European Commission Directorate General for Empl : How's Europe? Employment and social developments in 2015

22/01/2016

Yesterday Commissioner Thyssen presented the annual review of employment and social developments in the European Union.

In the coming posts, we will present some of the key findings from this review to examine how we are doing on the Europe 2020 employment and social goals and discuss the policy measures that contribute to achieving these objectives.

Differences between countries grew in the crisis

While the economic outlook has improved in Europe, the recent positive developments remain moderate and diverse across countries. Restoring convergence in the European Union has emerged as a major challenge.

Although there are around 3.5 million fewer unemployed people now than at the unemployment peak in April 2013, unemployment has yet to recede to pre-crisis levels. Unemployment rates are particularly high in some Member States and generally much higher than in the USA, with differences between EU countries now much greater than before the crisis (see Chart 1).

In November 2015, unemployment rate ranged from 5% or less in Germany, Malta and the Czech Republic to more than 20% in Spain and Greece.

These disparities do not result only from the asymmetries in the size and nature of the initial economic shocks, but also from the uneven capacity of Member States' economies and institutions to absorb the shocks and to limit their impact on labour markets and household incomes.

Improving resilience of vulnerable economies a necessity

Therefore, restoring convergence will depend on improving the resilience of the most vulnerable economies, notably by removing obstacles to growth and job creation and by strengthening labour market and welfare institutions. This is particularly important in EMU countries, where monetary and fiscal adjustment mechanisms are limited or not available. The Review analyses for example how self-employment and entrepreneurship can boost job creation, what policies are associated with skills development, and how effectively social policies support adequate incomes and labour force participation.

Poverty remains a major challenge

The economic crisis had severe social consequences in many Member States, but household incomes are on the rise again, benefiting from stronger economic activity and improving labour market conditions. On average in the EU, real gross disposable household income (GDHI) increased by 1.7% in 2014 (see Chart 2, and also our earlier post on inclusive growth).

Note: GDP for EU28. The real GDHI growth for the EU is DG EMPL estimation, and it includes Member States for which quarterly data are available (17 Member States: AT, BE, CZ, DE, DK, EL, ES, FI, FR, HR, IE, IT, NL, PT, SE, SI, UK, which account for at least 90% of EU GDHI, PL and RO available till 2012). The nominal GDHI is converted into real GDHI by deflating with the deflator (price index) of household final consumption expenditure. The real GDHI growth is a weighted average of real GDHI growth in Member States.

The share of people at risk of poverty or social exclusion (AROPE) stabilised in 2013 and 2014 after a continuous increase since the onset of the crisis. Nevertheless, the recent developments vary across countries and the rate remains very high: in 2014, a quarter of the EU population - about 122 million people - were at risk of poverty or social exclusion.

Despite recent positive signs regarding employment, unemployment, household incomes and poverty, a lot needs to be done to achieve the Europe 2020 objectives, to get back to the pre-crisis levels of well-being, and to create upward convergence within the European Union.

The forthcoming posts based on our review will address in detail how countries are performing with regard to employment and social outcomes and what can be done to boost job creation and citizens' well-being throughout Europe.

For sure, there will be a lot of food for thought for this New Year 2016!

Read more in our publication Employment and Social Developments in Europe 2015.

Author: M. Vaalavuo works as a socio-economic analyst in the unit of Thematic Analysis of DG EMPL.

The views expressed in this article are those of the authors and do not necessarily reflect the views of the European Commission.

Editor's note: this article is part of a regular series called 'Evidence in focus ', which puts the spotlight on key findings from past and on-going research at DG EMPL.