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 (%)

Labour market structure Reflects changing economic structure – from manufacturing to services Higher % of women in services than men Services employment

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 : –Population between ages will decline by 12 million in Europe –Population between ages 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 Source: Eurostat – Labour Force Survey 2004 Lisbon employment target (2010): 70%

Female activity rates (%) Source: Eurostat: Labour Force Survey 2004 Lisbon female employment target (2010) – 60%

Employment rates for the 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 s 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