Commission Working Document - European Commission background paper to the EPSCO Council - The employment crisis - Trends, policy responses and key actions
Date: 2009-11-24
Institutions: European Commission
Subjects: EU employment policy, economic recession, job access, job creation, job preservation, labour market, labour mobility, professional qualifications, unemployment

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 24.11.2009 
COM(2009) 649 final 

COMMISSION WORKING DOCUMENT 

EUROPEAN COMMISSION BACKGROUND PAPER TO THE EPSCO COUNCIL 

THE EMPLOYMENT CRISIS 
TRENDS, POLICY RESPONSES AND KEY ACTIONS 

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COMMISSION WORKING DOCUMENT 

EUROPEAN COMMISSION BACKGROUND PAPER TO THE EPSCO COUNCIL 

THE EMPLOYMENT CRISIS 
TRENDS, POLICY RESPONSES AND KEY ACTIONS 

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1. 

TRENDS IN EU LABOUR MARKETS  

Weak economic performance led to employment contraction and unemployment… 

By mid-2009 employment in the EU had contracted by 4.3 million (1.9%) compared with a 
year  earlier,  across  almost  all  sectors  but  with  a  particularly  pronounced  deterioration  in 
construction  and  industry.  Labour  market  performance  worsened  across  all  Member  States, 
but  most  notably  in  the  Baltic  States,  Ireland  and  Spain,  which  have  all  been  affected  by 
severe  housing  market  downturns  leading  to  employment  contraction  in  the  construction 
sector.  In  contrast,  in  certain  Member  States  such  as  Belgium  and  Germany  employment 
levels  have  remained  relatively  resistant  to  the effects  of  the  crisis,  in  part  due  to  extensive 
recourse to short-time working arrangements and other measures (Chart 1). 

Chart 1: Percentage change in employment across EU Member States 2008q2−2009q2  

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Source: Eurostat, national accounts. Data non-seasonally adjusted for change on prev. year. 

…but the rise in unemployment has been restrained so far 

Despite clear signs of deterioration, so far the European labour market has held up relatively 
well given the abruptness of the economic downturn. Unemployment has risen (Chart 2), but 
by less than might have been feared given the strength of the recession and the sharp declines 
in  confidence.  For  example,  despite  the  sharper  economic  downturn  and  stronger  falls  in 
business  confidence  in  the  EU  compared  with  the  USA,  by  September  2009  the 
unemployment  rate  in  the  EU  had  increased  by  2.1 percentage  points  compared  to  one  year 
earlier, while in the USA it had risen by a more marked 3.6 percentage points. Nevertheless, 
the unemployment rate in the EU has remained on an upward trend since spring of last year, 
and  by  September  2009  had  increased  to  9.2%,  a  rise  of  2.5  percentage  points  compared  to 
spring 2008. Total unemployment was up by over a third (38 %): an increase of 6 million to 
22.1 million,  

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Chart 2: Unemployment rates for EU Member States 

September 2009

September 2008

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Source: 
Note: Data for UK July 2008–July 2009, EE, EL, IT and RO 2008 q2–2009 q2. 

unemployment.  Data 

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adjusted. 

…with  young  people,  the  low-skilled,  migrants,  and  among  these  those  in  temporary 
employment, so far most affected… 

The crisis is affecting men and women differently. Initially men have been more affected by 
the  downturn  than  women,  since  many  of  the  sectors  hit  hardest  by  the  crisis  are 
predominantly  male-oriented  in  terms  of  employment.1  However,  female  employment  has 
also been severely affected during recent months reflecting an extension of the crisis to other 
sectors, more gender-mixed than the ones first hit. There has also been a continued strong rise 
in  unemployment  among  young  people,  with  young  men  being  particularly  affected, 
highlighting a rising need for support to tackle youth unemployment. Also most affected have 
been the low-skilled and migrants with low qualifications, which is partly a reflection of the 
sectors and occupations which have been most at risk in the downturn, such as construction 
and  the  low-skilled  manual  and  elementary  occupations.  In  terms  of  type  of  employment, 
those in temporary labour contracts have been relatively most affected by job losses. All these 
are  traditionally  the  most  disadvantaged  groups  in  the  labour  market,  and  the  current 
downturn has made their relative situation even worse.  

1 

'Growth, Jobs and Social Progress in the EU', The Social Protection Committee, September 2009 

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Chart 3: Rises in unemployment rates by sex, age, skill level and nationality, 2008q2–2009q2 

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Source: Eurostat, EU Labour Force Survey. Data non-seasonally adjusted. 

…and labour market conditions still likely to get worse before they get better 

Despite  the  encouraging  recent  economic  signals,  the  full  impact  of  the  economic  crisis  on 
labour markets is, at least partly, still to be faced. While overall labour markets have proven to 
be quite resilient, the EU is still expected to lose some 7.5 million jobs over 2009–10, with 
unemployment potentially reaching around 10.3% by 2010, up more than 3 percentage points 
on 2008 levels. Historical experience shows that employment reacts to economic conditions 
with a certain lag, and most forecasts suggest that, while recovery seems already underway, 
economic  growth  will  remain  moderate  for  several  years.  The  main  reaction  to  the  sharp 
downturn in economic activity in autumn last year only started to take effect in the course of 
2009, and labour market conditions can be expected to worsen for some time even after the 
resumption of economic growth.  

Signs point to substantial labour hoarding, given that most of the adjustment so far seems to 
have  been  in  terms  of  productivity  declines  rather  than  employment  losses.  Another 
adjustment mechanism to the slump in demand and the economic downturn has been through 
wage concessions in return for employment stability.  

Overall,  the  EU  labour  market  has  adjusted  to  the  crisis  mainly  through  reduced  labour 
productivity rather than through employment contraction: in Austria, Belgium, Germany, Italy 
and  the  Netherlands,  almost  all  labour  market  adjustment  has  been  through  falls  in 
productivity,  with  hardly  any  reduction  in  employment.  The  increase  in  labour  hoarding 
reflects both firms' perceptions that part of the decline in production is temporary (and they 
will  accordingly  seek  to  avoid  destroying  firm-specific  human  capital)  and  public  policy 
efforts to contain rises in unemployment, such as through short-term working arrangements.  

However,  the  decline  in  output  combined  with  labour  hoarding  has  led  to  a  significant 
increase  in  unit  labour  costs.  Unless  labour  productivity  returns  to  more  normal  levels,  unit 

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labour  costs  decline and firms' price-competitiveness improves, there is a significant risk of 
unwinding  of  this  labour  hoarding  in  coming  months,  leading  to  a  further  worsening  in  the 
unemployment situation, unless economic activity picks up noticeably.  

2. 

THE POLICY RESPONSES SO FAR 

Fiscal stimulus packages and National Recovery Plans include employment measures2… 

The  EU  and  its  Member  States,  including  central  banks,  have  taken  very  significant  policy 
action  in  face  of  the  severe  crisis.  National  Recovery  Plans  include  provisions  for 
employment, education, training and social policies. The total EU-wide stimulus package in 
Member  States'  recovery  programmes  is  significant,  amounting  to  1.8%  of  GDP  (Chart  4). 
The situation in Member States is diverse both in terms of the scope of stimuli packages and 
in terms of the effect of the crisis on growth and unemployment; some have been particularly 
hit  by  the  crisis,  such  as  Latvia  and  Lithuania,  and  have  had  to  resort  to  massive  budget 
consolidation  programmes.  Measures  taken  to  support  a  proper  functioning  of  the  labour 
market  and  raising  household  purchasing  power  represent  almost  half  of  the  recovery 
measures introduced by Member States. Austria, Belgium, Finland, Germany, Spain, Sweden 
and the UK have provided the largest fiscal stimulus to measures in these two categories.  

Chart 4: Overview of funding of recovery measures in EU Member States' recovery plans 

Measures aimed at households

Increased spending on labour market 

Measures aimed at business

Increased investment expenditure

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Note: In the case of HU a gross funding of 1,45% is reported 

Source: Commission services 

2 

The  Commission  will  continue  to  monitor  the  response  to  the  crisis  in  close  cooperation  with  the 
Employment  Committee,  Social  Protection  Committee  and  Economic  Policy  Committee.  A  more 
elaborate  overview  of  employment  measures  taken  by  Member  States  is  available  at:  http://www.eu-
employment-observatory.net/resources/meetings/MISEPSwedenSummaryTables.pdf 

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...with Member States' employment measures focussing on the three agreed EU priorities… 

The  employment  policy  response  has  covered  the  three  priorities  agreed  by  the  European 
Council: maintaining employment, creating jobs and promoting mobility; upgrading skills and 
matching labour market needs; increasing access to employment and supporting households.  

Overall,  EU  labour  markets  have  in  the  first  instance  reacted  by  adjusting  production  and 
aggregate  working  time  to  counter  the  slump  in  demand  rather  than  reducing  employment 
levels.  Short-time  compensation  programmes  whereby  employers  can  apply  for  temporary 
state  assistance  to  top  up  the  wages  of  workers  working  reduced  hours,  have  protected 
European  jobs  from  the  initial  impact  of  the recession.  Indeed,  the  relative  resilience  of  the 
EU  labour  market  to  date  reflects  in  part  the  increased  use  of  these  internal  adjustment 
measures  (e.g.  short-time  working  schemes  and  shorter  working  hours,  temporary  closures 
etc.) intended to preserve existing jobs while raising the employability of workers, including 
the  most  vulnerable  through  enhanced  training  programmes  (CY,  DE,  ES,  HU,  IE,  IT,  LT, 
NL,  AT,  PT)  and  to  support  transitions  between  jobs  (CY,  CZ,  ES  and  the  NL).  These 
arrangements  have  been  most  effective  when  they  have  included  a  provision  making 
eligibility conditional on pre-specified criteria, one of which may be their coupling to work-
related training to improve the employability of workers and ease their possible transition to 
new  jobs,  as  for  example  in  CZ  and  NL,  where  training  has  been  made  compulsory  for  all 
workers on short-time, but also in AT, BE, DE, HU. Stricter conditionality imposed on firms, 
e.g. in AT, HU, NL and SI, should also limit the risks of deadweight losses or of prolonging 
the moment of the sometimes inevitable restructuring of a company/plant. 

Training opportunities and incentives have been expanded in most countries in the face of the 
crisis,  with  on-the-job  training  increasingly  recognised  as  a  key  tool  for  improving  the 
employability  of  those  already  in  employment.  To  better  address  labour  market  needs, 
modernising  and  improving  the  administrative  capacity  of  Public  Employment  Services  has 
been a central focus for a number of Member States. Several national PES (e.g.UK, NL, BE, 
DE,  FI,  SE)  created  special  early  intervention  schemes  –  often  in  partnership  with  social 
partners, municipalities and other labour market stakeholders. These were aimed at ensuring 
quick and secure transitions to those at risk of redundancy and thus at preventing long-term 
unemployment. 

As  part  of  their  recovery  packages  many  Member  States  have  taken  action  to  support  the 
income of their most vulnerable citizens e.g. by increasing the level of minimum income or 
minimum  wage,  extending  the  coverage  or  duration  of  unemployment  benefits,  reinforcing 
other  social  benefit,  or  introducing  tax  rebates  or  exemptions  for  specific  groups.  Further, 
several are investing in their infrastructure for healthcare, long-term care, childcare or social 
housing. This has the twin aims of promoting employment and of improving access to social 
services for everyone including the most vulnerable. This is particularly important in order to 
support  female  employment  and  gender  equality  and  to  prevent  a  long  exit  from  the  labour 
market for some workers as during previous recessions.  

A range of measures have been taken to support the active inclusion of those furthest from the 
labour  market,  and  to  promote  the  employment  of  those  most  at  risk  of  exclusion: 
strengthening  Public  Employment  Services  to  allow  for  more  individualised  support  (BG, 
DK, DE, EL, ES, FR, LT, NL, PT, AT, SI, UK); expanding access to training (BG, CZ, DE, 
EL, FR, FI, IE, LT, PT, UK); subsidising employment for those furthest away from the labour 
market (FR, HU, LT), and promoting specifically the employment of people with disabilities 
(ES, RO).. Temporary rebates on social security contributions to boost labour demand during 

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the  crisis  have  been  introduced  in  several  Member  States;  specific  measures  are  targeted  at 
older workers and aim at avoiding the use of early retirement schemes (PL, PT).  

3. 

POLICY FRAMEWORK  

The three priorities identified by the European Council remain the right policy framework: 

Maintaining employment, creating jobs and promoting mobility 

Although  the  immediate  and  longer  term  employment  impacts  of  the  stimulus  and  recovery 
measures  are  not  yet  assessed  in  detail,  it  is  clear  so  far  that  they  have  proving  effective  in 
curbing the rise in the unemployment rate in several countries, particularly as concerns Short 
Term Work Arrangements (STWA). Evidence shows that measures will be most effective if 
designed with the involvement of social partners, and that stimulus expenditure should not be 
delayed by complex application procedures.  

Given  the  expected  further  raise  in  unemployment,  STWA  schemes  can  continue  to  serve 
their  purpose,  over  the  short-term,  provided  that  they  are  effectively  temporary  and  well 
targeted,  and  only  applicable  to  firms  where  the  demand  drop  can  be  argued  to  be  due  to 
exceptional and temporary circumstances. Because of changing labour market conditions, the 
eligibility criteria, durations and budgetary specifications of these schemes must be reviewed 
every 6 months allowing for improved targeting and resource management. Moreover, since 
they  may  lead  to  companies  getting  massively  overstaffed,  short-time  measures  need  to  be 
complemented by measures supporting employability and easing labour market transitions. 

Looking at consistency with long term goals, STWA provide security related essentially to a 
worker's  current  job:  the  security  is  lost  upon  leaving  the  protected  job.  In  line  with  the 
longer-term flexicurity approach, it is crucial to provide more general employment security, 
allowing  for  people  to  move  to  more  productive  parts  of  the  economy  if  so  needed.  A 
conceivable  way  forward  is  to  combine  STWA  with  training,  and  to  introduce  or  extend  a 
system of in-work benefits or tax credits. Given the depth and nature of the crisis, it is very 
likely  that  considerable  restructuring  will  be  necessary  as  the  economy  emerges  from  the 
crisis  (e.g.  construction,  financial  services,  automobile  industry).  This  suggests  that  there 
might well be a trade-off between unemployment today and more redundancies at later stage, 
particularly if the recovery is slow to materialise. 

Improving  the  situation  on  the  labour  markets  also  requires  enhanced  efforts  to  support  job 
creation. A number of Member States have already introduced financial incentives and hiring 
subsidies  to  create  or  sustain  job  places  for  particular  groups  of  workers.  Start-ups  and 
investment  in  business  expansion  can  be  facilitated  by  a  reduction  of  red-tape  and 
administrative  requirements  for  companies,  and  by  a  greater  availability  of  funding  and 
assistance  services  for  new  entrepreneurs  and  companies.  Incentives  to  invest  in  innovative 
and  expanding  sectors  (such  as  green  jobs  and  also  white  jobs)  should  be  considered; 
similarly, the social economy is an important source of job creation as it is less dependent on 
the business cycle and often provides labour intensive and socially useful services. 

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Upgrading skills and matching labour market needs: 

With increasing unemployment and decreasing job vacancies, it is essential to have effective 
activation systems in place. Greater emphasis on job seekers' responsibilities should go hand 
in  hand  with  the  provision  of  high  quality  job  search  services  and  programmes  and  an 
adequate replacement income, especially for people with very poor employment prospects.  

Tackling unemployment requires strengthened active labour market policies, better targeting 
of  programmes  and  services,  and  an  enhanced  capacity  of  Public  Employment  Services 
(PES).  The  objective  is  to  ensure  that  individuals’  itineraries  are  secure  (development  of 
skills,  employability  and  social  protection  safety  nets),  and  to  guarantee  the  security  of 
recruitment for businesses, while coping with an increased volatility in the labour market and 
threat  of  (mass)  redundancies.  For  men  and  women  facing  difficulties  in  gaining  new 
employment,  the  "training  first  approach"  should  be  considered.  For  the  entire  workforce, 
upskilling  and  re-skilling  is  crucial  to  ensure  adaptability  and  employability  in  uncertain 
times.  Education  and  training  providers  should  be  responsive  to  the  increasing  needs  of  the 
labour market in times of crisis. Active labour market policies must also address the needs of 
young  people,  for  whom  the  lack  of  work  experience  is  often  the  main  obstacle  to  access 
support schemes and find the first employment. 

Occupational,  sectoral  and  geographic  mobility  can  facilitate  transitions  into  new  jobs  and 
help  prevent  long-term-unemployment.  An  early  intervention  approach  requires  constant 
cooperation between PES and employers, to intervene before actual redundancies take place. 
Enhanced  co-operation  between  employment  services,  public  authorities, 
training 
organisations and above all employers and social partners is also of key importance to provide 
adequate services, including qualification and redeployment programmes and apprenticeships 
for  the  young.  This  co-operation  is  also  indispensible  to  prepare  the  workforce  for  the  new 
jobs of tomorrow, especially in expanding sectors.  

Increasing access to employment and supporting households: 

One  key  element  determining  increased  access  and  attachment  to  work  is  in  the  design  of 
taxation and benefit system. Complementarities between active labour market policies and tax 
and benefit systems must be strengthened to this effect. Features of tax and benefits systems 
such as the so-called unemployment traps or joint family taxation may discourage secondary 
earners  and  main  carers  from  (re)entering  or  remaining  on  the  labour  market,  notably  on  a 
full-time  basis.  In  order  to  maintain  the  labour  market  attachment  of  older  workers, 
opportunities for early labour market exit must be avoided. Reducing non-wage labour costs 
could be an instrument in particular to help people with multiple disadvantages (low skilled, 
young and older workers) to stay in the labour market. 

Increasing  the  income  tax  thresholds  below  which  no  taxes  are  to  be  paid  can  lead  to  a 
substantial  tax  relief  most  relevant  for  and  targeted  to  low  income  earners;  Sweden  has 
introduced tax reliefs on income from gainful employment. This is consistent with long term 
goals of making work pay, and is expected to have positive long term employment effects.  

While  the  reduction  of  non-wage  labour  costs  is  an  important  measure  to  increase  but  also 
maintain employment, the risks of deadweight costs are high: reducing taxes, social security 
contributions  and  other  non-wage  labour  costs  for  employers  should  be  welcomed  only  if 

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these measures have an immediate effect on the decision of an employer to hire or maintain 
staff - for example by providing subsidised part-time contracts with more attractive conditions 
for  companies.  If  there  is  no  immediate  effect  on  hiring,  other  temporary  government 
spending of equal value aiming to support increasing employment directly in labour intensive 
sectors confronted with skills bottlenecks (e.g. in the care sector) would be more effective in 
the short term.  

Considerable attention to supporting household incomes will be necessary until the recovery 
has taken hold, although Member States' capacity clearly differs in this regard. Benefits are in 
some cases too low, or their duration very limited in time. On the other hand, the design and 
generosity of benefits need to be properly defined in order to limit disincentive effects to take 
up work for beneficiaries. Workers with fixed term and part time contracts should also benefit 
from insurance against unemployment and other social risks. More attention is also needed to 
the self-employed who often have no insurance against the loss of work, and to young people 
who are in a particularly difficult situation.  

Direct social transfers are essential to mitigate adverse social impacts, since they reach those 
in most need very quickly and provide a direct positive impulse to the economy; governments 
can use existing channels to get the benefits to households, and therefore criteria for targeting 
can be readily used. Benefit design should support activity and adaptation to change, thereby 
contributing  to  better  labour  market  performance  when  the  economy  recovers.  However, 
government  income  transfers  to  households  draw  heavily  on  scarce  funding,  often  directly 
increasing national debt levels. These transfers can also create benefit dependency and result 
in  a  reduction  in  labour  supply  and  subsequently  create  inefficiency  and  malfunctioning  of 
labour markets. Therefore benefit spending should decrease as the labour market recovers. 

Workers  with  temporary  contracts  have  been  laid  off  massively  in  countries  which  have  an 
imbalance between precarious short term contracts and permanent contracts. To step up rights 
for this group of workers, Member States have taken different approaches: some have limited 
the  maximum  duration  of  temporary  contract  up  to  2  years  as  part  of  a  new  anti-crisis 
regulation;  others  have  extended  the  maximum  duration  of  temporary  contracts  beyond  2 
years. Within each context, the key point is that social partners and authorities should work 
together to ensure that as many workers as possible are retained in the labour market, and that 
employment legislation and contractual arrangements ensure adequate rights and obligations 
for  employees  and  employers.  This  implies  addressing  segmented  labour  markets,  through 
reforms in line with the "flexicurity" approach that shift the focus from protection on the job 
to employment security in the market.  

4. 

FIVE KEY ACTIONS FOR 2010 AND BEYOND 

The  severity  of  the  current  recession  justifies  continuation  and  reinforcing  labour  market 
policies and providing income support  for  those  most  in  need  even if GDP slowly  picks  up 
next  year  as  expected.  Once  the  economy  starts  growing  the  emphasis  will  need  to 
progressively shift from short term crisis measures to structural labour market reforms aimed 
at  stimulating  potential  growth  and  on  bringing  people  into  the  labour  market,  as  recently 
stressed by the Employment Committee3. The latter also requires an increase in the effective 

3 

"Bringing more people into the labour markets" EMCO ADHOC/18/201000 

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retirement  age  by  enabling  and  motivating  people  to  work  longer  through  labour  market 
policies promoting better age-management practices in work places and ambitious reforms of 
work incentives in pension systems. To this end, flexicurity and active inclusion provide an 
integrated framework that allows Member States to take up an adequate mix of priorities in 
line with their labour market and social situations and challenges. Flexicurity strategies which 
ease transitions into work, eliminate obstacles to participation and enable upward transitions 
within the labour market are particularly relevant. In line with the EU Common Principles of 
flexicurity,  five  key  actions  are  vital  to  mitigate  the  negative  effects  of  the  crisis  on 
employment and to return to sustained employment growth when the crisis is over:  

1. 

Invest  in  effective  labour  market  measures  and  skills  to  avoid  long-term 
unemployment  

The  top  priority  is  to  invest  in  effective  labour  market  measures,  adequate  social 
protection and relevant education and training provisions, to prevent unemployment 
from becoming structural. Keeping men and women in work widens the contributors' 
base for tax and social security, and thus contributes to sustainable public finances, 
macro-economic  stability  and  well 
functioning  social  protection  systems. 
Employment services must be enhanced to reach out to all those in need, including 
the  young  and  workers  threatened  by  redundancies.  Interventions  should  be  timely 
and targeted, and seek complementarily with other measures aimed at making work 
more  economically  attractive  and  rewarding  to  secure  transitions,  and  reduce 
inactivity  and  the  duration  of  unemployment  spells.  This  should  be  coupled  with 
measures  aimed  at  enabling  and  motivating  people  to  work  longer  through  labour 
market  policies  promoting  better  age-management  practices  in  work  places  and 
ambition  reforms  of  work  incentives  in  pension  systems.  The  best  results  are 
obtained  by  personalised  support,  with  a  focus  on  job  search  for  people  with  high 
employability potential and more comprehensive, tailored assistance to those having 
more  difficulties.  Unemployed  people  and  workers  on  short  time  and  in  declining 
sectors  should  be  offered  skills  upgrading  and  retraining  programmes.  These 
programmes  should  be  targeted,  so  that  they  match  the  future  skills  needs  of  the 
labour market and prepare for the recovery.  

the  ESF  and  ERDF, 

Member  States  are  encouraged  to  make  better  use  of  the  existing  European  funds, 
including 
particularly 
strengthening the efficiency and capacity of Public Employment Services, to improve 
the efficiency and effectiveness of the services offered to those seeking employment 
and to workers and companies under restructuring.  

to  support  recovery  measures 

2. 

Help businesses create new jobs 

It  is  essential  to  promote  job  creation,  by  facilitating  start-ups  and  strengthening 
services  to  assist  new  entrepreneurs  and  companies.  There  is  in  particular  a  high 
potential  for  business  creation  among  women  which  needs  to  be  tapped.  Efforts  to 
increase  access  to  finance  and  the  availability  of  credit  should  continue,  as  well  as 
incentives to companies to create or sustain job places and offer apprenticeships. An 
enhanced and constructive dialogue with social partners is crucial also to ensure that 
wage developments are in line with productivity and sectoral and local labour market 
conditions.  

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The  ESF,  the  ERDF  and  other  EU  funds  can  be  better  used  to  promote 
entrepreneurship,  self-employment  and  support  for  SMEs  and  micro-enterprises. 
Financial incentives for innovation and training can help, on the one hand to explore 
the  potential  of  expanding  sectors,  new  technologies  and  new  ways  of  doing 
business; on the other hand, to develop the social economy.  

3. 

Preserve jobs through flexible work organisation  

With rising unemployment, internal flexibility is an essential instrument to preserve 
jobs: in 2010 short-time working arrangements can still be seen as an efficient way to 
maintain the employment of workers who would otherwise be laid off, including in 
SMEs. These schemes can mitigate the social impact of the crisis in the short term, 
save considerable  firing  and (re)hiring  costs for firms and prevent the loss of firm-
specific  human  capital.  However,  these  arrangements  must  be  designed  in  an 
economically sound and sustainable way: they should be combined with (re)training, 
apply only to companies with strong fundamentals, and their duration and eligibility 
criteria  should  be  subject  to  regular  review.  In  sectors  and  companies  confronted 
with  structural  losses  in  external  competitiveness,  measures  must  be  focussed  to 
equip the workforce with the skills required for new jobs to facilitate the transition 
into growing activities.  

4. 

Support young people and those most affected by the crisis  

The greatest threat from the rise in unemployment lies in the prospect of permanent 
exclusion.  It  is  already  harder  for  young  people,  notably  those  with  low 
qualifications  and  for  people  at  the  margins,  to  (re-)enter  the  labour  market. 
Measures to support the employment of vulnerable groups, particularly making work 
economically  more  attractive,  in-work  benefits,  targeted  reductions  of  non  wage 
labour costs and other subsidies, should be stepped up. For the young in particular, 
places for work experience and apprenticeships, innovative learning methods such as 
project-based learning, can ease the transition from school to work. Flexible learning 
pathways can help to acquire progressively new skills and qualifications, to step up 
in the education and training system and to move up in and on work. For low-skilled 
and  older  unemployed,  the  key  priority  is  adequate  training  to  maintain  their 
employability.  Permanent  exclusion  can  be  a  particular  risk  for  women  especially 
those  having  care  responsibilities  since  they  already  represent  the  majority  of 
inactive  persons,  involuntary  part-timers  and  secondary  earners.  Specific  measures 
are needed in order to avoid exit of the labour market and exploit the full potential of 
female labour reserve. Job-seeking and income support initiatives for vulnerable job-
seekers  must  be  better  coordinated,  and  their  impact  closely  monitored  to  avoid 
excessive  dead-weight  and  negative  impact  on  social  protection  schemes.  The 
business  models  of  Public  Employment  Services  should  evolve,  with  effective  co-
operation  with  other  governmental,  non-governmental  and  private  institutions  (e.g. 
municipalities, NGOs, chambers of commerce, training providers, agencies offering 
employment  services)  and  above  all  with  companies  and  social  partners,  to  build 
public-private partnerships.  

5. 

Improve the situation of people on non-standard contracts 

The rise in unemployment and its subsequent social cost is falling disproportionally 
on  workers  on  temporary  and  other  non-standard  contracts,  who  often  have 

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inadequate coverage by unemployment insurance systems and active labour market 
policies (as their provision is usually linked to benefits). In the current context it is 
essential  to  improve  employment  security  and  to  support  transitions.  It  is  also  key 
addressing segmented labour markets, through reforms in line with the "flexicurity" 
approach  that  shift  the  focus  from  protection  on  the  job  to  employment  security  in 
the  market.  Social  dialogue  can  help  ensure  that  as  many  workers  as  possible  are 
retained  in  the  labour  market,  and  that  social  security  and  employment  legislation 
provide adequate rights and obligations for employees and employers in all type of 
contracts.  

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