(1)

The COVID-19 outbreak and the exceptional measures required to curb the spread of the virus and protect lives have caused a large and protracted economic shock in the European Union. In the third quarter of 2020, EU GDP was almost 4,2 % lower compared to the same quarter of the previous year. A strong but incomplete rebound followed from the second half of 2020 but the resurge in infections is expected to lead to a moderate contraction and delay the recovery into the second half of 2021 (1).

(2)

The policy response to the COVID-19 pandemic at both national and EU levels has been instrumental in limiting the socioeconomic impact of the COVID-19 pandemic. The use of short-time work schemes and similar job retention measures has so far helped contain the rise in unemployment relative to the drop in economic activity. At EU level, the unemployment rate increased by less than one percentage point between the first and the third quarter of 2020. Policies have benefited from flexible financing from the European Structural and Investment Funds under the Corona Response Investment Initiatives (CRII (2) and CRII Plus (3)) and from the European instrument for temporary support to mitigate unemployment risks in an emergency (SURE) (4).

(3)

Looking forward, crisis-induced changes to consumption patterns and the twin green and digital transitions, assisted by the European Green Deal (5) and by the European Digital Strategy (6), will transform our economies. Some sectors may not recover fully for some time, if at all, and companies may emerge from this crisis in financial distress (7). While the European Green Deal drives our growth strategy and the transition towards a greener economy is expected to create up to 2 million additional jobs by 2050 across the EU (8), jobs in certain sectors and regions will be at risk of being displaced. These developments could lead to a rise in unemployment in the short-term, while the creation of new quality jobs may take time, depending on the economic outlook and the availability of a skilled workforce. Rising unemployment and increased inactivity would imply a loss of skills, which could have scarring effects for the individuals concerned and the economy as a whole. Without effective up- and re-skilling measures, unemployment risks becoming persistent.

(4)

Young people are likely to pay the highest price in the absence of an adequate policy response. The increase in the youth unemployment rate has been triple that of the general unemployment rate between the first and third quarters of 2020 (9). A delayed entry into the labour market could mark this generation for years to come.

(5)

The crisis is also likely to adversely affect the labour market situation of groups that are in a disadvantaged position or under-represented on the labour market, such as women, older workers, low-skilled people, persons with disabilities, those living in rural and remote areas, LGBTIQ people, Roma people and other ethnic or racial minorities particularly at risk of exclusion or discrimination as well as those with a migrant background. In particular, while the average employment rate of women in the EU is higher today than ever before, many women still experience barriers to joining and remaining in the labour market and their employment rates should be improved (10).

(6)

A strategic approach at the EU and national levels is required to gradually transition between the emergency measures, taken in the context of the pandemic, and those necessary to ease the process of labour and capital reallocation in the recovery. The EU and the Member States should act together to promote a dynamic, job-rich and inclusive recovery and facilitate the green and digital transition in the European labour market. Attention should be given to the risks of phasing out emergency measures without effective new policies in place to support workers and firms during the recovery.

(7)

A coherent set of active labour market policies consisting of temporary hiring and transition incentives, skills policies and improved employment services (referred to as ‘Effective Active Support to Employment’ or EASE measures hereafter) is needed to support labour market transitions in the context of the recovery and the twin transitions, making full use of the available EU funds for this purpose.

(8)

Timely and well-designed support to employment can benefit workers and companies and the economy and society at large. If timely and actively supported, workers in crisis-hit economic sectors are more likely to find quality jobs in expanding sectors such as the green and digital sectors or in sectors with innovative business models but also in the social economy and in sectors that lack a skilled workforce such as the health and care sectors.

(9)

Temporary hiring incentives on the labour market can be effective in promoting quality job creation amid subdued economic growth during the initial stages of the recovery. They should be targeted and designed to facilitate job transitions and the creation of jobs that would not have happened absent those incentives. Target groups can include vulnerable and under-represented populations, including young people entering the labour market. In particular, supporting apprenticeships can be effective to develop the skills required on the labour market and help young people into employment. Moreover, transition incentives, which encourage the hiring of workers at risk of displacement by new employers, can contribute to easing those transitions and increasing the supply of skills in expanding sectors. Support for entrepreneurship, with a special focus on youth, women and social entrepreneurs, can usefully complement such measures, including support to help them deal with some of SME’s biggest challenges, such as regulatory obligations, late payments and access to finance.

(10)

Economic literature shows that hiring incentives can involve larger average gains in employment than other types of active labour market policies. Along with training programmes, they have the largest medium- to long-run effects, as they improve workers’ employability and their skills. Hiring and transition incentives coupled with on-the-job training can be more effective in providing labour market relevant skills than other forms of training. The risk that these incentives could contribute to jobs that would have been created anyway can be mitigated through targeting, monitoring and continued employment requirements. Moreover, this risk is lower in a crisis context, when hiring and re-training measures are more likely to have a positive impact (11).

(11)

Upskilling and reskilling opportunities geared towards the needs of the labour market can benefit all firms and workers but in particular those displaced or at risk of displacement against the backdrop of significant structural changes on labour markets. These measures should be based on relevant skills intelligence and an individualised approach, ensuring that workers have access to individual training entitlements. Short training courses can play an important role and can be certified by micro-credentials, alongside supporting partnerships between public and private stakeholders.

(12)

Effective policies fostering job transitions should be accompanied by well-performing employment services, with reinforced institutional capacity and able to deliver tailor-made support to jobseekers, including through an increased use of digital tools.

(13)

The European Framework for Quality and Effective Apprenticeships (12) and the Quality Framework for Traineeships (13) provide guidance and best practices that will become all the more relevant in the context of the recovery. Small and medium-sized enterprises (SMEs) should be particularly supported to supply apprenticeships, including through temporary recruitment bonuses or labour cost reductions where appropriate.

(14)

Social partners have a vital role to play to help build our economies back better while contributing to address, through dialogue, the employment and social consequences of the pandemic and the challenges of the twin transitions. The EU Quality Framework for anticipation of change and restructuring promotes, among others, their involvement in restructuring operations, in anticipating change and in identifying skill needs.

(15)

In the context of business restructurings, easing labour reallocation will be key. Directive (EU) 2019/1023 of the European Parliament and of the Council (14) ensures that viable enterprises that are in financial difficulties have access to effective early warning tools and preventive restructuring frameworks to continue operating. The EU Quality Framework for anticipation of change and restructuring (15) outlines good practices for anticipating skills and training needs in business restructuring processes.

(16)

The New Industrial Strategy for Europe (16) has for goal to build a globally competitive, climate-neutral, clean, circular and digitalised European industry. It revolves around European industrial ecosystems, which encompass all players operating in a value chain: from businesses to academia, research entities, service providers and suppliers. The identification of ecosystems can provide a useful framework to map skill needs.

(17)

According to the European Pillar of Social Rights, everyone has the right to support to improve employment or self-employment prospects, including support for job search and training, while employment conditions should respect quality criteria (17).

(18)

Promoting inclusiveness requires providing equal opportunities in labour market transitions regardless of sex, racial or ethnic origin, religion or belief, disability, age or sexual orientation. Low-qualified/skilled adults and people with a migrant background should remain in focus. Similarly, no territory should be left behind, from big cities to rural, coastal or remote areas across the whole EU, including the outermost regions.

(19)

The Youth Employment Support package (18) was adopted in view of the hardships being faced by young people across the EU, to provide them with stepping stones that contribute towards their stable labour market integration. In response, Member States have adopted two Council Recommendations to reinforce both the Youth Guarantee (19) and vocational education and training (20) and are now implementing them.

(20)

The European Skills Agenda for Sustainable Competitiveness, Social Fairness and Resilience (21) lays out a comprehensive plan to support the development of more and better skills to facilitate the adaptation to a changing labour market. In addition, the Pact for Skills (22) invites public and private organisations to join forces and take concrete action to upskill and reskill people in Europe.

(21)

Policy packages of EASE measures will be the most effective if supported by the right framework conditions, including modern labour market institutions, the removal of obstacles to investment, entry, growth and exit of firms, an efficient tax-benefit system, a well-functioning public administration, in an overall context of sustainable public finances. The implementation of the related country-specific recommendations, adopted by the Council in the framework of the European Semester, is all the more important to foster the economic recovery and ensure it deploys lasting effects.

(22)

Addressing the labour market challenges in the context of the recovery and the twin transitions requires dedicating adequate resources for the financing of EASE measures. As a horizontal principle, Member States must ensure the absence of double funding provided by Union programmes and instruments. They must also ensure that these support measures are designed to comply with State aid rules, where applicable.

(23)

Active labour market measures and measures aimed at enhancing the capacity of public employment services can be eligible for support under the structural funds, notably the European Social Fund Plus (ESF+) (23) and the European Regional Development Fund (ERDF) (24), as well as the Just Transition Fund (25), the European Globalisation Adjustment Fund for displaced workers (EGF) (26), Recovery Assistance for Cohesion and the Territories of Europe (REACT-EU) (27) and the Brexit Adjustment Reserve (28). Member States can also benefit from support from the Technical Support Instrument (TSI) (29) for the design and implementation of reforms in the areas of skills and active labour market policies.

(24)

Measures outlined in this recommendation to support job creation and employment, notably those addressing relevant challenges identified in the related country-specific recommendations, may be supported by the Recovery and Resilience Facility as part of coherent packages of reforms and investments. EASE measures proposed by Member States in their Recovery and Resilience Plans should respect the eligibility and assessment criteria set out in the Regulation establishing the Facility. (30) As a rule, the Facility cannot finance recurring expenditures, unless for duly justified cases, and can only finance reforms and investments that have a lasting impact and lead to structural change in the administration or in relevant policies. Financing under the Facility will only be provided upon positive assessment by the Commission of the individual measures proposed by the Member State, the approval of the Plans by the Council and the satisfactory fulfilment of the related milestones and targets.

(25)

Council Conclusions on the 2021 European Semester (31) encourage Member States to include essential reforms and investments in the labour market, social policy, healthcare and the educational and training areas in their Recovery and Resilience Plans. The Commission guidance to Member States on the Plans (32) highlights that they should be the opportunity to promote a strong policy response by supporting a shift in employment policies from employment preservation to quality job creation and support job-to-job transitions in order to ease and accelerate structural changes,