Major labor market challenges

The recent labor market trends are partly the result of cyclical movements, and notably of the deep economic crisis, but they are also due to structural and institutional labor market challenges affecting economic activity and the performance of labor markets.

Net job creation (employment growth) has consistently decreased both at EU level and across Member States, with the exception of 2010. Since the mid-2011 Europe as a whole has gone back to negative employment growth rate values. This is the net result of the declining trend of job findings (unemployed getting into jobs) and increasing trends in job separations, calling for policies to stimulate labor demand and a more jobs-rich growth pattern.

The potential of job creation in some key sectors could be further exploited if skills shortages were addressed. The eco-industry is estimated to create about 8 million jobs by 2020, with up to 2.8 million of these jobs originating from resource efficiency measures, 2 million from the implementation of energy efficiency policies, and a further 3 million from the development of the renewable energy sector.. In 2012, the number of people projected to work in eco-industries specifically across the EU is expected to be 3.4 million, an increase from 2.7 million in 2008, demonstrating that even in the current economic climate there is job growth potential in the green sector.

During the 2008-2011 period, the 'health and social work' sector created about 1 866 000 new jobs. Moreover, the demand for new positions in this sector is expected to increase with a projected 8 million of total job openings between 2010 and 2020.

As for the ICT sector, by 2015, it is expected that up to 700 000 unfilled vacancies will be available for ICT practitioners. Both sectors face similar challenges to replace an ageing workforce with younger workers. Significant skill shortages are generally reported within the sectors of the green economy, the ICT sector and the healthcare especially for occupations with a high degree of technical specificity.

Taxation on labor remains high and has even increased in a number of Member States, but changes in the composition are reducing the cost of labor. A high tax wedge is a disincentive to work for secondary earners and for low-income and low-skilled workers and may have a negative impact on their employment rates at aggregate level. On average, the tax-wedge in Europe increased by 0.3 percentage points between 2010 and 2011, affecting also low-wage earners. The increases have generally been highest in the Member States already concerned by high tax wedges.

However, this has been mainly due to changes in the personal income taxes and in a number of cases accompanied by reductions in the social security costs of employers thereby reducing the labour costs.

Part-time employment has accounted for a significant share of the job growth experienced during the crisis. While total employment contracted between 2008 and 2011 and the number of full-time workers shrank by 6.2 million, the number of part -timers increased by 1.1 million in that same period. The expansion of part-time work has been steady in recent years and reached 18,8% in 2012.

 

There are significant differences among Member States in the efficiency of their spending, namely in the outcomes and poverty reduction effect they achieve per unit of spending when the patterns of spending and structures in social protection provisions are similar. Tax and benefit systems, are among the most important instruments to prevent and address income poverty. In 2010, expenditure on social protection benefits (excluding pensions) reduced the poverty rate in the EU from 26% to 16%, i.e. by 37%. Some countries manage to reduce poverty rates among children and the old or absence due to sickness with less spending than others. Some countries can have better benefits levels for people because they manage to reduce the time they spend on benefits by bringing them quickly back to work.

 

Full implementation of active inclusion strategies, focusing concomitantly on adequate income support, inclusive labor markets, and access to quality services. A move towards active welfare policies and tackling financial disincentives to work is now visible in many Member States. Still, persisting differences exist in the level of coverage of social assistance and minimum income schemes across Member States and challenges remain to reach out to groups experiencing the deepest forms of poverty (such as the homeless and Roma). Ensuring adequate income support is an effective tool for smoothing the transition into work, promoting social inclusion and spurring aggregate demand. Quality and affordable childcare supports parents' participation in the labour market and give children the best chances in life, but evidence shows that the most vulnerable families have generally lower rates of participations on due to factors such as availability and access, affordability, eligibility, and parental choice.

Questions for delegates to consider:

1) Why is the problem of unemployment so acute today?

2) Why is the EU the only major region in the world where unemployment is still rising?

3) What is the possible future of European labour market?

4) What is the difference of the ''normal rate'' of unemployment in Southern and Northern Europe?

5) What policy should countries pursue to improve the situation in region?

6) What problems will the economy face if situation on labour market doesn’t change in future?

7) Who are the most vulnerable groups having risks to be unemployed?

8) What problems will the economy face if situation on labour market doesn’t change in future?