EU Employment and Social Situation Quarterly Review – Summer 2011

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EU Employment and Social SituationQuarterly review

June 2011


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CONTENTS

HIGHLIGHTS......................... ................................................................ ............................................................ ....... 3

INTRODUCTION ............................................................. .............................................................. ........................... 5

ECONOMIC CONTEXT.................................................................................... ....................................................... 5

LABOUR MARKET SITUATION......................................................... ........................................................... ....... 6

EMPLOYMENT .................................................. ........................................................... ............................................... 6

UNEMPLOYMENT ....................................................... ........................................................... ..................................... 7

LABOUR DEMAND ...................................................... ........................................................... ..................................... 9

LABOUR MARKET DEVELOPMENTS......................................................................... ..................................... 11

EMPLOYMENT PATTERNS ..................................................... ........................................................... ......................... 11

Special Focus: Shifts in the jobs structure during the Great Recession........................................................... 13

PRODUCTIVITY, LABOUR COSTS AND HOURS WORKED .......................................................... ................................... 16

Special Focus: Wages, productivity and labour cost in a macro-economic perspective .................................. 17

SECTORAL TRENDS .................................................... ........................................................... ................................... 23

Special focus: Volunteering ............................................................................................................................... 25

IMPACT OF RESTRUCTURING ON EMPLOYMENT .............................................................. ...................... 27

RECENT SOCIAL TRENDS................................................... ................................................................ ............... 30

LONG-TERM UNEMPLOYMENT AND INACTIVITY ........................................................... ............................................ 30

THE GENDER PERSPECTIVE................................................... ........................................................... ......................... 31

THE SITUATION FOR YOUNG PEOPLE ........................................................ ........................................................... ..... 32

LABOUR MARKET DEVELOPMENTS FOR OTHER VULNERABLE GROUPS...................................................... ............... 35

Special focus: The impact of the crisis on the risk of poverty or exclusion...................................................... 37

LATEST DEVELOPMENTS IN SELECTED MEMBER STATES................... ................................................ 41

OUTLOOK...................................................... ................................................................ .......................................... 49

ANNEX I: SELECTED STATISTICS................................................................................. ................................... 51


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HIGHLIGHTS2010 q1 2010 q2 2010 q3 2010 q4 2011 q1

Real GDP(% change on previous quarter) 0.4 1.0 0.5 0.2 0.8(% change on previous year) 0.9 2.3 2.1 1.9 2.6

Employment growth(% change on previous quarter) -0.1 0.2 0.1 0.1 0.0

(% change on previous year) -1.5 -0.6 -0.1 0.2 0.3

Employment rate(% of working age population, non-seasonally adjusted) 63.5 64.3 64.6 64.2 :

Job vacancy rate(% of vacant and occupied posts, non-seasonally adjusted) 1.3 1.4 1.4 1.5 1.6

Labour productivity(% change on previous year) 2.4 3.0 2.2 1.7 2.1

Labour cost(% change on previous year) 2.4 1.7 1.2 2.0 2.7

Long-term unemployment rate(% Labour force) 3.7 3.8 3.8 4.0 :

2010 Dec 2011 Jan 2010 Feb 2011 Mar 2011 Apr

Unemployment rate (seasonally adjusted)Total (% of labour force) 9.5 9.5 9.5 9.5 9.4

Men 9.5 9.5 9.4 9.4 9.3

Women 9.6 9.6 9.6 9.6 9.5

Youth (% of labour force aged 15-24) 20.7 21.2 20.6 20.5 20.3 The EU labour market is recovering slowly and unevenly. Although the EU has been out ofrecession since mid-2009, latest trends point to a rather jobless recovery, due to the persistinguncertainties about the economic and fiscal situation of some Member States. On a yearly basis,economic output growth picked up by 2.6% by the first quarter of this year, while employment onlyincreased by 0.3%.

Employment has improved since the second quarter of 2010, but significantly less than economicoutput. Moreover, the increases in employment are only due to part-time and temporary jobs:permanent employment was still declining at the end of 2010, even though at a slower rate. As oftenin the past, temporary and part-time contracts lead the business cycle, but at the same time this maycast some doubts about the quality of the recovery and the uncertainties that businesses are facing.

During the Great Recession, job losses have been concentrated in the lower-middle of the wagespectrum while higher paid jobs have continued to increase in knowledge intensive services. Thereare, however, strongly different national patterns of adjustment, i.e. some countries face apolarisation of the work force with relative increases (or smaller decreases) at the top and bottom,others a downgrading with relatively more jobs at the bottom, and others an upgrading with relativemore jobs at the upper end.

Unemployment decreased to 9.4%, but this benefited mostly Member States which already had alower than average unemployment rate. The unemployment rate, for both women and men, hadbroadly stabilised at the beginning of this year, and decreased in April to 9.5 % for women and to9.3% for men, widening slightly the gender gap in favour of men again. Overall, the effects of thecrisis remain more pronounced for men, who still account for 60 % of the total increase inunemployment since March 2008, and whose long-term unemployment rate nearly equalised, at 4 %,with that for women.

Even if the overall trends during the last year points to a slight recovery of the labour market, long-term social risks are apparent, especially for specific sub-groups, including young people, migrantsand low-skilled. Long-term unemployment, although with growth slowing by the end of last year,affects 4% of the EU labour force, with the rate reaching nearly 8 % or more in Ireland, Latvia,Lithuania, Slovakia and Spain. Additionally, although the activity rate, at around 71 %, has remainedstable in the EU, the risk of increased detachment from the labour market remains high in someMember States and for some population segments.


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The labour market for youth has been improving for some time; however the overall impact of thecrisis on young people remains significant. Unemployment still affects 20.3% of young people who areactive in labour market, and remains a major challenge in nearly all Member States, together with an

increased risk of long-term unemployment(at around a 6% level in the fourth quarter of last year). Therecent 'Youth on the Move' Eurobarometer highlighted concerns about the current labour market foryouth, but also pointed to the role of vocational training, higher education and mobility for theprospects on the labour market.

The labour market has also started to stabilise for most of the other population subgroups,however the marked impact of the crisis on migrants and the low-skilled is still evident. Nearly 20 % ofactive migrants from non-EU countries and around 15 % of the active low-skilled persons in the EU areunemployed, and although the increase in long-term unemployment has been slowing down, itespecially remains a risk for migrants and low-skilled (in the fourth quarter of 2010 at 8.0 % and 7.4 %respectively).

The impact of the crisis on the risk of poverty or exclusion is beginning to appear in some MemberStates. Material deprivation and especially those aspects relating to financial stress faced by thehouseholds reflect the social impact of the crisis.

Demand for labour is slowly improving after the crisis and an increasing but still limited number ofposts are not filled. Firms' hiring plans and expectations are easing, pointing to newly growinguncertainties in the labour market. The restructuring activity reported in the European RestructuringMonitor continues to see announced job losses outnumbering job gains, but the gap is narrowing.Manufacturing and real estate/business activities account for the majority of business expansion.

Labour productivity growth in the EU regained its upward momentum, growing by 2.1% in the firstquarter of 2011, if compared to the first quarter of 2010. Greece showed for the first time since thethird quarter of 2008 positive productivity growth all be it at the very low rate of 0.1 % - whileGermany reinforced its already strong growth (3.4%). Labour costs increased by a modest 1.8 % in the euro area in the first quarter of 2011, wherebyGreece was the only Member State that recorded a decrease. As a consequence, in the euro areaunit labour cost growth was negative for the fifth consecutive quarter. In the European Union as awhole the unit labour cost continued to rise albeit at a lower rate.

In the EU as a whole and the euro area, wages evolved in line with productivity growth over the2001-2010 period. However, at the level of the individual Member States the picture is mixed. In someMember States, especially Germany, nominal wage growth was in check with productivity growthand low inflation. In the Southern Member States and Ireland, nominal wage growth outstrippedlabour productivity growth markedly yielding an important deterioration in the internationalcompetitiveness of these Member States. In the new Member States -except Cyprus and Malta-significant divergences between nominal wage growth and productivity growth reflected acatching-up process.

Economic recovery in the EU has been underpinned by improvements in industrial productionsince mid-2009. In the last quarters, industrial production, though increasing, has been easing whileconstruction is still negative. Retail trade edged up in May but it is still quite volatile. This reviewanalyses the volunteering sector, linked with the "European Year of Volunteering". Roughly one fifth ofthe European population is engaged in some form of voluntary work and the sector account up to 3-4% of GDP in some Member States. According to the European Commission Spring forecasts, the EU economy is speeding up, butthe outlook remains for a rather jobless recovery with unemployment stubbornly high both in 2011 and2012. Worryingly, confidence on labour markets in the EU is broadly slowing down and the OECDleading indicators point to a loss of momentum.

This edition of the Quarterly Review takes a closer look at the situation on the labour markets inBelgium, Denmark, Finland, Greece, Poland, Portugal, Slovenia, Spain and Sweden.

This quarterly monitoring report provides in-depth analysis of recent labour market developments. It is prepared by theEmployment Analysis and Social Analysis Units in DG EMPL. A wide combination of information sources have been used toproduce this report, including Eurostat statistics, reports and survey data from the Commissions Directorate-General forEconomic and Financial Affairs, national and sectoral statistics, restructuring data from the European Restructuring Monitor(collected by the European Monitoring Centre on Change) and articles from respected press sources. The report has alsobenefited from contributions from public and private employment services. The section on restructuring trends was prepared bythe European Foundation for the Improvement of Living and Working Conditions. Contact: [email protected]


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first quarter. Overall, GDP growth revived to 2.3%(see Chart 2).

Chart 2: GDP growth in EU Member States and the US, 2011 Q1

Labour market situation

Employment

The EU labour market has responded slowly to

changed economic output

The labour market in the EU has been seriouslyaffected by the economic downturn and joblosses have continued despite the fact thateconomic growth picked up again in the second

half of 2009 (see Charts 1 and 3). However, thetotal fall in employment has remained moremoderate than the fall in economic activity inthe EU as a whole and in most Member States.While economic output in the EU contracted bya substantial 5.3% between the peak in the firstquarter of 2008 and the low in the secondquarter of 2009 and has expanded since then,employment has contracted by 2.8% from thepeak in the second quarter of 2008 to the troughin the first quarter of 2010 (see Chart 1).

The deterioration in the EU labour market resultingfrom the recent economic crisis has stopped and

employment has been slowly recovering sincethe second quarter of 2010. Employment, whichstarted to decline in the third quarter of 2008, onequarter after the contraction in economicactivity began and reflecting the usual delayedreaction, is slowly responding to the economicrecovery (see Chart 1). The number of personsemployed in the European Union increased by0.1% in the third and fourth quarters of 2010 andremained stable in the first quarter of 2011,according to national accounts.

Overall, the relative resilience of employment inthe EU was partly the result of well functioning

automatic stabilisers and a wide set of labourmarket institutions. However, the institutionalsettings that allowed a moderate decrease in

employment and restrained the increase inunemployment might also contribute to slowdown the recovery compared to more volatile

labour markets as the US.

employment in the first quarter of 2011 is up on

a year earlier

Taking a longer-term perspective, year-on-yearemployment growth started to improve at theend of 2009, after turning negative in the firstquarter of 2009 and reaching a trough of -2.2 % inthe third quarter of 2009. Year-on-yearemployment growth finally turned positive in thefourth quarter of 2010 and closed on a seasonallyadjusted 222.9 million (220.8 million non-seasonally adjusted) in the first quarter of 2011.

Chart 3: GDP and employment growth in the large Member States

Employment growth slightly accelerated in most

Member States in the first quarter of 2011

During the first quarter of 2011, employmentgrowth was positive in most Member States, butemployment declined in eight of the 21 MemberStates for which data are available (see Chart 4).The decline generally eased, apart from Greeceand Bulgaria, where the year-on-year changewas respectively -5% and -3.5%. The overallimpact of the crisis on the labour markets inMember States has been significant, mostnotably in Spain, Ireland and the Baltic States,

but the latter are now recovering quicker.

Chart 4: Employment growth for EU Member States, 2011 Q1


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Among the large Member States, employmentfell in the first quarter of this year in Spain (by0.4%) and in Italy (0.6%) but increased inGermany (by 0.3%), France (0.2%) and in the UK(0.4%) (see Chart 3). Among the other MemberStates, employment fell notably in Hungary(down by 1.2%), Bulgaria and Slovenia (down by0.7% and 0.6%), Denmark and the CzechRepublic and Portugal (all down by 0.1%). BalticStates suffered a strong decrease in employmentduring the crisis, but in the first quarter of 2011employment in Latvia and Lithuania increased by0.2% and 0.5% respectively. Employment alsogrew in Austria (up by 0.3%), Slovakia (1.5%),Belgium (by 0.2%) and Finland (by 0.3%) (seeChart 4).

Among the large Member States, year-on-yearemployment growth (non-seasonally adjusted)was negative in Spain (down by 1.4 %) and inItaly (by 0.7%), whereas employment expandedin Germany by 1.4%, France by 0.8%, Poland by2.1% and the UK by 1.4%. Among the remainingMember States, a part from theabovementioned Bulgaria and Greece, Romania(by 2.7%), Slovenia (by 2.3%) and Portugal (1.6%)recorded the steepest falls in employment overthe year (see Table 3).

Services are leading the recovery

The quarterly stagnation in employment hasresulted from increases in industrial sector (up by0.2%) and financial services (up by 0.7 %) whichwere offset by a decrease in agriculture, huntingand fishing (down by 0.2 %) and in theconstruction sector (down by 1.1%). Trade,transport and communication services and otherservices have seen no employment growth.

Over the year 2010, services led the recovery inemployment growth, whereas agriculture andconstruction all continued to decrease.

Unemployment

The EU unemployment rate fell slightly in April

Unemployment in the EU decreased by a further0.1 pp to 9.4% in April after four months at 9.5%.The unemployment rate for the EU had beenbroadly increasing by 0.1 percentage point permonth between May 2009 and February 2010,remained unchanged at 9.6% thereafter, andfinally decreased slightly in January by 0.1 pp to9.5%. The year-on-year gap closed to zero inDecember and unemployment in April was finally0.3 pp lower than one year ago. As often after acrisis, the job recovery is proving slow.

Chart 5: Changes in unemployment in the EU

Unemployment decreased markedly over the

year

Unemployment decreased in April by a robust165000 compared to the previous month (seeChart 5). Seasonally adjusted unemploymentnow stands at 22.5 million (22.6 million non-seasonally adjusted), down by a healthy 702 000from the previous year. However, unemploymentin the EU is still 6.5 million (or 40 %) higher than thelow in March 2008.

Unemployment had stabilised or declined in most

Member States by April

Unemployment had declined or stabilised in mostof Member States by April, with the rateremaining stable or down on the previous monthin 23 countries, while in the other Member Statesthe rate of increase in unemployment hadeased.

Among the large Member States, theunemployment rate remained stable in Spainand Poland in April and in the UK in February anddecreased by 0.2 pp in Italy and by a further 0.1pp in Germany and France. Among the otherMember States, the unemployment ratedecreased noticeably in the fourth quarter of2010 only in the Baltic countries after manymonths of steady increase (down by 1.6 pps inEstonia and by 0.9 pp in Lithuania). On the otherhand, the unemployment rate increasednoticeably in Greece by 1.1 pps over the fourthquarter and in Cyprus by 0.3 pp.

and is beginning to decrease significantly over

the year

The unemployment rate in April was lower than ayear ago in seventeen Member States andhigher in nine, but with the year-on-yeardifferences clearly diminishing (see Charts 6 and7). Of the large Member States, only Spainrecorded a steep year-on-year increase of 0.9pp, with the rate in April rising to 20.7%(equivalent to 4.8 million unemployed), whichwas the highest jobless rate in the EU.


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detail in the section Recent social trends (seepage 30).

Chart 8: Unemployment rate and expectations for the EU

US unemployment rose again in May

The US labour market started recovering lastNovember and unemployment dropped by 0.9pp in two months. However, in the last twomonths unemployment started increasing again.After dropping to 8.8% in March, unemploymentbounced back to 9% in April and 9.1% in May,still 0.4 pp lower than in the EU.

The US labour market initially benefited from afaster and stronger economic recovery andhigher business confidence index (BCI2) than inthe EU starting in autumn 2009. However, over thelast few months confidence has waned, andnow the BCI is higher in the EU than in the US.

The number of unemployed persons increasedby 200000 in May (to 13.9 million), whileemployment stayed broadly stable, pointing to areturn to activity of previously inactive workers.The gap between the US and EU unemploymentrates, which was 0.2 pp in favour of the EU lastyear, had disappeared by the end of 2010 and isnow favourable to the US (see Chart 9).

Overall, the impact of the crisis on the labourmarket was more moderate in the EU than in the

US, reflecting the difference in labour marketinstitutions that cushioned the effect of the crisisin the EU.

Unemployment in the US has more than doubled(up by around 120%) from the low of spring 2007,whereas in the EU the increase has been morelimited at 46% compared with the low recordedin spring 2008. By February 2010 theunemployment rate in the EU had risen to 9.6 %,up 2.9 pps from the low in March 2008, afterwhich it stabilised before decreasing in Januaryto 9.5%. Meanwhile, in the US the unemploymentrate had increased by a more substantial 5.7 pps

(to 10.1%) by October 2009, compared with May

2007, before falling to 9.6% by August 2010 andto 9.1% in May.

Chart 9: Unemployment rate and BCI for the EU and the US

Labour demand

EU firms employment expectations have eased

over the last few months

Since spring 2009, businesses have reportedrelatively better expectations for employment forthe months ahead across all the main sectors.However, while employment prospects in industryhave followed a consistently upward trend forthe last year and a half, repeated falls in theoutlook for construction have continued this year

and recently progress has been more sluggish inthe service sectors too3.

In April and May, employment expectationseased in every sector, with a particularly sharpdecrease in the financial sector (down by7.8 points) after several months of strongincreases. The construction sector finally reacheda zero balance in April (i.e. the same number ofthe firms interviewed expected an increase as adecrease in employment in the next 12 months)but fell back below zero again in May. In industrytoo employment expectations decreased. Onlyservices showed a slight improvement after a

marked decrease in April (see Chart 10).Chart 10: Sectoral employment expectations for the EU
http://ec.europa.eu/economy_finance/db_indicators/surveys/index_en.htmhttp://www.oecd.org/http://www.oecd.org/dataoecd/26/39/41629509.pdf


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and hiring plans in the third quarter indicate

modest progress

According to the June Manpower EmploymentOutlook Survey4, the year-on-year hiring outlookimproved modestly across Member States, withGermany reporting the most optimisticexpectations since the downturn, but Italy andthe UK remaining subdued.

Hiring expectations remain mixed in Europe, aswas the case last quarter: hiring plans arestrongest in Romania, Bulgaria and Poland andweakest in Spain, Greece and Italy. Strikingly, themanufacturing sector appears to be gainingsome traction across Europe, with hiring intentionsimproving in most countries compared with lastyear. Meanwhile, US employers expect hiringactivity to be relatively stable or to improve fromthree months ago.

Job vacancies are increasing in the EU and in

most of the Member States

In the first quarter of 2011, the estimated jobvacancy rate for the EU27 was 1.6%. This was anincrease of 0.3 pp compared with the samequarter of a year before, showing increasingunfilled demand. The rate was higher than a yearago in most Member States for which data areavailable, with demand in the first quarter of 2011particularly high in Malta (3.0%), Germany (2.7%),Finland (2.7%) and Austria (2.3%). Among thelarger Member States for which data areavailable, demand for new labour increased inGermany in the fourth quarter, where at1041477, vacancies were up on the previousquarter (by non-seasonally adjusted 45000).Vacancies are increasing also in France (up by0.4 pp to 0.7%) and slightly in the UK (up by 0.1pp to 1.7%). On the other hand, job vacanciesremained stable in Poland at 0.7 % anddecreased in Spain by 0.4pp to 1.1%.Official sources in Germany confirm the relativeimprovement in demand for labour in recent

months. In Germany, the Federal EmploymentAgencys job index (BA-X5), which had beenedging upwards for a year, decreased for thefirst time in May by two points to 164. It is not yetpossible to understand if this indicates astabilisation or just a temporary break. Overall,however, the demand for labour is still very high.The quarterly representative enterprise surveys bythe Institute of Employment Research found1055000 vacancies during the first quarter of2011, which is 398000 or 61% more than one yearago. Registered vacancies hardly changed inMay, after going up by 13000 in April and by8000 in March.

European online recruitment eased in May

According to the Monster Employment Index6,online job demand increased by 21 % in Maycompared with levels a year earlier. Onlinerecruitment activity eased in May after markedincreases in the previous months. In May, online job demand increased for production,manufacturing, maintenance and repair and fortransport, post and logistics but actually declinedfor public administration, defence andcommunity service.

while demand for temporary agency workers is

higher than a year ago in every country

Recent data from Eurociett7, covering the perioduntil March, continue to show an improvement inworkplace activity via temporary employmentagencies, which is a leading indicator ofrecovery in the labour market. The number ofhours invoiced exceeds the levels recorded ayear earlier in all the countries reviewed by amargin ranging from 10% in the Netherlands to17.2% in Belgium, 19.5% in France, 25.7% inGermany, 27.6% in Italy and 37.8% in Poland. Inthe EU countries reviewed, hours invoicedincreased on average by 21.6% over the year(see Chart 11). Data from the UK show thatagency work further increased in March.

Chart 11: Hours worked invoiced by private employment

agencies for selected Member States
http://www.manpower.com/press/meos.cfmhttp://about-monster.com/employment/index/17/45http://www.eurociett.eu/http://about-monster.com/employment/index/17/45http://www.manpower.com/press/meos.cfm


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Labour market developments

The general trends in employment masksignificant differences across groups (but theyare covered in more detail in the 'Recent socialtrends' section), Member States, sectors andtypes of employment. This section provide aninsight into the dynamics underlying the slightoverall improvement in the labour marketoutlook, notably part-time and temporary work,working hours and labour costs, and into sectoraldevelopments. A special focus section exploreswages, productivity and labour cost in macro-economic perspective.

Employment patterns

Permanent work still declining, albeit more

slowly, while self employment and temporary

work increase

In the fourth quarter of 2010 the number ofpeople in employment was down by 250thousand compared with the same quarter in2009 (with 212.83 million people in employment in2010 q4 against 213.08 million in 2009 q4).Compared with three years previously, it wasdown by 3.9 million. Over the year to the fourth

quarter 2010, the fall in the number of people inemployment is explained by a massive drop inpermanent jobs, down by around -1.2 million,outweighing the rebound of temporary jobs, upby 670 thousand, and the increasing number ofself-employed (incl. family workers), up by 270thousand.

Chart 12: Year-on-year change in permanent, temporary, selfemployment and total employment (15-64) (1 000 employees),

2006-2010

In most Member States, permanent work

adversely affected total employment while

temporary employment had a positive impact

The fall in employment in the EU-27 (250 thousandpeople or -0.1% in 2010 q4) was the sum of thedrop in permanent jobs (which accounted for -

0.6 pp) and the increase in self employment andtemporary jobs, which represented 0.2 pp and0.3 pp respectively. In most Member States,permanent jobs were still adversely affectingemployment growth (see Chart 13). Over theyear to 2010 q4, permanent work negativelyimpacted overall employment growth in 19countries. The countries with the worst suchimpact, namely Bulgaria, -3.8 pps, Greece, -2.5 pps and Ireland, -2.2 pps, were those with thesteepest fall in total employment, with - 4.7 %, -3.9% and - 2.9% respectively (y-o-y, 2010 q4). Selfemployment contributed positively toemployment growth in 14 Member States. In 19Member States, temporary jobs had a positiveimpact on employment in 2010.

Chart 13: Contribution to y-o-y employment change, 2010 q4, inMember States (percentage points of total employment)

The decrease in permanent jobs still hits young

people disproportionately

Over the year to 2010 q4, the decrease was stilldisproportionately weighted towards youngpeople, who lost 520 thousand permanent jobs,representing a 4.6% decrease (see Chart 14).Compared with two years previously, the loss was-14.2% (1760000 fewer permanent jobs for youngpeople).

Chart 14: Year-on-year change in permanent employment by agegroup in the EU, 2006-2010

Prime-age workers were comparatively less hit,with a -1.1% decline over the year to 2010 q4(1350000 fewer people) and -3.1% (3850000


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fewer people) compared with 2008 q4. On theother hand, the number of permanent older (55-64) workers increased by 3.3% (660 thousandmore employees) in 2010 q4 year-on-year and by6.3% (1170 thousand more workers) comparedwith two years previously.

The number of prime-age and older temporary

workers increased in 2010

At EU level, the number of persons (15-64) ontemporary contract has been growing since thesecond quarter of 2010, with a yearly gain ofaround 670 thousand (up by 2.7%) in winter 2010.Young people (15-24) benefited only marginallyfrom the growth in temporary work. Indeed, inwinter 2010 compared to the year before,temporary jobs increased by 590 thousand (upby 3.8%) for prime-age employees and by 60thousand for older employees (up by 4.3 %). Onthe other hand, the number of young temporaryworkers recorded slight growth (up by 0.2%, with20 thousand more people).

Chart 15: Year-on-year change in temporary employment by agegroup in the EU, 2006-2010

Part-time work was increasing while full-time was

decreasing, both at a slower pace in the last

quarter of 2010

Over the year to 2010 q4, the fall in employment(-0.1%, down by 250 thousand) was explained bythe fact that the decrease in full-time jobs (downby 640 thousand) outweighed the increase in

part-time jobs (up by 390 thousand) (seeChart 16). The negative impact of full-time jobson employment softened gradually in 2010 andthe growth of part-time jobs slowed down inwinter 2010. Consequently, the result was adecrease in total employment, but at a slowerpace.

with substantial differences between age

groups

At EU level in the fourth quarter of 2010, thenumber of full-time jobs fell sharply for youngworkers (down by 510 thousand, - 3.5 %compared with 2009 q4) after a steep drop in2009. The decrease in full-time jobs for prime-ageworkers moderated gradually in 2010, and was

down by 0.4% (810 thousand fewer people) in2010 q4 year-on-year. The number of olderpeople in full-time employment fluctuated in

positive territory in 2010, and recorded 3.2%growth in winter 2010 (up by 680 thousand).Chart 16: Change in the number of part-time, full-time, and totalemployed (1000 employees) in the EU, 2006-2010

Over the year to the fourth quarter 2010, thegrowth of part-time employment was sharedbetween prime-age workers (up by 190thousand, +0.7%) and older workers (up by 240thousand, +4.0%), while the number of youngpart-time employed people fell by 40 thousand (-0.7%) (see Chart 16). The trend of employmentby age group was the same in 2010 as in 2009,albeit less pronounced.

and also among EU Member StatesLike the EU as a whole, most Member States sawthe number of part-time workers contributepositively to employment growth (up in 19countries, y-o-y change in 2010 q4). Over theperiod, full-time employment was on the increasein 10 Member States. Depending on thecountries, full-time and part-work made a varyingcontribution to employment change in 2010 q4compared with one year before (see Chart 7).

Chart 17: Contribution to year-on-year employment change,2010 q4, full-time and part-time total employment in EU Member

States


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SPECIAL FOCUS: SHIFTS IN THE JOBS STRUCTURE DURING THE GREAT RECESSION

Five million jobs lost during the Great Recession in the EU

A net five million jobs disappeared from the second quarter of 2008 and the second quarter of 2010 in the EU-27 during the Great Recession and employment growth in the recovery phase has remained muted to datethough with large variation in labour market performance among Member States.

after 20 million net new predominantly better quality - jobs were created in the decade preceding

the crisis

This follows what appears in retrospect a golden age of employment expansion in Europe from the late-1990sto before the Great Recession when over 20 million net new jobs were created. Considering a job as a givenoccupation (e.g. a skilled trade/craft worker) in a given sector (e.g. construction), earlier work confirmed thatthe majority of new employment between 1995 and 2006 was created in higher-paying jobs, i.e. those in the

top two quintiles when ranking jobs by median hourly pay. The jobs that contributed most to employmentexpansion were in higher-level (associate) professional and managerial positions in business services as well aseducation and health. Overall, there was relatively low growth in medium-paying jobs and somewhat greatergrowth in lower-paid jobs. The pattern differed among Member States but with the majority of countriesconforming to one of two broad patterns of job shift: upgrading or polarisation (Fernandez-Macias and Hurley,2008).

In what follows, we summarise the results of some recent Eurofound analysis using the same jobs-basedapproach to look at the quality of the jobs destroyed in the EU during the Great Recession, again using wage asa proxy of job quality. How do the qualitative patterns of employment shift during a period of sharpemployment contraction compare to those during the preceding period of employment expansion?

Chart A.1: EU employment level changes by job-wage quintile (left lowest paid to right highest paid) comparing 1998-2007 and 2008q2-2010q2 (,000s)

Source: EU LFS (authors calculations), Fernandez-Macias 2010.

Note: earlier analysis covering 1998-2007 omitted PL, MT, RO, BG due to data availability

Recession job losses concentrated in jobs in (lower-)middle of wage spectrum

The most obvious observation is that the sign of the quantitative employment shifts change. There was a netloss of just over five million jobs (or 2.5% of total employment) in the EU27 in the period analysed (2008q2 to2010q2). These job losses were overwhelmingly concentrated in the middle and lower-middle wage quintiles.This reflects the fact that over 10% of construction and manufacturing sector employment in the EU-27 wasshed during the recession. Jobs in these sectors tend to cluster in the middle and lower-middle of the wagestructure.

but with continuing growth in higher-paid jobs in knowledge-intensive services

Notwithstanding the different signs, the relative qualitative employment shifts by quintile are actually quitesimilar before and during the recession. Top-quintile jobs grew both in relative and absolute terms during the

crisis. Seven hundred thousand net new jobs were created in top-quintile jobs primarily in state funded sectors health, education and public administration.


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As in the preceding decade, the top quintile job growth was mainly due to an increase in Knowledge IntensiveServices (KIS). These include both public services (mainly in education and health) and private services(business services). The relative importance of the public services for top quintile employment growthincreased during the recession.

Asymmetrical polarisation before and during the Great Recession

There was relatively greatest loss of employment in the middle and lower middle quintiles as before and onlyvery modest loss in the lowest quintiles. Overall, the pattern of employment shifts during the recession wasmore clearly one of polarisation consistent with trends already observed in many developed economies of adisappearing middle or a hollowing out of the employment structure. Collapsing construction booms inseveral member states e.g. Spain, Ireland, the Baltic countries - in particular accentuated this pattern.

Though generally associated with the decline of manufacturing, there are other important factors behind thedisappearing middle. One is the polarisation of service sector employment. Services tend to generateemployment at the top and the bottom of the employment structure but comparatively little in middle-rankingjobs. During the recession there has also been a polarised distribution of employment shifts for part-time andtemporary work. Also shifts in gender composition of the labour force have been polarising: women tend to beunder-represented in the middle of the job-wage distribution and men, who suffered greater employmentlosses, over-represented.

...but different national patterns of employment shift upgrading, polarisation and downgrading

As in the previous analysis, different patterns of employment shift during the recession were observed fromMember State to Member State though broad clusters could be identified. However, even where countriesshared a similar pattern of shift e.g. polarisation in the case of France and Spain the specific jobscontributing most to these shifts were often quite distinct. In France, growth at the top was strongest amongstmanagers and engineers in private services (consultancy, financial services, IT) while in Spain, comparativelylimited losses in the top quintile were attributable in large part to growth in the number of teaching andhealth professionals compensating net declines elsewhere.

Chart A.2: Patterns of employment shift (,000s), 2008q2-2010q2, by Member State

Polarisation Upgrading Downgrading

Source: EU LFS (authors calculations)

In addition to the two main patterns polarisation and upgrading a number of Member States experienced adowngrading of their employment structure during the recession. In other words, lower-paid jobs grew whilethere was net job destruction in higher-paid jobs. In the longer time period covered by the earlier analysis, noMember State had experienced such a downgrading which suggests recession-specific effects in some memberstates. The group of downgrading countries included perhaps surprisingly Denmark, the Czech Republic,Hungary as well as Italy and Lithuania. There is no obvious common explanation. Four of the five largest

growing jobs in the Denmark, for example, were in the bottom quintile and included retail salespersons andrestaurant service workers. Meanwhile the biggest growth in Hungary was in lower-level public administrationworkers (elementary occupations).


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The recession impacted less on female employment, both quantitatively and qualitatively

Female employment had a comparatively soft landing during the crisis in both quantitative and qualitativeterms, as the Chart above illustrates. The lions share of top quintile employment growth in the EU-27 has

been female. This has resulted in large part from continued expansion of professional-grade jobs in thepredominantly female-employing health and education sectors. Meanwhile net female job losses have beenexclusively in middle and low-paid jobs; employment losses for women were greatest in four bottom-quintilejobs including retail salespersons, blue-collar workers in textiles/clothing manufacture and in agriculture.There was in fact a clear contrast between the patterns of employment decline for men and women with anupgrading pattern evident for women and a stark polarisation pattern for men.

Chart A.3: Patterns of employment shift (,000s), by gender and age groups.

and employment for those over fifty actually grew in jobs across the wage spectrum

Europes ageing workforce became older faster during the recession as a result of sharp differential impacts of

job loss by age group. As we see in Chart A.3, employment loss has affected younger and core-age workersmainly in middle and lower-middle paid jobs. Younger workers also suffered job losses across all quintiles anddid not partake of any of the net employment gain in highest-paid jobs. Perhaps the most striking feature ofthe Chart is that employment for those in the pre-retirement age group (50-64) has been comparativelyimpervious to the recession enjoying growth across all quintiles but with a concentration at either end of thewage spectrum.

The sectors in which employment growth was greater for core-age than for old age workers tended to be inprivate services (management consultancy, civil engineering, and other professional, scientific and technicalactivities). Those in which older workers benefited most from employment growth tended to be in predominantly public services (health, education and social work activities).

For more detailed analysis refer to the full report, Shifts in the Job Structure in the EU during the Great

Recession, at the Eurofound website:http://www.eurofound.europa.eu/publications/htmlfiles/ef1141.htm

References:

Fernandez-Macias, E. and Hurley, J. (2008): ERM annual report 2008, More and better jobs?: Patterns ofemployment expansion in Europe, Dublin: Eurofound. Available at:http://www.eurofound.europa.eu/publications/htmlfiles/ef0850.htm

Fernandez-Macias, E. (2010): Changes in the Structure of Employment and Job Quality in Europe (PhD

Thesis), University of Salamanca.


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Lithuania the increase that started in the thirdquarter of 2010 persisted.

Table 16 shows that in the EU as a whole as wellas in the euro area, real wages (i.e. wagesdeflated by prices) have been falling belowproductivity growth since the first quarter of 2010 as is shown in the developments of the real unitlabour costs.

As far as the available data indicate, it is only inthe Czech Republic (1.2%) and Slovakia (0.4%)that the real wage increased by more thanproductivity in the first quarter of 2011. The largestdecreases in real unit labour cost are to be found

in Estonia (-5.5%) and Lithuania (-6.6%),strengthening earlier observed decreases. In theeuro area, Austria (-3.6%) and Finland (-3.7%)recorded the largest decreases

Hours worked showed some progress

To the extent that the available data allows us todraw conclusions, one can say that in the firstquarter of 2011 weekly working time of full-andpart-time employees continued its fairly stablepattern observed over the year 2010 (see Table17). This is to a large extent due to the lessintensive use of short-time working arrangementsover this period.

SPECIAL FOCUS: WAGES, PRODUCTIVITY AND LABOUR COST IN A MACRO-ECONOMIC PERSPECTIVE

This section reviews longer term trends in wages and labour cost in the European Union and discusses theirmacro-economic implications for competitiveness and incomes. A starting point for the analysis is thecomparison of the trend in labour productivity (expressed in terms of GDP per employed personi) to nominalwage developments, through the unit labour costii. Through transformations of the latter it is possible toestablish the importance of inflationary pressures stemming from labour cost, and to monitor internationalcompetitiveness and the labour income share. This analysis should be read against the background of therecent communication of the European Commission on correcting macro-economic imbalancesiii.

Labour productivity and nominal compensation per employee

Table 18 shows the evolution of labour productivity in the EU, euro area and the different Member States for

the period from 2001 until 2010.In the EU as a whole compounded labour productivity growth over the 2001-2007 period was 8.7%. For 2008 and 2009 a negative growth of -0.4% and -2.4% was recorded, followed by apositive strong growth of 2.3% in 2010, resulting in a negative compounded growth rate of -0.7 %.This profile in labour productivity growth in recent years is in line with the global economic downturn andhesitant recovery, generating business cycle effects in labour productivity due to the lagged response ofemployment growth to output growth. During the economic downturn (2008-2009), output decreased fasterthan employment so that productivity growth fell, and during the (modest) economic upturn (2010) outputincreased faster than employment so that productivity growth rose.

This slower adjustment in labour may be due to market rigidities, e.g. employment protection legislation or tomarket perceptions in the sense that the downturn is expected to be temporary and to avoid firing and hiringcosts employment is kept stable. In addition, employers may use the employees they have on the payroll withvarying intensity (extra hours in the peak, reduced hours in the through) before considering layoffs or hiring.

The Euro area shows a similar profile for labour productivity growth as the EU, but at lower rates, i.e.compounded growth over the 2001-2010 period reaches 5.1% and -0.5% over the 2008-2010 period.At the level of the Member States, several groups can be distinguished with respect to their performance overthe 2001-2010 period, whereby Romania had the strongest compounded productivity growth, i.e. 77.5 %, whileItaly recorded the lowest growth i.e. -4.7 %.There is the group of countries, including Estonia, Latvia, Lithuania and Romania which showed over the entire2000-2007 period annual labour productivity growth rates above 5% (with a few exceptions). This catching upin productivity reflects the effects of ongoing restructuring of the inefficient production structure inheritedfrom the past. In Estonia and Latvia the first signs of negative labour productivity growth emerged in 2008when the overall economic outlook in these countries deteriorated, initially following a bursting of theproperty bubble and slowdown in domestic demand, which was later on reinforced by the collapse of globalfinancing and trade.

Bulgaria, the Czech Republic, Poland, Slovenia and Slovakia also showed strong productive growth over the

2000-2007 period - albeit at a lower average rate than observed in the earlier mentioned Member States. Inthese countries the negative growth in labour productivity started a year later, in 2009, but rebounded


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Developments differ also in terms of sectors. Table 21 shows the compounded growth rate of the nominal unitlabour cost for the 2001-2010 period of the main sectors of the euro area and its Member States.

Chart B.3: Compounded ULC growth and inflation 2001-2010 Chart B.4: Unit labour costs in the euro area - levels

In the euro area, the construction sector saw the highest compounded increase in its unit labour cost over theperiod 2001-2010, reflecting the idea that wage inflation takes place mostly in non-tradable sectors, notablyservices and, in particular, in the construction sector.

In Ireland the unit labour cost fell sharply in industry and rose significantly in the construction sector over theperiod 2001-2010. In Greece strong increases are to be found in all sectors except in trade, repairs, hotels,restaurants, transport and communications during the period 20012010. Nevertheless, unit labour cost in thissector rebounded significantly during the period 2008-2010. Spain recorded a decrease in its unit labour cost inconstruction in the 2008-2010 period.

Among the new Member States, except Cyprus and Malta, Romania showed the highest compounded growthacross all sectors, with particular high increases in services. Poland showed the lowest increase in its sectoralunit labour costs with noticeable decline in agriculture and industry. All in all, in the new Member States

construction and finance show the highest increases in unit labour costs.

The real effective exchange rate

Table 22 shows the developments in the Member States' nominal unit labour cost relative to its principalcompetitors in international markets - taking into accountnominal exchange rate movements, i.e. the realeffective exchange rate (REER)viii. A positive sign indicates that international cost competitivenessdeteriorates.

For the EU as a whole, the real effective exchange rate showed an upward trend over the period from 2001until 2008, indicating a steady deterioration of external competitiveness of the European Union up to thebeginning of the crisis when it started to improve, reaching a fall of 7.2% in 2010.At the level of the Member States, the compounded increase over the period 2001-2010 in the REER was morethan 60% in the Czech Republic and Slovakia, while negative in Germany (-4.8 %), Poland (-3.4) and Sweden (-7.1%). The sharp increases in the real effective exchange rate since accessing to the EU up to the start of thecrisis in Estonia, Latvia and Romania are very noticeable.

In the euro area, except for the new Member States, the strongest increases over the period 2001-2010 arerecorded for Ireland (+24.5%) and Italy (+22.2%). Over the period 2001-2010 and among the EU-15, the gapwidened between Sweden and the UK on the one hand (with negative indicators), and Italy, Denmark andIreland on the other hand (indicators of 20% or more). In 2010 all real effective exchange rates, except thoseof Poland, Sweden and the UK, improved with the strongest improvement in Latvia, followed by Lithuania andIreland.

When the REER depreciates, international competitiveness will increase, having the potential to lead to higherexports and lower imports which may have a positive effect on employment. Chart B.5 shows a positivecorrelation between the cumulative growth in employment and the REER for the EU15 Member States.

Nevertheless, more detailed research shows that the relation between ULC and export performance is weakand of second order of magnitude compared with the deterioration of the trade balance (and hence the former


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cannot be the cause of the latter) x.

Limitations of the REER indicator are that the REER based on ULC does not reflect all costs, including capital

costs, R&D expenditure, and distribution costs. This indicator does also not take into account "pricing-to-market behaviour" whereby firms (partly) offset variations in the exchange rate by adjusting their profitmargins, instead of instantly passing the movement in the exchange rate on to prices charged to foreigncustomers.

As such, the REER provides useful insight in the developments in international competitiveness in the short run i.e. when for instance the capital stock is a predetermined variable. In the medium term as capital stocksadjust, a broader definition is required to guide policy making. Moreover, economic theory posits that in thelong run trade between countries is conducted on the basis of comparative advantages, not absoluteadvantages. However, absolute advantages are (in the long run) important at the level of individual enterprisesor sectors.

Chart B.6 shows a comparison of the evolution in a selected group of euro area Member States for the periodfrom 2000 until 2010. Their unit labour cost of the industry is compared with the euro area average. As theyare all expressed in euro the interpretation of these figures are straightforward to interpret.

Chart B.5: Compounded employment and REER growth EU15 2001-2010

Chart B.6: ULC of industry relative to euro area average ULC ofindustry

Note: An increase in REER indicates a worsening in internationalcompetitiveness

Greece shows by far the strongest increase in its unit labour cost of industry compared to the euro areaaverage, while Ireland shows the strongest decrease. Estonia showed initially a trend away from the euroaverage, but returned towards the euro average as of 2009.

Real wages and the real unit labour cost

Table 23 shows the evolution of real wages and salaries, i.e. the nominal wages and salaries deflated by theharmonised consumer price index (HCPI). This indicator reflects the evolution in households' purchasing power.For this reason it will also be worthwhile to investigate to what extent real wage growth kept up withproductivity growth.

The strongest real wage growth is to be found in Romania (133.0%) followed by Latvia (98.2%), Estonia (70.4%)and Bulgaria (62.9%). Greece is the only Member State that recorded a negative compounded growth of realwages over the period ranging from 2001 until 2010. Germany and Portugal showed the second lowest growth,i.e. 4.2%.The real unit labour cost measures the labour income share, or in other words, the relation between realwages and productivityx.

Table 24 shows that the real unit labour costs in the EU as a whole showed a negative growth rate until theonset of the crisis in 2008 (except for 2000 and 2001), indicating that the labour income share (also called "thewage share") decreased over that period. It increased by 0.8 % in 2008 and 2.8% in 2009 followed by a decreaseof 1.4% in 2010.In the euro area, the real unit labour cost had a negative growth rate over the whole period ranging from 2000


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to 2007, while it increased by 1.5 % in 2008 and 2.8% in 2009 followed by a decrease of 1.3% in 2010.This temporary increase in the real unit labour cost reflects the fact that in times of economic downturn the

real compensation per employee is less responsive to cyclical fluctuations than output or employment. Thestructural decline observed over the years is a reflection of various structural factors, including technological

progress and globalisationxi.

Concluding remarks

The previous analysis investigated to what extent developments in labour productivity and labour costscontributed to macro-economic instability. The following insights were gained from this analysis.

First, examining the evolution of the nominal unit labour cost there was no indication that for the Euro area orthe EU as a whole the wage developments posed a risk for cost-push inflation pressures. However, at the levelof the individual Member States the picture is mixed. Some Member States showed low compounded growthrates, especially Germany. Other Member States were confronted with significant inflationary pressures. Hereone has to make a distinction between the new Member States, except Malta and Cyprus, and the EU15Member States. In the case of the former Member States the strong growth in the unit labour cost reflects anadjustment process to the catching-up process. In several Member States, including the Southern Member

States and Ireland, the unit labour cost exceeded the threshold which is consistent with a close but below 2%inflation target at the level of the individual Member States due to strong nominal compensation growth andrelatively weak productivity growth.

Second, developments in the real effective exchange rate (based on unit labour costs) show that severalMember States, (including, apart from the new Member States which underwent significant catching-up,Ireland, Denmark, Italy, Greece and Spain) sustained losses in competitiveness (of more than 15 % over the2001-2010 period) and significant diverging trends in competitiveness across Member States have been built upover several years.

Third, examining the real unit labour cost indicator there was some mixed evidence on the evolution of thelabour income share. Member States where real wage growth was well above productivity growth, i.e. wherethe labour income share increased by more than 5 percentage points over the 2001-2010 period, are Ireland,the Czech Republic, Finland and Denmark. Member States were the real unit labour cost decreased by morethan 5 percentage points, include Romania, Poland, Lithuania, Hungary, Luxembourg and Spain.

Notes:

i Although it is considered appropriate to use the number of hours as labour input indicator, it is most common practice to use the numberof employees as denominator (because they are easier to obtain). This may pose some problems if the number of employees is notexpressed in full time equivalents and part-time workers participate in the production process.

ii The unit labour cost is defined as the ratio between the nominal compensation per employee and the productivity per employed person.iii European Commission (2011), "Concluding the first European semester of economic policy coordination: Guidance for national policies in

2011-2012", COM(2011) 400 final.iv Compensation of employees covers the total remuneration - including gross wages and salaries (before deduction of taxes and employees'

social security contributions), employers social security contributions, as well as bonuses and overtime payments -, that is payable, incash or in kind, by employers to employees in return for work done by the latter during the accounting period. Alternative conceptsinclude total labour costs (employee compensation as well as the cost of vocational training, recruitment costs etc., minus subsidiesreceived) and wages and salaries (included in employee compensation, see above).

v Other definitions of the unit labour costs (ULC) exist. The OECD calculates the unit labour as the ratio of total labour costs to realoutput, which differs from the EC-ECB definition notably by the weight given to the self employed.

vi The real unit labour cost (RULC) is obtained by dividing the nominal unit labour cost (ULC) by the GDP deflator (PGDP), i.e. RULC = ULC /PGDP = (Compensation of employees at current prices) / (GDP in volume * (no. of persons employed/ no. of employees), i.e. the so-

called "adjusted labour income share" Rearrange terms further it can also be proven that RULC = ((Compensation of employees atcurrent prices / no. of employees) / PGDP) /((GDP in volume / no. of persons employed) i.e. the real wage relative to productivity. Inother words, the RULC gives also an indication as to what extent real wage growth keeps up with productivity growth.

vii The observation outlier for Romania is not included in the chart.viii The real effective exchange rate (REER) measures a Member States' nominal unit labour cost relative to a weighted average of the

nominal unit labour cost of its principal competitors in international markets - taking into account nominal exchange rate movements,i.e. REER = NEER * weighted average(ULC / ULCf) with NEER the nominal effective exchange, defined as the weighted average ofbilateral exchange rates, ULC the domestic unit labour cost and ULCf the unit labour cost of trading partners. A rise in the index means aloss of competitiveness.

ix For more details, see European Commission (2010), European Competitiveness Report 2010, COMMISSION Staff Working Document,SEC(2010) 1276 final available at http://ec.europa.eu/enterprise/newsroom/cf/_getdocument.cfm?doc_id=6222.

x See footnote 6. Note that the real wage in this section is measured as the nominal compensation per employee deflated by the GDPdeflator. In the previous sub-section wages and salaries were deflated by the harmonised consumer price index as this variable measuresbest the evolution in household purchasing power.

xi "Chapter 5, The labour income share in the European Union" available at ec.europa.eu/social/BlobServlet?docId=3068&langId=en.


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Sectoral trends

Industrial output edged up slightly in April and

remains significantly higher than a year ago

Economic recovery in the EU has beenunderpinned by improvements in industrialproduction since mid-2009. After picking up overthe second half of 2009, industrial output broadlycontinued to increase in 2010. In April 2011compared with March 2011, seasonally adjustedindustrial production grew by 0.1% in the EU (seeChart 19). In March production had fallen by0.2% on the month. In annual terms, industrialproduction increased by 4.7

% from April 2010 toApril 2011. However, it is still well below the peak

recorded in 2008.

The slight improvement in industrial production atEU level in April 2011 reflected higher output indurable consumer goods (+0.7% on March 2011)and modest increases in capital goods and non-durable goods (both +0.1%), but also a decreasein energy (-3.0%) and intermediate goods(-0.1%). In April, a significant progress was notedin Latvia (+3.4% on the month), Denmark (+2.8%),Malta (+2.2%), Luxembourg and Slovakia(+1.6%), whereas major declines were recordedin Portugal (-3.6

%), Greece (-3.5

%), Slovenia (-3.1%) and the United Kingdom (-1.6 %).

Chart 19: Industrial production in the EU

Year-on-year growth in EU industrial production,which turned positive in the beginning of 2010and has since remained so, although at a slowerpace over recent months, was 4.7% in April 2011,against 5.1% in March. This year-on-year growth ismainly driven by increases in capital goods(+9.5%), intermediate goods (+5.5%), non-durable and durable consumer goods (+3.4 and+2.8% respectively), while the production ofenergy fell by 4.7%.

The employment situation is more mixed.Although the decline in the number of personsemployed seems to be easing in comparison to

the last two years. After falling by 8.4 % betweenthe first quarter of 2008 and the first quarter of

2010, it has stabilised and has even risen by 0.2 %between the first quarter of 2010 and the firstquarter of this year. This slight improvement wasdriven by rises in Estonia (+15.5%), Lithuania(+5.9%), Latvia (+4.4%), Poland (+3.7%) andAustria (+2.9%), while employment still receded inGreece (-9.1%), Bulgaria (-5.8%) and Finland(-2.8%).and new orders for industry slightly increasing

New orders in the EU increased by 0.2% in April,after a decrease of 1.7% in March. Excludingships, railway and aerospace equipment, for

which changes tend to be more volatile, newindustrial orders decreased by 0.6% in April (seeChart 20).

Comparing April 2011 with April 2010, newindustrial orders grew by 6.9%, while totalindustry, excluding ships, railway and aerospaceequipment, rose by 6%.Total manufacturing work on orders rose in themajority of the Member States for which data areavailable. The highest increases were recorded inEstonia (53.2%), Finland (28.8%) and Lithuania(21.1%). Denmark (-2.5%), Hungary (-2%) Poland(-2.4) and the UK (-2.8) registered a decreaseover the year.

Chart 20: New industrial orders for the EU

The construction industry receded in April, while

posting a lower production than a year ago

Although industry has recovered for more than ayear now, production in the construction sectorhas not yet really picked up following roughlythree years of deterioration, with only threemonths of revival observed in 2010. In theconstruction sector, seasonally adjustedproduction fell by 0.9% in the EU in April 2011,compared with the previous month, afterincreasing during the two previous months (+2.3%in March, Chart 21).


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The result for April reflected mixed performancesacross the Member States for which data areavailable. Construction output fell in eight and

rose in Sweden (+1.6%), France (+0.7%) andPoland (+0.5%). The largest decreases wereregistered in the United Kingdom (-13.4%),Germany (-5.7%) and Portugal (-4.0%).The sector's annual growth has been steadily innegative territory for three years, except in mid-2010, and is currently supported by expandingcivil engineering activities. Between April 2010and April 2011, construction output as a wholedropped by 1.2% in the EU.

Chart 21: Construction production for the EU

Employment figures are still on the decline inannual terms, as they have been since the peak

of the first quarter of 2008, and since the breakposted in the second quarter of 2010 (+0.7 % onthe quarter), the fall has been steady. In the yearuntil the first quarter of 2011, employment in theconstruction sector fell by 2.2%. In three years,the sector lost 11.1% of its workforce in the EU.The impact of the crisis has been particularlydramatic in Ireland (-56.9% in three years), thethree Baltic States (-47 to -48 %), Spain (-42%),Greece (-29.4%)and Bulgaria (-29.1%). Only afew countries exhibit positive trends in the sameperiod: Poland (+7.5%), Germany (+2.4%) andBelgium (+1.1%).while retail trade turnover increased in April

Compared with the sizeable falls in output seen inindustry and construction, retail trade turnover inthe EU held up fairly well at the height of the crisisbetween autumn 2008 and spring 2009 and hasevolved more slowly since then, althoughmonthly changes have always been quitevolatile. Retail increased by 1.1% in April (seeChart 22). Underlying the April result for the EUwas a good performance among MemberStates: total retail trade increased in France (upby 1.4%), Germany (0.6%), Poland (0.4%) andthe UK (1.1%).

Year-on-year growth in turnover was 1.9% in April.Among the Member States for which data areavailable, total retail trade rose in thirteen and

decreased in six.Chart 22: Retail trade turnover in the EU

Employment in the retail trade sector cantherefore be expected to benefit from thisrecovery. Between 2008 and 2009, it shrunk by

1.5% due to the recession.Euro area sentiment slips to five-month low

As indicated by the Markit8 compositepurchasing managers index (PMI), the recoveryin the euro area decreased once again in Mayto a five-month low. The final Markit PMIdecreased to 55.8 in May, down from 57.8 in

April, with only Germany and France recordingsome expansion. Employment continued to rise inMay, with the rate of jobs growth only marginallybelow Februarys three-year peak and abovethe earlier flash estimate.

Rates of output expansion eased in bothmanufacturing and services. The slowing wasmuch more pronounced in manufacturing,where production rose at the weakest pace inseven months. Manufacturers indicated thatslower inflows of new orders and continuingdisruption to supply chains following theearthquake in Japan had led to a cooling of

production growth. The easing of business activityin the services sector to a four-month low was much less marked, meaning that the servicesector outpaced manufacturing for the first timesince last September.

Rates of growth eased in all the MS where PMIdata for both manufacturing and services areavailable. The expansion also remained two-speed, with France and Germany leading therecovery. By contrast, Italy, Spain and Irelanddrifted closer to stagnation.
http://www.markiteconomics.com/MarkitFiles/Pages/About.aspxhttp://www.markiteconomics.com/MarkitFiles/Pages/About.aspxhttp://www.markiteconomics.com/MarkitFiles/Pages/About.aspx


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SPECIAL FOCUS: VOLUNTEERING

2011 is the European Year of Volunteering and this special focus reports on recent developments in thevolunteering sector. Nearly one-fifth of the EU population is engaged in some form of voluntary work, whichaccounts for up to 3 - 4% of some EU countries GDP. In the EU, the term volunteering is commonly used torefer to all forms of voluntary activity, whether formal or informal. People who undertake such activity do so oftheir own free will and for their own personal reasons, without concern for financial gain.

How important is volunteering to the economy?

According to the Volunteering in the European Union report,1 some 92 to 94 million adults (or 22% to 23% of theEU population) are involved in volunteering, while some key European and international surveys indicate thatthere are around 100 to 150 million volunteers in Europe. The gender balance of volunteers varies considerablyfrom one country to another. However, eleven EU countries have a greater number of male volunteers, whilenine EU countries have equal numbers of men and women volunteering. The predominance of male volunteers insome countries is due to the fact that the sports sector attracts the highest number of volunteers, and more menthan women tend to volunteer in that sector. In just five EU countries there are more female than malevolunteers. Besides, a positive correlation has been demonstrated between the level of volunteering andeducational attainment. In most EU countries, employees are the most active volunteers and there is a strong andpositive correlation between employment and propensity to volunteer.

The economic value of volunteering also varies greatly from country to country. It accounts for only a tinypercentage of GDP (less than 0.1%) in Slovakia, Poland and Greece but has a much bigger share in Austria(4.75%), the Netherlands (3.50%) and Sweden (3.14%). Volunteering also represents more than 2% of GDP in theUK, Finland and Denmark. Countries such as Germany (1.95 %), France (1.65%)and Ireland (1.79%) are among sixcountries in the middle range, where volunteering represents between 1 and 2 % of GDP. Finally, in Bulgaria, theCzech Republic, Italy, Hungary, Lithuania, Malta, Portugal, Romania and Slovenia, the value of volunteering isbetween 0.1% and 1% of GDP.In 2010, according to a Eurobarometer survey,2 30% of Europeans were actively involved in voluntary work in oneor more organisations. Their work is quite varied, as are the associations they work for. More than a third of thevolunteers are active in a sports club or association, while 22% are involved with a cultural, educational orartistic association. Some 17% do voluntary work for a charitable or social aid organisation, 16 % take part in areligious organisation and 13% are active members of a trade union. Lower down the list, 9 % are working for anenvironmental organisation and 8% for a leisure association for the elderly, a business or professionalorganisation or a political party. In the Netherlands, most of the people surveyed (54 %) do voluntary work. Thesituation is similar in Denmark (52%) and Sweden (52%). In Greece, by contrast, 87% of the people surveyed dono voluntary work at all, and the situation is similar in Portugal (86 %), Bulgaria (86%), Cyprus (80%), Lithuania(80%), Malta (79%) and Spain (78%). The involvement of respondents is conditioned by their socio-demographicprofile: volunteering is more widespread among the well-off and the most educated. It is undertaken by 43 % ofthose who studied until the age of 20 or beyond, 46% of managers, 40% of those who place themselves at the topof the social scale and 45% of those who are very interested in politics. By contrast, voluntary work is done byonly 21% of those who completed their studies at the age of 15 or earlier, 28% of manual workers, 23% of thosewho place themselves at the bottom of the social scale and 18% of those who are not interested in politics. Age,however, is not a factor in volunteering: 31% of those aged 15 to 24, 29 % of those aged 25 to 39, 34 % of the 40-54 age group and 30% of those aged 55 or over do voluntary work in an association or an organisation.Long term developments

According to the Volunteering in the European Union report, trends in the level of volunteering over the pastdecade vary from one EU Member State to another, depending on the national context and situation. In the lastten years, however, there has been a general upward trend in the number of volunteers active in the EU. Theincrease has been significant in ten countries: Austria, Belgium, the Czech Republic, Denmark, France, Greece,Italy, Luxembourg, Poland and Spain. A further six countries have seen modest increases in the number ofvolunteers: Estonia, Finland, Germany, Hungary, Romania and Slovenia. The number of volunteers has remainedstable or has fluctuated mildly in seven countries: Bulgaria, Ireland, Latvia, Lithuania, Malta, the Netherlands andSweden. Only Slovakia reported a downward trend over the past decade. In the remaining such as the CzechRepublic, Denmark and Spain, have noted that an increased public awareness of social and environmentalconcerns has led an increasing number of individuals to volunteer to make a difference.

1. GHK, February 2010.

2. Standard Eurobarometer No 73 Public Opinion in the European Union.


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In a number of countries, such as Estonia, recent civic initiatives have promoted volunteering and have increased

the number of individuals taking part in collective voluntary projects and events. Some countries like Denmarkhave pointed to the increased need for volunteers and voluntary labour in public sector and voluntaryorganisations, e.g. in nurseries, schools and care homes for the elderly. In France, more and more voluntaryorganisations are being created every year, and they attract new volunteers without affecting the number ofvolunteers already working with existing organisations. In some countries, notably Belgium, Denmark, Germany andSpain, older people are becoming more involved in volunteering. In other countries the public image ofvolunteering has been gradually changing. In Poland, for example, the main reason for the increasing number ofvolunteers is that people now take a more positive view of volunteering, such as seeing it as a valuable opportunityto gain work experience in the social or non-profit sector, for young people. In Slovakia, the only country to reporta decrease in the number of volunteers, stakeholders have pointed to the governments failure to support thetertiary sector.

Impact of the economic crisis

The recent economic crisis has had a considerable impact on volunteering in a number of countries. In some, suchas Ireland and the Netherlands, it has been seen as an opportunity and has led to an increased number ofindividuals participating in voluntary activities. According to Volunteer Centre Ireland (VCI), the recession has ledto a dramatic rise in the number of people registering for voluntary work. Many local volunteer centres reported anincrease of almost 80% in the number of people registering in 2009 compared to 2008. Indeed, for much of 2009the increase was more than 100%, and in some months it was as high as 120 %. In the Netherlands, a survey of 220voluntary centres (conducted by Movisie) found that, six months earlier, demand for work at a quarter of thesecentres increased sharply and now that share stands at 44%. In some other countries, including Italy and a numberof Eastern European countries such as Estonia, Latvia, Lithuania and Poland, the economic crisis has hit thevoluntary sector hard. In Poland, for example, the number of volunteers fell sharply at the end of 2008, triggeringa debate on the serious crisis in the social sector in Poland.

Outlook

There are divergent views about the future of volunteering. In Belgium, for example, the number of volunteers isexpected to increase over the next few years. In Italy, by contrast, the ageing population and the lack of youngpeople willing and able to volunteer raise concerns over the future of volunteering in that country. A report by vanHal et al (2004) on volunteering policies and partnerships in the EU suggests that the nature of voluntary work maybe changing. Volunteers are now much more likely to undertake shorter and more project-based activities. Indeed,representatives from civil society organisations in the Netherlands have the impression that the emphasis ofvoluntary work is shifting towards short-term projects with well-defined tasks and objectives. The quantitativeimpact of volunteering seen as a bridge between non-work and paid work has been shown especially in the social,environment or cultural fields and volunteers have played a major role in identifying needs and creating new jobs.Given that volunteering has increased in the great majority of EU countries over the past decade, it seems that inmost countries the main challenges concern changes in the nature of voluntary work, and a mismatch between theneeds of voluntary organisations and the aspirations of the new generations of volunteers. The difficulty may notbe recruitment as such but finding the right people with the right skills. Another issue concerns service substitutionand job substitution. There is indeed a real concern in some Member States that some of the activities undertakenor services provided by volunteering ought really to be carried out by paid workers or by a professional service.

The UK, for instance, has a long-standing tradition of volunteers helping deliver public services. Many voluntaryorganisations are involved, especially in contracting to deliver welfare services, and this involvement is likely tocontinue growing as part of the Big Society project. The key issue here is that the role of volunteers in deliveringpublic services should complement or add value to the work done by paid staff, not replace it.


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Impact of restructuring on employment

The European Restructuring Monitor (ERM)recorded a total of 255 cases of restructuringbetween 1 March 2011 and 31 May 20119.

Announced job losses continued to outnumber

announced job gains but the gap is narrowing

These cases involved 59548 announced joblosses and 47,610 announced job gains.

The member states with the largest announced job losses were France (11630 jobs) and theUnited Kingdom (10,690 jobs) followed by Italy(5271 jobs), Germany (4910 jobs) and Spain(4710 jobs).

Chart 23: Announced job losses and creation for the EU

Manufacturing and Transport andcommunications were the sectors most affected

by announced restructuring job losses

Between March and May 2011, manufacturing(20529 jobs) and transport and communications(16797) were the sectors the most affected byannounced job losses. Since September 2008these two sectors have recorded a total of793172 announced job losses, over half of totalannounced job losses. Other significantlyaffected sectors included public administration(7022 jobs) and financial intermediation (3716jobs).

In manufacturing, large job losses whereannounced in telecommunicationsmanufacturing companies. Nokia hasannounced plans to cut up to 2 900 jobs inFinland, through dismissals and outsourcing. Theannounced job losses include 1400 lay-offs andthe transfer of 1500 employees to softwaredevelopment firm Accenture. Nokia's cuts arelinked to its declining market-share in smart-phones and the resulting strategic partnershipwith Microsoft. Nokia announced also 700 jobcuts in the UK as part of plans to reduce its globalworkforce by 4000 employees within two years.The cuts will be mainly in research anddevelopment as well as in software divisions.

Further losses have been announced at Sony-Ericsson, which announced 450 job cuts withinsales and administration in Sweden, 400 jobs willbe cut in Stockholm and 50 in Gothenburg. Atthe same time, the company has started torecruit around 250 engineers within research anddevelopment (R&D) due to an increaseddemand for 4G-technology.

In transport manufacturing, French companyAlstom Transport announced the loss of 700 jobsat its site in Salzgitter (Lower Saxony, Germany)and 400 job cuts at its Spanish plant located inSanta Perptua (Barcelona). Alstom's plan to

reduce staff in Germany and Spain is part of alarge restructuring programme affecting manycountries and resulting in 4000 job losses. Morelosses in the sector have been announced byship producer Slovenske Lodenice Komarno,which announced the collective dismissal of 150out of 670 workers by the end of September 2011;while leisure boat producer Rodman Polyshipshas announced that it intends to present aredundancy plan to the labour authorities(expediente de regulacon de empleo deextincin) which will affect 120 workers at itsSpanish plant.

Chart 24: Announced job losses for selected Member States

In the pharmaceutical manufacturing sector,pharmaceutical giant Pfizer has announced thatit is to close its plant in Sandwich, UK, with the lossof 2,400 jobs. Other losses have been announcedby giant Sanofi-Aventis which announced inMarch it is to reorganize its European operationsand cut up to 700 jobs by reducing its number ofEuropean subsidiaries from 30 to 10. Therestructuring will affect Portugal (140 job losses),Germany (277 job losses), Belgium (87 job losses)and the Netherlands (70 job losses). Plants inSpain, the Czech Republic, Hungary, Romania,

Switzerland, Austria, and United Kingdom will bealso affected. In March, Sanofi-Aventisannounced its plans to cut a further 280 jobs in
http://www.eurofound.europa.eu/emcc/erm/index.htmhttp://www.eurofound.europa.eu/emcc/erm/index.htm


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marketing and sales in Germany, a spokespersonof the group stated that these job losses are notpart of the European-wide restructuring plan.

Further losses have been announced at WarnerChilcott, a worldwide pharmaceutical company,which announced a Europe-wide restructuringplan which will result in the loss of 500 jobs inGermany, France, Italy, Belgium, Netherlandsand Switzerland. In Italy, the company is closingits Italian subsidiary (ex Procter Pharma), with theconsequent loss of 151 jobs, while in Spain WarnerChilcott will dismiss 120 working inpharmaceutical sales. Takeda, the Frenchsubsidiary of the Japanese pharmaceuticalgroup, announced its plan to cut 195 out of its443 jobs (115 sales representatives and 25 fromthe head office) and not to fill 55 vacantpositions. The workforce reduction is mainly dueto a reduction in sales of 30 % within the last fouryears as well as the loss of some important patentprotections. Further losses in the country havebeen announced by DMH-Negma, a subsidiaryof the pharmaceutical Indian group Wockhardt,which announced its plans to lay off its 130 salesrepresentatives. The company had been placedinto compulsory liquidation on 25 March 2011.

Chart 25: Announced job losses by sector for the EU

In the postal sector, the biggest case relates toFrench national postal operator La Poste whichannounced it will cut 10000 jobs in 2011 after ithad cut over 11000 posts in 2010. Significant joblosses in the sector were also announced atRoyal Mail which announced plans to cut 1751 jobs across the UK. The job losses include 1000managers across the UK and 751 employees inLondon where two postal sorting centres will beclosed down.

In the transport sector, eleznice Slovenskejrepubliky (SR), a Slovak public railwayinfrastructure company, announced it will dismiss1700 out of about 17000 employees by the endof June 2011; dismissals are attributed to theimplementation of the recovery plan approvedby the government. Large losses in the countryhave also been announced at Cargo Slovakia, a

public freight railway company, which will dismiss1100 out of 9285 employees by the end ofAugust 2011. Dismissals are attributed to recovery

package adopted by the government to savethe company before bankruptcy; the companyis expected to be privatised in 2012. Other lossesin the sector relate to restructuringannouncements in airline companies, Czechairlines SA announced 317 job losses in March2011, while Spanair announced 50 job losses.

Job losses continue to be recorded in the publicadministration sector. In April, the CatalanGovernment (Generalitat) announced it willdismiss 1000 employees working in its publicenterprises. This measure is included in theCatalan Government's plan to cut the public

deficit and will affect public enterprises, entitiesand foundations where the Catalan Governmenthas more than 50% of ownership. According tothis cost savings plan, the Government is toreduce 6% of the total wages or dismissing 5% ofthe staff employed in its enterprises before June30th. The direct dismissals will affect 1000employees, while other measures includeworking time reduction and non-renewal oftemporary contracts. The Slovak CustomsAdministration has completed a first wave ofdismissal in March 2011, dismissing 800employees, and it plans to dismiss another 200employees by the end of April 2011. The job cutsare attributed to the implementation of theUNITAS programme promoted by the Ministry ofFinance which envisages the merger of tax andcustom offices with the aim of decreasing publicexpenditures. Further losses have beenannounced at DAK, the second largest publichealth insurer in Germany, which plans to cut 800 jobs in 2011, while the Austrian Government ofStyria plans to cut 700 of its 8500 public serviceposts by the end of 2015 due to the austerityplan.

Between March and May 2011, the largest

restructuring cases involving job loss were in: Manufacturing: Nokia (FI, 2900 jobs),Pfizer (UK, 2400 jobs).

Public Administration: CatalanGovernment (Generalitat) (ES, 1000jobs), Coln riaditestvo (SK, 1000 jobs).

Transport and Communications: La Poste(FR, 10000 jobs), Royal Mail (UK, 1751jobs) eleznice Slovenskej republiky (SR)(SK, 1700 jobs), Cargo Slovakia (SK, 1100jobs).

Real Estate/Business activities: In & Out(IT, 1464 jobs), Nokia Denmark (DK, 950jobs).


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while manufacturing and real estate/business

activities accounted for the majority of business

expansion

Of the 47610 new jobs announced during March-May 2011, 18315 new jobs were in manufacturingwhile 10265 in real estate/ business activ

Documents

EU Employment and Social Situation Quarterly Review – Summer 2011