m o st 

Respect  for  diversity  and  clarity 
about  the  respective  roles  of  the 
t he  Com 
M e m b er  S t a t es  a nd 
m i s s i on 
in 
Community  concerns.  It  is  vital  to 
preserve  and  respect  the  rich  diver 
sity  of systems  and  practices  in  the 
Community  and  to  draw  the  best 
from  this  common  heritage  in  pro 
moting  higher  standards  for  the 
future.  It  is  important  to  identify 
clearly  those  responsibilities  and 
measures to be pursued by or within 
Member States and those which  can 
be implemented  by the  Commission 
itself. 

The  main  objectives  in  this  next 
phase  are  seen  to be  to: 

•  develop  a  Europe  of  quality,  in 
which  the  skills,  creativity  and 
dynamism  of people  are  encour 
aged  through  a  commitment  to 
life-long  learning  while  develo 
ping, 
levels, 
initial  as  well  as  continuing 
training; 

appropriate 

at 

training 

•  devise  arrangements  whereby 
educational  and 
re 
forms  and  restructuring  within 
Member  States  can  be  designed 
in  full  awareness  of  the  experi 
ence  of other  Member  States; 

•  make  further  progress  towards 
of 
the  mutual 
higher  education  diplomas,  vo 
cational 
and 
qualifications. 

recognition 

training 

A  wide  range  of  actions  have  been 
developed  to support  the  promotion 

work,  including  the  problems  of 
long-term  unemployment  and  is 
sues  concerning the  development  of 
local  communities. 

Policies  a nd  Actions 
to  Develop  Vocational 
Education  and 
Training 

Technological change,  demographic 
change  and  the  completion  of  the 
Internal  Market  all  increase  the 
pressures  on  national  education 
and  training  authorities  to  ensure 
that  the  skills  of  tomorrow's  work 
force  match  the  needs. 

The  implications  are  far  reaching 
and include the need for greater  em 
phasis  on  forecasting  future  skill 
needs,  more  effective  h u m an  re 
source  development,  an  increase  in 
the  volume  of  education  and  train 
ing  at  all  levels,  greater  continuity 
between  compulsory  schooling,  in 
itial  and  continuing  training  and 
better  links  between  enterprises, 
education, research bodies and  local 
communities  in  strengthening  the 
investment  in  education  and  train 
ing. 

The  core  of the  Community's  effort 
in  the  field  of vocational  training  is 
the  pursuit  of  its  responsibilities 
under  the  Treaty  of  Rome  (Article 
128) to 'lay  down  general  principles 
for the implementation  of a  common 
training policy'. This is in parallel  to 
the  promotion  of  higher  standards 
of  t r a i n i n g, 
t he 
priority  objectives  of the  Structural 
Funds. 

i n t e g r al  w i th 

Co-operation  in  the  training  and 
educational  fields  at  Community 
level  now  has  to  move  up  a  gear  in 
the  period  up  to  1992  to  permit  a 
new phase  of development,  building 

172 

of  the  above  objectives  - see  Box  in 
Chapter  9.  In  addition,  new  em 
phasis  is  being  given  to  h u m an 
resource development within  indus 
try,  paying  particular  attention  to 
the  problems  of ensuring  an  adequ 
a te 
a nd 
s u p p ly  of  s c i e n t i s ts 
technicians  to meet  the  needs  of in 
dustry,  including  SMEs,  and  to  the 
mobility  of  persons  and  ideas,  the 
exchange  of  experiences  and  infor 
mation  on the different  systems  and 
the  conduct  of joint  projects. 

Social  Dialogue 

on 

s t r e ss 

p l a c ed 

The  European  Community  has  al 
w a ys 
t he 
co-operation  of  the  social  partners 
in developing economic and  employ 
t he 
m e nt  policy  b o th 
consultative  Economic  and  Social 
Committee  and  through  meetings 
between  the  social  partners  and 
relevant  ministers  from  national 
governments. 

t h r o u gh 

Chapter  16  Community  Policies 

In the  1980s, the  Standing  Commit 
tee  on  E m p l o y m e nt 
-  w h i ch 
includes  the  employment  ministers 
and  the  social  partners  - has  played 
a major  role in dealing with  employ 
m e nt  issues  at  its  twice  a  year 
meetings.  In  addition,  since  1985, a 
new  Social  Dialogue  has  been  in 
itiated  at  Community  level  which 
brings  together  the  two  sides  of  in 
dustry  to  discuss  issues  of  common 
concern  and  relevance.  This  dia 
logue  has  produced  opinions  on  the 
impact  of  new  technology  on  em 
p l o y m e nt 
v o c a t i o n al 
a nd  on 
training. 

This  year  the  Dialogue  has  been 
renewed  with  a  stronger  support 
s t r u c t u re  to  enable  longer 
t e rm 
work  to  be  developed.  Working 
groups have been established  on  the 
development  of  the  European  la 
bour  market  and  on  education  and 
training,  and  their  opinions  will  be 
produced  on  these  issues  by  the 
autumn. 

-  173 

-174 

Sources  a nd  Methodology 

The  principal  source  of the  historical  data  regarding the  European  Community  used  in this  Report  is the  Statistical 
Office  of the  European  Communities  (Eurostat).  Some  additional  material  has  been  supplied  by  other  Commission 
services. Chapter  3 makes  extensive  use  of United  Nations  data  and  International  Labour  Organisation  estimates. 
Sources  used  for  the  individual  maps  and  graphs  are  set  out  below.  The  short-term  forecasts  have  been  prepared 
by the  Directorate-General  for  Economic  and  Financial  Affairs  on  the  same  basis  as  those  presented  in  the  Annual 
Economic  Report. 
It is the  Commission's intention  that  the data  used in the preparation  of "Employment  in Europe" be made  available 
in  electronic  form. 

Sources  of  Graphs  a nd  Maps 

Eurostat 
Community  Labour  Force  Survey  (LFS)  and  derived  data:  Graphs  2, 4, 5, 6,  8,  12,  14,  15,  16, 45, 54, 60, 61, 62, 63, 
64,  65, 68, 69,  70, 71, 73, 74, 75, 76,  77, 84, 85, 86, 91, 92, 95, 96, 98,  107,  108. 
Population,  Labour  Force  and  Employment  Statistics:  Graphs  1, 6,  8,  10,  13, 17, 72, 79, 80, 81, 82, 83. 
Regional  Statistics:  Graphs  18,  19, 20, 21, 22, 23, 24, 25, 78, 93, 94, 97, 99,  106. 
Industry  Statistics:  Graph  58; Boxes  pp  62-65. 

C o m m i s s i on  s e r v i c es 
DGII  - Economic  and  Financial  Affairs:  Graphs  3, 7, 9, 26, 27, 28, 29, 30, 31, 40, 41, 42, 43, 44, 46, 47, 48, 49, 50, 51, 
52,  53, 55, 57. 
DGV  - Employment,  Industrial  Relations  and  Social  Affairs:  Graphs  87,  88,  89,  90;  Unemployment  Benefits  and 
Replacement  Ratios,  DGV/B  Graphs:  100, 101. 
United  Nations:  Graphs  32, 33, 34, 35, 36, 37, 38, 39. 

Other  Material 
Statistics  and  other  quantitative  estimates  other  than  the  above  which  have  been  used  in  certain  chapters  have 
generally  been  drawn  from  studies  undertaken  on behalf  of the  Commission.  The  following  are  the  most  important 
sources  used: 
Chapter  5: Studies  on  the  Cost  of Non-Europe  Graph  55, Boxes  p.61; Panorama  of EC  Industry  (Graphs  103, 104); 
Europe  in  1993,  Economic  Outlook  by  Sector  (Graph  56);  The  Sectoral  Impact  of  the  Internal  Market  (DGII); 
Employment  Structures  and  Trends  in  Telecommunications. 
Chapter  6: Studies on: "New Forms and New Areas of Employment Growth"; "The Changing Nature of Employment"; 
"Job  Creation  in  Small  and  Medium-sized  Enterprises"  (Graphs  11, 66, 67). 
Chapter  10: Analyses  and  studies  conducted  within  the  framework  of the  Poverty  Programme  and  by the  European 
Fundation  for  Living  and  Working  Conditions. 
Chapter  11: Reports  from  a  study  group  on  "The  Underground  Economy  and  Irregular  Forms  of  Employment  in 
Europe"(Map  102) 
Chapter  15: Misep  Reports  Graphs  109,  110 

Notes 

Except  where  otherwise  stated,  all  Community  graphs  are  EUR-12 
Graph  34: GDP  per  capita  in  current  1988  purchasing  power  standards 
Graphs  38 and  39:  exports. 
Graph  96: height  of bar  = unemployment  rate  as  % of labour  force 

within  bar  = share  of different  age  groups  in  total  unemployment. 

Map  106: inter-regional  migration  within  Member  States  as  % of the  population  of the  region. 

175-

European Communities -  Commission 

Employment  in E u r o pe  -1989 

Luxembourg: Office for Official  Publications of the European  Communities 

1989-176  p.-21.0x29.7  cm 

DE, EN, FR 

ISBN 92-825-9769-5 

Catalogue number: CE-55-89-366-EN-C 

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The  1989  Employment  in  Europe  Report  is  the  first  of a  series  which  will 
be  produced  annually.  It  aims  to  reach  a  broad  readership  within  the 
Member  States, covering business, trade unions  and interest  groups as  well 
as  governments.  It  covers  a  wide  range  of issues  in  the  employment  field, 
considering  the  Community  as  a  'heterogeneous  whole',  placing  the  Com 
munity  into  its  world  context  and  discussing  the  policy  implications  of  the 
analysis. 

176 

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