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European labour markets
Trends and the search for flexibility
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European business and labour
• Business requires a labour force that is:– Skilled– Flexible – Plentiful– Mobile– Healthy– Well-educated
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Labour market trends
These trends pose challenges for businesses and policy
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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 (%)
1970 1985 1998 2005
Fr 1.3 10.3 12.0 9.5
Ger 0.6 8.4 10.0 9.5
Ital 4.4 12.9 12.0 7.6
Sp 1.2 21.9 19.5 9.2
UK 2.5 12.0 6.5 4.6
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Labour market structure
• Reflects changing economic structure – from manufacturing to services
• Higher % of women in services than men
Services employment Male as
% of male employment
Female as % of female
employment Fr 53 82
Ger 52 80
Ital 55 75
Sp 51 81
UK 62 88
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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
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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
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0
10
20
30
40
50
60
70
80
Overall employment rates - 2004
Source: Eurostat – Labour Force Survey 2004
Lisbon employment target (2010): 70%
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10
20
30
40
50
60
70
80
Female activity rates (%) - 2004
Source: Eurostat: Labour Force Survey 2004
Lisbon female employment target (2010) – 60%
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20
30
40
50
60
70
80
Employment rates for the 55-64 age group
Source: Eurostat – Labour Force Survey 2004
Lisbon older workers employment target -50%
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Labour market flexibility
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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
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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
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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
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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
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Labour market policy
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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
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• 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
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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
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• 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
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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
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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
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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
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Labour market challenges
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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
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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
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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
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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
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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.
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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