ESDE 2017 CONFERENCE 10 OCTOBER 2017

#ESDE2017

INTERGENERATIONAL FAIRNESS Barbara Kauffmann Director of Employment and Social Governance Directorate

European Commission DG Employment, Social Affairs and Inclusion

Real GDP per capita, 2005 prices, since 1949

Why intergenerational fairness?

Living standards keep rising since generations.

Can we

take that for

granted?

The story of ESDE 2017

• Recovery continues, social situation slowly improving

• Labour market disadvantages of today's younger people

• Impact of demographic change on labour force; younger

people contribute more to pension system/receiving less

• Multipronged strategy needed to improve labour market

participation, productivity and intergenerational fairness

• Social dialogue can play an important role in promoting

intergenerational fairness.

Unemployment continues decreasing

• UR is decreasing fast in the EU

• Long-term unemployment is decreasing faster than short-term unemployment

The social situation is stabilising and slightly improving

0

5

10

15

20

25

30

200

5

20

06

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

% o

f popula

tion At risk of poverty or social

exclusionAt risk of poverty

Severe material deprivation

Very low work intensity household(less than 60 years old)

Generational difference in labour market outcomes

1995* 2000* 2005 2010 2016

U: Younger (25-39)U: Prime-age and older (40-64)LTU: Younger (25-39)LTU: Prime-age (40-54)

Unemployment and long-term unemployment rate, by age groups, 1995-2000 (EU-15) and 2005-2016 (EU-28)

After some convergence, unemployment gap between younger and older people increased during the crisis

Working lives

More fragmented working careers for younger people

Younger workers (25-39) are more exposed to:

• Lower job tenure

• Over-qualification

• (Involuntary) non-standard work (temporary & part-time jobs)

• Precarious employment (low-wage jobs with non-standard contracts)

19 20 15 8 8 6

23 31 38

12 14 16

28 27

29

13 18 18

29 23 18

67 60 60

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1995* 2005 2015 1995* 2005 2015

25-39 40-64

10+ years

5 to 9years

1 to 4years

<1 year

Length of time people have been employed in a company by age and duration

Working lives

Younger workers earn lower wages than older workers

Working lives

0

20

40

60

80

100

120

140

BG

EE

LV

LT IE

MT

SK

HU

CZ

SE FI

RO

UK

PL

DE

ES

DK

LU

BE

CY IT AT

PT

NL SI

FR

EL*

2014

2006

Average hourly wage of workers younger than 30 (relative to workers 60+)

What are the consequences?

1. Decrease in labour income share of younger people vs. older ones: • Due to demographic

changes, and • Relative decrease in income

per younger worker 2. Postponement of

household decisions: • Household formation • Home ownership • Parenthood

Working lives

Intergenerational adverse consequences on fertility rates, sustainability of pensions & growth Education & skills more and more important for the labour market Need to invest in efficient education and training

• Working-age population here: age group 20-64

Sources: UN World Population Prospects 2015 for the US, Eurostat 2015 population projection for the EU

Europe is not the only place where ageing is taking place … but ageing pattern will be particular in Europe.

Intergen. Fairness, Challenges Ahead

187

207

227

247

267

287

307

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

2032

2034

2036

2038

2040

millions

Employment

Active population

Employment will face its limits..

Own calculations based on Eurostat 2015 population projections, Eurostat LFS

70m Inactive people

Intergen. Fairness, Challenges Ahead

0.25

0.3

0.35

0.4

0.45

0.5

0.55

0.6

80

90

100

110

120

130

140

150

160

1702015

2020

2025

2030

2035

2040

2045

2050

2055

2060

2065

2070

2075

2080

Population > 65

Population 20-65

In

dex 2

01

5 =

10

0

Increasing old-age dependency in the EU

Old-age dependency rate (rhs)

Old

-ag

e d

ep

en

den

cy r

ate

Living standards in retirement

The challenges - and how the EU needs to react

1. To safeguard future potential growth:

• EU must activate its

inactive human resources • Future workers will have to

strongly accelerate productivity growth

2. Future workers will carry the

double burden of ageing

Action needed: Bring people into

productive employment

Need to invest in efficient education and training

Living standards in retirement

Union membership is lower among young employees

0

10

20

30

40

50

60

70

80

90

100

DK FI SE BE LU CY IE AT SI ROUKHR IT NL DE ES LV BG PT PL SK FR EL LT EE CZHU

15-29 45-59 TotalBased on European Social Survey. Data years: see ESDE 2017

Social Dialogue

(Self-reported) coverage by collective agreements is lower among young workers

0

10

20

30

40

50

60

70

80

90

100

BE DK FI DE HU NL PL ES UK

<30 30-39 40-49 >=50

Source: Tijdens and Van Klaveren, 2007

Social Dialogue

Social dialogue: important tool for promoting intergenerational fairness

Social partners:

• jointly advance the social market economy, including for younger and older workers and their employers

• Move from 'replacement' approach

(early retirement) towards promoting synergies (skills transfers) and lifecycle perspectives (work life

balance, health and safety)

European social partners' autonomous framework agreement on active ageing and an inter-generational approach

Living standards in retirement

Positive labour market and social trends, continued economic growth.

But today's younger generations remain disadvantaged on the labour market. This is worrisome also because…

...young people and future cohorts are found to bear the 'double burden' of demographic change.

Lesson to learn from ESDE 2017

Findings are a case for investing in today's young and future generations' employability because...

… they need to be more productive than today's workers while being able to cut their fair share from GDP.

More reforms needed in social security schemes to make them more sustainable, while safeguarding adequacy in the future.

Conclusions

Thank you for your attention!

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