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European Commission

László ANDOR

European Commissioner responsible for Employment, Social Affairs and Inclusion

A job-centred approach to resolving Europe's crisis

International Conference on Labour market reforms/
Ljubljana, 17 September 2012

Ladies and gentlemen,

I am grateful for the chance to address you on a subject of great topicality and importance.

This conference comes against a rather bleak background for employment and the economy in the European Union, and also in Slovenia.

The facts are grim. In the first half of 2012, one out of every two Member States were either in economic stagnation or in recession, with unemployment up in most.

The EU jobless rate stood at a depressing 10.3% in the first quarter of this year.

40% of our jobless have been unemployed for over two years now.

And more than half of the unemployed in some Member States have been out of a job for at least a year.

Perhaps most depressing of all, unemployment among European young people stands at around 23%. That may have dramatic consequences for a whole generation.

In Slovenia, the employment rate fell to 68.4 percent in 2011, which means that it fell below the European average.

Let me stress two worrying features of the labour market in Slovenia:

  • First, employment among the older workers is amongst the lowest in the European Union while the population is ageing fast.

  • Second, the percentage of young people on temporary contracts is one of the highest in Europe.

Given the low growth scenario, we need to give greater priority to employment policy. More than ever, employment policy must deliver new, sustainable jobs and maintain or transform existing jobs.

With a weak economic recovery, unemployment threatens to remain persistently high in the European Union, rising further above today’s 25 million. The crisis is also likely to continue to impact various groups of workers in different ways and will, in particular, further increase the risk of marginalisation for young people. Long-term and structural unemployment are likely to worsen, leading to erosion of skills, and in turn weighing down on productivity, competitiveness and therefore economic growth.

Against the background of slow GDP recovery, there should be no doubt that employment policy and all its institutions and actors – European and national - play a key role from both macroeconomic and microeconomic perspectives. Making progress towards the Europe 2020 target of 75% employment will be more difficult in a low growth scenario, but also more necessary.

Ladies and Gentlemen,

We all know that resolute action is needed to tackle financial market tensions, restore confidence and ultimately revive growth.

But my role - and even my duty - is to insist on the need for a pro-active approach to the labour market.

Indeed, we must remember that labour is not just an adjustment variable, but an essential source of growth.

Finding real solutions to Europe's crisis calls for a job-centred approach — both in its motivation and in the measures involved.

The Employment Package the Commission adopted in April offers a comprehensive response to this situation.

It attempts to identify the most effective way and practical measures for achieving a job-rich recovery.

The proposals in the Package cover three main areas. Most of them concern labour-market reforms.

First, they call for policy efforts to focus urgently on the demand-side of the labour market and support job creation.

This is vital because supply-side labour-market policy — for instance, to improve employability and activation — will not suffice, given current job scarcity.

We have to mobilise labour for growth, while also looking at the major structural challenges facing Europe:

• the move to a low-carbon, resource-efficient economy

• the ageing of our societies and

• fast technological change.

Those major structural changes are source of new economic and social needs and will affect our labour market. They are an important source of job creation in the green economy, the health care and ICT sectors.

Measures to boost labour demand may involve policy changes to introduce hiring subsidies for newly created jobs; a budget-neutral tax shift from labour to environmental tax, and greater support for business start-ups, self-employment and the social economy.

The second message of the Employment Package is a strong call for a much more dynamic European labour market.

Helping the labour market to function properly and providing quality jobs for all and securing transitions is an effective way to maximise productivity.

Supporting effective transitions from unemployment to employment calls for the sharing of responsibility. That calls for a stronger mutual responsibility approach, more activation and - also - more job-search assistance from the public employment services in the Member States.

We also need to support and secure transitions in employment. We know that the labour market segmentation is a great impediment to transitions and an increasingly serious concern in the EU.

Analysis shows that employment losses were far more serious in more highly segmented labour markets and also largely involved young people, who tended to account for the greatest percentage of fixed-term contracts.

This is why suitable (or innovative) contractual arrangements are needed.

The Employment Package also invites investment as a useful ingredient of a dynamic labour market. We need to invest in people and in the labour market institutions that support them.

Much of the loss of competitiveness in many Member States is explained by poor productivity growth. Investment in skills and reskilling plays a crucial role in supporting productivity and employability of vulnerable groups and older workers.

Clearly, investing in skills is crucial for tackling skill shortages and mismatches on the labour market, but we need to make sure we invest in the right kind of skills.

Let me now emphasize a third important point in the Employment Package: the need to strengthen social dialogue.

Sound social dialogue is vital for dealing with labour-market problems in a sustainable way and reaching consensus on reform.

Ladies and Gentlemen,

The country-specific recommendations issued to the Member States last July reflect those messages.

The recommendations concentrate on stepping up participation and improving the employment opportunities of certain under-represented subgroups — such as women and young people, the elderly and the low-skilled,.

They involve in particular:

• restricting possibilities of leaving the labour market early

• improving active labour-market policy to make it effective and tailoring it to the individual

• improving skills

• combating segmentation.

Let me say a word here about the latest labour market reforms in this country.

It is of course too early to comment on them in detail, since the negotiations have not yet started.

But we welcome the Slovenian Government’s efforts to improve the sustainability of the pension system and address the segmentation of the labour market, in line with the Council recommendations of last July.

Addressing the labour market segmentation, and one of its main causes - the high percentage of temporary contracts - is certainly a priority in Slovenia.

Single open-ended contracts present advantages both for the workers and for firms.

For workers, it clears the way to stability and economic protection.

For firms, it does not necessarily increase the expected average firing cost, because the firing and job destruction rate would be lower than in a segmented labour market.

Where workers are on temporary and/or fixed-term contracts, neither the worker nor the firm generally have an incentive to improve productivity through job-specific investments – such as training.

Single open-ended contracts offer firms and workers a greater incentive to invest in productivity-enhancing firm-specific skills and human capital. And accumulating human capital is a strong deterrent to dismissal.

More stable job careers also increase young people’s participation in the labour market and therefore help making a more sustainable pension system.

Starting with the reform blueprints presented by the Government, allow me to stress how it is important and even crucial to build national consensus — both at political level and between the social partners — on adopting and implementing suitable reforms.

Ladies and gentlemen,

The European Union is at a crossroads. It is faced with a number of major structural challenges.

Globalisation, population ageing, the enlarged EU’s greater diversity, and growing polarisation are putting our social model to the test.

These challenges compound a financial and economic crisis that is forcing Europe to take far-reaching decisions on a financial, fiscal and banking union.

Given the links between employment and economic growth and the seriousness of the situation, the June European Council called for further measures at both European Union and Member State level to boost growth and jobs.

The Compact for Growth and Jobs makes boosting employment for both women and men, and in particular for young people and the long-term unemployed, a clear priority — along with labour mobility within the EU.

The Compact makes also clear that we need to reinforce the governance of European employment policy.

At the European level, better governance calls for greater social-partner involvement.

The European and national social partners need to be involved more closely in setting priorities and shaping and implementing employment policy.

That is why we have proposed exchanging views with the social partners on growth and employment priorities during the European Semester and preferably before it gets under way.

We also propose to set up a European tripartite format to monitor wage developments, in full respect for the autonomy of the social partners.

Moreover, and in line with the European Council's conclusions, the Commission calls on the Member States to submit National Job Plans as an integral part of their next National Reform Programmes.

In addition to focusing the National Reform Programmes more closely on improving employment outcomes, such National Job Plans should improve the coordination of employment policy at European level.

Ladies and Gentlemen,

Ten days ago, I had the honour to host President Barroso, President Shulz and President Van Rompuy at the Employment Conference in Brussels. We all agreed that the genuine Economic and Monetary Union that we are currently building requires a much stronger employment and social dimension.

And I reiterate what President Barroso also emphasised: we need a strong employment and social dimension in the future EU budget, with a secure minimum budget for the European Social Fund, continuation of the European Globalisation Found, and a re-born programme of aid for the most deprived.

A strong EU employment agenda represents a pathway towards economic recovery and a way out of today's social crisis. People from the EU institutions, governments, trade unions, employers, NGOs and academics need to work together build this pathway.

It's not about adjustments in rules and numbers calculated from a desk in an ivory tower. It's about implementing structural improvements; it's about investment in people; it's about social dialogue.

Social justice, solidarity and equal opportunity are a precondition for economic prosperity and growth, for the well-being of our fellow Europeans, and for the cohesiveness of European society — now and in the future.

Thank you.

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