Annexes to COM(1999)445 - Commission Recommendation for Council Recommendations on the implementation of Member States' Employment Policies

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dossier COM(1999)445 - Commission Recommendation for Council Recommendations on the implementation of Member States' Employment Policies.
document COM(1999)445
date February 14, 2000
ANNEX


I. BELGIUM

Despite an improvement of the economic climate, the employment situation in Belgium recovered only modestly in 1998. The labour market is characterised by long-standing challenges:

- high inflows into long-term unemployment leading to increasing stocks of long-term unemployed people, which represented 5,7 % of the labour force in 1998; these may be related, inter alia, to benefit duration, eligibility conditions and enforcement,

- poor participation of older persons in employment, particularly those over 55, whose employment rate (22 %) is now the lowest in the Union,

- a large gender gap in employment, similar to the EU average of 20 percentage points,

- potential for job creation in services, which despite having a high share in overall employment, employs only 40 % of the working age population, that is 10 percentage points below the average of the three best performing Member States.

Belgium should:

1. strengthen preventive policies, by taking early action based on individual needs, to stem the flow into long-term unemployment. In particular, Belgium should comply fully with guidelines 1 and 2 and provide young and adult unemployed with effective employability measures before the 6- and 12-month thresholds, respectively;

2. examine in more detail disincentives within the tax and benefit system which may discourage labour market participation, particularly of women and older workers. Belgium should, in particular reassess existing policies facilitating early retirement of workers, and consider the policy choices most appropriate to avoid the early withdrawal of workers from the labour market and to promote employment of older persons;

3. adopt and implement coherent strategies, encompassing regulatory, fiscal and labour market measures, to exploit more fully the job creation potential of the services sector;

4. reinforce the cooperation between the different authorities implementing the national employment action plan.

II. DENMARK

The performance of the Danish labour market has improved significantly in recent years. Denmark enjoys currently the highest employment rate in the Union and one of the lowest unemployment rates. The key challenges for Denmark are:

- to promote the upgrading of skills and qualifications of the labour force as a means to help overcoming emerging bottlenecks in the labour market,

- to expand the current labour force, by encouraging employees to stay longer in working life and reducing the number of persons of working age on social benefits,

- to reach a more balanced participation of women and men across sectors and occupations.

Denmark should:

1. pursue reforms of the tax and benefit system so as to reduce the overall fiscal pressure on labour, in particular the tax burden on low incomes, and to increase incentives to take up or remain in jobs. The reform of early retirement and leave schemes should be completed and closely monitored in the light of the need to increase labour supply;

2. promote training and job opportunities for unemployed women, and examine, in the context of a gender mainstreaming approach, ways to reduce the current levels of occupational and sectoral segregation in the labour market.

III. GERMANY

As the economy recovered in 1998, the protracted fall of employment levels has come to a halt and unemployment has fallen somewhat against the background of the continuing consequences of German unification. The key challenges facing Germany's labour market include:

- negative employment growth throughout most of the 1990s (-1,2 % per year in 1991 to 1998 and -0,7 % in 1994 to 1998), and large regional differences in unemployment rates, affecting in particular the new Länder,

- persistently high long-term unemployment, representing 5 % of the labour force,

- a considerable potential for job creation in services, which employ only 38,5 % of the total working age population (50 % in the best performing Member States),

- the low share of people between 50 and 64 still in employment (about 47,5 %), which points to an additional unused employment potential.

Germany should:

1. strengthen preventive policies, by taking early action based on individual needs to prevent people from becoming long-term unemployed. Germany should increase the level of ambition of the present targets, to bring down the inflow into long-term unemployment to the levels reached by the best performing Member States (less than 10 % after 12 months);

2. adopt and implement a coherent strategy to exploit the employment potential of the services sector, encompassing regulatory, fiscal and other measures to reduce the burden for setting up new undertakings;

3. examine in more detail disincentives within the tax and benefit system which may discourage labour-market participation of all groups, especially of older workers. Germany should in particular reassess existing policies facilitating early retirement and consider the policy choices most appropriate to avoid the early withdrawal of workers from the labour market and to promote employment of older workers;

4. pursue and monitor efforts to bring down gradually the fiscal pressure on labour, by reducing taxes and social security contributions. In particular, labour costs should be reduced further at the lowest end of the wage scale, while respecting the need for fiscal consolidation;

5. take appropriate measures to improve and adapt its statistical system so as to provide data compatible with the common policy indicators by 2000. Germany should consider introducing a quarterly Labour Force Survey in the light of Council Regulation (EC) No 577/98.

IV. GREECE

In 1998, which was a year of high economic performance, employment increased significantly by 3 %, while unemployment increased by 1 %. This recent worsening of the unemployment situation illustrates serious structural deficiencies of the labour market which include the following:

- a low employment rate, owing to a very low participation of women in employment (41,3 %, 10 percentage points below the EU average), while employment in services remains low, despite recent improvements,

- youth unemployment is particularly high: nearly 12 % of the young population compared with an EU average of 9,3 %,

- long-term unemployment is also high and women have a long-term unemployment rate three times as high as men,

- despite continuous labour-productivity growth, labour productivity levels are still low and further improvements of skill levels of the labour force and up-take of new technologies and modernisation of work organisation are needed.

Greece should:

1. take decisive, coherent and measurable action to prevent young and adult unemployed people from drifting into long-term unemployment. In particular, strengthened efforts should be made to complete the reform of employment services, to implement preventive policies in compliance with guidelines 1 and 2;

2. examine in more detail disincentives within the tax and benefit system which may discourage labour market participation, in particular of women, so as to increase progressively the female employment rate towards the EU average of 50 %, and reinforce gender mainstreaming by building on progress already made in respect of entrepreneurship;

3. pursue efforts to improve further the quality of education and vocational training, and to strengthen support for continuous training, in particular by involving social partners more actively;

4. adopt and implement coherent strategies, encompassing regulatory, fiscal and other measures, designed to reduce the administrative burden for setting up new undertakings, in order to stimulate entrepreneurship and exploit the job creation potential of the service sector;

5. encourage a partnership approach and promote concrete commitments by the social partners at all appropriate levels on the modernisation of work organisation, with the aim of making undertakings more productive and competitive while achieving the required balance between flexibility and security;

6. take appropriate measures to upgrade the statistical monitoring system so that policy indicators on prevention and activation will be provided by 2000, with the agreed definitions and methods.

V. SPAIN

Spain has seen vigorous employment growth since 1996 at a rate three times above the Union average followed by a steady improvement of the unemployment situation and structural changes. However, serious challenges remain which include:

- the lowest employment rate (50,2 %) in the Union, including below-average employment in services (30 %),

- an unemployment rate which at 18,8 % is still very high, although Spain has achieved a strongly declining trend,

- the highest long-term unemployment rate in the Union, which will not decline until the high inflows into long-term unemployment are significantly reduced. Currently, 21,5 % of young unemployed people and 15,5 % of adult unemployed people reach the six month- and twelve month-thresholds respectively,

- the gender gaps in terms of employment and unemployment are the widest in the Union: the female unemployment rate is 26,6 %, more than twice the EU average, and only 35 % of the female working age population is in employment (against 51 % in the Union as a whole),

- a high proportion of workers on fixed-term contracts, mostly of short duration, representing almost one third of the total number of contracts.

Spain should:

1. pursue the preventive policies initiated in 1998, moving beyond the identification of the unemployed persons' needs by increasing the number and the efficiency of the individualised activation measures so as to reduce significantly the inflow of young people and adults into long-term unemployment;

2. adopt and implement coherent strategies, encompassing regulatory, fiscal and other measures, designed to reduce the administrative burden on companies, in order to stimulate entrepreneurship and exploit the potential for more stable employment in the service sector;

3. intensify efforts to mainstream equal opportunities in employment policy beyond the preparatory measures already announced in order to raise the female employment rate towards the average EU level;

4. pursue efforts to upgrade the statistical monitoring system, so that policy indicators on prevention and activation will be provided by 2000 in accordance with agreed definitions and methods. This is particularly important in the current framework of decentralisation of active labour market policies.

VI. FRANCE

Following the resumption of economic growth in 1997, the employment situation recovered in 1998. However, major structural problems remain to be tackled:

- lower than average employment rate (60,8 %), due to the low participation rate of workers above 55 years of age (29 %), which is well below the EU average (40,3 %),

- very slow growth of employment for most of the 1990s (0,1 % in 1991 to 1998),

- a high unemployment rate, nearly two percentage points above the EU average, and high long-term unemployment,

- high levels of youth unemployment linked to difficulties in the process of transition from school to work, particularly for those with lower qualifications,

- high non-wage labour costs in excess of the EU average,

- potential for job creation in services, which, despite having a high share in overall employment, employs only some 40 % of the working age population, that is 10 percentage points below the average of the three best performing Member States.

France should:

1. review existing benefit schemes, particularly those facilitating early retirement, in order to keep older workers longer in active life;

2. adopt and implement coherent strategies, encompassing regulatory, fiscal and other measures, designed to reduce the administrative burden on companies, in order to exploit the job creation potential of the service sector, inter alia, building on recent efforts to create new job opportunities for young people;

3. pursue and evaluate policy measures designed to reduce the fiscal pressure on labour, particularly those addressing unskilled and low-paid workers;

4. strengthen social partnership with a view to developing a comprehensive approach to modernising work organisation.

VII. IRELAND

The economy has enjoyed a protracted period of strong economic growth and job creation in the 1990s. The labour market is undergoing deep structural change and the nature of the problems is gradually shifting from high unemployment and long-term unemployment (both among young people and adults) to new challenges such as:

- tightening labour market conditions, which will act as a constraint on future economic growth,

- a substantial gender gap in employment, which offers scope for an increase in the participation of women in the labour market,

- low levels of participation of workers in education and training (around 5 %),

- maximising job-potential in services, where, despite the success of recent policy initiatives to create favourable conditions for job creation, the employment rate lags behind the EU average.

Ireland should:

1. adopt a comprehensive strategy to increase the participation of women in the labour market, including the removal of tax-benefit disincentives, and putting in place measures which facilitate the reconciliation of work and family life. In particular, a sustained effort to raise the standards of care for children and other dependants and flexible leave schemes is called for;

2. pursue recently implemented policies, encompassing regulatory, educational and fiscal measures, in order to further exploit the potential for job growth in the service sector;

3. intensify policy efforts to expand and improve in-house training of employees.

VIII. ITALY

The labour market showed a slight recovery in 1998. Employment grew moderately by 0,6 % in a context of subdued economic growth and a sharp decline of real unit labour costs. However, this improvement was not sufficient to redress the long-standing structural problems of the labour market which include:

- slow employment growth and a low employment rate of 50,8 %, (almost 10 percentage points below the EU average), linked to low average employment rate in services (31,7 %),

- high average unemployment, which remains two points above the EU average; in addition, high and rising youth unemployment (12,9 % of youth population) and long-term unemployment (8,4 % of the labour force),

- wide gender gaps in employment - close to 30 percentage points, compared with 20 percentage points for the Union as a whole; also, unemployment affects women to a much larger extent than men (16,7 % and 9,4 % respectively),

- regional differentials of unemployment between North and South remain significant (in the South, unemployment reaches 22,8 %, 10 points above the national average),

- higher than average tax burden on labour, with the implicit tax rate on labour income standing at 50 % (against an EU average of 43 %).

Italy should:

1. take decisive, coherent and measurable action to prevent young and adult unemployed people from drifting into long-term unemployment. In particular, strengthened efforts should be made to complete the reform of employment services, to implement preventive policies in compliance with guidelines 1 and 2, and to improve the quality of vocational training. Efforts to upgrade the statistical monitoring system should be pursued, so that policy indicators on prevention and activation will be provided by 2000 in accordance with agreed definitions and methods;

2. adopt and implement coherent strategies, encompassing regulatory, fiscal and other measures, designed to alleviate the administrative burden on companies, to stimulate entrepreneurship and exploit the job creation potential of the service sector;

3. continue current reform efforts designed to shift away the tax burden from labour to other tax bases;

4. continue the implementation of the reform of pension and other benefit systems in order to reduce the outflow from the labour market into pensions and other schemes;

5. adopt comprehensive policies in order to address the wide gender gaps in employment and unemployment, inter alia, by building on existing specific initiatives. Gender policies should also be mainstreamed under all the pillars of the National Employment Action Plan.

IX. LUXEMBOURG

The employment situation is generally favourable and is underpinned by strong economic growth accompanied by a constant rise in employment. However, very low employment rates of some segments of the population coexist with huge inflows of cross-border workers. Key issues of the labour market are:

- very low employment rate of workers over 50 (only 38 %) which is principally the result of policies facilitating early withdrawal from the labour market such as invalidity pensions and early retirement schemes,

- very low employment rate of women (45 %), resulting in a gender gap close to 29 percentage points, one of the highest in the Union,

- a growth in employment of which 75 % is accounted for by cross-border workers,

- low participation in continuous education and training.

Luxembourg should:

1. examine in more detail the tax-benefit system with a view to removing disincentives which may discourage the participation in employment, in particular of older workers;

2. pursue efforts towards a comprehensive strategy to increase the participation of women in the labour market, including the examination of tax-benefit disincentives, and measures facilitating the reconciliation of work and family life.

X. THE NETHERLANDS

The economy has enjoyed a protracted period of strong economic growth and job creation, so reducing unemployment steadily. Although the performance of the Dutch labour market is among the most favourable in the Union, key challenges in the labour market remain:

- low participation of people over 55 in employment (only 31 %, against an EU average of 40,6 %); the rate is even lower for women (19,8 % against an EU average of 26,1 %),

- despite a recent decline, the tax burden on labour remains considerable,

- high ratio of dependent to active people (35 %). Disability benefits have increased recently and the number of people receiving unemployment benefit is high (9 % of the labour force),

- emerging labour supply bottlenecks, with some 1360 00 unfilled vacancies at the end of 1998,

- high gender gap in employment, despite recent growth of the participation of women in employment. Women's employment rate remains some 24 percentage points below the employment rate for men (80,0 %), which represents a gender gap of 1 million jobs.

The Netherlands should:

1. continue efforts to improve the tax-benefit system with a view to removing disincentives which may discourage participation in employment, in particular of women and older workers. Resolute efforts are needed to reduce the high number of persons who remain outside the labour market supported by passive income support schemes;

2. pursue efforts to upgrade the statistical monitoring system, so that policy indicators on prevention and activation will be provided by 2000 in accordance with agreed definitions and methods.

XI. AUSTRIA

The employment situation remains generally favourable despite a slight increase of unemployment in 1998. The economy presents one of the highest employment rates and one of the lowest unemployment rates in the Union. Key challenges in the labour market are:

- slow employment growth throughout most of the 1990s (0,4 % in 1991 to 1998 and -0,03 % in 1994 to 1998),

- low participation of older workers in employment (43 % in the age bracket of 50 to 64),

- significant gender gap in employment (21 percentage points) despite the fact that the employment rate of women is higher than the EU average,

- higher-than-average tax burden on labour, with the implicit tax rate on labour income standing at 46 %.

Austria should:

1. review early retirement incentives and develop flexible working time schemes, so as to keep older people longer in working life;

2. pursue a comprehensive strategy to narrow the gender gap in employment, inter alia, by putting in place measures which facilitate the reconciliation of work and family life;

3. continue efforts to reduce the high tax burden on labour, in particular by focusing on problem groups in the labour market.

XII. PORTUGAL

The employment situation has improved continuously over recent years as a result of strong economic activity. However, good employment performance indicators hide structural weaknesses which make the labour market vulnerable. Key challenges in the labour market are:

- low levels of participation of workers in education and training and low level of formal education attainment among the adult work force,

- significant potential for creating jobs in services, which employs only 38 % of the population in working age,

- low average labour productivity levels, suggesting insufficient skill levels of the labour force and slow up-take of new technologies, as well as scope for modernisation of work organisation.

Portugal should:

1. pursue efforts to improve the quality of the education system, and to strengthen support for continuous training, in particular by involving social partners more actively;

2. adopt and implement coherent strategies, encompassing regulatory, fiscal and other measures, in order to reduce the administrative burden on companies, to stimulate entrepreneurship and to exploit the job creation potential of the service sector;

3. encourage a partnership approach and promote concrete commitments by the social partners at all appropriate levels on the modernisation of work organisation, with the aim of making undertakings more productive and competitive while achieving the required balance between flexibility and security.

XIII. FINLAND

The economy has achieved strong economic and employment growth over the recent years, which has led to a significant reduction of its unemployment rate. Key problems of the labour market are:

- low employment among men and women over 50 (55,2 % and 50,6 %, respectively), which are considerably lower than the equivalent rates among prime-age workers (76 % and 71 %, respectively),

- persistence of a stock of difficult-to-place unemployed, especially among older people (7 % of the work force),

- high youth unemployment (more than 11 %, two percentage points higher than the EU average),

- while the employment rate for women is high, particularly in the prime-age group, the occupational and sectoral segregation is significant,

- higher-than-average tax burden on labour, with the implicit tax rate on labour income standing at 55 % (against an EU average of 43 %).

Finland should:

1. pursue the review of existing benefit schemes, particularly those facilitating early retirement, in order to keep older workers longer in active life;

2. pursue recent policy orientations to reduce the tax burden on labour;

3. examine, in the context of a gender mainstreaming approach, ways of reducing the current levels of occupational and sectoral segregation in the labour market.

XIV. SWEDEN

The overall recovery of the economy has led to a marked improvement of the labour market in 1998. Despite the high employment rate, key challenges in the labour market are:

- slow employment growth throughout most of the 1990s (-1,7 % in 1991 to 1998 and 0,3 % in 1994 to 1998),

- unemployment is still high at 8,2 %, even if slightly below the EU average,

- high occupational segregation by gender,

- the highest tax burden on labour income in the Union, with the implicit tax rate standing at 58 % (compared with the EU average of 43 %).

Sweden should:

1. take measures to reduce the high tax burden on labour income, in particular for those with a low take-home pay from work;

2. examine, in the context of a gender mainstreaming approach, ways to reduce the current levels of occupational and sectoral segregation in the labour market.

XV. UNITED KINGDOM

The labour market presents a relatively favourable performance recently compared with the EU average. However, structural challenges to be tackled still remain:

- despite a favourable labour-market situation, the inflows into long-term unemployment of both young and adult unemployed (respectively at 18 % and 12 %) still exceed those of the best performing Member States in the EU,

- persistent pockets of very long-term unemployment and/or inactivity among older people, ethnic minorities, lone parents and deprived communities,

- the gender gap is above the EU average, in terms of full-time equivalents (some 33 percentage points), reflecting the important role of part-time work among women.

The United Kingdom should:

1. focus on the issue of gender pay gap and develop appropriate policies to address this, building, inter alia, on the positive effects to be expected from the introduction of the minimum wage in 1998;

2. encourage a partnership approach in order to enable the social partners at all appropriate levels to reach agreements on the modernisation of work organisation, with the aim of making undertakings more productive and competitive while achieving the required balance between flexibility and security;

3. upgrade the statistical monitoring system, so that policy indicators on prevention and activation will be provided by 2000 in accordance with agreed definitions and methods;

4. pursue efforts to expand and improve the quality of child-care provisions, in order to enable women particularly to participate more in part-time as well as full-time work, according to their preferences.