Report from the Commission - Employment in Europe (1997)
Date: 1997-10-01
Institutions: European Commission
Subjects: EU employment policy, economic growth, fight against unemployment, labour market, report

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 01.10.1997 
COM(97)479 final 

REPORT FROM THE COMMISSION 

Employment  in 
EUROPE 

1997 

An employment agenda for the year 2000: executive  summary 

An employment agenda for the year 2000: executive  summary 

The  Employment  in  Europe  report  1997  comes  at  a 
defining moment in the development of the Union. The 
new Treaty, agreed at Amsterdam, makes employment 
a  matter  of  common  concern  and  introduces  employ 
ment  as  an  explicit  goal  for  the  Union.  This  report 
contributes  to  the  preparations  for  the  extraordinary 
European  Council  on employment  and  unemployment 
and to the further development of the European employ 
ment  strategy.  It  presents  the  latest  trends  in 
employment  and  the labour market  and looks  forward 
to the challenges  of the 21st Century  as the  European 
Union prepares itself for this new phase in its develop 
ment  with  the  completion  of  the  Single  Market,  the 
third  phase  of EMU and  the  preparations  for  the  new 
wave of enlargement. 

Recent developments in jobs 
and  employability 

At  1.5%,  economic  growth  was  slow  in  1996,  the  re 
covery  not  gathering  momentum  until  the  end  of  the 
year.  Inflation,  at  2V2% continued  to be low  and  wage 
developments were moderate. 

•  employment  rose  by  some  600  000  in  1996,  not 
enough  to  make  significant  inroads  into  making 
good the job losses  of the  recession  or reducing  un 
employment; 

•  part-time jobs  again  accounted  for  all  net job  cre 
ation in  1996, as they have each year since 1990; 

• 

the rise, in job opportunities  led to a renewed rise in 
labour force participation. Participation of women in 
creased  further,  from  56Y2% to 57% and  withdrawal 
of men from the labour market slowed down; 

•  unemployment  remains  stubbornly  high  at  10.8% 
in mid-1997, and over 5% of the labour force in  the 
Union  had  been  unemployed  for  a year  or more  in 
1996; 

• 

the unemployed had great difficulty  in finding jobs: 
under  a third  of men,  and  a quarter  of women who 
were unemployed in  1995 had found  a job by 1996. 

•  unemployment  of  women  is  still  some  3%  points 
higher than for men (12.7% compared with  9.4%) 

•  while youth  unemployment  has  improved  slightly, 
due to demographic  factors  and  a higher  participa 
tion  in  education,  the  average  rate  in  the  Union 
remains at over 20%; 

• 

job losses over the  last  10 years  have been  concen 
trated  in  sectors  which  account  for  less  than  a 
quarter  of total employment in the Union; 

•  17% of the  working  age  population  is  hampered  by 
disabilities; nearly half of these are in the 50-64 age 
group.  The  average  employment  rate  of  disabled 
people is 44%, nearly 17% below the overall rate. 

The main questions for the 
employment  agenda 

The  challenges  of the  next  decade  raise  serious  ques 
tions  about  the  ability of the  European  labour  market 
to respond  to them. The single market  and  EMU focus 
attention  on mechanisms  of economic adjustment  and 
their effectiveness  and on whether the European labour 
market is sufficiently  flexible  to secure a balanced  and 
sustainable development of employment in the years to 
come. 

The main problem  is job  creation 

Whatever  the  relationship  between  employment  and 
output  growth,  it  is  clear  that  the  major  problem  re 
mains the creation of more jobs. The response in  terms 
of  increased  labour  market  participation  to  the  rela 
tively  small  improvement  in job  opportunities  in  the 
period  1994-96 shows that  there is a labour reserve in 
Europe which  can  be mobilised,  over  and  above  those 
recorded as being unemployed. Compared with the em-

1-

An employment agenda for the year 2000: executive  summary 

ployment rate in the US, this reserve  amounts  to over 
20 million people to be found jobs. A range of measures 
are needed to unlock this growth potential and to make 
growth  sustainable. 

•  While  in  the  short  term,  net job  creation  depends 
mainly  on the  rate  of output  growth,  in  the  longer 
term  it  also  depends  on  institutional  structures 
and  societal  choice on the priority given to employ 
ment  and  how  possible  conflicts,  between  this  and 
maintaining  productivity  growth  and  competitive 
ness are reconciled. 

•  Tax-benefit  systems  should  continue  to  be  made 
more  employment-friendly  to  create  an  environ 
ment that stimulates  enterprise  and the creation of 
jobs. 

• 

in  Europe-wide 

investment,  particularly 
infra 
structure  projects,  can  have  a  major  impact  on 
employment,  adding  to  capacity  and  productive 
potential,  with  less  inflationary  risk  than  con 
sumption,  and  promoting  competitiveness  and 
sustainable  growth. 

•  Job  creation  depends  to  a  high  degree  on  creating 
the  right  economic  environment.  Product  and  ser 
vices  markets  need  to function  in  a  more  effective 
way in order to create new opportunities which will 
generate  additional  demand  for  labour.  Measures 
proposed  under  the  action  plan  for the Single Mar 
ket  should  therefore  be  implemented  without  any 
delay at national  and Community level. 

The skills gap — A major  structural 
problem 

The ageing of the Union's  labour  force,  allied  with  the 
increasing  pace  of new  technology  means  that  we  are 
facing  an  ever-expanding  skills  gap.  Societies  must 
maintain  their  competitiveness with  a shrinking  num 
ber  of  young  people  with  modern  skills  and  a  large 
proportion  of older workers who have  been  trained  for 
technologies no longer used or for jobs no longer needed. 
A  triple-pronged  strategy  which  aims  to  ensure  that 
learning, training  and updating  skills and  competence 
is an on-going process throughout life is therefore called 
for:  first,  to reorganise fundamentally  initial  education 
and  training  systems to bridge the gap between  school 
and work and to enable young people to be adaptable in 
later working life  by ensuring  that  they have  the rele 
vant  skills  and  competence.  Second,  to  commit 

government  and  business  to much more  than  the  cur 
rent token efforts to upgrade and continuously train the 
whole  of the  adult  labour  force  so that  they  have  the 
ability  to  meet  the  challenges  brought  about  by  new 
technologies  and  third,  to develop better  programmes 
combining  training,  incentives  and  opportunities  for 
unemployed and displaced workers to equip them with 
the skills and abilities to enable them to reintegrate into 
the mainstream  of society. Bridging  the skills  gap  is a 
key to a more flexible and  dynamic  labour  market. 

At the  same time, efforts  to improve  the  skill levels of 
the  work  force  must  go hand  in  hand  with  continued 
efforts  to ensure sufficient flexibility in labour  markets 
and  that  labour  costs  are  conducive  to job  creation  so 
that  employment  opportunities  are  provided  for  those 
whose skill levels are likely to remain limited irrespec 
tive  of the  kind  and  extent  of training  received.  This 
means that the overall cost of employment for the latter, 
including  the  non-wage  element,  is  at  an  appropriate 
level in relation  to productivity and  that  artificial  bar 
riers  inhibiting  job  creation  are  removed.  Such 
measures  will  also  help  to  increase  confidence  that 
policies for fostering labour demand will not simply lead 
to increased  inflation. 

Flexibility in working  patterns 

P 

Flexibility in goods and  services markets, in the  form, 
for example, of the relaxation of restrictions on Sunday 
trading,  is  translated  in  the  European  labour  market 
into  non-standard  patterns  of work  and  employment 
contracts. Part-time  working  and  fixed-term  contracts 
have  become  the  standard  response  to  slow  market 
growth  and  uncertainty.  Such patterns  can also  result 
from  high  levels  of regulation, which  alter  the  way in 
which  employers  hire  labour,  as  well  as  affecting  the 
rate  of net job  creation.  A new  approach  is  therefore 
required  which  neither  condemns  them  outright  nor 
promotes  them  superficially.  Carefully  designed  pro 
grammes  of reform are required, preferably  negotiated 
through social dialogue between governments  and social 
partners.  Such  programmes  should  both  end  the  dis 
crimination  against  permanent  work  contracts  due  to 
excessive regulation,  and  extend  social protection,  ac 
quired  and  transferable  rights,  to non-standard  forms 
of work. 

Flexibility  in wages  and  salaries 

Differences  in  wage  levels  across  Europe  tend  to  be 
wider than in the US, not only between Member States, 
which is to be expected, but also between regions within 

An employment agenda for the year 2000: executive  summary 

Member  States.  Average  labour  costs  vary  at  the  ex-
, tremes from ECU 5 per hour to over ECU 25 per hour. 
Such  differences  largely  reflect  variations  in  labour 
productivity  and  there  is  little  sign  of  wages  being 
excessive relative to the contribution of labour to value-
added.  Analysis  of  labour  cost  differences  between 
regions  in  Europe  and  the  US  suggests  that  regional 
problems  of inadequate  infrastructure,  low local labour 
force  skills  and  so  on  may  be as  important  as  wage 
flexibility  in giving  rise to unbalanced rates of economic 
development  and  employment growth. Policy, therefore, 
needs  to  be  focused  on  correcting  these  problems, 
together  with  labour  market  rigidities  which  can deter 
job  creation. 

Geographical  mobility 

The scale of migration into the Union is relatively small: 
less  than  0.5% of the working-age population  in  1995. 
Inflows  into the Union have  slowed significantly  since 
the early 1990s; only half of immigrants  are from third 
countries and many of the rest are returning nationals. 
While the  policies for  labour  migration  must  continue 
to give priority to absorbing the excess labour supply in 
the EU, it must also recognise the value of the contribu 
tion  made  by migrants  to the  economies  of the  Union 
and, in  accordance with  the Treaties in force,  promote 
their  rights  and  equal  treatment  commensurate  with 
that  contribution. 

as  job  shortages.  It  may  also  reflect  the  constraints 
which exist, in both Europe and the US, on someone who 
is unemployed moving from their home to another part 
of the  country  to  look  for  work. Policy  should  aim  at 
alleviating  these  constraints. 

Regional  mobility is  not  confined  to migration.  Large-
scale commuting occurs in many parts of the Union and 
is  potentially  important  in  correcting  labour  market 
imbalances. Policies should aim at improving  the trade 
off between such benefits and disadvantages  which arise 
in other policy areas in relation to the provision of social 
services, traffic and  environmental  degradation. 

Occupational  mobility 

Sectoral  and occupational mobility are equally import 
ant  aspects  of  labour  market  flexibility  and  there  is 
evidence  that  this  is  relatively  high  in  most  Member 
States. In  1995, job turnover  was around  16% for men 
and  19%  for  women.  Making  it  easier  for  people  to 
change jobs and ensuring access to the necessary retrain 
ing is important for combating emerging skill shortages, 
narrowing  productivity  gaps  and  thereby  promoting 
growth  and  employment. 

Adjusting to the  capacities  of 
individuals 

Within the Union, movements of labour between Mem 
ber  States  are  also  small,  much  smaller  than 
movements  between  different  parts  of  the  US.  Less 
than  2% of the working age population  in EU  Member 
States  are  from  other  EU  countries.  However,  move 
ments between regions within Member States are much 
larger  than  between  countries  and  are  comparable  in 
size to those between  States in the US. In  1993-94, an 
average  of just  under  1.5%  of  the  population  moved 
between  NUTS  1 regions  in  Europe,  which  compares 
with just over 2.5% in the US. In most instances, these 
movements are linked to employment or education  and 
training  opportunities  and  are  particularly  important 
among younger  age groups.  Policy should  aim  to pro 
vide people  with  a  real  choice between  staying  in  the 
place where they were brought up and moving elsewhere 
to live and  work. 

Flexible  labour  markets  mean  that  employers  also, 
adapt to the needs and  capacities of individuals  and to 
capitalise  on  their  potential  so  as  to  maximise  the 
supply of skills. Evidence  of a lack of such  adjustment 
is  the  low  rate  of  training  of  workers  and  the  low 
employment  rate  of disabled  people. While this  varies 
between Member States, it tends  to be higher in coun 
tries  where  the  overall  employment  rate  is  also  high. 
Disability is often  the result of dangerous working con 
ditions  and  poor  safety  standards.  10  million  people 
every  year  are  stricken  by  occupational  diseases,  in 
juries or accidents. A decisive implementation  of agreed 
health  and  safety  standards  would  substantially  im 
prove  the  safety  situation,  reduce public  expenditures 
and  increase the employability  of the work force. 

Dynamics of the  labour  market 

Q 

CO 

6 
S 

The  scale  of regional  migration  was  slightly  lower  in 
1994  than  in  1990  both  in  Europe  and  in  the  US, 
perhaps  because  economic  activity  was  lower  in  the 
later  year.  This  suggests  that  the  availability  of jobs 
may be just as important in encouraging people to move 

An average of 30% of the unemployed find work within 
a year. This proportion  tends to rise slightly in  periods 
of strong growth. In  1996, some 57» million people had 
been unemployed for more than two years. In 1992, this 
figure was 3 million, suggesting that even the hard-core 

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An employment agenda for the year 2000: executive  summary 

long-term  unemployed  can  be tackled  with  a  period of 
sustained  employment  growth.  Structural  unemploy 
ment  reflects  the  nature  of  the  economy,  not  the 
individual. Policy needs  to recognise that  dealing  with 
the  unemployed  is  three-fold: bringing  about  a  suffi 
cient,  but  sustainable  rate  of  growth,  tackling 
the 
employability  of the unemployed  by enabling  them con 
tinually  to update their skills  in line with labour  market 
needs and improving and simplifying  the business envi 
ronment. 

The way forward: an employment 
agenda for the year 2000 

The Amsterdam Resolution called for the improvement 
of the functioning  of European  markets  and  enhanced 
coordination  of economic  policies. It  also called  for  an 
immediate implementation of the relevant provisions in 
the Employment Title in the new Treaty. The key pro 
vision  is  the  reference  to  employment  as  a  common 
concern.  That  is  why  it  provides  for  the  appropriate 
coordination of employment policies at EU level and the 
development  of a  common  employment  strategy.  The 
message  of Amsterdam  is  that  the  completion  of  the 
single  market,  monetary  discipline  and  job  creation 
have  to be pursued  in  parallel. This is the  task  for  all 
those concerned. 

The Commission  Communication "Agenda 2000" pres 
ents  the  economic,  technological  and  social  trends  in 
European  society in the years to come. This communi 
cation is the basis for the Commission's contribution to 
the further  development  of the European  employment 
strategy.  It  indicates  four  directions  for  action  in  this 
respect: setting the conditions for sustainable, employ 
ment-intensive  growth;  putting  knowledge  and 
technology  to  the  forefront;  modernising  employment 
systems; improving  living  conditions.  Certain  priority 
programmes,  with  a  high  value-added  from  Com 
munity-level  action  are  highlighted.  They  include  the 
trans-European  networks,  research,  education  and 
training,  the  introduction  of  environmentally-friendly 
technologies and measures  to support SMEs. 

stability  and  structural  reform  to  modernise  labour 
markets,  has  been  underway  since  December  1994. 
There  are  experiences  of  good  progress  and  perfor 
mance both on a national scale and at local and regional 
level. 

The  1997  Demographic  Report  has  focused  on  the 
underlying population changes which will affect  labour 
force  trends  in  the  first  decades  of  the  new  century. 
These changes must be taken into account in the devel 
opment of the Employment strategy for the year 2000. 

There is, however, a question of responsibility for action 
and how it should be shared. 

Member States continue to have responsibility for em 
ployment policy and the provision of sustainable growth 
and  a favourable  business  environment. 

Employers,  above all, must  maintain  the  competitive 
ness  and  job  creating  capacity  of  their  enterprises. 
Maintaining  and  developing  the  productive  capacity 
and  motivation  of  their  work  force  depends  on  the 
provision of on-going and relevant training and by treat 
ing this as an investment  rather  than  as a cost for  the 
enterprise. Many job opportunities  are lost when busi 
nesses  face  complex  and  difficult  administrative 
requirements during their start up and early years, and 
when businesses are transferred.  Simplifying  the busi 
ness  environment  would  help  to  overcome  these 
difficulties  faced by employers. 

0* 
Q 
> 

Trade  Unions  have  a  major  role  to play in  promoting 
equity in the labour market in encouraging responsible 
wage  determination  which  increases  investment,  pro 
ductivity and welfare  and which helps insiders to keep 
their jobs and outsiders to gain access to them. 

Local  governments,  within  a  coherent  national 
strategy,  must  bring  all  relevant  bodies  together  in 
partnerships  for  local  development,  to tap  local  capa 
cities and local markets to identify sources of jobs. They 
must  also act as agents for change, promoting  sustain 
able local restructuring. 

The European  employment  strategy is of  fundamental 
importance  in  tackling  the  employment  problem,  and 
will be even more important when Economic and Mon 
etary  Union  is  implemented.  While  high  employment 
and well functioning  labour markets are priority objec 
tives  in  their  own  right,-high  employment  is  the  best 
way to make EMU successful. The existing employment 
strategy,  based  on  a  combination  of  macroeconomic 

Individuals  have  a  claim  on  opportunities  offered  to 
them. But they must  also combine these  opportunities 
with  an  individual  responsibility:  a  willingness  to 
adapt,  to respond  to incentives and to seek and  master 
new capacities and skills. 

The European Institutions have an important contribu 
tion  to  make.  In  line  with  the  conclusions  of  the 

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An employment agenda for the year 2000: executive summary 

Amsterdam  European  Council,  the  Commission  will 
present a proposal for a Joint Employment Report and 
draft guidelines for Member States' employment policy 
to be submitted  to the Jobs Summit  to be held  at the 
end of 1997. These will be designed to specify an agenda 
for  employment  for  the  year  2000  and  beyond  and 
provide the  basis  for operational  action to provide for 
more and better jobs in the Union. 

An employment  agenda for the year 2000: issues and  policies 

An employment agenda for the year 
issues and policies 

2000: 

The Employment  in Europe Report for  1997 comes at a 
defining moment in the development  of the Union. The 
adoption  of an employment  Title in the Treaty provides  both 
the recognition that employment  is an issue of common 
concern and  the tools necessary to address  this issue at 
European level. The Report examines the challenges of 
employment and  labour market policy  in the years  to come 
and  suggests where the main priorities  for policy should lie. 

Employment is a 
common  concern 

The  inclusion  of  an  employment 
Title  in  the  Treaty  marks  a  new 
departure for the recognition of em 
ployment as an explicit objective for 
the  Union.  The  Treaty  now  states 
that "Member States... shall regard 
promoting employment as a matter 
of common concern and shall co-or 
dinate  their  action."  This  reflects 
the  commitment of'Member  States 
who have the main responsibility to 
implement  the  decisive  action  re 
quired to produce a substantive and 
sustainable  improvement  in  em 
ployment  performance.  It  also 
provides  for  action  at  Community 
level: "The objective of a high  level 
of employment  shall  be  taken  into 
consideration  in  the  formulation 
and implementation  of Community 
policies and  activities." The  Treaty 
identifies  the  promotion  of  "a 
skilled, trained and adaptable work 
force  and  labour  markets  respon 
sive  to  economic  change" as  a  key 
objective  in  developing  a  coordi 
nated  strategy  for  employment. 

Furthermore, the revision of Article 
2 of the  Treaty  also confers  on  the 
Community  the  task  of  promoting 
equal  opportunities  for  men  and 
women.  It  is not only the  culmina 
tion  of a  process which began  with 
the  White  Paper  on  Growth,  Com 
petitiveness,  Employment  in  1993, 
but  also  the  recognition  that  the 
roots  of  the  present  situation  go 
back  25  years,  to  the  economic 
shocks of the 1970s, and the  appar 
ent  inability  of  the  European 
economic  system  to  recover  suffi 
ciently  from  periods  of  economic 
downturn.  The third,  and  most  re 
cent of these shocks, aggravated  by 
the  failure  of  economic  policy  to 
maintain growth in the last decade, 
has  brought  us to the  present  situ 
ation. 

In  the  turmoil  of  the  early  1990s, 
half  of the  new jobs  created  in  the 
period  of  rapid  growth  of  the  late 
1980s  were  lost  —  4.9  million 
between  1991 and  1994 (though  as 
noted  in  last  year's  Employment 
Report,  employment  in  SMEs  in 
creased  between  1988  and  1995, 
compensating in some degree for job 

losses in larger enterprises). Unem 
ployment  soared  to  new  peaks, 
exceeding  11% on  average  for  the 
first  time ever in  1994. Neither  the 
production  system by itself nor  the 
macro-economic  policies  underpin 
n i ng 
it  seemed  capable  of 
generating  the  growth  of  output 
needed  to  deal  with  the  employ 
m e nt  problem.  In  a^world  of 
increasing  globalisation}  attention 
turned  to  improving  the  perfor 
m a n ce 
E u r o p e an 
t he 
employment system within the con 
text  of  stability-oriented  economic 
policies  and  structural  reforms 
aimed  at  increasing  the  employ 
ment-content of growth. 

of 

Meeting  the  challenge  of  insuffi 
cient  growth  and 
intolerable 
unemployment requires a  profound 
modernisation of Europe's economy 
and  its  social  system  for  the  21st 
Century  without  giving  away  the 
basic  principles of solidarity  which 
should remain the trademark of Eu 
rope.  The  completion  of the  Single 
Market  and-the move to  Economic 
and  Monetary Union will bring  the 
potential  for  greater  prosperity, 

W 
en 
en 

•8 

-6 

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An employment agenda for the year 2000: issues and policies 

stability and choice to citizens both 
as workers  and  consumers. This is 
being  matched  by  the  modernisa 
tion  of  the  labour  market  and 
reform of social security systems to 
bring about a new balance between 
flexibility and  security. 

The new Treaty provisions strike  a 
new  balance  by  making  employ 
ment  an  explicit  objective  and  by 
giving  the  Union  a  role  in  develo 
ping  a  common  e m p l o y m e nt 
strategy. 

Economic  and 
Monetary  Union 
and employment 

Europe  has  now left  behind  a  long 
period  of monetary  instability  and 
high inflation. There is now a strong 
political will to maintain  monetary 
stability, to be achieved through the 
third  phase  of Economic  and  Mon 
etary  Union  and  the  convergence 
programmes. EMU, as a  fundamen 
tal  change  in  the  economic  policy 
framework,  will  influence  growth 
and  employment  performances 
through  its  impact  on  the  policy-
mix  in  the  Euro  zone  as  a  whole. 
Successful  implementation  of  the 
employment  strategy  will  be  even 
more important  under  EMU. 

Efforts  undertaken  in  the  late 
1980s and  1990s  to create  a  single 
market  was  a  major  supply-side 
stimulus  for  the  European  econ 
omy. The introduction  of the  single 
currency,  together  with  the  im 
plementation  of  the  Action  plan 
measures,  will  significantly  im 
prove  the  functioning  of the  single 
market. This will provide the Euro 
pean  economy  with  the  solid 
economic  basis  which  will  help  to 
ensure that  EMU will work. 

The objective of Economic and Mon 
etary  Union  is  to  modernise  the 
European  economy, to bring  about 
a more integrated  system aimed  at 
monetary  stability,  leading  to  an 
increase in long-term rates of econ 
omic growth  and employment  with 
living  standards  in  the  Member 
States rising in step. 

and 

r a te 

Under EMU, the suppression of ex 
change 
c u r r e n cy 
disturbances between participating 
countries  eliminates  an  important 
obstacle  to  growth.  At  the  same 
time,  the  adoption  of  a  common, 
price-stability  oriented,  monetary 
policy, the budgetary  discipline re 
sulting  from  compliance  with  the 
convergence  criteria  and  the  Sta 
bility  and  Growth  Pact will  reduce 
considerably the risks of conflict be 
tween  budgetary  and  monetary 
policies. In such a context, it is prob 
able  that  wage  developments  will 
also take into account the  objective 
of  price  stability  and  the  profita 
bility  of  employment-creating 
investment.  Thus the  risk  of a  sta 
bility  conflict,  which,  in  the  past, 
repeatedly  contributed  to  the  un 
satisfactory 
and 
employment  performance  of  the 
Community, could be avoided in the 
coming years. 

growth 

Although  EMU  as  such  is  not  an 
"employment  policy",  it  provides 
the opportunity to achieve a macro-
economic policy mix favourable  to a 
sustainable growth of output  above 
the rate of growth of labour produc 
tivity,  t h us  r e s u l t i ng  in  net 
employment  creation.  In  this  way, 
it would fulfil  its role as set down in 
Article 2 of the Treaty to achieve a 
high level of employment  and  of so 
cial  protection,  the  raising  of  the 
standard  of  living  and  quality  of 
life, and  economic and  social cohe 
sion and  solidarity  among Member 
States'. 

The  macroeconomic  policy  mix  is 
determined  by  the  interaction  be 
tween  the  three  main  variables: 
money, public budgets and wages. 

A  single  monetary  policy  will 
strongly  influence  the  macroecon 
omic  policy-mix  of  the  whole 
Euro-area.  While  the  primary  ob 
jective  of  this  is  price  stability,  a 
second  objective  is  to  support  the 
general  economic  policies  in  the 
Community,  including  explicitly 
sustainable  and  non-inflationary 
growth  and  a high level of employ 
ment. The more the stability task of 
monetary policy is facilitated by ap 
propriate  budgetary  measures  and 
wage developments, the more it will 
be  favourable  to  growth  and  em 
ployment. 

Expenditure from national  budgets 
amounts  to  about  half  of  Com 
munity GDP and budgetary policies 
will  remain  under  Member  State 
responsibility.  In  addition  to  the 
provisions  for  achieving  and  près-  N 
erving  budgetary  discipline,  the  Q 
t> 
Stability and Growth Pact will rein- 
force  the  implementation  of  the  « 
required  discipline,  thus  ensuring 
that  no conflict  wilL occur  between 
budgetary  and  monetary  policies. 
In  addition,  the implementation  of 
this Pact will allow Member  States 
to restore  the  room  for  manoeuvre 
that  budgetary  and  fiscal  auth 
o r i t i es  need  for  an  optimal 
management  of their  economies  in 
a full  EMU. 

Wage developments will continue to 
be  determined  largely  through 
negotiations  between  the  social 
partners,  though  with  significant 
differences  in  the  specific  features 
of  national  systems  across  the 
Union. Wages, including social con 
tributions, account for about half of 
Community  GDP. The  macroecon 
omic  policy mix  will  be  favourable 
to growth  and  employment  insofar 

w 

o 

as  wage  developments  do not  con 
tribute  to  a  stability  conflict  with 
the  single  monetary  policy  and 
preserve,  or  strengthen  as  appro 
p r i a t e, 
t he  p r o f i t a b i l i ty  of 
employment-creating  investment. 
Wage developments by country, re 
gion,  qualification  and  sector  will 
not  be the  same  all  over  the  Euro-
area.  Differences  in  price  and 
productivity  trends  and  competi 
tiveness will play their normal role 
in  the  wage-setting  process  at  all 
levels. 

Because of their role in determining 
wage  developments,  the  Social 
Partners have an important respon 
sibility under EMU to facilitate  the 
pursuit  of  a  growth  and  employ 
ment-oriented  policy, as recognised 
by the European Council at Amster 
dam. 

EMU in no way replaces the need to 
carry out the structural reforms re 
quired to improve the functioning of 
the labour market which have been 
defined  by  successive  European 
Councils  since  Essen  in  December 
1994. These reforms are an integral 
part  of the  European  employment 
strategy, with or without  monetary 
union,  and  efforts  to  pursue  them 
must continue as before,  reinforced 
by  the  surveillance  procedure  pro 
vided  for  in  the  new  employment 
Title. 

EMU focuses  attention  on mechan 
isms  of  economic  adjustment  and 
their  effectiveness.  Under  EMU,  a 
principal adjustment  mechanism to 
respond  to  short-term  fluctuations 
in  economic  activity  in  particular 
parts of the Union are the  automat 
ic  fiscal  stabilisers  rather  than 
discretionary  changes  in  monetary 
or budgetary  policy. Adjustment  of 
exchange  rates  is  no longer  an op 
tion  with  a  single  currency.  Policy 
will  therefore  need  to  ensure  that 
such stabilisers are allowed to func 

w 

S a 

•T3 

An employment agenda for the year 2000: issues and  policies 

tion  as  effectively  as  possible,  so 
that  regions  suffering  a  decline  in 
economic activity and increased un 
employment  will  benefit  from  the 
higher net fiscal transfers from na 
tional budgets (in the form of lower 
tax  payments  and  higher  social 
transfers)  which are the  automatic 
result of their  operation. 

secure balanced development of em 
ployment across the Union at a rate 
high enough to ensure jobs for both 
the unemployed  and newcomers on 
to the labour market? These  issues 
are addressed  below. 

Major trends in 1996 

At the same time, there will need to 
be a greater focus on achieving bal 
anced  regional  development  to 
prevent excessively large migration 
of labour in response to lack of jobs, 
which needs to be avoided in order 
to  maintain  economic  cohesion 
within  the  Union.  This  will  con 
tinue to be a major objective for the 
Structural  Funds. 

Labour  market  adjustment  is  the 
other major element in these mech 
anisms.  Is  the  European  labour 
market  sufficiently  robust  to  face 
up  to  the  challenge  of  helping  to 

More detailed analysis of the trends 
highlighted  below  is  set  out  in  the 
background  analysis  annexed  to 
this  report. 

Economic  performance 
evens out 

Between  1991  and  1996  the  EU 
economy  registered  its  worst  post 
war  performance  over  a  5-year 
period  in growth  and  employment. 
While  this  poor  performance  has 
often  been  attributed  to  globalisa 
tion  or  the  introduction  of  new 

1 

Annual change in employment in the Union, 1970-96 

Annual %  change 

I Annual change in 
total  employment 

Unemployment  rate 

1112;: 

1.2 million Jobs 

• 2.8 million jobs: 

1975 

1980*4 

1970 1972 1974 1976 1978 1980 1982 1984 1986  1988 1990 "1992 1994 1996 

9-

An employment agenda for the year 2000: issues and  policies 

technologies, it was mainly  caused 
by  the  deep  recession  of  1992/93, 
which resulted from a stability con 
flict:  initial  overheating  in  the 
production process was  aggravated 
by a distorted policy-mix,  amplified 
by  the  effects  of  German  unifica 
tion. 

After  a setback to economic growth 
in  the  second  half  of  1995  and  in 
early 1996, a gradually  strengthen 
ing  upturn  in  economic  activity 
seems  to  be  underway,  under 
pinned  by  a  sound  re-balancing  of 
the  macroeconomic  policy-mix  and 
progress  towards  convergence. 
Combined  with  low  and  declining 
inflation  rates  and  prospects  for 
moderate  wage  increases,  these 
have paved the way for a  significant 
easing  in  monetary  conditions. 
Thus the stance of economic policies 
has become more conducive to sus 
tained  expansion  of  output, 
investment  and  employment. 

For the Community as a whole GDP 
growth  is  expected  to  be  2.4%  in 
1997  and  2.8%  in  1998.  This  pro 
gressive  acceleration  in  GDP 
growth  above  the  upward  trend  in 
labour productivity is forecast to re 
sult in employment  growth of 0.5% 
and 0.9% in 1997 and 1998, a cumu 

lative  increase  of  about  2  million 
jobs. However, the decline in unem 
ployment  will  remain  somewhat 
limited  (from  11%  of  the  labour 
force in 1996 to 10.3% in 1998) since 
labour  supply  is  still  expected  to 
rise  by about 0.5% a year. 

The policy challenge 

to 

These  positive  developments  rely 
upon  the  continuation  of a  favour 
able  policy mix,  including  credible 
budgetary  policies and  appropriate 
wage behaviour. Budgetary consoli 
dation  combined  with  the  political 
determination  to start  EMU as an 
nounced 
t he 
c o n t r i b u te 
improvement in the economic pros 
pects  themselves.  The  inherent 
risks  in  these  forecasts  are  about 
the  credibility  of  pursuing  such  a 
strategy  and  the timely  realisation 
of the third stage of EMU. Slippage 
from  budgetary  targets  would  put 
at  risk  the  favourable  trends in in 
terest  and  exchange  rates  and 
therefore  would  undermine  the 
prospects not only for EMU but also 
for  stronger  economic  growth  and 
employment. 

2  Employment rates in the Union, US and 

3  Unemployment rates in the Union, US 

Japan, 1974-96' 

^%  popular  ,«4 

and Japan, 1974-96 

.„  % labour  force 
12  r 

i  « 

•Japan; 

ie-

IM 

50  l  '  '  '  '  '  ' 

i  «  .  < 

i  . 

i 

i  • 

i 

5Q 

1974 W61878196019821984  ) 986198618901992 19941996 

197419761978198019821984198619881990199219941996 

-10 

Employment 
and  unemployment 
rates  stabilise 

1996 can  be  described  as  a year of 
"time-out" in  terms  of employment 
and  unemployment.  The  situation 
did not get much worse, but  neither 
did it improve significantly. The in 
crease in employment which began 
in  1995 faltered  in  1996,  rising  by 
less  than  600 000, half a& much  as 
in 1995. The total number employed 
in  the  Union  is  now just  over  148 
million,  still  over  3  million  below 
the peak of 151.5 million reached in 
1991. There has been only slow pro 
gress in making up the 5 million job 
losses  of the  early  1990s, let  alone 
in achieving the rate of expansion of 
jobs which is needed to provide em 
i n c r e a s ed 
ployment 
numbers  of people  who  would  like 
to work (Graph 1). 

the 

for 

The employment rate in  the  Union 
has  therefore  also  remained  vir 
tually unchanged since last year, at 
just  over 60% of working-age popu 
lation. In both the US and Japan, by 
contrast,  the  employment  rate 
reached  a post-war .high in  1996, in 
line  with  the  upward  trend  of  the 
last 25 years (Graph 2). 

Furthermore, in 1996 as in previous 
years,  part-time  employment  ac 
counted for all of the net addition to 
jobs  and  the  proportion  of  people 
working part-time went up  again. 

H 

Because  of  the  low  growth  in  em 
ployment, there was no reduction in 
unemployment.  Unemployment 
even  edged  up  at  the  beginning  of 
1996  to  reach  11% in  March  and 
since then it has hardly changed  at 
all, but  then  stabilised  and  in  July 
1997, the rate  was still  10.6%. In 8 
of the 15 Member States, the rate of 
unemployment  in  July  1997  was 
higher  than  in  1994,  in  Germany 

An employment agenda for the year 2000: issues and  policies 

markedly  so.  Unemployment  also 
rose m Japan  for the  fifth  consecu 
tive  year.  In  the  US, on  the  other 
hand,  unemployment  continued  to 
fall and in 1996 was only just above 
the lowest rate of the last  22 years 
(Graph 3). 

Young people — 
brighter signs 

For  young  people  of  both  sexes 
under 25, though participation con 
tinued to decline (to 47%), it  did so 
at only half the rate of the preceding 
four years. The long-term  trend to 
wards a higher proportion of young 
people  remaining  longer  in  educa 
tion and training was still  evident, 
but  the rise was  smaller  as job op^ 
portunities increased. 

Youth unemployment  has  declined 
somewhat  over  the  last  15  years 
Although it still remains  at  around 
twice  the  rate  for  adults  (around 
20%  as  against  under  10%),  the 
composition of the unemployed  has 
changed  significantly  over  the  last 
decade  as  the  relative  number  of 
young unemployed  has  declined  as 
a result of both demographic factors 
and falling participation,  while  the 

4  Unemployment «*** by sex in the 

Union, 1963 .July  1997 
% labour  fore* 

Q 

W 

«J 

relative  number  of  adult  unem 
ployed is much  higher. 

More jobs for women 

Almost  two-thirds  of the  net  addi 
tional jobs created in  the Union  as 
a  whole  in  the  two years  1994-96 
went  to  women,  continuing  the 
trend of the recent past. While part-
time  work  has  enabled  many 
women to enter the labour  market 
it  has  not  yet  contributed  to  a 
greater  equality  of  treatment  be 
tween  part-time  and  full-time 
workers.  Employment  of  women 
had  remained  broadly  unchanged 
during  the  recession  years,  while 
that of men had fallen  markedly 

The average rate of unemployment 
of  both  men  and  women  in  the 
Union  has  remained  virtually  un 
changed  for  the  past  two  years 
although the rate for women is still 
some  3  percentage  points  higher 
than  for  men  at  12.7%  compared 
with  9.4%.  Unemployment  of  men 
tends to be more affected  by fluctu 
ations  in  economic  activity  than 
that  of women, both because of the 
greater concentration of men in cy 
clically  s e n s i t i ve  sectors  — 
manufacturing  and construction, in 
particular  —  and  because  of  the 

trend  increase in  the  participation 
of women in the labour force as com 
pared with the trend decline in  the 
case of men. (Graph 4). 

Long-term 
unemployment — an 
intractable problem 

Long-term  unemployment  rates 
have  largely  followed  the  trend  in 
overall  unemployment  rates  over 
the last 15 years, withalagof a year 
or more. Although total  unemploy 
ment began to fall in  1985, the rate 
of  long-term  unemployment  conti 
n t0 
rise  **<* only showed  signs 
of falling in 1986, when total unem 
ployment was falling for the second 
year running. Both then  continued 
to  tall  together  until  1990.  While 
unemployment  then  began  to  rise 
with  the  onset  of  recession,  long-
t e rm 
r a t es 
u n e m p l o y m e nt 
continued  falling  and  only  in 
c r e a s ed 
in  1992,  a nd  have 
continued  to  do  so  since,  reaching 
5% m  1996 (Graph 5). 

The  evidence  of  the  last  12  years 
suggests,  therefore,  that  for  long-
term  unemployment,  even  more 
than  for  unemployment,  to  fall 
there  needs  to  be  both  relatively 

8  Total and kng-tetm unemployment 
rate» in the Union, 1986 to 1996 
*tabour*xca 

•UmmploystUtyiar 
•UrwmployBQSiywf 

6  Change in employment and GDP in the 

Union, 1974-96 

fl  Annual Î4 change 

—E m f t o p rm 

•••ÛDP togged 2 quaitas 

1963  1995  m 

1991  1993  199$  1097 

1«61M719M198918901»11W 1 N 3 1m  m^mt 

I*M i«* i«i  i«o m 

im  1*  IN, it» im 

im  1 W* 

1 1-

An employment agenda for the year 2000: issues and  policies 

strong  and  continuous  growth  in 
employment. A more  detailed  ana 
lysis  of  these  three  policy  areas 
(youth  employment,  equal  oppor 
t u n i t i es 
l o n g - t e rm 
unemployment)  will  be  published 
later in the year. 

and 

Underlying  factors 
— structural  trends 
and  adjustments 

The  likely  responses  of  the  Euro 
pean  economy  to  economic  shocks 
and structural changes is a  function 
of  existing  underlying  economic 
trends and in the way in which  the 
European economy, and in  particu 
lar,  the  labour  market,  adjusts  to 
these.  The  challenges  facing  the 
Union  over  the  immediate  future 
will  raise  serious  questions  about 
the strength  and flexibility of those 
adjustment  mechanisms  and  about 
whether Europe is ready to face  up 
to them. The following sections pro 
vide  an  analysis  of  some  of  the 
reasons  behind  the  overall  trends 
described above. Deeper analysis of 
all these issues depends on the con-
t i n u ed  provision  of 
timely, 
harmonised  and  consistent  labour 
market statistics and, in particular, 
the  need  to  move  towards  a  con 
t i n u o us  l a b o ur  force  survey 
providing at least quarterly results. 

Output  growth  and  its 
employment  content — 
two  necessary  elements 

The  slowdown  in  employment 
growth in 1996 is a reflection  of the 
slowdown  in  output  growth  in  the 
Union — from 2V2% in 1995 to 1V2% 
in  1996. Indeed, the increase in em 
ployment which occurred in the two 
years  1994-96 was in line with  the 
long-term  trend  relationship  in  the 
EU between GDP and  employment 

growth  which  implies  that  growth 
of GDP of just  under  2% a year  is 
necessary in  order to generate  any 
rise in the number employed at all. 
This  relationship  has  remained 
very stable over the  past  20 years, 
though  there  are  signs  of  a  very 
small  increase in  the employment-
content  of growth  over the  past  10 
years  as  compared  with  the  pre 
vious 10 years (Graph 6). 

The policy  challenge 

A  central  aim  of policy  across  the 
European Union is to seek to ensure 
that  the  employment-content  of 
growth  is  compatible  with  other 
economic  objectives,  such  as  the 
maintenance  of  competitiveness 
over the long-term.  There are  sub-
s t a n t i al  differences  between 
countries  with  comparable  income 
levels in both the way in which GDP 
is generated and the number of jobs 
which  it  supports.  This  suggests 
that  the  number  of people in  work 
is  far  from  being  the  mechanistic 
result of market forces operating in 
an  institutional  vacuum  and  that 
there  is  a  significant  element  of 
choice over this (in a societal rather 
than  an individual sense) and  that, 
therefore,  this  provides  an  oppor 
tunity for policy action. 

in 

•  The disparities in GDP per head 
between  European  Union Mem 
ber  States  are partly  associated 
with  differences  in  levels  of la 
bour  productivity,  partly  with 
differences  in  rates  of  employ 
the  more 
that 
ment, 
prosperous  countries  tend 
to 
have  both  higher  levels  of pro 
ductivity per hour worked and a 
higher  proportion  of their  popu 
lation  in work.  The  association, 
however,  is  by  no means  syste 
matic  and  there  are  striking 
differences  in  both  productivity 
and  employment  rates  between 

countries  with  similar  levels  of 
prosperity. 

•  While  some  countries  succeed 
better  than  others  in  attaining 
high  rates  of  employment,  the 
additional jobs which result  are 
not  concentrated  in  particular 
sectors  and  differences  in  the 
pattern of jobs between high em 
ployment  rate  countries  seems 
to  reflect  differences  in  com 
parative advantages. Tourism is 
an example of a sector which  of 
fers  good  prospects  for  growth 
and  employment.  It  already  ac 
counts for some 5.5% of GDP and 
6%  of  total  employment,  ;and 
this  is  forecast  to  rise  to 9% by 
the end of the next decade. Simi 
larly,  the  social  economy,  with 
5% of total  employment  and 6% 
of the enterprises  in the  private 
sector,  could  be  an  important 
potential  source  of  new  jobs  if 
given the  right  support. 

Getting the  unemployed 
into jobs 

A  relatively  small  proportion  of 
those who had beeiumemployed in 
1995 had succeeded in finding a job 
one year later. Over the Union as a 
whole, under  a third  of men  unem 
ployed  one  year  previously  had 
found  a  job  in  1996  (at  the  time 
when the LFS was conducted). Half 
were  still  unemployed  — which  is 
consistent with the figures for long-
term  unemployment  —  while  the 
remainder (17%) had left the labour 
force  completely  (in  the  sense  that 
they were no longer actively looking 
for  work).  For  women,  the  propor 
tion  of  those  unemployed  in  1995 
finding  work  in  1996  was  even 
lower,  at  only just  over  a  quarter, 
with  half  remaining  unemployed 
and  23% becoming inactive. 

w 

o 

-12 

The  figures  for individual  Member 
States  are broadly similar  to  those 
for  the  Union  as  a  whole.  In  Bel 
gium  and  Ireland,  the  proportion 
was  under  20%, in  both  cases  the 
low chances of the unemployed find 
ing  work  being  reflected  in  the 
figures  for  long-term  unemploy 
ment  which  are  much  higher  than 
in the rest of the Union. In  Ireland, 
therefore,  the  high  rate  of  net  job 
creation  (of  372% in  1996)  has  not 
been  of much  benefit  to the  unem 
ployed, with most of the increase in 
employment being fed by a growing 
labour  force  (by emigrants  return 
ing  from  abroad  as  well  as  by 
increased  participation)  rather 
than  by people moving from unem 
ployment into jobs. 

The  policy  c h a l l e n ge 

The inability of the  unemployed  to 
get back into work has  long been  a 
feature  of  the  European  labour 
market,  even  in  periods  of  job 
growth, although this is certainly a 
necessary pre-requisite. 

•  a  large  proportion  of the  unem 
ployed  are  not  equipped  for  the 
labour  market:  in  1996, 35% of 
both  unemployed  men 
and 
women  over  25  had  no  educa 
tional  qualifications 
beyond 
basic schooling; 

•  maintaining  the  employability 
of the unemployed,  and  particu 
larly  the long-term  unemployed 
is  essential  if  this  is  to  be  im 
proved; 

•  early identification  and early ac 
tion  are  among  the  ways  in 
which  policy  can  better  target 
the  reintegration  of  the  unem 
them 
ployed 
becoming 
unem 
ployed. 

long-term 

prevent 

and 

W 

O 

An employment agenda for the year 2000: issues  and  policies 

Labour  force  t r e n ds 
— participation 
and  employment 

The increasing number of job oppor 
tunities  has  affected  labour  force 
trends.  During  the  late  1980s,  in 
creased  participation  combined 
with  the  growth  of  working-age 
population added almost 172 million 
people a year to the Union's  labour 
force.  In  the  four  years  1990-94, 
falling  participation  reduced  total 
labour  force  growth  by  1 million  a 
year,  so that  instead  of  expanding 
by  5  million  or  so  over  the  whole 
period, it only increased by just over 
1 million. The decline in the availa 
bility  of  jobs  was, 
therefore, 
accompanied by a fall in the propor 
tion  of  people  of  working  age 
actively looking for work. This  had 
a  substantial  effect  in  containing 
the rise in  unemployment. 

boom generation. The ageing of the 
population is set to have major con 
sequences  both  for  the  European 
labour  force  and  social  protection 
budgets  in  10 to  15 years  time  as 
post-war  generations  reach  retire 
ment  age. Projections  suggest  that 
by  2015,  the  working-age  popula 
tion in  the Union will  be  declining 
in  almost  all  Member  States  and 
well over half will be 40 years old or 
more. 

•  The  underlying  demographic 
trends  in  the  Union  have  clear 
implications for the  productivity 
and  adaptability  of  the  labour 
force. The full  impact  on  the  la 
bour force of these  demographic 
trends  will  depend  on  future 
changes  in  participation  rates. 
The experience of the last decade 
shows  clearly  that  changes  in 
these  are  closely 
to 
changes  in  both economic  activ 
ity and  employment. 

linked 

Over the  two years  1994-96, while 
the  participation  of men  in  the  la 
bour force declined, this decline was 
much  less  marked  than  in  the  re 
cession years. With the exception of 
the  under  25  year-olds,  participa 
tion  of  women  continued 
to 
increase, at an even greater  rate. 

• 

In  1996, with  the  renewed  rise  in 
participation  some  850  000  people 
joined the labour force — almost as 
much  as  over  the  entire  four  years 
of  recession.  The  increase  in  the 
number  in  employment  in  1996 
was,  therefore,  accompanied  by  a 
rise rather than  a fall in  unemploy 
ment. 

The  policy  challenge 

The  average  age  of  the  European 
population  will  increase  signifi 
cantly 
in  future  y e a rs  as  a 
consequence  of  declining  birth 
rates,  increasing  life  expectancy 
and the ageing of the post-war baby-

13 

If current trends in participation 
continue,  they  could  reduce  the 
extent  of  the  ageing  of  the 
Union's  labour  force  over  the 
next  10 years  or  so,  but  there 
after,  they are~unlikely to  offset 
the  demographic  trend  towards 
ageing  significantly.  The  press 
ing need will be to maintain  the 
skills  and  capabilities  of  an 
ageing work force.  This  empha 
of 
sises 
reversing  the  trend  for  men  to 
withdraw from  the work force  at 
an ever younger age, though this 
itself  requires  a  fundamental 
change both in attitudes towards 
older workers  among  employers 
and  in  the  underlying  labour 
market  situation  which  for  too 
long  has  been  characterised  by 
too many  people looking  for  too 
few jobs. _ 

importance 

the 

•  This  prospective  decline  in  the 
Union's  labour  force  should  not 

An employment agenda for the year 2000: issues and policies 

be seen as  a solution to the un 
employment  problem..  The  low 
employment  rate  in  the  Union 
similar  de 
compared  with 
veloped 
economies 
demonstrates  the  extent  of  the 
labour  reserve  to  be  absorbed 
(over 20 million). A detailed ana 
lysis  of  these  developments  is 
presented in the main report. 

•  The  Union's  employment  prob 
lem  will  not  go  away  as 
prospective demographic  trends 
unfold. On the contrary, it could 
well  become  more  acute  as  the 
population  ages  and  as  their 
need for income support  grows 

Flexibility  and 
employability — 
the  skills  gap 

There are some signs of a widening 
skills mismatch in the Union. Occu 
pational  trends  in  the  Union  are 
reinforcing  the  two-speed  labour 
market, with an increasing concen 
tration  of  employment,  and  new 
jobs, in  the  high-level  occupations. 
Virtually all the net addition to em 
ployment in the two years  1994-96 
was  accounted  for  by  a  growth  in 
jobs with a relatively high skill con 
t e n t.  While 
the  n u m b er  of 
managers,  professionals  and  tech 
nicians  increased  considerably,  by 
over  2%  a  year,  the  number  of 
people  in  elementary  occupations 
declined.  The  only  less-skilled  jobs 
which  expanded  significantly  were 
those for sales and service workers, 
and  around  two-thirds  of  the  net 
addition  to  these  jobs  went  to 
women. 

There  is  some  evidence  to  suggest-
that  skill  shortages  may  be  a  par 
ticular  problem  for  small  and 
medium-sized  enterprises.  Com 
paring  surveys  of  enterprises 

carried  out  in  1989  and  1994,  the 
shortage  of  adequately  skilled  ap 
plicants  continued  to be  a  greater 
problem  for  enterprises  with  less 
than 200 employees than for larger 
enterprises.  In  effect,  in  1989, be 
tween  59%  and  62%  of  large 
enterprises in all size classes above 
200 employees considered said this 
an important or very important ob 
stacle to employing more people. In 
1994, however, only for enterprises 
with  fewer  than  200  employees 
(41%)  or  20O-499  employees(33%) 
was this still a major obstacle. The 
figures  for  larger  enterprises  of 
500-999 (26%) and of over 1000 em 
fallen 
(16%)  had 
ployees 
considerably.  It should be borne in 
mind, however, that economic con 
ditions were very different in these 
two years: 1989 was a year of high 
employment growth, while in  1994 
labour  demand  was «at  its  lowest 
level for many years. 

Although participation in education 
and  vocational  training  beyond 
basic schooling has  risen  markedly 
in  all  Member  States  in  recent 
years,  it  remains  the  case  that  a 
disproportionate number of the un-
employed  have 
insufficient 
qualifications  to be able to compete 
effectively for jobs. In 1996, over the 
Union  as  a  whole,  over  half  of  all 
men  aged  25  to  64  had  no  educa 
tional  qualifications  beyond  basic 
schooling  and  just  under  half  of 
women.  By contrast,  only just  over 
a third of men who were in employ 
m e n t,  and  about 
same 
proportion  of  women,  were  in  a 
similar  position. 

the 

This difference is particularly signi 
ficant  in  many  Northern  Member 
States  where  a relatively high pro 
portion  of  economic  activity  is  in 
comparatively  advanced  sectors, 
such  as business  and  financial  ser 
vices,  where  jobs  typically  have  a 
high skill content, and a low propor 

tion  in  sectors  where  low-skilled 
jobs  predominate,  such  as  agricul 
ture,  basic  manufacturing  and 
distribution. 

For women, there is an even bigger 
difference  in  educational  attain 
ment levels between those with jobs 
and those who are inactive than be-
tween  the  employed  and  the 
unemployed.  Over  the  Union  as  a 
whole, 63% of women aged 25 to 59 
who were economically inactive had 
no  educational  qualifications  be 
yond basic schooling  as opposed to 
only  34% of those  in  employment. 
As noted in Employment  in Europe, 
1996, the difference is significant in 
all Member States but is especially 
pronounced in countries where the 
participation of women in the work 
force is still comparatively low, such 
as* Spain  (84% of  inactive  women 
having no qualifications  as  against 
51% of those with jobs) and Ireland 
(62% against 27%). This almost cer 
tainly reflects in part differences  in 
attitudes  towards  working  as  be-  „ 
tween  well  educated  and less  well  p 
educated women in these countries, 
j> 
but it  also reflects  the relative lack  « 
of job  opportunities  for  those  with 
only basic education. 

The policy  challenge 

To meet  the  challenges  of the  next 
decade, we need  a fundamental  re 
form  of  our  systems  of  education 
and  training,  based  on  the  concept 
of  lifelong  learning,  to  raise  skill 
levels  throughout  the  labour  force, 
beginning  with  our  young  people, 
and  continuing  through  to those  at 
the  end  of  their  working  life,  but 
whose  usefulness  we  will  need  in 
the years  to come. 

Over  a  third  of  young  people 
aged  20  to  24  join  the  labour 
force  with  no  qualifications  be 
yond  basic  schooling.  Efforts 
should be made to bring average 

w 

o 

14 

levels  up  to  those  of  the  best 
Member  States.  For  those  who 
find  it  difficult  to  benefit  from 
formal education, a wider  range 
training  oppor 
of  vocational 
tunities 
found, 
preferably  with  a  work  experi 
ence component to reinforce  the 
possibilities  of  obtaining  em 
ployment at the end of it. 

should 

be 

the 

•  Bridging the gap between school 
and  work  is  a  crucial  stage, 
whatever  the level of a  person's 
qualifications. Apprenticeship is 
one of the  most  effective  means 
of  helping  young  people  to  de 
and 
velop 
competencies  which  match  la 
bour  market  needs,  and  thus 
make  this  transition.  Different 
to  apprenticeship 
approaches 
should  be  developed  across  the 
Union,  accompanied  by  adequ 
ate 
careers 
guidance. 

provision 

skills 

of 

that 

to  ensure 

•  At  the  same  time,  a  policy  of 
increasing  skill  levels  must  go 
hand in hand with continued  ef 
forts 
labour 
markets  are sufficiently  flexible 
and  that  labour  costs  are  suffi 
ciently conducive  to  job  creation 
to  provide  employment  oppor 
tunities  for  those  whose  skill 
levels  are 
remain 
likely 
limited  irrespective  of  the  kind 
and  extent  of training  received. 
This  means,  in  particular,  that 
the  overall  cost  of  employment 
for the latter, including the non-
wage 
an 
appropriate  level  in  relation  to 
productivity,  and  that  artificial 
barriers  inhibiting  job  creation 
are removed 

element, 

to 

at 

is 

•  But  this  is  merely  to  lay  the 
foundations  of  the  flexible  and 
adaptable  labour force  of the  fu 
ture. The  speed  of technological 
change  is  such  that  the  labour 

w 

o 

An employment  agenda for the year 2000: issues and  policies 

long-term  unemployment  and 
increasing  employability. 

•  The  Union  has  no  shortage  of 
potential  entrepreneurs,  nor  do 
our  new  businesses  fare  any 
worse  on  average  than  those  of 
our  competitors.  It  is  neverthe 
less, important for our education 
systems to encourage the devel 
opment of entrepreneurial  skills 
and an enterprise  culture. 

•  There  should  also  be  a  new  re 
form of social protection  systems 
to  make 
them  more  employ 
ment-friendly. 
Income 
maintenance  programmes  alone 
do  nothing  to  promote  the  em 
ployability  or 
the  security  of 
those temporarily excluded  from 
the  labour  market.  The  sums 
spent  on  unemployment  benefit 
and other passive labour  market 
measures,  which  still  make  up 
some  two-thirds  of  total  labour 
market  expenditure,  should  be 
redirected  and mobilised for pro 
moting 
and 
re-integration  into  working  life. 
Such  a  restructuring  of  public 
expenditure  is  important  in  the 
longer  term  in  order  to  reduce 
dependency  and  social  exclusion 
as  well  as  to  help  people  realise 

employability 

Change in part-time and  foil-time 
employment, 1987*96 
2 % Iota) tnploymaoiJR base yaar 

199719M1999  1990  1991  1992 1993 19M  1 9»  1996 

force  of  the  future  will  be  in 
creasingly  required  to  change 
and  adapt  to new skills  and  ca 
pacities, and to radically change 
jobs frequently  over the  lifetime 
of work. This means  that  train 
ing  must  not  only  be  aimed  at 
those  at  the  beginning  of  their 
working  life,  but  at  everyone 
right  up to the end of their work 
ing  life.  Such  a  strategy  of 
skills-upgrading is the only way 
in which the Union will meet the 
challenges  of  adjusting  to  the 
new  environment. 

•  Unemployment in Europe is  con 
centrated among the low-skilled, 
or  those  who  have  lost  their 
skills. The seemingly intractable 
nature  of  long-term  unemploy 
ment is partly a reflection of this. 
A major  reduction in  unemploy 
in 
ment, 
long-term 
unemployment 
in  particular, 
will  not  occur  unless  the  skill 
levels  of  those  affected  can  be 
raised through  training. 

and 

•  Occupational  segregation  be 
tween women and men  removes 
an  element  of  flexibility  in  the 
labour  market.  Girls  and  boys 
should  be  encouraged  to  diver 
sify  their  occupational  choices, 
to  greater 
thus  contributing 
desegregation  on 
labour 
the 
market  and  greater  chances  for 
women to find jobs. 

•  Since  high-skilled  jobs  in  the 
Union are disproportionately lo 
cated  in  the  growth  sectors,  the 
problem of the skills gap is likely 
to become more acute over time, 
with an increasing proportion of 
those  with  only  basic  qualifica 
tions 
it  ever  more 
difficult  to find employment. Up 
grading  and  broadening  skills 
while in work could be the most 
significant  and  cost effective  in 
preventing 
in 
vestment 

finding 

-15 

An employment agenda for the year 2000: issues and policies 

their  full  potential  —  for  the 
good  of the  economy  as  well  as 
themselves. 

A triple-pronged  strategy  is  there 
fore called for: improving the initial 
education  and  training  of  young 
people to help them into the  labour 
force and to enable them to adapt to 
new challenges later in life; a posi 
tive  approach  to  upgrading  the 
skills  of  the  existing  work  force 
throughout  their  working  life  and 
an active programme of training for 
the  unemployed,  particularly  the 
long-term  unemployed.  The  Euro 
pean Social Fund will underpin this 
strategy. 

Flexibility  and 
work  organisation 

The  increasing  flexibility  in  work 
ing  patterns  noted  in  last  year's 
Employment  in Europe report  con 
tinued in 1996. 

Beyond  the  overall job  turnover  of 
10 million jobs or more created  and 
destroyed  every year in the  Union, 
the  prevalence  of  the  standard 
working week, a  standard  contract 
or a standard career with a  lifetime 

job  is  gradually  declining.  During 
the recession, all of the net addition 
to jobs  was  in  part-time  working, 
suggesting  a  flexible  response  to 
difficult  labour  market  conditions. 
While there was some net  addition 
to full-time jobs in  1996, the  long-
term trend towards more part-time 
working is continuing (Graph 7). 

17%  of  all  employees  now  work 
part-time.  The  long-term  rise  in 
part-time working among men  has 
been common to all Member States. 
In the 6 years  1990-96, the propor 
tion of men employed part-time has 
increased from under 4% to 5V2% in 
the Union as a whole and there has 
so far  been  little  sign of this  trend 
abating  as  total  employment  has 
increased. 

The trend rise in part-time working 
women also continued in 1996, with 
over 31V2% of all women in employ 
ment working part-time.  Part-time 
jobs  for  women  accounted  for 
around 60% of the rise in the num 
ber of women  employed during  the 
year. 

While  12%  of  the  Union's  labour 
force  have  fixed  term  contracts 
there  is  wide  variation  between 

Member  States  in  their  use  which 
reflects  the  legislation  and  regula 
tions  in  force.  These  affect  the 
operation  of the labour  market,  as 
well  as  the  behaviour  of both  em 
ployers  and workers, leading  them 
to  choose  different  forms  of  flexi 
bility. What is much less evident is 
whether  these  different  forms  of 
flexibility  affect  employment  per 
formance,  growth  of  output,  or 
standards  of  living.  Comparisons 
based on the OECD index of regula-
tion,  a  r e l a t i v e ly  subjective 
measure, show  at best only a weak 
correlation  between  these  vari 
ables. 

The policy  challenge 

The  E u r o p e an 
employment 
strategy  which  has  been  pursued 
since  1994  has  rightly  placed  a 
strong emphasis on increasing flex 
ibility in labour  markets. The  type 
of flexibility which will be required 
of the  European  economy in  a  con 
text  of  a  fully-functioning  Single 
Market  and  Economic  and  Mon 
etary  Union  will  be  much  more 
complex  than  simply  deregulating 
labour  markets. 

Non-national population by citizenship in 
Member States, 1995 

%  population 

Hourly labour costs and value added per hour 
worked in NUTS 1 regions, 1992 

Value added per hour (ECU) 

•: 

•'••  • 

• 

mm 

40 

35 

30 

25 

20 

15 

10 

05. 

0  4 

40 

•  35 

•  30 

•  25 

-  20 

15 

10 

5 

0 

10 

15 

20 

25 

30 

fi  ÛK  C  OR 

iitlNIi: 

imf::S!?:;5:tlKii;€t5t 

Cost | *r hour (ECU) 

16-

o 

3 
a 

o 

An employment agenda for the year 2000: issues and  policies 

•  The  new  kind  of 

flexibility 
should  be  a  parallel  process  of 
continuing  the  structural  re 
forms in both markets for goods 
and services, and in labour mar 
kets.  Deregulation  and  greater 
competition  in  goods  and  ser 
vices markets  should be seen  as 
a way of improving  productivity 
and  job  creation  on  a  lasting 
basis. This is particularly true in 
services,  where  there  is  still 
enormous  potential  for job  cre 
ation 
in  a  whole  range  of 
activities. 

measures  to  maintain  and  up 
grade skills. 

•  The  Commission  will  intensify 
efforts  to  simplify  and  improve 
the  business  environment,  in 
cluding  the  setting  up  of  th 
eBusiness  Environment  Task 
Force in response  to the  invita 
tion 
the  Amsterdam 
from 
European  Council. 

Flexibility  and 
labour cost  dispersion 

•  Flexibility  in  product  markets 
means  flexibility  at  the  level  of 
the firm. Such flexibility will re 
quire an increasing focus on new 
types  of  work  organisation, 
which may lead  to more  flexible 
patterns  of  working  time.  The 
'flexible firm' should become the 
norm,  not  the  exception.  In  in 
troducing  new  patterns  of 
working,  a  certain  number  of 
principles  should  be  respected: 
they should be specific to the in 
dividual plant or office, and  they 
should  be  negotiated  between 
the employers  and  the  workers. 
The new agreement on part-time 
working negotiated by the Social 
Partners  at  European  level  in 
the context of the Social Protocol 
should be seen  as  a  first  step  in 
the  search  for  such  preferred 
strategies. 

•  Flexibility and security need not 
be  mutually  exclusive.  To  a 
growing  number  of  people,  job 
security will  probably no  longer 
mean  a job  for  life,  but  the  de 
mands  of  new  technology  and 
the  new  flexibility  mean  that  a 
new  partnership  should  be  de 
veloped 
workers 
between 
employers  and  governments  to 
guarantee employability throug 
life.  This 
hout 
foremost, 
means, 

the  working 
and 

first 

Labour  costs  vary  considerably 
across  the  Union,  ranging  from 
around 5 ECU per hour in industry 
in  Portugal  in  1992  to  around  23 
ECU per hour in most  German  re 
gions,  and  ECU  27  in  Hamburg. 
These  differences  largely  reflect 
variations  in  labour  productivity 
(Graph  8). In  terms  of unit  labour 
costs, there is relatively little vari-
ation  across  t he  Union  and, 
certainly, no tendency for unit costs 
to be lower in places where the aver 
age cost of employment is also low. 
Productivity  differences  tend  to 
compensate  for  labour  cost  dif 
ferences  and  there  is,  therefore, 
little  incentive  in  this  regard  for 
firms  to  shift  production  from  one 
Member State to another — at least 
at the aggregate level. 

Differences  in labour costs between 
regions  are  much  less  pronounced 
in  the  US,  and  there  is  compara 
tively  little  variation  in  the  unit 
costs of producing in one part of the 
US than  another. This is only to be 
expected, however, since the US has 
effectively  been  a  single  economy 
for  a  long  time,  has  a  single  cur 
rency and enjoys a higher degree of 
economic  integration  between  the 
individual  states  than  is  yet  the 
case  in  Europe.  In  terms  of labour 
market  adjustment,  a  more  rele 
vant  comparison  is  between  the 

17 

extent  of  labour  cost  differences 
within  Member  States  in  Europe 
and within different  parts, or broad 
regions, of the US. 

Average labour costs in the two hig 
hest-cost regions were around 30% 
higher than in the two lowest in four 
of the  five  largest  European  coun 
tries  in  1992. In  the  fifth  country, 
Germany,  the  difference  was 18%, 
if the  new Lander  are excluded.  In 
the US broad regions, the  difference 
was  between  20  and  30% in  each 
case.  Using  a  more  sophisticated 
statistical measure of disparity (the 
variance or standard deviation) and 
weighting  regions  according  to  the 
numbers  employed,  all  of the  nine 
US regions except two have a smal 
ler variation in average labour costs 
than  is the  case in  European  coun 
tries. 

There also tends to be less variation 
in  unit  labour  costs  between  US 
States  than  European  regions 
within  countries,  especially  in 
Spain  and  the  UK  This  suggests 
that economies are more flexible in 
the  US  than  in  some  parts  of  Eu 
rope,  or  t h at  there  are  fewer 
obstacles  to  mobjjity  of  both  pro 
ducers  and  workers,  in  the  sense 
that there is more of a tendency for 
market forces to eliminate any unit 
labour  cost  differences  which 
emerge  (through,  for  example,  en 
couraging  shifts 
in  economic 
activity between States). A more de 
tailed  analysis  is  presented  in  the 
main  report. 

The policy  challenge 

The Amsterdam  European  Council 
stressed  the  need  to make  tax  and 
social  security  systems  more  em 
ployment-friendly,  and  to  create  a 
tax  environment  that  stimulates 
enterprise  and the  creation  of jobs. 
In  particular,  the  prevailing  struc 
ture  of  the  tax  system  in  Member 

An employment  agenda for the year 2000: issues and  policies 

States,  and  the  scale  of  the  tax 
wedge (between the cost of labour to 
employers  and  employees'  take-
home  pay) need  to be re-examined 
in the light of the effect on employ-
ment  growth,  especially  of 
less-skilled, lower-paid workers. 

•  Member States should have  flex 
ibility in choosing the method of 
reducing taxes on labour and the 
means of financing those reduc 
tions.  However, there  are great 
benefits  to  be  gained  from  ex 
changing 
and 
experience 
these 
issues as well as from coordinat 
ing  tax  measures  as  part  of  a 
Community-wide  effort  to  re 
duce unemployment. 

information 
regarding 

Migration 
and mobility 

Mobility of the labour force is one of 
the  ways in which  the  labour  mar 
ket  brings  about  adjustment  to 
long-term  divergence  in  economic 
and  employment  opportunities  be 
tween  countries  and  regions  — 
divergences  which  s t r u c t u r al 
policies  seek  to  minimise.  As  time 
goes  on,  however,  the  need  for  an 
adjustment  to  long-term  diver 
gences  should  decline  as  a  more 
balanced  economic  development  is 
achieved  and  there is greater  econ 
omic  and  social  cohesion  between 
countries  and  regions 

Some  5%  of  people  resident  in 
Union  Member  States  who  are  of 
working-age  are  non-nationals 
(Graph 9). Of these, around  a  third 
come froin other EU countries. 

Although  most  Member  States  in 
the Union have experienced net im 
migration  since  the  late  1980s, 
which has added to their population 
of working  age,  the  scale  has  been 
relatively  small. Only in  Germany, 

Greece  and Austria has  net  immi 
gration  consistently  amounted  to 
much more than 0.3% of population 
over this whole period, and this has 
now  declined.  The  peak  period  of 
net immigration, which was around 
the  turn  of  the  decade  when  it 
reached  1% of  population  in  Ger 
many and Austria and just over Va% 
in  Greece,  mainly  because  of  in 
flows  from  Central  and  Eastern 
Europe, now seems to have passed. 

Some 30% of immigrants into Mem 
ber States  are returning  nationals 
and another 17% citizens of another 
Member  State.  Immigration  into 
the  Union from outside  amounted 
to under V2% of the Union's popula 
tion of working age in 1995. This is 
only slightly lower than the  inflow 
into  the  US. Moreover, in the  EU, 
about half of the inflow of migrants 
was  offset  by  people  emigrating 
from the Union (more than the very 
low outflow from the US). Since this 
is  around  twice the increase in  the 
natural  growth  of  population,  the 
inflow  of migrants is making  a sig 
nificant  contribution  to the  growth 
of  working-age  population  and  to 
the  Union's  potential  labour  force. 
The  inflow  is  particularly  import 
ant  in  Member  States  such  as 
Germany where population is natu 
rally  falling. 

The scale of labour movement in the 
US  is  greater  than  in  Europe,  but 
not  significantly  so.  In  practice, 
while  movements  over  long  dis 
tances, from one part of the country 
to another,  are more  frequent  than 
between  different  parts  of Europe, 
the  scale  of migration  between  re 
gions  or  states  within  these  'parts' 
or  broad  regions  (within,  say,  the 
Mid-West or the North-East) is only 
slightly  higher  than  between  re 
gions  in  Union  Member  States.  In 
1993-94,an  average  of  just  over 
2V2%  of  the  resident  population 
moved  between  either  state  or 

broad region in the US, which com 
pares  with  a  figure  of just  under 
1V2% who  moved  between  either 
NUTS  1 regions or Member States 
in Europe at about the same time. 

Migration between regions in Mem 
ber States  is  not  so different from 
movement  between  states  in  the 
US. In  1993-94, an average of just 
under 1V2% of people (14 in 1000) in 
each of the 9 broad regions of the US 
moved  from  one  state  to  another 
within that region. 

Across the Union, significant num 
bers of people regularly travel quite 
long distances from their homes to 
their  places  of  work,  and  in  some 
cases  even  cross  national  borders. 
Such  commuting  serves  to  enlarge 
what  might  normally be defined  as 
a pineal labour  market  and  is  a  far 
•more  common  occurrence  than 
people moving house to take up em 
ployment. 

In  1995, just  under  372%  of  em 
ployees lived in one NUTS 1 region 
and worked in another. In Belgium, 
the  figure  was  substantially  above 
the  Union  average  at  almost 13%, 
and  in  Austria,  it  .was  over  10%, 
mostly  consisting  of  those  travel 
ling  to  B r u s s e ls  and  Vienna 
respectively. 

Around  V2% of employees  (600 000 
people) in the Union in 1995 lived in 
one country and worked in another. 
Half  of  these  worked  in  another 
Member  State,  the  other  half  in  a 
country outside the Union, (mainly 
Switzerland).  Not  all  of  these 
necessarily  commute  on  a  daily 
basis,  but  may  work  in  another 
country for a lengthy period of time 
without  changing  their  place  of 
residence. The great majority, how 
ever,  almost  certainly  commute 
regularly. 

w 

- 18 

An employment  agenda for the year 2000: issues and  policies 

The policy challenge 

There  are  various  obstacles  to  mi 
g r a t i on  between  E u r o p e an 
countries, such as cultural  and  lin 
guistic  difficulties,  rigidities  in 
regulations,  the  spillover  effect  of 
restrictions  on  third  country  mi 
grants, and  racist  attitudes.  These 
are  difficult  to  overcome  through 
economic and labour market  incen 
tives to migration. 

•  The  adjustments  required  in» a 
more  integrated  European  la 
bour  market  do  not,  however, 
call for large increases in migra 
tion  or  geographical  mobility. 
The development of EMU should 
make  wage  and  price  compari 
sons  more 
transparent,  but 
other  factors  play  a  possibly 
greater part in the  employment-
wage  decision.  The  need  is  to 
provide a situation where poten 
tial migrants have  a real  choice 
—  between  the  opportunity  to 
stay  and  the  security  to  move, 
through  adequate  rates  of  job 
creation where they live, and  the 
dismantling of artificial  barriers 
to  their  ability  to  work  else 
where. 

•  Promoting  job  opportunities  in 
potential  migration  areas  — 
both  those  which  send  and  re 
ceive migrants  — will  decrease 
barriers  and  improve  integra 
tion. In particular,  such  policies 
will  address  the  problem  of dis 
crimination 
labour 
in 
markets  based  on  fears  of jobs 
being  taken  by  those  coming 
from elsewhere. 

local 

through 

•  Beyond  this,  policy  should  aim 
at  facilitating  freedom  of move 
ment 
removing 
remaining restrictions on labour 
mobility (many of which  are  not 
actually  linked  to  the  labour 
market,  such  as  pensions  and 

housing), improving information 
on job opportunities, and extend 
ing mechanisms such as EURES 
which  help  those  wishing  to 
move.  While  barriers  to  cross-
border  commuting  have  been 
reduced  considerably  in  recent 
years,  there  are still  significant 
obstacles,  to  people  working  in 
another Member State. 

Facilitating  mobility  adjustments 
will make a positive contribution to 
combating  emerging  skill  short 
ages,  correcting  productivity 
differences  and  thereby  promoting 
growth and  employment. 

Sectoral  and 
occupational  mobility 

The extent of mobility between sec 
tors  is  relatively  high  across  the 
Union.  In  1995, job  turnover  for 
men was around 16% a year and for 
women  around  19%. These  figures, 
however,  conceal  substantial  dif 
ferences  both  between  sectors  and 
between Member States. 

In  general,  the  rate  of  new  entry 
tends  to be higher in sectors which 
are  expanding  more  than  others, 
although the link with employment 
growth  is  not  systematic.  In  par 
ticular,  the  scale  of  sectoral 
mobility  is  much  higher  in  sectors 
like hotels and restaurants  (around 
25%  of all  employees  in  the  sector 
not  having  worked  there  the  year 
before), where  a high  proportion  of 
new  entrants  tend  to  be  school-
l e a v e r s,  t h an  in  sectors  like 
banking  and  insurance,  education 
or  health,  where  higher  education 
attainment and skill levels required 
of  the  work  force  both  limit  the 
number  of suitable  applicants  and 
make  employers  reluctant  to  lose 
people  once  they  have  been  re 
cruited  and  trained.  High  rates  of 
labour turnover, in other words, are 

(N 
l-H 
P 
> 
&_ 

5 

03 

o 

19-

not necessarily synonymous with  a 
high degree of competitiveness. 

The policy  challenge 

Differences  in  the  extent  of  turn 
over,  however,  do  not  seem  to  be 
systematically related to the degree 
of  labour  market  regulation,  or 
more specifically,  to the severity or 
laxity of protection against dismiss 
al, which is generally held to  affect 
the willingness of employers to take 
on new people. Spain, for  example, 
has one of the strongest  systems of 
job  protection  (as  assessed  by  the 
OECD) but  also one of the  highest 
rates of labour turnover, while Fin 
land also has a high rate of turnover 
coupled with  an  above  average  de 
gree  of  worker  protection  and 
Belgium  with  the  lowest  turnover 
rate in the Union is judged  to have 
below  average  restrictions  on  dis 
missal. 

•  Rather 

than  deterring  em 
ployers from hiring new  people, 
tight  restrictions  on  dismissal 
may alter the way they do so", in 
particular, by encouraging them 
to  take  them  on  under  fixed-
term 
This, 
contracts. 
paradoxically, would  tend  to in 
crease 
labour 
turnover  rather  than  reduce  it, 
and  the  evidence  suggests  that 
this is indeed  the case. 

rate  of 

the 

•  Restrictions on dismissal tend to 
increase  the  number  of  people 
employed  on 
temporary  con 
tracts  and, accordingly, the  rate 
of  labour  turnover.  This  could 
lead to the development of a dual 
labour  market  with  established 
employees  enjoying  a  high  de 
gree of protection  against  losing 
their  jobs  and  others  having 
little or none. This is not necess 
arily 
the _most  desirable  or 
efficient  way  of  increasing  la 
bour market  flexibility. 

An employment agenda for the year 2000: issues and policies 

•  There is a need for  a radical  re 
labour 
think  of  all  relevant 
market  systems — employment 
protection,  working  time,  social 
protection and health and  safety 
— to  adapt  them  to  a  world  of 
work which will be organised dif 
ferently,  in which the concept of 
security  for  workers  has  to  be 
reformulated,  focusing  more  on 
security based  on  employability 
in the labour market rather than 
security in a specific job. 

•  The  focus  should  move  away 
from  a  simplistic  debate  about 
regulation  and  deregulation  to 
wards  a  new  balance  between 
flexibility  and  employability  se 
curity, with tangible benefits  for 
both  workers  and  employers. 
Workers  will  be  better  able  to 
combine professional  and  family 
life,  while  employers  will  be 
given  the  opportunity  to  adapt 
faster  to the increasing  changes 
of the  market. 

Integrating  disabled 
people into the 
labour market 

If  past  trends  continue,  as  the 
Union's  population  ages, there will 
be  an  increasing  proportion  of 
people  with  disabilities  among 
those  of  working  age.  This  poses 
multiple  policy dilemmas  on a sen 
sitive  issue  which  has  polarised 
debate  in  the  past  and  which  the 
Employment  in Europe Report  this 
year  addresses in a special  section. 

Approximately  17% of the  Union's 
working-age  population  is  ham 
pered by disabilities. Nearly half of 
these  are  in  the  50-64  age  group. 
The  average  employment  rate  of 
hampered  people  in  the  Union  at 
44% is nearly  17 percentage  points 
below  the  overall  rate,  though  this 

varies  markedly  between  Member 
States.  Rates  tend  to be  higher  in 
countries where the overall employ 
ment rate is also high. A significant 
proportion  of those who are in em 
ployment,  moreover,  tend  to  be 
people  who  have  become  disabled 
while  working  and  who  have  re 
mained with  the same employer, if 
not necessarily in the same job. In 
deed,  around  10  million  people  a 
year  are  affected  by  occupational 
diseases or accidents and injuries  at 
the workplace. Contrary to conven-
of 
tional  wisdom, 
unemployment  for  disabled  people 
are not much higher in most coun 
tries  than  for  the  rest  of the  work 
force.  In  the  Union  as a whole, the 
average rate is under  2 percentage 
points higher  than  for  the  total  la 
bour force. 

r a t es 

The proportion who are inactive is, 
however,  considerably  higher  than 
for  other  groups. This is  especially 
so in  countries  like  Greece,  Spain, 
Ireland  and  Italy,  where  family 
support  is  still  strong.  These  are 
also  the  countries,  together  with 
Portugal, where the educational  at 
tainment of disabled people is lower 
than  for  the  rest  of the  population 
and  where  disproportionate  num 
bers  are  employed  in  agriculture 
and  in  elementary  occupations 
generally,  whereas  in  other  coun 
tries  where  disabled  people have  a 
similar  educational  attainment 
level  to  the  rest  of  the  population 
there are not significant  differences 
in  the  sectors  and  occupations  in 
which they work. 

The policy  challenge 

In the past, there has been a strong 
socio-economic bias in many Mem 
ber  S t a t es  towards  g r a n t i ng 
disability  benefits  to  those  who 
have  difficulty  in  finding  employ 
ment.  As  a  result,  expenditure  on 
such benefits  has  become the  third 

-20 

largest  item  in  the  Union's  social 
protection  budget  after  pensions 
and sickness benefits, amounting to 
1072% of the  total  budget  in  1993. 
This  is  larger  than  the  amount 
spent  on  unemployment  benefits 
(7% in 1993). 

Two of the main obstacles faced  by 
disabled people in terms of access to 
employment are prejudice and bias. 
As a result, there has been an exten 
sive  movement  among  disabled 
people for  the introduction  of anti-
discrimination legislation to protect 
their civil rights and for 'reasonable 
accommodation'  so  that  they  can 
exercise their  right  to employment. 
In economic terms, this is an invest 
ment  in  human  capital  which,  as 
well as the social benefits, promises 
positive  financial  returns  for  State 
budgets,  insofar  as  additional  em 
ployment  generates  more  tax 
revenue in place of the  expenditure 
required  to  support  the  income  of 
those who are inactive. 

•  Anti-discrimination 

legislation 
should  be  complemented  by 
measures  aimed  at  improving 
the  employability  of  disabled 
people,  as 
for 
example,  so  strengthening  the 
competitiveness  of  the  Union's 
work force  as well as  improving 
the job  prospects  of  disadvant 
aged individuals. 

in^  Sweden, 

to 

learn  and 

re-oriented 

•  Quota-levy  systems  should  be 
completely 
to 
respond to new working environ 
ments  where  employees  are 
to 
encouraged 
change the work process as they 
learn, so becoming part of a com 
pany's capital. In such adaptable 
and  employment-friendly  envi 
ronments, 
with 
disabilities are much more likely 
to stay on and develop their per 
sonal  skills.  The  employment 
prospects  for  disabled  people, 

those 

w 

o 

An employment  agenda for the year 2000: issues and  policies 

however,  cannot  be  divorced 
from  general labour market con 
ditions.  Disabled  people  are 
usually the first to lose their jobs 
and among the last to get hired: 
the  imposition  of quotas  is  self 
defeating  if  the  employment-
base to which they are applied is 
shrinking. 

short-term,  there  is  no  convincing 
evidence  that  environmental 
policies  are  liable  to  have  an  ad 
verse  effect  on  employment  or 
competitiveness  overall  and in  the 
longer term are likely to strengthen 
both. Recent analysis suggests that 
pursuing  environmental  objectives 
has, on the whole, a positive, albeit 
limited employment  effect. 

Q 

Environment  and 
employment 

The  environment  has  become  an 
area  of  significance  for  employ 
ment.  Environment  related  jobs 
include  a  wide  range  of  activities, 
with  the  core  ones  such  as  waste 
water  treatment,  waste  disposal, 
air  pollution  control,  soil  remedia 
tion and noise abatement  providing 
the  bulk of jobs and  accounting  for 
at least  1.5 million jobs or  1% of all 
employment  in  the  European 
Union. 

Other jobs  are  linked  to  the  provi 
sion  of  environmental  goods  and 
services which  are not for  environ 
mental  purposes  only  and  so  are 
less  easily  identifiable.  These  in 
clude:  recycling, 
the  use  of 
renewable energy, nature and land 
scape protection and the renovation 
of  urban  areas.  Preliminary  esti 
mates  suggest  that  these  activities 
may account for further  1.5  million 
jobs in the Union, so increasing em 
ployment  in  the  environmental 
sector  broadly  defined,  to  around 
2% of the Union total. The environ 
mental  sector  is  a  sector  with 
positive forecasts  for job growth. 

Of  course,  environmental  policies 
may  also  have  adverse  effects  on 
employment in other sectors as con 
trols  on pollution  and  measures  to 
reduce ecological damage are intro 
duced.  Despite  the  problems  that 
this  may  cause  for  particular  sec 
tors  or  regions,  especially  in  the 

of 

consumption 

Much  more  important  for  the  sus-
t a i n a b i l i ty  of  growth  in  the 
long-term  than  "green industry* is 
the  problem  of the  prevailing  pat-
t e rn 
and 
investment.  Major  investment  is 
likely  to  be  needed  in  the  coming 
years  to renew  the  current  capital 
stock by putting in place more envi 
ronmentally-friendly  technologies 
and production methods, especially 
in  manufacturing,  agriculture,  en 
ergy and  transport. 

The way forward 

The  1997  Employment  in  Europe 
Report  highlights  a  number  of  the 
major  factors  which  are  likely  to 
make the long-term environment of 
the  European  labour market  signi 
ficantly  different  in  the  next  two 
decades than in the last 25 years of 
the 20th  Century. 

The  European 
employment 
strategy, built on the concept of em 
ployment as a common concern, set 
out  in  the Amsterdam  Treaty,  will 
play an  important  part  in  securing 
a high rate of net job creation which 
is essential for ensuring the success 
of EMU. This strategy, initiated  at 
the  Essen  Summit,  combines  mac 
roeconomic stability and  structural 
reforms  to modernise the  function 
ing of the labour  market. 

In  the  coming  decade,  it  must  put 
even more emphasis on the develop 
ment of a knowledge  infrastructure 

- 2 1-

which  will  ensure  sustainable 
growth in a competitive world econ 
omy  and  will  enhance  human 
resources,  so  that  everyone  in  the 
labour  force  can  maintain  and in 
crease 
and 
employability.  Flexibility  must  be 
built on the confidence of workers in 
their  adaptability  and  em 
ployability  and on constructing  an 
effective  partnership  between  the 
work force and employers. 

skills 

their 

At the level of the Union, a number 
of  political  decisions  have  been 
taken,  new  commitments  made, 
and new institutional  arrangement 
put  in  place  to  focus  the  employ 
ment  policy  actions  of  the  Union 
and the Member States: 

• 

• 

• 

the inclusion of the employment 
Title in the revision of the Treaty 
will  provide  the Union with  the 
tools necessary to develop a coor 
dinated  employment  strategy 
adapted  to the needs of the 21st 
Century, while at the same time 
taking  account  of  the  different 
situations in the Member States; 

the  creation  of  an  Employment 
Committee provides a forum  for 
promoting coordination between 
Member  States  on  employment 
and labour market policies. This 
Committee will monitor employ 
ment  policies  in  the  Member 
States  and the Community,  and 
advise the Council and the Com 
mission on such issues; 

the  Commission  will  draw  up 
employment  policy  guidelines 
which  will  be discussed  and  ap 
proved by the European  Council 
after  extensive  prior  consult 
ations.  They  will  be  consistent 
with  the  Broad  Economic  Gui 
delines; 

• 

there will be monitoring and sur 
veillance  of  Member  States 

An employment agenda for the year 2000: issues and policies 

employment policies in the light 
of these guidelines; 

•  employment  will  be  taken  into 
account 
in  all  Community 
policies  and  actions,  accompa 
nied  by  an  examination  of  all 
relevant  existing  Community 
policies  to ensure  that  they are 
geared towards job creation; 

Employment policy must respond to 
global  challenges.  In  the  last  ana 
lysis,  everything  depends  on  our 
ability to provide decent and accept 
ably paid jobs for all of our citizens 
who want to work. Europe must re 
spond to that challenge. 

o 

22 

ISSN 0254-1475 

COM(97) 479 final 

DOCUMENTS 

EN 

04  17  05 

Catalogue  number  :  CB-CO-97-509-EN-C 

ISBN  92-78-25594-7 

Office  for  Official  Publications of the European  Communities 

L-2985  Luxembourg