Communication from the Commission - Key messages from the Employment in Europe 2009 Report
Date: 2009-11-23
Institutions: European Commission
Subjects: EU employment policy, European Employment Strategy, economic recession, environmental protection, knowledge economy, labour market, labour mobility, report, unemployment

EN 

EN 

   EN 

 
 
COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 23.11.2009 
COM(2009)639 final 

COMMUNICATION FROM THE COMMISSION 

Key messages from the Employment in Europe 2009 Report  

EN 

   EN 

 
 
 
  
COMMUNICATION FROM THE COMMISSION 

Key messages from the Employment in Europe 2009 Report  

1. INTRODUCTION  

The unprecedented crisis in global financial markets which gathered pace in autumn last year 
has  led  to  the  severest  recession  since  World  War  II,  affecting  the  global  economy  and 
increasingly impacting on EU labour markets. After several years of relatively high economic 
growth  and  job  creation  (9.7  million  new  jobs  in  the  period  2005-2008  alone),  pushing 
Europe's employment levels to historical highs, the global crisis is hitting businesses, jobs and 
households  and  increasingly  affecting  the  livelihoods  and  prospects  of  EU  citizens.  The 
sudden  reversal  of  employment  growth  has  set  new  challenges  for  policy  making.  As 
unemployment  continues  to  rise,  the  spotlight  has  fallen  on  limiting  the  social  impact  and 
creating  favourable  conditions  to  support  rapid  transitions  back  to  work  once  economic 
activity recovers.  

In  a  coordinated  response,  the  EU  has  taken  important  steps  to  address  the  impact  of  the 
crisis.  Last  autumn  the  EU  took  the  necessary  steps  to  prevent  a  meltdown  in  financial 
markets  and  to  provide  a  broad  response  to  the  crisis.  In  December  2008,  the  European 
Council  endorsed  the  European  Economic  Recovery  Plan  (EERP)1  to  cushion  the  effects  of 
the  recession  and,  at  its  meeting  in  spring  2009,  identified  the  following  key  priorities  for 
employment policies:  

•  maintaining employment, creating jobs and promoting mobility  

•  upgrading skills and matching labour market needs  

•  increasing access to employment 

Building on this common effort and on the extraordinary Employment Summit held on 7 May 
2009, the Commission published in June its Communication entitled 'A Shared Commitment 
for Employment', aiming to strengthen cooperation between the Union and its Member States 
as  well  as  between  the  social  partners,  on  the  three  key  priorities,  focussing  on  concrete 
actions  supported  by  all  the  available  Community  instruments,  particularly  the 
European Social Fund and the Globalisation Adjustment Fund. 

The new economic context shaped by the global crisis has highlighted not only the need for 
more  up-to-date  monitoring  and  analysis  of  the  labour  market  situation,  which  has  been 
addressed in part by the Commission's publication of a new monthly monitoring report2, but 
also  for  further  research  on  ways  to  limit  the  negative  impact  of  the  crisis  on  labour 
markets  and  better  position  them  so  they  are  well  placed  to  respond  to  the  recovery 
when it comes and to prepare them against future crises. 

1 
2 

COM(2008) 800 
Available  on  the  website  of  DG  Employment,  Social  Affairs  and  Equal  Opportunities  at 
http://ec.europa.eu/social/main.jsp?catId=120&langId=en 

EN 

2 

   EN 

 
                                                 
In this context, the current, already the 21st edition of the annual Employment in Europe report 
focuses  on  two  themes  crucial  (although  certainly  not  exhaustive)  to  the  ongoing  debate  on 
the  orientations  of  the  future  European  Employment  Strategy  -  dynamics  of  European 
labour markets and the implications of climate change for labour market outcomes. 

Analysis  of  labour  market  flows  becomes  critical  in  times  of  crisis  to  enable  timely  policy 
response,  especially  measures  to  foster  re-employment,  and  limit  the  incidence  of  long-
term  unemployment,  which  can  lead  to  permanent  losses  in  welfare  associated  with  the 
deterioration of human capital. Preventing the worst-case scenarios in this respect is therefore 
not only the precondition to a successful tackling of the current crisis, but also a cornerstone 
to the building of a structurally sound and internationally competitive European economy for 
the future. 

At the same time, a shift towards a competitive low-carbon, knowledge-based economy has 
become  a  pressing  priority  requiring  immediate  action.  The  scope  for  creating  new  'green 
jobs'3  and  for  greening  of  existing  jobs  in  Europe  is  significant  and  covers  all  types  of 
workers.  Nevertheless,  in  order  to  exploit  these  opportunities  effectively,  adequate  policies 
must  be  put  in  place,  based  on  a  solid  understanding  of  the  key  trends  underlying  both 
adaptation to and mitigation of the impact of climate change. 

2. KEY TRENDS, FINDINGS AND POLICY IMPLICATIONS 

Crisis  takes  its  toll  on  EU  labour  markets,  reversing  most  of  the  employment  growth 
achieved since 2000 

The  current  recession  is  expected  to  significantly  affect  EU  labour  markets  and  lead  to 
substantial rises in unemployment, although in certain Member States job losses to date have 
been restrained thanks to the use of arrangements such as shorter working hours or temporary 
partial unemployment4. 

However, even if labour markets have proven to be more resilient, Europe is still expected to 
lose  more  than  seven  million  jobs  over  2009-10,  and  unemployment  could  reach  over 
10%  by  20105.  Indeed,  as  employment  reacts  to  economic  conditions  with  a  certain  lag, 
labour market conditions will continue to worsen for some time even after the economy enters 
a recovery path. 

All  this  represents  a  significant  setback  for  reaching  the  Lisbon  targets  for  2010.  Since  the 
beginning  of  the  Lisbon  Strategy,  considerable  progress  has  been  made  in  the  employment 
policy  area  -  the  overall  employment  rate  has  risen  by  close  to  four  percentage  points, 
reaching 65.9% in 2008, while the employment rates for women and older workers have also 
increased substantially, attaining 59.1% and 45.6% respectively in 2008.6 Unfortunately, the 

3 
4 

5 
6 

Bearing in mind all the definitional problems with 'green jobs' discussed more in detail in the report 
For  similar  observations,  see  also  e.g.  Labour  market  and  wage  developments  in  2008,  European 
Economy 8/2009 
European Commission economic forecast, autumn 2009, European Economy 10/2009  
Although  it  must  be  acknowledged  that  this  progress  often  coexisted  with  significant  numbers  of 
workers in precarious jobs and persistent levels of in-work poverty 

EN 

3 

   EN 

 
                                                 
current economic recession is expected to largely reverse that growth7, leading to employment 
rates moving away from the respective targets between 2008 and 2010.  

This  crisis  is  characterised  by  the  severity  of  impact  on  some  groups  of  workers  more  than 
others. In particular, workers with fixed-term or temporary contracts have borne the brunt of 
the  employment  contraction  while  unemployment  among  young  people  has  reached  new 
historical  highs  over  recent  months.  These  trends  highlight  a  need  for  intensified  action  to 
tackle youth unemployment and reduce labour market segmentation. 

labour  markets  display  a  high  degree  of  dynamism  pointing 

EU 
improvement… 

to  structural 

EU  labour  markets  have  demonstrated  considerable  dynamism  in  recent  years.  Over  the 
period from 2002 to 2007, average annual labour turnover8 amounted to 22%, which indicates 
that every year between one fifth and one quarter of all European workers change jobs. 

Such labour market dynamics are not just limited to countries usually considered as 'flexible', 
such as the UK or Denmark, but concern all Member States, although annual labour turnover, 
relative to total employment, ranges from 14% in Greece and 16% in Sweden to between 25 
and 30% in the UK, Finland, Spain and Denmark. 

The extent of labour turnover varies considerably between different groups of workers. Flows 
tend to be substantially higher for women than for men (five percentage points difference at 
aggregate EU level) with only a few exceptions (Estonia, Poland and Sweden). Turnover rates 
for  young  workers  (15  to  24)  stand  at  about  70%  of  their  employment  level,  being  much 
larger  than  those  of  prime-age  and  older  workers.  At  the  same  time,  turnover  rates  tend  to 
decrease with the level of education, although to different degrees across Member States.  

Sectoral differences account for a much larger fraction of overall variability in EU hiring rates 
compared  to  differences  between  countries  or  the  effects  of  the  economic  cycle,  underlying 
the importance of sector-specific technological, organisational and demand factors in driving 
labour dynamics.  

It is difficult to draw definite conclusions about the desired or 'optimal' levels of labour 
turnover.  While  more  rigid  labour  market  institutions  tend  to  create  obstacles  to  the 
reallocation of labour from declining to expanding activities, high labour turnover can also be 
associated with welfare costs, such as high frictional unemployment, matching costs, a loss of 
specific human capital, as well as possible higher spending on unemployment benefits.  

In  line  with  the  evidence  on  labour  turnover,  the  stock  of  unemployed  is  not  static  being 
affected by large in and out flows. On average during the period 2002-2007, nearly a third 
of unemployed people, and about 10% of inactive people, found a job within one year. 
However, such unemployment-to-employment transition rates range from 40% or more in the 
UK, Spain, Portugal and the Netherlands to 25% or below in Germany, Greece, Poland and 
Belgium; while inactivity-to-employment transition rates range from 15% or more in Sweden, 
the UK and Denmark to 3 and 4.5% in Greece and Italy.  

7 

8 

It  must  be  noted,  however,  that  the  improvements  since  2000  have  been  mostly  structural  while  the 
recent deterioration is to some extent cyclical 
Labour  turnover  measures  the  number  of  workers  who  either  change  employment  status  or  move 
between jobs 

EN 

4 

   EN 

 
                                                 
A  sustained  rise  in  the  trend  components  of  both  unemployment-to-employment  and 
inactivity-to-employment transition rates (which are considered as the 'positive' labour market 
transitions)  has  occurred  since  the  second  half  of  the  1990s  in  the  EU,  suggesting  a 
fundamental structural improvement in our labour markets during this period9.  

In relation to worker characteristics, unemployment-to-employment transition rates for older 
workers (aged 55-64) are less than a third of those for prime-age workers (aged 24-54). Also, 
more highly educated unemployed or inactive people have a substantially higher probability 
of moving back into employment (compared with low and medium skilled groups).  

…but long-term unemployment remains a problem 

Although  the  long-term  unemployment  rate  in  the  EU  declined  since  the  mid  1990s,  the 
incidence  of  long-term  unemployment  and  its  duration  remains  a  problem  to  be  tackled.  In 
Europe, on average during the period 2005-2007 close to 45% of all unemployment spells in 
progress  lasted  longer  than  a  year,  compared  with  only  about  10%  in  the  US,  raising 
concerns on both equity and efficiency grounds.  

Gender gaps in average unemployment duration are very small across the EU (12 months for 
women  against  11.7  for  men).  However,  unemployment  duration  tends  to  increase  with  age 
and  decreases  with  the  level  of  education  (12.3  months  for  the  low-skilled  unemployed, 
compared to 8.1 months for the skilled unemployed).  

The recession has also highlighted several issues concerning the appropriate measurement 
of unemployment, namely the insufficiency of relying exclusively on the unemployment rate 
as indicator for policy purposes.  

Although  requiring  further  research,  preliminary  results  suggest  that  the  usual  statistics  of 
unemployment duration based on incomplete spells (i.e. spells still in progress at the time of 
observation)  tend  to  overlook  many  short  spells  of  unemployment  that  occur  between 
observation  periods,  leading  to  an  over-estimation  of  the  average  duration  of  completed 
spells.  In  the  EU  over  the  2005-2008  period,  the  average  duration  of  completed  spells  in 
unemployment was just about one-half of the measurement calculated using incomplete spells 
i.e. the official statistic.  

Although a measurement based on completed spells would be more appropriate for assessing 
the welfare implications of unemployment, the usual statistic of unemployment duration has a 
number of practical advantages in terms of timeliness, transparency, data availability and ease 
of calculation, which justify its continued use, despite the possible bias.  

Additionally, an evaluation of a number of aspects related to unemployment duration, such as 
its  relation  with  the  multiplicity  of  unemployment  spells,  needs  to  use  longitudinal  data.10 
Three  particular  aspects  are  associated  with  the  use  of  longitudinal  data  to  measure 
unemployment duration. First, their use allows for a more comprehensive coverage of shorter 
spells  of  unemployment.  Second, 
long-term 
unemployment  to  be  calculated,  which  are  robust  to  short  interruptions  of  unemployment, 
such  as  the  fraction  of  unemployed  persons  spending  a  total  of  12  or  more  months  in 
unemployment  over  a  number  of  years.  Third,  the  data  can  be  used  to  monitor  multiple 

they  enable  alternative 

indicators  of 

9 
10 

This is also confirmed by developments in 'bad' transitions (or the net transitions) 
From EU Statistics on Income and Living Conditions (EU SILC) 

EN 

5 

   EN 

 
                                                 
unemployment  spells,  allowing  the  calculation  of  unemployment  duration  statistics  per 
number of spells.  

The  above  considerations  clearly  indicate  the  need  to  calculate  various  indicators  of 
unemployment duration, assessing their relative merits. This is particularly important during 
severe recessions, which are associated with significant rises in unemployment duration that 
might have major negative and long-lasting impact on the employability of those affected. 

Supporting  positive  labour  market  transitions  –  key  to  lowering  unemployment  duration 
and preserving employability 

The  probability  of  leaving  unemployment  decreases  with  duration  (i.e.  'negative  duration 
dependence');11  in  part  because  employability  tends  to  decline  the  longer  people  are  away 
from  the  labour  market.  Thus  a  rise  in  unemployment  duration,  following  an  economic 
downturn, may become entrenched, transforming a cyclical problem into a structural one. 
In this context, adequate policy responses may involve, inter alia, better targeting of spending 
on active labour market policies (ALMP) towards those most at risk of staying unemployed 
for  long  periods,  or  of  becoming  inactive,  including  using  profiling  techniques.12  Through 
relevant  education  and  training  programmes,  this  investment  may  help  the  most-at-risk  to 
acquire the key competences and skills, which are necessary to succeed in the labour market. 

A simple econometric cross-country analysis of the impact of various types of policies on the 
incidence  of  long-term  unemployment  as  shown  in  the  report  suggests  that  strict 
employment  protection  legislation  tends  to  raise  long-term  unemployment,  while 
spending on labour market policies tends to reduce it.13  

Flexicurity  principles  argue  for  focusing  on  protecting  and  supporting  workers  in 
undertaking 'good' transitions in the labour market, rather than preserving particular jobs. 
The econometric results provide broad support for this approach, with the specific prospect of 
lowering long-term unemployment.  

Low-carbon policies will become a significant driver changing EU employment structures  

The EU policy efforts14 aimed at a transition towards a competitive low-carbon, knowledge-
based  economy  of  the  future  will  become  driving  forces  from  a  labour  market  perspective. 
These  drivers  will  have  an  impact  on  the  structure  of  the  economy  because  they  will  affect 
how and which goods and services are produced, imported and exported and because they will 
also  affect  the  demand  for  goods  and  services  through  their  impact  on  the  behaviour  of 
consumers, employees and employers, and public authorities.  

11 

12 

13 

14 

Although after controlling for individual characteristics, the magnitude of this effect seems to be rather 
limited 
Individuals profiled are those most at risk of becoming long-term unemployed, being referred to various 
ALMPs 
This analysis does not find a significant effect of incentives linked to tax-benefit systems on long-term 
unemployment 
These include initiatives to improve energy efficiency, to develop renewable energy sources, to capture, 
store  and  process  CO2  and  other  harmful  emissions,  to  modernise  the  European  infrastructure 
(including transport networks and supply), to integrate environmental responsibility in business models, 
to  promote  environmentally  friendly  land  use  and  agriculture,  and  to  create  conditions  conducive  to 
climate related research and innovation 

EN 

6 

   EN 

 
                                                 
The underlying structural changes will involve re-allocation of workers and different effects 
across economic sectors, skill types, and regions. On the whole, however, the impact on the 
overall employment level should be limited and possibly slightly positive (at least in the long-
run - provided that adequate policies are implemented).  

This will be best seen in changes in the sectoral composition of employment. There will be 
the creation of new green jobs, greening of existing jobs, and the loss of some existing jobs. 
In addition, indirect knock-on effects will ripple through the economy and affect employment 
via price, wage and income effects.  

Not all employment effects will be permanent as for instance the labour intensities  in  the 
production of new products and new production processes will decline as technologies mature 
and  an  important  part  of  the  employment  gains  will  disappear  once  the  production  and 
installation of new infrastructure has been completed. On the other hand, competitive markets 
should  ensure  that  companies  continue  to  innovate  and  invest  in  new  technologies  and 
production  processes,  thereby  continuing  to  keep  and  create  new  jobs  associated  with  the 
production and installation of new infrastructure. 

The  transition  to  a  low-carbon,  knowledge-based  economy  might  favour  high-skilled 
employment  at  least  initially.  In  an  initial  phase,  high-skilled  workers  will  benefit  more  as 
transitions to  new activities  call  for the implementation of advanced  technologies for  which 
only  the  high-skilled  have  the  necessary  qualifications,  with  the  introduction  of  new  'green' 
technologies  increasing  the  demand  for  corresponding  skills,  and  rendering  obsolete  others. 
However, with market deployment of new technologies, lower-skilled workers should also be 
able to fill these jobs – provided they receive adequate training. 

The  employment  effects  of  the  transition  will  also  contain  a  regional  dimension,  reflecting 
different  initial  starting  points  regarding  regional  weather  conditions,  the  characteristics  of 
local economic activity, as well as specific features of local labour markets.  

Labour  market  policy  response  to  climate  change:  support  transitions;  focus  on  skills, 
social dialogue 

In  view  of  the  expected  structural  economic  changes,  there  is  a  strong  case  to  be  made  for 
promoting labour market policies that ease transitions so that workers can be encouraged and 
helped  to  become  receptive  to  experimental  innovations  as  they  shift  towards  less  polluting 
activities.  In  particular,  adequate  training  and  education  schemes,  inside  and  outside  of 
enterprises, are required to avoid the emergence of skill gaps and shortages. The "New 
Skills for New Jobs" initiative has mobilised community instruments to anticipate and match 
labour  market  skills  needs.  The  European  Social  Fund  (2007  –  2013)  has  budgeted  €  13.5 
billion for adaptability measures in support of this. Such policies should be complemented by 
appropriate  measures  to  promote  the  anticipation  and  management  of  restructuring  in  a 
socially  responsible  way,  involving  all  main  stakeholders.  In  this  connection,  it  is  vital  to 
guarantee  workers'  rights  to  information  and  consultation  in  line  with  existing  EU 
Directives15. Appropriate room should also be left for social spending focused on items that 
support and accommodate the transition process in an active way.  

15 

See inter alia Directive 2002/14/EC of the European Parliament and of the Council of 11 March 2002 
establishing a general framework for informing and consulting employees in the European Community, 

EN 

7 

   EN 

 
                                                 
In  order  to  support  the  development  of  labour  market  policies  that  promote  the  creation  of 
more  and  better  jobs  for  all  in  a  sustainable  economy,  further  research  should  be  aimed  at 
strengthening the EU capacity for assessing the employment effects of a transition to a 
low-carbon, knowledge-based economy, and social dialogue should be reinforced in order to 
ensure that structural change in relation to climate change is achieved in a way that is efficient 
and acceptable from both economic and social perspectives. 

The  current  economic  downturn  should  not  hinder  the  speed  and  direction  of  the  transition 
process, as tackling climate change and other environmental challenges provides a major 
opportunity to create new jobs. 

3. CONCLUSIONS 

The crisis has had a major impact on economic growth in the EU. Although the effect on the 
labour market was initially rather limited - partly due to the usual lags of six or more months 
before  output  changes  affect  employment  levels,  but  also  to  the  fact  that  labour  demand 
started  to  adjust  through  flexible  working  arrangements  (e.g.  shorter  working  hours)  rather 
than  through  reduction  of  employment  -  the  negative  impact  has  become  more  manifest  in 
recent  quarters  and  this  is  expected  to  continue  in  the  months  to  come.  Policies  to  assist 
economic  recovery  and  mitigate  the  loss  of  employment  have  thus  gained  importance 
especially in the medium term as any pick-up in employment will lag behind the recovery in 
economic activity. 

Europe must not just tackle the recession but must turn it into an opportunity to create a 
more  productive,  more  innovative,  better  skilled  and  greener  economy;  one  with  open  and 
inclusive labour markets, offering more and better jobs for women and men. This cannot be a 
one-off  effort  but  rather  a  continuous  and  well-coordinated  process,  involving  not  only 
structural  policies  in  the  labour  market  but  also  action  in  other  policy  areas  of  the  Lisbon 
process. 

European labour markets will be changed profoundly by the crisis and the transition to a low-
carbon, knowledge-based economy, and workers and companies must be given the necessary 
means  and  incentives  to  successfully  adjust  to  these  changing  realities  in  ways  which 
favour  inclusion,  equity  and  social  justice.  Flexicurity,  combined  with  comprehensive 
active inclusion policies, remains the right approach to both modernising labour markets and 
ensuring a successful recovery.  

The Employment in Europe 2009 report is published on the following website: 
http://ec.europa.eu/social/main.jsp?catId=119&langId=en  

and  Directive  2009/38/EC  of  the  European  Parliament  and  the  Council  of  6  May  2009  on  the 
establishment of a European Works Council 

EN 

8 

   EN