ESDE 2017 CONFERENCE 10 OCTOBER 2017 #ESDE2017 INTERGENERATIONAL FAIRNESS Barbara Kauffmann Director of Employment and Social Governance Directorate European Commission DG Employment, Social Affairs and Inclusion
Why intergenerational fairness? Real GDP per capita, 2005 prices, since 1949 Living standards keep rising since generations. Can we take that for granted?
The story of ESDE 2017 Recovery continues, social situation slowly improving Labour market disadvantages of today's younger people Impact of demographic change on labour force; younger people contribute more to pension system/receiving less Multipronged strategy needed to improve labour market participation, productivity and intergenerational fairness Social dialogue can play an important role in promoting intergenerational fairness.
Unemployment continues decreasing UR is decreasing fast in the EU Long-term unemployment is decreasing faster than short-term unemployment
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 % of population 30 25 The social situation is stabilising and slightly improving 20 15 10 5 At risk of poverty or social exclusion At risk of poverty Severe material deprivation Very low work intensity household (less than 60 years old) 0
Working lives Generational difference in labour market outcomes Unemployment and long-term unemployment rate, by age groups, 1995-2000 (EU-15) and 2005-2016 (EU-28) U: Younger (25-39) U: Prime-age and older (40-64) LTU: Younger (25-39) LTU: Prime-age (40-54) After some convergence, unemployment gap between younger and older people increased during the crisis 1995* 2000* 2005 2010 2016
Working lives More fragmented working careers for younger people Younger workers (25-39) are more exposed to: Lower job tenure Over-qualification (Involuntary) nonstandard work (temporary & parttime jobs) Precarious employment (lowwage jobs with nonstandard contracts) Length of time people have been employed in a company by age and duration 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 29 28 23 23 18 27 29 31 38 19 20 15 67 13 60 60 18 18 12 14 16 8 8 6 1995* 2005 2015 1995* 2005 2015 10+ years 5 to 9 years 1 to 4 years <1 year 25-39 40-64
BG EE LV LT IE MT SK HU CZ SE FI RO UK PL DE ES DK LU BE CY IT AT PT NL SI FR EL* Working lives Younger workers earn lower wages than older workers Average hourly wage of workers younger than 30 (relative to workers 60+) 140 120 100 2014 2006 80 60 40 20 0
Working lives What are the consequences? 1. Decrease in labour income share of younger people vs. older ones: Due to demographic changes, and Relative decrease in income per younger worker 2. Postponement of household decisions: Household formation Home ownership Parenthood Intergenerational adverse consequences on fertility rates, sustainability of pensions & growth Education & skills more and more important for the labour market Need to invest in efficient education and training
Intergen. Fairness, Challenges Ahead Europe is not the only place where ageing is taking place but ageing pattern will be particular in Europe. Working-age population here: age group 20-64 Sources: UN World Population Prospects 2015 for the US, Eurostat 2015 population projection for the EU
Intergen. Fairness, Challenges Ahead 2000 2002 2004 2006 2008 Own calculations based on Eurostat 2015 population projections, Eurostat LFS 2010 2012 2014 2016 2018 2020 2022 2024 Employment will face its limits.. 2026 2028 2030 2032 2034 2036 2038 2040 307 millions 287 267 70m Inactive people 247 227 Active population 207 Employment 187
Index 2015 = 100 Living standards in retirement 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 2080 Increasing old-age dependency in the EU 170 Population > 65 160 150 140 130 120 110 100 Population 20-65 90 80 Old-age dependency rate (rhs) 0.6 0.55 0.5 0.45 0.4 0.35 0.3 0.25 Old-age dependency rate
Living standards in retirement The challenges - and how the EU needs to react 1. To safeguard future potential growth: EU must activate its inactive human resources Future workers will have to strongly accelerate productivity growth Action needed: Bring people into productive employment Need to invest in efficient education and training 2. Future workers will carry the double burden of ageing
Social Dialogue Union membership is lower among young employees 100 90 80 70 60 50 40 30 20 10 0 DK FI SE BE LU CY IE AT SI ROUK HR IT NL DE ES LV BG PT PL SK FR EL LT EE CZ HU Based on European Social Survey. Data years: see ESDE 2017 15-29 45-59 Total
Social Dialogue (Self-reported) coverage by collective agreements is lower among young workers 100 90 80 70 60 50 40 30 20 10 0 BE DK FI DE HU NL PL ES UK <30 30-39 40-49 >=50 Source: Tijdens and Van Klaveren, 2007
Living standards in retirement Social partners: Social dialogue: important tool for promoting intergenerational fairness jointly advance the social market economy, including for younger and older workers and their employers Move from 'replacement' approach (early retirement) towards promoting synergies (skills transfers) and lifecycle perspectives (work life balance, health and safety) European social partners' autonomous framework agreement on active ageing and an intergenerational approach
Conclusions Positive labour market and social trends, continued economic growth. But today's younger generations remain disadvantaged on the labour market. This is worrisome also because...young people and future cohorts are found to bear the 'double burden' of demographic change. Lesson to learn from ESDE 2017 Findings are a case for investing in today's young and future generations' employability because... they need to be more productive than today's workers while being able to cut their fair share from GDP. More reforms needed in social security schemes to make them more sustainable, while safeguarding adequacy in the future.
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