The impact of the crisis
on the labour market
&
Labour market
segmentation and recent
reforms
Klara Stovicek
European Commission, DG ECFIN
Labour market developments in the EU
230,000
000's persons
30,000
- 6 Millions
Employment (Lhs)
225,000
25,000
220,000
20,000
Unemployment (Rhs)
15,000
215,000
q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1
05
06
07
08
09
10
11
12
European Commission (2012): EU Employment and Social Situation Quarterly Review, June, forthcoming.
Large diversity
across EU countries
2008-2011
Outlook
Weak, no
substantial
improvements
over forecast
horizon
Young
unemployme
nt rate:
In 2011:
21.3% in the
EU, about 45%
in Spain and
Greece
Young: at high risk of unemployment
Unemployment rate 15-24
50
2011
el
es
• Labour market
entrants
40
• High exposure to
temporary jobs
sk
lt
pt ie
it
bg lv
ro pl hu
se cyfr ee
uk
fi be
lucz si
dk
mt
30
20
10
• High concentration
in cyclicallysensitive industries
• … But also preexisting structural
weaknesses,
including
employment
protection
legislation (EPL)
at de
nl
0
0
10
20
30
40
50
Unemployment rate 25-64
EPL reforms 1990-2008
EPL indicator (OECD): liberalisation of fixed-term contracts
6
6
2008 Permanent contracts:
5
pt
dese
nl
fr
el
at
fi
pl
be hu
ie it
dk
uk
3
2
1
4
es
2
3
pl
hu
1
4
5
at
0
it
fi
dk de
se
nl
ie
uk
0
6
el
be
pt
2
1990
1
fr
es
3
0
0
Temporary contracts
5
individual dismissals
4
2008
1990
1
2
3
4
5
6
Young: temporary jobs frequent where
EPL for permanent contracts is high
(individual dismissals)
European Commission (2010): Labour market and wage developments in 2009
EPL reforms since 2008
At the top of the structural reform agenda in several Member
States, e.g. ES, IT, PT
Objectives: to reduce labour market segmentation, foster job
creation and ease labour market adjustment:
by reforming and promoting permanent contracts
• Easing dismissal rules (individual and collective dismissals)
• Reduction of costs of dismissals and uncertainty related to
dismissals (individual and collective dismissals)
• Enhancing the efficiency of the dispute settlement procedures
by revising temporary contracts
PERMANENT CONTRACTS
EPL reforms since 2008: individual dismissals
• Simplification of notification procedures (IT, PT)
• Clarification and broadening of the scope of justified dismissals
Dismissals on economic grounds:
Justified if revenues or sales fall for 3 consecutive quarters (ES)
Include also dismissals based on organisational reasons (ES)
Employers are not obliged to look for a compatible job within the firm
to prevent dismissal anymore (PT)
A tenure rule (last in first out) is abolished if more than one worker in
a section is at risk of redundancy (PT)
Dismissals based on incompetence:
Justified also in case of no changes to the work place or nature of a
job (PT)
Justified for qualified employees if they fail to meet agreed objectives
(PT)
PERMANENT CONTRACTS
EPL reforms since 2008: individual dismissals
• Reduction of costs and uncertainties related to justified
dismissals
Severance payments:
Reduced from 30 to 20 days per year of work (ongoing discussion to
reduce further to 10 days); a minimum of 3 months of pay
independently of tenure is abolished; a maximum is set at 12months
(PT)
Maximum wage to calculate severance payments is limited to
20*minimum wage (PT)
Creation of a portable fund to create incentives to job-to-job mobility,
under discussion (PT)
Creation of the Wage Guarantee fund (FOGASA) to contribute to
severance payments in case of firms with less than 25 workers, up to 1
year (ES)
PERMANENT CONTRACTS
EPL reforms since 2008: individual dismissals
• Reduction of costs and uncertainties related to unjustified
dismissals
Severance payments:
Reduced from 45 to 33 days per year of work, a maximum is reduced
from 42 to 24 months (ES)
Interim wages during the trial against unfair dismissal:
Capped at 12 months (IT, PT)
Abolished if the employer opts for severance payments (ES)
Reinstatement:
Its scope is reduced in firms with more than 15 employees (IT),
including as a result of procedural errors (IT, PT)
EPL reform since 2008
5
Permanent contracts:
4
individual dismissals
3
2
1
PT
SI
CZ
DE
SE
LU
NL
SK
PT after reform
ES
FR
AT
KOR
EL
ES after 2010 reform
FI
ES after 2012 reform
PL
EL after 2010 reform
HU
JPN
IT
BE
IE after reform
DK
IE
IT after reform
AUS
CAN
CHE
UK
USA
0
Own calculations based on the OECD methodology
Update of the EPL
indicator
•Based on the OECD
standard methodology
(indicators are
indicative, not official
OECD figures!)
• Only for selected
countries
• Not all features of
the EPL reforms are
captured by the
indicator
Results:
EPL was reduced in
the countries which
have the strongest
segmentation (fixedterm, selfemployment)
Conclusions (1)
• The impact of the crisis on labour market developments has
been uneven across countries and demographic groups
• The crisis gave a decisive push to the recent EPL reforms,
which would be very difficult to implement otherwise
• The impact will be country specific, depending on how
agents will internalize reforms
• Relevant are also complementarities with other reforms
(e.g. those that address collective bargaining, unemployment
benefits, internal flexibility, apprenticeship and training)
Conclusions (2)
• Slovenia has a country specific recommendation (CSR) in
the area of EPL: “Adjust employment protection legislation as
regards permanent contracts in order to reduce labour market
segmentation, in consultation with social partners and in
accordance with national practices. Further tackle the parallel
labour market caused by student work.”
•
Thank you