International: Employment in the European Union candidate countries
In December 2002, accession negotiations with 10 EU candidate countries were completed prior to their joining the European Union from 1 May 2004. As part of the preparations for their accession, the European Commission and candidate countries have carried out an analysis of the key challenges for employment policies, which took the form of "Joint Assessment Papers" (JAPs). These JAPs contain a range of commitments, the implementation of which the candidate countries and the Commission have agreed to monitor. Here, we look at the most recent communication from the Commission on the progress of labour market reform in the candidate countries.
The first of the JAP documents were signed in 2000 and early 2001 by the Commissioner for Employment and Social Affairs and the labour ministers of the Czech Republic, Slovenia, Poland and Estonia. JAPs with Malta, Hungary, Slovakia, Cyprus and Lithuania were signed in late 2001 and early 2002, followed by those with Romania and Bulgaria (due to join the EU in 2007) in autumn 2002. The document with Lithuania will be signed during 2003. Accession negotiations with Turkey are planned to commence in 2004, and a background study is currently in preparation.
The report (available at http://europa.eu.int/comm/employment_social/empl_esf/enlargement2_en.htm) states that candidate countries have made progress in transforming their labour markets, but that there is still much to be done. It highlights the urgent need to increase employment rates, to increase employment in services, to reduce reliance on agriculture and traditional industrial sectors and to increase skill levels. Anna Diamantopolou, employment and social affairs Commissioner, said: "Progress has been made by the candidate countries towards the objectives of more and better jobs, but there are large performance gaps between individual countries and, in general, reforms need to be accelerated now."
Below, we look at the Commission's assessment of the situation in individual countries.
Bulgaria
Current performance
The Commission's report states that the Bulgarian economy was hit by a severe crisis in 1996-97 but it has now achieved macroeconomic stability, allowing sustained growth. Industrial employment has been decreasing strongly, and this has not been compensated for by job creation in services. Employment in agriculture remains high and labour reserve exists in this sector. The new private sector has not yet acquired sufficient strength to generate employment growth and there is a large informal sector.
Labour maket participation remains low, at 63.3%, and the labour force is ageing. The employment rate is on a downward trend - decreasing by 4.4% in 2001 - and unemployment reached nearly 20% in 2001, with young people and the least educated suffering most. Long-term unemployment amounted to 13% in 2001.
The average educational level of the labour force is low and the qualifications held by many workers do not meet the requirements of the new jobs. Skills mismatches are emerging in some regions.
Key issues
The Commission states that the key challenges for Bulgaria are to strengthen job creation while completing economic restructuring, and to ensure that wage developments and the wage-setting system aid labour market transformation. This should be supported by improving the skills of the working-age population to further the reallocation of labour from declining sectors and to respond to restructuring.
Measures to make the labour market more adaptable are also crucial to shift employment from the informal to the formal sector. Social partners have the key role for developing a market-oriented wage-setting system, through both tripartite and bipartite dialogue.
The education and training system requires the completion of ongoing reforms and measures to address the high incidence of dropouts from school, non-enrolment and irregular attendance as well as the establishment of a clear framework and of incentives for continuing training.
Obstacles to the implementation of existing strategies to aid the integration of ethnic minorities (in particular, the Roma minority) should be addressed. The persistent gender gaps in pay and occupational and sectoral distribution need to be addressed by the development of institutional mechanisms and concrete programmes promoting equality that were hampered by the rejection of draft equal opportunities legislation in 2001.
Cyprus
Current performance
Cyprus currently enjoys strong economic growth and favourable labour market conditions. Employment and labour productivity increased by 1.9% and 2.1% respectively in 2001, and the employment rate continued to rise, reaching 68%. The employment rate for older workers rose to 49.8%. Unemployment remains low, declining to 4% in 2001, with female unemployment dropping from 7.4% in 2000 to 5.8% in 2001. Long-term unemployment decreased from 30% in 2000 to 23.4% in 2001.
Labour market participation increased to 70.8% in 2001, with women accounting for most of the labour force growth, reaching an activity rate of 60%. The gender gap in employment, while significantly narrowing in 2001, remained substantial at more than 23 percentage points.
Foreign, temporary labour accounts for 10% of total employment, and is concentrated in a few sectors and occupations such as home-helpers in private households and in the hospitality sector.
The economy is increasingly dominated by services (71.1% in 2001), while agricultural employment continues to decline. The service sector is expected to continue to be the driving force behind rapid growth, but it needs to become more diversified, according to the Commission. However, the favourable medium-term growth outlook should lead to an increase in additional employment opportunities.
Key issues
Key challenges for Cyprus are to ensure that activity is growing sufficiently and that the labour force has appropriate adaptability and flexibility to cope with further restructuring of the economy towards, and within, the service sector, as well as to address the growing mismatches between supply and demand in a number of occupations and sectors.
Some progress has already been made towards gender equality, with the introduction of new legislation in May 2003, covering issues such as part-time work and parental leave, and an action plan to narrow the pay gap is being discussed. However, it remains a priority to promote women's participation, to include broadening education and training, as well as care services and other family-friendly employment patterns and practices. The social partners have a key contribution to make through negotiations at enterprise level and at other levels of the social dialogue. Finally, the Commission maintains that Cyprus needs to develop a policy frame that creates conditions for a more balanced contribution of foreign labour to the economy and to employment.
Czech Republic
Current performance
The Czech economy suffered a recession in 1997-98, from which it has largely recovered, returning to solid growth rates and becoming increasingly attractive to outside investments. The ongoing restructuring of the economy was accompanied by a continuing decline in employment until 2000, and a modest increase in 2001, at which point the employment rate stabilised. Unemployment doubled between 1997 and 2000, but declined to 8.1% in 2001. At the same time, however, the long-term unemployment rate rose to 4.1%. Those facing major problems are unskilled workers, school leavers, workers with small children and the Roma minority.
Economic restructuring has accelerated, after a period of delays, but a number of large enterprises still have to catch up, and the potential for growth in the small and medium-sized business sector is as yet undeveloped. Restructuring is responsible for most new unemployment - although the employment share of industry still stands at 40% - and is also leading to major regional labour market imbalances. In Prague, unemployment is as low as 2.5%, compared with some of the border regions such as Most and Ostravia, where there is still much smokestack industry, and unemployment may be as high as 20%.
Demographically, the makeup of the labour force is uneven, with, on the one hand, many over-50s with outdated work experience, and, on the other, a new generation of recent graduates with no work experience. Owing to very low birth rates, the size of the labour force is set to decrease significantly.
Key issues
The Commission highlights the most important medium-term challenge for the Czech Republic as to create employment, otherwise ongoing restructuring will continue to drive up unemployment, particularly youth unemployment. For this to be avoided, new employment needs to be created in the private sector, which requires the necessary financial incentives to be put in place.
Education and training need improving and modernising, and the skills gap needs to be addressed. Additionally, the policy effort must focus on the employability of recent graduates and those workers who will lose their jobs as a result of restructuring.
Estonia
Current performance
Estonia's economy recovered from a sharp slowdown in 1999, caused by the crisis in Russia, and employment also recovered and increased for the first time in 2001, rising modestly from 60.6% in 2000 to 61.1% in 2001. The female employment rate remained at around 57% and the male rate increased to 65.6%. Participation is declining, but relatively large numbers of older people remain economically active. Unemployment declined from 13.2% in 2000 to 12.4% in 2001, although youth unemployment remains high and the long-term unemployment rate is almost 6%. The trends in unemployment reflect ongoing restructuring, which has also led to major regional imbalances.
Services account for 58.7% of total employment, but there is scope here for further development. Employment in agriculture has declined, but there may well be some overemployment in this sector. Labour reserves still exist in some parts of traditional industries, although the coexistence of skilled labour shortages and high unemployment points to structural problems in the labour market. There is evidence that belonging to an ethnic minority and lack of national language skills are among the risk factors for unemployment.
Key issues
Estonia's main challenge is to reduce unemployment and to increase the overall employment rate in the context of a labour market where restructuring in agriculture, industry and services is creating job losses. The social partners should contribute to improving the function of the labour market through bipartite action to modernise work organisation, and working arrangements combining flexibility for enterprises and security for workers.
The gender wage gap and the male/female differences in the occupational distribution of employment suggest the persistence of barriers to women's full participation in the labour market, and draft policy principles enshrining gender equality have an uncertain future as yet. Reforms in the tax and unemployment benefit systems are also required, the Commission maintains.
Hungary
Current performance
On the basis of far-reaching institutional and administrative reforms, Hungary has achieved rapid economic growth and strong macroeconomic stability, registering a 9.1% growth in the export of goods and services in 2001. Hungary has completed an important phase of economic restructuring, with the share of agricultural employment comparable to that of the EU, and with job creation in the service sector - which accounts for 60% of employment - matching job losses in industry.
Although the employment rate has been rising since 1998, it remains relatively low, at 56.3% in 2001. It is low for both men (63.3%) and women (49.6%), and particularly for unskilled workers. Unemployment decreased to 5.7% during 2001, with young people being especially hard-hit.
Labour market participation, standing at 59.7%, is low among middle-aged and older people, and is insufficient to support the increasing demand for labour, with some 2.75 million people of working age economically inactive. An important share of the young labour force has only basic education, and substantial numbers of the working-age population do not have the educational and vocational skills required by the present labour market. Thus, unskilled people without work find it hard to find employment, and skills mismatches are appearing in some regions. Economic restructuring has led to major labour market imbalances between the central and western regions.
Key issues
There is a growing recognition that government policy must improve labour market access and employability so as to stimulate a substantial increase of employment, and proposed amendments to employment legislation are likely to boost the number of part-timers and teleworkers. Additionally, the amendments will include more effective training for disadvantaged people. Participation in active labour market measures, however, focuses on younger people, while gaps in provision remain for older people and the Roma population. Further, urgent measures are required to promote regional and sectoral mobility.
The government's commitment to strengthening cooperation with the social partners has given rise to the recognition that a period of "real consultation" is imminent, with, for instance, the creation of a national collective bargaining council. The role of the social partners is important in ensuring employment-friendly wage developments, and in improving the adaptability of enterprises and workers through bipartite negotiations at all levels of collective bargaining.
Latvia
Current performance
Structural reforms have strengthened economic performance and Latvia has recovered well from the effects of the crisis in Russia in 1999. The process of economic transition has been accompanied by major changes in the labour market, with employment stabilising in 2000 and 2001, having fallen during the 1990s. In 2001, the employment rate was 58.9%. Further job losses are expected as restructuring continues, particularly in agriculture, which still accounts for 15% of total employment. The share of services has risen to 60% of all employment.
The unemployment rate peaked in 1996 at over 20%, before falling to 13.1% in 2001. It displays structural features, with a rising rate of long-term unemployment, which stood at 7.7% in 2001, plus high youth unemployment and wide regional variations. Low-skilled workers experience an employment rate of 35%, which is half that of their high-skilled counterparts - they are largely excluded from standard employment. There is also evidence that belonging to an ethnic minority and lack of national language skills is among the risk factors for unemployment.
Key issues
The key challenge, as identified by the Commission, is to increase employment and participation and to promote labour transfer from declining industries to growing services. A review of the relationship between ethnic origin, language skills, regional disparities and labour market outcome is required to develop appropriate policy measures - active measures should be targeted at young and long-term unemployed people. Education reform should be continued, to reduce the number of dropouts and to align the needs of the labour market, while continuing education and retraining should be expanded.
Finally, the strengthening of bipartite social dialogue is important so that the social partners can promote labour market adaptability and enterprise restructuring.
Lithuania
Current performance
Lithuania's economy was severely hit by the Russian crisis in 1999, but has since recovered. However, the economic recovery has not yet translated into employment growth. The overall employment rate is continuing to fall, standing at 58.6% in 2001. This was mainly due to the sharp drop in male unemployment, which fell to 59.8%. The employment rate for those aged between 55 and 64 years was 39.1% in 2001, just above the EU average.
Employment in agriculture is declining, although it still represents 16.5% of total employment. Several industries, including transport, sectors of heavy industry and energy, are still undergoing restructuring, and employment in services has not yet risen to absorb job losses in other sectors.
The unemployment rate reached 16.5% in 2001, and is still increasing, while labour force participation is declining. Long-term unemployment rose to 9.3% in 2001. While registered unemployment began to decline in 2002, it is likely that this will remain a marginal improvement on account of ongoing restructuring and remaining structural deficiencies in the labour market. Youth unemployment remains high at 30.2%. There is evidence that belonging to an ethnic minority and lack of national language skills are among the risk factors for unemployment.
Key issues
Job creation in new sectors to take the place of job losses in agriculture is a key priority for Lithuania. The social partners should be encouraged to take an active part in this at national level and also in setting up regional and local structures. An appropriate structure for the involvement of the social partners in decision-making at national tripartite level is in place and works well. The new Labour Code will enable more collective bargaining at local level, and the social partners should contribute to the improvement of the functioning of the labour market through bipartite action to modernise work organisation and working arrangements combining flexibility for enterprises and security for workers.
Malta
Current performance
Malta's economy has suffered from a slowdown in demand for electronics products, and the tourist industry was severely affected by the aftermath of the events of 11 September 2001. Overall activity and employment rates remained relatively low in 2001, at 58% and 54.2% respectively. At the end of 2001, the male employment rate was 76.4%, while the female rate was 31.6%. Male participation increased to 81.3%, while that of women decreased to 34.2%. Thus, the already substantial gender gap increased with the decline in women's activity and employment rates.
Enterprise restructuring is ongoing and is more advanced in the private sector, which has been very dynamic in terms of job creation. The sectoral structure of employment has remained fairly stable, albeit dominated by services. In 2001, employment in industrial sectors accounted for 31.8% of total employment, compared with 66% for services. The overall unemployment rate has remained relatively low, standing at 6.5% in 2001, while female unemployment continued to increase, reaching 7.8%.
The educational level has substantially increased in the younger generation, although around 60% of the labour force still do not have any formal qualifications and the illiteracy rate among the working-age population is 9%.
Key issues
Malta's main challenge is to increase the overall employment rate, in particular for women, and although the situation of women will be partially addressed in new equality legislation, further policy initiatives are required to increase female labour market participation and employment in the formal sector.
The government must also increase incentives for inactive and unemployed people to look for work, and appropriate schemes need to be developed to support the reallocation of labour from sectors under restructuring. The modernisation of vocational education and training is under way.
The government has recognised the need for reforms to address the existence of a substantial informal economy and it is trying to reduce benefit fraud and undeclared employment through measures such as the launch of a tax amnesty.
Social partnership is well developed, although further strengthening of tripartite and autonomous social dialogue is required. Finally, the social partners need to contribute more systematically to the modernisation of the labour market and to address the gender gap.
Poland
Current performance
Poland experienced a period of high economic growth in the second half of the 1990s which slowed down in 2001 and 2002 - primarily as a result of a significant drop in domestic demand, in particular, in private investment. The labour market situation has been deteriorating, with the unemployment rate (18.4%) reaching its highest level since the start of economic transformation in 2001. The employment rate decreased from 58.8% in 1997 to 53.8% in 2001, and is expected to decrease further in 2002. Long-term unemployment amounted to 9.2%. Unemployment is particularly high for young people and persons with low levels of qualifications.
The number of persons of working age threatened by social exclusion is rising, and gender gaps in employment, unemployment and wages are significant. There are also persistent regional disparities in the level of unemployment, which reaches 30% in some agricultural regions. Further job losses are expected in agriculture, which still accounts for 19% of all employment, as well as in the coal, steel and railway sectors as a result of the restructuring of state-owned enterprises.
Key issues
Reducing unemployment is a clear priority for the Polish government and it has submitted to parliament a first set of measures aimed at making the labour market more adaptable and flexible. It has also embarked on a programme to create employment through an entrepreneurship programme.
The social partners have a key role to play in the restructuring process through sustaining employment-friendly wage developments and through actively promoting structural change at enterprise level, while the continuation of education and training reform will help provide new labour market entrants with the required skills to flourish in a labour market characterised by structural reform.
Romania
Current performance
Structural reforms started very late in Romania. The economy is now stabilising, although the country is still in a process of transition-related reforms. The development of services is concentrated in the capital city and its region, and employment in agriculture still accounts for 44.4% of total employment, nearly half of private employment and 90% of all self-employment in 2001. High employment in the rural labour market helps to keep overall unemployment down to around 6%.
The main sources of job creation are the small and medium-sized enterprises in the private sector, but their development has been severely hampered by economic and institutional weaknesses. The employment rate is on a downward trend, returning to its 1994 level of just below 64% in 2001. There is a substantial informal economy.
Average educational levels are low, and the qualifications of many workers will not meet the requirements of new jobs.
Key issues
Accelerating the restructuring of its economy is a key priority for Romania, and it is crucial that institutions and all relevant policies are able to support the necessary reform of the labour market. The social partners will have an important role to play in promoting labour market reform and the adaptability of companies and their workers. Establishing wage-setting systems that can ensure employment-friendly wage developments and reflect productivity skills and regional differentials is an important part of the reform of the labour market.
Major efforts are required to improve and adapt the skills of the present and future labour force so as to respond to the future needs of the labour market.
Slovakia
Current performance
Structural reform in Slovakia is advancing, but the process is not yet complete. In 2001, employment grew by 1%, although the overall employment rate remained at 56.7%. The male employment rate decreased to 61.8%, while the female rate increased to 51.8%. The employment rate for low-skilled workers stands at 17%, compared with 86% for their high-skilled counterparts. The employment rate for people aged between 55 and 64 increased to 22.5% in 2001.
Since the end of the 1990s, unemployment increased sharply, reaching 19.4% in 2001. Long-term unemployment continued to rise, reaching 11.3% in 2001. Unemployment among low-skilled workers registers over 40%, which is higher than in any EU member state. The groups particularly hard hit by unemployment include the Roma minority, school leavers, disabled people and those with small children. Significant regional disparities exist, between the capital Bratislava and its region and the eastern part of the country.
The labour market is characterised by a large number of older people with work experience not adapted to a market economy, as well as young people without work experience.
Key issues
The overriding priority for the Slovakian government is employment creation. The Commission stresses that the social partners need to support labour market reform and adaptability of both enterprises and workers through bipartite action. More determined efforts are needed to modernise the education system, and a key priority is the committed implementation of integrated policies aimed at improving the labour market position of the Roma minority. This is one of the areas where social inclusion and employment objectives need to be pursued in a coordinated manner.
Slovenia
Current performance
The restructuring of the Slovenian economy has been slow, but has accelerated since 1998. Progress has been uneven and industrial restructuring is not yet complete. In 2001, the service sector accounted for 51.4% of all employment.
The employment rate stood at 63.6% in 2001, with male employment at 68.6% and female employment 10 percentage points lower, at 58.6%. Employment in the group of people aged between 55 and 64 was 23.4%.
The unemployment rate decreased from 6.9% in 2000 to 5.7% in 2001. Long-term unemployment amounted to 63% of total unemployment. Youth unemployment is high, and unemployment among unskilled workers represents almost 50% of all unemployed people. There are wide regional disparities in the unemployment rate.
Key issues
Slovenia should, in the Commission's view, strengthen incentives for labour market participation and improve conditions to boost job creation - in particular, in the service sector. The Labour Relations Act, which was adopted in 2002 and came into force in January 2003, will facilitate part-time work, telework and work in temporary agencies.
The social partners need to contribute to improvements in the functioning of the labour market through bipartite dialogue at all levels, and their joint action should promote flexibility for enterprises and security for workers.
Continuing training and lifelong learning need to be enhanced by creating more facilities and providing adequate incentives for workers and enterprises to invest in training, with training measures to improve the employability of low-skilled workers being a priority.
Table 1 Employment, participation and unemployment RATES in 2001
|
|
Employment, ages 15-64 |
Activity, ages 15-64 |
Unemployment, ages 15+ |
Youth unemployment |
Long-term unemployment |
||||||
|
|
Total (%) |
Men (%) |
Women (%) |
Total (%) |
Men (%) |
Women (%) |
Total (%) |
Men (%) |
Women (%) |
Total (%) |
Total (%) |
|
Bulgaria |
50.7 |
53.6 |
47.9 |
63.3 |
67.8 |
59.1 |
19.9 |
20.8 |
18.9 |
39.3 |
12.5 |
|
Cyprus |
67.9 |
79.7 |
56.5 |
70.8 |
81.9 |
60.0 |
4.0 |
2.7 |
5.8 |
8.4 |
0.9 |
|
Czech Republic |
65.0 |
73.2 |
57.0 |
70.7 |
78.5 |
63.0 |
8.0 |
6.7 |
9.6 |
16.3 |
4.1 |
|
Estonia |
61.1 |
65.6 |
56.9 |
69.9 |
74.5 |
65.6 |
12.4 |
11.8 |
13.1 |
24.5 |
5.8 |
|
Hungary |
56.3 |
63.3 |
49.6 |
59.7 |
67.6 |
52.2 |
5.7 |
6.3 |
4.9 |
10.5 |
2.5 |
|
Lithuania |
58.6 |
59.8 |
57.4 |
70.4 |
74.5 |
66.5 |
16.5 |
19.4 |
13.5 |
30.9 |
9.3 |
|
Latvia |
58.9 |
61.9 |
56.1 |
68.0 |
72.7 |
63.6 |
13.1 |
14.6 |
11.5 |
22.9 |
7.7 |
|
Poland |
53.8 |
59.2 |
48.4 |
66.1 |
71.6 |
60.8 |
18.4 |
17.0 |
20.0 |
41.5 |
9.2 |
|
Romania |
63.3 |
68.6 |
58.2 |
68.3 |
74.3 |
62.4 |
6.6 |
7.0 |
6.0 |
17.6 |
3.2 |
|
Slovenia |
63.6 |
68.5 |
58.6 |
67.5 |
72.5 |
62.5 |
5.7 |
5.4 |
6.0 |
15.7 |
3.6 |
|
Slovakia |
56.7 |
61.8 |
51.8 |
70.4 |
77.4 |
63.6 |
19.4 |
20.1 |
18.6 |
38.9 |
11.3 |
|
EU-15 |
64.0 |
73.0 |
54.9 |
69.2 |
78.1 |
60.2 |
7.6 |
6.6 |
9.0 |
15.3 |
3.2 |
Source: Eurostat.
Note: At present, all candidate countries (except Turkey) provide Labour Force Survey (LFS) data in accordance with Eurostat definitions. In 2001, most of these countries (except Cyprus, Latvia and Lithuania) had a quarterly LFS. Time-series labour market data are regularly published in Employment in Europe. Data for Malta starting in 2000 have not yet been released by Eurostat.
Table 2: Total employment by sector in 2001
|
Country |
Employment in agriculture |
Employment in industry |
Employment in services |
|
|
(% of total employment) |
(% of total employment) |
(% of total employment) |
|
Austria (A) |
5.8% |
29.4% |
64.8% |
|
Belgium (B) |
1.4% |
25.5% |
73.1% |
|
Cyprus (CY) |
4.9% |
24.0% |
71.1% |
|
Czech Republic (CZ) |
4.9% |
40.5% |
54.6% |
|
Denmark (DK) |
3.5% |
25.4% |
71.1% |
|
Estonia (EE) |
7.1% |
34.2% |
58.7% |
|
Finland (FIN) |
5.8% |
27.1% |
67.1% |
|
France (F) |
4.1% |
26.0% |
69.9% |
|
Germany (D) |
2.6% |
32.8% |
64.6% |
|
Greece (EL) |
16.0% |
22.8% |
61.2% |
|
Hungary (HU) |
6.1% |
34.5% |
59.4% |
|
Ireland (IR) |
7.0% |
29.1% |
63.9% |
|
Italy (I) |
5.2% |
31.7% |
63.1% |
|
Latvia (LV) |
15.1% |
25.3% |
59.6% |
|
Lithuania (LT) |
16.5% |
27.2% |
56.3% |
|
Luxembourg (L) |
1.5% |
21.4% |
77.0% |
|
Netherlands (NL) |
3.1% |
21.6% |
75.3% |
|
Poland (PL) |
19.2% |
30.7% |
50.1% |
|
Portugal (P) |
12.9% |
34.0% |
53.0% |
|
Romania (RO) |
44.4% |
25.8% |
29.7% |
|
Slovakia (SK) |
6.3% |
37.1% |
56.7% |
|
Slovenia (SL) |
9.9% |
38.6% |
51.4% |
|
Spain (ES) |
6.7% |
31.3% |
62.0% |
|
Sweden (S)1 |
2.9% |
24.4% |
72.7% |
|
United Kingdom (UK) |
1.4% |
24.9% |
73.7% |
|
EU as a whole |
4.2% |
28.6% |
67.2% |
12000 for Sweden.
Notes:
Due to the very high proportion of persons having agricultural activity in addition to another main occupation in Bulgaria, the LFS does not provide an accurate estimate of total employment by sector.
No Eurostat data available for Malta.
Source: LFS; Eurostat.
