ETUC Conference – delivering Lisbon Aggregate demand policy and the labour market John Morley University of Nottingham Business School 1 March 2005, Brussels, Belgium 1033

Lisbon European Council 23/24 March 2000 New employment targets ‘to raise the employment rate from an average of 61% today to as close as possible to 70% by 2010’ ‘to increase the number of women in employment from an average of 51% today to more than 60% by 2010’ 868

Four basic economic questions 1.Does the EU have an employment problem? Is it getting better or worse? 2. How much does EU employment growth depend on EU economic growth? 3. To what extent is inflation an obstacle to EU employment growth? 4. How flexible is the EU labour market? How does flexibility affect employment? 1039 Lisbon and the labour market

Question 1 – the EU’s employment performance EU v US employment performance Employment performance across Member States The gender-age dimension of the employment gap 1039 Lisbon and the labour market

Europe’s employment problem Japan USA EU % Employment Rates

Recent employment rates trends – EU-US US EU Source: US Household Survey and EU Labour Force Survey 36 Per cent of population aged in employment

% population Number employed as a percentage of working-age population, Source: Eurostat 3 Employment rates EU15 Lisbon target 2010 Unadjusted Full time equivalents

% Men employed as a percentage of population in different age groups 34 Employment rates by age (men) EU-US 2003 EU US

% Women employed as a percentage of population in different age groups 35 Employment rates by age (women) EU-US 2003 EU US

% population Number employed as a percentage of working-age population, Source: Eurostat 20 Employment rates 2003 – new Member States Lisbon target 2010 Unadjusted Full-time equivalents

Question 2 – Employment performance and the economy Growth and employment Cyclical recoveries – EU and US style Investment and employment 1039 Lisbon and the labour market

8 Annual % change EU GDP and employment growth Source: Eurostat

9 Employment growth in EU15 and US EU15 US Annual percentage changes

899 % % Investment share of GDP Unemployment rate Investment share of GDP Unemployment rate Investment and unemployment - EU15

Question 3 Employment and inflation – how related are they? Inflation and unemployment Structural unemployment The wage share 1039 Lisbon and the labour market

EU15 Inflation rate Unemployment rate Inflation and unemployment - EU 1002

Inflation and unemployment - US US Inflation rate Unemployment rate 1003

OECD estimates 1997 Actual Unemployment 2001 % Structural unemployment

Japan USA EU % Wages shares in EU, US, Japan Percentage of GDP at factor cost

Question 4 – Labour market flexibility From temporary to permanent jobs From part-time to full-time jobs Making work pay – cutting social transfers 1039 Lisbon and the labour market

Flexibility – transitions year to year 1034 ECHP 1995/1996 EU14 Permanent contract Temporary contract Unemployed or inactive Full time Part time Unemployed or inactive PERMANENT TEMPORARY FULL-TIME INVOLUNTARY PART-TIME Year 1 Year 2

Social transfers and unemployment % % Social transfers Unemployment rate Social transfers (% GDP) Unemployment rate

Some issues for psychologists and psychiatrists as well as economists 1.Treating delusions - why do so many people in authority look at reality, but see something else? 2. Right meets left - financial market analysts are coming round to our point of view 3. Public education - what can be done to correct misconceptions and promote positive policies? 1039 Lisbon and the labour market

For more information and analysis of the EU economy and labour market download 2004 report free of charge SOWE asbl Authors: John Morley, Terry Ward, Andrew Watt 1039 The State of Working Europe