Labour market performances across the EU

Transcription

1 Labour market performances across the EU Active labour market policies, what works Bruegel, Malta 27 April 2016 Alfonso Arpaia European Commission, DG Employment and Social Affairs

2 Outline The overall labour market performance in the EU is improving Unemployment has declined amidst weak recovery & low investment But long-term unemployment has declined slowly Performances across the EU has started to converge, but remain heterogeneous Improvements reflect ongoing rebalancing of external positions within the euro-area and wage adjustment in high unemployment countries And comprehensive reforms implemented in particular in vulnerable countries Keep reform momentum and use the full scope for adjustment already introduced

3 The labour market recovery is continuing, but Unemployment rates across world macro regions Swift and relative strong fall of 14 unemployment in spite of 12 Anaemic growth 10 Weak investment dynamics until 8 recently 6 Pervasive rebalancing needs 4 Jul-2015 Jan-2007 Jul-2007 Jan-2008 Jul-2008 Jan-2009 Jul-2009 Jan-2010 Jul-2010 Jan-2011 Jul-2011 Jan-2012 Jul-2012 Jan-2013 Jul-2013 Jan-2014 Jul-2014 Jan-2015 Jan-2016 % USA EA19 EU28 G7 Latest data : May 2015

4 % Long-term unemployment is declining slowly, reflecting depressed job finding rates, especially for those out of work for more than 12 months Long-term unemployed in the EU, the euro area and the US 2005q1 2006q1 2007q1 2008q1 2009q1 2010q1 2011q1 2012q1 2013q1 EU Euro area US 2014q1 2015q1 2015q Q1 Job finding rate by duration of unemployment % 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 Less than one month Between 6 and 12 months 2011Q1 2012Q1 2013Q1 2014Q1 2015Q1 Between 3 and 6 months More than 12 months 2015Q4 LTU falling But well above pre-crisis levels Job finding rates has started to improve only recently Less for LTU

5 Improved confidence goes with fall in unemployment Unemployment rate and unemployment expectations for the coming 12 months Drop Job destruction rates dynamic private consumption From April 2015 consumers' and employers' unemployment confidence back to pre-crisis levels Consumers' expectations on unemployment Employers' expectations on employment, industry (inverted) Unemployment rate (right axis)

6 Reduction of unemployment along a worsened matching Beveridge curve for the euro area, Q3-2011Q2: Vacancies rise, unemployment unchanged Q1 2011Q2-2013Q3: vacancies drop, unemployment increases 2013Q3-2016Q1: vacancies rise, unemployment drops BC has shifted outward but not all increase in LTU reflects persistent mismatches Vacancies Q1 2007Q1 2006Q1 2009Q1 2011Q1 2016Q1 2012Q1 2015Q1 1995Q1 2014Q1 2013Q1 2010Q Unemployment rate

7 Supportive wage and unit labour costs developments Growth in nominal compensation per employee Phillips curve of the EA : growth rate of compensation per employee 4 remain moderate Compensation per employee (annual growth) Linear trend Unemployment rate

8 Labour market performances across the EU has started to converge, but remain heterogeneous recession Unemployment rate (EU15) Unemployment rate (EU28) standard deviation EU15 standard deviation EU Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q1-2015

9 Asymmetric effects of common shocks prevail Share of countries in recession (EU15) (Lhs) Share of countries in recession (EU28) (Lhs) standard deviation EU Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q3-2015

10 Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3 14Q4 15Q1 Unemployment Rate 15Q2 15Q3 15Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3 14Q4 15Q1 15Q Real GDP Current Recovery 15Q3 15Q4

11 Q1 13Q Q2 Unemployment Rate 13Q3 13Q4 14Q1 14Q2 14Q3 14Q4 15Q1 Unemployment Rate 15Q2 2013Q1 15Q Q2 2013Q Real GDP Past and current Recoveries 15Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3 14Q4 15Q1 15Q2 15Q3 15Q Real GDP Current Recovery Q2 2013Q1 Real Compensation/employee

12 Unit labour cost dynamics consistent with rebalancing of external positions in the euro area Since 2011 NULC dynamics support rebalancing in the euro area

13 The process of rebalancing is under way Developments in employment and profitability: tradable vs non-tradable sectors Sectoral pattern helps reallocating employment towards the tradable sector in deficit countries Employment growth (tradable vs non-tradables: changes IT FI LU Profit margins (tradable vs non-tradables: changes ) NL AT BE ES FR SK EL DE SI PT IE

14 Reforms stance in wage setting, euro area countries Reforms of wage setting are associated with wage adjustment Horizontal axis: actual wage growth wages growth expected on the basis of fundamentals Vertical axis: reform stance in the wage setting, Avg. diff. between actual and benchmark wage growth, EL ES CY IE IT FR FI BE LU MT AT NL SI PT EE SK DE Average reform stance in the wage setting domain,

15 Common reform pattern: evolving reform strategies : cushioning the impact of the crisis Strengthened short-time working schemes (permanent) Increased coverage and level of benefits Targeted labour costs reductions (temporary) PES more effective for wider number of jobseeker : fiscal constraints, macro-imbalances and enhancing adjustment capacity EPL: tackle duality and enhance reallocation, reducing uncertainty of dismissals procedure for open-ended contracts Wage setting: enhance adjustment of relative wages and foster contract renegotiation Unemployment benefits

16 From 2013 : tackling the social implications of the crisis ALMPs: employment subsidies, training, targeted services, customized offers and counselling) LTU, low-skilled youth PES: improved job-seekers profiling and targeting of job search assistance Vocational training and recognition of on-the-job-training Improved social safety net: streamline and broaden coverage (permanent) Tax wedge cuts (permanent but timid) Wage setting frameworks: New mechanisms to set MW Measures to ensure better alignment wages to productivity encourage more rapid renewal of expired contracts Keep reform momentum and use the full scope for adjustment already introduced

17 Evolving reform strategies

18 Unemployment benefits, policy direction by parameters: Since the onset of the crisis Increasing generosity (NRR and duration) Strengthening search & job availability conditions Extending coverage Net replacement rate Duration of benefits Coverage and eligibility criteria Search and job availability conditions increasing decreasing

19 Welfare Benefits, policy direction by parameters: In-work benefits Social assistance Family-related benefits Short-time work schemes increasing decreasing

20 Reform stance in social assistance Reforms improving the generosity of social assistance less frequent in countries with a sharper deterioration of social situation (perhaps owing to tight fiscal constraint)

21 Unemployment started to decline but LTU remains high How to avoid that increase in LTU translates into permanently higher unemployment rates? Policy priorities: labour taxation vs. active policies and safety nets To maintain momentum towards structural reforms, exploit the full scope of adjustment introduced with recent reforms and avoid reforms' reversal

22 Thank you for your attention