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% Unemployment rate (%)
the norm - pre-1970
1970 1985 1998 2005
• cyclical and structural
Fr
1.3 10.3 12.0 9.5
components
Ger
0.6
8.4 10.0 9.5
• 70s onward - higher
Ital
4.4 12.9 12.0 7.6
long term trends
Sp
1.2 21.9 19.5 9.2
• 2005 – ranges from
UK
2.5 12.0 6.5
4.6
4.3% (Ireland) to
17.7% (Poland)
Labour market structure
Services employment
• Reflects changing
economic structure –
from manufacturing to
Fr
services
Ger
• Higher % of women in
Ital
services than men
Male as
% of male
employment
53
Female
as % of
female
employment
82
52
80
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 parttime 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
Overall employment rates - 2004
80
Lisbon employment target (2010): 70%
70
60
50
40
30
20
10
Source: Eurostat – Labour Force Survey 2004
U
K
E
S
Fi
S
l
S
K
H
U
M
T
N
L
A
T
P
L
P
T
LU
LT
C
Y
LV
IT
IE
B
E
C
Z
D
K
D
E
E
E
E
L
E
S
FR
0
Female activity rates (%) - 2004
80
70
Lisbon female employment target (2010) – 60%
60
50
40
30
20
10
Source: Eurostat: Labour Force Survey 2004
E
U
K
S
Fi
l
K
S
S
H
U
M
T
N
L
A
T
P
L
P
T
LU
LT
C
Y
LV
IT
IE
B
E
C
Z
D
K
D
E
E
E
E
L
E
S
FR
0
Employment rates for the 55-64 age
group
80
70
60
Lisbon older workers employment target -50%
50
40
30
20
10
Source: Eurostat – Labour Force Survey 2004
E
U
K
S
Fi
l
K
S
S
H
U
M
T
N
L
A
T
P
L
P
T
LU
LT
C
Y
LV
IT
IE
B
E
C
Z
D
K
D
E
E
E
E
L
E
S
FR
0
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