Report on employment in Europe 2004

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Report on employment in Europe 2004

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Employment and social policy > Social and employment situation in europe

Report on employment in Europe 2004

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Commission report on Employment in Europe 2004. Recent developments and prospects [Not published in the Official Journal].


Economic growth in the enlarged European Union slowed in 2003 whilst world growth accelerated, driven by the United States and Japan. As a result, employment growth in the EU in 2003 was virtually zero, unlike in the United States where jobs continued to be created steadily.

It is the most vulnerable sectors of the labour market in the European Union, especially the industrial sector, young people and the low skilled, that suffer most in this difficult situation. What is more, the employment situation is very uneven throughout the 25 Member States, with close to half of them seeing employment decline in 2003 and the other half enjoying employment growth of more than 1 %.

Employment is a key element of the Lisbon strategy, which is intended to increase the volume and enhance the quality of work and its role as a promoter of social inclusion and cohesion. The employment strategy is built around three quantitative objectives, namely an employment rate of 70 % for the entire population, 60 % for women and 50 % for older people by 2010. Although progress was made in 2003 in terms of women’s and especially older people’s employment, the employment rate as a whole stagnated at around 63 %.

In general, the failure to hit the Lisbon targets reflects the structural problems in the labour market in the various Member States. Radical reforms are required to enhance the prospects of employment for women, young people and older persons. At the same time, these efforts to increase the rate of employment must be accompanied by an increase in productivity and job quality.

The key factors in employment: institutions active labour market and policies (ALMPs)

To increase the rate of employment, it is crucial for the economy to open up to trade. However, in the current situation, two specific instruments may also need to be deployed: expenditure on ALMPs and the use of part-time work. As far as ALMPs are concerned, the report views the measures on behalf of young people and to improve public employment services as being particularly effective. Their positive impact on employment is even more marked in countries where unemployment and social security benefits are lower in comparison with income from employment.

However, the report plays down the long-term impact of tax incentives on employment. The level of taxation and social security contributions does not appear to affect the overall rate of employment appreciably, although it does have a detrimental effect on low-skilled employment. As a general rule, ALMPs are more effective where wage bargaining is coordinated at central or sectoral level than in decentralised bargaining systems.

Employment in services is lagging behind the United States

There is a considerable gap in employment in the services sector between the EU and the United States, where the sector accounts for a greater proportion of the labour market. This is particularly true in the case of women and older workers, which means that there is untapped potential for creating jobs in services. The highest job creation rates in the United States are for both the most highly and least skilled jobs, although some EU Member States are equally as dynamic in this area.

The differences in employment in services between Europe and the United States reflect radical differences in consumption patterns and the level of final demand. Easier access to work for women and older persons in the United States generates a greater demand for services which explains why jobs are being created more quickly in this sector. The less dynamic employment situation in the EU is accounted for less by inflexibility, which is frequently cited as an obstacle to creating low-skilled jobs, than by weak household consumption.

In order to better tap the potential for employment in services, it is up to the Member States to set up a genuine single market in services and also to redirect public investment towards creating relatively well-paid and highly-productive jobs in social education and health services.

Education and training to get people out of low-paid and insecure employment

The various types of contracts and new forms of recruitment enable enterprises to respond more effectively to demand in real time. However, this flexibility carries the risk of lower job security for certain workers, which can adversely affect productivity and equality of employment. Although it is possible to make the transition from a temporary or low-paid job to a more stable and better paid job in most cases, the rate of exclusion from the labour market is still very high for vulnerable workers. There are marked differences between the Member States for workers attempting to make the transition from unemployment to insecure employment and then to permanent employment.

Women, the low-skilled and older workers are more likely to have temporary contracts and are more vulnerable in terms of pay and advancement prospects. The report takes the view that qualifications and training offer the best opportunities of strengthening a person’s position in the labour market. As a rule, flexibility should not marginalise the most vulnerable workers. Active labour market policies must deploy public employment and training services to make it easier to gain access to and improve one’s position in the labour market.

Employment and globalisation

In terms of growth and employment, the European economies have benefited from integrating their markets and from the increasing pace of globalisation. In the short term, the 2004 enlargement should not have a significant effect on pay and employment in the EU. By contrast, technological progress and higher productivity in some sectors are likely to lead to more restructuring and relocation. Transitional policies must be implemented to enable workers who have been relocated or laid off to retrain or strengthen their position in the labour market.

The differences in pay vis-à-vis international competitors in some sectors will not necessarily result in job losses in the EU. Policies geared to productivity and research will enable flexible and highly qualified labour forces to reap the benefits of globalisation. EU companies will need to modernise to maintain their competitive edge if job security is to be safeguarded for everyone.


Despite the efforts made to reform its labour markets, the EU is not on schedule to hit the employment targets set in Lisbon for 2010. The report’s priority recommendation is to encourage greater participation of women and older persons in the labour market, mainly by creating more jobs in services. Moreover, training and public employment services must be developed in order to strike a balance between flexibility and job security. The European employment strategy offers a suitable instrument for reinforcing national action on employment and harnessing globalisation for the benefit of the EU’s economic and social objective.


Report from the Commission (2003). Employment in Europe 2003 [Not published in the Official Journal]

Report from the Commission (2002). Employment in Europe 2002 [Not published in the Official Journal]

Report from the Commission (2001). Employment in Europe 2001 [Not published in the Official Journal]

Report from the Commission (2000). Employment in Europe 2000 [Not published in the Official Journal]

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