‘Education and innovation key to Europe’s competitiveness’

Experts in Brussels discussed the mechanics that may lead to a larger, more productive and more profitable workforce in Europe. 

Presenting the study by Anna Turmann, Jørgen Mortensen of CEPS stressed that Europe's ageing workforce is the key to all the problems that European labour markets face. "Without a raise in the employment rate, the problem of ageing will be insolvable," he said. He said that the Nordic states and the Netherlands were in many ways pre-empting labour-market developments that the rest of Europe will experience within the next 20 to 40 years, including relatively low and stable unemployment rates of around 6%. 

Comparing employment figures between the EU and the US, Turmann found that they vary little. Large differences exist, however, in education - the US managed to provide a much higher percentage of its population with tertiary education. This figure seems to be even more important in the light of statistics indicating that economies with higher average levels of education have much fewer problems concerning a lack of mobility with their workforce. "The EU-US gap is mainly an education gap," Mortensen concluded, adding that "labour market performance must be assessed through an education filter". 

Claus Hjort Frederiksen, the Danish minister for employment, summed up his country's success story with the well-known flexicurity model - the unemployment rate is at 3.7% and for young people, it's as low as 2.6%. These levels are so low that Denmark is actively hiring people in Germany, Poland and Sweden. Around a third of the Danish workforce changes jobs each year. At the same time, the collectively agreed minimum wage is €12 to €13 per hour. This has led to the absence of a low-wage sector. It proves those wrong who say low-wage sectors are essential for re-integrating the long-time unemployed in labour markets. 

Denmark was the first EU country to reach the Lisbon target of a 70% employment rate. Nevertheless, the country decided, with a high level of unanimity in parliament, in favour of a far-reaching reform of the social system, which aims to further raise employment. It includes such measures as raising the retirement age from 65 to 67 years by 2007 and cutting in on the popular early retirement schemes. These measures are backed by more investment in education, training, research and innovation. 

Frederiksen offered a few recommendations for politicians from other EU countries whom, he said, he would like to see take more of what he deems to be "the necessary measures": 

  • Acknowledge the problem early and tell people that changes are necessary;
  • analyse the problem and use the best experts in the field; 
  • elaborate on the problem and debate the possibilities of an open process, and; 
  • solve the problem.

"We know the disease, we know how to cure the patient, so why don't we do it?", Frederiksen asked. He added, however, that "you can never copy another country's labour market".

Egbert Holthuis, deputy head of unit in charge of the European Employment Strategy in the Commission's DG Employment, Social Affairs and Equal Opportunities, said that according to research, it will be tricky to go beyond the 70% employment target defined in the Lisbon objectives. The only way, therefore, to boost the economy's competitiveness was to invest in productivity. 

Figures from the US and Asia confirm this assessment - both regions have not raised their working time overmuch since the 1990s. Their economies have still produced a higher output, which was mainly due to a productivity growth that far outpaced the development in the EU. "Europe is lagging behind in productivity," Holthuis said. He stressed the importance of research and particularly information-society technologies for giving a boost to productivity in Europe's service-oriented economies. 

David Arkless, the senior vice-president in charge of corporate affairs with Manpower, the temporary work company, agreed with the other speakers on Europe's competitive disadvantage. Speaking from his experience as a government adviser in China, Arkless found strong words: "You are not moving fast enough in Europe," he said. He spoke out in favour of a classic approach to labour-market issues: "Simple economic policies are what is needed." 

At the same time, Arkless dismissed panic reactins to high growth-rate figures for India and China. He pointed out that in real value, the US economy is growing by the whole of the Chinese economy every four months. Comparing figures on expenditure for passive versus active labour-market policies, Arkless found that good performers such as the US and the Nordic countries spend less than some poor performers, such as Germany or France, but they spend it on policies that lead to new qualifications and consequently new jobs. 

Looking closer at the German example, Arkless criticised the country for not managing "to train the right people in the right numbers for the right jobs". He added that "forcing people to take jobs which are below their level of qualification by capping employment benefits is definitely not something that deserves to be called an active labour-market policy". 

He concluded by making the case for more flexible forms of working, the proportion of which, he said, was on the rise in Europe. "A more flexible workforce," he said, "means more productivity, consequently more export and more money for the economy."

There is general agreement that, in order to compete with Asia and North America, Europe must raise its employment rate. But questions remain as to how this can be achieved in a sustainable way, what will the side effects be, and is it really the most promising approach? At a seminar organised by the Centre for Europen Policy Studies (CEPS), experts and politicians discussed the future of European labour markets. The discussion was based on a study published by CEPS earlier in 2006. 

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