Opinion of the Economic and Social Committee on "Structural indicators"
Date: 2001-03-01
Institutions: European Economic and Social Committee
Subjects: economic indicator, economic policy, economic statistics, social policy

11.5.2001

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Official Journal of the European Communities

C 139/79

Opinion of the Economic and Social Committee on ‘Structural indicators’

(2001/C 139/15)

On 3 October 2000 the Commission decided to consult the Economic and Social Committee, under
Article 262 of the Treaty establishing the European Community, on ‘Structural indicators’.

The Section for Economic and Monetary Union and Economic and Social Cohesion, which was
responsible for preparing the Committee’s work on the subject, adopted its opinion on 8 February 2001.
The rapporteur was Mrs Bulk.

At its 379th plenary session (meeting of 1 March 2001) the Economic and Social Committee adopted the
following opinion by 87 votes to one, with two abstentions.

1.

Introduction

1.1.
At the Special European Council of Lisbon on 23 and
24 March 2000, the EU set itself a new strategic goal of
promoting employment, economic reform and social cohesion
as part of a knowledge-based economy: ‘to become the most
competitive and dynamic knowledge-based economy in the
world capable of sustainable economic growth with more and
better jobs and greater social cohesion’ (paragraph 5 of the
Council conclusions).

1.2.
The European Council felt that the existing Broad
Economic Policy Guidelines and the Luxembourg, Cardiff and
Cologne processes offer the necessary instruments for this, in
particular through the Broad Economic Policy Guidelines,
which should focus increasingly on the medium and long-
term implications of structural policies and on reforms aimed
at promoting economic growth potential, employment and
social cohesion, as well as the transition towards a knowledge-
based economy (paragraph 35). The method of open coordi-
nation, with clearly defined targets, data and benchmarking
was extended to areas of economic, structural and social
policy.

1.2.1.
Reform in the four policy areas strengthens each of
them, since there are various interactions between them, as
well as with the general economic context. In order to gain
maximum benefit from the structural economic reforms, a
clear and coherent approach is necessary, which takes account
of the mutual relations between the various markets.

1.2.2. With this in mind, the European Council asked the
Commission to draw up an annual synthesis report on progress
on the basis of structural indicators to be agreed relating to
employment, innovation and research, economic reform and
social cohesion (paragraph 36 of the Council conclusions).

The European Council of Feira of 19 and 20 June 2000
1.3.
asked the Commission to present a report by the end of
September 2000 on the proposed approach for indicators and

benchmarks, both in specific policies and to be used in the
synthesis report to the spring European Council, to ensure the
necessary coherence and standard presentation (paragraph 38
of the conclusions). This communication is the Commission’s
response to the requests from the Lisbon and Feira European
Councils.

In this communication,

the Commission sets out
1.4.
27 indicators to be used in its synthesis report intended for the
Stockholm European Council in spring 2001. These indicators
are an important tool for tracking and comparing progress
and, at the same time, for assessing the effectiveness of the
policies followed by the Member States in the above-mentioned
fields. This assessment will also provide a basis for fixing
guidelines in the short and medium term for economic and
social policy.

2. General comments

2.1.
The ESC would emphasise that an approach which
would be common to all the Member States and in which a
system of indicators and benchmarks would be agreed in order
to give form to the machinery for mutual responsibility is
helped by an annual structured report on the progress achieved
in the political areas mentioned. So, the emphasis should be
less on benchmarks and more on qualitative indicators and
reports by country.

2.2.
Hence, the Committee is particularly pleased with the
Commission proposal. The proposed indicators must be
considered as different pieces of the same puzzle. They are
distributed among the four policy areas mentioned above.
The use of general economic indicators delimits the overall
economic context into which the structural reforms fit. So,
evaluations and comparisons between the Member States and
the other developed economies (such as the United States and
Japan) are possible with the greatest transparency.

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2.3.
The open coordination procedure advocated by the
Council and the Commission, the practice of ‘peer pressure’
and ‘benchmarking’ between the Member States, can benefit
greatly from the availability of reliable facts serving as a basis
for mutual coordination and comparison between national
practices.

2.3.1.
For this reason it must be borne in mind that
indicators make it possible to draw comparisons between the
performances of the Member States. Indicators which give
only one picture of the whole European Union are insufficient
to ensure coordination between the Member States. One must
not only assess to what extent the Union as a whole is
complying with the conclusions of the Lisbon Council; it is
just as important to be able to judge how much the individual
Member States are implementing the political agreements
reached in Lisbon.

The ESC wishes to stress that indicators have to rest on
2.4.
a solid theoretical footing. In any event, the statistical sources
on which indicators are based should be measurable without
ambiguity or dispute. They will also have to meet the following
criteria:

— the costs of collecting the data must be proportional to,

or reasonable in relation to, the results;

— it should be possible to process the data and make them

available rapidly;

— the quantitative data should be relatively easy to obtain

from public sources;

— the series of indicators must be able to resist institutional

changes on the markets;

— the procedures for carrying out new measurements in the

future should be simple.

2.5.
The reliability of the conclusions that the Commission
will be able to draw in its synthesis report on the basis of the
indicators will depend on the reliability, quality and topicality
of the figures provided to Eurostat. The preferred option is
that, as far as possible, the indicators should be provided by
national statistical services, since often less is known about the
collection and harmonisation methods used for data from
other sources. It is very important that the figures be highly
reliable and as up to date as possible. It is only under these
conditions that an indicator can give a reliable and objective
picture of the situation in the European Union.

2.5.1.
One can also wonder whether the indicators pro-
posed by the Commission can be adapted to the requirements
of the synthesis report, which will have to be finished in at
most six months. This is the first time that the Commission is
to draw up a synthesis report using the proposed indicators.
Hence, as the Commission communication itself notes, these

indicators are not limitative, but may well be added to or
improved. The Committee would therefore urge that priority
be given to the further development and fine-tuning of a
reliable statistical information system. Given the complexity
and importance of further developing the set of indicators, the
Committee — subject to the comments below — will continue
to follow closely the development of the statistical information
system.

2.6.
The ESC wishes to point out that any measuring
instrument is at the service of the objective for which it is
used, and this also applies to the structural indicators. The
choice of certain indicators depends on the objective of the
Commission’s synthesis report, namely the evaluation of the
progress achieved in the implementation of the strategic goals
outlined in Lisbon, aimed at reforming the EU into the most
competitive and dynamic knowledge-based economy in the
world.

2.7.
The Committee would also stress that, in addition to
the high standards of reliability, topicality and uniformity
required of each of the proposed indicators, it will be necessary
to interpret the indicator-based figures in order to assess
progress made in economic, social and structural policy. This
can be done with the help of an underlying statistical
information system, so that in interpreting the data account is
taken of e.g. the economic and demographic characteristics of
a Member State. A sound evaluation is needed if the objectives
agreed at the Lisbon summit — namely a high level of
employment in a competitive and dynamic economy — are to
be achieved. Thus,
the interpretation and assessment of
indicator-based figures will also have to meet high standards
of verifiability, efficiency and reliability.

2.8.
The ESC notes that a large number of the proposed
indicators are not new. They are already used inter alia to
support the national accounts of the Member States, the Broad
Economic Policy guidelines and the employment pact.

The ESC wishes to stress that

2.8.1.
the relationship
between the annual synthesis report of the Commission and
the existing processes of economic and social development of
the European Union should be delimited clearly. The European
Commission’s synthesis report is clearly linked to existing
processes and thus, in the Committee’s view, will potentially
be an excellent basis for directing policy in the above-
mentioned areas, among other things, by assessing how far
Member States have implemented the strategic goals outlined
in Lisbon.

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2.8.2.
The value added of the list of indicators submitted
by the Commission lies not so much in the separate indicators
as in the integrated approach to the political sectors covered
by the series of indicators. A clear, structuring basis such as that
provided by the Commission’s synthesis report is potentially of
great benefit to the open coordination procedure advocated
by the Council and the Commission, under which Member
States coordinate their policy among themselves. The European
Commission can draw on this synthesis report to establish a
similar basis for the discussions required in the various
meetings of the Council of Ministers.

2.9.
Although the Commission stresses that the various
indicators cannot be considered completely separately from
each other, there is a risk that the separation into four policy
areas will highlight less clearly the interdependence and direct
interactions which exist between the different indicators, which
may give a distorted picture. Moreover, there are considerable
differences in the economic structure of the Member States,
e.g. in their financial, tax and social security arrangements. In
this respect, it is inappropriate to apply separate indicators.
Moreover, a series of separate indicators can hardly give a
detailed description of the interdependence between the vari-
ous indicators. A more detailed structure where the indicators
are, as far as possible, derived from a single underlying
statistical information system may provide a clearer picture.

2.9.1.
Such an information system and the underlying
indicators derived from it can be targeted at the various sectors
of the economy and a country’s overall economic structure.
The indicators proposed by the Commission are clearly defined
and delimited in a similar way. As a result, they are indeed able
to measure the same thing in the various economic structures
of the Member States. Only when this condition is fulfilled can
genuine conclusions actually be drawn from the synthesis
report on the progress made in implementing the strategic
aims of Lisbon.

2.9.2.
The Committee feels that account must naturally be
taken of EU enlargement. After all, following accession, the
new Member States’ statistical services will also be required to
submit
the figures needed to determine the
indicators proposed by the Commission. Consideration must
therefore be given to how far these figures already exist.

to Eurostat

3.

Specific comments

3.1.1.
The Treaty of Amsterdam lays down that environ-
mental protection should be integrated into Community policy
in order to achieve sustainable development. The overall
guidelines for economic policy must ensure that consistent
policy measures are proposed for the various sectors of the
economy.

The

currently

strategies

integration

3.1.1.1.
being
developed by the Council have already provided various
indicators which are of sectoral and general
importance.
Indicators such as the level of energy efficiency, environmental
investment and emission of greenhouse gases or other pol-
lutants — both in absolute terms and per unit of GDP —
should be used in any general assessment. The Committee also
indicator of this kind is
wonders why an environmental
lacking; it points out once again that the indicators should be
related to the economic structures in the Member States and
the various sectors. Only in this way can there be a true
comparison between the Member States. This presupposes
that the indicators are derived from a consistent information
system for the economy and the environment. The NAMEA
system currently being developed by Eurostat (and already
applied in 14 Member States) is eminently suitable for this
purpose.

The Commission’s proposed general economic
3.1.1.2.
is
background indicator ‘energy intensity of the economy’
difficult to assess because it depends on the economic structure
of a country. A possible alternative is the aforementioned
measurement of energy efficiency, which can be defined as the
weighted sum of energy consumption in each industrial sector
in relation to the European average for that sector.

3.2. Employment indicators

One of the key objectives of the new strategy adopted
3.2.1.
by the European Union at the Special European Council of
Lisbon is to boost employment as part of a knowledge-based
economy. The European Union has to endeavour to achieve
an employment rate of 70 % by 2010. The average number of
women in employment should then be more than 60 %. For
that, an active employment policy is necessary. The proposed
indicators should first of all cover the two strategic employ-
ment goals set for 2010. For employment, seven indicators
are proposed: employment rate, female employment rate,
employment rate of older workers, unemployment rate, long-
term unemployment rate, tax rate on low-wage earners and
lifelong learning adult participation in education and training.

The Commission proposes five general economic
3.1.
indicators to delimit the general economic context within
which the structural reforms on the labour, product and capital
markets take place, namely: GDP per capita and the real GDP
labour
growth rate, the energy intensity of the economy,
productivity (per person employed and per hour worked), the
inflation rate and the cyclically adjusted budget balance.

3.2.2.
In addition to the specific position of older workers,
the ESC feels that account should also be taken of that of
younger workers. It is also worth noting that there are no
indicators of the relative percentages of men and women or of
younger and older workers in the workforce.

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3.2.3.
The Committee would note that the ‘female employ-
ment rate’ indicator is an important one, but that it is equally
important to measure the male employment rate so that the
two can be compared. Furthermore, the Committee would
recommend that the unemployment rate should also be broken
down into male and female rates.

found) changes to organisational structures and work process-
es. The new ICT increases the mobility of knowledge. This will
certainly affect the possibility of transferring work across
borders.

3.2.4.
The Committee wonders whether the indicator ‘tax
rate on low-wage earners’ really measures something which is
relevant to policy. The Commission’s intention is to measure
the extent of the poverty trap among the lowest-income
groups; the point at issue therefore is not so much the tax rate
as the income gap. Secondly, it notes that the data for this
indicator are sourced from the OECD and are model-based. A
somewhat different definition is employed by Eurostat, whose
data are survey-based. The Committee prefers the latter
approach.

3.2.5. With regard to ‘lifelong learning’, the Committee
would stress once again that this aspect of employment policy
is very important for the citizen, as it enables him to acquire
the necessary skills and knowledge to maintain and if possible
improve his position on the labour market. However, the
Committee wishes to point out the minor differences in the
definitions used in the various Member States. Moreover, this
indicator centres on the input side. Consideration should also
be given to output. In addition, the Committee thinks it highly
important, in this context also, for not only quantitative but
also qualitative indicators to be developed, such as length and
relevance of the education undertaken.

3.3.

Innovation and research indicators

Technological progress and improvements in the
3.3.1.
quality of work and of capital flows in the production process
are responsible for a major part of economic growth and
constitute an important engine for competitiveness and
employment. This explains why the strengthening of the
capacity for innovation is an essential element of the EU’s
new strategic objective. The transition to a knowledge-based
economy must be backed up by a better policy as regards
R&D, education and the information society.

3.3.1.1.
The information society has assumed a much
higher profile over the years, and technological developments
are becoming increasingly rapid. The use of information and
communications technology (ICT) for the transfer of funds,
commercial transactions and communications has become
widespread. The new possibilities offered by ICT can make the
market sector more competitive. The exponential growth of
the possibilities offered for the rapid mutual exchange of
information between the various players involves (often pro-

There are seven proposed innovation and research
3.3.1.2.
indicators: public expenditure on education, R&D expenditure,
ICT expenditure, level of Internet access, patents in high-tech
areas, exports of high-technology products and venture capital.

3.3.2.
However, older people and the low-skilled usually
have difficulty in accessing ICT. In addition to the importance
of lifelong learning in this policy area, attention should also be
paid to the access of the (long-term) unemployed and their
dependants to the new knowledge-based society. An integrated
approach is necessary, but it is not clear how much the
individual indicators contribute to this. A further division in
society should be avoided. That in turn is an indication of how
important it is to establish an underlying information system
which can be used to assess which sections of the population
benefit directly or indirectly from the knowledge-based econ-
omy. Mere aggregated indicators do not therefore suffice.

The Committee notes that ‘public expenditure on
3.3.3.
education’ is an input indicator which fails to provide adequate
information on changes in the quality of education. This
difficulty could be overcome by adding the national accounting
indicator on growth trends in the education sector — an
indicator which does take quality issues into account. Harmon-
ised data on this front will be available from Eurostat shortly.

3.3.4.
The Committee would point out that ‘R&D expendi-
ture’ is also an input indicator and that consideration should
also be given here to growth trends as opposed to value trends
alone.

3.3.5. With regard to the indicator ‘patents in high-tech
areas’, the Committee notes that it is better to include all
patents, not only those in the high-tech sector. After all, the
competitiveness of the Member States is also influenced by
technological developments in sectors other than the high-
tech industries.

3.3.6. With regard to the indicator ‘exports of high-tech-
nology products’, the Committee notes that it is important for
high-tech products processed into other exports to be assessed.
However, a marginal note should be made to the effect that a
country’s competitive position is determined not so much by
major high-tech production but rather by the high-value
production of as many goods and services as possible.

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3.4.

Indicators of economic reform

3.4.1. With the establishment of EMU and the introduction
of the euro important steps have been taken towards an
integrated European internal market. Technological progress
and globalisation have given an additional spur to these
integration processes relating to the goods and capital markets.
For economic reform policy indicators are proposed in the
fields of market integration and market efficiency. There are
seven proposed indicators: trade integration, relative price
levels and price convergence, prices in network industries,
public procurement, sectoral and ad hoc State aids, cross-
border banking penetration and capital raised on stock mar-
kets.

3.4.2.
The Committee would point out that a ‘trade inte-
gration’ indicator makes little sense. At most, a change in this
indicator can provide information.

3.4.3. With regard to the indicator ‘relative price levels
and price convergence’, the Committee notes that this is
complicated by the fact that a comparable basket of goods
must be found that is relevant to all the countries concerned.
Within the EU we try to solve this by using purchasing power
parities, but to date the quality of such data leaves much to be
desired.

3.4.4.
In the case of the ‘cross-border banking penetration’
indicator, the Committee wonders whether the very detailed
information required is available in all the Member States. In
addition the Committee points out that the ‘cost of capital’
indicator which the Commission proposes to develop would
probably be better suited to the goal which the indicator
purports to measure: integration of the financial markets.

3.4.5.
The Committee wonders whether the ‘public pro-
curement’ indicator really measures the openness and trans-
parency of the public procurement market in the European
Union. For example, the indicator takes no account of the
differences in scale between the Member States’ economies.
Probably a better indicator would be the value of public
procurement divided by GDP. But even that indicator still gives
little information on stimulating the internal market, since it
does not measure the value of public procurement contracts
which are finally awarded to enterprises from other Member
States.

traditional tasks of social and economic policy are therefore
more valid than ever: to promote participation in society
through work, to have a labour market that functions smooth-
ly, to have a balanced distribution of incomes, to guarantee an
income for persons who are unable to provide one for
themselves, and to combat benefit dependency and premature
exclusion from the work process.

3.5.2.
Six indicators are proposed for social cohesion:
distribution of income (income quintile ratio), poverty rate
before and after social transfers, persistence of poverty, jobless
households, regional cohesion (variation in GDP per capita in
PPS across regions) and early school-leavers not in further
education or training.

3.5.3.
The exalted aim of becoming the most competitive
and dynamic knowledge-based economy in the world means,
among other things, that poverty must be combated. Combat-
ing poverty and social exclusion means encouraging access to
careers of quality and the access of all to resources, rights,
goods and services. Account must be taken of the proposal
submitted by the Commission at the Lisbon European Council
to bring down the percentage of persons living below the
poverty line from 18 % today to 15 % in 2005 and 10 % in
2010, and to halve the number of children living in poverty
by 2010. The Committee would point out that the proposed
poverty indicator is based on a relative poverty threshold
which is adjusted automatically in line with any change in the
income level in the Member State concerned. The Committee
considers it very important that the persistence of poverty also
be measured. Households living for several years below the
poverty threshold are in an even more vulnerable position
than households living temporarily below the threshold.

3.5.3.1.
It is essential here to try and establish a clear link
between the indicators which reflect the various aspects of
employment policy and those which measure social cohesion.
To this end, excellent use can be made of the Social Accounting
System currently being tested in a pilot project by eight
Member States and Eurostat.

3.5.

Indicators of social cohesion

3.5.1.
The structure of the workforce is changing. As the
labour market is tightening, it is important to have a workforce
that is employable, well-trained and always learning through-
out life. Combating poverty and making sure that people can
still be part of the work process remain major challenges. The

The fixing of qualitative and quantitative com-
3.5.3.1.1.
mon indicators can serve as a basis for the development of an
open coordination method between the Member States, like
that which already exists in the field of employment and for
the development of national programmes to study and combat
poverty and social exclusion, in accordance with the con-
clusions of the Lisbon European Council.

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that

3.5.4. With regard to the ‘distribution of income’ indicator
the Commission proposes
income distribution be
measured using the quintile ratio of incomes (which compares
the share of a country’s income received by the highest-earning
20 % of a country’s population with that received by the
lowest-earning 20 %). The Committee takes the view that the
decile ratio (comparing the income of the highest-earning
10 % with that of the lowest-earning 10 %) is a better indicator
of income inequality in a Member State since it better reflects
the extremes in the income distribution.

The Committee would point out that the ‘jobless
3.5.5.
households’ indicator is heavily influenced by differences in
the size of households.

The strengthening of economic and social cohesion,
3.5.6.
with the view to a harmonious development of the various
regions within the Union, is one of the EU’s political priorities
under the terms of the Treaty of Amsterdam. The 15 Member
States are composed of 150 regions. The figures for per capita
GDP, which is the basis for determining whether the level of
development of a given region is higher or lower than the
Community average, date from 1995 and are therefore no
longer up to date, but they do show that there are still big
differences between the regions. Owing to the lack of data, it
is not clear if this gap between the different regions is getting
smaller over the years and/or if convergence is really taking
place. Furthermore, regional per capita GDP figures are
sometimes not the best indicators of regional prosperity, e.g.
in regions where many residents commute out of the region,
where often little is produced, but the incomes (of employees
working elsewhere) are relatively high. For this reason the
disposable per capita income of the population would seem a
better indicator.

3.5.6.1.
In this connection the Committee would also
recommend that at a later stage the standards now being tested
at national level be tested at regional level too.

3.5.7. With regard to the still to be developed ‘company
registration’ indicator, the Committee would recommend that
account be taken of the fact that while there is agreement on
the definitions, they are used in practice in different ways by

Brussels, 1 March 2001.

the Member States, e.g.
the founding and dissolving of
companies are not registered in the same way throughout the
EU.

4. Conclusions

The Committee is very pleased with the Commission
4.1.
proposal to establish a set of indicators to be used as a basis
for the annual synthesis report. The Committee would stress
the importance of further developing and fine-tuning a reliable
statistical information system and therefore hopes that in the
process the Commission will draw on the comments in this
opinion. Given the complexity and importance of further
development of the set of indicators, the Committee will
continue to follow the development of the statistical infor-
mation system closely.

4.2.
The Committee strongly recommends that account be
taken of the fact that the application of separate indicators
does not make possible any real synthesis and cannot do
justice to the differences between the Member States in their
overall economic structure. A more detailed structure, with
the indicators being based as far as possible on a single
underlying statistical information system, will provide a clearer
picture.

The Committee wishes to stress that

4.3.
the figures
provided by the indicators will need to be interpreted to make
it possible to assess progress in the policy areas of employment,
innovation and research, economic reform and social cohesion.
The interpretation of these figures as a basis for policy will
have to meet high requirements of appropriateness, verifiability
and reliability; it should also be borne in mind that the figures
alone can never give a fully accurate picture of social reality.

4.4.
The Committee thinks that an open coordination
method as applied in the field of economic, social and
structural policy can benefit greatly from a clear, structuring
basis, as can be provided by the Commission’s synthesis report.
The European Commission can draw on this synthesis report
to establish a similar basis for the further discussions required
in the various meetings of the Council of Ministers.

The President

of the Economic and Social Committee

Göke FRERICHS