Commission staff working document - Accompanying the Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions - Towards Common Principles of Flexicurity: More and better jobs through flexibility and security - Impact Assessment {COM(2007) 359 final} {SEC(2007) 862}
Date: 2007-06-27
Institutions: European Commission
Subjects: EU financing, employment policy, job mobility, labour flexibility, labour relations, organisation of work, social security, work contract

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 27.6.2007 
SEC(2007) 861 

COMMISSION STAFF WORKING DOCUMENT 

Accompanying the  

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMITTEE OF THE REGIONS 

Towards Common Principles of Flexicurity: 

More and better jobs through flexibility and security 

Impact Assessment 

{COM(2007) 359 final} 
{SEC(2007) 862} 

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TABLE OF CONTENTS 

Annex to "Towards Common Principles of Flexicurity" ........................................................... 4 

Executive summary .................................................................................................................... 4 

Modifications following the opinion of the Impact Assessment Board..................................... 5 

1. 

1.1. 

1.2. 

Procedural issues and consultation of interested parties .............................................. 6 

Organisation and timing............................................................................................... 6 

Consultation ................................................................................................................. 7 

1.2.1.  Council and Member States ......................................................................................... 8 

1.2.2.  Other EU institutions.................................................................................................. 10 

1.2.3.  Social partners and other stakeholders....................................................................... 10 

1.2.4.  Studies and research carried out................................................................................. 12 

2. 

3. 

Problem definition...................................................................................................... 16 

Main Objectives ......................................................................................................... 20 

3.1. 

The flexicurity concept and its added value............................................................... 20 

3.1.1.  Added value of EU action .......................................................................................... 21 

3.2. 

3.3. 

4. 

4.1. 

4.2. 

4.3. 

4.4. 

General objective: Contributing to the Lisbon Strategy for Growth and Jobs........... 23 

Specific objectives ..................................................................................................... 23 

Policy options............................................................................................................. 26 

Basis for the policy options........................................................................................ 26 

Option 1: No additional EU action............................................................................. 26 

Option 2: Comprehensive legislation on flexicurity at EU level ............................... 26 

Option 3: Flexicurity approach through the open method of coordination................ 28 

4.4.1.  Sub-option 1: One flexicurity approach for all .......................................................... 29 

4.4.2.  Sub-option2 : Common principles including typical pathways ................................. 29 

5. 

Analysis of impacts .................................................................................................... 31 

5.1. 

The impact of no additional EU action (option 1) ..................................................... 31 

5.1.1.  Social impact.............................................................................................................. 31 

5.1.2.  Economic impact........................................................................................................ 31 

5.2. 

The impacts of a flexicurity approach through the Open Method of Coordination 
(option 3).................................................................................................................... 32 

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5.2.1.  Sub-option 1: One flexicurity approach for all .......................................................... 32 

5.2.2.  Sub-option 2: Common principles including typical pathways ................................. 33 

6. 

6.1. 

6.2. 

6.3. 

7. 

7.1. 

7.2. 

Comparing options ..................................................................................................... 40 

No additional EU action versus EU action ................................................................ 40 

Comprehensive legislation at EU level versus the Open Method of Coordination ... 40 

One single flexicurity model versus different pathways and common principles ..... 40 

Monitoring and evaluation ......................................................................................... 42 

Monitoring.................................................................................................................. 42 

Evaluation .................................................................................................................. 42 

Annex 1: background indicators of flexicurity used to support the assessment ...................... 44 

Annex 2: glossary..................................................................................................................... 46 

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ANNEX TO "TOWARDS COMMON PRINCIPLES OF FLEXICURITY" 

EXECUTIVE SUMMARY 

This  impact  assessment  will  accompany  the  Communication  on  flexicurity,  planned  for 
adoption by the Commission on 27th June, 2007, in response to a request by the 2006 Spring 
European  Council.  To  prepare  the  Communication,  the  Commission  engaged  in  a  broad 
consultation,  including  discussions  at  the  Employment  Committee,  and  a  number  of  events 
involving  Member  States,  Members  of  the  European  Parliament,  Social  Partners,  Non 
Governmental Organisations and other partners. 

The flexicurity approach is a broad concept, where different policies are integrated and made 
mutually consistent in a deliberate policy action. These policy interventions involve changes 
in  the  regulatory  framework  of  contractual  arrangements,  in  the  functioning  of  lifelong 
learning and active labour market policies and social security systems (see box 5). Flexicurity 
belongs  to  the  Lisbon  Strategy  for  Growth  and  Jobs  and  the  Integrated  Guidelines,  and 
contributes  to  fulfilling  the  objectives  of  the  European  Employment  Strategy  of  more  and 
better jobs, higher productivity and quality in work and greater social cohesion. 

The rationale for a flexicurity approach is that in order to achieve the objectives of the Growth 
and Jobs Strategy, and at the same time to preserve and modernise the European Social Model 
and  its  values  in  times  of  globalisation  and  demographic  ageing,  it  is  essential  to  design 
policies that address simultaneously the flexibility of labour markets, work organisation and 
labour relations, employment security, and social security. 

Three  options  are  considered  in  this  impact  assessment.  The  first  option  analysed  is  "no 
additional  EU  action".  The  impact  of  such  an  option  would  be  that  many  of  the  current 
problems  of  the  EU  labour  markets,  as  identified  in  the  Lisbon  Strategy,  would  remain 
unaddressed,  particularly  as  concerns  segmented  labour  markets,  long  term  unemployment 
and,  more  generally,  adaptation  to  globalisation  and  change.  In  line  with  the  views  of  all 
Member States and major stakeholders, the option of no additional EU action is therefore not 
chosen. 

A  second  option  is  "comprehensive  legislation  on  flexicurity  at  EU  level".  This  is  not  a 
realistic  option,  both  politically  linked  with  subsidiarity  and  proportionality  and  because  of 
the inherent complexity of a flexicurity approach. The impact has therefore not explicitly been 
analysed.  The  third  option  is  the  "flexicurity  approach  through  the  open  method  of 
coordination".  In  this  option,  an  integrated  approach  covering  contractual  arrangements, 
credible lifelong learning systems, active labour market policies, and modern social security 
systems is promoted. Rather than proposing a one-size-for-all policy, common principles and 
different pathways would be adopted by Member States. 

The  Impact  Assessment  concludes  by  highlighting  the  third  option  as  the  best  choice.  This 
option would start a policy process between the Commission, the Member States and the other 
stakeholders, fully within the framework of the Lisbon strategy and the Open Method of Co-
ordination.  This  approach  would  contribute 
term 
unemployment and more generally increase adaptability to globalisation. It would contribute 
to  achieving  the  targets  in  the  Lisbon  Strategy  of  more  and  better  jobs,  higher  productivity 
and  quality  in  work  and  increased  social  cohesion.  The  precise  impact  of  flexicurity  will 

to  reducing  segmentation, 

long 

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depend  on  how  Member  States  will  define  their  own  pathways,  and  on  how  policies  are 
implemented.  Since  flexicurity  falls  into  the  broader  scope  the  Lisbon  Strategy,  it  will  be 
monitored, assessed and evaluated in that framework. 

MODIFICATIONS FOLLOWING THE OPINION OF THE IMPACT ASSESSMENT BOARD 

In  response  to  the  suggestions  of  the  Impact  Assessment  Board  (opinion  dated  23rd  May, 
2007), the following changes have been introduced in the text of the draft Impact Assessment 
(IA). 

The origin, substance and the content of typical pathways have been described in more detail, 
with  a  clearer  reference  to  the  fact  that  labour  market  performances  have  been  analysed 
separately.  Moreover,  in  addition  to  the  four  policy  components  specified  for  the  pathways, 
the  IA  identifies  the  following  policy  challenges  to  be  addressed  through  each  pathway: 
tackling  contractual  segmentation,  need  for  enterprises  for  more  flexibility,  developing 
flexicurity  within  the  enterprise  and  offering  transition  security,  tackling  skills  and 
opportunity  gaps  among  the  workforce,  improving  opportunities  for  benefit  recipients  and 
informally employed workers. 

A  new  chapter  on  the  specific  added  value  of  EU  action  has  been  introduced.  It  underlines 
that the flexicurity policy proposes for the first time an integrated approach to the challenges 
confronting labour markets in the EU. The Communication will thus identify the basis for a 
series  of  common  principles  of  flexicurity  at  EU  level,  that  would  constitute  a  common 
framework for the different typical "flexicurity pathways". The typical pathways should also 
allow a strengthening of mutual learning and the exchange of best practices. The flexicurity 
approach does not require any new method or instrument of coordination: It uses the existing 
Open Method of Coordination within the revised Lisbon Process. 

The different views of consulted stakeholders have been described more in detail, as well as 
the  explanation  how  these  views  have  been  taken  into  account  in  preparation  of  the 
Communication.  Budgetary  constraints  are  also  more  explicitly  addressed,  with  special 
emphasis on the long term financial benefits of flexicurity policy. 

The role of the principles of subsidiarity and proportionality in the formulation of flexicurity 
policy  has  been  better  explained  in  chapter  4.3  (Option  2,  comprehensive  legislation  on 
flexicurity  at  EU  level):  Flexicurity  falls  essentially  within  the  framework  of  the  European 
Employment Strategy (EES), which initiated the 'open method of co-ordination' (OMC) with 
subsidiarity as one of its key principles. The flexicurity approach is thus fully in line with the 
OMC and its emphasis on subsidiarity. 

Concerning the implementation and monitoring of flexicurity, it has been further highlighted 
in the IA that the on-going work with the Member States on indicators and monitoring should 
help ensure the proper implementation of flexicurity policies. 

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1. 

PROCEDURAL ISSUES AND CONSULTATION OF INTERESTED PARTIES 

1.1. 

Organisation and timing 

This impact assessment will accompany the Commission Communication on flexicurity that 
is  planned  for  adoption  in  June  27th  2007.  The  Communication  explores  -  following  the 
request  made  by  the  2006  Spring  European  Council  -  a  set  of  "common  principles  of 
flexicurity".  The  concept  of  flexicurity1  relates  simultaneously  to  the  flexibility  of  labour 
markets,  of  work  organisation  and  labour  relations,  and  to  employment  security,  social 
protection and social security. The "common principles" and the "pathways" described in this 
Communication  are meant to facilitate a debate at national and EU level – notably between 
public authorities and social partners – on the best balance between the different components 
of flexicurity at Member States level. 

The  key  principle  behind  flexicurity,  i.e.  the  need  to  simultaneously  enhance  flexibility  and 
security, has been on the policy agenda for over a decade. Adaptability, which covers aspects 
of flexicurity, has been an important part of the Employment Guidelines since the beginning 
of the European Employment Strategy2. 

The  Communication  will  set  out  strategic  orientations  to  be  further  discussed  with  Member 
States  and  developed  in  the  context  of  the  implementation  of  the  revised  Lisbon  Strategy, 
notably through the Open Method of Coordination3. The Open Method of Coordination is 
used on the EU level in the field of employment, social protection and social inclusion and in 
the Lisbon Strategy for growth and jobs. It can provide value added in the field of flexicurity, 
by  offering  a  framework  for  the  exchange  of  best  practices  and  mutual  learning  between 
Member States. The Communication does not address concrete policy proposals to individual 
Member States, and the assessment of the likely impact of the Communication is essentially 
qualitative. 

As  regards  the  EU's  "right  to  act",  it  should  be  stressed  that  the  different  components  of 
flexicurity are already included in the Employment Guidelines and the Lisbon Strategy. At the 
same time, the Joint Employment Report4 has shown that these components are often treated 
separately, and that the problems described in section 2, such as the need for more adaptable 
labour markets, are not treated in a comprehensive and integrated way. 

In  this  context,  flexicurity  represents  a  clear  value  added  for  European  labour  markets. 
Whereas  flexibility  focuses  on  contractual  arrangements  and  easing  employment  protection, 
and security focuses only on workers' protection, flexicurity takes into account the importance 
of  a  combination  of  policies  that  promote  investment  in  people  and  facilitates  their  upward 

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4 

On  the  interpretation  of  the  meaning  of  the  word  flexicurity  there  is  broad  understanding 
internationally. The same holds true for the interpretation of the underlying components. In the March 
8th  and  9th  2007  preparatory  meeting  for  the  G8  meeting  in  May  between  G8  countries,  OECD,  the 
ILO and the Commission the following wording was agreed: "every successful package requires well-
designed employment regulations and contractual arrangements, adequate employment-oriented social 
protection, as well as effective active labour market and lifelong learning policies". 
For more information on the European Employment Strategy, EES, see: 
http://ec.europa.eu/employment_social/employment_strategy/index_en.htm 
For more information on the Lisbon Agenda/Strategy, see: 
http://ec.europa.eu/growthandjobs/index_en.htm 
Joint employment report 2006/2007, adopted on 23rd of February 2007, doc number 6706/07 

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mobility  in  the  labour  markets  and  transitions  from  one  job  to  another.  The  flexicurity 
approach  is  therefore  a  broad  concept,  where  different  policies  are  integrated  and  made 
mutually  consistent  in  a  single  deliberate  policy  action.  These  policy  interventions  involve 
contractual arrangements, the functioning of lifelong learning, active labour market policies, 
and social security systems, and take place essentially at Member State level. 

The general rule is that Commission impact assessments should be proportionate. In the case 
of a proposal for legislation, the Commission should demonstrate, as far as possible, that the 
benefits with legislation will outweigh the costs. In a case when no legislation is proposed, as 
in this Communication, there is not the same obligation. 

Box 1: Collection and use of expertise 

A  first  flexicurity  seminar  was  organised  with  DG  EMPL  in  May  2006,  chaired  by 
Commissioner  Špidla.  Three  labour  market  experts  -  Professors  Maria  João  Rodrigues, 
Bernard Gazier and Per Kongshøj Madsen, were invited to give their views about the issues at 
stake. Representatives from SEC GEN, DG ECFIN and DG ENTR also participated. 

Both  an  internal  DG  EMPL  working  group  and  an  Inter-service  Steering  Group  on 
flexicurity were established (respectively on 31 May 2006 and 21 December 2006) to consult 
on  the  process  and  content  of  the  flexicurity  concept.  The  internal  group  met  six  times 
bringing together the policy and geographic directorates. The Inter-service Steering Group on 
Flexicurity  was  led  by  DG  EMPL  and  met  three  times.  It  consisted  of  representatives  from 
SEC GEN, DG ECFIN, DG ENTR, DG EAC, DG MARKT, and BEPA. 

To  support  the  Commission  in  preparing  the  analytical  elements  of  the  Communication,  a 
high-level External Experts Group was created in September 2006. This Group advised the 
Commission on the socio-economic factors of flexicurity, on identifying adequate indicators, 
on  the  Member  States'  starting  positions  and  pathways  to  flexicurity,  and  produced  its  final 
report  in  May  2007.  The  rapporteur  of  the  Group  was  Dr.  Ton  WILTHAGEN,  Professor  of 
Institutional and Legal Aspects of the Labour Market at Tilburg University, the Netherlands. 
The  other  members  of  the  group,  participating  in  a  personal  capacity,  were:  Professor  Tito 
BOERI,  Bocconi  University  and  Fondazione  Rodolfo  Debenedetti,  Italy;  Professor  Pierre 
CAHUC,  University  of  Paris-I,  France;  Mrs  Sanja  CRNKOVIC,  CEPOR-SMEs  and 
Entrepreneurship  Policy  Centre,  Croatia;  Mrs  Renate  HORNUNG-DRAUS,  Managing 
Director,  European  and  International  Affairs,  Confederation  of  German  Employers,  Berlin, 
Germany;  Mrs  Catelene  PASSCHIER,  Confederal  Secretary,  ETUC,  Brussels;  Professor 
Csilla KOLLONAY-LEHOCZKY, Central European University and Head of the Labour and 
Social  Law  Department,  Faculty  of  Law,  Eotvos  Lorand  University,  Hungary.  DG  EMPL 
chaired  the  expert  group;  some  of  the  members  of  the  internal  and  Inter-service  Steering 
groups also took part in the meetings with the experts. 

1.2. 

Consultation 

Given  the  nature  of  flexicurity  and  its  different  components,  the  involvement  of  social 
partners and other stakeholders, together with national and sub-national public authorities, is 
essential for the success for the development of a flexicurity approach and the implementation 
of flexicurity policies. 

Therefore, the Commission considered that the preparation of the Impact Assessment, and of 
the  Communication  itself,  should  involve  a  broad  consultation  process.  For  this  reason,  the 

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Commission  organised  a  number  of  events  involving  Member  States,  Members  of  the 
European  Parliament,  trade  unions,  businesses,  Non  Governmental  Organisations  and  other 
partners.  Key  events  have  been  the  informal  EPSCO  council  in  January  2006,  the  Spring 
Council  2006,  the  joint  EMCO-SPC  contribution  in  May  2006,  the  Extraordinary  Social 
Summit in Lathi in October 2006, and a hearing in the European parliament in March 2007. 
The key elements of the forthcoming Communication were also discussed in the Stakeholder 
Conference  on  20th  April  2007,  on  the  basis  of  a  background  document  to  facilitate  these 
discussions5. The Commission also launched a number of studies, and dedicated a full chapter 
of  the  Employment  in  Europe  2006  Report  to  flexicurity.  Member  States  views  have  been 
discussed intensively in the Employment Committee and at the Council. 

The  Commission's  assessment  and  proposed  ways  forward  on  flexicurity,  as  well  as  the 
elements relating to implementation of an integrated policy approach, has taken into account 
these consultations and contributions. 

1.2.1.  Council and Member States 

In  January  2006,  the  informal  EPSCO  Council  discussed  flexicurity  in  detail.  The 
Employment Committee6, EMCO, has before and after this meeting explored the subject on 
several  occasions.  Following  the  informal  council  meeting,  a  working  group  on  flexicurity 
was  created.  The  group  consisted  of  Denmark,  Belgium,  Czech  Republic,  Germany,  Spain, 
Italy, Austria, Sweden, the Slovak Republic, Slovenia; and the Commission. They produced a 
report in May 20067. 

The conclusions of the Spring European Council in 2006 contained a separate paragraph on 
the  role  of  flexicurity8.  The  European  Council  "stresses  the  need  to  develop  more 
systematically  in  the  National  Reform  Programmes  (NRPs)  comprehensive  policy  strategies 
to improve the adaptability of workers and enterprises. In this context, the European Council 
asks Member States to direct special attention to the key challenge of "flexicurity" (balancing 
flexibility  and  security):  Europe  has  to  exploit  the  positive  interdependencies  between 
competitiveness,  employment  and  social  security.  Therefore  Member  States  are  invited  to 
pursue,  in  accordance  with  their  individual  labour  market  situations,  reforms  in  labour 
market  and  social  policies  under  an  integrated  flexicurity  approach,  adequately  adapted  to 
specific  institutional  environments  and  taking  into  account  labour-market  segmentation.  In 
this context, the Commission, jointly with Member States and social partners, will explore the 
development of a set of common principles on flexicurity. These principles could be a useful 
reference  in  achieving  more  open  and  responsive  labour  markets  and  more  productive 
workplaces." 

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8 

The conference web site, including the background document, can be found at: 
http://ec.europa.eu/employment_social/employment_strategy/flex_stakeholderconference_en.htm  
The  Employment  Committee  is  a  Treaty-based  Committee  which  was  formally  created  by  a  Council 
Decision in January 2000. The main obligations of the Committee, as defined in the EC Treaty and in 
the founding decision, relate to the preparation of the Council proceedings with regard to the European 
Employment Strategy and its instruments - the Employment Guidelines, the Joint Employment Report 
and the recommendations on the implementation of national employment policies. 
The report can be found at: 
http://ec.europa.eu/employment_social/employment_strategy/pdf/emco_workgroupflexicurity06_en.pdf 
The conclusions can be found at: 
http://www.consilium.europa.eu/ueDocs/cms_Data/docs/pressData/en/ec/89013.pdf 

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Based on the EMCO working group report and the Spring Council, a Joint Contribution of 
the  Employment  Committee  and  the  Social  Protection  Committee  on  flexicurity  was 
finalised in May 20069. This joint contribution, with the attached working group report, was 
adopted by the EPSCO Council in June 2006. 

In March 2006, the ECOFIN Council discussed the issue of flexicurity (Ministerial dinner). 
The  discussion,  led  by  the  Danish  Finance  Minister,  was  based  also  on  an  issues  paper 
prepared  by  DG  ECFIN.  Ministers  discussed  the  concept  of  flexicurity,  and  the  extent  to 
which lessons can be learned and applied in other countries with very different labour market 
institutions and social security  systems.  The  subgroup  of  the Economic Policy  Committee, 
the Labour Market Working Group, has also discussed and exchanged views on flexicurity. 

In  the  autumn  2006  country  examination  of  Member  States'  implementation  of  the 
employment  part  of  their  Lisbon  National  Reform  Programmes  (the  "Cambridge  Review"), 
discussions focused on three themes, including flexicurity. In November, EMCO produced a 
background  document10  and  sent  a  contribution11  to  the  EPSCO  Council  as  a  result  of  the 
examination. A range of flexicurity indicators already exist, and EMCO's indicator group is 
discussing specifically how  best to use current indicators and - if necessary how to develop 
new ones fitting into the concept of flexicurity. The on-going work with the Member States 
on  indicators  and  monitoring  should  help  ensure  the  proper  implementation  of  flexicurity 
policies (see also section 7) 

Throughout  2007,  the  EMCO's  Ad  Hoc  group  will  devote  four  meetings  to  discuss  and 
exchange  views  and  good  examples  of  flexicurity.  This  will  form  an  input  for  further 
discussions in the Employment Committee. 

On the basis of discussions in the Employment Committee, the EPSCO Council adopted the 
Joint Employment Report in 2007 including a key message, stating that "Flexicurity should 
ease  the  transitions  between  different  stages  of  working  life.  The  internal  and  external 
components of flexicurity should mutually reinforce one another, so that at the same time the 
modernisation  of  labour  law,  investment  in  training  and  active  labour  markets,  and  the 
provision  of  adequate  social  protection  and  income  security  can  take  place  in  a  context  of 
modern  work  organisation.  Flexicurity  should  also  be  conducive 
to  addressing 
precariousness,  reducing  segmentation  on  the  labour  market,  and  combating  undeclared 
work.  The  social  partners  have  an  important  role  to  play  here.  The  Commission 
Communication  on  flexicurity  should  be  instrumental  in  preparing  a  range  of  flexicurity 
pathways to find the right mix of policies tailored to labour market needs.12" 

The conclusions of the Spring European Council in 2007 also referred to flexicurity saying 
that  "it  looks  forward  to  the  discussion  on  the  Commission  Communication  on  flexicurity, 
which  should  be  instrumental  in  preparing  a  range  of  flexicurity  pathways  to  find  the  right 
mix of policies as well as set priorities tailored to labour market needs including increased 
labour-market participation." 

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11 

12 

The joint contribution can be found at: 
http://ec.europa.eu/employment_social/employment_strategy/pdf/emco_spc_en.pdf 
The background document can be fount at: 
http://ec.europa.eu/employment_social/employment_strategy/pdf/emco_cambridgeadhoc_en.pdf 
The contribution can be found at: 
http://ec.europa.eu/employment_social/employment_strategy/pdf/emco_cambridgereview06_en.pdf 
Joint employment report 2006/2007, adopted on 23rd of February 2007, doc number 6706/07. 

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1.2.2.  Other EU institutions 

The European Parliament held a hearing on flexicurity as part of a broader discussion on the 
Green  Paper  on  labour  law,  in  the  Employment  and  Social  Committee  on  the  21st  March 
2007.  Commissioner  Špidla  and  the  rapporteur  of  the  expert  group  on  flexicurity,  Professor 
Ton Wilthagen, were key-note speakers. The Swedish Minister of Labour presented his views 
on  flexicurity  at  the  Committee  on  11th  April,  2007.  There  was  also  an  informal  meeting  at 
technical level with representatives from national parliaments in March 2007. 

The  European  Economic  and  Social  Committee  adopted  an  opinion  on  "Flexicurity:  the 
case  of  Denmark"  in  May  2006.  On  the  23rd  April  2007  the  Study  Group  on  Flexicurity, 
Section for Employment, Social Affairs and Citizenship of the European Economic and Social 
Committee,  discussed  a  Preliminary  Draft  Opinion  on  Flexicurity:  "internal  flexibility 
dimension  –  collective  bargaining  and  the  role  of  the  social  dialogue  as  instruments  for 
regulating  and  reforming  labour  markets"13.  A  plenary  session  of  Economic  and  Social 
Committee will discuss this opinion on 18th June . 

1.2.3. 

Social partners and other stakeholders 

In the work programme of the European social dialogue for 2006-2008, the social partners 
undertook to make a joint analysis of the key challenges facing Europe’s labour market. One 
of the issues mentioned as key areas is the balance between flexibility and security14.  

The European Commission has invited the European Social Partners to contribute to the debate 
on flexicurity. The Commission met with the Social Dialogue Committee to give information and 
to discuss flexicurity in June 2006 and February 2007. The concept of flexicurity and the role of 
social partners were discussed at the Extraordinary Social Summit devoted to flexicurity in Lahti in 
October 2006. Their joint contribution is expected in the near future. 

The  Commission  has  also  invited  sectoral  social  dialogue  committees  to  contribute  to  the 
debate  on  flexicurity.  The  Commission  presented  flexicurity  in  a  number  of  sectoral  social 
dialogue meetings. Several social partner groupings have made joint written contributions on 
flexicurity, notably the social partners in the temporary agency work and industrial cleaning 
sectors. 

Written  contributions  have  been  submitted  to  the  Commission  by  the  Social  Platform, 
EAPN,  AGE,  ETUC,  CESI  trade  union,  EUROCADRES  (organisation  for  professional  and 
managerial  staff)  and  social  partners  in  the  temporary  agency  sector  (Eurociett  and  UNI 
Europa).  It  should  be  noted  that  the  Commission  has  also  received  a  number  of  written 
contributions in the framework of the consultation on the Green Paper on labour law, which 
include  some  aspects  of  flexicurity,  (see  box  3).  However,  the  full  outcome  of  this 
consultation  will  not  be  available  in  time  for  the  flexicurity  Communication  (the  European 
Parliament's opinion in particular will probably be available only in July 2007). 

13 

14 

The discussion of the Group highlighted among other things the importance of the social dialogue and 
collective  bargaining  in  determination  and  implementation  of  the  flexicurity  policy,  as  well  as  the 
strong  need  to  include  the  dimension  of  internal  flexibility  and  gender  equality  in  the  debate  on 
flexicurity. 
The work programme can be found at: 
http://ec.europa.eu/employment_social/news/2006/mar/work_programme_2006_2008_en.pdf 

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The consultation process was complemented by a Stakeholder Conference on Flexicurity, 
held in Brussels on April 20th, 2007, with around 450 participants. Key note speakers in the 
conference  were  Commissioner  Spidla,  the  Employment  Ministers  from  the  present  and 
upcoming Presidencies of the Council, the Danish Employment Minister, the Chairman of the 
Employment  and  Social  Committee  of  the  European  Parliament,  the  General  Secretary  of 
ETUC  and  BUSINESS  EUROPE,  and  the  rapporteur  of  the  Flexicurity  Expert  Group. 
Representatives from Member States, Social Partners, Non Governmental Organisations, EU 
institutions  and  the  general  public  participated.  Two  panels  were  held  in  the  afternoon;  the 
first  one  focused  on  addressing  labour  market  segmentation,  and  the  second  on  promoting 
transitions between jobs. (see box 2) 

A  questionnaire  on  flexicurity  was  sent  out  through  the  European  Business  Test  Panel, 
EBTP. The EBTP is composed of around 3200 companies of all sizes and sectors located in 
all  EU  Member  States.  EBTP  members  reply  to  online  questionnaires  sent  to  them  by  the 
European  Commission  on  a  regular  basis.  The  questionnaire  on  flexicurity  was  sent  out  in 
April 2007 and the first results were made available in May15. These results show that - in-line 
with the flexicurity approach - over half of the respondents believe that flexibility and security 
can be improved at the same time. Equally half of the employers consider that existing labour 
law and collective agreements need to be adapted to allow more flexibility while still one out 
of  four  employers  mention  the  need  for  changes  to  provide  more  security  for  workers. 
Importantly,  half  of  the  respondents  note  that  they  would  hire  more  staff  on  permanent 
contracts  if  the  regulatory  framework  made  it  easier  to  terminate  employment  contracts.  As 
regards  transitions  from  fixed-term  contracts  to  permanent  contracts  over  half  of  the 
respondents state that workers are offered a permanent contract after the original (fixed-term) 
contract  has  expired.  Concerning  the  promotion  of  training  and  perhaps  not  surprisingly, 
about 70% of the respondents claim that they would increase investments in training of their 
staff if a larger share of the training costs were born by external funds. However, the survey 
also demonstrated that the decision to increase investment in training is not strictly depending 
on the type of contract of the worker concerned. 

Regarding  the  way  to  achieve  flexicurity,  Trade  Unions  tend  to  advocate  legislative 
instruments to ensure minimum rights, although they are also eager to defend the autonomy of 
national social  systems and collective agreements. Employers on the whole strongly oppose 
legislative initiatives in the social field. 

Flexicurity  was  designed  in  large  part  to  help  alleviate  the  fears  associated  with  the 
modernisation of labour markets. Its balance across the four components aims to implement a 
broad and credible kind of security which goes beyond security of one's actual job. During the 
consultations,  the  concerns  expressed  by  the  different  stakeholders  have  been  taken  into 
account,  e.g.  by  stressing  the  importance  of  internal  flexicurity  (meaning  flexicurity  at 
enterprise  level)  and  by  underlining  that  the  so-called  Danish  model  (characterised  by 
moderate EPL) is not the only option. 

Box 2: The Stakeholder Conference on flexicurity on the 20th April 2007 

A  Stakeholder  Conference  on  flexicurity  of  the  20th  April  2007,  organised  by  the 
Commission,  gathered  approximately  450  participants,  including:  Commissioner  Spidla,  the 

15 

A  full  report  on  the  results  of  the  EBTP  questionnaire  will  be  made  available  on  the  Commission's 
flexicurity website: http://ec.europa.eu/employment_social/employment_strategy/flex_meaning_en.htm 

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Ministers for Employment of the current and forthcoming Council Presidencies, the Chairman 
of  the  European  Parliament's  Employment  and  Social  Affairs  Committee,  the  Employment 
Minister  of  Denmark,  the  Secretary  Generals  of  ETUC  and  Business  Europe  and  the 
rapporteur  of  the  Flexicurity  Expert  Group.  The  overall  view  expressed  by  the  keynote 
speakers and participants at the Conference was that the status quo is not an option, i.e. that 
the  flexicurity  issue  must  be  addressed,  notably  by  Member  States  and  social  partners  at 
national  level,  but  also  at  EU  level  through  the  Lisbon  Strategy  and  the  Open  Method  of 
Coordination. 

The integrated approach and the components of flexicurity agreed in the Council (see box 5) 
were  acknowledged  by  the  stakeholders.  In  this  respect,  Mr  de  Buck,  Secretary  General  of 
Business Europe, underlined that employers do not want to limit the discussion to "hiring and 
firing":  the  other  components  are  also  important  for  increased  productivity  and  jobs  in  the 
labour  market.  He  stressed  that  the  fear  that  increased  flexibility  would  lead  to  increased 
precariousness (see glossary for explanation) and undeclared work is unjustified. Mr Monks, 
Secretary  General  of  ETUC,  stressed  that  ETUC  was  not  negative  about  flexicurity,  but 
wanted to broaden the debate beyond concentrating on reducing employment protection and 
unemployment benefit entitlements, and giving the impression that the way to tackle the issue 
of precarious work is to make regular work more precarious. 

The stakeholders, including Ministers, Social Partners, Non Governmental Organisations and 
the  European  Parliament,  also  stressed  that  one  size  does  not  fit  all,  and  expressed  their 
interest  in  common  principles  and  different  pathways  .  Many  stakeholders  stressed  that 
strong social partners and social dialogue are key for effective implementation and success. 

Participants also stressed the role of the Open Method of Coordination and the European 
Employment Strategy. Mr Andersson, chairman of the Economic and Social Committee in the 
European  Parliament  (EP),  highlighted  that  the  EP  considers  flexicurity  a  priority.  He  also 
said  that  coordination  and  mutual  learning  are  key  in  this  respect  on  the  EU  level,  and  that 
given  the  scope  of  existing  Community  legislation,  new  (comprehensive)  legislation  at  EU 
level is not necessary to pursue flexicurity. 

1.2.4. 

Studies and research carried out 

A  specific  key  chapter  in  the  Commission's  Employment  in  Europe  2006  Report  was 
devoted to flexibility and security  in  the  EU  labour  markets16.  The  main  aim  of  the  chapter 
was to present a preliminary characterisation of the balance between flexibility and security 
across  Member  States  –  to  reflect  their  current  institutional  setting  –  and,  on  that  basis,  to 
propose a taxonomy that would analyse the situation of Member States in accordance with a 
reduced number of “flexicurity” systems. This should be seen as preliminary work leading to 
the Commission’s Communication. The analysis of the chapter builds on a long tradition of 
work  carried  out  within  past  editions  of  Employment  in  Europe  (see  EiE  2001,  2002,  2003 
and  2004).  This  work  focused  on  issues  such  as  job  quality,  labour  market  flexibility, 
employment  security  and  labour  market  transitions  and  advancement.  In  this  context 
extensive empirical evidence as well as a number of indicators have been provided. 

16 

The  second  chapter 
http://ec.europa.eu/employment_social/employment_analysis/employ_2006_en.htm 

is  about  flexibility  and  security.  The  full  report  can  be  found  at: 

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Moreover,  under  the  Socio-Economic  theme  of  the  Commission's  Research  Framework 
Programmes  substantial  research  has  been  carried  out  dealing  with  Work,  Flexibility  and 
Quality of Work17. 

The European Employment Observatory Review published in the autumn 2006 a series of 
national  articles  provided  by  the  network  of  national  experts,  covering  30  countries  (EU 
27, candidate countries Croatia and Turkey, and EEA country Norway)18. Experts analyse of 
the key challenges and debates in each country, national strengths and weaknesses including 
governance,  and  national  priorities  and  strategies  that  would  have  the  best  chance  of 
achieving  a  better  flexicurity  balance.  These  national  articles  contain  rich  evidence  and 
argument about flexicurity and the balance between flexibility and security in national labour 
markets. 

The Commission devoted a Eurobarometer survey (number 261) on social reality, including 
some  issues  linked  to  the  role  of  flexicurity.  This  Special  Eurobarometer  survey  was 
conducted through face to face interviews by TNS Opinion & Social. A total of 26755 people 
were  interviewed  between  the  17th  of  November  and  the  19th  of  December  2006.  This 
barometer  showed  a  positive  attitude  of  citizens  to  the  concept  of  flexicurity:  European 
citizens  recognise  the  values  of  flexicurity  measures.  To  illustrate  this  about  90%  of  the 
respondents believe that education and training will improve their labour market perspectives 
while over 70% consider that contractual arrangements need to become more flexible in order 
to create more jobs. Finally, over 50% trust that in the case they would be fired that they will 
quickly find another job (note: this percentage is the highest in DK). 

The European Foundation for the Improvement of Living and Working Conditions in its 
Fourth  European  Working  Conditions  Survey  (2005)  covering  31  European  countries  and 
30000  workers  provided  an  interesting  analysis  of  some  of  the  key  flexicurity  issues  like 
career development, functional flexibility, work life balance and development in the job19. 

The  Joint  Research  Centre  of  the  Commission  and  DG  EMPL  plan  to  build  a  number  of 
synthetic/composite  indicators  on  flexicurity.  The  methodology  used  in  the  construction  of 
these  indicators  will  be  similar  to  that  used  to  calculate  an  Active  Citizenship  Composite 
Indicator using the European Social Survey of 200220. 

OECD  in  its  recent  assessment  of  the  Job  Strategy  characterise  certain  countries  as  having 
flexicurity  type  policies.  These  appeared  to  work  in  the  particular  circumstances  of  the 
countries concerned21. The ILO has also done work looking at aspects of flexicurity. In 2005, 
a paper looked at labour market security in a globalised world22. Flexibility and security was 
one of the main topics on the agenda of the institutional ILO European and Central Asia ILO 
meeting in Budapest in 2005, where also Commissioner Špidla attended. Flexicurity was also 

17 

18 
19 
20 
21 
22 

A summary of the main research findings and policy recommendations will be made available via the 
Flexicurity website of DG EMPL: 
http://ec.europa.eu/employment_social/employment_strategy/flex_meaning_en.htm 
The national articles are available on the EEO website: www.eu-employment-observatory.net/_ 
The report can be consulted on: http://www.eurofound.europa.eu/ewco/surveys/EWCS2005/index.htm 
Hoskins et al. (2006), "Measuring Active Citizenship in Europe", CRELL Research Paper n°4 
OECD (2006), OECD Employment Outlook, Boosting Jobs and Income 
Protected mobility for employment and decent work: labour market security in a globalised world: Peter 
Auer, ILO, Employment Strategy papers, 2005/01  

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developed as a theme by the ILO Office in the ILO Office book on flexicurity in Central and 
Eastern Europe published in March 2007. 

Box 3  The on-going consultation of the Green Paper on Labour Law 

In parallel with the flexicurity process, a Green Paper 'Modernising labour law to meet the 
challenges  of  the  21st  century'  was  adopted  by  the  European  Commission  on  22nd 
November  2006,  launching  a  consultation  process  which  is  still  underway.  Over  400 
submissions  were  made  in  the  course  of  the  subsequent  public  consultation  exercise 
conducted by the Commission. All of these submissions - from Member State parliaments and 
governments,  EU  social  partner  organisation,  trade  unions,  employers'  organisations,  non 
governmental organisations, companies, and individuals – are currently being analysed by the 
Commission services. They will be considered in the context of the preparation of a follow-up 
Communication,  which  will  address  the  main  policy  issues  and  options  identified  in  the 
responses 
the  Commission's  follow  up 
Communication  is  scheduled  for  October  2007  having  regard  to  the  need  to  undertake  a 
qualitative  analysis  of  the  large  volume  of  submissions  received  and  to  accommodate  the 
anticipated adoption of the opinion of the European Economic and Social Committee in May 
and of the opinion of the European Parliament in July 2007. 

the  Green  Paper.  The  presentation  of 

to 

The  Green  Paper  considered  the  role  labour  law  might  play  in  advancing  a  “flexicurity” 
agenda in support of a labour market which is fairer, more responsive and more inclusive, and 
which  contributes  to  making  Europe  more  competitive.  To  this  end  it  addressed  aspects  of 
flexicurity  in  a  number  of  questions23.  In  the  light  of  the  large  volume  of  responses  to  the 
Green  Paper  from  a  wide  range  of  interests,  it  has  not  been  possible  to  complete  a  general 
assessment as an input to the preparation of this Impact Assessment. While it is impossible to 
draw conclusions on the consultation at this early stage - especially without the contribution 
from  the  Parliament,  and  the  basis  of  a  preliminary  assessment  of  the  very  comprehensive 
submissions  received  from  the  EU  social  partners,  -  a  short  summary  of  key  issues  raised 
could be: 

1. Flexicurity - the need for an integrated approach 

The  social  partners  put  strong  emphasis  on  the need  to  address  the  modernisation  of  labour 
law  as  part  of  a  broader  flexicurity  agenda,  acknowledging  that  labour  law  is  only  one 
component of a flexicurity approach. For the trade unions, modernising labour law at national 

23 

In specific the questions 2-6: Question 2: Can the adaptation of labour law and collective agreements 
contribute  to  improved  flexibility  and  employment  security  and  a  reduction  in  labour  market 
segmentation? If yes, then how? Question 3: Do existing regulations, whether in the form of law and/or 
collective agreements, hinder or stimulate enterprises and employees seeking to avail of opportunities to 
increase  productivity  and  adjust  to  the  introduction  of  new  technologies  and  changes  linked  to 
international  competition?  How  can  improvements  be  made  in  the  quality  of  regulations  affecting 
SMEs,  while  preserving  their  objectives?  Question  4:  How  might  recruitment  under  permanent  and 
temporary  contracts  be  facilitated,  whether  by  law  or  collective  agreement,  so  as  to  allow  for  more 
flexibility  within  the  framework  of  these  contracts  while  ensuring  adequate  standards  of  employment 
security  and  social  protection  at  the  same  time?  Question  5:  Would  it  be  useful  to  consider  a 
combination  of  more  flexible  employment  protection  legislation  and  well-designed  assistance  to  the 
unemployed, both in the form of income compensation (i.e. passive labour market policies) and active 
labour  market  policies?  Question  6:  What  role  might  law  and/or  collective  agreements  negotiated 
between  the  social  partners  play  in  promoting  access  to  training  and  transitions  between  different 
contractual forms for upward mobility over the course of a fully active working life? 

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level can only be satisfactorily addressed in the context of the overall regulatory framework at 
national  level  and  by  recognising  the  significance  of  collective  bargaining  as  an  important 
source of law. In the view  of employers, a flexicurity  approach should not  seek to organise 
tradeoffs  between  flexibility  and  security.  Rather  flexibility  should  be  seen  as  a  way  to 
improve employment security. 

2.  Tackling  segmented  labour  markets  –  flexible  contractual  arrangements  and  precarious 
employment and working conditions 

Responses revealed a common concern to reduce the segmentation of labour markets and to 
harness education and training measures to assist individuals in their career development. 

Employer interests maintain that the scope for flexibility in traditional standard contracts must 
be improved and that the availability of a variety of contractual arrangements is essential. As 
regards the depiction in the Green Paper of the situation of "insiders" and "outsiders" within a 
segmented  labour  market,  employers  maintain  that,  in  reality,  the  "outsiders"  are  the 
unemployed and the "insiders" are all those legally employed. Trade unions consider that the 
gap between "insiders" and "outsiders" can only be eliminated by improving the protection of 
vulnerable  workers,  tackling  their  exclusion  from  proper  labour  law  coverage  and  their 
precarious employment and working conditions. 

3. Security of Employment 

There is a shared interest in developing arrangements to strengthen the position of workers in 
the context of job-to-job transitions through effective active labour market policies combined 
with  employment  friendly  social  protection  systems.  For  employers,  flexicurity  approaches 
can  help  to  improve  employment  security  so  that  workers would  become  less  dependent  on 
labour law instruments and be able to rely more on education and training measures. For the 
trade  unions,  active  labour  market  policies  combined  with  adequate  unemployment  benefit 
systems, social security and pension systems adapted to labour market transitions are crucial 
to  boosting  workers'  capacity  to  face  change  and  to  provide  them  with  security  throughout 
their working lives. 

4. Subsidiarity – social policy competences 

The social partners placed strong emphasis on the need to avoid any uniform top-down EU 
approach  to  promoting  flexicurity  policies  including  labour  law  reform  and  flexible 
contractual arrangements. They share the view that no single model of flexicurity policies can 
be generalised across Europe since each country has to decide on its own on the sequence of 
reforms  and  on  the  different  components  of  the  policy  mix  to  be  put  in  place.  While 
employers consider that competence to modernise labour law lies primarily at national level, 
the development of an EU-wide supportive legal framework is favoured by the trade unions. 

5. Follow up 

The social partners emphasise their shared commitment to joint initiatives such as an analysis 
of key labour market challenges as foreseen in the EU social dialogue work programme 2006-
2008.  For  employers,  the  role  of  the  EU  should  be  to  organise  exchanges  of  experience 
between Member States and to monitor national reforms using the instruments of the Growth 
and Jobs strategy. In the view of trade unions, social policy should be reinforced in the Lisbon 
strategy with due regard to the autonomy of the national social partners. They also point out 

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that  genuine  and  balanced  flexicurity  models  wherever  they  exist  in  Europe  reflect  the 
outcome of negotiations between the social partners at all levels. 

2. 

PROBLEM DEFINITION 

In order to achieve the objectives of the Growth and Jobs Strategy, and at the same time to 
preserve and modernise the European Social Model and its values in times of globalisation, 
rapid  technological  change  and  demographic  ageing,  it  is  essential  to  design  policies  that 
address  simultaneously  the  flexibility  of  labour  markets,  work  organisation  and  labour 
relations, employment security, and social security. 

An integrated approach is needed to be able to cope with the problems facing the European 
labour  markets,  combining  measures  to  improve  both  flexibility  and  security.  The  focus 
should be on exploiting the synergies between policies that improve both the flexibility and 
the security and between policies that enhance workers' security in the market. This integrated 
approach  calls  for  a  deliberate  and  synchronic  design  of  different  contractual  arrangements, 
credible lifelong learning systems, active labour market policies, and modern social security 
systems.  Such  synergies  have  the  potential  to  create  more  and  better  jobs,  strengthen  social 
cohesion and fight poverty and exclusion by pursuing the active inclusion of all and spreading 
the benefits of more open and flexible labour markets to all citizens, including disadvantaged 
groups.  Equal  opportunities  and  gender  equality  are  an  integral  part  of  flexicurity  policies. 
This approach will help Europe strengthen its social values and its Social Model. 

The  Joint  Employment  Report  adopted  by  the  Council  and  the  European  Commission  in 
March  2006  stated  that,  despite  recent  progress  in  employment  outcomes  for  all  Member 
States,  policy  implementation  in  the  employment  field  is  still  particularly  weak  as 
concerns adaptability of workers and enterprises24 (see box 4 hereafter): 

Box 4: The analysis of adaptability policies in the Joint Employment Report25 

In line with the conclusions of the Annual Progress Report 2006, which clearly illustrated a 
lack  of  policy  emphasis  in  the  adaptability  priority,  implementation  under  this  priority  has 
been  slow.  At  the  2006  Spring  Council,  Member  States  committed  themselves  to  a  more 
comprehensive  strategy  to  improve  the  adaptability  of  workers  and  enterprises,  directing 
special  attention  to  the  challenge  of  flexicurity.  Although  not  every  country  explicitly  cites 
flexicurity, it is clear that the attention given to this concept has had a positive effect on the 
policy debate. Most countries are testing its value for national policy making. As yet, few go 
beyond  clustering  separate  measures  under  this  new  heading.  Member  States  have  not  yet 
integrated  the  concept  to  focus  on  the  interaction  of  measures  rather  than  on  measures 
individually. Nonetheless, a small number of them have already taken serious steps towards 
such  an  approach  within  their  national  context.  In  Ireland  a  new  10-year  social  partnership 
agreement was signed in 2006, covering many items related t o flexicurity. 

Labour  code  reviews  are  by  far  the  most  widespread  type  of  measure.  Member  States  are 
increasing  contractual  diversity  but  generally  do  not  focus  on  transitions  between  types  of 
contracts. There are few examples of measures aimed at redesigning Employment Protection 

24 
25 

Joint employment report 2006/2007, adopted on 23rd of February 2007, doc number 6706/07 
Joint employment report 2006/2007, adopted on 23rd of February 2007, doc number 6706/07 

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Legislation  for  regular  contracts  to  promote  more  flexibility  and  transitions  (including  LV, 
PT). Some countries, such as EE and SI, announce new reviews of their labour codes with a 
view to making them more flexible. In other cases political sensitivity causes delays in policy 
making  (CZ,  PL)  or  abandonment  of  previous  plans,  such  as  the  announcement  by  DE  to 
extend  probation  periods  in  exchange  for  the  abolition  of  fixed  term  contracts.  Policies  to 
introduce  flexibility  'on  the  margins'  are  still  pursued  (FR,  PL).  Countries  having  operated 
such policies for some time increasingly realise these encourage labour market segmentation 
which  needs  to  be  addressed.  In  IT  temporary  workers  will  benefit  from  increasingly 
harmonised social rights and improved pension rights via higher social security contributions 
In ES, a package of measures was agreed with the social partners. 

A  majority  of  countries  pay  attention  to  tackling  undeclared  work,  often  through 
strengthening the labour inspectorate or other control or surveillance measures (AT, EE, DE, 
DK,  EL,  HU,  LV,  LT,  MT,  SI).  A  few  countries  have  designed  measures  to  improve  their 
capacity to anticipate and manage economic restructuring and to forecast future labour market 
needs. LU is introducing transition plans for those who lose their jobs due to restructuring. IE 
is announcing a review of future challenges facing the manufacturing sector. MT has set up a 
one-stop shop for collective redundancies. The introduction of innovative and adaptable forms 
of  work  organisation  has  been  promoted  in  several  countries  by  initiatives  at  national  level 
(DE, LV, SI, SK, UK) and by the social partners (DE, LU). 

Some countries are implementing new forms of support for transitions in occupational status 
(transition security) allowing workers to be better prepared for transitions between jobs. FI is 
implementing  'change  security',  providing  dismissed  workers  with  greater  financial  security 
during the stage of transition between jobs and fostering more efficient cooperation between 
employers,  employees  and  labour  authorities.  Other  initiatives  focus  on  incentives  for 
unemployed  people  to  start  businesses  (BE,  DE,  LT).  Policies  presently  implemented  or 
designed  will  not  suffice  to  meet  the  flexicurity  challenge.  Effective  combinations  of 
flexibility and security result from comprehensive policies impacting on labour markets as a 
whole.  Redesigned  EPL  to  promote  more  flexible  contractual  arrangements,  active  labour 
market policies, lifelong learning and modern social protection systems should interact with 
each other, supporting transitions between jobs and contract types, and offering opportunities 
for workers to progress. 

Slow  progress  in  adaptability  is  a  particularly  serious  problem,  considering  the  increasing 
need  for  adaptable  labour  markets  in  order  to  address  the  challenge  of  globalisation  and 
demographic change. And yet, adaptability of labour markets, for workers and enterprises, has 
been a key concept since the beginning of the European Employment Strategy and is key also 
in the Lisbon process for more growth and jobs26.27 

26 

27 

See the original pillars of the European Employment Strategy and the current Integrated Guidelines on 
Growth and Employment from 2005at: 
http://ec.europa.eu/employment_social/employment_strategy/guidelines_en.htm 
While  labour  market  performance  is  clearly  influenced  by  a  mismatch  between  institutions  and  the 
economic structure, the link between institutions and performance is not stable over time. The increased 
degree of competition in the product markets and the nature of technological progress have changed the 
labour market response to pre-existing labour market institutions. In a context of the allocation of gains 
between  employers  and  employees,  labour  market  institutions  that  maximise  social  welfare  when 
markets  are  relatively  closed  turn  out  to  be  too  costly  in  terms  of  employment  loss  when  markets 
become  more  exposed  to  the  international  competition.  In  technical  terms,  these  institutions  put  a 
wedge between labour demand and labour supply that can be desirable from distributional viewpoint. 

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Measures  to  increase  flexibility  of  labour  markets  along  side  measures  to  ensure  or  even 
increase security of workers and individuals have been ongoing. However, results show that it 
has not been as successful as hoped for. There are still segmented labour markets (increasing 
in some Member States), high long term unemployment and/or a lack of adaptability on the 
labour markets in some Member States. There may be behaviour that gives rise to a status quo 
bias  which  will  keep  inefficient  institutions  from  changing.  Moreover,  because  of  a  general 
uncertainty on the costs and benefits from reform, different socio-economic groups could be 
engaged in a war of attrition - it takes time for each part to learn about the costs that the other 
can bear and the conflict can be brought to a standstill - which delays the reform process28. 

Finally, when reforms entail distributive effects (i.e. they are expected to favour certain socio-
economic groups but not others), uncertainty about who will gain from reform can prevent its 
adoption when the winners cannot commit to compensate ex-post the losers29. In these cases, 
non  integrated  policy  measures  are  more  likely  to  be  implemented.  However,  treating  the 
individual  measures  separately,  as  currently  is  the  case  in  most  Member  States,  does  not 
exploit the complementarities between different policies and is less likely to be conducive to a 
set of consistent policies for achieving our employment targets within European social values 
and the social model. Indeed, within a context of non integrated and inconsistent flexicurity 
policies,  fewer  winners  and  more  losers  are  more  likely  to  emerge  on  the  European  labour 
markets from accelerated change. The objective of flexicurity must be a win-win situation. 

Segmented  labour  markets  represent  significant  threats  to  social  cohesion  in  many 
countries.  They  are  characterized  by  high  protection  of  some  workers,  while  others  have 
limited  opportunities  to  train  and  improve  their  employment  situation  or  are  outside  the 
formal  labour  market  in  undeclared  work.  Segmentation  demonstrates  in  practice  that 
flexibility  and  security  are  treated  as  a  trade-off.  It  may  result  in  flexibility  for  some  and 
security  for  others.  Segmentation  is  linked  to  gender  segregation  since  women  are 
overrepresented in low opportunity employment, part time work and precarious employment. 
For many workers in this kind of job, transitions between segments are difficult to make; for 
those  most  excluded  from  the  labour  market,  segmentation  means  lagging  within  the  low 
pay/no  pay  option.  This  has  contributed  to  the  persistence  of  long-term  unemployment  – 
especially  but  not  only  for  specific  groups  on  the  margins  of  the  labour  market,  such  as 
youth,  migrants,  ethnic  minorities  and  disabled  –,  and  to  the  problem  of  segmented  labour 
markets, which represent a significant threat to social cohesion in many countries. 

As  regards  demographic  change  it  should  be  noted  that  an  ageing  population  puts  higher 
pressure  on  European  labour  markets.  The  dependency  ratio  –  number  of  people  aged  65 
years and above relative to those aged 15-64 – is set to double and reach 51% by 2050 and the 
working  age  population  is  projected  to  decrease  by  30  million  people  by  2050.  This  poses 
tremendous challenges for the sustainability of our pension and health systems, as well as our 
labour markets. Economic growth rates are set to decline, mainly owing to the reduction in the 
working-age  population.  The  projections  show  that,  if  current  trends  and  policies  remain 
unaltered,  the  average  annual  growth  rate  in  GDP  for  EU-25  will  fall  systematically  from 

As  a  stronger  product  competition  reduces  the  price  mark-up  and  makes  labour  demand  more  wage 
elastic, deregulating product markets increases the wedge, raising pressure to reform the labour market 
institutions and the cost of non-reform. See Bertola and Boeri (2002), Bertola (2004)  
See Alesina and Drazen (1991) 
See Fernandez and Rodrick (1990) 

28 
29 

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2.4%  over  the  period  2004-2010  to  only  1.2%  between  2030  and  2050.  The  labour  force 
potential must therefore be fully used and must be used in an efficient way30. 

30 

European  Policy  Committee  and  European  Commission  (2006),  The  impact  of  ageing  on  public 
expenditure:  projections  for  the  EU25  Member  States  on  pensions,  health  care,  long-term  care, 
education and unemployment transfers (2004-2050), European Economy Special Report No.1. Can be 
found at:  
http://ec.europa.eu/economy_finance/publications/european_economy/2006/eespecialreport0106_en.htm 

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3. 

MAIN OBJECTIVES 

3.1. 

The flexicurity concept and its added value 

Flexicurity belongs to the Lisbon Strategy and the Integrated Guidelines, and contributes 
to  fulfilling  the  objectives  of  the  Employment  Strategy  of  more  and  better  jobs,  higher 
productivity and quality in work and greater social cohesion. 

The  key  principle  that  underpins  the  concept  of  flexicurity  is  that  flexibility  and  security 
should  not  be  seen  as  opposites,  but  can  be  made  mutually  supportive.  The  flexicurity 
approach therefore goes beyond a simple trade-off between flexibility and security, whereby 
the former is seen to be in the exclusive interest of the employer, and the latter in the interest 
of  the  employee:  a  high  degree  of  flexibility  should  go  hand  in  hand  with  a  high  degree  of 
employment  security,  in  the  interest  of  both  employers  and  employees.  Although  the  the 
group  of  people  that  are  self-employment  are  not  specifically  addressed  in  the  flexicurity 
approach  they  are  not  excluded  from  the  considerations.  In  fact,  comprehensive  policies 
should include an improved promotion of self-employment and entrepreneurship as a flexible 
way to adapt to changing labour markets. This would not only include related training but also 
improving  the  environment  for  self-employment  such  as  providing  start-up  capital  or 
facilitating administrative procedures. 

Flexicurity  constitutes  a  part  solution  to  structural  unemployment  in  the  EU  and  can 
improve the competitiveness of and job creation in the European companies by encouraging 
companies to hire new staff through more flexible labour contracts. At the same time it can 
strengthen social cohesion and social inclusion in line with Lisbon Strategy. This is possible 
thanks to its integrated approach to the problems of labour markets that implies the exploiting 
the  synergies  between  the  four  policy  areas:  contractual  arrangements,  lifelong  learning 
strategies,  active  labour  market  policies,  and  social  security  systems  (see  box  5).  Member 
States that implemented successful flexicurity type policies have addressed in particular active 
labour market and social security systems. Piecemeal reforms tend to increase problems like 
social exclusion and segmentation of the labour market, and as a result, resistance to change – 
a vicious circle that needs to be broken. 

Flexicurity covers transitions (i.e. job changes) within an enterprise (internal flexibility) as 
well  as  transitions  from  job  to  job  between  enterprises  and  between  employment  and  self-
employment (external flexibility). It can also ease transitions from unemployment/inactivity 
or  even  early  retirement  to  gainful  employment.  High  quality  work  places  with  capable 
leadership, good organisation of work, and continuous upgrading of skills are part and parcel 
of the concept of flexicurity. This includes measures that maintain and improve work capacity 
and  offer  possibilities  to  reconcile  work  and  family  life.  All  these  measures  are  a  key  to 
improved  productivity  and  longer  working  lives  and  aim  at  simultaneously  increasing  both 
labour productivity and wellbeing in European work places. 

The key point underpinning a flexicurity approach is that, on the one hand flexibility is in the 
interest of employers, but also of workers; on the other hand, security is also in the interest of 
both the employees and employers. Security is not a matter of preserving a job for life: in a 
dynamic perspective it is about building and preserving people's ability to enter, remain and 
progress in employment throughout the life-cycle. The focus of policies should shift from job 
security  to  employment  security,  i.e.  from  the  protection  of  a  given  job  to  supporting 

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people's  transitions  from  one  job  to  another  with  a  good  level  of  social  protection  to  make 
transition easier and more successful. 

Flexicurity  can  contribute  to  promoting  gender  equality,  for  example  by  ensuring  better 
possibilities to reconcile work, private and family live, for both men and women. Specifically, 
it can reduce gender gaps in employment, unemployment and pay, by for example, extending 
provisions  on  parental  leave  for  fathers,  providing  better  access  to  social  security  and 
childcare facilities, as well as increasing care facilities for the elderly and disabled. Flexicurity 
can also improve the situation of women if fixed-term contracts and part-time work become 
more  secure.  It  can  also  facilitate  all  types  of  transitions  of  women  in  the  labour  market 
(between inactivity and activity, between working-time regimes, between jobs) by enhancing 
participation  of  women  in  lifelong  learning  and  active  labour  market  policies.  Redesigned 
employment protection legislation can contribute to increase female participation, as well as 
the  participation  of  disadvantaged  groups  that  the  empirical  evidence  suggests  to  be  more 
negatively influenced by such restrictions31. 

Encouraging  flexible  labour  markets  and  ensuring  adequate  levels  of  security  will  only  be 
effective  if  workers  are  given  the  means  to  adapt  to  change,  to  stay  on  the  job  market  and 
make  progress  in  their  working  life.  Therefore,  the  concept  of  flexicurity  includes  a  strong 
emphasis on lifelong learning strategies, in particular adult education and training on the job, 
complemented by active labour market policies when the transition involves unemployment, 
supported  by  adequate  social  security  systems  to  provide  income  support  during  job  search 
periods  and  allow  people  to  combine  work  with  care.  This  should  also  contribute  to  equal 
opportunities and gender equality. 

Compared to policies merely based on flexibility, flexicurity represents a clear value added 
for  the  labour  markets  of  the  Member  States.  Whereas  flexibility  focuses  on  contractual 
arrangements and easing employment protection, flexicurity takes into account the importance 
of  investing  in  people  and  facilitates  their  upward  mobility  in  the  labour  markets.  The 
flexicurity  approach  is  a  broad  concept,  including  contractual  arrangements,  active  labour 
market policies, lifelong learning, and social security systems. (see box 5) 

While flexicurity policies – like other employment policies – are designed, implemented and 
financed  mainly  at  the  national  level,  the  establishment  of  common  EU  objectives,  the 
exchange of good practice, and mutual learning between Member States, provide added value 
at European level. Furthermore, all the measures that fall within the Employment Guidelines 
(including  therefore  flexicurity  policies)  are  eligible  for  European  Social  Fund  support, 
which  will  make  available  to  Member  States  approximately  70  billion  €  in  the  2007-2013 
programming period through multi-annual Operational Programmes. 

Labour  market  reforms  are  by  their  nature  a  relatively  slow  process.  Their  implementation 
due  to  their  political  sensitively  often  takes  years.  Visible  results  are  even  longer  in  their 
appearance. Furthermore it is extremely difficult to disentangle precise causalities. 

3.1.1.  Added value of EU action 

At  Community  level,  the  common  principles  should  provide  a  common  framework  for  the 
different  typical  "flexicurity  pathways"  identified  in  this  Communication.  The  pathways 

31 

See Bertola et al. 

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should in turn allow for a significant strengthening of mutual learning and exchange of best 
practices  -  which  constitute  an  essential  added  value  of  the  Lisbon  Strategy  and  the  Open 
Method of Coordination – on the design and implementation of flexicurity policies. 

The implementation of the common principles of flexicurity in the Member States requires the 
establishment of carefully planned and negotiated combinations and sequences of policies and 
measures.  Since  Member  States  vary  considerably  in  their  socio-economic,  cultural  and 
institutional background, the specific combinations and sequences will also vary. 

However, while flexicurity is not a one size fits all  solution, best practices from  throughout 
Europe provides ample opportunity for Member States to learn from each other, by analysing 
what works best in their national situation. 

In this context, a number of broad, "typical" combinations and sequences between the policy 
components of flexicurity can be identified; these are 'flexicurity pathways'. The four typical 
pathways described in the Communication do not reflect the concrete situation of any specific 
country - but they do each address specific challenges that are pertinent to Member States. 

The pathways have been developed analytically on the basis of the Member States' situations, 
in the 2006 Employment in Europe Report, and in the report of the Flexicurity Expert Group. 
The pathways serve a twofold purpose: as a policy tool for Member States to draw on while 
designing their own national flexicurity strategies; and as an instrument for mutual learning 
and  a  benchmark  in  the  framework  of  the  Lisbon  Strategy  and  the  Open  Method  of  Co-
ordination. 

Member States, taking account of their own particular situation and institutional background, 
should consider, in consultation with social partners, the relevant typical flexicurity pathways 
and design their own national pathway towards better combinations of flexibility and security. 

Box 5: The four components of flexicurity 

The challenges of ensuring flexible labour markets and high levels of security are very broad 
and  complex;  therefore,  it  is  impossible  to  define  the  different  ingredients  and  aspects  of 
flexicurity in an overly detailed and precise way to cover all possible situations. 

However, there is a broad agreement on the policy content of flexicurity: the Commission and 
the  Member  States,  drawing  on  previous  experience  and  on  work  by  academics  and 
international  institutions  such  as  the  OECD  and  the  ILO,  have  reached  a  consensus  on  a 
definition of flexicurity which comprises four components32: 

- 
Flexible  contractual  arrangements,  both  from  the  perspective  of  the  employer  and 
the  employee,  through  modern  labour  laws  allowing  for  sufficiently  flexible  work 
arrangements and reducing labour market segmentation and undeclared work. 

- 
Reliable and responsive lifelong learning systems with particular emphasis on adult 
education and training on the job to ensure the continuous adaptability and employability of 
workers, thereby facilitating career advancement and moves from job to job. 

32 

Components adopted by the Council in the Joint Employment Report, February 2006. The report can be 
found at: http://ec.europa.eu/employment_social/employment_strategy/jer_en.pdf 

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Active  labour  market  policies  (ALMP)  which  effectively  help  people  to  cope  with 

- 
rapid change, unemployment spells and transitions to new jobs. 

- 
Modern social security systems which provide adequate income support during job 
search  periods  and  are  supportive  to  labour  market  mobility  by  embedding  appropriate 
eligibility and job availability rules and effective incentives to work and further training. 

Particular attention should be given to social dialogue, which embodies a shared tradition that 
proactive policy-making can be to everybody's benefit. Social partners are often best placed to 
address  the  various  needs  of  employers  and  workers,  and  detect  synergies  between  them. 
Similarly, a tripartite approach with the active involvement of the social partners and public 
authorities is often a necessary element for successful flexicurity policies. 

It  should  be  noted  that  the  objectives  of  the  "Jobs  Strategy"  of  the  OECD,  as  "restated"  in 
200633,  largely  correspond  to  those  of  the  Lisbon  Growth  and  Jobs  Strategy  (including  a 
macro, a micro and an employment pillar). In this context, the four ingredients of flexicurity 
as  presented  in  the  Commission  Communication  are  broadly  covered  in  the  OECD  Jobs 
Strategy, which inter alia calls for: i) make sure that employment protection legislation helps 
labour  market  dynamism  and  provides  security  to  workers;  ii)  active  labour  market 
programmes should be regularly assessed [so] that the mix of programmes is adjusted to suit 
the needs of jobseekers and the labour market; iii) facilitate the development of labour force 
skills and competences; and iv) implement well-designed unemployment benefit systems and 
active labour market policies. 

3.2. 

General objective: Contributing to the Lisbon Strategy for Growth and Jobs 

The  general  objective  of  flexicurity  is  to  contribute  to  the  overall  strategy  for  more  and 
better jobs, higher productivity and quality in work and greater social cohesion. It will 
help  Europe  to  strengthen  its  social  model(s)  and  its  social  values  and  achieve  the  agreed 
targets of 70% employment overall, 60% for women and 50% for older workers by 2010. 

The EU's main response to the challenge of globalisation is the revised Lisbon Strategy for 
Growth and Jobs. The Integrated Guidelines for growth and jobs call upon Member States to 
promote  flexibility  combined  with  employment  security  and  reduce  labour  market 
segmentation (IG 21)34. Flexicurity is fully in line with the main thrust of the Lisbon strategy, 
and  contributes  to  its  implementation:  it  increases  adaptability  of  workers  and  enterprises 
while  at  the  same  time  supporting  those  among  the  workforce  who  may  be  left  behind  by 
economic change. As such, flexicurity can contribute to the positive management of change 
and strengthen public support. 

3.3. 

Specific objectives 

The design and implementation of flexicurity policies can contribute to a number of specific 
objectives which fall within the aims of the Lisbon Strategy and of the European Employment 
Strategy. These specific objectives are designed and implemented mainly at the national level, 
and  co-ordinated  at  EU  level  through  the  Employment  Strategy  and  the  Lisbon  Integrated 
Guidelines. 

33 
34 

OECD (2006), "OECD Employment Outlook, Boosting Jobs and Incomes" 
Integrated Guidelines for growth and jobs 2005-08, adopted in 2005.  

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Flexicurity  aims  to  increase  the  productivity  of  individuals  through  active  labour  market 
policies and continuous lifelong learning. Flexicurity also aims to improve matching on the 
labour market since more adaptable individuals will be able to find new employment and fill 
the supply gaps in the labour market more easily. 

In  particular,  flexicurity  can  contribute  to  reducing  segmentation  (see  glossary  for  an 
explanation)  of  European  labour  markets.  Segmented  labour  markets  with  insiders  and 
outsiders  are  reflected  by  high  long-term  structural  unemployment  in  Europe.  Reducing 
segmentation  will  improve  welfare,  participation,  solidarity  and  dignity35.  A  secure  job  is 
considered key to move out of poverty. Many groups of people are at least partially excluded 
from the labour market. This concerns mostly women, long-term unemployed, young people 
and people with disabilities. A lot of workers are also trapped in less secure employment or 
undeclared work. They do not have the opportunity to progress into better jobs, whereas the 
others  enjoy  a  high  degree  of  security.  There  is  no  single  measure  or  indicator  of 
segmentation. One indication could be the number of new jobs using fixed term rather than 
permanent contracts. 

Flexicurity  can  also  help  to  transform  undeclared  work  into  regular  employment  by 
providing workers with additional security and a possibility to upgrade their skills in order to 
better  match  the  needs  of  the  labour  market.  By  its  very  nature  it  is  difficult  to  find 
quantification  of  the  extent  of  undeclared  work.  A  report  by  the  European  Employment 
Observatory  gives  estimates  according  to  different  measurement  and  sources  indicating  that 
undeclared work is a severe problem in many countries36. 

Flexicurity can provide "security of employment" through a high level of access to training, 
subsidised jobs and social security measures needed during the period of transition from job 
to job. Flexicurity can provide equal pension rights to all employees, regardless of the form of 
their contract. 

Flexicurity  can  contribute  to  creation  of  new  jobs  and  increasing  employment  by 
encouraging, through more flexible contracts, enterprises to hire new staff. 

Flexicurity can reduce youth unemployment, and precarious jobs often held by young people, 
in line with the Lisbon strategy and the European Youth Pact, by facilitating their entrance to 
the labour market and by providing better vocational training and apprenticeships. 

Better access to training and lifelong learning means improvement of work capacity, higher 
productivity  and  longer  working  lives.  It  is  important  from  the  point  of  view  of  the 
competitiveness of the European economy and employability of workers. It helps to secure a 
workforce  for  various  employment  profiles  that  are  needed  in  a  knowledge-based  society. 
Active labour market policies can effectively support the return to employment as well as help 
the development of the unemployed towards a new job. 

35 

36 

See  the  Communication  from  the  Commission  on  European  Values  in  the  Globalised  World, 
20.10.2005 COM(2005) 525 final, the EU Charter on Fundamental Rights and the Berlin Declaration 
(Declaration on the occasion of the fiftieth anniversary of the signature of the Treaties of Rome) of 25 
March 2007. 
European Employment Observatory review autumn 2004. Can be found at: 
http://ec.europa.eu/employment_social/emplweb/publications/publication_en.cfm?id=30 

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Flexicurity  aims  to  contribute  to  the  development  of  SMEs  which  represent  99%  of  all 
enterprises in Europe and about 70% of private sector jobs and which are one major source of 
job creation and growth in Europe. Small businesses require internal and especially external 
flexibility in order to cope with the challenge of globalisation. Internal flexibility (within the 
firms) means adjustable arrangements for working hours, use of part-time or overtime work. 
External  flexibility  is  connected  to  rules  on,  and  costs  of,  employing  workers.  A  variety  of 
contracts types may reduce costs. Collective bargaining arrangements can also have an effect 
on these costs for SMEs. 

Flexicurity  can  contribute  to  promoting  gender  equality  by  taking  into  account  different 
needs of women and men at the labour market, for example when it comes to reconciliation of 
work  and  private  life.  It  can  result  in  reducing  gender  gap  in  employment,  by  for  example, 
extending  provisions  on  parental  leave  for  fathers,  providing  better  access  to  social  security 
and childcare facilities, as well as increasing care facilities for elderly and disabled. 

Flexicurity  can  also  contribute  to  promoting  non-discrimination,  by,  for  example,  helping 
the integration of people with disabilities into the labour market. It can take into account the 
specific  needs  of  this  group  of  people  through,  for  example,  adapted  timetables  or  specific 
working conditions. It is particularly important in an ageing society such as Europe's where 
the number of people with disabilities is increasing. 

A  key  aspect  is  also  to  promote  social  dialogue  on  flexicurity  policy  implementation. 
European  social  partners  have  successfully  negotiated  agreements  about  parental  leave,  part 
time work and fixed-term contracts. In addition to this, there are also autonomous agreements 
on  telework  and  lifelong  learning.  Many  aspects  relating  to  flexicurity  belong  to  the 
competence of the social partners. The participation of social partners and other stakeholders 
should  be  ensured  in  the  development,  monitoring  and  evaluation  of  policies  –  in  order  to 
create  a  common  agenda  and  joint  responsibility  for  change.  Collective  agreements  and 
companies  can  provide  conditions  for  modern  work  organisations,  improving  internal 
numerical  (working  hours,  rosters)  as  well  as  functional  flexibility  within  a  secure  context. 
Moreover, social partners in the EU and in the Member States are responsible for a variety of 
recommendations, guidelines, guides to good practice, joint opinions and declarations37. 

The  concept  of  flexicurity  includes  an  important  (territorial)  regional  and  trans-national 
dimension. Firstly, international economic integration requires more and more flexibility as 
regards inter-regional, national and international labour mobility. As a consequence, there is 
an  increasing  need  to  address  the  aspect  of  adequate  training  (e.g.  language  skills)  or  the 
adaptation  of  social  security  systems  (e.g.  in  relation  to  the  trans-national  transfer  of  social 
security  rights).  Moreover,  economic  and  social  conditions  are  very  different  not  only 
between Member States but also between regions. Solutions to promote flexicurity thus need 
to be tailored to the different national and regional circumstances. 

37 

See e.g., the Work Programme of the European Social Partners 2006-2008 where the balance 
between flexibility and security is mentioned as one of the key challenges in view of which a 
joint analysis will be undertaken. 

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4. 

POLICY OPTIONS 

4.1. 

Basis for the policy options 

The  2006  Spring  European  Council  specifically  asked  the  Commission  to  explore  the 
development  of  a  set  of  "common  principles  of  flexicurity"  (see  section  1).  The 
Commission, in its January 2006 Annual Progress Report, concluded that EU countries do not 
yet adequately respond to the adaptability challenge. Thus, Commission and Council agreed 
that Member States should pursue reforms in labour market and social policies in accordance 
with the concept of flexicurity. In the Spring European Council 2007, the Council declared 
that  it  looks  forward  to  the  discussion  on  the  Commission  Communication  on  flexicurity, 
which  should  be  instrumental  in  preparing  a  range  of  flexicurity  pathways  to  find  the  right 
mix  of  policies  tailored  to  labour  market  needs  including  increased  labour-market 
participation. 

The  Employment  Guidelines,  as  part  of  the  Integrated  Guidelines  in  the  Lisbon  Strategy, 
already include the priority to increase the adaptability of workers and enterprises. The 
current  guidelines  address  adaptability  and  segmentation  as  well  as  the  components  of 
flexicurity. 

The Open Method of Coordination in the field of social inclusion and protection addresses 
the modernisation of social protection systems, income security, active labour market policies 
and access to education. 

At  the  request  of  the  Commission,  European  Social  Partners  have  successfully  negotiated 
agreements about parental leave, part time work and fixed-term contracts. In addition to this, 
there are also autonomous agreements on telework and lifelong learning. 

4.2. 

Option 1: No additional EU action 

A  first  policy  option  is  the  status  quo  option  in  which  most  Member  States  treat  the  four 
components, for the most cases, separately on the basis of existing experience on their side. 

Member States would continue implementing measures in line with the Integrated Guidelines 
and the Lisbon Strategy; however not in an integrated flexicurity approach. 

4.3. 

Option 2: Comprehensive legislation on flexicurity at EU level 

According  to  EC  Treaty  articles  136  and  137,  some  aspects  of  the  specific  components  of 
flexicurity  can  in  principle  be  subject  to  legislation  at  Community  level.  Indeed,  significant 
legislation  already  exists  in  a  number  of  areas,  in  particular:  working  conditions,  social 
security  and  protection,  dialogue  between  management  and  labour,  human  resources, 
integration of persons excluded from the labour market, and gender equality. 

However, Community legislative competence is not the same for each of the components of 
flexicurity, which to a great extent refer to policy measure to be implemented within the legal, 
institutional and political frameworks of each Member State. 

The  employment  and  social  protection  policies  that  constitute  flexicurity  are  essentially  a 
competence  of  Member  States,  with  active  involvement  of  social  partners.  In  this  context, 

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legislation at the national level on some (or  part)  of  the components of flexicurity already 
exists, as part of Member States' competencies in the field of employment and social policy. 
However, the extent and scope of legislative action varies between the different components 
of flexicurity (e.g. social security versus lifelong learning), and between Member States (e.g. 
on labour market contracts). 

Community legislation also covers some of the aspects of flexicurity policies, although the 
scope of legislation at EU level varies even more than national legislation, depending on the 
level of Community competence. On labour law in particular, the Commission has presented a 
Green Paper in order to launch a public debate in the EU on how labour law can be updated 
to meet the key challenge of greater adaptability of workers and enterprises. On the basis of 
the results of the Green Paper consultation, the Commission will present a Communication in 
the autumn of 2007 (see box 3 above). 

Given  the  nature  of  flexicurity  as  described  in  the  Communication  that  this  Impact 
Assessment supports, the different components of flexicurity cannot be considered separately, 
since  an  integrated  approach  is  what  provides  the  added  value  of  flexicurity,  and  it  is  not 
possible  to  cover  the  whole  range  of  flexicurity  policy  through  a  comprehensive  legislative 
package, be it at national or Community level. If a comprehensive legislation package, though 
very complex, were possible, it would indeed be counter-productive because of it being a "one 
size fits all" approach. 

It should also be noted that the Member States, and the European Council conclusions, have 
clearly stated that they expect from the Commission a proposal on common policy principles 
and  a  range  of  flexicurity  pathways  tailored  to  the  different  labour  market  needs  of  each 
Member State. 

The principles of subsidiarity and proportionality, enshrined in the EC Treaty, should be taken 
into account in the formulation of all and thus of flexicurity policy. 

Flexicurity  falls  essentially  within  the  framework  of  the  European  Employment  Strategy 
(EES), initiated, as amended by the Amsterdam Treaty at the Luxembourg European Council 
of  November  1997,  as  the  main  tool  to  give  direction  to  and  ensure  co-ordination  of  the 
employment policy priorities to which Member States should subscribe at EU level. 

EU  Heads  of  State  and  Government  thus  agreed  on  a  framework  for  action  based  on  the 
commitment  from  Member  States  to  establish  a  set  of  common  objectives  and  targets  for 
employment  policy. This  co-ordination of national employment  policies at EU level is built 
around an annual process of guidelines agreed at the Council level, national action plans from 
the Member States and a joint report by the European Commission. This process was revised 
in 2005 to improve coordination between Member States and the European institutions on the 
one  hand  and,  on  the  other  hand,  to  better  coordinate  employment  policies  with 
macroeconomic and microeconomic policies of the EU. 

In light of the above, on the one hand, there is no legal base for comprehensive supranational 
initiatives  on  employment,  since  the  responsibility  for  employment  policy  is  under  the 
exclusive  responsibility  of  the  Member  States.  On  the  other  hand,  while  the  EC 
http://ec.europa.eu/employment_social/employment_strategy/develop_en.htm - top#topTreaty 
does  not  change  the  basic  principle  of  the  Member  States  having  the  sole  competence  for 
employment policy, it does attribute to the Council and the Commission a stronger role, new 
tasks  and  more  forceful  tools;  it  integrates  the  European  Parliament  more  closely  into  the 

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decision  making  process;  lastly,  the  responsibilities  and  potential  contribution  of  the  social 
partners were also enhanced through the inclusion of the Social Protocol into the EC Treaty. 

The Commission in particular has an important role to play: to promote co-operation between 
Member  States  at  EU  level,  by  taking  initiatives,  reporting  on  employment  trends  and 
prospects and undertaking research and analysis, by promoting dissemination of information, 
and by assisting the Member States in their fight against unemployment and social exclusion 
with Community funding, mainly through the European Social Fund. 

In this context, it is important to note that the EES initiated a new working method at EU level 
-  the  'open  method  of  co-ordination'  (OMC)  -  with  subsidiarity  as  one  of  its  key  principles. 
The  OMC  establishes  an  equilibrium  between  European  Union  level  co-ordination  in  the 
definition  of  common  objectives  and  outcomes,  and  Member  States'  responsibilities  in 
deciding  the  detailed  content  of  action.  The  definition  of  the  means  and  conditions  under 
which policies and measures are implemented is left to a large extent to individual Member 
States, who are responsible for their employment policy under the EC Treaty. 

The flexicurity approach is fully in line with the OMC and its emphasis on subsidiarity. Thus, 
at the EU level, the Commission, upon the request of the Member States, will present in its 
Communication a proposal for common policy principles and a range of flexicurity pathways 
tailored  to  the  different  labour  market  needs  of  each  Member  State.  The  EU  level  will  also 
serve as a common platform for mutual learning and the exchange of good practices among 
EU Member States. The formulation and implementation of concrete flexicurity policies will 
take place at the national level in line with the Lisbon process and the Open Method of Co-
ordination". 

In conclusion, a Commission proposal for a comprehensive legislative package at EU level on 
flexicurity  is  not  a  viable  option,  both  politically  and  operationally  (on  grounds  of 
subsidiarity and proportionality); the impact of this option will therefore not be discussed in 
next section. 

4.4. 

Option 3: Flexicurity approach through the open method of coordination 

This  policy  option  does  not  imply  any  new  processes,  no  new  reporting  and  no  additional 
administrative  costs.  It  would  require  at  EU  level  improving  the  policy  tools  that  already 
exists. The flexicurity approach would thus be articulated in the Integrated Guidelines of the 
Lisbon Strategy, and would be monitored through the National Reform Programs. 

This  option  should  be  based  on  Article  127  of  the  EC  Treaty:  "The  Community  shall 
contribute to a high level of employment by encouraging cooperation between Member States 
and by supporting and, if necessary, complementing their action. In doing so, the competences 
of Member States shall be respected." 

The  option  is  based  on  Lisbon  Strategy  and  the  Open  Method  of  Coordination,  whereby 
Member States are themselves mainly responsible for implementation. Member States agree 
on  common  objectives  and  targets  and  country  specific  recommendations  are  issued  as 
political  pressure  for  reforms.  A  key  component  of  the  Open  Method  of  Coordination  is 
mutual learning. The experience with the European Employment Strategy - and subsequently 
the Lisbon Agenda - has shown that there is an added value of mutual learning and this kind 
of cooperation at the EU level. 

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4.4.1. 

Sub-option 1: One flexicurity approach for all 

One  sub-option  is  to  propose  an  agreement  at  EU  level  on  a  single  flexicurity  approach, 
covering  all  components  for  all  Member  States  and  specifying  how  they  should  act.  This 
option  would  use  the  same  approach  for  all  Member  States,  regardless  of  their  different 
institutional  settings,  traditions  (e.g.  as  concerns  social  dialogue),  social  protection  systems, 
and budgetary constraints. 

4.4.2. 

Sub-option2 : Common principles including typical pathways 

Another  sub-option  is  to  establish  a  series  of  broad  common  principles  and  different 
pathways, to be adopted by the Member States on the basis of a Commission proposal. 

The common principles of flexicurity, as requested by the European Council, aim to start and 
facilitate positive debates at national  level. They  result  from consultation with  stakeholders, 
Member  States  and  other  EU  institutions,  from  the  work  of  the  external  expert  group  on 
flexicurity, and from the findings of studies and research carried out by the Commission and 
other  international  institutions.  They  specify  the  objectives  to  be  achieved  with  flexicurity 
policies and  the  issues  to  be taken into account. For example, the common principles  could 
stress  that  labour  market  policies  and  labour  law  reforms  need  to  address  the  interests  of 
insiders as well as outsiders in the labour market, while at the same time reducing the divide 
between them. 

Typical  flexicurity  pathways  result  from  the  work  of  the  external  expert  group  on 
flexicurity, and from the findings of studies and research carried out by the Commission and 
other  international  institutions38.  These  pathways  address  four  typical  challenges  existing  in 
the Member States while remaining sufficiently few to act as useful benchmarks They would 
be studied and examined by Member States and inspire national flexicurity pathways as part 
of their policy mix of aiming to improve labour market outcomes. Each Member State, taking 
account  of  its  own  particular  situation,  including  the  financial  position  of  the  public  and 
private  sector,  and  institutional  background,  would  design  and  implement  its  own  pathway 
towards better combinations of flexibility and security, and report on it in their 2007 National 
Reform Programme. 

The common principles and typical pathways would take account of the different situations 
in Member States; namely institutional settings, traditions (e.g. as concerns social dialogue), 
social protection systems, and budgetary constraints. At the same time, they would provide a 
framework  from  mutual  learning  and  for  policy  development  through  the  established 
processes of Lisbon and of the Open Method of Coordination. 

Box 6: The content of the typical pathways 

In  addition  to  the  four  policy  components  specified  for  the  pathways  (flexible  contractual 
arrangements,  active  labour  market  policies,  effective  lifelong  learning  and  modern  social 
security),  the  Communication  identifies  the  following  policy  challenges  to  be  addressed. 
These four pathways address four typical challenges existing in the Member States: 

Pathway 1: tackling contractual segmentation. 

38 

The Commission's Employment in Europe 2006 report, the Expert Group report on Flexicurity, restated 
OECD Jobs Strategy. 

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This typical pathway is of interest to countries where the key challenge is segmented labour 
markets,  with  insiders  and  outsiders.  This  pathway  would  aim  to  distribute  flexibility  and 
security  more  evenly  over  the  workforce.  It  would  provide  entry  ports  into  employment  for 
newcomers and it would promote their progress into better contractual arrangements. 

Pathway 2: developing flexicurity within the enterprise and offering transition security. 

This typical pathway is of interest to countries with an under-dynamic labour market. It would 
increase  investments  in  employability  to  allow  workers  within  enterprises  to  continuously 
update their capabilities and thus be better prepared for future changes in production methods, 
organisation  of  work.  This  pathway  would  also  look  beyond  the  actual  job  and  the  actual 
employer, by putting in place systems that provide safe and successful job to job transitions in 
the case of company restructurings and redundancy. 

Pathway 3: tackling skills and opportunity gaps among the workforce. 

This  typical  pathway  is  of  interest  to  countries  where  the  key  challenge  is  large  skills  and 
opportunity gaps among the population. It would promote opportunities of low-skilled people 
to enter into employment and develop their skills in order to obtain a sustainable position at 
the labour market. 

Pathway 4: improving opportunities for benefit recipients and informally employed workers. 

This typical pathway is of interest to countries which have experienced substantive economic 
restructuring in the recent past, resulting in high numbers of people on long-term benefits with 
difficult  perspectives  of  returning  to  the  labour  market.  It  would  aim  at  improving 
opportunities for benefit recipients and shifting from informal to formal employment through 
development  of  effective  active  labour  market  policies  and  lifelong  learning  systems 
combined with an adequate level of unemployment benefits. 

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5. 

ANALYSIS OF IMPACTS 

The Communication on flexicurity is a strategic paper, suggesting a broad range of policies 
and  specific  actions  to  be  identified  and  implemented  by  each  Member  State.  More 
importantly,  the  Communication  is  the  start  of  a  process,  which  should  lead  in  the  medium 
term  to  a  better  balance  between  flexibility  and  security  in  all  Member  States.  The  actual 
impact of flexicurity will depend on how Member States implement policies on the ground. 

The analysis of impacts hereafter takes into account this specific nature of the Communication 
it aims to support. It should also be noted that, given the nature of the Communication and its 
policy area, no direct impact on the environment is expected. 

5.1. 

The impact of no additional EU action (option 1) 

As stated in the Joint Employment Report adopted in February 2007, there is a lack of action 
to  increase  the  adaptability  of  labour  markets  in  the  Member  States  despite  the  need  for 
adaptability  in  a  situation  of  globalisation  and  an  ageing  population.  This  option  does  not 
provide such an integrated approach - it is a status quo option. Many of the current problems 
of the EU labour market, as identified in the Lisbon process, remain unsolved, particularly as 
concerns  segmented  labour  markets,  long  term  unemployment  and,  more  generally,  the 
adaptability to globalisation. 

New social risks are increasingly affecting all Member States, although with varying degrees 
and  impact.  They  cannot  be  addressed  exclusively  or  separately  through  traditional  social 
protection  or  flexibility  measures.  The  challenges  to  be  addressed  are  not  just  about 
globalisation; social structures are also changing dramatically, and national social protection 
policies  are  still  often  organised  around  a  traditional,  the  stable  nuclear  family,  model.  The 
structure of public expenditure is thus often based on traditional and stable family and work 
patterns (pensions, health assistance et cetera) and ignores the new family types, immigration, 
more female employment, and lifelong learning needs. The EU and its Member States must 
respond to these new social risks as urgently as to trade and investment openness, since they 
are  all  part  of  the  same  process  of  modernisation,  although  the  nature  and  impact  of  these 
risks will vary according to the different situations or "pathways". 

5.1.1. 

Social impact 

The problems identified, with its social impacts in section 2 risk to remain and even increase. 
This  would  mean  a  highly  segmented  market  in some countries with insiders and outsiders, 
particularly  affecting  young  people  and  women.  A  high  degree  of  undeclared  work  would 
persist in many Member States. People at the margins, would continue facing difficulties in 
getting in to the labour market or making the transition from precarious jobs . Social cohesion 
will be increasing at risk in several Member States. 

5.1.2.  Economic impact 

As with the social impact, the economic impacts of the problems identified in section 2 also 
risk to remain, and increase. Companies that face or perceive high firing costs in the event of 
difficult situations or when restructuring, may be not interested in starting a new business in 
the country concerned or in expanding their business, be very reluctant to employ people on 
permanent  contracts  and  be  tempted  to  rely  on  informal  and  non-standard  employment 

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contracts.  All  this  may  result  in  a  segregated  labour  market.  The  overall  effect  will  be  less 
dynamism,  lower  investment,  and  disappointing  aggregate  demand  and  employment. 
Compared to treating the four components separately, effective use of resources and synergies 
resulting  from  combining  different  policies  in  a  consistent  framework  may  also  lead  to 
important  financial  savings.  For  given  budget  outcomes,  tax  rates  will  be  higher  or  fiscal 
resources lower to invest in productive growth enhancing areas such as education and R&D. 

5.2. 

impacts  of  a  flexicurity  approach  through  the  Open  Method  of 

The 
Coordination (option 3) 

5.2.1. 

Sub-option 1: One flexicurity approach for all 

Moving  all  Member  States  in  one  direction  via,  for  example,  a  detailed  set  of  Employment 
Guidelines,  would  imply  difficulties  since  starting  positions,  institutional  settings, 
traditions  and  budgetary  constraints  differs  between  Member  States.  Forcing  Member 
States in one direction, not adapted to their own reality, situation and labour markets would 
not  be  feasible.  A  country  with  budget  constraints  could  face  difficulties  in  implementing 
pathways that may require disbursement of public funds not covered with general taxation or 
social contributions. A strong social dialogue and development of trust that is a prerequisite 
for flexicurity in some countries can not easily be transferred into other countries. If proposed 
by the Commission, many Member States would object. 

5.2.1.1.  Social impact 

One single flexicurity approach would in most cases not be optimal since it would not address 
the  specific  problems  and  situation  in  each  Member  State.  Social  impacts  of  different 
stakeholders  and  target  groups  would  likely  not  be  addressed  properly.  This  would  mean  a 
highly segmented market in some countries with insiders and outsiders, particularly affecting 
young people and women. A high degree of undeclared work would persist in many Member 
States.  People  at  the  margins,  would  continue  facing  difficulties  in  getting  in  to  the  labour 
market  or  making  the  transition  from  precarious  jobs  (for  explanation  see  glossary).  Social 
cohesion will be at increasing risk in several Member States. 

5.2.1.2.  Economic impact 

The economic impacts, namely the impact on employment, productivity and growth, would be 
far from optimal. The reason is the same; a single flexicurity approach would not address the 
specific  problems  facing  different  Member  States.  The  outcome  could  be  similar  to  option 
one, described in 5.1.2, since the specific problems in each respective Member State could not 
be addressed through one single pathway for all Member States and the problems would not 
be solved. 

One single Danish style model could be costly39 for many Member States if adopting a model 
that demands much higher expenditure than the country currently puts on these issues. The tax 

39 

The Employment in Europe report 2006, EiE2006, notes the implied increase in passive labour market 
policy, spending that would result from the adoption of the spending intensity (per unemployed) of the 
three higher spending countries (NL, DK and BE). The unweighted increase in passive labour market 
policy expenditure across the EU would amount to 2.7 percentage points of GDP. The implied average 
increase in total spending on labour market policies as a percentage of GDP would therefore amount to 
over 4 percentage points. Increases in government expenditure would be particularly large in new and 

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burden  could  be  heavy  if  the  country’s  high  spending  on  labour  market  programmes  and 
unemployment benefits is financed through taxes40. In situations with a high unemployment 
level,  a  move  toward  increasing  levels  and  coverage  of  unemployment  benefit  and  active 
labour  market  policy  will,  in  the  short  run,  trigger  a  sharp  increase  in  the  cost,  thereby 
widening the tax wedge, with an adverse impact on labour demand and supply. This implies 
that  a  model,  involving  generous  benefit  levels  and  a  large  extent  of  active  labour  market 
policy may not be suitable for countries currently facing high unemployment and budgetary 
difficulties. 

Nonetheless  certain  key  aspects  of  a  successful  model  could  be  studied  and  considered  by 
other  countries.  This  leads  us  to  the  second  option,  different  pathways  based  on  common 
principles. 

5.2.2. 

Sub-option 2: Common principles including typical pathways 

The  Communication  will  be  a  basis  for  discussions  and  agreement  on  a  common  set  of 
principles  in  the Council. The  impact  of  the  Communication  and  the  proposed  common 
principles themselves will be that a political process will start between the Commission, the 
Member States and the other stakeholders. 

On a Member State level, the European Employment Strategy and the Lisbon Strategy will be 
implemented,  covering  flexicurity.  On  an  EU  level,  Member  States  will  through  mutual 
learning  learn  from  each  other  and  exchange  views  on  how  to  improve  flexicurity  in  their 
respective Member State. The Communication will be a framework and basis for discussion. 
Good  examples  and  policies  could  be  transferred  to  other  Member  States.  This  would  be 
enhanced in an option where different pathways are established, based on common principles. 

The  impact  of  flexicurity  will  therefore  depend  on  how  Member  States  will  define  their 
own  policies,  and  on  how  these  policies  are  implemented  at  the  national  level.  Flexicurity 
falls into the broader framework of the Lisbon Strategy and will be monitored, assessed and 
evaluated accordingly (see section 7). 

The  Employment  in  Europe  2006  report  concludes  that  a  consensus  is  emerging  among 
stakeholders, international organisations, and the academic community that countries should 
adopt institutional configurations in the labour market that better combine the requirements of 
flexibility and security – in other words “flexicurity”41. This implies that, in an environment 
where  workers  experience  more  frequent  transitions  between  employment  and  non-
employment,  and  between  different  kinds  of  employment,  policies  need  to  put  in  place  the 
right  conditions  for  individuals  to  successfully  manage  these  transitions,  thereby  ensuring 
sustainable integration and progress of individuals in the labour market. 

In addition to the Danish one, examples of other approaches to flexicurity include that of the 
UK  and  HU  of  providing  strictly  conditional  job  search  allowances  instead  of  high 
unemployment benefits, and combining efficient incentives to find a new job or participate in 

Southern  European  Member  States.  The  magnitude  of  the  resources  involved  clearly  indicates  that 
models with high spending on unemployment benefit per active labour market policy cannot easily be 
transplanted to other Member States without undergoing significant adjustments 
October 2006 IMF Country Report No. 06/342 
Employment in Europe report 2006, chapter 2.which can be found at: 
http://ec.europa.eu/employment_social/employment_analysis/eie/eie2006_chap2_en.pdf 

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training, with in-work benefits to those who take up low-paid jobs. The NL model of the Life 
Course Arrangement Scheme can also be mentioned. This scheme provides tax incentives for 
individuals  to  save  money  on  individual  accounts  which  can  be  used  later  for  several 
purposes, e.g. for training, sabbatical leaves, child rearing, early retirement etc. 

5.2.2.1.  Social impact 

The  flexicurity  approach  tailored  to  the  specific  circumstances  of  a  Member  State,  will 
contribute to solving the problems described in section 2. In short, flexicurity can contribute 
to  improving  chances  of  employment,  reducing  segmentation  and  undeclared  work;  it  can 
provide  the  employment  security  through  high  level  of  access  to  training,  subsidised  jobs 
and  social  security  measures  needed  during  the  period  of  transition  from  job  to  job;  better 
access  to  training  and  lifelong  learning  means  improvement  of  work  capacity,  higher 
productivity and longer working lives; a key objective is also to foster social dialogue on 
flexicurity. 

Flexicurity  policies  address  the  difficult  situation  of  certain  groups  on  the  labour  market.  It 
will facilitate entrance for people at the margins, in undeclared work and the transition to 
better  jobs  for  people  in  precarious  employment  overrepresented  by  the  long  term 
unemployed,  the  disabled,  youth,  immigrants,  and  women.  In  this  respect  it  can  help  to 
implement  the  European  Youth  Pact,  by  facilitating  entrance  and  providing  more 
employment  to  young  people  through  better  vocational  training  and  apprenticeships;  it  can 
contribute  to  promoting  gender  equality  and  the  European  Pact  for  Gender  Equality  by 
ensuring  better  possibilities  to  reconcile  work  and  private  live  for  both  men  and  women, 
reducing  gender  segregation  and  improving  the  situation  as  regards  employment  and  social 
security and transitions; it can also contribute to promoting non-discrimination. It can reduce 
the fear of change, breaking the vicious circle of fear of change causing rigidities which make 
the economic situation worse. 

5.2.2.2.  Economic impact 

The  appropriate  flexicurity  policies  can  contribute  to  reaching  the  Lisbon  goals  of  higher 
growth,  competitiveness,  more  and  better  jobs  and  social  cohesion.  The  positive  social 
impacts  described  above  will  contribute  to  these  objectives.  In  addition,  flexicurity  can 
constitute  a  solution  to  structural  unemployment  in  the  EU  and  can  improve  the 
competitiveness  of  European  companies;  it  will  increase  the  productivity  of  individuals 
through lifelong learning and active labour market policies; it can improve matching on the 
labour  market;  it  improves  the  adaptability  of  enterprises  which  is  especially  crucial  for 
job creation and development of SMEs (see also section 3). 

Few  studies  have  been  able  to  show  the  impact  of  a  flexicurity  approach  on  growth, 
productivity, labour markets and social cohesion. However, those countries currently having a 
more  flexicurity  orientated  approach  has  comparatively  good  levels  of  employment, 
productivity  and  growth.  Higher  growth  and  employment  rates  imply  higher  government 
revenues  which  offset  the  high  levels  of  expenditure  associated  with  extensive  social 
protection systems. There are on the other hand studies showing problems resulting from not 
having  a  flexicurity  approach,  pointing  at  specific  components  and  ingredients,  e.g.  poorly 
implemented lifelong learning, that would be changed when applying a flexicurity concept. 

In  the  reassessment  of  the  Jobs  Strategy,  the  OECD,  found  that  countries  that  often  are 
referred  to  as  having  a  flexicurity  mix  have  average  employment  protection  strictness,  high 

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generosity  in  unemployment  benefit  systems,  very  much  active  labour  market  policy,  very 
high  union  coverage.  The  employment  rate  is  high,  the  unemployment  rate  is  low  and  the 
income inequalities and relative poverty rate is lower than average42.  

5.2.2.3.  Other impacts 

Job creation 

It should be kept in mind that flexicurity pathways should be pursued in a wider context of 
sound macro- and micro-economic policies. According to the revised OECD Jobs Strategy, 
the  interaction  of  macroeconomic  policies  with  reform  packages  plays  an  important  role  in 
determining  labour  market  performance.  Flexible  and  open  product  markets  enable  firms  to 
seize  new  opportunities,  create  and  expand  businesses,  thereby  creating  jobs.  Well-
functioning  and  sustainable  capital  markets  provide  innovators  and  entrepreneurs  with 
efficient access to finance, enabling them to fund new ideas and create new businesses in the 
economy, which again has a positive effect on levels of job creation and opportunities in the 
labour market43. 

Impacts on productivity 

low-skilled  workers, 

OECD has studied the relationship between social and labour market policy and productivity, 
which for some aspects are closely related to the flexicurity concept44. The results show that 
stringent  statutory  employment  protection  for  regular  contracts  appears  to  dampen 
productivity growth, most likely by restricting the movement of labour into emerging, high-
productivity activities, firms or industries. Results for other policies are more tentative: higher 
minimum wages (not a core component of flexicurity), for example, appear to be associated 
with higher productivity, but it is unclear to what extent this occurs as the result of improved 
provision of employer-sponsored training or whether it is due to simple substitution of high-
skilled  for 
important  distributional 
consequences  whose  desirability  must  be  assessed.  Clearly,  more  research  is  needed  on  the 
channels through which minimum wages affect productivity. Family-friendly policies (again, 
not a core flexicurity component) that encourage sustained workforce participation by parents 
appear  also  to  increase  productivity  by  allowing  workers  with  family  responsibilities  to 
maintain  their  links  to  the  workforce  in  general,  and  to  their  existing  jobs  in  particular, 
although these results are somewhat sensitive to the empirical specification used. There is also 
some  scattered  evidence  that  reforms  that  reduce  the  generosity  of  the  unemployment 
benefits tend to depress productivity, by reducing the time and/or resources available to the 
unemployed  to  find  a  well-matched  job  vacancy  and  by  discouraging  firms  from  creating 
high-risk, high-productivity jobs. Yet, the overall long-run impact of lowering unemployment 
benefits  on  GDP  per  capita  (incorporating  positive  employment  effects  and  negative 
productivity effects) appears to be negligible. 

latter  channel  having 

the 

Financial impacts 

42 
43 

44 

See http://www.oecd.org/dataoecd/47/53/36889821.pdf 
These  issues  were  underlined  during  the  Hampton  Court  meeting  of  the  European  Council  (October 
27th, 2005) 
More  jobs  but  less  productive?  The  impact  of  labour  market  policies  on  productivity:  OECD, 
DELSA/ELSA/WP5(2007)2 

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35 

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Flexicurity  pathways  naturally  have  financial  implications  for  Member  States,  for  workers 
and  for  employers.  Workers,  while  changing  jobs,  may  have  to  take  recourse  to 
unemployment benefits more quickly, and possibly more often; active labour market policies 
and  lifelong  learning  may  also  require  additional  finances.  However,  more  effective  policy 
formulation  and  more  efficient  use  of  existing  budgets  is  often  crucial.  For  example, 
unemployment benefits tend to be more effective in smoothing expected income uncertainty 
when subject to proof of job search. By financing job search, unemployment benefits reduce 
the  likelihood  of  periods  of  inactivity.  The  financial  cost  of  flexicurity  should  be  placed 
against  the  direct  benefits  of  enhanced  labour  market  dynamism  and  reduced  costs  of 
restructurings  as  incurred  by  enterprises,  and  against  the  more  general  societal  benefits  of 
enhanced competitiveness, higher employment and activity rates and increased productivity. 
One study estimates that a 10% increase in ALMP spending per unemployed reduces by 0.4% 
the  unemployment  rate45.  Early  intervention  cuts  the  long-term  costs  of  unemployment, 
associated ill health and social exclusion46. It has been estimated that individuals undertaking 
on the job vocational training earn on average 5% more than those who have not47. 

Negotiations  on  flexicurity  pathways  should  take  into  account  the  need  to  share  costs  (and 
benefits), in particular between business and public budgets. 

Box 7: The financial aspects of flexicurity, as analysed by the External Experts Group 

The  External  Experts  Group  report  looks  at  the  financial  aspects  of  the  pathways,  thereby 
concluding  that  investments  do  have  to  be  made,  in  various  degrees,  either  by  the 
governments,  employers  or  workers  themselves,  but  that  in  the  long  run  the  benefits  will 
almost  certainly  outweigh  the  costs  as  labour  market  participation  will  go  up,  (long-term) 
reliance  on  social  security  benefits  will  decrease  and  administrative  costs  can  be  reduced. 
From this perspective, it  is essential that  Member States engage in a broader  debate on risk 
allocation and risk sharing and the idea of mutual risk management. 

1. Make contractual arrangements more flexible and secure 

Measures  to  reduce  asymmetries  between  typical  and  atypical  contracts  may  involve  some 
public costs if social security provisions are to be adapted to cover specific kinds of contracts 
not  previously  covered.  This  may  also  involve  costs  for  business  when  it  concerns 
entitlements  paid  for  by  the  employer,  such  as,  for  instance,  rights  to  training  or 
supplementary  pensions.  Business  also  benefits  from  a  better  trained  workforce  and  higher 
public acceptance of (former) atypical work, which may reinforce labour market dynamism. 

The  introduction  of  a  tenure  track  approach  to  work  contracts  does  not  imply  significant 
increases  in  public  expenditure.  It  may  include  some  costs  for  enterprises  when  employees 
who  would  otherwise  have  continued  to  work  on  consecutive  atypical  contracts  gradually 
increase  their  level  of  protection.  Benefits  for  government  budgets  can  be  substantial  to  the 
extent that the tenure track approach stimulates easy entry into employment, and "automatic 
progress"  into  more  secure  contractual  relationships.  This  may  increase  employment  and 
reduce the risk of falling back into unemployment. 

45 

46 

47 

Bassani  and  Duval,  "Employment  Patterns  in  OECD  Countries:  Reassessing  the  Role  of  Policies  and 
Institutions", OECD WP n° 35, 2006 
Iskra  Beleva,  Long-Term  Unemployment  as  Social  Exclusion,  Human  Development  Report,  UNDP 
1997 
De la Fuente and Ciccone, "Human capital in a global and knowledge-based economy", May 2002 

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Redesign of labour law and in particular provisions with respect to dismissal and redundancy, 
may, depending on its nature, imply a reduction in redundancy and legal costs for enterprises. 
Enterprises gain financially when economic restructuring can be conducted more quickly and 
with less administrative hurdles. Improved predictability of outcomes of dismissal procedures 
due  to  clearer  legal  rules  is  also  a  financially  tangible  asset.  In  exchange  for  redesigned 
dismissal  procedures,  employers  may  have  to  bear  part  of  the  financial  responsibility  for 
helping  redundant  workers  find  another  job.  This  may  take  the  form  of  a  personalised 
contribution to the individual worker, or of a dismissal tax, to be paid into the unemployment 
benefit  system  (as  proposed  by  Cahuc/Kramarz  and  Blanchard/Tirole),  as  far  as  this  would 
not  hinder  job  creation  and  the  hiring  of  new  staff.  Particular  attention  should  be  paid  to 
SMEs,  in  particular  micro-enterprises  with  less  than  10  staff,  that  have  limited  financial 
resources for contributing. A substantial part of financial resources that is now being used for 
redundancies,  to  "buy  off"  workers'  protection  against  dismissal,  or  to  conduct  court  cases, 
can  be  redirected  to  finance  safe  job  transitions.  Although  this  may  reduce  direct  financial 
gains  for  employers,  the  main  advantage  for  them  will  come  from  the  increased  scope  to 
conduct  company  restructuring  within  a  shorter  time  frame  and  in  a  more  predictable 
environment. 

2. Upgrade active labour market policies to strengthen transition security 

Strengthening  active  labour  market  policies  (ALMPs)  is  likely  to  imply  increases  in 
government  expenditure.  These  policies  are  usually  considered  as  a  component  of 
unemployment costs but financed directly from general government revenues (see below). In 
ALMP  literature  it  is  suggested  that  ALMPs  do  not  become  more  effective  simply  by 
increasing  total  expenditure.  Their  effectiveness  is  partly  dependent  on  the  close  interplay 
between  carrots  and  sticks  (i.e.  the  design  of  activation  policies),  quality  and  labour  market 
relevance of trajectories, a tailor-made approach to the individual’s position and preferences, 
anti-discrimination policies, combination security and dynamism on labour markets. In some 
countries,  it  would  seem  that  ALMP  expenditure  in  itself  is  high  enough  but  effectiveness 
needs to be increased. In other countries, there is clearly a need for extra resources and thus 
increased  budgetary  expenditure  (at  least  in  the  short  run).  Some  countries  having  to  make 
such investments under financially constrained conditions would be supported by EU funding, 
in particular by the European Social Fund. 

3. Lifelong learning systems 

Improved lifelong learning will require better but also more expenditure, in particular in adult 
education and training on the job. The most significant proportion of the workplace training 
costs  is  currently  borne  by  employers.  The  effectiveness  of  training  expenditures  could  be 
increased  by  pooling  resources  at  industry  level.  Through  individual  training  accounts, 
workers  can  be  given  the  right  to  a  certain  amount  of  training.  This  would  reduce 
disincentives  faced  by  employers  to  invest  in  training  resulting  from  the  present  risk  of 
"poaching".  In  addition  to  the  role  of  enterprises,  public  authorities  may  also  stimulate 
lifelong  learning,  e.g.  through  tax  deductions  and/or  through  higher  public  spending 
depending upon the specific constraints in the Member States concerned. Specific measures 
and public support concerning SMEs should be considered due to their limited resources In 
most countries workers can also be made part responsible for investments in lifelong learning 
and  the  taking  up  of  current  training  offers.  Therefore,  workers  may  also  bear  some  of  the 
costs,  but  not  necessarily  of  a  financial  nature.  A  non  direct  financial  cost  would  be 
contributing their time. 

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37 

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4.  Reform  social  security  provisions  with  a  view  of  supporting  labour  market  mobility 
and adjustment 

The financial implications of flexicurity policies may result from the need of developing an 
integrated  system  of  active  and  passive  policies.  Although  better  unemployment  benefits 
when financed via taxation or social security contributions, in principle, would not have large 
impact  on  net  public  expenditure,  the  need  of  an  institutional  setting  able  to  run  integrated 
active  and passive  policies may  entail financial costs due  to intensified ALMPs. Flexicurity 
proposals may call for redesigning employment protection legislation (EPL) in tandem with 
making  unemployment  benefit  (UB)  and  welfare  assistance  schemes  supportive  to  labour 
market mobility. Thus, at the  same  time flexicurity  also  implies  that  contractual diversity is 
complemented and supported by adequate social protection, the incentives of which provide a 
good  balance  between  rights  and  duties.  A  difference  between  EPL  and  unemployment 
benefits  is  that  expenses  linked  to  unemployment  benefits  show  up  in  government  budgets 
whereas costs associated with EPL do not. Even if the public expenses rise, the total economic 
cost of workers’ protection remains unchanged. 

Unemployment  benefits  can  be  financed  by  (1)  general  taxation  (such  as  in  Denmark),  (2) 
social contributions by employers and workers or (3) by some degree of "own contribution" 
by  the  firing  enterprise.  A  dismissal  tax  (see  above)  is  one  way  of  implementing  the  latter 
option, a system of experience rating, as operated in the US, is another. In the US, something 
between  1/3  and  2/3  of  unemployment  benefits  are  paid  by  the  firing  firm,  and  the  rest  is 
spread  evenly  across  all  enterprises.  Systems  like  experience  rating,  by  putting  a  price  on 
dismissals, run the risk of creating a disincentive for employers to hire people. This would be 
a  reason  to  limit  the  share  of  the  UB  expenses  financed  through  such  systems.  The  largest 
share  of  the  cost  of  the  unemployment  benefit  system  should  be  financed  either  through 
government  budgets  or  through  social  contributions,  evenly  spread  among  the  enterprises. 
Since the employers experience the most direct benefit from lowering the costs of dismissal 
protection  (EPL),  it  would  seem  fair  that the  (extra) UB  expenses linked to such  a shift are 
borne by them. 

Tax  reforms  could  also  serve  as  an  important  step  within  flexicurity  pathways.  Lowering 
taxes  on  wages  (to  be  offset  by  e.g.  an  increase  in  green  taxes  or  consumption  taxes  and 
targeted tax allowances or tax credits could be instruments for increasing the possibilities of 
better integrating marginalised groups into the labour market. Reduced low-wage taxes could 
also  limit  the  informal  sector  and  thus  integrate  informal  workers  into  mainstream 
employment. 

The European Social fund for the 2007-2013 programming period can provide a significant 
Community  financial  contribution  for  Member  State  to  support  flexicurity  approach,  for 
example  by  providing  funds  for  training  at  company  level,  in  particular  in  SMEs  or  active 
labour  market  measures  including  job  finding  assistance  for  the  unemployed.  In  addition  to 
the ESF, which has a major role to play, the European Regional Development Fund and the 
European Agricultural Fund for Rural Development can also contribute to flexicurity policies. 

5.2.2.4.  Impact on Third Countries 

Flexicurity aims at increasing jobs, growth and the competitiveness of European firms. Better 
resource  allocation  will  be  expected.  More  adaptable  labour  markets  would  mean  that 
companies  would  be  more  inclined  to  invest  in  Europe  raising  employment  and  effective 
demand. Higher demand at a macro level in Europe could have a positive effect on imports 

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38 

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from,  and  thus  income  in,  third  countries.  Successful  flexicurity  approaches  in  the  Member 
States, taking advantage of the positive aspects of globalisation would lead to over all growth. 

5.2.2.5.  Obstacles to compliance 

For  successful  implementation  of  a  flexicurity  approach,  Member  States  and  the  social 
partners need to be committed to reform. In this respect, consultation on a national level is 
crucial;  with  social  partners  in  particular.  In  addition,  effective  implementation  of  the 
policies  needed  is  vital.  Among  the  most  important  possible  impediments  to  flexicurity 
policies are financial constraints (5.2.2.3.3 and Box 7) and political constraints (1.2.3). 

Compliance also might require re-allocation of funding. As regards EU support it should be 
recalled  that  the  2007  –  2013  programming  structure  of  European  Structural  Funds,  the 
European Social Fund (ESF) is perfectly adapted to financing flexicurity policies in Member 
States.  For  the  2007-2013  programming  period,  the  ESF  will  devote  13  billion  Euros 
specifically to enhance the adaptability of workers, enterprises and entrepreneurs through the 
development of systems and strategies for lifelong learning in companies. Another 22 billion 
Euros will support ALMPs including access to employment and the sustainable inclusion in 
the  labour  market  of  job  seekers  (especially  long  term  unemployed)  and  inactive  people. 
Further, as a new priority, ESF will also support strengthening institutional capacity and the 
efficiency  of  public  administrations  across  all  areas  of  government  (including  regional  and 
local level) with approximately 2.5 billion Euros. 

5.2.2.6.  Administrative costs 

A flexicurity approach through the Open Method of Coordination would be implemented via 
the existing  policy and administrative  instruments, both nationally and  at EU level;  through 
the  EMCO  and  the  Employment  Strategy  within the new Lisbon cycle for the period 2008-
2010.  The  same  applies  to  reporting,  monitoring  and  evaluation,  as  explained  in  section  7 
hereafter. Therefore, there would be no significant additional administrative cost either for the 
Commission or for Member States. 

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6. 

COMPARING OPTIONS 

6.1. 

No additional EU action versus EU action 

Looking at the impacts of these two options, there is a clear value added of EU action in the 
field  of  flexicurity  (see  section  3).  With  no-additional  EU  action,  we  would  have  the  status 
quo. Through the employment guidelines and the Lisbon Strategy, the different components 
of flexicurity are included. The Joint Employment Report48 has however shown that flexibility 
and security mostly are treated separately and that the problems described in section 2, with 
for example a need for more adaptable labour markets are not met. 

6.2. 

Comprehensive legislation at EU level versus the Open Method of Coordination 

For most of the flexicurity components, legislation seems not to be an option either through 
lack of relevance or current lack of political will. Member States have signalled that they are 
not interested in EU legislation on for example active labour market policy or social security 
arguing  for  subsidiarity.  Member  States  have  indicated  that  there  is  an  interest  for 
coordination  in  the  field  of  flexicurity  through  common  principles49.  Most  areas  within  the 
flexicurity  concept  fall  under  the  competence  of  the  Member  States.  The  flexicurity 
Communication is however a first step in a process and appropriate legislation at an EU level 
might be considered in the future. 

6.3. 

One single flexicurity model versus different pathways and common principles 

Looking at the impacts of these two options and given that starting positions, institutional 
settings,  traditions  and  budgetary  constraints  differs  between  Member  States,  no  single 
flexicurity model seems feasible for all. Member States cannot and should not be expected to 
follow  the  same  path,  hence  the  second  option,  one  single  model,  seems  not  optimal  (and 
politically unrealistic). 

Many  Member  States  do  however  face  common  problems,  for  example:  segmented  labour 
markets where some workers enjoy a high degree of security while others are trapped in less 
secure employment or undeclared work with fewer opportunities to progress into better jobs. 
Different pathways with policies based on flexicurity can help overcome this dichotomy, by 
improving opportunities for people to enter the labour market and move from one job into a 
better one, or from temporary contracts into more stable work relationships. 

Building on the idea that Member States are different and have different starting positions, the 
Experts Group on Flexicurity appointed by the Commission (see section 1) has analysed the 
differences  and  similarities  between  Member  States  with  respect  to  flexicurity  and  its 
components. On this basis they were able to define a series of "typical flexicurity pathways". 
These  pathways  describe  the  challenges  shared  by  different  types  of  situations  to  which 
Member  States  can  relate,  and  the  sets  and  combinations  of  measures  that  could  improve  a 
country's  performance  in  terms  of  flexicurity.  The  report  has  served  as  an  input  for  the 
Communication. 

48 
49 

Joint employment report 2006/2007, adopted on 23rd of February 2007, doc number 6706/07 
The conclusions can be found at: 
http://www.consilium.europa.eu/ueDocs/cms_Data/docs/pressData/en/ec/89013.pdf 

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40 

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The  option  of  "flexicurity  pathways  building  on  common  principles"  acknowledges  and 
underlines the differences in the starting points linked to the specific situations of Member 
States. It also show that different flexicurity pathways reflect underlying "common principles" 
of  flexicurity;  for  example,  the  need  for  broad  support  from  workers,  business  and  other 
relevant  actors  in  society;  the  need  to  take  into  account  the  interest  of  insiders  as  well  as 
outsiders on the labour market; or the importance of a climate of trust between social partners 
in which all the actors concerned accept responsibility for change. 

It needs to be highlighted that Member States themselves are to choose which pathway(s) 
they  relate  to  (and  there  might  be  examples  of  Member  States  feeling  that  they  belong  to 
several pathways). This, of course, will mean a considerably more challenging coordination 
role for the EES than with a single model. 

Box 8: Comparing the options at the stakeholder conference 

At the stakeholder conference on the 20th April there was a general view that the status quo is 
not an option and that the flexicurity issue must be addressed (see box 2). The stakeholders, 
including  Ministers,  social  partners,  non  governmental  organisations  and  the  European 
Parliament, stressed that one size does not fit all and showed an interest in different pathways 
and  principles.  They  also  stressed  the  role  of  the  open  method  of  coordination.  Many 
stakeholders highlighted the complications that would arise with a legislative approach. 

This  underscores  the  attractiveness  of  the  third  option,  and  in  particular  sub-option  2  of 
common principles including typical pathways. 

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7. 

MONITORING AND EVALUATION 

7.1.  Monitoring 

The  flexicurity  concept  does  not  imply  any  new  process  and  no  new  Open  Method  of 
Coordination.  Flexicurity  policies  are  in  the  field  of  the  existing  Open  Method  of 
Coordination  within 
the  Lisbon  Strategy  and  Employment  Strategy  and  policy 
implementation is therefore decided on at Member States' level. According to article 127 in 
the EC Treaty, the Community shall contribute to a high level of employment by encouraging 
cooperation between Member States and by supporting and, if necessary, complementing their 
action. In doing so, the competences of the Member States should be respected. 

Monitoring  and  measuring  progress  in  Member  States  on  flexicurity  parameters  will  be 
possible using the instruments in place in the context of the Employment Strategy and the 
Open Method of Coordination in social protection and social inclusion. Most of the necessary 
indicators  are  already  agreed  with  the  Member  States  and  data  are  available  on  a  regular 
basis.  Together  with  the  Employment  Committee  and  the  Social  Protection  Committee,  DG 
EMPL is identifying a set of indicators relevant for each of  the four elements of  flexicurity 
(flexible  contractual  arrangements,  lifelong  learning,  active  labour  market  policies,  and 
modern social security systems), as well as outcomes (in particular the contribution to labour 
market dynamism, employment and reduction of long-term unemployment). Joint work with 
the Joint Research Centre on composite indicators of flexibility and security will complement 
this. (see annex 1). The on-going work with the Member States on indicators and monitoring 
should help ensure the proper implementation of flexicurity policies. 

The Employment Guidelines, as a part of the integrated guidelines for growth and jobs, set 
out  common  priorities  for  Member  States'  employment  policies.  Next  year,  a  new  cycle  for 
the  years  2008-2010  begins  and  a  revised  guideline  package  will  be  adopted.  The 
Commission  aims  to  propose  that  flexicurity  will  be  integrated  better  in  the  employment 
guidelines.  This  will  allow  better  follow  up  and  monitoring  of  the  process  achieved  in  the 
Member States. Moreover, Member States could be asked to report in their National Reform 
Programmes  about  progress  made  and  problems  encountered  with  the  selection  and 
implementation of the chosen flexicurity pathway or of a combination of different pathways. 
It  should  be  underlined  that  Member  States  will  be  encouraged  to  explain  how  they  have 
ensured proper stakeholder support for these pathways. 

7.2. 

Evaluation 

Member States National Reform Programmes for jobs and growth and the Implementation 
Reports, taking the employment guidelines into account, will allow the Commission to follow 
up  and  evaluate  progress  towards  flexicurity  for  each  Member  State.  Member  States  are 
themselves  evaluating  each  others  progress  in  implementation  of  reforms  in  the  multilateral 
country examination. 

The Employment Committee, EMCO, will continue its work on flexicurity in 2007. A Sub-
Group,  the  Ad  Hoc  Group,  will  provide  support  by  making  a  review  of  good  practices  for 
each  of  the  four  ingredients  of  the  flexicurity  (contractual  arrangements  including  internal 
flexibility,  lifelong  learning  strategies,  active  labour  market  policies,  and  social  security 
systems). 

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The Commission will be able to evaluate progress in outcome and in the different components 
of  flexicurity  through  agreed  quantitative  indicators  (see  annex  2).  The  role  of  the  other 
EMCO Sub-group, the Indicators’ group, together with the Indicators Sub-group of the Social 
Protection Committee, is to provide technical advice and support and to develop, revise and 
improve indicators. A broad range of indicators do already exist to evaluate the employment 
guidelines,  including  key  aspects  of  flexicurity.  Moreover,  DG  Research  is  sponsoring  a 
network to identify existing data sources that are of relevance to the tension between labour 
market  flexibility  and  socio-economic  security50.  Also  relevant  forthcoming  research  under 
the  7th  Research  Framework  Programme  with  a  specific  attention  to  issues  related  to 
growth,  employment  and  competitiveness  in  a  knowledge  society  will  support  the 
Commission and Member States in developing flexicurity policies. 

***

50 

In close cooperation with the RECWOWE European Data Centre (EDACwowe) the aim is to produce 
data  inventories  that  clearly  point  to  the  whereabouts  of  data  sets  containing  relevant  indicators  (see 
www.RECWOWE.EU). 

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Annex 1: background indicators of flexicurity used to support the assessment 

Indicators  are  currently  discussed  by  the  Member  States  and  Commission  within  the 
Indicators  Group  of  the  Employment  Committee.  Discussions  are  also  ongoing  in  the 
indicators  group  of  the  Social  Protection  Committee,  especially  with  regard  to  the  fourth 
component  of  flexicurity  (modern  social  security  systems).  The  indicators  below  were 
presented to both indicator groups, and work is now ongoing to develop a comprehensive list 
to monitor flexicurity: 

Flexible contractual arrangements through modern labour laws 

•  Indicator  of  the  strictness  of  employment  protection,  total,  for  permanent  and  for  non-

permanent employees (OECD; Index scale 1 to 6). 

•  Share of employees with fixed-term contracts (EUROSTAT) 

•  Share of employees with part-time contracts (EUROSTAT) 

Credible lifelong learning systems 

•  Percentage  of  the  total  population  25-64  participating  in  education  and  training 

(EUROSTAT) 

•  Educational  attainment  of  age  cohorts  45-54  and  25-34  (share  of  the  population  with  at 

least upper secondary education (OECD) 

•  Active Labour Market Policies 

•  Expenditure on ALMPs, as a percentage of GDP as well as the expenditure intensity per 

unemployed (EUROSTAT) 

•  Share of adult workers not having received a new start within 12 months (EU target) 

Modern social security systems 

•  Net replacement ratios in the first year as well as after 5 years (OECD) 

•  Degree of strictness in the availability rules of labour market policies (Danish Ministry of 

Finance, 2005) 

•  Coverage  of  unemployment  benefits  for  flexible  workers,  which  includes  part  time, 

temporary and self-employed (ALPHAMETRICS) 

•  Unemployment trap (EUROSTAT) 

•  Tax wedge on labour cost (EUROSTAT) 

Labour market outcomes 

•  Employment rates, total, for women, and for older workers (EUROSTAT) 

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•  Unemployment rates for young people 15-24 (EUROSTAT) 

•  Labour turnover (EMPL) 

•  Long-term unemployment (EUROSTAT) 

•  Labour productivity (EUROSTAT) 

•  Growth in labour productivity (EUROSTAT) 

•  Undeclared work as a percentage of GDP (Regioplan and Inregia 2004) 

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45 

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Annex 2: glossary 

Lifelong  learning  comprises  both  formal  school  education  and  learning/training  of  the 
workforce  (continuous  training  of  workers,  training  of  the  unemployed  and  inactive). 
"Lifelong  learning  must  be  understood  as  all  learning  activity  undertaken  throughout  life, 
with  the  aim  of  improving  knowledge,  skills  and  competences  […]",  Council  Resolution  on 
lifelong learning of 27 June 2002. 

Labour market policies (LMPs) are essentially public interventions in the labour market that 
are targeted towards particular groups in the labour market. LMPs are generally grouped into 
either active or passive measures.  Active labour  market policies (ALMPs) aim to increase 
the  unemployed 
the 
persons/groups  who  find  it  difficult  to  enter  the  labour  market.  Passive  labour  market 
policies  (PLMPs)  aim  to  provide  income  support  to  unemployed  people  or  early  retirees, 
without, a priori, attempting to directly improve their labour market performance. 

likelihood  of  employment  or 

income  prospects  for 

improve 

Labour market segmentation. In traditional economic thought the labour market is assumed 
to  be  one  single  entity.  Labour  market  segmentation,  sometimes  know  as  "dual  labour 
markets"  or  "insiders  and  outsiders"  describes  a  labour  market  that  is  not  a  homogeneous 
entity, but is composed instead of two or more segments. The mechanisms and structures at 
work with regard to job security, access to training, salaries, etc. differ fundamentally among 
segments.  The  secondary  sector  can  be  characterised  by  low-wage  jobs,  less  restrictive 
employment protection legislation, less access to training, and a high degree of job insecurity. 
The primary sector, on the other hand, can be characterised by high-wage jobs, better access 
to training, and job security. Mobility between the sectors tends to be restricted. 

People  at  the  margins.  People  who  mainly  due  to  low  skills  have  difficulty  finding  stable 
employment  and  as  a  consequence  are  more  dependent  on  benefits  and  social  services  (e.g. 
public employment services) than other groups can be referred to as the people at the margins 
of the labour market. (See EMCO Working Group Report on: "Enhancing higher productivity 
and more and better jobs including for people at the margins of the labour market", 2006). 

Precarious work is a term used to describe non-standard employment which may be poorly 
paid, possible undeclared, insecure, and unprotected. 

Transitions  are  changes  from  one  status  to  another.  For  example  transition  can  take  place 
between unemployment and work or a transition can take place from one job to another. 

The  Open  Method  of  Coordination  rests  on  guidelines  and  indicators,  benchmarking  and 
sharing  of  best  practice  (so  called  mutual  learning,  see  below)  and  is  often  termed  as  "soft 
law".  This  means  that  there  are  no  official  sanctions  if  Member  States  do  not  meet  the 
recommendations,  targets  etc.  Rather,  the  method's  effectiveness  relies  on  a  form  of  peer 
pressure and the desire of Member States to implement effective policies. Mutual learning is 
one key component in the Open Method of Coordination. The main objective is to encourage 
exchange  of  good  practice  and  that  Member  States  and  stakeholder  should  learn  from  each 
other. Key to this is identifying the transferability of good practices. 

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