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László Andor

Commissioner for Employment, Social Affairs and Inclusion

Towards a jobs-centred approach to economic policy

Employment Committee

Brussels, 2 May 2012

Good afternoon ladies and gentlemen,

Since around last summer, we have experienced a deceleration of economic growth across Europe. This has worsened the recession which had already been ongoing in a number of Member States, and has brought many others into a double dip.

Unemployment is again increasing, particularly inside the Euro area. Within the EU-27, the unemployment rate is now more than 10%, which is something we have not seen since the 1990s.

As the ILO emphasised on Monday in its World of Work Report 2012, the employment slowdown we face is not a normal one. Clearly, the worsening situation partly reflects the predominant focus in the last two years on fiscal consolidation and internal devaluation, which has had a negative effect on aggregate demand. To move away from this "austerity trap", we need an alternative approach, a jobs-centred approach.

Our proposals, which the College adopted 10 days ago, respond to this urgency. The Employment Package identifies the most effective ways and tools for a job-rich recovery, and should be at the core of a future EU Growth Agenda to be discussed in the next weeks.

I am very pleased to have the opportunity to present the Employment Package to the Employment Committee, for at least two reasons:

  • first, the Employment Package highlights the importance of additional efforts in the area of employment policy to support sustainable growth;

  • second, your Committee is key in the governance of the European Employment Strategy, of the EU 2020 Strategy and of the European Semester.

This package, I believe, presents an opportunity to ensure EMCO plays its role to the full.

The Employment Package comes as many countries undertake painful labour market reforms. Huge efforts have been made in several Member States, most recently in Italy, Spain, and Greece.

But we must look beyond the immediate term, by complementing the Annual Growth Survey. We need a solid medium-term EU employment agenda which responds to the critical present situation, and shows a way to reach the Europe 2020 goals, and in particular the employment targets, and which is based on the Employment guidelines.

The Employment Package shows how employment policies can make it possible for labour to be a driver of growth.

The ideas we have set out for Member State policy and EU action cover three main areas:

Firstly, we emphasise the urgent need to focus policy efforts on the demand-side of the labour market and support job creation.

Supply-side policies are not sufficient to create the right conditions for job creation. To mobilise labour for growth, we need to boost labour demand.

This can be done by horizontal policy changes such as hiring subsidies for newly created jobs; a budget-neutral tax shift from labour to environmental taxes; or greater support for business start-ups, self-employment and the social economy.

The package also looks at the major structural challenges facing Europe: the move towards a low-carbon and resource-efficient economy, the demographic ageing of our societies and the rapid technological change.

Here, we identify the green economy, information and communication technologies, and health services as the three areas that can generate the most job opportunities. We are drawing attention to the fact that the economic and social needs over the next decade are set to be such that there is a significant growth potential in the green economy, health and care and the ICT sector, and that public policy needs to help in turning this potential into as many quality jobs as possible. We are therefore proposing concrete and detailed action plans to support and develop the employment potential of these areas.

For example, the green economy, on which EMCO, especially the Indicator Group, already worked a lot, is expected to create over 20m jobs in the next ten years.

Secondly, we have to make the European labour market much more dynamic. What does this mean?

To be dynamic, labour markets should be reformed in a balanced way. Employment policies should allow for quality jobs and transitions, meaning that people move to a new job or between jobs more easily. The Commission will also address the quality of jobs by launching a public consultation on a quality framework for traineeships.

In addition, establishing decent and sustainable wages that help avoid low wage traps is very important. In-work poverty is a persistent problem in Europe, affecting more than 8% of the working population. But beyond that, it is clear that an across-the-board downward pressure on wages would depress aggregate demand and would not help our economies grow again.

I believe that translating the concept of a dynamic labour market into a reality on the ground will be much easier if there are efficient public employment services, effective partnerships and, above all, a strong social dialogue.

To be dynamic, labour markets need investment in people and in the labour market institutions that support them. Investment in skills and re-skilling plays a crucial role in supporting productivity. Much of the lost competitiveness in many Member States can be explained by poor productivity growth – and investing in skills is an essential component towards addressing this. It is also of course essential to support continuous employability, in particular for the unemployed and vulnerable groups as well as older workers.

Investing in skills is also crucial in tackling existing skills shortages and mismatches in the labour market. But of course we need to invest in the right kind of skills. In this regard we propose new tools to better anticipate and monitor skills development at the EU level, which could help better orientate the investments that are made.

A dynamic labour market also requires greater mobility. To improve labour mobility within Europe, we need to remove any remaining legal and practical obstacles to the free movement of workers. For example we need to improve the portability of pensions. We are also proposing to transform the current EURES tool into a genuine EU employment service able to match jobs and jobseekers across borders.

And thirdly, and I would like to stress the importance of this, the package sets out ways to reinforce the coordination and monitoring of employment policies at EU level. This point is the key for the Committee's work, which we would like to see enhanced in line with important developments which have been taking place in EU governance.

Firstly, I know and welcome that the Employment Committee has undertaken a lot of work to strengthen the degree of multilateral surveillance. I believe this is a crucial value added that this Committee can provide.

You will have an increasingly important role in helping deliver a stronger employment dimension in the European Semester cycle. Three months ago, the European Council called for the elaboration of National Job Plans as part of the National Reform Programmes of Member States. This is why, in the Employment Package, the Commission proposes that National Job Plans focus on labour market reforms but also on job creation measures.

Furthermore, the various employment challenges as reflected in the Joint Assessment Framework and in your Employment Performance Monitor could be complemented by a list of most relevant indicators.

To complement, and indeed strengthen this, we also propose the setting up of an annual scoreboard on how Member States are actually implementing their employment policy commitments.

Improved governance also requires greater involvement of social partners. The EPSCO Council has been very clear on that point: we need the social partners to be more involved in setting priorities and shaping and implementing employment policies.

This is why we have proposed to exchange views with social partners on growth and employment priorities in the context of the European Semester.

We also propose to set up, in full respect of the autonomy of social partners, a European tripartite format for the monitoring of wage developments. This proposal is new and the exact set-up should be discussed with social partners, but an option of a tripartite EMCO is not precluded. The point is to be able to analyse wage developments in Europe in a coherent way and with the social partners, who have very important responsibilities on the ground. The added value of this format would also be in generating a reflection on what wage developments in 27 individual countries mean in the aggregate.

Finally, the new European governance requires stronger link between policy and funding. We all know that the EU budget instruments, in particular the ESF, are essential sources of funding for employment and social policies. As negotiations on the Multiannual Financial Framework are progressing and the EU is more than ever looking for a Growth Agenda, it is crucial to understand how these instruments could be used most effectively in delivering the employment agenda that we develop with the perspective of our target for 75% employment by 2020.

We need to make an even stronger link between Member States' labour market reforms and investment through EU financial instruments – like the European Social Fund – which can support such reforms. It is clear that the programming of structural investments will need to take account of developments in EU economic governance in one way or another. Here the Employment Committee could also play an important role as it discusses country-specific recommendations and analysis.

Ladies and gentlemen,

Europe really is at crossroads. The Commission proposes a new and broader approach to employment policy, notably by focusing more than in the past on job creation and on the demand side of the labour market, as well as on the importance of investment. In line with the Council Conclusions, and indeed building upon your impressive work this semester, the Commission proposes a series of steps to further enhance the governance for employment policies and strengthening the employment dimension in economic governance.

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