At the end of May 1993, the Commission put forward the proposal for a "community-wide framework for employment" within which a process of analysis and exchange of experience can be pursued in a structured and co-operative manner, between all the actors concerned, with a view to coordinated action. In the following we publish selected parts of this proposal.
7.4.1.1.1. Unacceptable levels of unemployment
Over the past two decades, the rate of economic growth has averaged around 2% a year - much lower than in the two
decades which went before. Employment creation has been insufficient to meet the growing demand for jobs, and
unemployment has shown a persistent and disturbing upward trend. While falling during the period of recovery in the
latter part of the 1980s, it has risen by even more during the current period of recession.
Unemployment has once more climbed above 10%. Over 17 million people across the Community are now out of work.
Almost half have been out of work for more than a year. On current forecasts, unemployment will continue to increase
during the rest of this year and next. If current trends persist, by the end of 1994 it will be some way above the record
level of 10.8% reached in 1985.
At the same time, progress has been limited in achieving convergence between regions in terms of employment level,
and in ensuring equal opportunities as regard access to the labour market. Many people - especially women - are
effectively excluded from the labour market altogether.
7.4.1.1.2. Low rates of employment
The community has a low rate of employment compared with other industrialised parts of he world. Less than 60% of the Community's population of working age are in work, compared with over 70% in the United States, EFTA and Japan.
The counterpart of such low rates of employment is, not only high unemployment, but a large hidden labour supply. Thus, even when employment increases, unemployment remains high as new people enter the labour market. In the late 1980s, the creation of over 9 million new jobs only reduced unemployment by 3 million.
The consequence is that, in order to get unemployment down from current levels of over 10% to more acceptable levels - say 5% - the Community will have to create extra jobs on a scale large enough not only to absorb the currently recorded unemployed, but also to meet the demands of those who will enter the labour market.
Job creation on that scale cannot be achieved on the basis of growth alone. Given the increased numbers wishing to work, 3.5% economic growth, with 2% productivity growth - the experience of the second half of the late 1980s - sustained over the rest of the decade, would still leave the Community well short of a target such as 5% unemployed.
7.4.1.2.1. Comparisons within and outside the Community
Levels of employment depend not only on the rate of economic growth, but also on the employment-intensity of that growth. Employment-intensity is determined not only by the relative use of capital and labour - which determines the volume of employment for a given volume of output - but also by the way in which a given volume of employment is divided up between numbers of jobs and hours of work.
In this latter respect in particular, experience between the Member States varies. For example, while Belgium and Holland have similar levels of labour productivity, the Netherlands provide jobs for 10% more people of working age than Belgium. Equally, Denmark - with a lower level of income per head (measured in PPS) than the western part of Germany - has a much higher proportion of its population in work.
Comparisons with other industrialised countries are also revealing. In Scandinavia, the rate of employment has been at over 70% since the beginning of the 1970s. The main difference relative to the Community is with regard to women. Indeed, activity rates of women in the Community, although growing, are still lower than in most of the economically developed world.
Over the past decade, the United States has sustained a similar rate of growth of GDP to the Community - around 2% a year, once allowance is made for changes in the growth of population. During this period, however, the rate of income growth per worker has been lower in the United States than in the Community - 1% as opposed to 2%. On the other hand, the United States' rate of employment has continued to rise during this period to a level of 70% today - 10 percentage points above the Community level. Thus, while the overall growth of incomes has been the same in the Community and the United States, a larger proportion of the United States population has had access to paid employment.
Japan has also succeeded in achieving higher rates of employment than the Community. In common with other industrialised countries, including the Community, a competitive traded-goods sector with high productivity has been a means of generating income to create jobs in the service sector. The main difference is, however, that Japanese productivity in the service sector is lower than in the Community - thereby generating more employment - even though earnings in industry and services are much the same in both cases.
While a more employment-intensive pattern of growth inevitably implies a wider spreading of paid employment, the effect on the distribution of income depends on the economic, social and cultural situation in the countries concerned. For example, in Scandinavian countries, and in Japan, a high level of employment has been achieved with an income distribution narrower than that in the Community. The United States, however, has seen a widening in income distribution as its rate of employment has increased.
While experiences are not necessarily easily transferable from one Member State to another, or from outside the Community to inside the Community, such difference as exist are sufficiently wide to warrant more detailed analysis in order to identify what approaches are both adaptable to the Community, and compatible with its overall economic and social aims. In particular, the Community would need to ensure that any changes to existing policies were carried out in ways that do not exploit workers in a weak position in the labour market, or inhibit the development of the high value-added, knowledge-based jobs which will be the key to future competitiveness.
7.4.1.2.2. Government actions and employment-intensity
In the face of high levels of unemployment, a
nd long-term unemployment, governments have increased their expenditure on a range of policies and instruments designed, in general, to alter the incentive structures in the labour market in ways which can encourage a more employment-intensive pattern of growth, particularly in favour of the unemployed.
These measures have generally sought to make
unemployed people more attractive to employers by reducing the costs of employing them, by increasing their value as employees through training or other help, or by addressing problems of mis-match or transition, for example between school and work. Thus, government support measures have take the form of grants, loans, tax incentives and subsidies to the unemployed and to potential employers, as well as the direct provision of counselling and training services. Governments have also sought to change the legislative environment in ways which encourage greater labour market adaptability.
7.4.1.2.3. Community support
The Community's emp
loyment objectives have been supported at Community level by a wide range of policies and activities - economic, industrial, technological and scientific. In addition, however, the Community has focused on employment and related human resource issues through a variety of more specific activities.
These have included
analysis and research (e.g. Employment in Europe reports), experimental action-research and pilot project programmes (like LEDA, ERGO, ILE, etc.), the dissemination of best practice and the exchange of experiences and provision of information (Employment Observatory: MISEP, SYSDEM), as well as funding from the Community's structural funds, notably the European Social Fund - which encompasses both mainstream funding and specific Community Initiative programmes.
Policy development
has been reinforced through funding from the European Social Fund which now contributes some 6 billion ECU) towards active manpower measures undertaken by national governments within the structure of Community Support Frameworks - some 13% of total expenditure by Member States, and a significantly higher proportion in priority regions of the Community.
That support has be
en targeted on the long-term unemployed and unemployed young people, and on the needs of less developed regions in the Community. The bulk of the support is for vocational training, although some support is provided for employment subsidies to encourage recruitment and, in the less developed regions, for vocational education in schools.
7.4.1.3. New framework for action
From the above analysis, t
hree main conclusions can be drawn:
1. The scale and nature of
Europe's employment problem are cause for major concern. Action is needed if the problem is not seriously to impair the Community's economic competitiveness into the 21th century, and to inflict considerable damage to the fabric of our societies.
2. There is sufficient evi
dence and experience to suggest that ways of, at least, improving the situation can be found - over and above those which can result from higher levels of economic growth - by governments adopting policy mixes which favour a more employment-intensive pattern of growth.
3. Although the main instr
uments lie with, and within, the Member States, the Community has an important role to play as a catalyst, as a forum for coordination, and as a support through the use of Community-level policies. Action at the level of the Community is also necessary for reasons which are both economic (because the growing interdependence of our economies requires active cooperation across all policies) and political (because it is vital that the Community take an active interest in an issue of such importance for the well-being of the citizens of Europe).
7.4.1.3.1. Commission's role
The Commission unde
rtakes to underpin this process as well as to contribute analyses and suggestions for coordinated action. But this would in no way preclude others from doing the same.
In addition, the Co
mmission will seek to promote the transformation of successful Community pilot experiences into mainstream policies, on the basis of a systematic evaluation of successful experiences and measures, such as those described above.
More generally, it
is the Commission's intention to apply its financial support in ways which can contribute to the overall objective of employment expansion. The proposed reform of the European Social Fund - which aims to increase the flexibility of the Fund, to anticipate labour market developments and to link the Fund more with policy-driven objectives - is a step in this direction. In particular, however, the Commission's initiatives in this area will be able to support experimentation and innovation on a trans-European basis.
7.4.1.3.2. Issues for analysis and action
The Commission intends to present analyses and suggestions for co-ordinated action in a number of different areas. As far as specific issues are concerned, the Commission has identified, in particular, the following:
- adaptability at the workplace, and the potential for developing new forms of employment based on new forms of work organisation;
- the development of new working time structures able to expand employment opportunities;
- the development of training systems and qualifications able to improve integration into the labour market, and anticipate structural change;
- investigating the scope for reducing labour costs and increasing employment-intensity, notably by modifying the incidence of taxation systems;
- the exploitation of the employment growth potential of new areas of work - the environmental industries, the arts, household services, etc.;
- the creation of employment through small businesses and self-employment, and the role of SMEs generally;
- the role of local initiatives and local economic and employment development in strengthening the capacity of areas to create employment;
- the role of different agencies and partners in developing efficient external labour markets.
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