Recommendation for a Council recommendation on the implementation of member states' employment policies
Date: 2003-04-08
Institutions: European Commission
Subjects: Council of the European Union, EC recommendation, EU Member State, EU employment policy, European Employment Strategy, employment policy

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 08.4.2003
COM(2003) 177 final

Recommendation for a

COUNCIL RECOMMENDATION

ON THE IMPLEMENTATION OF MEMBER STATES' EMPLOYMENT POLICIES

(presented by the Commission)

EXPLANATORY MEMORANDUM

Since  2000,  the  Employment  Guidelines  have  been  accompanied  by  recommendations  on
Member  States'  employment  policies,  which  are  adopted  by  the  Council  on  the  basis  of  a
recommendation from the Commission in line with article 128.4 of the Treaty. The role of the
recommendations is to provide Member States with specific guidance for implementation of
the Employment Guidelines and focus their policy action on key challenges.

Employment recommendations as part of a new policy guidance package

The  Barcelona  European  Council  requested  that  policy  co-ordination  processes  be
streamlined,  with  synchronised  calendars  for  the  adoption  of  the  Broad  Economic  Policy
Guidelines  and  the  Employment  Guidelines  and  Recommendations.  In  its  report  on
streamlining of 3 December 2002, the Council considered that streamlining should be guided
by the objective to increase transparency and efficiency, avoid overlap and repetitions in the
formulation  of  guidelines,  and  ensure  consistency,  complementarity  and  coherence.  The
Employment Recommendations are therefore presented as part of a package together with the
Employment Guidelines and the Broad Economic Policy Guidelines. The package is intended
semester  2003.
to  be  adopted  by 

the  Council  at 

the  end  of 

first 

the 

Within  a  streamlined  approach  the  Broad  Economic  Policy  Guidelines  will  provide  the
overarching economic policy co-ordination for the European Union, while the leading role on
employment  policy  co-ordination  will 
the  Employment  Guidelines  and
Recommendations to Member States. The 2003 Brussels Spring European Council requested
that  the  Employment  Guidelines  and  the  Broad  Economic  Policy  Guidelines  operate  in  a
consistent way.
The response to previous recommendations

lie  with 

The Council adopted the last set of recommendations on Member States' employment policies
on  18  February  20021  together  with  the  Employment  Guidelines  for  2002.  The  Joint
Employment  Report  2  contains  a  detailed  assessment  of  how  Member  States  responded  to
these  recommendations  in  their  latest  National  Action  Plans.  Although  Member  States'
responses  to  the  recommendations  have  generally  been  constructive,  they  reflect  different
stages of implementation and a continuing need for pursuing structural labour market reforms.
The present proposal draws on the findings of the 2003 Joint Employment Report.

Consistency and complementarity with the revised Employment Guidelines

The proposal for Employment Recommendations is presented in conjunction with a proposal
for  fundamentally  renewed  Employment  Guidelines,  based  on  Article  128.2  of  the  Treaty.
The  proposal  for  Guidelines  re-orientates  the  Employment  Strategy  towards  delivering  the
medium-term objectives agreed in  Lisbon, builds on  the evaluation of the first five  years of
the Employment Strategy and takes account of the context of an enlarged European Union. In
line  with  the  need  for  a  more  streamlined  approach,  the  guidelines  have  been  reduced  in
number  and  simplified.  They  pursue  the  three  complementary  and  mutually  supportive
objectives  of:  full  employment,  quality  and  productivity  at  work,  and  social  cohesion  and
these  objectives  requires  further  structural  reforms
inclusion.  The  achievement  of 
concentrating on 10 key priorities, and special attention for important aspects of governance
such as social partnership and efficient employment services.

1

2

OJ L 60 1.3.2002, p. 70.
Jointly adopted by the Commission and the Council on 6 March 2003 on the basis of the Commission
proposal COM(2002) 621 final of 13.11.2002.

2

                                                
The proposal for recommendations mirrors the objectives and priorities of the new guidelines.
The recommendations have been strictly selected to reflect the key challenges ahead for each
Member  State.  The  order  of  the  recommendations  reflects  the  order  of  the  Employment
Guidelines and does not constitute a ranking in terms of priority.

3

Recommendation for a

COUNCIL RECOMMENDATION

ON THE IMPLEMENTATION OF MEMBER STATES' EMPLOYMENT POLICIES

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article
128(4) thereof,

Having regard to the Commission recommendation of 8 April 2003,

Having regard to the opinion of the Employment Committee

Whereas:

(1)

(2)

(3)

(4)

(5)

(6)

The Lisbon European Council on 23 and 24 March 2000 set a new strategic goal for
the  European  Union  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. To this end the Council agreed overall employment
targets and employment targets for women for 2010.

The Barcelona European Council of 15 and 16 March 2002 called for a strengthening
of  the  European  Employment  Strategy  through  a  reinforced,  simplified  and  better-
governed  process  fully  integrated  into  the  Lisbon  strategy.  The  Barcelona  European
Council  also  requested  a  streamlining  of  policy  co-ordination  processes,  with
synchronised calendars for the adoption of the Broad Economic Policy Guidelines and
the Employment Guidelines.

The  Council  agreement  on  streamlining  of  3  December  2002  considered  that
streamlining should be guided by the objective to increase transparency and efficiency,
avoid overlap and repetitions in the formulation of guidelines, and ensure consistency,
complementarity and coherence.

The Spring European Council held  on 20  and  21  March 2003  in  Brussels  confirmed
that  the  Employment  Strategy  has  the  leading  role  in  the  implementation  of  the
employment and labour market objectives of the Lisbon strategy, and urged Member
States to maintain the momentum of reform of national labour markets.

The Council adopted the employment guidelines by the Decision of

The  Joint  Employment  Report  adopted  by  the  Commission  and  the  Council  on  6
March  2003  describes  key  challenges  for  employment  policy  in  each  Member  State
and indicates priorities for action which will enhance the contribution of each Member
State  towards  the  achievement  of  the  overall  objectives  of  the  Employment
Guidelines.

4

(7)

Sound macro-economic policies and comprehensive economic reforms are crucial for
job  creation.  Member  States  should  therefore  implement  this  Recommendation  in  a
way that is consistent with the Broad Economic Policy Guidelines.

HEREBY RECOMMENDS :

That the Member States should take the actions set out in the Annex.

Done at Brussels, […]

For the Council
The President

5

BELGIUM

ANNEX

The  challenges  posed  by  an  ageing  population  suggest  a  need  for  measures  aimed  at
mobilising  the  non-occupied  potential  labour  force,  thereby  increasing  employment  and
participation  rates.  Despite  the  positive  evolution  in  recent  years,  employment  rates  in
Belgium remain markedly below the EU average and far from the EU targets, especially for
older  workers,  for  which  the  employment  rate  is  the  lowest  in  the  EU.  It  is  unlikely  that
measures taken so far to promote a more active ageing will suffice to reach the EU target for
2010. Although long-term unemployment has decreased in recent years and is now below the
EU  average,  it  remains  a  structural  problem.  The  inflows  into  long  term  unemployment
remain  high  and  an  appropriate  preventive  approach  for  all  adult  job  seekers  is  still  not
provided. Notwithstanding recent measures to remove unemployment traps, the risk of benefit
dependency calls for a further review of the benefit system. Moreover, increases in real unit
labour  cost  risk  to  jeopardise  the  beneficial  effects  of  the  tax  reform  and  the  reductions  of
social  security  contributions  for  disadvantaged  people.  Furthermore,  the  persistent  regional
and  sub-regional  disparities  in  labour  market  performance  reflects  not  only  differences  in
economic  performance,  but  also  inadequate  geographical  labour  mobility,  and  initiatives  in
this area remain of limited scope.

Belgium should therefore:

Prevention and activation

1.

Strengthen measures to reduce inflows into  long-term unemployment  by improving
the coverage of unemployed adults by the preventative approach.

Labour supply and active ageing

2.

Develop and implement a comprehensive  strategy  to  increase the employment rate,
in particular for older workers and women, based on appropriate targets; take further
preventive  measures  and  remove  incentives  to  early  withdrawal  of  workers  from
work.

Making work pay

3.

Implement  the  planned  multi-annual  reduction  of  the  tax  and  non-tax  burden  on
labour so as to encourage  employees to take up  work and employers to create new
jobs, in combination with a further review of the benefit system in order to remove
unemployment traps.

Mobility

4.

Take  concerted  action  to  increase  labour  mobility  between  regions  and  further
improve the co-ordination and integration of labour market policies.

6

DENMARK

Employment rates in Denmark are already well beyond the EU targets, including for women
and  older  workers.  However,  in  view  of  the  ageing  of  the  labour  force,  Denmark  needs  to
ensure an adequate labour supply, in order to safeguard growth potential and the sustainability
of the social  protection system. Recent  reforms  have  raised the  average  effective  retirement
age, but care still needs to be taken in certain sectors, particularly in the health, education and
social sector, where there is overrepresentation of employees aged over 50. Other sources of
potential  labour  supply  include  immigrants  already  living  in  Denmark,  whose  participation
should  be  encouraged.  Reforms  have  been  undertaken  to  reduce  the  overall  tax  burden  on
labour, but further  reforms would be needed to ensure labour force participation in  the  long
term,  in  particular  by  reducing  the  still  relatively  high  marginal  tax  rates  and  by  providing
incentives to postpone early retirement.

Denmark should therefore:

Labour supply and active ageing

1.

Strengthen efforts to sustain the availability of labour in the long term, in particular
by  promoting  the  labour  market  participation  of  older  workers  and  by  preventing
bottlenecks in sectors with an ageing workforce.

People at a disadvantage

2.

Strengthen further the labour market integration of immigrants by ensuring the right
balance between increasing economic incentives and avoiding social exclusion.

Making work pay

3.

Continue the on-going reforms to reduce the high marginal tax rates and the overall
fiscal pressure on labour, in particular on low and medium income earners and assess
their impact.

7

GERMANY

The  overall  employment  rate  in  Germany  is  close  to  the  EU-target  of  67%  for  2005.  The
employment  rate  for  women  already  exceeds  the  intermediate  EU-target  of  57%  for  2005,
whereas  for  older  workers  it  remains  below  the  very  low  starting  level  of  1997.  However,
labour market participation of women is still negatively influenced by the continuing lack of
care  facilities  and  gender  pay  differentials,  particularly  in  the  private  sector.  The  expected
deterioration of the unemployment situation in 2003 calls for efficient preventive and active
labour  market  policies.  The  combined  effect  of  taxation,  social  security  contributions  and
benefit  withdrawal  continues  to  create  disincentives  to  work,  particularly  for  low  wage
earners.  Reforms  of  the  education  system  also  constitute  an  important  element  for  tackling
unemployment because the low skilled make up a large share of the unemployed. A large job
deficit  remains,  notably  in  the  Eastern  Länder,  with  a  risk  of  further  increasing  regional
disparities  on  the  labour  market.  The  degree  of  regulation  may  inhibit  job  creation,  and
requires a comprehensive review, including of labour market institutions which govern wage
formation such as the "Flächentarifverträge" and the "Günstigkeitsprinzip".

Germany should therefore:

Prevention and activation

1.

Improve  the  efficiency  of  job  search  assistance  and  active  labour  market
programmes, by targeting them towards those persons most prone to the risk of long-
term unemployment; implement labour market policies with special attention for the
lack of job creation in the Eastern part of the country.

Address change and promote adaptability

2.

Support job creation by a systematic review and removal of regulatory barriers which
may  hamper  the  development  of  employment  in  services  and  industry;  promote  a
more adaptable work  organisation  and  create  a  regulatory  framework  favourable  to
both employment creation and productivity.

Lifelong learning

3.

Further  develop  and  implement  an  overall  lifelong  learning  strategy,  addressing  all
levels of the educational system, with special attention to increasing participation in
continuing  training,  in  particular  of  older  workers,  and  low  qualified  and  SME
workers.

Gender Equality

4.

Strengthen action to address the factors underlying the gender pay gap in the private
sector  and  the  impact  of  the  tax  and  benefit  system  on  women's  employment;
promote  the  availability  of  childcare  facilities  and  the  correspondence  between
working hours and school schedules.

8

Making work pay

5.

Reform the tax-benefit system with a view to increase incentives to work, notably by
assuring  positive  net  income  gains  from  moving  into  a  job  or  a  higher  income
bracket across all income levels, and by enforcing the conditionality of benefits upon
active job search.

9

GREECE

Greece's  overall  employment  rate  is  considerably  below  the  targets  set  by  the  European
Council, in particular for women. The comparatively low employment rates are partly due to
the  low  incidence  of  part  time  employment  in  Greece.  Unemployment  fell  for  a  third
consecutive  year in 2002 but is still above the  EU average, with the unemployment  rate  for
women  attaining  more  than  double  the  rates  of  men.  The  reform  of  the  public  employment
service,  which  is  essential  to  address  the  high  level  of  long-term  unemployment,  is  still
delayed. In order to increase labour productivity, which suffers inter alia from the low levels
of  skills,  the  systems  for  initial  and  continuous  training  need  to  be  better  integrated.  The
complexity  of  the  tax  system  and  the  high  social  security  contributions  remain  important
obstacles  to  hiring,  despite  recent  reforms.  Moreover,  reforms  aimed  to  promote  flexible
forms  of  employment  have  had  limited  impact.  Efforts  are  also  necessary  to  reduce
undeclared work.

Greece should therefore:

Address change and promote adaptability

1.

Implement fully and in close co-operation with the social partners the labour market
reform  package,  with  a  view  to  improve  access  to  part  time  work  and  support  the
adaptability  of  workers  and  enterprises  while  ensuring  the  balance  between
flexibility and security on the labour market.

Lifelong learning

2.

Complete  and  implement  the  comprehensive  lifelong  learning  strategy,  building  on
co-ordination  initiated  between  education  and  vocational  training  and  employment
systems.  Take  measures  to  increase  the  levels  of  educational  attainment  and  the
participation of adults in education and training.

Gender equality

3.

Take effective actions to narrow the high  gender  gaps  in terms of employment and
unemployment  rate,  and  continue  efforts  to  increase  care  facilities  for  children  and
other dependants.

Making work pay

4.

Simplify the tax system and reduce social security contributions, in particular for the
low paid, while offering greater incentives for part time employment.

Undeclared work

5.

Implement  an  adequate  policy  mix  to  reduce  substantially  undeclared  work,
including  by  the  reduction  of  taxation  on  low  paid  labour  and  increased  incentives
for the transformation of undeclared work into regular work.

Delivery services

6.

Complete  the  reform  of  the  public  employment  services  and  fully  implement  the
preventative and individualised approach, in particular for women and young people;
further upgrade statistical monitoring systems.

10

SPAIN

Notwithstanding the great efforts and progress made in recent  years, the unemployment rate
remains  significantly  above  the  EU  average,  while  the  employment  rate  remains  below  the
EU average. The reduction in unemployment has been  greater for women than for men, but
the  female  unemployment  rate  is  still  more  than  double  that  of  men.  Other  features  of  the
Spanish labour market remain almost unchanged: the slow improvement of productivity, the
high share of fixed-term contracts and the low use of part-time contracts, which are still much
less widespread than in other Member States. Moreover, employment creation in the different
Autonomous  Communities  has  not  succeeded  in  closing  the  large  existing  gaps  among
regions  as  regards  unemployment  rates.  Geographical  labour  mobility  is  limited,  partly  on
account  of  structural  obstacles,  notably  the  poor  functioning  of  the  housing  market.  In  this
context, it is important the complete the modernisation of the Public Employment Service and
to increase co-ordination between regional employment services.

Spain should therefore:

Address change and promote adaptability

1.

Improve,  in  consultation  with  the  social  partners,  work  organisation  and  the
participation in lifelong learning with a view to strengthen productivity and quality at
work. Revise the regulatory framework, putting emphasis on reducing the high share
of fixed-term contracts and increasing the use of part-time contracts.

Gender equality

2.

Take  effective  actions  to  increase  the  overall  employment  rate  and  to  close  gender
gaps in employment and unemployment. Improve the provision of care facilities for
children and for other dependants.

Mobility

3.

Improve the conditions conducive to employment creation in regions lagging behind
and  eliminate  obstacles  to  labour  mobility.  This  should  include  reinforcing  the  co-
ordination  between  the  different  regional  employment  services  with  a  view  to
reducing regional disparities in employment and unemployment.

Delivery services

4.

Finalise  the  modernisation  of  the  public  employment  services  so  as  to  improve  its
efficiency and to increase its capability to mediate in the labour market. These efforts
should include the completion of the statistical monitoring system.

11

FRANCE

France still has a relatively low overall employment rate and a very low employment rate for
older  workers  (among  the  lowest  in  the  EU).  In  the  context  of  an  ageing  population,  the
challenge is therefore to encourage labour force participation, in particular for older workers.
Despite  the  implementation  of  active  and  preventative  policies,  the  level  of  structural
unemployment  remains  high  in  certain  parts  of  the  country,  and  there  is  a  continuing
mismatch between labour supply and demand, posing recruitment problems in certain sectors.
In  this  context,  the  number  of  young  people  leaving  school  without  a  qualification  is
particularly  problematic.  Finally,  despite  its  potential  to  play  a  significant  role  in  several
fields, social dialogue remains under-developed in France.

France is therefore invited to:

Prevention and activation

1.

Pursue  and  develop  measures  to  prevent  unemployment  by  strengthening  a
personalised  approach  for  the  unemployed  and  by  ensuring  effective  job  search
incentives  and  co-ordination  of  the  various  employment  services.  To  this  effect,
ensure that the new unemployment insurance system is accompanied by appropriate
requirements and effective incentives to search for a job.

Lifelong Learning

2.

Pursue a comprehensive lifelong learning strategy,  which  accounts  for  the  needs  of
initial  training  and  encourages  access  to  training  for  less  qualified  employees,  in
particular in SMEs.

Labour supply and active ageing

3.

Implement  a  coherent  policy  to  appreciably  increase  the  participation  in  the  labour
market  of  older  workers,  in  particular  by  offering  incentives  to  remain  active,
strengthened access to training, and a reform of the early retirement systems.

Social partnership

4.

Stimulate  and  strengthen  the  social  dialogue,  in  particular  to  address  issues
connected with active ageing and lifelong learning.

12

IRELAND

Ireland is making steady progress towards achieving the Stockholm and Lisbon employment
targets.  However  the  sharp  slowdown  in  economic  growth  and  the  recent  increase  in  the
unemployment  rate  present  a  major  challenge.  Female  participation  in  the  labour  force  has
significantly  improved,  but  there  is  still  a  significant  gap  between  employment  rates  for
women and men, as well as a high pay gap. This is exacerbated by difficulties in the supply
and affordability of childcare. Although progress has been made, disparities continue to exist
between the two regions, in terms of equal access to the labour market and economic activity.
A  strategic  framework  for  lifelong  learning  has  not  yet  been  implemented  and  the
development of in-company training, in particular for older workers is still awaited.

Ireland should therefore:

Job creation

1.

Take  further  comprehensive  action  to  address  regional  imbalances  in  employment,
unemployment  and  job  creation,  including  through  assistance  from  the  structural
funds.

Lifelong Learning

2.

Increase in-company training and expedite the implementation of a coherent lifelong
learning strategy, with overall targets. Promote the active involvement of the social
partners in pursuing these objectives.

Gender equality

3.

Strengthen  efforts  to  mobilise  and  integrate  into  the  labour  market  economically
inactive  people,  in  particular  women,  by  continuing  to  remove  tax  barriers,
increasing  the  number  of  affordable  childcare  places  and  addressing  the  factors
underlying the gender pay gap.

13

ITALY

Despite  improvements  in  recent  years,  there  remains  an  important  gap  between  the
employment rates in Italy and the European average, especially for women and older workers,
and national targets have been set in accordance. There continues to be a large regional gap,
with the North recording high participation rates and almost full employment on one side and
the South characterised by low participation and high unemployment on the other. While past
reforms  may  have  contributed  to  increase  employment  and  to  reduce  the  level  of
unemployment  in  both  parts  of  the  country,  the  relative  distance  has  remained  virtually
unchanged and may hide a large share of undeclared work. A further major weakness is the
increasing imbalance between flexibility and security. The growing recourse to more flexible
contracts, enjoying a relatively low degree of protection vis-à-vis the still strict protection of
permanent jobs in medium and  large  firms, has intensified the  duality  in  the  labour  market,
with insecurity at one end amplified by a very limited system of unemployment benefits and
social  assistance.  Further  initiatives  aiming  at  flexibility,  inter  alia  the  introduction  of  new
labour contracts and the liberalisation of employment services were taken by the Government
at  the  beginning  of  2003.  However,  long-standing  plans  such  as  the  reform  of  the  Public
Employment Service and the lifelong learning strategy are lagging behind.

Italy should therefore:

Job creation

1.

Take  further  comprehensive  action  to  address  regional  imbalances  in  employment,
unemployment  and  job  creation  with  an  effective  use  of  all  means  of  action,
including the assistance from the structural funds.

Address change and promote adaptability

2.

Implement,  in  consultation  with  the  social  partners,  measures  to  increase  labour
market  flexibility  and  modernise  work  organisation,  while  promoting  the  synergy
between  flexibility  and  security  and  avoiding  marginalisation  of  disadvantaged
persons.

Lifelong learning

3.

Take  action  to  implement  the  lifelong  learning  strategy,  in  particular  by  increasing
the continuous training offer through agreements with the social partners.

Labour supply and active ageing

4.

Take  action  to  raise  the  employment  rate  of  older  workers  in  accordance  with  the
national  target,  in  particular  by  increasing,  in  close  co-operation  with  the  social
partners,  the  effective  exit  age  and  by  widening  the  offer  of  continuous  training
opportunities.  Take action to  increase the employment rate of  women,  in  particular
by increasing the supply of care facilities for children and other dependants.

Undeclared work

5.

Implement  an  adequate  policy  mix  to  reduce  substantially  undeclared  work,
including  by  the  reduction  of  taxation  on  low  paid  labour  and  increased  incentives
for the transformation of undeclared work into regular work.

14

Delivery services

6.

Improve the functioning of the market  for  employment services  by  implementing  a
national  computerised  labour  market  data  system  available  for  all  the  operators,
while  at  the  same  time  improving  the  delivery  capacity  of  the  Public  Employment
Service for providing active and preventive measures to the unemployed.

15

LUXEMBOURG

Labour  force  participation  in  Luxembourg  is  below  the  EU  average,  in  particular  for  older
workers. Employment growth has been possible thanks to cross-border workers and increased
participation  of  national  prime-age  women,  while  virtually  no  progress  has  been  achieved
regarding the employment rate of older workers despite some measures undertaken with the
aim  of  increasing  incentives  to  remain  in  the  workforce.  Mobilising  part  of  the  unutilised
national  employment  potential  is  of  great  importance  to  enhance  labour  supply  and  thus
provide  impetus  to  growth.  Incentives  to  remain  in  the  labour  force  could  be  improved  by
further reforms of early retirement and pre-retirement schemes. Also the effects of the latest
revisions in the disability pension scheme should be closely monitored. There is a risk that the
progress achieved in raising the female employment rate could let-up in a less dynamic labour
market.  The  transition  of  young  people  without  vocational  qualifications  into  the  labour
market remains a major difficulty as well. In relation to these aspects (young people, women
and  older  workers)  and  important  aspects  of  quality  in  work  (lifelong  learning,  pay  gaps
between men and women),  Luxembourg has not  yet established an  appropriate follow up to
verify the impact of the measures and reforms decided on since the first Employment NAP.

Luxembourg should therefore:

Lifelong learning

1.

ensure  effective  implementation  of  the  framework  law  on  continuous  training
through  developing,  with  strong  involvement  of  the  social  partners,  a  coherent
lifelong learning  strategy. Combat  early school leaving  and undertake a  revision of
the  overall  learning  system  with  a  view  to  achieving  better  coherence  between  the
education and training sectors.

Labour supply and active ageing

2.

further strengthen action aimed at significantly increasing labour market participation
rates amongst older workers by  reviewing the  early  retirement  pension scheme  and
by  closely  monitoring  the  effects  of  the  latest  revisions  in  the  disability  pension
scheme.

Gender equality

3.

continue  efforts  aimed  at  increasing  labour  market  participation  rates  amongst
women, by improving services to facilitate a better reconciliation of work and family
life, by encouraging their return to work after long periods outside the labour market
and by adopting measures to promote equality between men and women particularly
by addressing factors underlying the gender pay gap.

16

THE NETHERLANDS

Despite  the  recent  rise  in  unemployment,  the  Netherlands  continue  to  score  well  above  the
overall  employment  target  set  by  the  European  Council.  Although  the  female  employment
rate  exceeds  the  EU  target,  the  gender  pay  gap  is  still  comparatively  high.  Further
improvement of employment rates will depend on continued  growth of female employment,
and  on  a  stronger  activation  of  older  persons  and  minorities,  as  well  as  on  mobilising  the
unutilised labour potential. In this context, the high number of people on disability benefits is
a matter of concern and unemployment traps in the social benefit schemes continue to create
disincentives  for  people  to  take  up  work.  The  persistence  of  unfilled  vacancies  due  to  skill
gaps points  to  an  insufficient  ability  of  lifelong  learning  policies  to  bridge  the  gap  between
labour supply and demand. With unemployment on the increase, this may add to the risk of
job loss among the low skilled workers.

The Netherlands should therefore:

Life long learning

1.

Target,  in  close  co-operation  with  the  social  partners,  life  long  learning  policies  to
the  demands  of  the  labour  market  in  order  to  tackle  inactivity  and  to  prevent  low
skilled workers from drifting out of the labour market.

Gender equality

2.

Further  develop,  together  with  the  Social  Partners,  a  strategy  for  addressing  the
factors underlying the gender pay gap.

Making work pay

3.

Improve  the  transparency  of  the  benefit  system  by  an  increased  use  of  tax-based
measures  instead  of  subsidies  and  by  a  better  co-ordination  of  national  and  local
income support. Ensure that the disability scheme addresses both the need to contain
the inflow and to activate those who already receive benefits.

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AUSTRIA

The  employment  rate  targets  set  by  the  Lisbon  and  Stockholm  European  Councils  have
already  been  largely  met  by  Austria  with  the  exception  of  the  employment  rate  for  older
workers.  This  situation  is  also  reflected  in  the  fact  that  the  average  exit  age  on  the  labour
market is very low. The unemployment rates started to increase from mid 2001, notably for
young persons, but continue to be of the lowest in the EU. Structural changes on the labour
market,  the  adaptability  of  the  workforce  and  the  removal  of  skill  mismatches  remain  a
constant  challenge.  Although  the  female  employment  rate  is  already  very  high,  the  gender
gaps and the lack of childcare facilities constitute important weaknesses.

Austria should therefore:

Lifelong learning

1.

Continue  to  implement  a  comprehensive  strategy  for  the  development  of  lifelong
learning,  underpinned  by  the  necessary  mobilisation  of  all  actors  involved  and
including relevant targets on financial resources and participation.

Labour supply and active ageing

2.

Develop, together with the Social Partners, an action plan, based on adequate targets,
for  increasing  the  employment  of  older  workers,  notably  older  women,  and  the
effective exit age.

Gender Equality

3.

Develop, together with the Social Partners, a strategy, based on relevant targets, for
addressing  the  factors  underlying  the  gender  pay  gap,  and  enhance  action  to  offer
more childcare facilities; assess the impact of the present childcare allowance scheme
on the quality and quantity of female employment.

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PORTUGAL

General economic indicators have deteriorated since 2001, and unemployment has increased
significantly in 2002. However, progress towards the EU-wide targets has been positive since
1997  and  the  employment  rate  is  already  above  the  67%  target  for  2005.  However,  labour
productivity in Portugal is the lowest in the EU and is growing slowly. The average level of
educational attainment of both the adult population and the younger age groups continues to
be low. Although Portugal has substantially increased spending on education in recent years,
the share of early school-leavers without upper-secondary education and not in training is by
far  the  highest  in  the  EU.  In  spite  of  recent  progress,  the  levels  of  vocational  training  are
significantly  below  the  EU  average.  It  has  been  particularly  difficult  to  involve  the  large
number  of  small  and  micro  companies  in  the  national  programmes  designed  to  upgrade  the
skills of their staff and increase worker qualification levels. Although the employment rate for
women  is  above  the  Community  average,  important  gender  imbalances  persist  in  terms  of
sectoral  distribution  and  pay-gaps  in  the  private  sector.  Important  agreements  have  been
signed recently between the social partners and the government, but their implementation will
require a strong involvement of the signatories.

Portugal should therefore:

Lifelong learning

1.

Pursue  the  implementation  of  the  national  lifelong  learning  strategy;  improve  the
education system to reduce the high level of school drop-outs and ensure the supply
of  skilled  labour,  and  implement  targets  for  education  and  training  of  workers  in
enterprises.

Gender equality

2.

Pursue efforts to  reconcile  family  and  working  life,  in  particular  by  extending  care
services  and  facilities  for  children  and  other  dependants.  Take  action  to  reduce
gender  segregation  at  sectoral  level,  and  address  the  factors  underlying  the  gender
pay gap in the private sector.

Social partnership

3.

Building  on  existing  agreements  between  the  Government  and  the  social  partners,
strengthen  social  partnership  in  the  areas  of  wage  policy  and  productivity,
adaptability, work organisation and quality in work.

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FINLAND

Finland  exceeds  the  EU-wide  overall  and  female  employment  targets  for  2005  set  by  the
European Council, as well as the Lisbon target for the female employment rate to be reached
by  2010.  Finland  is  one  of  the  Member  States  most  exposed  to  the  effects  of  ageing
population. Thus an increase in the employment rate and in the labour supply will require that
older  workers  remain  longer  in  the  labour  market.  The  overall  unemployment  rate  remains
above  the  EU  average,  with  high  structural  unemployment.  The  coexistence  of  high
unemployment in some regions with difficulties in recruiting indicates that there is still room
for further improving the effectiveness of active labour market programmes in addressing the
mismatch  between  supply  and  demand  of  labour.  Although  measures  have  been  taken  to
reduce  the  high  tax  burden  on  labour,  the  reform  of  tax  and  benefit  schemes  still  deserves
attention,  especially  with  regard  to  low  paid  labour.  National  sources  indicate  also  a  high
gender pay gap, which can only be partially explained by gender segregation across sectors.

Finland should therefore:

Prevention and activation

1.

Improve further the effectiveness of active labour market programmes with a view to
combating  structural  unemployment  and  reducing  regional  disparities  and  labour
market bottlenecks, focusing on the needs of the most vulnerable persons.

Labour supply and active ageing

2.

Strengthen efforts to sustain the availability of labour in the long term. In particular,
continue action to increase the effective exit age in line with the national strategy for
active ageing, and encourage participation in the labour market by further reforming
tax and benefit schemes, notably by reducing the high marginal effective tax rates for
low-wage earners.

Gender equality

3.

Strengthen efforts, in the context of gender mainstreaming approach, to address the
factors underlying the gender pay gap and gender segregation.

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SWEDEN

The Swedish labour market is characterised by very high employment rates, including among
older workers and women, and all the EU-wide targets have already been exceeded. However,
in view of the ageing population, there will be a need to sustain labour supply by exploiting
potential  sources  of  labour  among  immigrants,  the  young  and  the  long-term  sick.  Early
retirements and the rapid increase in long-term sickness deserves particular attention in order
to  sustain  an  adequate  labour  supply.  Despite  the  ongoing  tax  reform,  the  tax  burden  on
labour  is  still  the  highest  in  the  EU.  Benefit  schemes  are  relatively  generous  in  an
international perspective and further efforts appear necessary to improve incentives to work.

Sweden should therefore:

Address change and promote adaptability

1.

Reduce the numbers  of people on long-term  sick  leave  by  improving  conditions  of
work,  and  adapting  the  regulatory  framework  to  promote  an  effective  reintegration
into the labour market.

Labour supply and active ageing

2.

Strengthen  efforts  to  sustain  the  availability  of  labour  in  the  long  term  by  fully
exploiting  all  potential  sources  of  labour,  in  particular  through  an  increased
participation of immigrants.

Making work pay

3.

Pursue further the reforms of tax and benefit systems to improve work incentives, in
particular for those groups with high marginal effective  tax rates, and complete the
tax reform on labour income.

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UNITED KINGDOM

The UK  exceeds  the  EU-wide  overall  employment  rate  target  set  by  the  European  Council,
including the targets for women and for older workers. However, high employment rates are
associated with relatively low levels of productivity in part due to insufficient levels of basic
skills, and specific job quality-related problems like the gender pay gap and lack of access to
training  for  some  categories  of  workers.  These  challenges  constitute  a  concrete  agenda  for
further developing social partnership at the national level. In addition, the continuous rise in
the number of working-age people claiming sickness and disability benefits may constitute a
constraint  for  a  further  increase  in  labour  supply.  Although  the  overall  unemployment  rate
remains well below the EU average, there are significant disparities in terms of access to the
labour market, with a  concentration of economic inactivity  and long term  unemployment  in
certain  regions  and  amongst  particularly  disadvantaged  persons  (lone  parents,  households
with no-one in  work, certain  ethnic minorities, male older workers,  disabled people  and  the
low skilled). This calls for strengthened and well targeted active labour market policies.

The UK should therefore:

Prevention and activation

1.

Implement  active  labour  market  policies  leading  to  sustainable  integration  in  the
labour market, to alleviate the high concentration of unemployment and inactivity in
certain  communities.  Special  attention  should  be  paid  to  people  facing  particular
problems  in  the  labour  market  and  at  risk  of  becoming  long-term  unemployed,
working poor or inactive.

Labour supply and active ageing

2.

Ensure that all those who are able to work have the opportunities and incentives to do
so, in particular by reforming sickness and disability benefit schemes.

Gender Equality

3.

Strengthen  efforts  to  address  the  underlying  factors  of  the  gender  pay  gap,  in
particular  by  improving  the  balance  in  representation  between  women  and  men
across occupations and sectors, and increasing access to training for low paid women
part-time  workers.  Further  improve  the  provision  of  affordable  care  services  for
children and other dependants.

Social partnership

4.

Further  develop  social  partnership  at  the  national  and  workplace  levels  to  help
improve productivity and quality in work,  in particular by addressing low levels of
basic skills and skills gaps amongst the workforce.

22