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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.

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European labour markets

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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 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 (%)


Reflects changing economic structure – from manufacturing to services

Higher % of women in services than men

Services employment

Labour market structure

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

  • 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

Overall employment rates - 2004

Lisbon employment target (2010): 70%

Source: Eurostat – Labour Force Survey 2004

Female activity rates (%) - 2004

Lisbon female employment target (2010) – 60%

Source: Eurostat: Labour Force Survey 2004

Employment rates for the 55-64 age group

Lisbon older workers employment target -50%

Source: Eurostat – Labour Force Survey 2004

Labour market flexibility

What is labour market flexibility?

  • Conflicting views

  • 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

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 issues in Treaty of Rome - needs operationalising

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 - 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

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.


  • 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

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