The Commission presents its second report on employment EMPLOYMENT PROSPECTS Employment and Unemployment Trends In the 4 year period 1985 to 1989, employment in the Community increased by 7 million -a sustained rate of employment growth unsurpassed since the 1950s. Employment is forecast to increase still further -by over 1 1/2 million this year and by over 1 million in 1991. As employment has increased, unemployment has fallen. It now stands at 12.5 million -some 8.5 % of the working population. The forecast is for a continued small decline over the next two years. It is notable that the fall in unemployment has been much less than the additional number of jobs created. Employment creation 1985 to 1988 - An In-Depth Analysis A detailed analysis is presented for the 3 year period 1985 to 1988, for which detailed statistics are available. Of the 5 million extra jobs created in the 3 years 1985 to 1988, nearly 3 million were filled by women i.e. 60 % of the additional jobs. 40 % of the additional 5 million jobs were part-time rather than full time. The additional jobs created between 1985 and 1988 were predominantly in service sector activities. Employment in services increased in every Community country over this period by an average of 5 %. Few extra jobs were created in inudstry apart from in Spain and Portugal. Within the service sector, employment increased most in health, education and other services, which accounted for over 2 million extra jobs. In all Member States female employment increased significantly more than male employment between 1985 and 1988. The only exception was the FRG where employment fo men and women rose at a similar rate. In most Member States, the percentage increase in female employment was at least twice the increase for men. In a majority of countries, part-time employment increased at a significantly higher rate than full-time employment between 1985 and 1988. In some countries, however, the share of part-time work has fallen. In Spain (1987 data) the number of part-time workers -particularly men- declined. - 2 - Unemployment Only Falling Slowly As employment increased, unemployment has fallen. It now stands at 12.5 million -some 8.5 % of the working population. However, in all Member States, the fall in the number unemployed between 1985 and 1988 was substantially less than the additional number of jobs created. In effect, only 1 in 8 of the new jobs created were filled by the unemployed. While the number of unemployed men fell by almost a million between 1985 and 1988, the number of women out of work actually rose by almost 350,000. The reason unemployment did not fall significantly was that the extra jobs were filled either by young people coming on to the labour market for the first time -who accounted for over half of the increase in employment- or by people who, up until finding a job, had not been counted as unemployed at all. These were predominantly women, who were not previously in the labour force, but who took up employment once it became available. The pattern varied between countries. In several countries, particularly Spain, France and Italy, a large proportion of the new jobs were taken by new entrants to the labour market as the working age population increased. In others, the increased employment resulted from proportionately more people going into employment -this was noticeably the case in the Federal Republic of Germany, where increased participation accounted for 90 % of employment growth. In Italy, although employment rose during this period, unemployment actually increased. Only in Portugal and the UK were a significant proportion of the extra jobs created filled by people who had previously been counted as unemployed. The major exception to this general tendency was Belgium where unemployment fell, despite the fall in employment, as both the working age population and the rate of participation declined. Persistent Long-term Unemployed The problem of long-term unemployment seems to have become more entrenched during the 1980s. While unemployment has fallen, the proportion of long-term unemployed (those unemployed for more than 1 year) has increased from 37 % in 1979 to 47 % in 1983 and to 53 % in 1988. Moreover, the proportion of very long-term unemployed (over 2 years) has increased from 23 % in 1983 to 35 % in 1988. - 3 - 7 million people, 5 % of the Community's labour force, have been unemployed for over 1 year. the problem is particularly acute in Spain and Ireland where, in 1988, the number of long-term unemployed amounted to 11 % of the labour force. The problem is also serious in the southern part of Italy and in parts of Belgium, where long-term unemployment also exceeded 10 %. In the southern Member States, long-term unemployment particularly affects the young. In Italy, young people under 25 made up over half of the long-term unemployed in 1988 and the proportion was only slightly less in Portugal, Spain and Greece. In the more developed countries in the north, only around 10-15 % of the long-term unemployed were young people. Employment Issues The 1990s promises to be a decade of immense opportunities for the Community. The completion of the Internal Market, in conjunction with prospective moves towards monetary union and closer coordination of other aspects of policy, offer the potential for stronger economic performance, more balanced development and closer social cohesion within the Community. The 1992 programme is having a significant effect on business. Companies are adopting a more European perspective and, in a number of cases are beginning to rationalise their operations on a European rather than a national basis. Perhaps the clearest quantitative evidence of the change in the business environment is the quadrupled increase in merger activity over the past 5 years. The Commission has identified the industrial sectors which stand to be most affected by the 1992 measures. In the Northern Member States, the sectors tend to be both high-tech and more traditional heavy industries, in many cases protected at present by national public procurement policies. In Southern Member States, they tend to be labour intensive industries such as clothing, footwear or textiles. In the North of the Community further rationalisation seems likely as national protection is removed. In the South, countries face a choice of continuing to specialise in current manufactures, or of exploiting the opportunities offered by the 1992 programme and diversifying their industrial structures to be more like those in more developed economies. There are clear signs in Spain and Portugal that industrial transformation in this direction is underway. - 4 - Wages and Labour Costs In all Member States, the rate of increase in real wages was much less in the 1980s than in the 1970s. Since 1983 real wage growth has slowed down and as a result unit labour costs have fallen steadily and are now lower as a proportion of value-added than in the 1960s. Wage levels vary markedly across the Community when measured in terms of ECU. Differences in real income, however, are much less pronounced once differences in the pattern of consumption and in relative prices are taken into account. Differences in real wages between Member States have tended to narrow in the last 20 years, but more so in the 1970s than the 1980s. Differences in wages and labour costs across the Community largely reflect differences in labour productivity. Labour costs per unit of output do not vary much from one part of the Community to another. The incentive for producers to relocate from high to low wage areas may therefore not be great. As a result, policy focused primarily on low rates of pay will not necessarily secure a shift in market share towards the weaker countries in the Community. That will depend on raising productivity through increased investment in industry and infrastructure, and in a better educated and more skilled and enterprising workforce. The gap between the wages paid to men and those paid to women remains significant in most parts of the Community with men in manufacturing employed in manual jobs earning on average around 25 % more per hour than women. There are differences between Member States -in Denmark and Italy women were paid an average of 85 % of the hourly rate for men whereas in the UK and Ireland they received less than 70 %. Environment and Employment Problems of the environment -notably of the threat from global warming, of the increasing destruction of natural resources and of growing pollution- impose new constrains on economic development. This does not mean that the Community should accept or even welcome slower growth of the European economy, still less of the world economy. It does mean, however, that the need to protect and improve the environment must play an increasingly important role in determining the direction of development, the pattern of growth, the kinds of goods produced and the methods used to produce them. Changes will be far reaching but they are manageable. - 5 - Around 1 % of the Community's labour force is employed directly in environmental industries with a much larger number of jobs concerned indirectly. The future growth of employment in these industries depends very much on Government policy and on the commitment of public expenditure. The environmental market is largest in the Federal Republic and the smallest in the Southern States. The Community will need to ensure that its products are environmentally friendly and incorporate sophisticated pollution controls if it is to exploit the potential for job creation in this area and if it is to maintain its competitiveness relative to producers in the US and Japan. Women's Access to Employment The participation of women in the labour force remains low in the Community. The participation rate for women with children is around 50%, with substantial differences between Member States. Although women account for 38 % of total employment in the Community, many women have non-stnadard terms of employment and inferior working conditions. 28 % of women's employment is part-time and a significant proportion of women filling such jobs would prefer full-time work. Large numbers are also employed in temporary jobs, half of them because they could not find permanent ones. The obstacles to employment are much greater for women than for men. Adequate childcare arrangements are a key requirement for many women to participate at all in the labour market. Other areas where improvement is needed include: pre-vocational training courses; transport arrangements for travelling to and from work; co-ordination between working hours and school hours; systems of parental and family leave during pregnancy and early infancy. Managing Human Resources Large firms -those employing more than 500 people- employ more than a quarter of the Community's labour force, and a much higher proportion in the manufacturing sectors. The way such large firms recruit and manage their labour forces has an important impact on standards and practices within the labour market generally. Large companies are paying greater attention to human resource management. A particular emphasis is given to raising the educational and skill level of their labour force and developing flexible production systems adapted to meeting global market conditions. - 6 - The globalisation of markets is being matched by the globalisation of different management ideas. The Japanese ways of doing things, or the strategies of US multi-nationals, are becoming as much a part of the European labour market management scene as the practices of indigenous European companies. Vocational Training The 1990s will be a period of intense pressure on systems of education and training. The inadequacy of existing training provisions in many areas is being perceived, although the poor quality of statistics makes it difficult to document the current situation and hence to develop better strategies and practices. There are significant differences in education and training provisions between Member States as regards the amount and duration of schooling and normal training which young people receive, both compulsorily and voluntarily. In some Member States education and training are closely linked, in others, vocational training has a lower status. EMPLOYMENT POLICIES Economic and Social Cohesion Disparities in income per head and in employment remain substantial across the Community. From the beginning, the Community has committed resources to structural readjustment and the alleviation of social problems. These have increased and been given more coherent purpose under the Single European Act and the Reform of the Structural Funds as the Community has expanded to include poorer, less developed countries. The main policy emphasis is on strengthening regional and local economies through investment and through the training and education of the workforce. Structural Fund expenditures will double in real terms between 1988 and 1993 when they will account for 25 % of the Community budget. Over 60 % of expenditure from the Funds will go to assisting less developed regions in the less developed Member States. Reducing long-term unemployment is one of the major objectives of Community policy within the new Structural Funds. Employment in Central and Eastern Europe In order to assess the potential economic and employment effects of the policy changes taking place in Central and Eastern Europe, the report presents the basic facts about employment activity. The total populaion of Central and Eastern Europe -Albania, Bulgaria, German Democratic Republic, Poland and Hungary, Czechoslovakia, Romania and Yugoslavia- is around 140 million. Of these, some 93 million are of working age. - 7 - This compares with a total Community population of around 320 million, of whom some 220 million are of working age. The Soviet Union's population totals 285 million, some 185 million of whom are of working age. A higher proportion of the working age population is employed in Central and Eastern Europe than in the Community. In total, 66 % of the population aged between 15 and 64 were in employment in Central and Eastern Europe in 1988 as compared with 59 % in the Community. Figures for the United States, Japan and several other industrialised countries are higher again -at over 70 %. The difference between the Community and Central and Eastern Europe is due entirely to differences in the rate of employment of women -the employment rate of women being 60 % in Central and Eastern Europe, compared with 45 % in the Community. In contrast to the Community, the labour force in Central and Eastern Europe is much more extensively employed in agriculture and industry than services. In Central and Eastern Europe employment in services accounts for around 37 % of total employment, a figure slightly below the proportion employed in services in Portugal and Greece, and well below the Community average of over 60 %. The political changes now underway in Central and Eastern Europe raise various issues for the Community. In the short run, the process of systematic reform and the abolition of administered full employment will lead to a significant increase in unemployment. This gives cause for concern since social security provision is totally lacking. Up to now trade between the two parts of Europe has been small. In 1988 only around 3% of total Community export of goods to countries outside went to Central and Eastern Europe. In the longer run, however, there are consideraly possibilities of achieving a significant expansion of trade which could provide business opportunities and employment for theCommunity.