2

Labour market and social developments: from shock to crisis

Chapter Introduction

The past decade has seen EU labour markets first suffering and then progressively if slowly, recovering from the post-2008 great recession. As already noted in the 2019 edition of Benchmarking Working Europe, some of the policies implemented in the latter part of this period were aimed at restoring employment and growth in the short term, but also sought to prepare the EU for some of the longer-term challenges to come. The Covid-19 pandemic and the ensuing unprecedented economic crisis, still unfolding and with the depth of its social impact as yet unknown, has become a sudden, unexpected test for these preparations.

 

The Covid-19 crisis is very different from the great recession of 2008. The negative impact on economic activity has been immediate and direct, with sudden closures of entire branches of the economy and an abrupt re-organisation of operations in many others. Moreover, the Covid-19 crisis is not, strictly speaking, a direct result of inefficiencies in any of the markets, including the labour market. Admittedly, the policy responses across the EU have been unprecedented in their scope, direction, and speed of implementation. Instead of deregulation and austerity, which almost immediately followed the 2008 crisis, the first response to Covid-19 consisted of stimulus and support. At the time of writing, the key questions are how deep, and for how long, the crisis will plough through the EU labour market and society, and what measures will be taken to address it in the longer run.

The European Commission’s Annual Sustainable Growth Strategy 2021, published in September 2020, provides an overarching vision for how the recovery from the Covid-19 crisis should unfold. In this document, the Commission sets out to support Member States in their efforts to strengthen their social and economic resilience and to achieve a sustainable and fair recovery driven by investment. The emphasis on investment as a means to stimulate the economy raises hopes that lessons have indeed been learned from the post-2008 austerity policies, which did not deliver on their promises. The renewed emphasis on sustainability and fairness is certainly to be welcomed as a much-needed policy turn in view of the rising levels of inequality and precariousness experienced by a growing number of workers in the EU. It is a good sign that these priorities have not been lost in the midst of this pandemic emergency.

However, this chapter argues that vision alone will not suffice to deliver on promises of social progress and create inclusive labour markets in a context once more dominated by a deep social and economic crisis. For instance, the Strategy appears to dedicate more attention to broadband coverage and digital skills than it does to supporting quality job creation. In contrast to the various targets set for the digital and green transformations, no tangible targets have been set for employment and social policies. Various groups of vulnerable workers that have not benefitted enough from the progress made during the pre-Covid-19 recovery years – from women to third-country nationals to younger workers – are not receiving the attention and specific, targeted measures they both need and deserve. This chapter seeks to foster a more detailed understanding of social and labour market developments both at the EU level and in particular Member States, in order to assist with the formulation of informed and targeted policy recommendations for how to achieve a sustainable and socially fair recovery. 

The most severe employment loss in EU history

The year 2020 marked an abrupt halt to a period of employment growth that the EU as a whole had been enjoying since 2013. The measures taken to contain the spread of the Covid-19 pandemic restrained economic activity across various sectors, while the uncertainty created by the economic slowdown had effects across the labour market.


Paradoxically, this unprecedented impact on employment is difficult to grasp with currently available labour market statistics. The main reason is that a large proportion of workers who lost their jobs due to the Covid-19 crisis do not meet two conditions to be classified as unemployed in official statistics: either they did not immediately start searching for a new job (e.g. because the activity of their sector was stopped completely, as in the hotel or entertainment industries) or they were not available to start a new job right away (e.g. due to limitations imposed by lockdowns). Therefore, the increase in the unemployment rate – by about 0.7 percentage points between January and July 2020 in the EU27, amounting to about 1.15 million more unemployed persons – does not fully reflect the extent of the employment loss and most likely paints an overly optimistic picture of what to expect in the months to come. For this reason, it is important to also consider the increase in the number of ‘economically inactive’ persons, who are neither ‘employed’ nor ‘unemployed’. The share of economically inactive people aged 15-64 grew from 27% in the second quarter of 2019 to 28.6% in the second quarter of 2020 (EU28 countries except for Germany and Malta). In real terms, this means there are almost 4.4 million more economically inactive persons in the EU this year.


The net employment loss also shows a much more severe impact from the Covid-19 crisis than the unemployment figures do. As shown in Figure 2.5, the number of persons in employment declined sharply in the past 12 months, by around 4.8 million people across the EU28 (not including Malta) between the second quarters of 2019 and 2020. In comparison, the net employment loss at EU28 level between 2008 and 2009 amounted to 3.97 million jobs. However, these figures are still likely to underestimate the scale of the damage inflicted by the Covid-19 crisis because of the various support measures introduced to cushion the loss of jobs, such as short-time work or furlough schemes. According to estimates produced by Müller and Schulten (2020a), at the peak of the first wave of the pandemic (that is, between April and May 2020) as many as 50 million workers in Europe were on short-time work or similar schemes, amounting to nearly half of all workers in countries such as Switzerland, France and Italy (Figure 2.6). These numbers have evolved in the months since, and the ETUI plans to publish an update with the autumn figures in early 2021.


The loss of employment has differed significantly across the Member States, which is mainly due to differences in sectoral composition (e.g. countries with a larger tourism sector being more affected by job losses) as well as to different national policy responses and mechanisms adopted to alleviate the toll on employment. As illustrated in Figure 2.7, Spain and Bulgaria suffered the biggest job losses: around 6% of all employed persons compared to 2019. They are followed by Ireland, Estonia, Portugal, Italy, Romania, Greece and Austria, which all lost more than 3% of their employment over the past 12 months. On the other hand, the UK and Cyprus were the only countries with a higher number of persons in employment in 2020Q2 than in 2019Q2, though again this trend would need to be reviewed as new data and statistics become available.


-4.8 million

employment loss in the EU28 over the last year
(number of employed aged 15-64 in 2020Q2 compared to 2019Q2, not including Malta)


Source: Eurostat-LFS [lfsq_egaps], data for Germany are from Destatis (Genesis-Online Database). Data for Malta for 2020q1. Age group 15-64.

 

Figure 2.6 Number of workers (actual or applied for) on short-time work and similar schemes. End of April/beginning of May 2020. (In % of all workers and in millions)

Figure 2.6

Source: Müller and Schulten (2020a) on the basis of data from national employment agencies and ministries.
Note: Data for Luxembourg include cross-border commuters.

Source: Eurostat [lfsq_egaps], data for Germany are from Destatis (Genesis-Online Database).
Note: Malta not included in the EU28 average.

Authors

Agnieszka Piasna
Agnieszka Piasna

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Béla Galgóczi
Béla Galgóczi

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Silvia Rainone
Silvia Rainone

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Wouter Zwysen
Wouter Zwysen

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