ETUI Benchmarking Working Europe 2012

8/22/2019 ETUI Benchmarking Working Europe 2012

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Benchmarking

Working Europe2012


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Brussels, 2012

Publisher: ETUI aisbl, BrusselsAll rights reserved

Print: Imprimerie Bietlot s.a., B-6060 Gilly

D/2012/10.574/14

ISBN: 978-2-87452-262-8 (print version)

ISBN: 978-2-87452-263-5 (online version)

The ETUI is fnancially supported by the European Union.The European Union is not responsible or any use made o the

inormation contained in this publication.


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Benchmarking Working Europe

2012Contents

Foreword .................................................................................................. 4

Introduction ..............................................................................................5

1. Macroeconomic developments, policies and inequality ....................102. Inequality on the labour market ...................................................... 22

3. Education and inequality in Europe: a youth perspective ............... 40

4. Collective bargaining and diversity in wage developments ..............565. Social security and inequality ...........................................................72

6. Climate change and inequality .........................................................80

7. Regional inequalities in Europe ...................................................... 88

8. Do unions and worker representation bodies

make for more or less inequality? ...................................................1009. Working conditions to blame for wide gaps in workplace health ... 112

References .............................................................................................120

List of gures ........................................................................................128List of abbreviations .............................................................................130

The Benchmarking Group .................................................................... 131

List of regions (NUTS 1) codes .............................................................132


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Foreword

Foreword

As the great recession persists on itscourse and the European Union adjustsits expectations to cope with a period of at best subdued growth, governmentsare reacting by pushing for more auster-ity in the hope that such an approachwill serve the goal of a better future for

the population of Europe. Meanwhile,though inequality is rising as jobless-ness becomes the everyday reality ofmany Europeans, job creation is taintedby sub-standard conditions, and socialprotection systems are being cut back the widening gap between afuence andpoverty does not appear to constitutea major concern of the European govern-ments in the context of their efforts to re-duce debt levels and public decits.

Yet inequality was one of the rootcauses of the great recession. Over thepast decades income inequality has

slowly but steadily increased, paving theground for a growing instability withinthe economy. The stagnation in incomeaffecting some sections of the popula-tion, while other sections enjoyed a rapidincrease in especially capital income,led to a constantly expanding demandfor credit, thereby fuelling the growth ofan unsustainable credit bubble. Whileways could have been found of contain-ing this phenomenon had it developed inisolation, the simultaneous deregulationof the banking system allowed nancialinstitutions to create new instruments

their workings impenetrable to the restof the population in which those whocontinued to get richer could invest theirincreasing assets. This cocktail createda bubble-economy which burst in 2007.

This nancialisation of the econo-my is, however, far from being the onlydimension of rising inequality that givescause for concern.

Growth in inequality leads to anaccumulating sense of injustice andlack of social cohesion both within andacross countries. The fair distribution ofresources is something that matters topeople, within their own countries espe-cially, but also across borders and withinthe world at large; when gaps in incomedistribution are perceived as becomingtoo wide, the sense of injustice can gener-ate mistrust and even lead to unrest be-tween individuals and groups within so-ciety. The need to forestall such outcomesis one of the main reasons why govern-ments have put in place redistributive

inequality generated by the market, couldcome to form a positive strategy for thefuture of the European Union and ensurethat Social Europe was not merely onebrief moment in history but that, on thecontrary, it continues to represent the un-derlying foundation on which European

integration can build its future.We hope you will derive both inter-est and benet from your reading of thisyears edition ofBenchmarking WorkingEurope.

Bernadette Sgol

ETUC

General Secretary

Maria Jepsen

ETUI

Director of Research Department

Philippe Pochet

ETUI

General Director

welfare states based on progressive taxa-tion and insurance against social risks.

Yet another aspect of which it is im-portant to be aware is that inequality, inits varying manifestations, leads to a lossof human potential in its broadest senseas societies fail to provide equality, or

structures that would serve to promotegreater equality, thereby underminingthe foundations for equal opportunities.The disadvantaged groups in society, inother words, are so far from enjoying thesame opportunities as the advantagedgroups that society at large stands to missout on the development of the human po-tential present within the former groupswhile, at the same time, the negative spill-over effects of the inequality suffered en-tail widespread adverse consequences forsociety at large.

There are thus several reasons to

justify a belief that inequality should beat the heart of all concerns about the fu-ture direction of the European Union.A forward-looking approach would beone that supported and reinforced poli-cies and institutions designed to ensurethat equality and not income equalityalone is the foundation of any short,medium and long-term strategy. Build-ing a common future on austerity andderegulation, and thereby laying theground for a vicious downward spiral ofdeteriorating social and labour rights, iscertainly not the right way forward for a

prosperous and more egalitarian Europe.Benchmarking Working Europe,

which rst appeared in 2001, representsa contribution to the EU Spring summitby providing a genuine benchmarkingexercise applied to the world of labourand social affairs and grounded in ef-fective labour and social rights. It aimsat establishing what progress or lackof it has taken place in selected areasof importance to the trade unions andof signicance for a social Europe. Thisyears edition ofBenchmarking WorkingEurope, in choosing to focus on the singleissue of inequality, nonetheless takes ina wide range of areas extending far be-yond the question of income inequalityalone. While raising serious concerns asto the direction currently being taken bysocial and labour rights in the EuropeanUnion, this report points also to ways inwhich policies, institutions, and the politi-cal will to contain market inequalities andprovide ways of offsetting other forms of

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Crisscrossing inequalityIn Europe inequality is growing notonly within each of the EU member

states but also between one country

or group of countries and another,as shown by the chapter of this Bench-marking Working Europe devoted tomacroeconomic developments. The crisisnaturally exacerbates these trends, gener-ating economic outlooks that differ greatlyfrom one country to the next. Some havebeen much more severely affected thanothers by the debt crisis (Greece, Ireland,Italy, Spain), while growth prospects areparticularly poor in countries such as Slo-venia, Romania, Hungary, or Denmark.Others have succeeded in returning totheir pre-crisis production levels: France,The Netherlands, Belgium, Germany, andAustria. Yet others have actually achievedsome economic growth during this period(Poland, Sweden, Slovakia). Even so, in2012 the outlook is bleak for most mem-ber states; and for Greece and Portugal it

is nothing less than a nightmare.In spite of the austerity pro-

grammes now in place right across theEU, the public-debt-to-GDP ratios,far from declining, are expected to con-tinue to rise until 2013 in almost allcountries (see: Public debt crisis deepensand expands, p. 14). Attempts to combatexcessive decits form indeed only oneof the three variables for a reduction ofpublic debts, the two others being growthrates and the level of the interest ratespayable on the debt. At present growth

rates are low and the situation is madeeven worse by the austerity programmesimplemented in the member states.

In terms of income distribution,these austerity programmes havein some cases entailed regressive effects,insofar as low incomes are more

severely affected by them than high

ones. In a context of recession, the majorrisk in terms of social consequences is that

Introduction

ity to which various international or-ganizations (OECD 2011a; EuropeanCommission 2012) have already drawnattention even in European countrieswith more egalitarian traditions suchas Germany, Sweden, Finland or Den-mark. Above all, however, this exami-nation conducted by the ETUI brings tolight, unlike other studies and reports,the way in which the policy choices im-plemented in the EU weaken the mech-anisms that would facilitate the struggleagainst these forms of inequality andenable the crisis to be vanquished viathe route of cohesion and prosperity. Inother words, the message delivered byBenchmarking Working Europe 2012is that Europe is on the wrong path.

This brief introductory chapteris structured in three parts: rst of all,

how and in what areas has inequalitygot worse? The nine chapters of thisedition ofBenchmarking Working Eu-rope provide a multidimensional set ofanswers to this question: in the macro-economic sphere (Chapter I), in terms oflabour market developments (Chapter2), of education (Chapter 3), of wages(Chapter 4) and of poverty (Chapter 5),of transition to a low-carbon economicmodel (Chapter 6), of regional dispari-ties (Chapter 7), of worker participation(Chapter 8), and of health and working

conditions (Chapter 9). In its secondpart, this introduction considers thequestion of political responsibility forthe growing inequality and weakeningof the mechanisms of social cohesion.The third part, nally, seeks to exam-ine how it might be possible to modifythe non-egalitarian stance adopted bythe EU and most of its member states,in order to nd a positive way of mov-ing beyond the crisis. Such, indeed, isthe essence of the message deliveredby this report: there will be no lasting

way out of the crisis in the absence ofa reduction in inequality (Reich 2011).We should remember, after all, that, ac-cording to the Treaties, the purpose ofthe European Union is the promotionof employment, improved living andworking conditions, so as to make pos-sible their harmonization while the im-provement is being maintained (Article151 TFEU).

During much of the period when west-ern Europe was prosperous and highlydeveloped, the challenge representedby social inequality was regarded assecondary, insofar as this problemwould so the conventional wisdomwent ultimately be eradicated by theeffects of continuing economic growth.The question arose to a greater extentin the English-speaking countries,which were less egalitarian (Pikettiand Saez 2004), but in a manner toooften conned to the monetary aspect

alone.This edition of Benchmarking

Working Europe shows that social in-equality is now worsening everywherein Europe, and not only on account ofthe succession of nancial, economic

and debt crises. Inequality has beengrowing since long before 2008 be-cause the policies implemented overmore than twenty years in the Euro-pean Union (EU) and its member stateshave contributed to deepening socialand pay disparities. While the crisis isamplifying and accelerating this de-velopment, the structural changes inincome distribution were actually oneof the factors that triggered the crisis.It is becoming increasingly evident thatpolicy choices in relation to growth(based on competition and competi-

tiveness) and employment (based onincreasing labour market exibility and

deregulation) lead to a weakening ofsocial cohesion and greater inequalityin terms not only of income but also ofeducation, training, access to the labourmarket, social security entitlement andbenets, healthcare, etc. This evolution

is increasingly perceived, in a context ofausterity which affects the most vulner-able groups more severely, as a seriousform of injustice.

Such is the fundamental message

conveyed by this 2012 edition ofBench-marking Working Europe. Since 2001the purpose of this publication has beento assess the progress or lack of prog-ress in areas of importance for thetrade union movement: employment,unemployment, working conditions,wages, etc. This year, a meticulous ex-amination of these areas shows orrather conrms the rise in inequal-

Introduction

Characteristicsand causes of

inequality


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Introduction

austerity is likely to lengthen periods ofunemployment, leading to labour marketexclusion or marginalization of the mostvulnerable groups and growing inequality.Indeed, as shown by Chapter 3 (e.g. sec-tion on Social and educational inequali-ties), long-term unemployment levels andlow educational levels in households havean impact on poverty reproduction andsocial exclusion mechanisms. Childrenliving in households experiencing or

threatened by marginalization are

less likely to achieve or gain access

to higher levels of education.

This trend is perceived as deeplyunjust when we see the European CentralBank (ECB) deciding to subsidize the -nancial sector (by offering loans direct-ly to banks at very low interest rates) atthe same time as the debt crisis is extend-ing to include countries that seemed be-yond its reach, leading to an ever increas-ing number of austerity plans.

Another effect of the crisis is thatwe are witnessing a reversal of the trendobserved in recent years (before 2008)whereby the poorer EU countries wereexperiencing higher growth rates than thericher ones. In other words, the trendfor the poorer economies to catch

up with the richer ones, leading to

greater convergence which wouldhave led to a convergence in per capita

income has been halted and evenreversed (see Trend towards greaterequality between countries halted, p. 19).After a few years during which inequalityamong the EU member states was gradu-ally narrowing, the gulf between centreand periphery is widening once again.

What is more, this gulf is deepen-ing even within individual member statesbetween their rich(er) and their poor(er)regions. Chapter 7 on Regional inequal-ity in Europe shows, in particular, theexacerbated divisions between de-

mographically expanding areasand rural regions, the latter beingfrequently less developed and sufferingfrom the loss of their most important re-source, namely their population. Apartfrom the demographic inequality (whichnaturally also entails inequality in termsof infrastructures, mobility, environment,and so forth), this chapter brings to lightalso the growth of regional inequali-

to which such trends vary from countryto country. Collective bargaining systemsin Europe differ from one member stateto another in terms of coverage rates, thedegree of centralization, the role of thesocial partners in policy denition andimplementation, etc.

In terms of pay, developments varystrongly. Thus wages continue to rise inthe Nordic countries, in spite of the crisis,while pay restraint can be observed in thecountries of western and central Europe(Austria, Germany, Belgium, Luxem-bourg, The Netherlands, Slovenia). In theEnglish-speaking countries (the UK, Ire-land, Malta, Cyprus) wages have come tostandstill or even fallen, accompanied bya high degree of volatility and reductionsin purchasing power in the countries ofcentral and eastern Europe. Finally, wag-es have been falling in keeping with thedrop in productivity in the Mediterraneancountries (Greece, Spain, France, Italy,Portugal).As such there exists real di-vergence in wage developments be-

tween different groups of countries

since the crisis of 2008 (see Divergingreal wage developments in the EU, p. 66).

In parallel, trends in terms

of the development of unequal in-

come distribution display similar

divergence. Whereas income distribu-tion tends to be more even in the Nordic

countries and the corporatist countriesof central and western Europe, it is moreuneven in the Baltic countries, Romania,Bulgaria, the United Kingdom and somesouthern European countries.

One particularly interesting obser-vation is that, when examining the corre-lation between, on the one hand, the levelof collective bargaining coverage and, onthe other, income inequality, it becomesclearly apparent that, the greater the cov-erage, the lower the degree of inequalityand, by the same token, the lower the rate

of coverage, the wider the inequality (seeHigh bargaining coverage: an importantfactor for reducing inequality, p. 68).This factor should undoubtedly not be re-garded in isolation when gauging incomeinequality, for several other factors, suchas taxation and social security systems,also play a signicant role here.

It may, however, be concluded thatsound collective bargaining sys-

ties in terms of income, health and

lifestyle (in particular the digital dividethat is widening all the time, see Closingthe divide in a digital age, p. 93).

What we are witnessing is, accord-ingly, an aggravation of both internal andexternal inequality. It is essential to real-ize that to resolve the crisis withoutreducing these forms of inequality

would be to allow the seeds of the

next crisis to take root in the soil of

Europe. These seeds could sprout in thenot too distant future and would furtherundermine could indeed cause collapseof the legitimacy of the European inte-gration project.

Quality of work and working conditionsApart from the increasing disparities interms of income, health, or lifestyle, thedevelopment of inequality also affectsworking conditions, at least for those whoare in work. An increasing number ofworkers, in particular young work-

ers, nd themselves trapped in sub-

standard or insecure forms of em-

ployment: xed-term contracts, tempo-rary work, extended internships, etc. (seeintensication of work, p. 114-115; Chap-ter 2). Similarly, large numbers of womennd themselves exercising part-time jobs,whether or not of their own volition. Thesesituations are likely to entail worse career

prospects, an experience of job insecurityand, ultimately, a deterioration of workingconditions in general.

Chapter 9, focussing on workingconditions, shows that the crisis con-tributes also to work intensication,additional forms of constraint and an in-crease in the phenomenon of presentee-ism, that is, continuing to work duringperiods of sickness (see presenteeism isa growing concern, p. 117). It is hardlysurprising therefore that many workers(almost 60%) believe that they will be un-

able to remain in their job until the ageof 60. This observation, in the context ofthe deterioration of working conditions,is particularly striking at a time when theEU is calling for a raising of the retire-ment age in most member states.

Wages and collective bargainingIn the light of the above observations, it isparticularly interesting to note the extent

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The climate challengeFinally, in addition to and beyond the cri-sis, Europe has to deal with the extremelyurgent challenge of climate change, whichappears to be not directly linked to in-equality. And yet this transition, orthis green convergence, equally

bears the stamp of inequality, both

external and internal.

External green inequality: we knowthat within the EU the poorer memberstates emit less C02 per capita than dothe richer ones. But at the same timethe poorer countries perform less well interms of resource productivity (see Di-vided Europe: resource productivity andper capita emissions, p. 83). How can in-creased green convergence be developedand speeded up in this context?

Internal green inequalities arelinked to the questions of social exclusiontackled in Chapter 5: within the memberstates the poorest population groups en-counter more housing, heating and en-ergy problems (see The micro-dimensionof environmental inequality, p. 85-86).

The principle of a fair transition must

be based on an integrated approach that

combines in a balanced fashion the climate

issue and the industrial policies and social

and employment policies most appropriate

for accompanying this transition. Yet the

responses to the crisis currently pro-

vided in the forms of cuts and auster-ity programmes risk undermining

such an integrated approach.

According to the OECD, the most impor-tant general reasons for the exacerbationof inequality include technological chang-es that benet primarily the most highly

Introduction

dermine and disrupt social dialogue andcollective bargaining (see Crisis: a pre-text for deregulation, p. 109).

For all this, the EU bears its

share of responsibility, for the trade

unions are increasingly marginal-

ized in the new Europe 2020 strat-

egy, in which their consultation and nego-

tiation role is less recognized than previ-

ously under the Lisbon strategy.

Similarly, the remedies pre-

scribed by the EU Commission

and Council for exiting the crisis

contribute in most cases to weak-

ening the national social models:the EU calls for deregulation of labourmarkets, reform of labour codes, increas-ing exibility of work organization and

practices, reforms of social security andsocial protection, reforms of collective

bargaining mechanisms, the introduc-tion of new forms of employment con-tract, decentralization of collective bar-gaining, etc. The labour market is chang-ing: part-time work is developing, affect-ing predominantly women, whereas it isabove all young people who are affected

by xed-term and agency contracts. In

Poland, 60% of young workers employedon temporary contracts have acceptedthis form of contract because they wereunable to nd a permanent job; in Portu-gal the gure is 70%, and in Spain 80%.

What is more, short-hours contracts andother forms of sub-standard or semi-casual work are spreading in particu-lar among the relatively unskilled, theworking poor; self-employment is en-couraged but is frequently tantamount toincreased insecurity, particularly amongmigrant workers (see Developments innon-standard employment, p. 31-36).

Apart from the fact that it seems dif-cult under these conditions to advocateactive labour market policies when it isobvious that the problem is less one of de-

mand than of supply of jobs, it can be ob-served that the development of thesenon-standard forms of employment

affects the more vulnerable groupsand leads to an increase in pay inequality,to greater social insecurity and sub-stan-dard employment, and ultimately to lesscohesion and prosperity (see Outcomesof labour market inequalities in terms ofin-work poverty, p. 37-38).

tems do contribute to promoting

equal pay; and it may similarly be ob-served that the degree of centralization ofbargaining tends to reduce wage volatil-ity, while decentralization fosters greatervolatility in this respect and hence has theeffect of amplifying economic cycles anddivergences in the euro area and beyond(see Wage share stable only where bar-gaining coverage is high, p. 70).

Role of trade unions and workerparticipationContrary to the clich according to whichtrade unions defend the acquired gains ofinsiders (full-time workers on unlimitedcontract, civil servants) to the detrimentof outsiders (the self-employed, tempo-rary and part-time workers, etc.), col-lective global action may be seen to

contribute to a better overall distri-

bution of income, and hence to a re-duction in inequality.

This applies in a number of diffe rentrespects: broad collective bargaining cov-erage (Chapter 4); introduction of mini-mum wages in some countries; efforts toeliminate gender inequality (includingin worker representation bodies, Chap-ter 8); steps to counter the abusive wagepractices of certain employers (there be-ing less evidence of excessive manage-ment pay levels in companies where

European Works Councils have been setup) (see Worker participation: a way togender equality and balanced boards,p. 105). It is necessary to place also on thislist the social dialogue, both national andEuropean, insofar as it tackles aspects ofinequality as it affects the most vulner-able groups (workers with disabilities,migrants, youth, etc.); worker participa-tion; information and consultation, etc.(Chapter 8).

In all these ways, the trade unionscontribute to the ght to reduce inequal-

ity and injustice. But this contributionis made increasingly difcultby sev-eral factors: obstacles, often ideological innature, placed in the way of trade unionactivity, loopholes in European legisla-tion (the provisions of the EWC directive,for example, are worded so as to tolerateserious decits in its implementation),but also trade union membership losses,and the crisis itself, which is used to un-

Weakening ofthe mechanismsfor reducinginequalityand policyresponsibilities


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Introduction

skilled workers; working conditions (de-regulation of labour law, development ofnon-standard contracts, etc.); changesin the volume of work (development ofpart-time work, increased gap betweenhighly paid and low-paid workers); andan increasingly ineffective use of taxationfor the purpose of redistribution (OECD2011a). Even if there is no formal consen-sus on the academic level concerning therole of globalisation in widening inequal-ity, it can indeed be observed that thechanges triggered by globalization havefrequently brought much greater gains tohighly skilled than to low-skilled workers.

Since the 1980s, structural re-forms on the labour markets have beenundertaken in most EU member states,initially for the purpose of reducing un-employment. These reforms were basedon relaxation of employment protectionlegislation (EPL), deregulation of productmarkets, lowering of minimum wages,revision of wage-xing mechanisms, low-ering of the replacement rates of unem-ployment benets, reduction of tax bur-den entailed by the employment of low-skilled workers. According to the OECD,while these measures seem to have

had a positive effect on overall em-

ployment rates, they have, at the

same time, contributed to the in-

crease in wage inequality: all in all,

therefore, we have more jobs but, at thesame time, more inequality. This long-term trend the increase in the overallemployment rate does not, per se, serveto reduce either inequality in householdincomes or poverty rates (see also de Beer2012) also calls into question the Euro-pean discourse according to which a ris-ing employment rate is a means towardseliminating social exclusion and poverty:in actual fact, if it is to contribute to theaim of reducing social exclusion, this in-crease must necessarily be accompanied

by an improvement in the quality of em-ployment and by redistribution policies.

The economic paradigm underly-ing the policies implemented over the lastthirty years serves, ultimately, to wideninequality. Apart from the element of la-bour market deregulation and less redis-tributive taxation, it is important to notethe factors stressed in this report: auster-ity programmes entailing regressive ef-

employment; of improving access to em-ployment for vulnerable groups and of-fering training to persons with few skills;of recognizing also the importance ofthe role of social transfers, wage-xing

mechanisms, and workers bargainingpower. At the same time, this entailsrecognizing and encouraging the role ofsocial partners and trade unions in con-tributing to a fairer society.

It means, in a nutshell, simul-

taneously conducting both active

employment policies and redistri-

bution policies.

Since the beginning of 2012 the Europeandiscourse on the crisis has increasinglyplaced the emphasis on the post-auster-ity period, in other words, the expectedreturn of growth and employment. Thisreturn, insofar as it is expected to takeplace, is made responsible for solving themajor outstanding problems: improve-ment of public nances, convergence of

the economies, reduction in unemploy-ment and increase in the employmentrate, all of which will, according to theofcial discourse, enable salvation of theEuropean social model. According to thisapproach, the broadening of inequalitywill have been a merely temporary phe-nomenon and the return to growth willtrigger a dynamic whereby inequality inits various forms will once again be re-duced.

Yet this discourse is mistaken inthat it places the stress on growth over

and above equality, insofar as it conti-nues to believe that the former will auto-matically engender the latter. As thingscurrently stand, however, the tide is nolonger rising for the population at large:growth is no longer reducing inequality;the link between growth and equality hassnapped (Niechoj et al.2011). On the con-trary, the increase in inequality ex-perienced in the EU and its member

fects, reversal of the past trend towardsincreased convergence among memberstates and regions, increasing employ-ment insecurity, deterioration of workingconditions, calling into question of col-lective bargaining systems even thoughsuch systems contribute to the fosteringof income equality, weakening of nationalsocial models, and marginalization oftrade unions in the denition and imple-mentation of the strategic socio-economicguidelines of the European Union and itsmember states.

It is thus paradoxical, at the

very least, to seek now to assert be-

lief in the values of equality and so-

cial justice while at the same time

weakening the systems and institu-

tions that allow these values to be

fostered. Might it be that we are here inthe presence of an implicit political choicethat would allow certain forms of inequal-ity to ourish, along the lines of the Ang-lo-Saxon model so frequently lauded forits competitiveness?

In its report Employment and So-cial Developments in Europe 2011, theEuropean Commission acknowledgesthis phenomenon of increasing inequal-ity. While pointing out that equality is anunavoidable fact of life, it stresses that ahigh level of inequality, or its rapid

widening, can be both economi-

cally and socially harmful. It arguesthat increasing inequality gives rise toproblems of social cohesion (risks of so-cial unrest), threat to democracy (concen-tration of wealth and power), and nally

of economic stability (some economistsbelieve that the increase in inequalitywas a contributory factor to the crisis, butthe Commission is at pains to stress thatthere is no consensus as to this interpre-tation).

The path of an improvement ofliving and working conditions and their

harmonization while improvement isbeing maintained entails the need foraction on the social policy front butalso in redistribution policy terms. It isa question of simultaneously restoringto tax policies their redistributive roleand capacity, in particular via the taxa-tion potential offered by high and veryhigh incomes; of conducting job creationpolicies and improving the quality of

8

When the tide is

no longer risingfor all


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9

Introduction

The analysis of various forms of inequal-ity contained in this 2012 edition of

Benchmarking Working Europe leads tothe conclusion that the political remediesmust in future focus not primarily on eco-nomic growth but on a redistribution anddeconcentration of wealth.

Europe and the United States have

experienced thirty years of a winners-

take-all culture, which has enabled the

richest members of society, via a variety of

mechanisms such as tax havens (Hacker

and Pierson 2010; Chang 2011), to helpthemselves to ever larger shares of thecake. This economic model is condemnedto collapse.

The priority focus must insteadbe today, for reasons that are social butalso environmental, the need for greaterequality. A sustainable route out ofand beyond the crisis presupposes

the reconstruction and strength-

ening of the mechanisms and poli-

cies that contribute to reducing the

various forms of social inequality,

and a reversal of the tendency to-

wards the excessive concentration

of wealth.

states in recent years including dur-ing periods of economic growth is oneof the factors that led to the crisis

and not one of its consequences. Themechanisms have been brought to light:on the one hand, excessive concentrationof wealth and speculative bubbles; on theother, the struggle of the middle classssuffering from insecurity and uncertainand sub-standard labour market condi-tions to maintain their social standingand lifestyle, leading ultimately to a crisisof indebtedness.

Is it possible that a way can be found

out of the crisis without rst reducing so-

cial inequality in all its forms? There are

those answer to this question is an emphat-

ic no (Reich 2011). Is it possible that more

economic growth will improve the wellbe-

ing of the European population at large?

There are those who believe the answer to

this question is also no (Wilkinson andPicket 2009). To put the same questiononce again but in positive form: is it pos-sible that more equality might pro-

vide an alternative route to auster-

ity in moving beyond the crisis and

nding a way back to sustainable

prosperity?

In response to this question, in-creasing numbers of people are answer-ing yes.

Wilkinson and Pickett have shown

that the developed societies displayingthe widest inequalities perform particu-larly badly when it comes to dealing withsocial and health problems. But above all,these authors observe that, in our societ-ies, more economic growth serves to im-prove neither health nor wellbeing. Fora better quality of life what we need

is not so much stronger growth

as more equality. In societies thatstrengthen social cohesion and report thesmallest income gaps between rich andpoor, the population has a better quality

of life, levels of trust are higher, and thereis less violence. Is this not what the EUmember states need today? According toEurobarometer, 88% of Europeans be-lieve or tend to believe that gaps inincome are today too large (EuropeanCommission 2012: 67). This opinion wellindicates that too much inequality hasnow come to be regarded as prejudicial tosociety as a whole.

Conclusion


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Macroeconomic developments,policies and inequalityIntroduction

In 2011 we witnessed the spread of the public debt crisis within the euro area.

The central principle of the policy response to this crisis has been the escalation of

scal austerity programmes in those member states that received nancial support

from the EU and the IMF and in those that have been facing increasing difculties

in the nancial markets in other words, pretty much everywhere. These scal

policies, in combination with the European Central Banks tightening of monetary

policy, have aborted the recovery that had been forecast for the area. The prospectof a recession in the euro area in 2012 and, given the close economic inter-

dependence among member states, in the EU as a whole is now highly realistic.

The irony has been that the depressed demand conditions induced by scal austerity

in the euro zone have been making the task of consolidating public debts and

government decits ever more difcult and costly.

This chapter, while reviewing these macroeconomic developments and policy

responses, also investigates their implications for income inequality between

EU member states. Is there any likelihood that the catching-up process in terms

of per capita output between poorer and richer EU member states will, under the

current and currently foreseeable macroeconomic conditions, continue?

Topics

> Economic developments the crisis is not over 11

> Decits, debts and austerity 14

> Macroeconomic policy responses 16

> Monetary policy 18

> Output growth and cross-country inequality 19

> Conclusions 21

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1.Macroeconomic developments, policies and inequality

11

During 2010 and at the start of 2011, theEuropean economy appeared to havebounced back although considerablyless strongly than the US from the

Great Recession (see Figure 1.1). In thecourse of 2011, however, the recoveryvirtually came to a standstill. For 2012,the current ofcial forecasts are bleak.The prospects in the US are only mar-ginally better. Growth at such rates isactually below the historical trend of theEuropean economy, which means thatno progress can be expected in closingthe output gap that has been opened upby the crisis and in reducing the sharplyincreased unemployment. Growth fore-casts were repeatedly revised downward

during 2011, as the debt crisis escalatedin the euro area. With employment andunemployment gures deteriorating(see Chapter 2) and credit stagnatingor even shrinking, the risk of a double-dip recession has increased markedly.The most recent forecasts are morepessimistic still with the Institut frMakrokonomie und Konjunkturforsc-hung (IMK 2011), for instance, forecasting

a second and substantial contraction(-0.6% for real GDP in the euro area in2012). Moreover, all forecasts are subjectto substantial downside risks; the pro-longed sovereign debt crisis and a possi-ble second banking crisis in Europe, withtheir potential for another credit crunch,pose a major threat to the Europeaneconomy, with macroeconomic policyalready so stretched (see below). Thiswould almost inevitably have an adverseeffect on the US economy and the globaleconomy more generally, where there

are already worrying signs of a slow-down in until recently resilient emergingeconomies.

Recovery aborted risk of double-diprecession

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EU27

US

Figure 1.1 Real GDP growth EU27-US, annual data

Source: AMECO (2011).

Economic developments the crisis is not over


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12

After three years of supposed recov-ery from the crisis, EU27 output stillremains almost 2% below its high pointin the summer of 2008. Even if a renewedrecession is avoided which looksunlikely Europe will at best experi-

ence a lost half-decade ve years withno net increase in output. In this respect,the USA appears to have turned the cor-ner, with output growth stabilising andemployment expanding.

Behind the EU average gures wesee substantial variation between mem-ber states. Output losses since the onsetof the crisis in the second quarter of2008 have yet to be reversed in all but sixmember states, most of these small ones(see Figure 1.2). As was documented inthe last edition ofBenchmarking Work-

ing Europe (ETUC and ETUI 2011), thelosses have been greatest in the Balticstates, in countries which have beenfacing a debt crisis in the nancial mar-kets, such as Greece and Ireland, Italyand Spain, but also in member statessuch as Slovenia, Romania, Hungaryand Denmark. Countries such as France,the Netherlands, Germany, Austria andBelgium have more or less clawed their

way back to the pre-crisis output level,whereas Sweden, Slovakia and, spectac-ularly, Poland even grew over the periodas a whole.

A lost half-decade at least


-18,0-16,0-14,0-12,0-10,0-8,0-6,0-4,0-2,00,02,04,06,08,0

10,0

PT PL GR EE HU UK IT DK FI EU27

ES SK EA CY SI MT RO CZ LU BG NL FR AT IE DE BE SE LT LV

Figure 1.2 Change in real GDP, 2008Q2-2011Q2

Source: Eurostat (2011c).



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The forecasts for the next two years andespecially for 2012 are not positive, inparticular for large European econo-mies several of which, such as Franceand Germany, have so far fared relativelywell Poland being an exception. Some

of the member states which are projectedto grow most robustly are those bounc-ing back from the biggest losses; thisis especially the case of the Baltics (seeETUC and ETUI 2010 and Figure 1.3above). At the same time, what can onlybe described as the economic nightmarein Greece and Portugal is set to continuenext year: the Commission is forecast-ing, almost certainly over-optimistically,a further loss of output in the region of3% for these two countries.

Normally economies can be

expected to accelerate as they emergefrom a long and deep recession. In muchof Europe, however, there seems to bea serious risk that an initial recoveryhas been snuffed out before it has hada chance to signicantly improve thelabour market situation and enable the(public) debts accumulated during thecrisis to be brought down. To some extent,this reects the special difculties of an

economic and nancial crisis in whichboth households and the governmentare trying to repair their balance sheetsat the same time and the banking sectoris fragile. The comparison with the US,though, suggests that policy mistakeshave played an important role, an issuewe examine further below.

Recovery on therocks?


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GR PT CY IT UK ES SI IE DK HU EA EU27

LU FR RO CZ NL MT BE BG DE SK AT FI SE PL LV LT EE

2011 2012 2013

Figure 1.3 Forecasted real GDP change, EU member states, 2011-2013



13


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14

Government debt-to-GDP ratios rosesharply on the EU average by almost 25percentage points of GDP in the wakeof the crisis, as output plunged and gov-

ernments ran decits, partly automatic,partly discretionary, to cushion the cri-sis (see Figure 1.4). What is, on the faceof it, more surprising is that, in spite ofthe austerity programmes implementedacross the EU, starting at the latest in2011, in some cases earlier (see below andTheodoropoulou and Watt 2011), grossdebt-to-GDP ratios, far from declining,are projected to increase slightly in theyears 2011, 2012 and 2013, from theirelevated post-crisis levels, in virtually allcountries.

These gures are a stark reminderthat success in reducing governmentdebt depends on three variables. In addi-tion to the primary government bal-ance (the governments surplus or decitbefore interest payments), these are thenominal growth rate and the interest ratepaid on the debt. As a result of the crisis,nominal growth has been depressed, andausterity policies, by reducing demand in

a context where the private sector is alsotrying to rebuild its balance sheets, haveworsened the situation. Meanwhile, thefailure to resolve the government debtcrisis has led to investors, concernedabout possible losses (defaults and vol-untary haircuts, as imposed in the caseof Greece), demanding ever higher inter-est rates on the debt of countries seen asvulnerable (see Figure 1.8).

Public debt crisisdeepens andexpands


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GR IT IE PT BE EA17

FR UK EU27

DE HU AT MT ES CY NL PL FI SI LV SK DK CZ LT SE RO LU BG EE

2007 2011 2012 2013

Figure 1.4 Gross public debt/GDP, 2007, 2011-2013

Notes: 1) The forecasts were finalised before the European Union Summit of 26 October 2011. Thus, they have not been updated to reflect the decisions taken at this summit whichwill have a direct impact on the debt, the interest and the deficit projections as of 2012. 2) Euro area 3) Non-consolidated for intergovernmental loans amounting to 0.9 bn EUR in

2009 and 21.2 bn EUR in 2010


Decits, debts and austerity


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The combination of these factors meansthat enforced scal consolidation is prov-ing self-defeating in terms of reducingscal positions (as foreseen in Theodoro-

poulou and Watt 2011).As can be seen in Figure 1.5, the

discrepancy between total and primary(i.e. excluding interest payments) gov-ernment budget decits has been par-ticularly pronounced in member stateswhich received nancial support fromthe EU and the IMF, because of the largeinterest payments. The primary budgetdecit in countries such as Greece andPortugal has been spectacularly reduced,even in the face of deep recession in theireconomies, yet their total budget decits

remained high and off-target, while theirpublic-debt-to-GDP ratio also increased.

Austerity draggingdown publicnances


Figure 1.5 Government total and primary budget deficit, 2010-2011


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total 2010 total 2011 primary 2010 primary 2011

Decits, debts and austerity

15


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16

In spite of the deteriorating macroeco-nomic conditions, apart from a briefupturn in early 2011, scal policies havebeen contractionary since 2011 at thelatest in almost all countries. Figures1.6 and 1.7 show the evolution of the

structural government budget balance(excluding interest payments), an indica-tor of the stance of discretionary scalpolicy (as changes in government rev-enues and expenditures due to the busi-ness cycle are netted out) on the y-axisand that of the output gap (i.e. the dif-ference between potential and actualoutput) in the EU member states on thex-axis. Figure 1.6 shows the situationin the years 2009 and 2010. We mightrefer to this as a Keynesian period. Fig-ure 1.7 repeats the exercise for 2011 and

2012, the austerity period, on the basisof Commission forecasts. In both cases,there is an association between the twoin that countries with higher negativeoutput gaps (i.e. more severe recessions)are more likely to have experienced adiscretionary tightening of scal policy,Overall, this means that governments inthe EU have been pursuing a tighteningin the discretionary part of their scal

policies in spite of a deterioration in thedemand for the output of their econo-mies. Particularly crass examples are theBaltic States in 2009/10 and Greece andPortugal in 2011/2012.

Procyclical policyresponse


Figure 1.6 Counter-cyclicalfiscal policy2009-2010

BEBG

CZ

DKDE

EE

IE

GR

ESFR

IT

CY

LV

LT

LU

HU MT

NL

AT

PL

PT

RO

SI

SKFI

SE

UK EA17

EU27

y = -0,2967x - 1,5179R = 0,3024 -4

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tructuralgovt.balanceex

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output gap (% potential GDP)


Macroeconomi

c policy responses


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More importantly, there are major differ-

ences between the two periods (2009-10

and 2011-12). In the rst Keynesian period

most countries actively steered against the

crisis with expansionary discretionary s-

cal policy (as reected in a negative move-

ment in the primary structural balance).

In the austerity period (Figure 1.7), on

the other hand, all but a few countriesimplemented discretionary contraction-ary policies. This is despite the fact thatthe negative output gaps had closed toonly a limited extent in most cases. Por-tugal is a striking example of the change.In the rst period it sought to stimulateits economy, but was forced rst by thenancial markets and then by the EU/

IMF conditionality in 2011 to adopt a radi-cal austerity package, deepening and pro-longing its recession.

In terms of the effects of these aus-terity programmes on income distribu-tion, the rst indications are that theyhave in several cases been regressive,affecting those at the lower ends of theincome distribution more adversely thanthose at the top (see Theodoropoulou and

Watt 2011). Even when this has not beenthe case though, the recession is likely toreduce the intended progressivity in thestructure of austerity packages (see forexample Matsaganis and Leventi 2011for the case of Greece). To the extent thatausterity is likely to lead to prolongedunemployment spells and labour marketmarginalisation, increases in inequalitywould appear inevitable.

Inequalityexpected toincreases further


Figure 1.7 Procyclical fiscal policy2011-2012

BE

BGCZ

DK

DE

EE

IE

GR

ES

FR

IT

CYLV LT

LU

HU MTNL

AT

PL

PT

RO

SI

SK

FISE

UK EA17EU27y = -0,3711x + 0,1331

R = 0,3242

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-9 -8 -7 -6 -5 -4 -3 -2 -1 0structuralgovt.balanceex

cl.interest

output gap (% potential GDP)


Macroeconomi

c policy responses

17


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18

During 2011, the European CentralBank raised its main renancing rate

by 25 basis points (0.25 p.p.) twice, inApril and July. It claimed that this pol-icy tightening was justied by increases

in headline ination, despite the fact

that core ination (prices excluding

volatile items such as energy and food)remained contained, and by its expecta-tion that the economic recovery in early2011 was set to continue and strengthen.On both occasions, the increase in thespreads in the 10-year bond yields ofGreece, Portugal, Ireland, Spain andItaly increased sharply (see Figure 1.8).This reected the market sentiment

that the prospects for successful debtrestructuring in these countries haddeclined because of the higher nanc-

ing costs imposed by the ECB and/orthat the interest-rate hikes were moregenerally premature and would hit theperipheral countries particularly hard.This monetary tightening was reversedin November and December, after MarioDraghi had replaced Trichet as ECBPresident, and as alarming gures over

the growth prospects of the Europeaneconomies emerged.

At the same time the ECB has con-tinued half-heartedly to pursue its Secu-rities Markets Programme, buying outItalian and Spanish government bondsin order to stabilise their markets, whilethe debate among its governing councilmembers over whether it should inter-vene more dynamically in the marketscontinued publicly and as the calls forthe ECB to step in and act as the gov-ernments lender of last resort in theeuro area intensied. At the very end of2011, it offered low-interest loans not to

governments but to the banking sector.At the time of writing, it was not clearwhether some of these funds would ndtheir way into the sovereign debt market;in any case, this indirect approach raisesserious normative issues (subsidisingbanks at the expense of taxpayers). Thefailure to undertake a full governmentbanker role so far, along with other fail-ures of economic governance, has led to aspreading of the debt crisis even to mem-ber states with fundamentally soundpublic nances whose governments then

promptly planned and started imple-menting further scal austerity meas-ures, further stiing economic growth(see previous section).

ECB helps quellthe recovery


0

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10121416182022242628303234

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ECB MRR(right-hand scale)GR

PT

IE

IT

ES

FR

Figure 1.8 Spreads of selected countries 10-year government bonds over German bonds in p.p. and ECB main refinancing rate

Source: IMK (2011: 8) and ECB.

Monetary policy


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The dismal output growth conditionsthat have prevailed in the European

economy since the onset of the crisis in2008 have not only dampened prospectsfor the European economy as a wholebut also halted or reversed the previousrelative output growth developments,under which poorer EU member statesgrew faster than richer ones. As can beseen in Figure 1.9, during the period1999-2007, there was a relatively cleardistinction between the new memberstates with relatively low GDP per capitaand the old member states with relativelyhigh GDP per capita. (We use purchasing

power standards here to allow for pricelevel differences and illustrate real liv-ing standards.) The former grew faster,reducing East-West inequality in Europein a process that would eventually, hadit continued, have led to the conver-gence of real per capita incomes. Overall,there was a very strong negative correla-tion between income levels and rates ofchange, implying a strong convergence

trend. Partial exceptions were Ireland,which grew rapidly in spite of its highinitial level and Poland where, along withHungary, per capita incomes grew ratherslowly despite their relatively low start-ing point.

Trend towardsgreater equality

between EUcountries halted


Figure 1.9 GDP per capita growth rates 2000-2007 by level of GDP per capita 2000


EU27EU15EA

BE

BG

CZ

DK

DE

EE

IEGR ES

FRIT

CY

LVLT

HU

MT

NL

AT

PL

PT

RO

SI

SK

FISE

UK

y = -0,0035x + 106R = 0,7228

0

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4.000 6.000 8.000 10.000 12.000 14.000 16.000 18.000 20.000 22.000 24.000 26.000

%c

hangeinGDPpercap

ita2000-2007

GDP per capita 2000 (euros PPS)

Out

put growth and cross-country inequality

19


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20

As Figure 1.10 illustrates, however, af ter2008, the GDP per capita growth rates

converged between rich and poorermember states, turning very negative forsome of the poorest central and easternEuropean countries, such as Latvia andEstonia, while some wealthy countries(Belgium, Germany) performed com-paratively well. Overall, for this periodthere is no relation whatsoever betweenincome levels and their rate of growth.These gures clearly suggest that theconvergence process in real per capitaincome that is, a clear trend towardsfalling inequality between national

populations across Europe has cometo a halt. What is unclear is whether theconvergence process will continue oncemore if and when the European economyas a whole emerges from crisis. Whilethis does not necessarily affect the issueof within-country inequality (see alsoChapter 7), the combination of sluggishgrowth, mass unemployment and cut-backs in welfare spending is unlikely to

be conducive to the Europe2020 goals ofreducing relative poverty within coun-tries (see Leschke et al. 2012).Austerity and

unemploymentthreatening povertyheadline target


Figure 1.10 GDP per capita growth rates 2008-2010 by level of GDP per capita 2008


EU27 EU15

EA

BE

BG

CZ

DKDE

EE

IEGR

ES

FR

IT

CY

LV

LT

HU

MT

NLAT

PL

PT

RO

SI

SK

FISEUK

y = 3E-05x - 3,7911R = 0,0029

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8.000 13.000 18.000 23.000 28.000 33.000

%c

hangeinGDPpercapita2008-2010

GDP per capita 2008 (euros PPS)

Output growth and cross-country inequality


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21

What is needed instead are poli-cies that are consistent with the percep-tion of the euro area and the EU as thelarge, integrated and relatively closedeconomy that it has become. Generalizedscal austerity alone, and the insistenceby Germany and other core economiesthat current account imbalances arecorrected unilaterally by those mem-ber states in decit, are bound to makerecession deeper and more widespread.Policy changes are needed to, amongother things, ensure that capital ows donot grind to a sudden halt in the presenceof current account imbalances while thedecit countries commit to bringing theirpublic nances on to a sustainable path;and, at the same time, there is a need formeasures to protect member states fromthe sometimes irrational attacks of nan-cial markets.

The analysis of the trends presented inthis chapter leaves little doubt that theEU is currently at a very critical juncturein its history. Essential objectives, such aspromoting economic progress, strength-ening economic and social cohesion, andestablishing and maintaining an eco-nomic and monetary union, are in jeop-ardy. The persistent misdiagnosis of thecurrent crisis in the euro area as rootedin earlier scal imprudence, and thepolitical unwillingness to put into placeall the mechanisms necessary to secureits smooth functioning, have increasedthe risk that the euro area may break upwith unpredictable, but almost certainlyhugely damaging consequences for Euro-pean integration. Meanwhile, the reces-sion that these policy responses havegenerated has halted the process of con-vergence in per capita income betweenpoorer and richer member states. For aslong as the current account imbalanceswithin the euro area are not resolved in

a symmetric fashion, the divide betweenthe core and the periphery will persist oreven widen further.

However, growing inequalityamong member states is not just theoutcome of this crisis and the way it hasbeen handled. Just as in the run-up to theGreat Depression of the 1930s, the rise inincome inequality, especially at the topof the income distribution, had reachedunprecedented levels immediately beforethe economic crisis broke out. While theunderlying causalities are controver-

sial and have yet to be fully understood,resolving the current crisis withouttaking care to reduce income inequal-ity is likely to leave in place the seedsfor another crisis in the not-so-distantfuture, and also to damage the legitimacyof the European integration project. Yetin many countries the austerity policieshave served to exacerbate existing formsof inequality.

Crisis andinequality

inextricably linked

Conclusions


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Inequality on the labour marketIntroduction

Labour market opportunities are unequally distributed not only among European

countries, but also over different sub-groups. This is true of access to the labour market

i.e. employment, but applies also to the types of jobs people get, including aspects such

as the accompanying form of contract, working hours, and benets entailed, in terms of

earnings in particular, but also of social security and fringe benets. Inequalities also per-

sist when looking at unemployment rather than employment, with specic groups being

more likely to enter and remain in unemployment.

The new Europe 2020 strategy drawn up by the EU as a follow-up to the Lisbonstrategy which ended in 2010 formulates some new ambitious headline targets (see

ETUC and ETUI 2011). Both the employment rate target (75% for 20-64 year olds) and the

new poverty headline target (lifting 20 million people out of poverty) relate directly to

inequality. Whether these targets are realistic in terms of the current economic and labour

market situation remains questionable.

This chapter will, in the rst section, illustrate how employment (including non-

standard forms of employment) developed over the Lisbon period for the EU27 as a whole.

In order to give an encompassing picture of forms of inequality on the labour market, the

main section describes developments in terms of employment, unemployment, part-time

and temporary employment and analyses these for single countries. Subgroups affected to

differing degrees by the various forms of inequality are taken into account. This applies,

in particular, to young people who face difculties in entering and staying in work with

potential longer-term impacts on their wellbeing and welfare; and also to women who still

have much lower employment rates and work fewer hours than men in most countries, a

situation that is problematic with regard not only to earnings but also to social security

benets and, in particular, pensions. Some analysis is also carried out on the basis of

educational and occupational groups. Finally, in-work poverty is shown for different sub-

groups in order to highlight the material outcomes of inequality on the labour market.

Topics

> Overview o labour market developments over the Lisbon period 23

> Recent developments in employment 25

> Developments in non-standard employment 31

> Outcomes o labour market inequalities in terms o in-work poverty 37

> Conclusions 39

22


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2.Inequality on the labour market

23

The rst half of the Lisbon period sawemployment rates rising and unemploy-ment decreasing (Figure 2.1). However,much of the employment growth was

accounted for by non-standard forms ofemployment involving one or more ele-ments of precariousness. What is more,the EU remained far from the ambitious70% employment rate target set by theLisbon strategy for 2010. The averageemployment rate, having risen to onlyabout 66% by 2008, with the crisis fellback down to 64.1% in 2010 (Figure 2.1).Differences between male and femaleemployment rates remain pronouncedwith, on average, 70% of men but onlyabout 58% of women in employment. It

is important to note, what is more, thatthe basis commonly used by the Euro-stat labour force survey for denition ofthe employment rate is one hour of workin the reference week (http://epp.euro-stat.ec.europa.eu/portal/page/portal/employment_unemployment_lfs/meth-odology/denitions). In other words,employment rates fail to take accountof the volume of employment and thus,

that workers on xed-term contract or intemporary agency work were the rst tobecome unemployed as their contractswere due to expire or easier to end thanthose of permanent workers. During therecent crisis period temporary employ-ment is again on the increase and, at 14%,has returned to close to its pre-crisislevel. Own-account self-employment isanother form of non-standard employ-ment often connected with precarious-ness. It has, however, been increasingonly slightly over the last decade, albeit

more rapidly during the crisis. Somecountries, notably Germany, have, in thecontext of active labour market policies,actually devised incentives designed topromote own-account self-employment.

among other things, of the fact thatwomen are very likely and everywheremore likely than men to work part-time(see below). Employment rates basedon full-time equivalents according towhich, for example, the Netherlands, withone of the highest employment rates forwomen as measured by the LFS, comesclose to the bottom (compare ETUC andETUI 2011: Figure 2.3) are not com-monly used. The simple employment ratetarget as formulated in the Lisbon strat-egy, and now again in the Europe 2020

strategy, might thus be, to some extent atleast, misleading.

The incidence of non-standardforms of employment increased overthe Lisbon period and up to the begin-ning of the crisis. Part-time employmentas a percentage of total employment isnow around 19%, and thus 3 percentagepoints up from 2000 (see also Chapter 8).It continued to grow during the economiccrisis, a fact attributable at least in part toshort-time working insofar as part-timework in the labour force survey is self-

assessed. Indeed, part-time work grew,proportionally, more among men (whowere also more likely to be short-timeworkers) than among women, and yetthe gap remains huge with, on average,32% of women working part-time in theEU27 and only about 9% of men. Tempo-rary employment, i.e. all employment ofxed duration, also grew over the Lisbonperiod and up till 2008, with the result

Labour marketoutlook remains

bleak

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own-accountself-employed

unemployment

2000 2008 2010

Figure 2.1 Developments in important labour market indicators over the Lisbon period, EU27, 2000, 2008, 2010, annual averages

Source: Eurostat (2011j).

left-hand scale right-hand scale

Overview o labour market developments over the Lisbonperiod


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24

While employment was growing overmost of the Lisbon period, unemploy-ment was, on average, declining. In 2008it had reached its lowest point of 7.1 per

cent on average but, with the economiccrisis kicking in and some sectors beingstrongly affected, it increased dramati-cally over the last two years of the Lisbonperiod by 2.6 percentage points to anannual average of 9.7% in 2010. Figure2.2 illustrates the development of unem-ployment over the last decade. The steepincrease between 2008 and 2009 is evi-dent for all groups. Between 2009 and2010 unemployment is still increasing forall groups, but at a slower pace. It is obvi-ous that unemployment is not equally

spread over sub-populations. Youth here dened as those aged between 15and 24, in spite of the fact that the 25-29age group also often still struggles onthe labour market (compare Chapter 3) have had the highest unemploymentrates, close to 21% in 2010. They arefollowed closely by non-EU27 migrantworkers who have an average unemploy-ment rate of close to 20%. Differences in

the Lisbon period women were invariablymore likely to be unemployed on averageand in the majority of countries. Indeed,the initial crisis period saw employmentlosses particularly but not exclusively in male-dominated sectors such asconstruction and manufacturing. How-ever, women have been more affected inthe more recent period as the crisis hasspilled over to other sectors and austeritymeasures have focussed on female-dom-inated public-sector employment.

Long-term unemployment (>12

months) currently stands at close to 40%as a percentage of total unemployment. Itwas at a relatively stable high level duringthe rst period of Lisbon and decreasedsignicantly as the crisis set in, a factthat can be easily explained by the largenumbers of newly unemployed enter-ing the pool of unemployed. In the lastyear it has increased strongly by about 7percentage points as the unemploymentgenerated by the crisis has become morepermanent. Those countries that were hitparticularly hard and early by unemploy-

ment (Spain, Ireland, Baltic countries)saw their long-term unemployment ratesincrease markedly by as much as 20percentage points between 2008 and2010 (not shown).

this area become apparent when com-pared with an unemployment rate ofaround 12% among EU27 migrant work-ers who, in principle, have free access toEU labour markets, with the exceptionof the transition measures that are stillin place in several countries for Roma-nia and Bulgaria and have only recentlybeen fully lifted for the central andeastern European countries that gainedEU accession in 2004. Migrant workerswork, to a considerable extent, in sectorssuch as construction or manufacturing

that were seriously affected by the eco-nomic crisis and were, as such, dispro-portionally affected by unemployment(Galgoczi et al. forthcoming). It shouldbe borne in mind that the labour marketsituation of migrant workers is difcultto capture insofar as they are prone toreturning home, or to moving furtheraeld, in times of crisis. They are, whatis more, commonly underrepresented insurvey (and administrative) data, par-ticularly if they are working in the infor-mal economy. Another group with higher

than average unemployment rates arethose with the lowest educational level(ISCED 0-2: pre-primary, primary andlower secondary education). Unemploy-ment among this group has increaseddisproportionally and is currently about16%. This said, the group also has verylow employment rates (see next section).In 2010 women and men had, on average,the same unemployment rates, while over

Labour marketoutlook remains

bleak


5,0

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

long-term unemployment as % of unemployment

youth (15-24)migrant (non-EU27)

lowest education (ISCED 0-2)

migrant (EU27)

total

men

women

Figure 2.2 Development of unemployment over Lisbon period for sub-groups, annual averages 2000-2010, EU27

Note: if not stated otherwise age: 15-64 year.Source: Eurostat (2011j).

Overview o labour market developments over the Lisbonperiod


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The following section will look at recentlabour market developments not on thebasis of the EU27 aggregate but sepa-rately by country. Figure 2.3 illustrates

that most countries replicated the EU27trends in terms of decreasing employ-ment rates between the second quarter of2008 (2008Q2) and the second quarterof 2011 (2011Q2). Drops in employmentwere steepest in the rst two years of thecrisis. Employment decreased markedlyin some countries, namely, Spain, Ire-land, the Baltics, Greece and Bulgaria,and also albeit from an initially veryhigh level Denmark, in some cases byas much as 10 percentage points. OnlyGermany, Poland and Malta saw a steady

increase in employment rates over thisperiod. In the Polish case this can beexplained, at least in part, by the fact thatPoland was the only country not to expe-rience output decline. Germany, on theother hand, managed, in spite of a largeoutput shock, to keep people in employ-ment through the use of working timeaccounts and short-time working meas-ures (compare e.g. Leschke and Watt

2010). Several countries have seen theiremployment rates rising again duringthe most recent period (2010Q2-2011Q2),most markedly in the cases of Lithuaniaand Estonia. Overall, national employ-ment rates within Europe using thesuboptimal labour force survey meas-ure differ by as much as 20 percent-age points: the Netherlands and Swedenhave employment rates of close to 75%(i.e. have already achieved the Europe2020 targets), while Hungary and Greecebarely exceed 55%. In terms of country

rankings, southern with the exceptionof Portugal and a number of centraland eastern European member states,but also Ireland, are doing poorly withregard to employment rates, whereasthe Nordic countries, but also Germany,Austria and the Netherlands, are doingwell with regard to employment. Thesecountries, however, make substantial useof part-time work, particularly amongwomen. In fact, the decisive reason forthe large overall differences in employ-ment rates is the large country differ-

ences in the labour market participa-tion of women and particularly olderwomen (see below).

Employment ratesslowly stabilising,

but at low levels


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Figure 2.3 Developments in total employment, 2008Q2, 2010Q2, 2011Q2

Note: 15-64 years.Source: Eurostat (2011j).

Recent developments in employment

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In contrast to previous crises, olderworkers (55-64 years) were not used as

buffers in times of increasing unemploy-ment through, for example, the steppingup of early retirement schemes. Indeed,recent trends of increasing labour mar-ket participation among older workers that were strengthened by the gradualwithdrawal of early retirement schemes,increases in the pensionable age and, atleast in some countries, improvements inthe work environment for older workers continued during the crisis. Employ-ment rates increased on average by morethan 1.5 percentage points, between

2008Q2 and 2011Q2, to the current47.5% at a time when employment forother age groups, and particularly youth(from 37.3% in20008Q2 to 33.6% in2011Q2) (not shown), was falling (see alsoChapter 3). Employment among olderworkers is still relatively low, however,compared to prime-age workers (25-54)who, in 2011Q2, had an average employ-ment rate of close to 78%. It is important

to note the huge degree of country vari-ation, with countries such as Sloveniaand Malta having less than one third ofolder workers in employment and others,including Germany and Denmark, hav-ing close to 60%, and Sweden more than70%, of older workers in employment(Figure 2.4). Here the shortcomings ofthe LFS employment measures haveto be emphasised, however, since, par-ticularly in Germany with its so-calledmini-jobs arrangement, many olderworkers (a majority of them women) are

in sub-standard employment, includingpart-time work with very low hours andreduced access to social security benets(see, for example, Minijobzentrale 2011).An important point particularly withregard to older workers is the large differ-ence in employment rates between menand women: on EU27 average only 40.2%of older female workers were employed,comparing with 55.2% of male workers.The best performer, Sweden, has highemployment rates for both women andmen with a difference between the two

of only about 7 percentage points. Hav-ing said this, older workers, and particu-larly women, have largely contributedto employment growth over the Lisbonperiod their relative situation has thusimproved.

Older workershave faredrelatively wellduring the crisis


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Figure 2.4 Developments in employment of older workers (55-64 years), 2008Q2, 2010Q2, 2011Q2

Source: Eurostat (2011j).



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The economic crisis has, on average, con-tributed to reducing the gap in employ-ment rates between men and women,insofar as men were more likely to losetheir employment, particularly in therst two years of the crisis (Figure 2.5).While the difference in employment rateswas 14 percentage points in 2008Q2(72.9% for men and 58.9% for women), ithad fallen to 11.5% in 2011Q2 (70.2% formen and 58.7% for women). Employment

gaps between men and women have nar-rowed in all countries and very substan-tially so in a number of countries, such asSpain, Lithuania and Latvia, as a resultof the disproportional losses in employ-ment for men due to the uneven affected-ness of sectors and the remaining largegender segregation in terms of sectorsand occupations. In Lithuania femaleemployment rates are now slightly higher

measures such as exible working hoursand more equal participation of menin care and household work, do play animportant role here as the example of theNordic countries shows (OECD 2007;for country differences in institutionalsetting such as childcare see www.oecd.org/els/social/family/database; see alsoChapter 5). Corporatist countries, such asBelgium and France, with encompassingchild care but comparatively low femaleemployment rates show that it is an inter-action of different institutions at the state

and rm level, but also values and normswith regard to the participation of menin care work (Leschke and Jepsen 2011),that contribute to closing the gap betweenmale and female employment rates. Pub-lic policy decisions such as reserved part-ner months in parental leave schemes,but also awareness campaigns, can con-tribute to a change albeit slow in val-ues and norms.

than male ones. Relatively small employ-ment rate gaps are also evident in Latvia,Estonia, Finland, Denmark and Swe-den. Huge employment rate gaps exist inMalta, Greece, Italy, Luxembourg and theCzech Republic. Greater gender equalityin terms of employment is attributable,however, merely to disproportionatedeterioration in the situation of men.

Overall, countries vary hugely interms of female employment rates witha gap of more than 30 percentage pointsbetween the worst performer, Malta, and

the best performer, Sweden; even whenusing the full-time-equivalent methodol-ogy, these differences remain great (seeETUC and ETUI 2011: 23). Three coun-tries have female employment rates ofless than 50% (more than 10 percentagepoints below the Lisbon female employ-ment rate target of 60%), namely, Malta,Greece and Italy, while the countries atthe top with employment rates of close to70% or more are the Netherlands, Swe-den and Denmark. Looking at countrygroupings, with regard to female employ-

ment rates, the Nordic countries, but alsothe Netherlands and some corporatistcountries Germany and Austria aredoing well, whereas particularly South-ern European countries (Malta, Greece,Italy, Spain), but also the majority of Cen-tral and Eastern European countries, aredoing badly. Publicly supported work-lifebalance measures, particularly encom-passing and all-day childcare, rm-level

Some reduction ingender employmentrate gaps during thecrisis but largegender inequalityremains


Figure 2.5 Developments in employment rates by gender, 2008Q2 and 2011Q2

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men 2008Q2 2011Q2Note: 15-64 years.Source: Eurostat (2011j).


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Another important subgroup withinwhich large inequalities in employmentrates persist, and have indeed widenedduring the crisis, are persons with dif fer-ing levels of education. Between 2008Q2and 2011Q2 employment rates of personswith at most pre-primary, primar y andlower secondary education (ISCED 0-2)decreased by 3.4 percentage points to thecurrent level of 44.7% at the EU27 aver-age. For persons with at most upper sec-

ondary and post-secondary non-tertiaryeducation (ISCED 3 and 4) employmentrates have decreased by 2 percentagepoints and now stand at 68.8%. For themost highly educated, with a rst or sec-ond stage of tertiary education (ISCED5 and 6), employment rates now standat 82.4%, down by 1.5 percentage points(not shown). Figure 2.6 illustrates thehuge differences in employment rates by

as job-related training and incentives toemployers to hire low-skilled workers asa means of enabling them to gain work-place experience. Whether the ambitiousEU2020 target of increasing the share of30-34 year olds with tertiary educationto 40% is the right way forward remainsquestionable (see also Chapter 3; com-pare ETUC and ETUI 2011).

educational level. Portugal, Denmark andthe Netherlands stand out with relativelyhigh employment rates of close to 60%even among those with the lowest levelsof educational achievement. At the otherend of the spectrum we have Hungary,Bulgaria, Slovakia, Poland, Lithuaniaand the Czech Republic with one quarteror fewer of this group in employment. Ithas to be noted, however, that all of thesecountries have substantially lower thanthe EU-average shares of the popula-tion with the lowest educational attain-

ment (not shown). And they are, indeed,experiencing a situation that has beentermed brain overow which refers tolarge shares of young people with highqualications and unable to nd a suit-able job, one response to which has been,in some cases, emigration (e.g. Fihel etal. 2009). Particularly Malta and Por-tugal but also Italy and Spain still havevery large shares of the population withonly the lowest educational attainment.Among these countries only Portugal hassubstantially higher than EU-average

employment rates among this group.Integration into employment of workerswith low levels of educational at tainmentremains one of the biggest challenges inEurope. Decreasing the rate of schooldrop-outs, as specied in the Europe2020targets, is but one way forward. Whatis urgently needed is improved employ-ment prospects for those already in thelabour market including measures such

Employmentsituation oflow educatedhas furtherdeterioratedduring the crisis


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Figure 2.6 Employment rates by education level, 2011Q2

Note: 15-64 years.Source: Eurostat (2011j).



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With an unemployment rate of 20.8% in2011Q2, young people (15 to 24 years) in

the EU27 have an extremely high levelof unemployment compared to prime-age (25-54 years) and older workers(55-64) total unemployment stood at9.4% in 2011Q2 (Figure 2.7). The unem-ployment gures used here are basedon the LFS data and thus refer to self-assessed unemployment. This differsfrom the national gures that are oftenbased on administrative data and thustake account of people registered asunemployed at the Public EmploymentService. Over the last three years, youth

unemployment increased by more than 5percentage points, whereas total unem-ployment increased by 2.5 percentagepoints between 2008Q2 and 2011Q2.Though the relative change was similar,in absolute levels youth are clearly one ofthe most disadvantaged groups in termsof labour market outcomes, particularlywhen we also take account of the largedecreases in employment rates (see also

only at the recent changes 2010Q2-2011Q2

(not shown), quite a number of countriessee some stabilisation of youth unem-ployment albeit at a higher than pre-crisis level or even a decline, mostnotably the Netherlands, Slovenia, Bel-gium and Estonia. Portugal and Greece,on the other hand, have seen very largeincreases in the course of the last year.All these developments show, quite une-quivocally, that young workers have beenone of the groups most vulnerable to ine-quality, a situation that has been fur ther

aggravated by the crisis.

Chapter 3). The large incidence of unem-ployment among youth is particularlyvisible when the issue is viewed countryby country. Indeed, in roughly half of allcountries one quarter or more of youngpeople are unemployed. In Greece andSpain, two of the countries most affectedby the economic crisis, youth unemploy-ment rates are as high as 43.1% and 46.1%,respectively. They have approximatelydoubled in a three-year period which hasled to, among other things, protest move-ments fuelled predominantly by youth.

Other countries that have seen a strongincrease in their youth unemploymentrates during this period are the Balticcountries, Ireland, Bulgaria and frominitially rather low levels the CzechRepublic, Denmark and Cyprus. Onlythree countries have youth unemploy-ment rates below 10% in 2011Q2, namely,the Netherlands, Austria and Germany,the latter two benetting from the exist-ence of strong dual-education systemsthat are known to improve transitionsfrom school to work by providing youth

with specic skil ls that they acquiredirectly in the work place. Those rmsthat offer apprenticeship training can atthe same time use this phase as screen-ing for recruiting their future workers(Germany is indeed the only country thathas seen youth unemployment declineover the 3-year period, and declines intotal unemployment were even slightlymore marked in this country). Looking

Bleak labourmarket situationfor youth and onlyslow improvements


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Figure 2.7 Developments in unemployment for youth and adults, 2008Q2 and 2011Q2

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Inequality in labour market outcomesis also evident with regard to migrantworkers. Compared to nationals (declar-ing country) with an EU27 average unem-ployment rate of 8.9%, EU27 migrantshad unemployment rates of 11.2% andmigrants from outside the EU27 unem-ployment rates as high as 19.6% (Fig-ure 2.8). A rst point to note is that thedata situation with regard to migrants isdecient. Important groups of migrantworkers, such as seasonal workers andundeclared workers, are hard to capture

in survey and administrative data.

Documents

ETUI Benchmarking Working Europe 2012