European labour markets

Trends and the search for flexibility

European business and labour

• Business requires a labour force that is:– Skilled– Flexible – Plentiful– Mobile– Healthy– Well-educated

Labour market trends

These trends pose challenges for businesses and policy

Unemployment

• Unemployment of 3% the norm - pre-1970

• cyclical and structural components

• 70s onward - higher long term trends

• 2005 – ranges from 4.3% (Ireland) to 17.7% (Poland)

Unemployment rate (%)

1970 1985 1998 2005

Fr 1.3 10.3 12.0 9.5

Ger 0.6 8.4 10.0 9.5

Ital 4.4 12.9 12.0 7.6

Sp 1.2 21.9 19.5 9.2

UK 2.5 12.0 6.5 4.6

Labour market structure

• Reflects changing economic structure – from manufacturing to services

• Higher % of women in services than men

Services employment Male as

% of male employment

Female as % of female

employment Fr 53 82

Ger 52 80

Ital 55 75

Sp 51 81

UK 62 88

Part-time and temporary work

• Gradual increase in part-time and temporary work– Trend throughout Europe– Part-time range from 2.4% in Slovakia to 46%

in Netherlands– More women (33%) than men (7.4%) in part-

time work

Ageing population

• 2000-2010:– Population between ages 20-39 will decline by 12

million in Europe– Population between ages 40-59 will increase by 13

million in Europe

• European age dependency will rise from 23.4% in 2000 to 53.8% in 2050

• Major challenges for businesses and welfare systems

• Lisbon targets – if met, would help

0

10

20

30

40

50

60

70

80

Overall employment rates - 2004

Source: Eurostat – Labour Force Survey 2004

Lisbon employment target (2010): 70%

0

10

20

30

40

50

60

70

80

Female activity rates (%) - 2004

Source: Eurostat: Labour Force Survey 2004

Lisbon female employment target (2010) – 60%

0

10

20

30

40

50

60

70

80

Employment rates for the 55-64 age group

Source: Eurostat – Labour Force Survey 2004

Lisbon older workers employment target -50%

Labour market flexibility

What is labour market flexibility?

• Conflicting views

1. Neo-classical market forces approach

Competitive success based on lower costs from:

– minimal regulation– market clearing wages– freedom to hire and fire

2. Flexible specialisation (Piore and Sabel)

(Shift from Taylorism and Fordism → knowledge-based Information Society)

Competitive success based on:• multi-skilling (requires training)• flexible labour deployment• skilled work force• co-operative not adversarial IR• employee identification with organisation

Evolution of EU Labour Market Policy

• 1980s → 1990s: labour market issues about rights and integrity of SEM.

• 1990s → 2000s: demographic, competitiveness, emerging shortages.– creating high value jobs– Ageing population– Pension costs– immigration

Labour issues in Treaty of Rome - needs operationalising

• Freedom of movement

• Right of establishment• Right to provide

services• Improved working

conditions• Common measures -

social security migrant workers

• Equal pay for equal work

• European Social Fund

• Co-operation - employment law, working conditions, etc

Labour market policy

Evolution of policy• 1960s - low unemployment

– Policy emphasises labour mobility: mutual recognition of qualifications; social security rights, some health and safety

• 1970s - Social Action Programme– employment law– equal opportunities• equal pay directive (equal value)• equal treatment directives (workplace & social security)

– failed attempts - industrial democracy

• Mid 1980s - SEM and Single European Act - big boost to social/labour market policy

– SEM - not just for business

– Social dumping argument

– Qualified majority voting for health and safety

Social Charter - December 1989

• Not legally binding - declaration of rights• Signed by all members bar UK• UK:

– Social Charter increases costs - reduces competitiveness

– ‘Socialism through the back door’• Other member states:

– most Social Charter elements already in national law

• Social Charter debate about flexibility

• Maastricht - 11 member states wished to bring Social Charter into Treaties to give it legal force

→

Social protocol and UK opt-out

• Social dumping controversies - e.g. Hoover• Battles over policy (e.g. Working Time)• Only two directives adopted under Protocol

– Works Council Directive– Parental Leave Directive

• UK opt-out ended by Labour government

1990s - recession and unemployment

• Emphasis shifts from workers’ rights to job creation

• Concerns about:– competing with low cost countries– high burden of indirect costs– changing nature of labour market– demographic shifts and associated costs

Amsterdam Treaty

• Biggest changes in labour issues– Employment chapter - ‘high’ level of

employment– Social Protocol into Treaty– Non-discrimination - race, gender, ethnic

origin, religion, age or sexual orientation– Mainstreaming of equal opportunities - men

and women

EU Labour Market Position - 2000s

• EU economy growing - but unemployment above US

• No shortage of work - labour still inflexible• Since 1997, EU created 5.6 m jobs• Labour shortages are evident esp. IT• Increase in flexible employment – increase in

part-time/temporary work

Labour market challenges

Lisbon agenda

“to become the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesions”

Lisbon sets employment goals – see above

Challenges for Policy

• EU economies growing, working population shrinking – compounded by ageing population

• Immigration is key• Currently encourage migration of skilled workers

(e.g. software workers from India)• But political implications• Need to sort out asylum and immigration policy

Challenges for Policy

• Emerging skill shortage is hitting performance of business

• Red- tape hits recruitment of foreign workers

• Education systems slow to adapt to changing need of European labour market

• Mobility of EU citizens very low• Need foreign labour

Challenges for Policy

• Most EU states stopped `primary immigration’ – economic migration

• Limited to skilled or seasonal workers

• Result est. ½ million illegal immigrants p.a.

• Fear enlargement could speed this flow – make it legal

Post-2004 labour market mobility

• Fears about labour flows westwards• EU(15) retained right to impose restrictions for

transition periods– Only UK, Ireland and Sweden opened their markets

completely – 2006 Spain, Portugal and Finland open their markets– Commission argues – labour flows modest and

focussed on hard-to-fill jobs

• Countries with higher unemployment not so keen.

Conclusion

• Shift in debate since 1980s from rights → jobs

• No move to remove rights• Emphasis on flexible specialisation

version of labour market flexibility• Need for flexibility increases with

EMU• Ageing population/Immigration issue