The social impact of the crisis

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1 Backgroud paper Impact of the crisis o labour markets Impact of the crisis o youg people Impact of the crisis o livig coditios ad quality of life Wage developmets durig the crisis Impact of the crisis o workers evidece from the th EWCS Relevat Eurofoud research Wyattville Road, Loughlistow, Dubli 18, Irelad. - Tel: (+33 1) Fax: / postmaster@eurofoud.europa.eu - website:

2 Impact of the crisis o labour markets While there has bee some recovery sice the depths of the Great Recessio i 2009, both output ad employmet levels remai lower tha they were pre-crisis i the EU-27. Ideed, the severity of the recessio has bee such that output has yet to retur to 2007 levels i each of the largest Member States, eve i those like Germay where recovery has bee most stable. Moreover, growth forecasts have bee revised dowwards throughout 2011 sigallig the weakess of the recovery ad the presece of egative global ecoomic ad fiacial risks. Most recetly, o 21 September 2011, the IMF revised growth forecasts dowwards throughout the developed world. Employmet i the most recet quarter for which data is available (2011Q1) was over 8 millio below those i the peak pre-crisis quarter of employmet (2008Q3). Uemploymet rates i the EU have persisted at aroud 9.% for over a year. A diverse regioal ad sectoral picture Aside from its severity, a secod, importat dimesio of the crisis ad recovery has bee the differetial impact o labour markets across the EU-27. Some coutries such as Polad, Germay ad Luxembourg have emerged from the recessio with labour markets comparatively uscathed ad have posted sigificat employmet growth durig the recovery phase (spectacularly so i the case of Luxembourg), see Figure 1. Most coutries, however, suffered sigificat employmet declies with oly margial coutervailig icreases i last year (20Q1-2011Q1). Ad the coutries worst affected by the crisis Spai, Irelad, the Baltic Republics ad Bulgaria each lost at least % of pre-recessio employmet. Figure 1: Percetage chage i employmet, EU-27, 2008q1-2011q q1 11q1 08q1 q IE LV BG LT ES EE GR PT DK SI HU FI SK NL EU CZ UK IT FR CY BE RO SE AT DE PL MT LU 27 Source: EU LFS (authors calculatios) 1

While the labour markets i the Baltic republics show sigs of recoverig from their steep recessio slump, those of Greece ad Sloveia i particular are ailig i the recovery phase.

3 While the labour markets i the Baltic republics show sigs of recoverig from their steep recessio slump, those of Greece ad Sloveia i particular are ailig i the recovery phase. I both coutries, employmet declied more i the post-recessio period. Employmet declied i eight member states i the period 20q1-2011q1 ad grew i 19. Coutries whose sovereig debt sustaiability has come uder questio sice the first Greek bail out i May 20 - Irelad, Spai, Greece ad Portugal - are amogst those with cotiuig decliig employmet. Uemploymet remais at treble its pre-crisis levels i Irelad ad double i Spai. It is oteworthy that those coutries that have most obvious labour market, ad so also social, problems are those with limited public sector fiaces to esure a high level of social security i the crisis. Figure 2 presets a more uaced regioal picture of employmet chage sice early Most Germa regios experieced icreasig employmet rates, as did may Polish, Romaia ad Austria regios. Souther Frech regios fared better tha their Norther ad Atlatic couterparts while Norther Italia regios especially Piemote ad Tretio/Alto Adige fared better tha souther ad cetral regios. This map paits a strikigly cotrastig picture to the developmets up to 2008, which showed a much more positive picture i the geographical peripheries of Europe with more sluggish growth i the cetre. Figure 2: Employmet rate chages, 2008Q1-2011Q1 (20-64 yrs of age), EU-27 by NUTs 2 regio Source: Europea Labour Force survey 2

Sectoral chage The two broad sectors that cotributed most to employmet declies were maufacturig ad costructio. Betwee them, they accout for more tha 6.

4 Sectoral chage The two broad sectors that cotributed most to employmet declies were maufacturig ad costructio. Betwee them, they accout for more tha 6.4 millio job losses, well over 0% of the of the total et employmet declie durig the recessio ad post-recessio period. Ulike employmet losses i maufacturig which teded to be more evely spread across coutries, costructio sector declies teded to be cocetrated i specific coutries where precedig real estate booms foudered. I Spai, 4% of costructio sector jobs disappeared betwee 2008Q1-2011Q1 (1.1 millio jobs). I the UK, oe i five jobs was lost (400,000) while i Irelad a astoishig three out of five costructio jobs disappeared. The retail sector was the other major cotributor to overall et employmet loss. Over 1 millio jobs (early 4%) were lost i this sector. The log-ru declie i agricultural employmet slowed somewhat durig the recessio the sector lost 4% of employmet i 2008Q1-11Q1. By compariso, over 11% of employmet was shed i the pre-recessio period (Eurofoud 2008). Figure 3 shows that the predomiatly state-fuded sectors educatio ad health have held up employmet durig the recessio. There was a 4% icrease i employmet i educatio ad a 7% icrease i health. While these sectors appeared to beefit from some balacig or compesatory Keyesiaism, otably i the most recessio-affected coutries employmet i the Spaish health sector for example icreased by 17% betwee 2008Q1-2011Q1 the core of the public service, public admiistratio, displayed istead some evidece of austerity. Employmet declied margially overall i public admiistratio at EU-level (-1%) but with larger declies of 6% i Frace, % i the UK ad a dramatic 30% i Latvia. Figure 3: Relative employmet growth i predomiatly state-fuded sectors, 2008q1-2011q1 Source: EU LFS (authors calculatios) 3

5 Impact of the crisis o youg people Youg people i Europe have bee hit particularly hard by the recessio. Accordig to the latest Eurostat figures, i the first quarter of 2011, the youth employmet rate dropped to 32.9%, the lowest value ever recorded i the history of the Europea Uio. Furthermore, i July 2011, the youth uemploymet rate reached 20.7%, correspodig to approximately millio people. Figure 4 shows the distributio of the youth uemploymet rate as of July 2011 i Europe. This cofirms the picture paited i Figure 2 of severe problems i the periphery but with the cetre holdig relatively strog. Figure 4: Youth uemploymet rate i Europe, July 2011 No EU coutries Less tha % Betwee % ad 1% Betwee 1% ad 20% Betwee 20% ad 2% Betwee 2% ad 30% More tha 30% Source: EU LFS Whe uemploymet reaches such high levels, obviously it hits wider ad wider groups of youg people, for example, eve the well educated youth. Ideed Eurofoud estimates show that the protective effect of tertiary educatio o the probability of youg people becomig uemployed has decreased i all Member States betwee 2007 ad Ideed, for some coutries, havig completed tertiary educatio o loger lowers the risk of uemploymet compared to havig the lowest level of educatio. This is the case for some Mediterraea (Italy, Greece ad Portugal) ad Easter Europea coutries (Estoia, Lithuaia, Romaia ad Sloveia) ad eve for Demark ad Filad. 4

6 Ecoomic cost of the log term uemploymet of youg people. Uemploymet ad other forms of exclusio from the labour market ad society lead to sigificat ecoomic ad social costs for the directly affected idividuals. It also icurs costs o society as a whole. Eurofoud is coductig a project that attempts to measure these wider social ad ecoomic costs. Here we preset oly the results for the ecoomic costs. There are Resource costs: foregoe earigs due to the lack of participatio i labour market (employee ad self-employmet icome, o-cash employee beefits, goods produced by ow cosumptio, pesios from private plas, etc.) Public Fiace Costs: the excess of trasfer paymets through welfare state arragemets (uemploymet beefits, sickess ad disability beefits, educatio related allowaces, etc.) Estimatig the ecoomic cost of log term uemploymet for youg people Data: The 2008 Europea Uio Statistics o Icome ad Livig Coditios (EU-SILC) Scope: 21 coutries. Demark, Frace, Greece, Filad, Malta ad Swede have bee excluded due to missig variables. Populatio: year olds uemployed or iactive (but ot i educatio) for more tha 6 moths. Method: 1. Match the uemployed ad iactive to comparable employed idividuals i the survey o the basis of their age, sex, educatio level, immigratio backgroud, health, marital status, offsprig, household status, etc. Those youg employed who are ot comparable because their characteristics are very differet from the uemployed are excluded from the compariso. 2. The total cost is the sum of the resource cost (foregoe earigs) ad public fiace cost (excess trasfer) as defied above. Foregoe earig are estimated as the differece betwee the earigs geerated by the uemployed or iactive ad those geerated by comparable idividuals i employmet. Similarly, excess trasfer is computed as the differece betwee the total amout of beefits received by the log term uemployed ad the oes received by those i employmet. O the basis of these calculatios the cost of log term uemploymet or iactivity amog youg people i the 21 coutries i 2008 amouted to at least 2 billio euro per week to society. The aual total cost of 4 billio euro correspods to 1.1% of GDP. The mai cost is 96 billios of foregoe earigs ad 6.4 billios of excess trasfers. At the coutry level, the most expesive bill i euros is paid yearly by Italy (26 billios) ad UK (19 billios). However, i terms of percetage of GDP, Irelad ad Bulgaria pay the most expesive bill (2.% of GDP), followed by Italy ad Cyprus (1.6%). Luxembourg ad the Netherlads show the lowest cost, 0.3% ad 0.6% of GDP respectively.

Figure : Costs of log term uemployed ad iactive youg people i 2008 3 total fiace cost as % of GDP total resource cost as % of GDP 2. 2 1. 1 0.

7 Figure : Costs of log term uemployed ad iactive youg people i total fiace cost as % of GDP total resource cost as % of GDP AT BE BG CY CZ DE EE ES HU IE IT LT LU LV NL PL PT RO SI SK UK EU27 Source: Eurofoud calculatios based o EU-SILC data Note that the estimatio is the curret cost oly ad it refers to Moreover, it is a uder estimatio of the full cost as additioal costs for health, crimial justice, ad upaid taxes o foregoe earigs are ot icluded i the defiitio. Moreover, the problem of homelessess is ot cosidered here. Of course oe could argue that the compariso sceario of all these youg people gettig a job i the curret depressed labour market is ot realistic ad that ot all these youg people are curretly able ad willig to work. While this is udoubtedly true, these are still what the costs of this iactivity are. Perhaps a more useful type of presetatio of these results is that re-itegratio ito employmet of just % of these people would achieve a yearly savig of more tha billio euro. Impact of the crisis o livig coditios ad quality of life I the EU 27, material coditios improved just before the crisis (betwee 2003 ad 2007) ad worseed after the start of the crisis i This is illustrated by the resposes to a questio i the EQLS ad Eurobarometer about how easy or difficult it is for the respodet s household to make eds meet. After a improvemet betwee 2003 ad 2007, by 20 the proportio of people reportig difficulties is back at 2003 levels. Whe lookig at coutry groups, we see that the iitial improvemet was drive by the ew Member States where people reportig fiacial difficulties decreased by as much as 1 percetage poits. Sice 2009 the situatio has worseed at a similar rate i old ad ew Member States. 6

Figure 6: Difficulties i makig eds meet, by coutry group 4 41 40 3 30 2 26 22 2 EU12 20 1 17 13 13 11 17 14 EU27 EU1 0 2003 2007 2009 20 Sources: EQLS 2003; EQLS 20; Eurobarometer 72.

8 Figure 6: Difficulties i makig eds meet, by coutry group EU EU27 EU Sources: EQLS 2003; EQLS 20; Eurobarometer 72.1 (2009); Eurobarometer 74.1 (20); Treds i Quality of Life (resume), Eurofoud, 20 Lookig at coutry-level data, the biggest icrease i the umber of households with fiacial difficulties is i coutries where the crisis hit the hardest: Greece, Latvia, Lithuaia, Irelad ad Spai. Figure 7: Difficulties i makig eds meet, by coutry (%) Bulgaria Greece Romaia Latvia Cyprus Lithuaia Hugary EU12 Polad Czech Republic EU27 Frace Spai Malta Estoia EU1 Slovakia Portugal Belgium Sloveia Italy Irelad Netherlads UK Germay Austria Filad Demark Luxembourg Swede Sources: EQLS 2003; EQLS 20; Eurobarometer 72.1 (2009); Eurobarometer 74.1 (20); Treds i Quality of Life (resume), Eurofoud, 20 7

9 A similar patter of declie ca be see whe people s satisfactio with their stadard of livig is compared. I the EU as a whole, after a period of stability i perceived stadard of livig, there has bee a declie betwee 2007 ad 2009 ad a further deterioratio betwee 2009 ad 20. At the same time, respodets i the ew Member States reported a cosiderable icrease i satisfactio with their stadard of livig pre-crisis, followed by a large drop by This tred, perhaps, reflects the hopefuless of citizes i most ew Member States after their coutry joied the EU, from which they expected primarily a improvemet i their stadard of livig. These expectatios were ot met ad there has bee a sigificat deterioratio i this idicator of subjective well beig. Figure 8: Satisfactio with stadard of livig EU EU Sources: EQLS 2003; EQLS 20; Eurobarometer 72.1 (2009); Eurobarometer 74.1 (20); Treds i Quality of Life (resume), Eurofoud, 20 May households are strugglig to make paymets related to their debts, whether it cocers mortgages or cosumer credit. Furthermore, households ru behid payig their bills, especially from utility ad ret. Agai, these problems have become icreasigly commo amog households i the EU27 durig the crisis. I late 20, aroud 27% of EU27 residets of 1 years ad older reported feelig very or fairly at risk of beig over-idebted (Eurobarometer 2011). Job loss or drop i icome is a commo cause especially i the coutries most affected by the ecoomic crisis, like Spai, Irelad, Greece ad the Baltic states. 8

Figure 9: Importat cause of debt problems: drop i icome, triggered by various causes (2008) 3 30 2 Other cause Retiremet 20 1 Carig for child Sickess/disability Job loss or drop i wage/hours 0 IT HU

10 Figure 9: Importat cause of debt problems: drop i icome, triggered by various causes (2008) Other cause Retiremet 20 1 Carig for child Sickess/disability Job loss or drop i wage/hours 0 IT HU ES PT UK LT BG LV IE EU AT EL CZ PL SK CY DE FI SE LU SI DK BE NL EE RO Source: Usig EU-SILC data from Fodeville et al. (20) Wage developmets durig the crisis Withi the cotext of the ecoomic crisis, the level of agreed pay icreases has bee a source of major cocer across Europe. The majority of coutries ad sectors have experieced a cosiderable declie i the rates of collectively agreed pay icreases durig 20. Negotiatios were ofte hard, it took loger to come to some coclusios, ad i some cases the duratio of existig agreemets was prologed whereas i other cases collective bargaiig o wages was eve discotiued. Particularly i the coutries hardest hit by the crisis, atioal actors have started to discuss ad adjust their usual ways of pay settig already i 20. Further adjustmets are to be expected i future. I almost all coutries where figures are available (almost half of the Europea Member States have databases recordig collective agreemets) collectively agreed omial pay icreases i 20 have bee lower tha those i With regard to real pay, the 2009 EIRO pay update reported a icrease i the average collectively agreed real pay across the EU coutries for which data are available. This was due to the iflatio rate fallig sharply for the EU as a whole, from 3.7% i 2008 to 1% i The euro zoe saw a eve greater drop, from 3.3% to 0.3%. However, 20 marks a turig poit, as iflatio icreased to 2.1% of collectively agreed pay i may coutries did ot make up for price developmets. Miimum wage Miimum wage icreases were geerally low or o-existet i 20 as reported by the EIRO atioal correspodets. I ie coutries out of 20 where miimum wages exist Belgium, Bulgaria, Czech Republic, Estoia, Greece, Irelad, Latvia, Lithuaia ad Romaia o omial icrease was set or agreed for 20. Moderate icreases of the miimum wage were recorded i Frace, the Netherlads, Spai ad the UK. Slightly higher percetage icreases of the miimum wage tha the previous group of coutries could be see i Hugary, Luxembourg, Malta, Polad ad Portugal. The highest icrease i the statutory miimum wage i 20 was grated i Sloveia (9.6%). Slovakia is the oly coutry where a declie i the umber of miimum wage recipiets has bee reported. 9

11 Youth miimum wages A umber of coutries have set lower miimum wages for youg people. The table below presets a summary of these rates. The exceptio is Latvia, where the adult miimum wage also applies to youg people, although they have a shorter workig week by regulatio. Hece, youg people i Latvia have i fact a miimum wage that stads at 114% per hour of the full adult rate. For Belgium, it has bee reported that a sigificat umber of sector agreemets have i recet years abadoed the lower, specific youth rates, i order to coform with Europea Uio ati-discrimiatio laws. Youth miimum wages were bee abadoed i Slovakia i Miimum wages for youg people, 20 Belgium Czech Republic Frace Recipiets Note: Euro coversios based o average exchage rates for 20 from the ECB. Source: EIRO Rate or percetage of full rate Workers aged 16 years 70% Workers aged 17 years 76% Workers aged 18 years 82% Workers aged 20 years 94% Workers aged 21 years ad over 0% Workers aged below 18 years 80% Workers aged years 90% Workers aged below 17 years 80% Workers aged years 90% Greece Workers aged 1 18 years 70% Irelad Workers aged below 18 years Workers aged over 18 years, o first year of first employmet Workers aged over 18 years, o secod year of first employmet 6.06 per hour 6.92 per hour 7.79 per hour Workers aged over 18, traiig or study udertake i ormal workig hours (1st / 2d / 3rd period) 6.49/ 6.92/ 7.79 per hour Luxembourg Workers aged 1 ad 16 years 7% Workers aged years 80% Latvia Workers aged 1 18 years 114% (LVL 1.23 ( 1.7) per hour) Malta Workers aged uder 17 years 94% Workers aged over 17 years 96% Workers aged 1 years 30% Workers aged 16 years 34.% Workers aged 17 years 39.% Netherlads Workers aged 18 years 4.% Workers aged 19 years 2.% Workers aged 20 years 61.% Workers aged 21 years 72.% Workers aged 22 years 8% Polad First year i employmet 80% Workers aged years GBP 3.63 ( 4.23) per hour UK Developmet rate : years (util 2009); (from 20) GBP 4.83 (.63) per hour Appretices (itroduced i Oct 20) GBP 2.0 ( 2.91) per hour

Impact of the crisis o workers evidece from the th EWCS The th Europea Workig Coditios Survey (EWCS) asked those i employmet at the time of the survey i sprig 20 whether their work situatio had

12 Impact of the crisis o workers evidece from the th EWCS The th Europea Workig Coditios Survey (EWCS) asked those i employmet at the time of the survey i sprig 20 whether their work situatio had chaged sice Jauary With regard to workig time 71% of workers did ot see ay chage, 18% saw a icrease ad 11% saw a decrease i their weekly workig hours. Coutry differeces are, however, very strikig. I Irelad, Estoia, Latvia ad Lithuaia, the situatio is the reverse. More workers reported a decrease rather tha a icrease i their workig time. I these coutries, betwee 17 ad 24% of workers saw a decrease, while betwee 9% ad 1% saw a icrease. With regard to pay, the majority of workers, albeit a somewhat smaller percetage (7.7%), report experiecig o chage i their icome from Jauary 2009 to sprig 20. A quarter of workers experieced a icrease. Regardig icome, there is a clear distictio betwee self-employed ad employees. The former seem to have experieced more difficulties to keep their icome at the same level, as less tha half (46.6%) declared o chage ad more tha a third (37%) idicated a decrease. Oly 16.3% experieced a icrease. Not surprisigly, workers feel less secure about keepig their jobs i 20 tha they did i 200. The th Europea Workig Coditios Survey shows that whereas i % of workers i the EU 27 were cocered that they might lose their job i the ext six moth, i 20 this average figure had rise to 16%, o doubt reflectig the impact of the crisis. Maual workers i particular lower skilled maual workers feel less secure i their jobs tha do clerical workers ads the gap has bee wideig sice 200. Feelig isecure about oe s job is related to how work ad the work eviromet is perceived. Those who feel their job might be i dager are more likely to feel that their health ad safety is at risk because of work ad that work affects their health egatively. 30% feel that their well-beig is poor, compared to 20% of those who do ot feel their job is threateed. See figure below. Figure : Impact of job security (%) 60 I will probably NOT lose my job i the ext 6 moths I might lose my job i the ext 6 moths Health ad safety risks Work affects health egatively Sickess absece Poor well beig Work ijury Source: th EWCS 11

13 Relevat Eurofoud research The third wave of the Europea Quality of Life Survey (EQLS) is curretly i the field. Data (which will be available i 2012) is expected to provide more detailed iformatio o treds i quality of life before ad after the crisis, ad it will allow extesive aalysis of relatioships betwee subjective ad objective idicators of quality of life as well as a i-depth look ito differeces betwee social groups. Active iclusio of youg people with disabilities. The rise i the umbers of youg people claimig disability beefits seems to be widespread i Europe, though the extet of the rise is ot always i excess of other age groups. Curret policies ted to focus o youth uemploymet or o promotig the employmet of people with disabilities. This project examies social parter iitiatives ad good practice examples i 11 EU coutries (DK, UK, PL, NL, ES, FI, FR, PT, DE, IE ad SK. Maagig household debts: extet ad character, access to ad quality of advisory services. Debt advisory services have the potetial to improve, eve if just partially, the difficult coditios faced by may households with debt problems. Effective assistace for households with debt problems ca prevet ad alleviate poverty. This Eurofoud study looked at advisory services i four coutries, Hugary, Portugal, Swede ad Irelad. The assessmet preseted should help policy-makers, debt advisory service providers ad other stakeholders i learig from experieces. Compay iitiatives for workers with care resposibilities for disabled childre. I early all coutries more tha half of carers uder the age of 6 combie care with employmet. 6%-% of employees are providig regular care, especially older (female) workers (13%-16%). But amog those with care resposibilities oly half of wome (but 9 out of me) are able to work full-time. I this research project, Eurofoud has looked at 0 compaies i 11 coutries (AT, BE, DE, FI, FR, IE, NL, PL, PT, SI, UK) ad examied measures for workig carers itroduced at compay level. Measures covered are related to leave (log ad short term, emergecy leave), reductio i workig hours, work flexibility, care related support, occupatioal health ad well beig measures, awareess raisig ad skills developmet ad co-operatio with exteral etities. Case studies will be published i 2011 i a o-lie data base. Youth employmet: Challeges ad solutios for higher participatio of youg people i the labour market. This project explores youth uemploymet i Europe i order to capture the extet of the pheomeo, highlightig similarities ad differeces amog Member States, its dyamics ad the tred across time to provide a evaluatio of the effect of the crisis amog youth. The focus of the study is o the exploratio of the so called NEET geeratio (Not i Employmet, Educatio or Traiig), defiig who they are, the extet ad the dyamics of the pheomeo ad aalysig possible determiats of why youg people ed up NEET. The project also icludes a estimatio of the ecoomic ad social cost of the NEET geeratio, as well as a overview of differet activatio policies for youth ad NEET. The Europea Jobs Moitor ad the Europea Restructurig Moitor will cotiue to provide very timely iformatio o the labour market adjustmet to the very rapid structural chage ow o-goig i Europe. The Restructurig i Recessio ad Labour Force Participatio project to be published 2012Q1 revisits Eurofoud s ageig workforce data to examie how compay ageig policies were successful i facig the challeges of restructurig durig the recessio. EF/11/68/EN 12

This article is part of a series providing

This article is part of a series providing feature Bryce Millard ad Adrew Machi Characteristics of public sector workers SUMMARY This article presets aalysis of public sector employmet, ad makes comparisos with the private sector, usig data from