DRAFT JOINT EMPLOYMENT REPORT FROM THE COMMISSION AND THE COUNCIL accompanying the Communication from the Commission on the Annual Growth Survey 2015 
Date: 2014-11-28
Institutions: Council of the European Union, European Commission
Subjects: dropout, economic growth, economic reform, employment statistics, job creation, labour mobility, tax reform, wage cost, youth unemployment













EUR-Lex - 52014DC0906 - EN











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52014DC0906

DRAFT JOINT EMPLOYMENT REPORT FROM THE COMMISSION AND THE COUNCIL accompanying the Communication from the Commission on the Annual Growth Survey 2015 /* COM/2014/0906 final */









The draft Joint Employment Report
(JER), mandated by Article 148 TFEU, is part of the Annual Growth Survey (AGS)
package to launch the 2015 European Semester. As key input to strengthened
economic guidance, the JER underpins the key employment messages contained in
the AGS. The analysis it contains is based upon employment and social
developments in Europe; the implementation of the Employment Guidelines[1];
the examination of the National Reform Programmes (NRP) that led to the Country
Specific Recommendations (CSRs) adopted by the Council on 8 July 2014 and on
the assessment of their implementation so far. 
Employment and social
situation continues to cause concern
The Autumn economic forecasts by
the Commission are marked by slow growth and high but relatively stable
unemployment (24.6 million people). Divergences across countries, particularly
in the euro zone, remain high. Even in economies which perform comparatively
well unemployment is becoming structural as evidenced by the increasing number
of long-term unemployed.
Reforms
supporting well-functioning labour markets must continue
Several Member States have pursued
reforms, in line with their Country Specific Recommendations. Positive effects from
reform are visible for instance in increasing activity rates. However, more
investments are needed to stimulate growth and create a positive environment
for the creation of decent jobs.  
As to combatting youth
unemployment, Member States have progressed in the implementation of Youth
Guarantees. Further efforts are required, with specific attention for public
employment services, tailored active labour market interventions and vocational
education and training. Member States should ensure a favourable environment
for companies to offer apprenticeships, thus facilitating the transition from
education to employment.
Investing in
human capital through education and training will increase productivity 
Member States have worked to
introduce measures aimed at improving skills supply and promoting adult
learning. A number of countries took measures to improve their primary,
secondary and tertiary education system, while others addressed the overall
education strategy. Member States need to continue to reform their VET systems
to increase productivity of workers in the light of rapidly changing skills
requirements.
Tax and benefits
systems should support job creation
Unemployment benefits schemes
should be better linked to activation and support measures and further action
is needed to increase the integration of long term unemployed into the labour
market. Member States should continue, or in some cases step up, measures
addressing the challenge of segmented labour markets by simplifying labour law.
Some reforms of tax systems have
been initiated so as to reduce disincentives to take on jobs and –at the same
time- decrease labour taxation to allow companies (re)hire young and long-term
unemployed. Several Member States have addressed wage-setting mechanisms to
promote the alignment of wage developments to productivity and to support
households’ disposable income, with a particular focus on minimum wages. A few
Member States have looked at avenues for job creation through (temporary)
hiring, wage or social contribution subsidies targeted to new hires. 
Modernisation of
social protection systems 
Policy reforms of the social
protection systems have been introduced. The pensionable age is being raised
and gender disparities in pensionable age are being reduced. Member States are
opening routes for people to prolong their working lives and improve pension
entitlements by deferring retirement. Social protection systems activate those
that are able to access the labour market, protect those most excluded from the
labour market and shelter individuals from risks in their lifecycles.
Member States are increasing
efforts to better target those at higher risk of poverty, in particular for
children and the elderly. 
In addition, reviews of health care
expenditure are promoting ways to increase effectiveness for citizens and improve
value for money.
1.       LABOUR
MARKET AND SOCIAL TRENDS AND CHALLENGES IN THE EUROPEAN UNION
Unemployment
is slowly decreasing but remains at high levels in the EU-28. While
the unemployment rate decreased by over 2 percentage points between 2004 and
2008, the financial and economic crisis has caused a severe deterioration
(Figure 1). Between 2008 and 2013 the (seasonally adjusted) unemployment rate
in the EU-28 increased from 7.0% to 10.8%. More recent Eurostat figures show
that since then, the unemployment rate has fallen again, to a level of 10.1% in
September 2014 (11.5% in the EA-18). This is the lowest level since February
2012 and it is stable compared to August 2014. This rate is equivalent to an
absolute number of 24.6 million unemployed, down from 26.4 million on a year
before. Looking at developments over time for different groups on the labour
market, it can be seen that the youth unemployment rate is structurally above
the average rate, and also more responsive to the business cycle. Unemployment
rates for the low-skilled
are also structurally higher.[2]
Older workers have rather low unemployment rates, however for older workers it
is generally more difficult to regain employment once unemployed. Unemployment
rates for men and women have been almost similar since 2009.
Figure 1: Development of
unemployment rates between 2004 and 2013 in the EU-28 (annual data), total,
youth, older workers, low-skilled and women      
Source:
Eurostat
Developments
in unemployment across the EU still
vary widely, but have stopped diverging further. In
September 2014 unemployment rates ranged from 5.0% in Germany and 5.1% in Austria at the one extreme to 24.0% in Spain and 26.4%
(July figure) in Greece at the other. Over the last year unemployment decreased
in 21 Member States while it remained the same in one country and rose in six.
The largest decreases were registered in Spain, Croatia, Hungary and Portugal. There was a further increase in six
Member States (France, Italy, Lithuania, Luxembourg, Austria and Finland). 
Long-term
unemployment is still rising. Between 2010 and 2013
the long-term unemployment rate in the EU-28 has increased from 3.9% to 5.1%.
Developments have been particularly negative in Greece and Spain and to a somewhat lesser extent in Cyprus, while significant improvements have been recorded
in the three Baltic States. Over the last year long-term unemployment as a share
of total unemployment increased further from 45.3% to 48.7% in the EU-28 (47.5%
and 51.5% for the EA-18). 
Long-term unemployment affects men, young people and low-skilled
workers more than other groups on the labour market, and especially hits those
that work in declining occupations and sectors. The overall state of the
economy remains an important factor in determining changes in the levels and
flows to and from long-term unemployment, but there are also strong
country-specific effects with some Member States (such as Finland, the
Netherlands and Sweden) ensuring high transition rates back to employment in
contrast to others, for instance Bulgaria, Greece and Slovakia. In general, one
in five of the long-term unemployed in the EU has never worked, and three out
of four are young people below the age of 35, creating risks of
marginalisation.[3] 
Figure 2: Long-term
unemployment rates in % of the active population, EU-28 and Member States, 2010
and 2013    
Source:
Eurostat
Youth
unemployment remains at very high levels,
but is showing signs of improvement.
In September 2014 the youth unemployment
rate (15-24 years) in the EU-28 stood at 21.6%, down by 1.9 percentage points
on the year before. There is a wide dispersion between Member States, with
figures ranging from 7.6% in Germany and 9.1% in Austria to 50.7 (July 2014) %
in Greece and 53.7% in Spain. Meanwhile the divergence has stopped growing, but
it remains large.
The
proportion of young people (15-24) not in employment, education or training
(NEET) has remained high, even though nearly
70% of young people in the EU were in education in the first quarter of 2014.
In many Member States NEET rates are considerably above the lowest
levels recorded since 2008 and still close to the upper bounds. This is
particularly true for some Member States with the highest rates such as Bulgaria, Cyprus, Greece, Spain, Croatia, Italy and Romania.. Rather low – and improving – rates can
be found in Austria, Germany, Denmark, Luxembourg, the Netherlands and Sweden. In 2013 the levels remained above 10% in a great majority of Member States.
NEET rates are somewhat higher for females than for males: in 2013 the rates
were 13.2% and 12.7% respectively (total 13.0%). The NEET phenomenon is
primarily due to an increase in youth unemployment, but also to non-education
linked inactivity. In some Member States (Bulgaria, Romania and Italy) inactive NEET rates exceed 10%.
Early
school leaving levels are gradually going down, making progress towards the
target of less than 10% school drop-outs by 2020. Early
school-leaving (ESL) stood at 12.0% in 2013, down from 12.7% a year earlier,
with males (13.6%) being more affected than females (10.2%). ESL remains a
serious problem though, as it concerns about 5 million people, over 40% of whom
are unemployed. In 2013 in 18 Member States the rate was lower than the Europe
2020 target of 10%. ESL was highest in Spain and Malta with rates over 20%. 
Europe
is making good progress towards the target of achieving a tertiary or
equivalent attainment rate of at least 40% by 2020. In
2013 tertiary education attainment stood at
36.9%, which is 1.2 percentage points higher than a year earlier. The highest
rates (above 50%) can be found in Ireland, Lithuania and Luxembourg. Across the EU, more women (39.9%) than men (31.5%) finish tertiary education. 
Figure 3: NEET rates for the EU-28 and Member States in the second quarter of 2014 and the highest and lowest values since 2008 
Source:
Eurostat (LFS; data non-seasonally adjusted, average of 4 quarters to 2014Q2,
DG EMPL calculations)
Activity
rates have withstood the crisis years well in most Member States,
mainly because of increasing activity rates among older workers (aged 55-64)
and women. Between 2008 (Q1) and 2014 (Q1) the EU-28 activity rate for the
population aged 15-64 went up from 70.3% to 72.0%, although there was
considerable cross-country variation. Activity rates increased most strongly in
the Czech Republic, Hungary, Lithuania, Luxembourg, Malta and Poland, while the
largest decreases were witnessed in Denmark (but from a very high level) and Ireland.
Although female activity rates have improved over time there is still a considerable
gap as compared with those for men: 11.7 percentage points in the first quarter
of 2014 (the corresponding rates for men and women were 77.9% and 66.2%
respectively). Gender gaps in activity rates are particularly high in Greece and Italy. Some other countries such as Austria, Germany and the Netherlands show high female
activity rates and they
are characterised by widespread part-time employment for women.
The
EU employment rate continues to show a negative trend and a strong reversal
would be needed to reach the Europe 2020 headline target of 75% for men and
women aged 20-64.  Since
the onset of the crisis the employment rate in the EU-28 has gone down by
almost 1.5 percentage points, from a peak in 2008 to 68.4% in the first quarter
of 2014. Developments across Member States have been quite different (Figure
4). Between the first quarters of 2008 and 2013, employment growth was
particularly negative in several Southern European countries, the Baltic
states, Bulgaria and Ireland. Strong increases have been recorded in Luxembourg and Malta and to a lesser extent in Germany. Over the last year developments have been
more moderate, with employment increasing also in several countries that
performed badly in the years before. 
Developments
in employment have not been evenly distributed. While
employment rates for men (20-64) have decreased by more than 3 percentage
points between the first quarters of 2008 and 2014 (from 77.4% to 74.0%),
female employment went down only marginally and has even increased somewhat
over the last year (by 0.8%). Increases have been quite substantial for older
workers (6.2 percentage points since the first quarter of 2008 to reach 50.9%
at the beginning of 2014, with sizeable increases in Belgium, Germany,
France, Hungary, Italy, Luxembourg, the Netherlands and Poland), in particular
older women (8.4 percentage points). As for education levels, decreases in
employment have been largest for the lower-skilled and more or less similar for
medium and high-skilled individuals. The employment rate of third-country
nationals (20-64) in the EU-28 declined from 62.4% to 55.4% between the first
quarters of 2008 and 2014. As far as employment trends by sector are concerned,
the share of the services sector continues to increase, at the expense of
employment in both industry and agriculture. Currently the shares are roughly
72.5%, 22.5% and 5%. Although the crisis years have been detrimental for
permanent employment, the greatest burden of adjustment fell mainly on
temporary jobs (non-renewal). Finally, full-time employment has decreased by
roughly 8.1 million between the first quarters of 2008 and 2014. Conversely, there has been steady growth in part time jobs
in recent years, with 4 million more since the first quarter of 2008.
Figure 4: Employment
growth (number of persons employed, aged 20-64) since 2008q1, by Member State
Source:
Eurostat, DG EMPL calculations
Employment
is likely to improve slightly in the future, mainly as a result of projected
GDP growth. Over
the medium term, several trends will lead to further jobs growth, in particular
in certain areas[4].
Technological progress will create jobs in the ICT sector (900,000 unfilled ICT
practitioners' vacancies are expected by 2015), while ageing, despite present
and future constraints on public healthcare budgets, is likely to increase the
demand for health workers and health-related services in the medium term.
Furthermore, the greening of the economy may lead to an increase in green jobs[5].
Other high-tech-reliant sectors such as the transport industry will also
require substantial hiring of medium- to high-skilled workers,
to accommodate the growth recorded in aviation and passenger transport and the
high percentage of older staff expected to leave the transport sector by 2020.
Small- and medium-sized enterprises are traditionally seen as the engine of
employment growth, with some research showing that between 2002 and 2010, 85% of new
jobs in the EU were created by SMEs. By contrast, between 2010 and 2013,
employment in SMEs in the EU fell by 0.5%. When excluding the construction
sector, which employed one in seven SME workers in 2008, this turns into a
slight increase of 0.3%, but this is dwarfed by a 2% rise among large firms. 
To date and in many Member States, credit availability to the
non-financial sector remains weak, due to both supply and demand factors
including sector restructuring and deleveraging that followed the financial
crisis. Moreover, bank lending interest rates in the vulnerable Member States
remain high despite recent ECB actions, mainly affecting SMEs. Limited access
to finance is also likely to curb the number of start-ups which is of concern
given the evidence that, among SMEs, young firms account for a major share of
net job growth. The lack of dynamism in the employment record of SMEs since
2010 shows the potential employment impact of appropriate solutions to
financial sector problems. Policies supportive of business start-ups also come
with a significant employment impact.
Segmentation
on the labour market continues to be considerable
in several Member States. Youth
employment is characterised by high shares of both temporary and part-time
employment, at 42.4% and 31.9% (of total employment) respectively in the first
quarter of 2014. In comparison, in the total working population the share of
temporary and part-time employment was much lower, at around 13% and 19%
respectively. Women are overrepresented in part-time work. In the first quarter
of 2014 the incidence of part-time work for women was 32%, as compared with
8.3% for men, with Austria, Belgium, Germany, the Netherlands and the United
Kingdom all having shares
of more than 40% of women working part-time. In
the  current
macroeconomic context
temporary and part-time jobs, involuntary to some extent[6],
may contribute to job creation and in the medium to long run they may act as a
stepping stone to permanent and/or full-time contracts (e.g. for youth).
Segmentation can also be seen from persistent gender pay gaps and low
transition rates from less to more protected contractual forms of work. 
Labour
market matching has worsened
in several Member States. While
the number of vacancies has remained
relatively stable over the last few years on
average, unemployment has increased,
hinting at a deterioration in labour market matching. The Beveridge curve
(Figure 5) suggests that structural unemployment has been rising since around
mid-2011[7].
Looking at developments across Member States, labour market matching has
deteriorated in the majority of Member States, with
the notable exception
of Germany in particular.
The overall negative development
is driven mainly by negative labour demand shocks as well as growing skills
mismatch[8],
indicating that the lack of labour market opportunities associated with the
economic crisis is producing hysteresis effects which need to be counteracted
by investments in human capital and more effective matching.
Figure 5: Beveridge curve, EU-28,
2008q1-2014q1
Source:
Eurostat; Note: LSI (vertical axis) stands for "labour shortage indicator",
derived from EU business survey results (% of manufacturing firms pointing to
labour shortage as a factor limiting production); UR stands for
"unemployment rate".
The
growing number of unemployed during the crisis, the increasing share
of long-term unemployed and the resulting decrease in matching efficiency pose
serious challenges to active labour market policies (ALMPs) and public
employment services (PES). 
Intra-EU
labour mobility remains limited, especially in
proportion of the overall size of the EU labour market. While one out of four
EU citizens say they would consider working in another EU country in the next
ten years, until 2013 only 3.3% of the EU economically active population
resided in another Member State. Cross-country differences are quite sizeable
though (Figure 6). Due to substantial differences in unemployment rates between
EU Member States, the rising number of persons wanting to move has partly
materialised in increased mobility since 2011 but only to a limited extent and
not as much as would be needed to have a real equilibrating role against the
huge imbalances across EU labour markets.[9]
Figure 6:
Mobility rate by Member State by years of residence, 2013  
Source:
"Key Features", DG EMPL; Notes: The mobility rate is the number of
working-age citizens living in another Member State in 2013, as a percentage of
the working-age population of the country of citizenship. Figures for MT and SI
are too small to be reliable. Figures for CY, DK, EE, FI, LU and SE are not
reliable due to the small size of the sample.
The
supply of skills needs to be further
improved. Several
trends, in particular globalisation and (skill-biased) technological change,
have led to gradual changes in the relative
demand for different skill levels.  In addition,
there has been a change in the relative
importance of different
skill types, with both ICT-related skills and 'soft skills' such as
communication skills becoming more important for a large number of occupations.

Even
though over time average education levels have increased, the skills that
workers possess have not kept pace with skills demand. As a result of these
changes in the relative demand for and supply of skills, employment
opportunities for the high-skilled are better than for the medium- and low-skilled.
Labour market forecasts confirm this trend for the coming years[10].
Europe's
growth potential is
threatened by structural weaknesses in its skills base.
Recent data[11]
show that about 20% of the working-age population have only very low skills,
and in some countries (Spain, Italy) this proportion is even higher. Only
a few countries (Estonia, Finland, the Netherlands and Sweden) have a high proportion of people with very good skills and most European
countries do not come near the top-performing countries outside Europe (such as
 Japan or Australia). The data on government spending confirm an increasing
risk of investment gaps in human capital. Europe is not investing effectively
in education and skills, which poses a threat to its competitive
position in the medium term and to the
employability of its
labour force. Nineteen Member States have reduced education expenditure in real
terms and 14 Member States have reduced the relative share of GDP that they
invest in education. 
Wage
developments have started to accommodate
rebalancing needs. In the run up to the
crisis several Member States witnessed sizeable increases in their nominal unit
labour costs, notably Latvia, Romania and to a lesser extent Estonia, Lithuania, Bulgaria and Ireland (Figure 7).  In response to the crisis nominal unit labour
cost developments in these countries have been much more moderate since 2009,
with the exception of Bulgaria, and have in fact turned negative in Ireland, Lithuania and Latvia, and just above zero in Romania. Also in Greece and Spain nominal unit labour costs have decreased after the crisis, following increases in the
years before. Germany shows a different pattern as it is the only Member State where nominal unit labour costs decreased (albeit slightly) before the crisis,
to increase in more recent years. Moderate nominal
unit labour cost developments (more strongly before the crisis) were also seen
in Belgium, Sweden, the Netherlands, Austria and Finland in particular. The
trend reversals in "troubled" Member States on the one hand and "surplus
countries" on the other have been supportive
of external rebalancing, which was needed in
particular within the Euro Area. It is important that
wage developments continue to be consistent with the need to adjust external
imbalances and reduce unemployment and in the long run match productivity
gains. If sustained, recent wage increases in surplus
countries may strengthen overall deficient aggregate demand.[12]

Figure 7:
Nominal unit labour cost developments in the EU-28, average year-on-year
changes, 2003-2008 and 2009-2013                
Source:
Eurostat, DG EMPL calculations
Unit
labour cost reductions and wage moderation have fed only slowly and
incompletely into lower prices.
Partly, this incomplete pass-through can be explained by simultaneous hikes of
indirect taxes and administered prices due to fiscal consolidation.[13]
Nominal unit labour cost reductions in the face of sticky prices have led to
decreases in labour income shares in several Member States, in particular Greece, Spain, Ireland and Portugal. The resulting increase in profit margins has not (yet) been fully
accompanied by an increase in investments. 
The
tax wedge remains high in many Member States. A
high and in some cases increasing tax wedge, especially for low-wage and second-income
earners, remains an important issue in a considerable number of Member States.
To illustrate, in the case of low-wage earners (67% of the average wage), a
fall in the tax wedge between 2008 and 2010 in most countries was followed by
an increase in the three subsequent years in nearly all Member States. The 2013
levels ranged from 20% or less in MT (2012) and IE to more than 45% in Belgium, Germany, France and Hungary. 
Changes
in the total tax wedge have been driven mainly by personal income tax (PIT),
where increases can be seen for 15 out of 21 Member States (Figure 8).
Increases in PIT (at least for this particular type of household and at 67% of
the average wage) have been particularly large in Portugal and Hungary, while it has decreased quite substantially in the United Kingdom and Greece. Taking PIT and employees' social security contributions together, the burden
on employees has increased in 10 Member States, while this is less true for
employers (3 countries with increases in the tax burden). Overall the level of
employers' social security contributions has remained more or less stable in
most Member States, with a few exceptions; there were relatively strong
increases in Poland and Slovakia, while at the same time the level decreased
quite considerably in France.
Figure 8: Change between 2011 and 2013
of the total tax wedge by components (67% of the average wage, single person,
no child)
Source:
EC-OECD tax and benefits database; Note: Data for non-OECD countries (BG, CY,
HR, LV, LT, MT and RO) are not available.
Fighting
undeclared work is a challenge in some Member States. Undeclared
work covers a variety of activities ranging from
undeclared work in a formal enterprise to
clandestine work by own account workers, but excludes those involving illegal
goods or services.  Undeclared work has several
negative implications.
From a macroeconomic perspective, it decreases
tax revenues (income tax and VAT) and undermines
the financing of social security systems. From a microeconomic perspective,
undeclared work and other atypical forms of employment such as bogus
self-employment tend to distort fair competition among firms, paving the way
for social dumping inhibiting the creation of regular employment with full
social protection. It also causes productive inefficiencies, as informal
businesses typically avoid access to formal services and inputs (e.g. credit)
and do not grow. Although fully reliable figures on the extent of the shadow
economy and undeclared work are not readily available, rough data do indicate
that the issue poses a challenge in some Member States[14].
Moreover, the scope of undeclared work might be growing because of several
socioeconomic trends such as sectorial reallocation and internationalization of
the economy, reduction in standard forms of work, and social distress in some
MS.
While
economic developments generally affect
different sections of the population in different ways,
the levels of inequality increased in many Member States.
While the S80/S20 ratio[15]
remained stable between 2008 and 2013
in the EU on average, there is a wide dispersion and growing divergence in
inequality between Member States (Figure 9). The inequality has grown in most
of the Southern Member States (Spain, Greece, Italy and Cyprus) as well as in Croatia, Estonia, Denmark and Hungary and slightly in Ireland and Austria. Despite recent improvements, inequality also remains a particular concern in Bulgaria, Greece, Latvia, Romania, Spain and Lithuania (see also Figure
V in Chapter 3).
Figure 9:
Inequality of income distribution (S80/S20; income quintile ratio), 2008-2012             
Source: Eurostat, EU-SILC
2013; referring to the income year 2012. Note: * - 2011 data (data for 2012 are
not available yet for BE, DE, IE, EL, FR, HR, LU, NL, PT, RO, SE, UK). 
The
at-risk-of-poverty and social exclusion (AROPE)
rate increased significantly, with growing
divergences between Member States.
Between the beginning of the crisis in
2008 and 2012, the number of Europeans at-risk-of-poverty or social exclusion
increased by a worrying 8.7 million (excluding Croatia), to 25.1% of the EU-28
population in 2012 (Figure 10)).

Figure 10:
Developments in the at-risk-of-poverty or social exclusion rates (AROPE),
2008-2012           
  
Source:
Eurostat, EU-SILC 2013; referring to the income year 2012. Note: * - 2011 data
(data for 2012 are not available for BE, DE, IE, EL, FR, HR, LU, NL, PT, RO, SE, UK).
The
developments in poverty levels vary substantially depeneding
between age cohorts. Overall, the working
age population has been most affected by the crisis (Figure 11;
also Figure IV in Chapter 3),mainly due to
increasing levels of unemployment or low work intensity
households and in-work poverty. In 2012, approximately 50 million people of
working age lived on less than 60% of the national equalised median income in
the EU-28, and 31.8 million (31,5 million in 2013) suffered from severe
material deprivation. 10.9% of the population aged 18-59 lived in a jobless
household in 2012. 
Figure 11:
Development of at-risk-of-poverty or social exclusion rates (AROPE) since 2005
in the EU-28, total, children, working-age population and elderly     
Source: Eurostat, EU-SILC.
Note. EU-27 average for 2005-2009; EU-28 average for 2010-2012. 2103 SILC-Data
not available yet. 
Older people (65+) have been relatively less
affected as their risk of poverty or social exclusion has declined in most
Member States with women still more affected by old-age poverty than men.
However, these relative improvements do not necessarily reflect a change in the
real income situation of the elderly, but result primarily from the fact that
pensions being largely unchanged while income levels for the working age
population have stagnated or dropped. 
Children
have been experiencing an increasing
risk of poverty or social exclusion since 2008 as
the situation of their (mostly working-age) parents
worsened. It has been the case
in more than 20 Member States as compared to 2008, with single parent
households facing a risk of poverty and social exclusion (EU-28: 47.8% in 2012)
that is more than twice as high as for families with two adults (24.4%). The
substantially higher risk of poverty among single parent households is found
across all Member States ranging from 35% in Slovenia, Finland and Denmark to 78% in Bulgaria. Similarly, families with three or more children face
considerably higher risks of poverty or social exclusion (EU-28: 30.9%) than
the population as a whole. Working-age men have been more directly hit by the
deterioration of labour market conditions in the crisis. However
women still face a higher risk of (persistent)
poverty or exclusion than men due to care related periods of inactivity and (voluntary
or involuntary) part-time work. 
The
risk of poverty and social exclusion in 2012 was much higher (48.9%) for
third-country nationals (aged 18-64) than for the nationals (24.3%); an
increase of over 3 pps between 2012 and 2013.
On
average in the EU,  growth in the gross disposable household income (GDHI) had
improved in real terms by the end of 2013,
after nearly four years of continuous declines (see also Chapter 3 for a more
discussion on the developments in gross household disposable income). This was
due to an increase in market incomes (compensation of employees, compensation
of self-employed and property incomes), supported by an increase in social
benefits transferred to the households[16].
It remains to be seen if the 2013 improvement
will be sustained, as jobs creation is still modest, the impact of tax-benefit
systems remains weak and the very latest data from 2014 show another decline
(Figure 12) . 
Figure 12: Contributions of components to the growth of gross
disposable income of households (GHDI) 

Source: Eurostat – Sectoral accounts
The
distributional impacts of changes in tax and benefit systems over latest years
varied substantially across countries[17]
Depending on their design, changes in tax and benefit systems impacted
differently on high and low-income households. In a few countries regressive
impacts put an additional strain on the living standards of low-income
households in particular. Other Member States, through more careful attention
to the distributional profile of their changes in tax and benefit systems,
managed to avoid disproportionate effect on low income households. Such
differences in distributional impacts occurred independently of the differences
in the overall size of the adjustments.
Overall,
after a peak in 2009, social expenditure growth rates have been negative since
2011.
In the early phase of the crisis (until 2009), the rise in social expenditure
was driven mainly by unemployment expenditure, but also, to a lesser extent, by
other functions (notably pensions and health). Social expenditure growth
weakened in 2010, reflecting a combination of fiscal stimulus measures expiring
and the standard path of phasing out automatic stabilisation in countries
experiencing recovery. Since 2011, social expenditure in particular on in-kind
benefits and services declined, despite the further deterioration of the
economic and social conditions (Figure 13).[18].
Figure 13: Contributions to growth in real public social expenditure in EU
of cash and in-kind benefits (2001 – 2012)
                        
Source: National accounts, DG EMPL calculations; 
The
structure of social protection spending
has also been altered by the crisis.
Between 2007 and 2011, (real) social protection expenditure per inhabitant has
increased by 8 per cent in the EU-27 (Figure 14). The strongest contributions
to the increases have occurred in the areas of pensions (increasing old age
& survivors benefits accounted for 44% of the total increase) and health
and disability (32%). The differences across Member States are thereby
substantial, as between 2007-2011 the rise in total social protection spending
per inhabitant was below 5% in four Member States, while increases amounted to
more than 15% in seven Member States. 
Figure 14: Changes in social protection expenditure per inhabitant
between 2007-2011; by social protection function                
Note: contributions by
function to the overall growth of social expenditure (per inhabitant at
constant 2005 prices); Source: ESSPROS
In some Member States, people in vulnarable
situations and
with low-income continued to experience
difficulties in access to healthcare.
While from 2008 to 2012 for the EU-27 as
a whole the proportion of people in
the poorest income cohort who reported unmet
needs for health-care increased only
moderately, significant increases were registered in countries such as Finland, Portugal and Greece (see Figure 15).
The highest level of unmet needs for health-care in 2012 was reported in Latvia, Bulgaria and   Romania. While the highest decrease was in Bulgaria (by -11.4 pp from 2008 to
2012), the proportion of people with unmet need for health-care in 2012
remained significant (16,9%).  
Figure 15: Unmet need for health-care, poorest income quintile,
2008-2012   

Source: Eurostat EU-SILC 2012. Note:  Unmet need for
health-care: too expensive, too far to travel or waiting list. * - 2011 data
(data for 2012 are not available for BE, IE, LU and AT; data for 2008 are not
available for HR and EU-28).  
2.         IMPLEMENTING THE
EMPLOYMENT GUIDELINES: EMPLOYMENT AND SOCIAL POLICY REFORMS
This section[19]
presents an overview of reforms and measures introduced by Member States in the
past 12 months. The Employment Guidelines[20] offer stable
policy guidance to Member States on how to respond to employment and social
challenges against the background of current trends and with a view to reaching
the Europe 2020 objectives (as presented in Section 1). The 2014 Annual Growth
Survey set out the priorities and policy guidance for Member States submitting
their National Reform Programmes in the framework of the 2014 European
Semester. The National Reform Programmes were reviewed accordingly and the
Council, on the basis of the Commission's proposals, issued country-specific
recommendations. The Employment and Social Protection Committees review the
Member States' performance and progress in responding to relevant challenges
through the application of the Employment Performance Monitor (EPM) and the
Social Protection Performance Monitor (SPPM). The subsequent policy reforms
will be assessed in the context of the 2015 European Semester. 
The European Social Fund supports
efforts to achieve the Europe 2020 objectives through actions to fight
unemployment, with a special focus on youth, offering traineeships and
apprenticeships for re-skilling and up-skilling and supporting education actions
to fight poverty and social exclusion, as well as promotion of administrative
capacity building. For the 2014-20 programming period the close alignment of
the ESF and other European Structural and Investment Funds to the policy
priorities of the Europe 2020 Strategy together with the Funds' results
-oriented focus will reinforce their role as financial pillars of the Strategy.

Reforms have been undertaken in all
the areas described in the following sections. However, the degree of progress
varies across policy areas and between Member States. Further efforts are thus
needed, even though in many cases the full effects of the reforms are not yet
visible as they typically take time to materialise. Also the 'value' of reforms
cannot typically be judged in isolation as several reforms may be undertaken at
the same time. Member States should therefore take relevant trade-offs into
account when designing policies and reforms. 
The box below presents an overview
of prevailing gender gaps on the labour market and reforms that can support
progress towards gender equality and that are further explained under each
respective guideline.  
Gender equality: Labour
market is still marked by significant inequalities[21]

While progress has been made, wide
gender gaps are still prevailing. The employment
rate for women remains well below that of men (62.8% versus 74% at the
beginning of 2014). The gap in full-time equivalent employment is even wider
(18.3 pp in 2013). Moreover, women are paid 16% less per hour of work. The
gender gaps in employment, in number of hours worked and in pay add up and lead
to a wide gender total earnings gap (37% across the EU). As pensions reflect
earnings throughout life, the gender gap in pensions is also wide (39% on
average). The at-risk of poverty or social exclusion for those over 55 is
higher for women in all Member States
Access to affordable and quality
childcare services, long-term care services and out-of school care, flexible
working arrangements as well as adequate leave policies continue to play a
crucial role in sustaining women's employment
and helping men and women to reconcile work and family life. While a majority
of Member States made progress towards the Barcelona targets on childcare
provision since 2005, only nine Member States met the objective of 33% coverage
rate for children under three years of age in 2012[22]
and eleven met the objective of 90% coverage rate as regards children between
three years old and the mandatory school age. Tax benefit systems in some
countries continue to discourage women to take up work or work more, in
particular by providing disincentives for second earners to work full-time.  
Labour
market segregation and gender stereotypes can impede men and women to realise
their full potential and lead to suboptimal matching of skills and jobs.
Women now outnumber men in education and training but remain overrepresented in
fields of study that are linked to traditional roles, such as health and
welfare, humanities and teaching, whereas areas such as science, technology,
engineering and mathematics (STEM) are still male-dominated. 
Action
was undertaken to foster female employment rates and to reconcile work and
family life, however differing in scope and ambition across the EU. The
measures taken by Member States aim e.g. at (continuing to) increase the
availability of childcare facilities, and/or amending the parental leave
regulations or flexible working time arrangements.
Fewer initiatives were registered aimed at reducing the gender pay gap or
reducing fiscal disincentives for women to stay/enter the labour market. Some
Member States took measures to combat child poverty or adapt the benefit system
with a view to supporting (low-income) families/parents. While in many
countries a (gradual) equalisation of pensionable ages between men and women is
foreseen, in some cases, steps have also been taken with regard to foster older
women's participation on the labour market or adapting accumulation of pension
entitlements.
2.1 Employment
Guideline 7: Increasing labour market participation
and reducing structural unemployment
The
process of modernization of employment protection legislation continued in a
number of ways in Member States to promote employment dynamism and combat
segmentation. Croatia adopted the second stage
of its labour law reform through a new Labour Act facilitating the use of
flexible types of work contracts, including part-time, seasonal and temporary
agency work, relaxing legislation on working time and simplification of
dismissal procedures. Following the comprehensive social partners’ agreement, the
  Netherlands is in the process of implementing the simplification of dismissal
procedures, capping the amount of severance pay with a linkage to seniority
rather than age, while tightening rules on temporary work to prevent labour
market segmentation and reforming the unemployment benefit system. Spain simplified contract templates for firms, clarified collective dismissal procedures
and promoted part-time work through contributory incentives and increased
flexibility in using complementary hours. Italy relaxed the conditions for
companies to use fixed-term and apprenticeship contracts, while a further
comprehensive reform to employment protection legislation and ALMP is in its
legislative stage in the parliament. Slovakia limited the duration of work
performed outside a core employment relationship to one year, so called work
agreements., 
The
ability of MS to significantly increase the employment rate of women depends to
a large extent on the availability of high quality and affordable childcare. OECD
evidence confirms that childcare is a key driver for women's labour market
participation. Several countries continued measures implemented in previous
years and/or made additional funding for childcare available (Austria, Germany,
Ireland, Malta, Poland), whereas others recently prepared steps to put in place
new legislation or projects (the Czech Republic, Slovakia). Malta started as of April 2014 a free and universal childcare offered to families where
both parents are working. Childcare is available during the parent/s work hours
as well as an extra hour a day for commuting. Furthermore, the 2014 Budget envisaged
a free-of charge service for children in kindergarten and state primary schools
that will be offered during school days to employed
parents who wish to take their children to school an hour before school starts.
In the Czech Republic, the law on child groups, that has been delayed
for several years and aims at easing the creation of child care centres outside
of the public kindergarten network, has been approved by parliament. 
In
a number of countries measures have been taken to make working arrangements
more flexible or amend the parental leave regulations
(the United Kingdom, Spain, Poland, Germany and Finland). In the United Kingdom the right to request flexible working was extended to all employees
as from 2014. As part of the amendment of the act on employment promotion and
labour market institutions, as from 2 May 2014 in Poland a grant for
teleworking – for the employment of unemployed parents returning to the labour
market (bringing up at least one child under 6) or those who resigned from work
to care for other dependants – was introduced. In Italy, as part of the
currently discussed "Jobs Act" measures have been proposed
on amending maternity leave. In Germany, the reform on the parenting benefit
that will come into force in January 2015 incentives both parents to share
childcare and work. 
In
a fewer number of cases initiatives addressed reducing the gender pay gap.
In Austria equal pay reports are compulsory for companies with more than 250
employees since 2013 and with more than 150 employees since 2014. 
Measures
in the field of taxation were proposed
in the framework of the Italy "Jobs Act" and in Malta with an
extension of the tax credit for parents sending their children to private
childcare centres was introduced
(from EUR 1,300 to EUR 2,000).
In the united Kingdom a tax-free childcare scheme for working families will be
in place from 2015, replacing the current system of vouchers and directly
contracted childcare. Eligible families will receive 20% of their yearly
childcare costs on fees of up to GBP 10,000 per child. 
A
number of Member States have addressed wage-setting mechanisms to promote the
alignment of wage developments to productivity. Other Member States have sought
to support households’ disposable income with a particular focus on minimum
wages. In Germany, a general hourly minimum
wage of EUR 8.50 will be introduced starting from 1 January 2015 with a
transition period allowing for some exceptions until end 2016. Estonia, Romania and  Slovakia increased the level of their national minimum wage floor to combat
in-work poverty, while the United Kingdom sharpened sanctions for employers who
do not apply the requirements of the National Minimum Wage. Austria
extended the obligation to indicate the collectively agreed minimum wage in job
advertisements to all employers in industries for which there is no collective
agreement. In turn, Portugal – within wide-ranging
reforms - implemented reductions in the remuneration of high-earners among
workers in public services.
Some
measures were taken to reduce the tax wedge on labour, especially for
disadvantaged individuals, and stimulate labour demand and consumptions.
  Belgium intervened to lower the social insurance contributions paid by
low-wage workers, exempted employers from paying social contributions on pay
for overtime hours in selected sectors, and extended the scope of the exemption
of the withholding tax for employees. Italy lowered personal income tax for
low-income earners for the year 2014 and applied a permanent reduction of 10%
in the regional tax economic activities due by employers. The Spain government approved a proposal for a tax reform including a reduction from seven to
five tax rates, a slight reduction of the marginal rates and an increase of the
exempt amount, which will phase in between 2015 and 2016. Slovakia increased the earnings threshold for students to be exempted from social security
contributions, while Estonia will increase the income tax allowance as of 1
January 2015. In the context of a wide-ranging budgetary package, Latvia alleviated the tax burden especially on families with dependents by increasing
targeted non-taxable thresholds for personal income tax and social
contributions. France implemented for the first year a wage-based tax credit
for companies to be completed in 2015 by a decrease on employer's social
security contributions and measures to reduce income tax on median and low wage
earners were also decided.
Some
Member States stepped up efforts against undeclared work.
In Slovenia, amendments to the Prevention of Undeclared Work and Employment Act
introduced a voucher system for personal supplementary work, involved the
customs service in controlling illegal work practices, and increased sanctions,
especially for tinkering. In August 2014, Croatia established a Commission to
combat undeclared work tasked with evaluating existing measures, monitoring
their implementation and proposing new measures or necessary amendments.  
The
implementation of the Council Recommendation on Establishing a Youth Guarantee
lent impetus to implement a bold structural reform involving many facets of
active labour market policies in the Member States.
In 2014, all Member States presented their Youth Guarantee Implementation Plans
and discussed them with the Commission. Implementation will be key, but
promising first steps have already been taken. 
Some
Member States dedicated efforts at upgrading public employment services'
support to young people. In Belgium, the public employment service in the Brussels region, Actiris, set up a
dedicated YG service, whose role is to provide specific support in finding jobs
and internships to young people officially registered as jobseekers. Romania
has launched two Youth Guarantee pilot schemes leading to the creation of 27
youth guarantee centres (currently supported by the European Social Fund) which
aim at identifying the young NEETs and offering them integrated packages of
personalized services. In ES an activation and employment strategy 2014-2016
was adopted as a main coordination policy instrument to operate
a shift towards a results-based approach to ALMPs. In 
  Italy, the set-up of integrated e-Portals allows people to register directly
on-line and be connected to a national register to facilitate automatic
verification of fulfilment of requirements, and transmission of offers.
Targeted
hiring incentives and start-up subsidies have been means to promote the
activation of young jobseekers in some Member States.
The Netherlands adopted a tax rebate for employers hiring young people who
receive unemployment benefits or social assistance for a period up to two
years, whereas Poland introduced exemptions from social insurance contributions
for under-30-year olds. Other Member States have adopted new hiring
incentives to stimulate job creation for other groups among the long-term
unemployed. General hiring incentives have been introduced or reinforced in
 Portugal, Malta, Greece, Spain and Cyprus. For example, Malta offers a wage subsidy
to employers for new hires up to half of the basic wage and of social
contributions for a period up to one year, whereas Spain approved a flat social
contribution rate for firms hiring new workers with open-ended contracts,
including part-time contracts, for a period up to two years (three for small
firms) as well as special allocations for Youth Guarantee beneficiaries hired
on open-ended contracts.. In turn, Malta targeted a specific subsidy on older
workers, including a tax deduction covering the costs of training.  
Also
related to the implementation of Youth Guarantee, the reform of public
employment services has continued in a number of Member States to improve
service standards and coordination throughout regional levels.
Within the framework of a comprehensive Activation Strategy for the period
2014-2016, Spain has drafted a common catalogue of employment services,
consisting of a homogeneous battery of measures to be implemented by all
Spanish regions with the objectives of securing equal right of access by
jobseekers, individualized treatment, efficiency, transparency,
result-orientation and integration between administrative layers.  Finland will scale-up the requirement to accept job offers provided by the Labour Market
Service Centres at municipal level, within three hours journey per day, and
enhance employment plans for long-term unemployed offering active measures
within 3 months of unemployment. 
Start-up incentive
schemes have widely developed across Europe,
as no less than nine Member States (Malta, Croatia, Spain, Lithuania, Greece, Poland, France, Portugal and Ireland) adopted incentives to support the
unemployed to take up an entrepreneurial activity. In its encompassing Action
Plan for Jobs, Ireland envisaged the set-up of local enterprise offices in
coordination with a the Centre of Excellence in Enterprise, a new youth
entrepreneurship fund to support entrepreneurial activity and expansion; and a
simplification of tax supports for entrepreneurs. In Portugal, Investe Jovem
is a new programme that offers financial support to young people to become
self-employed or create their own micro-enterprise. 
2.2
Employment Guideline 8: Developing a skilled workforce, responding to labour market needs and promoting lifelong
learning
The need to improve skills supply and to promote adult learning
resulted in policy action in several Member States[23]. Member
States introduced measures aimed at improving skills supply and promoting adult
learning frequently in conjunction with vocational training reform. 
In Denmark, as part of a broad
political agreement on a ‘growth’ package, initiatives resulting from a
tri-partite agreement between the government and the social partners will
support the skills development of the unskilled and enable more skilled workers
to take training at tertiary level. The agreement to strengthen the unskilled
and skilled workers opportunities to participate in vocational training will
reach an additional 160.000 people over the 2014-2020 period. In Greece a roadmap on vocational education and training, which is part of the Memorandum of Understanding
under the economic adjustment programme, is intended to increase the number and
the quality of apprenticeships and the provision of vocational training.
In Lithuania the law on non-formal adult education
and continuous training
was amended and the new version (adopted on 10 July 2014) enters
into force on 1 January 2015. The law
provides (among other) for improving the coordination of adult education on
national and local levels, for new models of funding for adult education to be
implemented and for granting of leaves to employees for non-formal education.
Over the reporting period, the government also signed agreements with employers’
organisations representing different sectors aiming to improve the balance
between qualified labour supply and demand. In Cyprus, public universities have
reached agreement to broaden the scope and breadth of programmes offered
through distance education. The New Modern Apprenticeship Programme has been
introduced and includes two levels: preparatory (for youth not having completed
secondary education) and core (through which a 'skilled craftsperson'
qualification is awarded). In Malta the government launched a 2014-2019
strategy to tackle the problem of illiteracy.
In Poland a new law that entered
into force on 1 October 2014 allows for intercollegiate studies, dual studies
conducted with employers and a three month apprenticeship in colleges with an
applied profile and regulates the monitoring of graduates’ paths, it also
supports quality in higher education. Universities
will be able to recognise knowledge and skills acquired in training and or
professional work and take them into account towards graduation. Thus, the new
legislative framework opens up the way to study for those who work, who want to
change careers or supplement education. In France, a law reforming the
Vocational training system has been enacted, introducing a personal training
account and changing the financing of vocational training system to enable more
adequacy and access of employees and jobseekers to vocational training.
A fair number of Member States introduced measures that facilitate
school to work transitions; this will
equally contribute to a comprehensive Youth Guarantee. 
In France a programme for
re-launching the apprenticeship system was decided. The system is to become
more oriented towards skills shortages and includes incentives to employers
when recruiting an apprentice, and for young people the possibility of open-ended
contracts following a period of apprenticeship. The decreed reform is set to
become operational as of 2015. In Ireland, a ‘Skills to Work’ campaign offers
jobseekers online information on what education, re-skilling or work experience
options are available to them in areas of new and emerging employment
opportunities. In Latvia a new student summer employment programme of one
month’s paid work in businesses and local authorities for secondary school
students provides for initial work experience and an introduction to a variety
of skills needed for employment. 
Women
now outnumber men in education and training but remain overrepresented in
fields of study that are linked to traditional roles,
such as health and welfare, humanities and teaching, whereas areas such as
science, technology, engineering and mathematics (STEM) are still
male-dominated. In Germany for example, an ESF-co-financed programme aims to
get more people, mainly men into childcare. 
2.3
Employment Guideline 9: Improving quality of education and training systems at all levels and increasing participation in tertiary education
All Member States submitted
comprehensive Youth Guarantee Implementation Plans, in compliance with the deadlines set by the European Council.
Most Member States took measures to
improve their vocational education and training systems (VET) to better reflect the needs of the labour market (Belgium, the
Czech Republic, Denmark, Estonia, Spain, France, Hungary, Ireland, Italy,
Latvia, Lithuania, the Netherlands, Poland, Portugal, Romania, Slovakia, Sweden
and the United Kingdom, in general linked to their Youth Guarantee scheme and
commitments taken under the European Alliance for Apprenticeships. Several countries introduced
legislative revisions of their VET systems (Denmark, Greece, Spain, Greece, Spain, France, Hungary, Ireland, Portugal, Slovakia and Belgian regions).
Belgian regions have intensified
cooperation between education and training and employment policies and actors
to make VET training more relevant to market needs. Spain has launched a reform
to introduce a dual VET system and adapt it to labour market needs. In France, the new law on lifelong learning and VET increases support for apprenticeships for
those with fewer qualifications. Romania launched new legislation to provide
subsidized professional stages for higher education graduates. Sweden has adopted measures to facilitate the transition from school to work via
apprenticeships, and help young people get work experience. In Estonia additional funding was allocated to adult VET courses. In Portugal, the curricular pattern of vocational education and training was adapted and Portugal created a vocational centres network and new vocational courses at basic (age 14)
and secondary (ages 15 to 17) education. In
  Denmark the reform of vocational education and training was adopted in June
2014 and is to take effect from the school year 2015/16. The reform is to
contribute to ensuring that more young people complete a VET programme, and
contribute to ensuring education guarantee in Denmark for all young people who
want basic vocational education and training.  
Member States put less emphasis on
implementation of qualification frameworks. AT set up a contact point for recognition of foreign
qualifications improving opportunities for migrants and avoiding occupational
mismatch. Croatia set up the Croatian qualifications framework to regulate the
system of qualifications, as well as improve the educational programmes through
their harmonization with labour market needs. 
Some Member States introduced reforms to
their tertiary education systems. Reforms of the higher education system have been introduced in Austria, Germany, Estonia, Greece, Lithuania, Luxembourg, Poland and the United Kingdom. A number of reforms often
including increased financial support for groups with special needs (Austria, Germany, Estonia, Luxembourg and the United Kingdom).
Austria will increase financial assistance to students with own children,
employed students or married students. Germany will increase threshold
limits and to provide additional financial support, especially for young people
whose parents have a low income (from 2016 on). Luxembourg modified the
eligibility criteria for financial support to take into account social aspects.
In the United Kingdom special funding is being made available to increase the
supply of engineers and to encourage more women into the sector.
A number of Member States took measures
to improve their primary and secondary education system (Austria, Estonia, Greece, Spain, Hungary, Ireland, Malta, Slovakia and the United Kingdom), while others addressed the overall education
strategy (Croatia, Lithuania). 
A few Member States (Austria, the Netherlands, Estonia, Ireland and Sweden) improved teachers' working conditions,
salaries or increased the number of available teachers. Estonia increased the minimum wage for teachers to increase the
attractiveness of teaching profession, and is implementing general upper
secondary school and vocational education and training reform. Ireland has budgeted for additional 1400 teachers, as well as maintaining existing levels
of resource teachers for children with special needs. Spain anticipated the choice of educational paths to the 3rd and 4th
grade of secondary education (15 and 16 years old) and introduced new
evaluations in the 3rd and 6th level of primary school (9
and 12 years old). Denmark government reached an agreement on a reform of state
provided compulsory education (primary and lower secondary school), which will
take effect in the school year 2014-15. The Portuguese government
is implementing a programme for teachers training and schools with autonomy
agreements are now allowed to enjoy greater curricular flexibility.
2.4
Employment Guideline 10: Promoting social inclusion and combating poverty
Many
policy reforms in this area have focused on ensuring that social protection
systems can: 

 effectively
     activate and enable those who can participate in the labour market,
 protect
     those (temporarily) excluded from the labour markets and/or unable to
     participate in it,
 prepare
     individuals for potential risks in their lifecycles, by investing in human
     capital.

A.
Member States are increasing efforts to strengthen ALMPs, reforming social
assistance and/or unemployment systems, while introducing targeted measures for
those at higher risk of poverty. A number of
Member States are introducing or strengthening activating measures as part of
their policy to better address adult poverty (Austria, Belgium, Bulgaria, Cyprus, Denmark, Spain, Ireland, Italy, Latvia, the Netherlands and Slovakia). Reforms of the social assistance and/or unemployment system are in progress in a
number of Member States (Belgium, Greece, Cyprus, Ireland, Croatia, Italy, Lithuania, Luxemburg, Poland, Portugal, Romania and the United Kingdom). In Belgium
a reform of the unemployment benefit system aims to ensure an appropriate
balance between the benefit and effective job search assistance and training
opportunities As part of its reform of the welfare system, Cyprus has
introduced a guaranteed minimum income scheme (GMI) (replacing the old public
assistance scheme). Some Member States (Belgium, Estonia, Spain, Malta and the  United Kingdom) have taken specific measures targeted to the population with
higher risk of poverty notably youth, families with children or people with
disabilities (Austria, Belgium, Cyprus, Finland, Ireland, Latvia, Sweden and the United Kingdom). Some Member States (France, Sweden) also reported on
measures to ensure equal opportunities between women and men.
B.
In parallel, Member States have introduced reforms aimed at protecting those
who are temporarily not participating or are unable to participate in labour
markets. To that end some Member States have enhanced their social policies
aiming at safeguarding well-being of children and elderly, improved benefits
while others have introduced specific policies to address child poverty. In response to growing
concerns about the effects of increasing numbers of children affected by
poverty, measures to address child poverty have been
stepped up in some Member States (Bulgaria, Estonia, Spain, Ireland, Italy, Lithuania, Latvia and Romania). In Bulgaria, the most significant measures reported
in relation to the implementation of the National Strategy for Reducing Poverty
and Promoting Social Inclusion 2020 include: the increase of monthly benefits
for a second child and for twin, for children with permanent disabilities as
well as financial support to cover the heating costs for elderly and children. Ireland launched a new evidence-based area based childhood programme designed to tackle
child poverty through the expansion of prevention and early intervention
services which were assessed to be successful during a pilot phase. Italy introduced a support scheme for families with children, which provides passive
measures along with activation measures and services. In Latvia, there has been a significant progress in addressing the child poverty, such as
increases in child-related benefits and in the support for single-parent
families as of 1 January 2014. Moreover, the Latvian government also increased
the Personal Income Tax non-taxable threshold for dependants. In Estonia the government decided (in June 2014) to substantially raise the universal child
allowance as well as the needs-based child benefit and child’s subsistence
level as from January 2015. 
Member
States have taken an investment approach to social policies by improving access
to early childhood education and care. Some
Member States (Austria, Bulgaria, the Czech Republic, Germany, Estonia, France, Hungary, Lithuania, Latvia, Poland and the United Kingdom) took initiatives aimed at extending child enrolment in early
childhood care and education as part of their strategies to improve opportunities
for children. Germany has made some progress in
further increasing the availability of fulltime childcare facilities but only
limited progress in increasing the availability of all-day schools. In France,
the multiannual plan against poverty and social exclusion also contains
measures targeting families with dependent children, such as improving access
to school canteens and providing extra childcare places (with 10% reserved for
children from low-income households). Ireland has introduced subsidised
afterschool child care places to support low-income and unemployed persons to
return to the workforce, and created childcare places for unemployed persons
who participate in community employment schemes which provide training and
experience to support activation into employment. In Malta, a new scheme offers
free early childhood education and care in public and private facilities to
households in which parents are in employment and/or education.
Rebalancing
time in work and retirement is a key theme in pension initiatives as almost
everywhere the retirement
age is being raised and gender equalised. Responding
to the demographic challenges for pension provision, Member States increasingly
recognise the need to ensure longer working lives to offset the impact of increasing
longevity and enable people to compensate declining
replacement rates through longer contributory careers. Over the past years,
various Member States adopted (e.g. Cyprus, Spain, France, Ireland, Hungary and  Latvia) or already implemented (e.g. Denmark, the United Kingdom) an increase
of the pensionable age for women and/or men. In total, 25 of 28 Member
States have now legislated current or future
increases of the retirement
age. In many cases, the increase is accompanied by a (gradual) equalisation of retirement
ages for men and women (the Czech Republic, Estonia, Greece, Croatia, Italy, Lithuania, Malta, Poland, Romania, Slovenia, Slovakia and the United Kingdom). With its extension of pension entitlements ("mutter
rente") to parents who had children
before 1992 Germany aimed to address
some of the impact of career interruptions and part-time work.
However, in many Member States more efforts are
warranted to tackle these other key drivers of the gender gap in pension
entitlements. 
Further
countries are linking the retirement
age to longevity growth. The United Kingdom and Portugal are
now following the growing number of countries (Cyprus, Denmark, Greece, Italy,
the Netherlands and Slovakia), which after first raising the retirement
age to cover earlier increases in longevity have opted to introduce an explicit
link between the pensionable age and future gains in life expectancy. Yet some
Member States still have serious reservations about this idea. 
In
order to raise effective retirement
ages, more Member States have taken steps to restrict access to early
retirement. The main reform measures involve
stricter eligibility conditions for early pension take-up (higher minimum age,
longer contribution record and benefit level reductions) and stronger focus on
activation measures (Belgium, Cyprus, Spain, Croatia, Portugal and Slovenia). Some countries are also restricting access to widely-used alternative
pathways to early retirement such as prolonged
unemployment benefits (e.g. Spain) or invalidity benefits (e.g. Austria, Denmark). Yet in several countries (e.g. Austria, Belgium, Bulgaria, Croatia, Luxemburg, Malta and Romania) including some of those engaged in recent reforms early retirement
options still tend to undermine the adequacy and sustainability of pensions.
Other countries have facilitated access to early retirement options
for individuals with long contributory careers and taxing workloads. In Latvia and Portugal this happened in response to increasing employment problems for certain groups
of older workers. In Denmark the aim has been to offset imbalances in prior
reforms that reduced early retirement options. In Germany the goal was to raise
equity for persons that started work at an early age, while in Bulgaria the easing was primarily targeted at people, who have performed arduous work. 
More
Member States are opening routes for people to prolong their working lives and
improve pension entitlements by deferring retirement.
In France the age at which private employers can send a worker into retirement
without his/her consent has been raised from 65 to 70. Many pension systems
include incentives for working beyond pensionable age, such as higher pension
accrual rates or a pension bonus in the event of delayed retirement (e.g. Denmark, Finland, France). More countries are relaxing rules to allow pension benefits to be
combined with work-related income (Belgium, the Netherlands and Slovenia). Importantly, some countries are increasingly underpinning pension reforms with
active ageing measures in work places and labour markets (e.g. Belgium, France, Slovenia). But in this area efforts in many Member States are still far too limited
and uncoordinated. 
As
part of fiscal consolidation efforts the indexation of pensions in payment
has been changed or temporarily
frozen in a number of Member States. This is
for example the case in Cyprus, France, Italy and Portugal. In others
indexation, possibly in a revised form, is being re-established after a period
where it has not
been applied
(e.g. the Czech Republic, Bulgaria and Latvia).
C.
In response to fiscal pressures, countries are reviewing healthcare expenditure
and seeking ways to improve value for money and effective outcomes while better
instruments for cost containment are introduced. Several
Member States have undertaken or launched structural reforms of their
healthcare systems (Austria, Bulgaria, Cyprus, Greece, Spain, Finland, Croatia, Ireland, Romania, Slovakia and the United Kingdom). Finland has agreed a reform of the social and healthcare services whereby the
responsibility for service delivery will be allocated to five social and
welfare and health care regions. The new Care Act will bring major changes to
the National Health Service in the United Kingdom (England) creating the legal
framework for the Better Care Fund which will provide important financial
incentive for local authorities to integrate health and social care services. A
number of Member States introduced measures to contain the rising costs of
health expenditure (Austria, Bulgaria, Belgium, Cyprus, Germany, Spain, France, Croatia, Ireland, the Netherlands, Portugal, Slovenia and the United Kingdom). Austria, Belgium and France focused on capping the overall level of
healthcare expenditure growth. France introduced new measures to contain
pharmaceutical expenditure by better price setting and encouraging the use of
generics. A variety of measures have been taken to improve health service
delivery, many of them further developing e-Health (Austria, Belgium, Bulgaria, Cyprus, Denmark, Spain, France, Lithuania, Latvia, Malta, Poland, Portugal, Sweden, Slovenia, Slovakia and the United Kingdom). Cyprus is introducing the main
reforms related to the implementation of the new National Health Service and
its IT infrastructure as well as reforms relating to public hospitals and other
health facilities and the organisation and management of the Ministry of
Health. Belgium voted an e-Health Action Plan with the aim of generalising the
electronic exchange of patient information and patient files by 2018. 
It
remains necessary to find new ways of tackling staff shortages and securing
access to healthcare for all calls for further measures. Some
Member States are substantially investing in the healthcare workforce (Germany, Hungary, Latvia, Malta and Slovakia). Latvia decided to increase the minimum remuneration
for health care professionals by 10-12,5%. Enhancing access to healthcare
services remained a priority for several Member States (Bulgaria, Denmark, Greece, Finland, France, Ireland, Luxembourg, Latvia and Portugal). In Greece all uninsured persons are now formally entitled to access to medicine
and hospital care, subject to medical need.  
Against
the background of ageing populations many Member States take steps for meeting
the fast-growing demand for effective, responsive and good-quality long-term
care. Bulgaria adopted a national strategy based on an integrated
approach and enhancing the provision of quality social services, including
long-term care. The Netherlands will implement from January 2015 a major
structural reform of its LTC system which consists of transferring some
responsibilities from the current system to municipalities and health insurance
companies. In several Member States the lack of formal LTC services remains a
major impediment to an adequate protection against the financial risks related
to long-term care needs and to female employment.  
Member
States introduced special inclusion programmes for people in situations of
particular disadvantages and for people affected by homelessness and housing
exclusion. In Bulgaria there are positive examples
of targeted support measures facilitating the access of Roma to employment.
However, overall there are still few systematic measures put in place at
national level. Two-year obligatory preschool introduced in Bulgaria and obligatory pre-school from the age of three being introduced
by Hungary are promising for the primary education of Roma children. A few
countries (Ireland, Finland and Latvia) have adopted policy measures on
housing- and homelessness-related benefits, while the Czech Republic,
Lithuania, the Netherlands, Slovenia are introducing
policies or legislation on social housing. Some Member States (Spain, Latvia) have adopted housing-market related measures to ease the pressure on household
indebtedness. In Belgium, five local authorities have launched the
"Housing First" pilot project with the guiding principle of providing
roof over one's head.
3.         SCOREBOARD OF KEY EMPLOYMENT AND SOCIAL
INDICATORS 
Institutional set-up of the
scoreboard of key employment and social indicators 
The
purpose of the scoreboard, proposed in the Communication on Strengthening the
Social Dimension of the Economic and Monetary Union (EMU)[24]
and presented in the draft 2014 Joint Employment Report[25],
has been better anticipation through the identification of major employment
and social problems or developments
at an early stage. The scoreboard, as an analytical
instrument, focuses on employment and social trends
that would threaten the stability and good functioning of the EU and the EMU by
undermining employment, social cohesion and human capital, and therefore the
competitiveness and sustainable growth and
its purpose is to allow a broader understanding of social developments[26].
The scoreboard was approved in December 2013 and adopted in March 2014 (as part
of the Joint Employment Report) by the EPSCO Council[27].
Following the mandate of the European Council[28], the
scoreboard was used for the first time in the 2014 European Semester.
Subsequently, the Commission drew on the results of the scoreboard when
drafting the 2014 Staff Working Documents and reflecting on draft Country
Specific Recommendations with the aim of better underpinning challenges and
policy advice. The reading of the scoreboard was supplemented by the additional
information derived from the Employment Performance Monitor (EPM) and the
Social Protection Performance Monitor (SPPM) and the assessment of policy
measures undertaken by the Member States. The scoreboard succeeded in highlighting
key employment and social challenges in the context of the European Semester
and feeding into debates on the institutional level.
In
parallel, the Employment Committee (EMCO) and the Social Protection Committee
(SPC) commenced a discussion on the operationalization of the scoreboard beyond
the 2014 European Semester[29].
The Committees elaborated in particular on the choice of indicators, on reading
of the scoreboard in conjunction with EPM and SPPM and methodology for defining
what constitutes the most problematic employment and social developments. The
current edition of the Joint Employment Report includes several tabled
proposals, among others, strengthening the gender and age dimensions in the
data analysis and the consideration of changes in the levels of an indicator
beyond the most recent period. 
3.1 Findings from the comprehensive
reading of the scoreboard on the EU and the Eurozone level 
What
follows is an overview of recent divergent socio-economic trends identifying
the most noteworthy developments in the EU and individual countries across the
board of the scoreboard and per each of the five indicators. Finally, tables
are provided in Annex with an overview of the situation per indicator in all EU
Member States as well as an overview of the key employment challenges as
identified in the EPM and the social trends to watch from the SPPM. 
Potentially
worrying key employment and social developments and levels leading to
divergences across the EU and warranting further analysis and possibly stronger
policy response could be detected along three dimensions[30]:
·               
For each Member State, the change in the
indicator in a certain year as compared with earlier periods in time
(historical trend);
·               
For each Member State, the difference
from the EU and the euro zone average rates in the same year (providing a
snapshot of existing employment and social disparities);
·               
The change in the indicator between two
consecutive years in each Member State relative to the change at the EU and
euro zone levels (indicative of the dynamics of socio-economic
convergence/divergence). 
In
general, when looked across the board, the scoreboard's findings indicate
persistent, yet not growing to the extent similar to the last year,
socio-economic divergences. The divergences remain visible in the rates of
unemployment, of youth unemployment and of young people who are neither in
employment nor in education or training; declines in household income and increases
in inequalities and increased poverty rates are evident in most Southern European
Member States of the Euro zone. At this stage, in particular for the
unemployment related indicators, the divergences are not becoming more profound
yet the scale of reversal of
the previous trends remains to be seen.
The
data derived from the scoreboard is analysed also with a gender breakdown taken
into consideration (for all the indicators where it is possible). In several
Member States, the burden of increases in unemployment for both the working age
population and the youth was unproportionally heavy for women while in other
countries, these were the male workers that were hit stronger by the effects of
the crisis. 
When
analysed on the country level, the scoreboard points at several Member States
experiencing serious employment and social challenges while looking at
historical developments and distances to the EU average. The most problematic
situation across both employment and social indicators can be observed in Italy and Romania. These are the Member States which experienced negative developments across the
board from already problematic starting points. Employment indicators in Greece, Spain and Portugal show either improvements or a stable situation while the social
indicators still indicate growing and already high poverty rates and inequalities
as well as decline in household incomes in real terms. In Cyprus and Croatia, (youth) unemployment rates show some improvements or no further deterioration
while NEETs rate continue to increase from the already high levels. In the
former Member State, negative labour market developments translated in the
further worsening of the social conditions. While Lithuania continued to
improve its labour market situation (already for the two reporting periods in
row), social indicators point at growing concerns regarding poverty and
inequality increases from already above the EU average levels. Finally, there
are two Member States that until now managed to shelter their societies from
the effects of the crisis yet some worrying signals are evident in the scoreboard:
The Netherlands experienced increases in (youth) unemployment and NEETs rates
and the poverty indicator while Finland had some worrying developments
regarding the unemployment and NEETs rates.   
 Levels || Changes || Employment indicators || Social indicators 
 UR || YUR || NEETs || GHDI || AROP || Inequality 
 L       || L || Italy || Belgium, Italy, Romania || Croatia, Italy, Cyprus, Hungary, Romania || The highest declines: Greece, Spain, Italy, Cyprus, Hungary, Slovenia || Greece,  Lithuania, Portugal, Romania || Greece,  Bulgaria, Italy, Lithuania, Romania, Portugal 
 - || Greece, Croatia, Cyprus || - || Bulgaria, Greece, Spain   || Italy ||   
 J || Spain, Portugal, Slovakia || Spain, Greece, Croatia, Cyprus, Portugal, Slovakia || - || Latvia || Latvia 
 J || L || Luxembourg, the Netherlands, Finland || The Netherlands, Austria || Belgium, the Netherlands, Austria, Finland   || Denmark, Luxemburg, Cyprus, Malta, the Netherlands, Slovenia, Sweden || Cyprus, Germany, Hungary, Malta, Slovenia 
Table: Summary of the reading of the
scoreboard of key employment and social indicators[31]

The
challenges identified through the scoreboard of key employment and social
indicators will need to be considered in the context of the European semester,
in particular the Commission's work on the Staff Working Documents underpinning
the draft Country Specific Recommendations and the multilateral surveillance
conducted in EMCO and SPC. The battery of indicators included in the EPM and
the SPPM will be fully integrated in to order to
complement the country-specific analysis.
3.2
Findings from the reading of the scoreboard per indicator 
3.2.1
Unemployment rate – change and level 
In
general across the European Union, dramatic increases in the unemployment rate
as reported in the previous edition of the scoreboard have been halted. The
rate among EU28 decreased of 0,5 pp giving indications of a slight recovery on
the labour market. The improvements in the Eurozone were more marginal
(decrease of 0,3 pp). Yet cross-country divergences that have mounted
throughout the years of the crisis remain high and show no signs of
improvements. The gap between two best and two worst performers remains more
than 20 pps. The unemployment rate for women remains higher than among man (respectively
of 0,2 pp in the EU28 and 0,4 pp in the Eurozone in the first half of 2014)  
Figure I: Unemployment rates – 1st semester 2014 and
changes 1st semesters 2012-13 and 1st semesters 2013-14
by country (age group 15-74)          
Source: Eurostat (LFS), DG EMPL
calculations; sorted by level at the first half of 2014 
As
seen from figures in the scoreboard, there are six Member States (Greece, Spain, Croatia, Cyprus, Portugal, Slovakia, Italy) where the unemployment rates are still
alarmingly high (comparing to the EU average).  While three of these states (Spain, Portugal, Slovakia) have witnessed some positive changes, the situation in Italy is becoming even more worrying as the unemployment rate deteriorated even further
(i.e. an increase of 0,5 pp over a one-year period). On top of the Southern
European countries, a new group of states facing growing unemployment is
emerging. Luxembourg, the Netherlands and Finland have all still quite low
unemployment levels, however the scoreboard shows some problematic developments
of the unemployment rate for the countries that have so far managed to shelter
relatively well their labour force throughout the crisis. The comparison with
the first scoreboard edition shows that it is not a completely new phenomenon
indicating these developments may turn into longer-term trends that may require
attention. Regarding the gender dimension of the unemployment phenomenon,
in the Southern European countries (Spain, Greece, Italy), the female
unemployment rate remains
higher than the male one; the situation is reversed in Sweden, Finland, Ireland or the Baltic States  
3.2.2
Youth unemployment rate and NEETs rate 
In
the current reporting period, there has some positive developments regarding
the youth unemployment rate with the averages declining both in the EU (decline
of 1,2 pp) and the Eurozone (0,5 pp). While the situation in the worst
performing countries has improved, the differences in Member States'
performances still remain large. Regarding the NEETs rate, the EU and the
Eurozone averages decreased only slightly leaving the European Union diverged
with the high levels of NEETs rates (mostly in the Southern European countries)
that have accumulated thought the crisis years. 
Figure IIa: Youth unemployment rates - 1st semester 2014, 1st
semesters 2012-13 and 1st semesters 2013-14 by country (age group
15-24)   

Source: Eurostat (LFS), DG EMPL calculations; sorted by level at
the first half of 2014 
Figure IIb: NEET rates 2013 level and changes 2011 – 2012 and 2012
- 2013 (age group 15-24)
Source: Eurostat (LFS), DG EMPL
calculations; sorted by level at the first half of 2014; Note: FR 2013 break in
series, so no changes available 
The
situation of young people on the labour market remains dramatic in many Member
States; in not less than seven countries (Greece, Spain, Croatia, Italy, Portugal, Cyprus, Slovakia), the unemployment rate remains 9 pps higher than the EU
average. On a more positive side, most of these countries managed to improve
the situation of youth with a notable exception of IT where the rate continued
to raise (i.e. 4,1 pps). In addition, Belgium and Romania witnessed increases
in the unemployment rate among young people with levels already relatively
high.  Similarly to the analysis of developments regarding the unemployment
rate, also in the case of this indicator, there is a group of countries (the Netherlands, Austria, Finland) that shows signs of deterioration from still a comparatively good
starting point.      
While
the levels of the youth unemployment rate have not risen drastically across the
board, the share of young people not in education, employment or training
(NEETs) increased significantly in nearly half of the Member States. From the
already high levels, Croatia, Italy, Cyprus, Hungary and Romania experienced a rise of the NEETs rate between 2,7 pps and 0,4 pp.  Here again, the
situation of NEETs in Italy is most dramatic as the country with the highest
levels of NEETs has experienced the third highest increase in the NEETs rates.
On a more positive note, the negative trends in Greece were brought to a halt
(at least in this reporting period): while the levels of NEETs rate are still
high they have not continued to increase. Comparably to other
employment-related indictors, several Eurozone Member States (Belgium, the Netherlands, Austria, Finland) have been experiencing downturn of their labour markets
with the recent increases in the NEETs rates from levels still below the EU
average. The NEETs rates among young women are most dramatic
in the Czech Republic, Croatia, Cyprus, Lithuania and Hungary while high male NEETs rates are evident in Greece, Croatia, Cyprus and Finland.  
3.2.3 Real changes in gross
disposal income of households
Household
incomes continued to stagnate in real terms or decline strongly after 2011 in
the countries most impacted by the further deterioration of economic
conditions. Household incomes have primarily been affected by the reduction of
market incomes and the weakening of the impact of social transfers over time.
In addition, fiscal tightening in some Member States has affected employment
and changes to the tax and benefits systems and cuts in public sector wages
have led to significant reductions in the level of real household incomes. This
may have contributed to the widening divergence within the euro area.
Figure III: Real change in gross
disposable household income (GDHI): growth in 2012 and 2011
Source: Eurostat, National accounts, DG EMPL calculations; sorted
by total 2012 growth
There
is both a wide dispersion and growing divergence between Member States in the
evolution of gross household disposable income in real terms. Looking at the
situation in 2012 data no less than 16 Member States experienced significant
negative developments in gross household disposable incomes: Greece has experienced a year-on-year decrease of nearly 10% and Cyprus one of 9%. The declines in
the former country as well as in Spain and Italy came on top of the already
detectable deterioration under the previous reporting period. On the other
hand, there is now a group of countries emerging whereby until 2011 wages
continued to growth and it was 2012 that brought some negative
developments: Cyprus, Hungary, Slovenia, Estonia and Bulgaria.    
3.2.4
At-risk-of-poverty rate of working age population – change and level
At-risk of poverty rates for the
working age population are on the rise in many Member States (see Figure IV).
In many countries the increase comes on top of already high poverty risk
levels, often compounded by drops in the level of the poverty threshold over
the period. 
Figure IV: At-risk-of-poverty rates in working age, 2013 level and
changes 2011 – 2012 and 2012 - 2013 (age group 18-64)
Source: Eurostat, EU-SILC (DG EMPL
calculations); referring to the income year 2012. Note:
ES 2013 break in series, no changes available; AT UK break in series in 2012,
no change 2011-2012 available, 2012 (change 2011-2012 and 2010-2011) for IE.
The
Member States with the highest increase in the at-risk-of-poverty rate of the
working age population between 2012 and 2013 include Greece, Cyprus, Lithuania,
Luxembourg, Malta, Portugal and Romania, while the highest increases between
2011 and 2012 were observed in Greece, Portugal, Croatia and Spain. In most of
these countries, the extended period of negative or close to zero GDP growth,
rising long-term unemployment and the weakening over time of the impact of
social transfers have given rise to poverty risks.
3.2.5 Inequalities (S80/S20 ratio[32])
– change and level 
Income
inequality is growing across and within Member States, particularly in the
Member States that witnessed the largest increases in unemployment (see Figure
V). In many countries, the crisis has intensified the long-term trends of wage
polarisation and labour market segmentation, which together with less
redistributive tax and benefit systems have fuelled rising inequalities. The
significant increases in inequalities can be related to high levels of
unemployment (with the largest increases at the bottom of the labour market).
In some cases the impact of fiscal consolidation has been also a factor[33].

Figure V: Inequality (S80/S20 measure) 2013 (*2012) level and
changes 2011-2012 and 2012 – 2013

Source: Eurostat, EU-SILC (DG EMPL
calculations); Note: ES 2013 break in series, no changes available; AT, UK
break in series in 2012, no change 2011-2012 available, 2012 (change 2011-2012
and 2010-2011) for  IE 
There
is a wide dispersion and growing divergence in inequality (S80/S20 ratio)
between Member States. The recent data for the income year 2012 (which are
available for a number of Member States) show increases in income inequality
(as measured by the S80/S20 indicator) by 0.5 or more between 2012 and 2013 in Lithuania
and Bulgaria and some notables increases in Italy, Romania, Portugal, Cyprus,
Germany, Hungary, Malta and Slovenia. Income inequality remained particularly
high in Bulgaria, Greece, Spain, Lithuania, Latvia, Portugal and Romania in 2013, with the income share of the top 20% being at least six times higher than
that of the bottom 20%.
[1]           Official Journal L308/46,
24.11.2010, “Council Decision of 21 October 2010 on guidelines for the
employment policies of the Member States (2010/707/EU)”
[2]        This is also true for third-country
nationals and people with disabilities. The unemployment rate for third-country
nationals was 21.7% in 2013 (14.3% in 2008), while for people with disabilities
the unemployment rate is almost double the rate for people without
disabilities. 
[3] See
"Key Features" from DG EMPL for further analysis (forthcoming).
[4] See Commission staff working document:
Exploiting the employment potential of ICTs, 18.4.2012, SWD(2012) 96;
Commission staff working document on an action plan for the EU healthcare
workforce, 18.4.2012, SWD(2012) 93 and Commission staff working document:
Exploiting the employment potential of green growth, 18.4.2012, SWD(2012) 92
[5] See also Commission communication Green
Employment Initiative: Tapping into the job creation potential of the green
economy, 2.7.2014, COM(2014) 446.
[6] For example, involuntary part-time
employment (as a percentage of total part-time employment) in the EU-28 was
29.6% in 2013, up from 25.3% in 2008.
[7] A Beveridge curve, or UV-curve, is a
graphical representation of the relationship between unemployment and the job
vacancy rate (the number of unfilled jobs expressed as a proportion of the
labour force). It slopes downwards as a higher rate of unemployment normally
occurs with a lower rate of vacancies. If it moves outwards over time, then a
given level of vacancies would be associated with higher and higher levels of
unemployment, which would imply decreasing matching efficiency in the labour
market.
[8]           "Labour Market Developments in Europe, 2013", European Commission.
[9]           For
further analysis, see "Key Features", DG EMPL.
[10]          For instance "Future
Skills Supply and Demand in Europe", Cedefop.
[11]          In October 2013, the OECD and
Commission released the outcome of a new "Survey on Adult Skills
(PIAAC)", European Commission, OECD.
[12]          See e.g. "Is Aggregate
Demand Wage-Led or Profit-Led? National and Global Effects",
International Labour Office, Conditions of Work and Employment Series No. 40, Geneva, 2012.
[13]          See "Quarterly Report on
the Euro Area", European Commission, Volume 12, No. 3, 2013.
[14]          See
e.g. Eurofound (2013), "Tackling Undeclared Work in 27 European Union Member States and Norway: Approaches and Measures Since 2008",
Eurofound, Dublin; Hazans, M. (2011), "Informal Workers Across Europe",
Research Paper 5912, World Bank, Washington DC.  
[15]          The income quintile share ratio or the S80/S20 ratio
is a measure of the inequality of income distribution. It is calculated as the
ratio of total income received by the 20 % of the population with the highest
income (the top quintile) to that received by the 20 % of the population with
the lowest income (the bottom quintile). All incomes are compiled as
equivalised disposable incomes.
[16] See more details in EU Employment and
Social Situation, Quarterly Review, June 2014.
[17]          EU Employment and Social
Situation - Quarterly Review - March 2014 - Supplement on trends in social
expenditure (2014)
[18]        See
EU Employment and social situation, Quarterly Review March 2013. Analysis shows
that the downwards adjustment of social expenditure observed since 2011 appears
more pronounced in comparison to similar episodes of recession over the past
three decades.
[19]          This section gives an update of
the situation as presented in the previous Joint Employment Report and due to
space limitations, is not exhaustive and does not aim to report on all reforms
and policy measures. As a rule, measures that have been only announced but have
not been submitted to Parliament for adoption or to a collective bargaining
with social partners are not covered in the Report.  
[20]          Council Decision 2010/707/EU of 21
October 2012 on guidelines for the employment policies of the Member States. 
[21] Note that the Commission's annual report
on progress on equality between women and men provides a detailed analysis
[22] Latest data available; published in spring
2014
[23] For a more complete overview of
developments covering guidelines 8 and 9 see Education and training Report
2014.
[24]  COM(2013) 690, 2.10.2013. See in
particular pp. 6-7 " The Commission proposes to create a scoreboard of key
indicators to be used in its draft Joint Employment Report to follow employment
and social developments. It should serve as an analytical tool allowing better
and earlier identification of major employment and social problems, especially
any that risk generating effects beyond national borders. (…) It would be
incorporated into the draft Joint Employment Report in order to provide a more
focused basis for reinforced multilateral surveillance of employment and social
policies, helping to identify developments that warrant stronger employment and
social policy responses. (…) The employment and social indicators for the scoreboard
should capture the key phenomena for each country and identify the most serious
problems and developments at an early stage and before the country diverges too
strongly from its past performance or from the rest of the EU."
[25] COM(2013) 801 final, 13.11.2013
[26]   European Council Conclusions, 19/20
December 2013, par. 39
[27] 7476/14, Brussels, 12 March 2014
[28] European Council Conclusions, 19/20
December 2013 "38. The European Council reiterates the importance of
employment and social developments within the European Semester. On the basis
of work undertaken by the Council, the European Council confirms the relevance
of the use of a scoreboard of key employment and social indicators as described
in the Joint Employment Report" 
[29] Joint SPC/EMCO opinion the scoreboard of
key employment and social indicators for the June EPSCO Council. In addition,
SPC tabled the document on" Key employment and social indicators'
scoreboard: operationalization – Report from the Social Protection Committee
Indicators' Subgroup"
[30] This three-fold dimension analysis follows
the 2014 Joint Employment Report as agreed between the Commission and the
Council.  As stated in the Key Messages to the 2014 Joint Employment Report:
“The impact of the crisis has also translated to a growing divergence between
Member States' employment and social situations, particularly in the euro zone,
as this Joint Employment Report and its new scoreboard of key employment and
social indicators illustrate. This divergence is visible across all of the five
key indicators within this scoreboard.” 7476/14, Brussels, 12 March 2014, p. 3.
In addition, as it was agreed in the 2014 Joint Employment Report, the
scoreboard covers all EU Member States and comparisons are thus made with the
EU average. In some cases, statistical deviations from the EA average might
also be relevant. 7476/14, Brussels, 12 March 2014, p. 49
[31] The table represents an overview of
employment and social developments across the Member States whereby levels or
trends in key indicators could be considered problematic.
[32] The ratio between the incomes of the 20%
of the population with the highest incomes and the incomes of the 20% with
lowest incomes.
[33]          See EUROMOD Working Paper 2/13.
Annex 1 Scoreboard of key
employment and social indicators with EU and Eurozone averages as reference
points*
* For
each indicator (except for real growth in GHDI as it is represented as a
monetary value) the three columns refer to i) year on year change in absolute
terms; ii) the difference from the EU (or Euro Area) average rates in the same
year iii) the year on year change for the country relative to the year on year
change at the EU or EA levels (indicating whether the country's situation is deteriorating/improving
faster than the rest of the EU/EA reflecting the dynamics of socio-economic
divergence/convergence). S1 stands for 1st semester and is based on quarterly
data. Source:
Eurostat, EU LFS, National Accounts and EU-SILC (DG EMPL calculations). NEET:
change 2011-2012 for FR (break in series in 2013); AROP and S80S20: 2012 inst.
2013 (change 2011-2012) for IE change 2011-2012 for ES (break in series in
2013)."

Annex 2 Summary overview of Key
Employment Challenges and particularly good labour market outcomes according to
the Employment Performance Monitor (C=challenge; G=good labour market outcome)
– adopted in June 2014[1]
Annex 3 Summary overview of the ‘social trends to
watch’ and Member States with statistically significant deterioration and
improvement for the period 2011-2012 as identified by the Social Protection
Performance Monitor – adopted on 19 February
2014
Source: Social Europe: Many ways, one objective.
Annual Report of the Social Protection Committee on the social situation in the
European Union 2013
Note: The social trends to watch for 2011-2012, as
adopted by the SPC on 19 February 2014 on the basis of the available data at
that moment in time, identify deterioration in more than 1/3 of MSs and are
highlighted in red in the table above (Source: Social Europe: Many ways, one
objective. Annual Report of the Social Protection Committee on the social
situation in the European Union 2013) 
[1] http://register.consilium.europa.eu/doc/srv?l=EN&f=ST%2010763%202014%20INIT