Joint Employment Report (1999)

1) OBJECTIVE

To present the employment situation in the European Union - in its entirety and at national level - and examine the measures taken by the Member States to implement the 1999 employment guidelines.

2) COMMUNITY MEASURE

Joint Employment Report 1999 (Part I)

3) CONTENTS

The Joint Employment Report comprises two parts. The first provides a comparative overview of the current situation and the results obtained by the Member States in implementing the 1999 employment guidelines based on the four pillars (improving employability, developing entrepreneurship, encouraging adaptability in businesses and their employees and, lastly, strengthening the policies for equal opportunities). The report also mentions examples of good practices in certain Member States.

The Joint Report evaluates the 1998 national action plans (NAPs), which were adopted in application of the 1998 employment guidelines, and notes real progress in their implementation.

The Luxembourg process requires the development of comparable quantitative objectives at European and national levels. A full set of indicators is needed, which involves the collection of similar data in the European Union. On the question of the NAPs, the social partners are now more involved in the drafting and implementation of labour market policy at national and local levels.

Economic background

The Joint Report confirms the economic upturn in 1998. The growth rate was 2.9% - 0.2% higher than in 1997 - although there was a considerable slowdown in activity in the second half of 1998.

The coherence of European economic policy is crucial to the success of the initiatives. It is based on three points:

• total commitment to compliance with the stability and growth pact;
• improvement in the overall functioning of the labour market and especially the promotion of employability, entrepreneurship, adaptability and equal opportunities;
• economic reforms in order to improve the effectiveness and flexibility of the markets in goods, services and capital.

The employment rate rose by 1.2% in 1998, which corresponds to 1.8 million jobs created. For the first time since 1990, employment increased in each of the Member States. There is a widespread move towards the use of fixed-term contracts. Together with this increase in the employment rate, unemployment fell in 1998, and in the first half of 1999, reaching 9.4% of the labour force in June.

Although there is still a large gap between the unemployment rates of adults and the under-25s, unemployment among young people continued to fall in 1998. There was a slight drop in the number of long-term unemployed.

More than 75% of total net job creation in the EU in 1998 concerned only six Member States: Spain, France, United Kingdom, Netherlands, Portugal and Italy. The first three of these account for approximately one million of the 1.8 million jobs created.

Nevertheless, the net job creation rate of the four main economies of the EU - France, Germany, United Kingdom and Italy - is relatively low. Given that they account for 70% of employment in the EU, the modest level of employment in Europe can be attributed to this lack of job creation.

Evaluation of the NAPs

The NAPs are organised around four priorities (pillars), which give each Member State common guidelines, while leaving some margin for manoeuvre to take account of national needs. Real progress has been made in the implementation of the first three guidelines - on youth unemployment, long-term unemployment and the strengthening of active measures.

However, when the guidelines propose no quantitative objectives, their implementation is far more uncertain.

Pillar I: employability

A high level of education is a key factor for ensuring an effective and adaptable labour market. There are still marked differences between the Member States, which are even greater in the area of lifelong education and training.

Participation figures vary sharply between Member States, but also between age groups - older workers appear to participate less in training activities than younger workers - and levels of initial training - the higher its original level, the greater the worker's chance of receiving a training offer. Certain Member States have chosen to tackle youth and adult unemployment at the same time - this is true of France, Finland, Austria, Spain and Portugal - whereas others have given priority to the recruitment of young people.

The report stresses the advantage of developing comparable indicators between the Member States. As these indicators are considered to be a crucial factor for the evaluation of progress by the Member States, it is necessary to develop administrative data that are in keeping with the common strategic indicators. This is all the more necessary since the lack of sufficient quantitative data is often due to the lack of appropriate follow-up. This problem of interpretation should be solved in the forthcoming reports.

Pillar II: developing entrepreneurship

Small and medium-sized enterprises (SMEs) make a major contribution to European employment. However, the share of employment accounted for by SMEs varies considerably between the Member States: from 86% in Greece to no more than 56% in Denmark, Finland and the United Kingdom. The report stresses that, over the period 1988-1997, employment was more susceptible to economic fluctuations in large enterprises than in SMEs. Moreover, the three services sectors that have recently experienced the highest level of growth (services to businesses, services to individuals, and the hotel and restaurant trade) have a large number of SMEs.

The administrative and fiscal obstacles to business creation are too great in most Member States. SMEs, in particular, suffer from insufficient access to information, funding and advice, but also from the high marginal cost of social security contributions. The average amount of time required to incorporate an enterprise is far longer in the Member States than in the United States of America, with the exception of the United Kingdom, Denmark and Luxembourg. As employment rates in the primary and secondary sectors (agriculture and industry) are stagnant or falling, the future development of the employment rate in the European Union depends on the job creation opportunities in the services sector.

The report underlines the effects on the labour supply of a reduction in the taxation of employment. If tax reductions were particularly concentrated on low wages, there would be a substantial fall in structural unemployment among low-skilled workers - which is particularly high in this category. And yet, over the period 1994-1996, only four Member States managed to reduce the tax burden on employment. These were the Netherlands and, to a lesser extent, Ireland, Denmark and Finland. Denmark and Germany fixed national objectives for gradually reducing the overall tax burden in the coming years.

A reduction in VAT for highly labour-intensive services would make it possible to promote employment, while at the same time combating undeclared employment. This policy is supported by the Netherlands, France, Finland and Italy, but most Member States are still hesitating, on the grounds that the knock-on effect on prices - and therefore on demand - is not guaranteed, whereas revenue from taxation would definitely fall.

Pillar III: encouraging adaptability in businesses and their employees

Pillar III covers the following two objectives: modernising the organisation of work and supporting the adaptability of businesses. Only in rare cases have measures actually been taken to apply this pillar, with the exception of several Member States (Austria, Finland, Ireland, Italy and the Netherlands), even though none of them has chosen an overall strategy for modernising the legislative framework.

The NAPs of the various Member States rarely mention negotiations between social partners at extra-national levels.

Pillar IV: strengthening the policies for equal opportunities

There are still major inequalities between women and men on the labour market in the European Union. An index of segregation between occupations has been produced on the basis of aspects of vertical (hierarchical) segregation and horizontal segregation (between the various sectors of activity). A study of this index reveals the need for a structural compromise between the strong demand among the female labour force and fair access of women and men to all types of employment.

As far as the gap between the remuneration of men and women is concerned, the report notes that this discrimination will not change until men take more responsibility for family tasks. The differences in remuneration between the sexes are also a sign of structural differences: women and men tend to have different jobs and different age structures - working women are younger, on average, than their male counterparts - but there are also differences in the level and type of education.

Efforts have been made to improve the statistics on this subject, but the Member States need to pay even more attention to reducing such forms of discrimination.

Dissemination of good practices

The exchange of good practices is a major stage in the Luxembourg processes. The Member States submitted 27 cases of good practice in their 1999 implementation reports. Seven of these are described in the report.

The report presents various indicators on the employment situation, common indicators on basic performance and indicators for measuring the overall performance of each Member State, the European Union and, in some cases, the USA.