This article is part of our special report Jobs and Growth.
As modest growth figures fail to dim fears of recession and employment data do not restore confidence in a recovery, experts flag a ‘worrying’ crisis outcome if structural reforms are not taken promptly to adapt the workforce to new business needs.
According to the first report of the European Jobs Monitor, published by the EU agency Eurofound, employment continued to grow in top-paying jobs, largely in knowledge-intensive services and business services, while sharp losses in medium-paying jobs in construction and manufacturing led to a shrinking of employment in the middle of the wage spectrum.
The recession has accentuated the long-running shift in employment away from manufacturing and towards services, highlighting the polarisation of the employment market between high-paid and low-paid jobs, says the report.
"In terms of the long-term structure of employment, there seems to be the feeling that you have good jobs at the upper end of the job market and not so good, precarious at the lower end and increasingly not so much in the middle,” John Hurley, the Eurofound researcher who drafted the report, told EURACTIV in an interview.
“That raises question of what kind of employment we are going to see in the coming years, and it is a quite worrying prospective,” he added.
Europe enjoyed something of a jobs miracle from the late 1990s until the onset of the recession in 2008, with more than 20 million new jobs created in little over a decade. However, social NGOs have over the years consistently complained that many new jobs were low-paid and precarious, dead-end jobs.
Jobs with wage premium
Hurley says the jobs that are being lost are jobs that are reasonably well-paid compared to the level of education required. Indeed, they are predominantly male jobs in construction and manufacturing that have enjoyed a wage premium for many years.
"The mobility of the people losing these jobs is quite problematic because they don’t have the human capital endowment to move up the wage structure. In many cases they will end up competing the low-level service jobs,” explained Hurley, stressing the resulting political consequences of such change.
According to BusinessEurope, the European employers’ organisation, the rigidity of labour markets does not help as it has a negative impact on voluntary job movement as it makes it more difficult for workers to move to a job or better employment opportunities.
"Economic cycles are becoming more volatile, resulting in a constant tension between job creation and job destruction,” concurred Anne-Marie Muntz, president of Eurociett, the temporary employment confederation.
“The reality is that people are becoming more flexible themselves,” she added, noting that only half of those getting a job through private employment agencies want a permanent job.
Re-training the 'shrinking middle'
“There is too much over-surrender,” said Steven d’Haeseleer, director of social affairs at BusinessEurope. “We cannot be that negative,” he added, commenting on the polarisation of the job market.
D’Haeseleer insisted that Europe has been successful in generating more and better jobs, as the trend confirms an increase of high-paid jobs, but he insists more needs to be done to create employment across the spectrum.
According to the employers’ organisation, the need for highly skilled workers is projected to rise by 16 million by 2020 and the corresponding figure for medium-skilled workers is 3.5 million. At the same time, the demand for low-skilled people will decline by 12 million.
“We should not have a too narrow attitude,” added D’Haeseleer, stressing that engineering and design of new products goes hand-in-hand with local production. “Not everything can be outsourced to China and India, we need to have this production here,” he said.
Ageing and climate change will generate new opportunities for the production side, only if stronger lifelong and vocational training are put in place.
Investment and taxation
French socialist MEP Pervenche Berès, chairwoman of the Employment and Social Affairs Committee, told EURACTIV that education and vocational training are key to get Europe out of the current crisis.
“You cannot talk about education and training without putting money into it,” she said, adding that half of EU countries had reduced their education budgets because of the current financial strains.
But even if reforms to education and training systems are put in place, results do not become visible over night. “It is high time for stakeholders to act in order do avoid dramatic effects on economic growth and employers are fully committed to providing their employees with lifelong opportunities,” said D’Haeseleer.
Recent data from Eurofound shows that training paid by employers is at its highest level since 1995 forthe older, EU-15 member states.
According to Eurociett, agency workers receive substantially more training than fixed-term workers and that is seen as an advantage, especially by young workers, who represent a third of agency workers in Europe. Seven EU countries (Belgium, France, Luxembourg, the Netherlands, Italy, Spain and Austria), have set up €500 million in training funds for agency workers, says the Eurociett report, 'Adapting to Change'.
Berès insisted that governments also have to come up with new investment strategies as well as reform taxation systems, alleviating fiscal pressure on labour.
OECD estimates show that 1% decrease in employers’ social security contribution leads to a 0.6% increase in employment. Sweden, which has cut its labour taxation in 2007, said that despite having about 6 billion Swedish krona less in the public treasury, the reform is still projected to be self-financing as it is offset by new workers paying taxes.
Growth won't be strong enough in coming years to make a difference in the labor market, Commissioner Olli Rehn said. "Employment growth in 2013 is therefore projected to remain relatively meager," he said. "As a result, unemployment is not expected to fall in the EU over the forecast horizon."
“Economic cycles are becoming more volatile, resulting in a constant tension between job creation and job destruction,” concurred Anne-Marie Muntz, president of Eurociett, the temporary confederation. “The reality is that people are becoming more flexible themselves,” she added, noting that only half of those getting a job through private employment agencies want a permanent job.
Brussels slashed its growth forecast for 2012 and said it can't exclude the possibility of a "deep and prolonged recession," said the European Commission in its semiannual forecast for the 27-countries bloc.
The EU's gross domestic product, adjusted for inflation, is expected to grow just 0.6% in 2012, the commission said, sharply down from its forecast only six months ago of 1.9%. The Commission's forecast for the 17-nation eurozone is 0.5% growth in 2012, also short of the May outlook for 1.8% growth.
The commission's forecast for unemployment is also grim. Joblessness across the bloc is expected to increase slightly next year, to 10.1% from 10% in 2011, the forecast says. The EU's spring forecast predicted unemployment would fall to 9.7% in 2012.
The commission expects already broad disparities between member countries to widen next year. The German economy is expected to expand 2.9% this year and 0.8% in 2012, with Germany's unemployment rate falling to 5.9% next year.
At the other end of the spectrum, the Portuguese economy is forecast to contract 3% next year, with an unemployment rate of nearly 14%. The Greek economy is expected to shrink 5.5% this year and 2.8% next year. The country's unemployment rate is seen jumping next year to 18.4%, significantly above the commission's previous forecast of 15.3%.
- 23 November: Adoption of new economic governance package including stability bonds green paper and 2012 Annual Growth Survey 4
- Eurociett:Adapting to change