Session 4 – What can we see about the structure of the fututre labour demand and supply ?

Session 4 – Whatcanwesee about the structure of the fututre labour demand and supply? WP7 – Public/Private mix WP9 – Two scenarios for SET in EU WP10 – Demagraphic changes and labour market NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

Session schedule • Presentation of NEUJOBS findings • WP7 - Public/private mix and social innovation in service provision, fiscal policy and employment • T. Sirovátkaand B. Grevewith contributions by O. Hora, M. Horáková and P. Horák • WP9 – Global scenarios for European socio-ecological transition • B. Boitier, Lancesseur N. and Zagamé P. • WP10 - The consequences of demographic change on labour supply, wages and labour demand • H. Schneider, Dolls M., Lichter A. and Sommer E. • Criticalreview by Thomas Hemmelgarn (DG Taxud) • Questions/remarksfrom audience NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

NEUJOBS mid-term conferenceBrussels, February 18-19, 2013WP 7: Public/private mix and social innovation in service provision, fiscal policy and employment T. Sirovátka and B. Greve with contributions by O. Hora,M. Horáková and P. Horák NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

Focus (Questions) • Is social services development sustainable. • Which potential for job creation? • scope/level of employment • quality of jobs • and sustainability of jobs and employment • How fiscal consolidation context matter? • How governanceischanging? (regulation, financing, delivery) • Whatkind of innovationsin (governance)of social services? NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

Findings: employment in social services demand drivers • Changing women’s roles, their growing labour market participation (women’s rolerevolution) • Demand shift towards services - broadening purchasing power throughout the population (role of income differentials?) • Ageing of population • New social risks (dynamic labour market, reconciliation work-family, social exclusion) • Path dependency of WS development • Service dependency ? NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

Findings: employment in social servicessupply drivers • Productivity lag(Baumol) should foster employment growth in sector of services ? • Possible responses: • to adjust labour cost(market cleaning), • to adjust earnings in services to overall economy earnings • to subsidize services • Technical complexity of the provision of social services (Health Care) • Vested/professional interests • User profile of the clients (middle class interested) • Political considerations – electoral gains, buffer against uncertainty/unemployment • Governance reforms (their own urgencies) NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

Employment in SS 2000-2010 • Health and social services sectorin 2010:in average 6% employment ratein the EU • Increased in last ten years by 0.7 percentage points • Differences among EU countries are remarkable (from 14% in Denmark to 2.7% in Romania) • Crisis in 2008-2010 did not change much on the continuous growth of employment in social services • 78% of employment in HSW are women • Growing older: in 2010 overall 26.5 %workers older than 50 years while in HSW it is 30.3 % NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

Employment in SS 2000-2010 • First cluster: countries where employment rate is between 10.6% to 14.0% (Sweden, Finland, The Netherlands and Denmark) • Second cluster: countries where employment rate is between 8.4% to 9.1% (Belgium, France, Germany and UK) • Third (North-West) cluster: between 6.1% to 7.7% (Luxembourg, Austria and Ireland) • Large South-Central-East cluster employment rate in social services is between 2.7% (Romania) and 4.8% (Portugal) NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

Employment rate HSS (+ GOV) NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

Jobs in social services • Wages in HSW sector grew more slowly than in other parts of the economy and are in most EU member states bellow average wage in the economy • Although skill levels are relatively high and working conditions are often demanding • Sufficient labour supply in future ?? • Above average job quality in cognitive demands on jobs, job complexity, learning new things, monotony of the job + job security • But lower level of job autonomy, higher psychical and physical health risks NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

Examination of the factors shaping employmentin SS, 2000-2010 • Financing of the welfare state(government receipts, tax on labour, social protection expenditure, social protection expenditure in kind) • Demographic(ageing of population – old age dependency, fertility rate) • Political-economic cycle(proxy variables - GDP growth, public deficit, unemployment rate total, men, women) • Employment pattern/modernization(employment rate total, men, women) • Static (values) + dynamic (change in values) view NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

Findings: factors of employment growth in SS • Employment rate in social services is stably andstrongly correlated with three kinds of variables: • financing of the welfare state(receipts, exp) • overall employment rate • and fertility rate • Moderate correlation with the variables which characterize labour market performance like unemployment rates, empl rate women, men • ? GDP growth, O-A dependency • The above pattern changed only little during time NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

Factors – key findings

Current and future problems • The labour force in the HSW sector is rapidly ageing • The younger generations of workers in HSW less often have a high level of education when compared to the older generations • Workers with a medium level of education are usually NOT specifically educated in health and welfare • Risk to lack of manpower despite high levels of unemployment, due todemanding working conditions and low job quality NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

Current and future problems • There may be two worlds of social services emerging: • The world of formal, more standardized, high quality services provided by a relatively highly qualified workforce • The world of hidden, semi-formal, unknown quality services provided by less qualified people who are often neighbours or immigrant workers. NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

Financing • Sustainable financing is a necessary condition for employment in social services(stable revenue within a decided tax-structure, ability to finance social services given the changes in the global economy and over the business cycle) • In the EU the tax systems have not become more sustainable in the last 10 years – this implies a higher level of pressure on the financing of the welfare states NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

Social Innovations • Social innovation plays an increasing role in social services, especially when understood and implemented as systematic change • This includes several elements: • focus on consumers needs and service quality standards; • mobilising resources and combining different ways offinancing social services – public and private; • participation of a broader range of actors and synergy of their actions. NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

Future scenario I: low road • Uncertain public financing of social services due to either increasing public debt and unsustainable public finances (like in some South-European countries), or a deliberate strategy to dismantle the welfare state (like in some East Europeancountries) • Low public expenditure on social services and a limited role of social services as a buffer against unemployment or social investment measures • Limited role of the state in regulating and financing social services NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

Future scenario I: low road • Lack of social innovation in social services • Limited quality standards in social services • Slow growth of employment in social services • Lower quality of employment in social services • Lower employment rates of women, lower employment rates in general (i.e. higher unemployment rates), considerable child employment penalty, e.g. the work family balance will not really be supported • Dualisation of social services in terms of quality, access and employment characteristics NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

Future scenario II: high road • Sound and sustainable public finance (balanced public finances, with reasonable public expenditures), no strong attacks on the welfare state • Sufficient public expenditure on social services and the active role of social services as social investment measures • Strong role of the state in regulating and financing social services • Social innovations in social services embedded in broader governance reforms NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

Future scenario II: high road • Important role of quality standards in social services • rapid growth of employment in social services • higher quality of employment in social services • higher employment rates of women, higher employment rates in general (i.e. lower unemployment rates), low child employment penalty • less diverse conditions and access to social services NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

The driving forces summarized • Strong path dependency in WS model – financing and employment patterns matter • Employment growth in SS: positive correlated with WS finance, overall employment, fertility rate, GDP growth • Maturation of the revolution of gender roles (gender order) • Ageing of society will mater in future more • Two (three) possible scenarios: low road, high road, mixed strategy NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

The driving forces summarized • Sound, sustainable public finance necessary (expenditure + revenues, tax structure) • Private funding plays an increasing role • State governance and regulation is essential(quality standards, choice) • Social innovations as systemic change (consumer focus, mix of resources, actors) • Politics matter – commitment to social investments NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

Thank you for your attention NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

Global scenariosforEuropean socio-ecologicaltransition SEURECO B. Boitier, Lancesseur N. and Zagamé P. NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

Outline • Introduction • Macroeconomic results • Global results on Employment • Employment in services • High-skilled and Low-skilled employment • Energy and environment • Conclusion NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

1. Introduction • To make a quantitative assessment of the “Friendly” and the “Tough” scenario. • “Friendly” potential growth enhanced by labor force. Natural and financial conditions allows to get near by the potential • “Tough”: low potential growth and bad natural and financial conditions NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

2. Macroeconomic results2.1 Friendly scenario: towards potential growth (1) • Enhancement of potential growth by labour force and high-skilled labour (+15 million and +35 million) • Natural and financial conditions allow to approach potential growth after a recovery period • The engine of growth is mainly internal demand, private and public (finance recovery) • 2% in average for Europe but, on the whole period (2010-2030) the growth is dependant on initial debt for every country NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

2. Macroeconomic results2.1 Friendly scenario: towards potential growth (2) NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

2. Macroeconomic results2.1 Tough scenario: obstacle to growth • Slowing down of potential growth by labour force shortage (-2 million) even with an increase of high-skilled labour (+15.5 million) • After the “austerity” period the natural (price for oil) and financial (interest rates) conditions do not allow to reach the weakened potential growth • The engine of growth is mainly private internal demand because financial conditions get worse with slow growth • 1.2% growth rate in average for Europe but the financial constraint reinforces inequalities among countries NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

2. Global results on employment2.1 Friendly scenario: toward services • 19.3 million jobs created and an unemployment rate of 7.5% in 2030 • Jobs destruction in Agriculture (-3 million) and Industries (-6 million) • Jobs creation in Construction (+4.4 million), Private services (+13.7 million) and Non Market Services (+10 million) NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

2. Global results on employment2.2 Tough scenario • 6.6 million jobs destruction and an unemployment rate of 12% in 2030 • Jobs destruction in Agriculture (-4 million) and Industries (-7 million) • Stagnation of employment in Non Market Services • Jobs creation in Construction (+3 million), Private services (+13 million) NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

3. Employment in services • Jobs destruction in distribution (-0.8 million in the friendly case and -3 million in the tough case) transport services (respectively-0.4M and -1M ) and communication (respectively -0.8M and -1M) • Jobs creation in Lodging and catering (+2M and +1M) Bank. Finance and Real Estate (+4M and +2M) and Other Private services (+9.5M and +5M) • High-skilled jobs creation in all services sectors • Low-skilled destruction everywhere except for Lodging and catering NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

4. High-skilled and Low-skilled employment • Destruction of Low-skilled jobs on both scenarios (-12.7M and -17.4M). • Unemployment reduction in the “Friendly” case and increase in the “Tough” case. • Creation of High-skilled (+32M and +10.7M) • Increase in High-skilled unemployment in all scenarios from 5.6% to 7% (“Friendly”) and 10% (“Tough”) NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

4. High-skilled and Low-skilled employment • Increase of High-skilled unemployment • “Tough”: Financial and Natural conditions prevent to reach potential growth • “Friendly”: • Potential growth • Bottleneck and wages increase diffusion on other activities • R&D and Intangibles NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

5. Energy and Environment • None scenario reaches neither the objective of 20% reduction for energy consumption in 2020 nor the 20% of renewables • Both scenarios are under the -20% GHG emissions in 2020. None reaches the Roadmap -40% in 2030 • A weak decoupling (GDP vs Energy) is reached in the “Friendly scenario” NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

Conclusion Where are we? NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

Conclusion Correctingpolicies • Employment policies for both scenarios but mainly for the “Tough” one • Energy and Environment Policies mainly for the “Tough” scenario : financial constraints does not allow energy efficiency compatible with SET • R&D policies or R&D based policies for potential growth, employment ,Energy and Environment in particular in the “Tough” case that does not allow a development of public services compatible with SET NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

Conclusion Policies implementation • Economic instruments or market based policies • Governance, education, regulation. Modification of behavioural equations • The challenges identified in the “Tough” scenario will need a drastic modification of behaviours NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

Thanks Contact: Baptiste.boitier[at]erasme-team.eu Nicolas.lancesseur[at]erasme-team.eu NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

The consequences of demographic change on labour supply, wages and labour demand PD Dr. Hilmar Schneider, IZA BonnDr. Mathias Dolls, IZA BonnAndreas Lichter, IZA BonnEric Sommer, IZA Bonn NEUJOBS Midterm Conference, Session „What can we say about the structure of the future labour demand and supply?“Brussels, February 18-19, 2013 NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

To what extent is population decline aggravated by structural effects (age-specific labour supply; skill-specific labour supply)? How does labour demand react to increasing wages induced by declining labour supply? How are wages affected by foreseeable changes of relative shortages of labour supply? Outline NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

In the friendly scenario, labour supply in head counts is declining by 6% Labour supply in hours worked is declining by 13% to 22% due to the increasing share of older workers who tend to work less In the tough scenario, labour supply in head counts is declining by 15% The relative decline of labour supply in head counts is c.p. aggravated by structural effects Message 1 NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

The relative decline of labour supply is likely to increase average wages and also the skill-specific wage spread Wages for low-skilled workers are likely to decline by up to 40% until 2030 Wages for high-skilled workers may increase by up to 35% until 2030 Wages for medium-skilled workers will only moderately increase until 2030 Message 2 NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

Increasing wage spread due to demographic change NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

The increase of wages is likely to induce a decline of labour demand in parallel to the decline of labour supply Demographic change will not automatically eliminate unemployment Decline of labour demand may not be a problem for the labour market as such, but may impose huge problems for the stability of pension systems Message 3 NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

Labour supply and labour demand by working hours categories – Friendly scenario NEUJOBS Mid-Term Conference - 18th February 2013 - CEPS

Session 4 – What can we see about the structure of the fututre labour demand and supply ?