Employment in Europe 2005: Recent Trends and Prospects

[Excerpt] The seventeenth edition of Employment in Europe appears at a challenging moment. In the international context of rapid economic growth in much of the developing world and sustained economic growth in the US, the EU seems to be mired in economic difficulties. This is why, at their 2005 Spring summit, Heads of State and Government have put employment and growth as the two main objectives of the renewed Lisbon strategy, in order to raise the living standards and the quality of life of EU citizens. As set out by the new Integrated Guidelines for Growth and Jobs (2005-2008), the Strategy implies raising growth performance of the EU on a sustainable basis and striving for full employment, improved quality and productivity at work, and greater social and territorial cohesion. Indeed, linking economic and social progress is at the heart of the European Social Model. Creating more and better jobs largely depends on a subtle balance between the macro-economic policy mix, micro-economic reforms and effective employment and social policies. First, an appropriate macro-economic policy framework is important to reassure consumers and entrepreneurs and help maintain or restore high levels of demand. Second, reform of product markets and achieving a fully integrated economic area would bolster economic activity and thus trigger employment creation. Third, effective employment and social policies are crucial elements to attract and retain more people in employment, to improve the adaptability of workers and enterprises in the context of rapid economic change, and to increase investment in human capital through better education and skills. Action is all the more necessary in the EU in the context of current demographic trends, as the working age population will gradually diminish. These issues will feature prominently in the National Reform Programmes which Member States will adopt this autumn. Against this background, the current report sees encouraging signs of global economic recovery which should spill over and benefit Europe, if Europe actively enacts further reforms and does not simply wait for growth to appear. The benefits from such structural reforms, which have already translated into structural improvements in the past few years, should not be jeopardised by inaction. Five issues developed in detail are politically prominent. • The findings confirm that macro-economic, micro-economic and employment policies go hand in hand to deliver more and better jobs. • Overall, positive employment prospects depend on the economic cycle and on improvements in domestic demand, especially in some larger countries in the EU. • Particular concerns remain regarding the unemployment situation of young people; this is in large part why the European Council recently adopted the Youth Pact. • In the face of an ageing and declining workforce, Europe still has a large potential labour reserve to draw upon; this should receive urgent priority. • Attention must be paid to social inclusion and cohesion, preventing exclusion from the labour market and reducing regional disparities in terms of employment, unemployment and earnings, as there are worrying signs that the recent economic slowdown may have affected Europe’s record in this regard