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Growth and Jobs

3. Boosting employment

The EU is striving to help as many people as possible in member countries into jobs. This is critical to maintain economic growth and to pay for social welfare provision as populations throughout Europe age. The EU also believes that work is the key to social inclusion in Europe.

To make this a reality, the EU is working towards 70 percent of Europeans of employable age in jobs by 2010. This ambitious figure can only be reached, says the EU, if innovation is more widely supported, education and training are increased, bureaucracy reduced and discrimination minimised.

Women, the young, immigrants and older workers all face tough obstacles getting jobs. Even those on open-ended contracts can feel threatened because, if they are made redundant, they face the same difficulties moving on to good quality jobs.

Flexicurity

The EU believes that the best way addressing the dilemma of how to maintain and improve competitiveness whilst preserving the European social model is the principle of flexicurity: blending flexible contractual employment arrangements with strong social protection and education.

The EU began to seriously embrace flexicurity following a 2003 report for the European Commission, by economist André Sapir of the Bruegel think tank that classified European social models into four groups:

The Mediterranean model (Italy, Spain, Greece): Social spending concentrated on old age pensions and a focus on employment protection and early retirement schemes - inefficient both in creating employment and in combating poverty.

The Continental model (France, Germany, Luxembourg): Insurance-based, non-employment benefits and old age pensions and a high degree of employment protection - good at combating poverty but bad at creating jobs.

The Anglo-Saxon model (Ireland, the UK and Portugal): Many low-paid jobs, payments linked to regular employment, activating measures and a low degree of job security - relatively efficient at creating employment but bad at preventing poverty.

The Nordic model (Denmark, Finland, Sweden, Netherlands and Austria): High spending on social security and high taxes, little job protection but high employment security - successful at both creating jobs and preventing poverty.

The secret behind the success of the Nordic models was found to be the flexicurity approach. The approach is based on social dialogue between employers' organisations and trade unions, and it was initially promoted by Social Democratic politicians such as Poul Nyrup Rasmussen, who was Danish prime minister from 1992 until 2001.

The concept rests on the assumption that flexibility and security are not contradictory, but complementary and even mutually supportive. It couples a low level of protection for workers against dismissals with high unemployment benefits and a labour market policy based on the obligation and right of the unemployed to receive training. The concept of job security is replaced with employment security.

Much of the discussion since the publication of the Sapir report has focused on features of the more successful economies - namely the Nordic ones - that could be applied to those lagging behind. In particular, the systems of Germany and France, which used to be the motors of the EU economy, have found themselves under scrutiny.

In Sapir's presentation, France and Germany are in the 'continental' sector. Both countries' social systems are characterised by a relatively high degree of employment protection: businesses argue this makes it tough for them to hire people, as they would then have difficulties firing them again.

EU Member States which already base labour market law on flexicurity principles are among the best performing and socially inclusive in the world because this system is, according to Brussels, ‘not just a safety net, but a trampoline’, which can help enable those who lose out in the short-term from globalisation to be winners in the longer term.

Education and training

The other key aspect of the EU’s job creation policy is access to education and training throughout a worker’s life. The EU has made a number of policy commitments to high quality education for all, from childhood to old age. It has also pledged to cut dropout rates from schools and to promote world-class higher education, including vocational training.

Member States committed themselves to establishing comprehensive lifelong learning strategies by 2006. But turning those commitments into action has been a challenge. In its December 2006 Annual Progress Report on the Growth and Jobs Strategy, the European Commission identified lifelong learning as an area where progress at national level has been limited.

For example, according to a 2007 progress report issued by the Commission, EU member states are not doing enough to reduce the number of early school leavers to meet Lisbon Strategy targets for jobs and growth. "Six million young Europeans left education systems prematurely in 2006 despite an EU goal, agreed in 2002, to lower the figure to two million," the report warned. "Young people who leave school with only lower secondary education are at a disadvantage on the labour market in today’s knowledge-based society," said the Commission.

To try to reverse these trends, the EU adopted for 2007-13 a new generation of European funding programmes for lifelong learning, worth €7 billion.

The importance of education to the EU’s economic future is highlighted in a March 2006 article by Daniel Gros, Director of the Centre for European Policy Studies (CEPS). Gros argues that greater EU investment in education would secure the Lisbon goal of an employment rate of 70 percent without the need for labour market reforms.

According to Gros, data indicate that the modest improvement in employment rates over recent years is entirely due to a small but significant upgrading of skills within the EU, rather than any change in the labour market.

What has been lacking is research on what skills EU Member States will need in the future to grow and stay competitive. This need was partially met in February 2008 when the European Centre for the Development of Vocational Training (CEDEFOP), presented its first forecast of future skill needs within the EU. The study, Future skill needs in Europe: medium-term forecast concludes that demand for skills and qualifications is being driven upwards in most occupations, including in so-called elementary jobs, by the continuing rise of the service sector and sweeping technological and organisational changes.

The forecast shows where skills deficits are likely to occur in the future as the EU grows. Ján Figel, European Commissioner for Education, Training, Culture and Youth, said at the report’s launch: “Today we have a study that gives us a clearer idea of where skills deficits are likely to occur in the years to come. With this information, young and old alike can assess their learning objectives, which will help them decide their training and learning needs."

By 2015, the primary sector is expected to employ 10 million workers across Europe - down from 12 million in 2006 (15 million in 1996) - while manufacturing will employ 34.5 million - down from 35 million over the same period (38 million in 1996).

The EU believes that substantial growth will occur in the services sector. The economy as a whole will generate more than 13 million new jobs by 2015 – despite the loss of well over 2 million jobs in the primary sector and half a million in manufacturing. Transport and distribution, including tourism, will create 3.5 million additional jobs, while business and various services offer the best employment prospects in the medium term, generating 9 million new jobs by 2015. Another 3 million additional jobs will be created in education, health and social work.

Even more significant in its impact than the continuing shift to the services sector is the growing requirement of skills and qualifications at all levels. The demand for high skills has not yet peaked. Today, 80 out of 210 million European workers are in highly-skilled, non-manual jobs and this high proportion is expected to rise further.

Between 2006 and 2015, Europe will gain 12.5 million additional jobs at the highest qualification level and 9.5 million at the medium level (especially vocational qualifications). But jobs for workers with low qualifications will decline by 8.5 million. Even jobs for unskilled manual workers are demanding more qualifications, while skilled manual workers will increasingly need medium-level qualifications.

The implications for employment are enormous. A shrinking population implies a continuing need to replace workers, even in declining sectors and occupations. But with skill requirements increasing dramatically, the new workers will need higher qualifications to perform the same or a similar job.