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Blink and you missed it

Labour market / COMMENTARY
Fabian Zuleeg

Date: 08/05/2009
Ahead of this week’s EU Employment Summit in Prague, European Commission President José Manuel Barroso said the meeting was an opportunity to “keep employment at the top of the EU agenda, where it belongs”. But it was an opportunity that was missed.
The original plans for a fully-fledged EU Summit were downgraded to a meeting between the EU Presidency troika (the Czechs, Swedes and Spaniards), the social partners (business and trade unions) and the European Commission – all key players in the debate nevertheless, but hardly anyone took any notice of their discussions.
At first sight, this seems odd: jobs (or rather their rapid disappearance) should be at the forefront of everyone’s minds. The economic crisis has begun to hit labour markets hard: the European Restructuring Monitor (ERM), published by Eurofound, recorded 220,000 jobs lost and only 90,000 created in the first quarter of 2009.
The deterioration has been especially dramatic in Spain, Ireland and the Baltic States, which are all recording double-digit unemployment rates. Euro-zone unemployment now stands at just under 9%, up from just over 7% a year ago, and the Organisation for Economic Cooperation and Development is forecasting an unemployment rate of around 10% or more in all of Europe’s large economies in 2010.
This is clearly an issue which will dominate the political debate across Europe for the rest of 2009 and beyond. So why was so little attention paid to the Employment Summit?
Some of the reasons are down to bad timing. Given the changes in Czech politics, few have high expectations that their EU Presidency can now deliver substantive progress on key issues.  With a second referendum on the Lisbon Treaty pending in Ireland, the European Parliament in campaigning mode and the Commission coming to end of its term, few major initiatives are likely to see the light of day at EU level for some time to come.
Despite the rhetoric, the EU also has few direct ways of influencing labour markets. The European Social Fund and Globalisation Fund are dwarfed in size by Member States’ spending on social protection and labour market measures and, with a few exceptions, labour market policy remains firmly in the hands of Member States.
There has been some progress recently at EU level - labour market performance is routinely discussed as part of the Lisbon Agenda and there is much more focus on exchanging good practice, with, for example, a broad consensus emerging on the flexicurity principle (achieving a balance between labour market flexibility and security for workers, coupled with active labour market policies such as re-training). But in terms of immediate actions to deal with rising unemployment, there is relatively little in the EU toolbox.
The European Economic Recovery Plan endorsed at December’s EU Summit made some references to labour markets, including proposals to use the Social and Globalisation Funds proactively and the suggestion that Member States should reduce employers' social charges for those on lower incomes. But in terms of the overall response to the economic crisis, these were relatively minor elements.
Given the scale of the problem, the Employment Summit could have been an opportunity to launch an ambitious employment action plan, drawing on the good practice which has been developed in recent years.
This should, for example, include funding for active labour market policies to ensure that those who lose their jobs continue to upgrade their skills. It should also include an emphasis on the need for structural reforms to deliver long-term solutions to ensure effective labour markets with high participation rates for all groups in society, including older workers, new entrants into the labour market, women and minorities. A strong commitment to education, skills development and lifelong learning, including spending a higher percentage of GDP on these policies, would have been a positive signal. 
But there is no appetite for such an ambitious commitment, not least because even with the right kind of policies, labour markets are unlikely to recover soon. There is also uncertainty about what to do: finding the right kind of policies in face of an economic crisis which is clearly more than just a cyclical downturn is challenging indeed.
Herein might also lie another key reason for the lack of more decisive action. Labour market forecasts and predictions are becoming gloomier almost by the day; the deterioration is rapid and it is starting to engulf many countries which were seen as having well-functioning labour markets – even Denmark, home of the flexicurity concept, has seen unemployment almost double in the last year to 5.7%
Indeed, the crisis may turn out to be a test of policy concepts such as flexicurity. In the long term, Europe might not see a return of many of the jobs which are being lost now. The situation is especially precarious for low-skilled workers in sectors that can easily outsource production and employment in manufacturing in the EU - which is being hit by low global demand - may never recover to its previous levels, potentially affecting many thousands of lower-skilled workers.
This implies structural changes to our economies and societies which, when coupled with the ageing of Europe’s population, mean the EU’s future labour markets will never look the same again.
By focusing on the immediate impact of the crisis on labour markets at this week’s Employment Summit, instead of these longer-term trends, the EU has missed a trick. It is vital to understand how the crisis will affect our long term well-being and how our economic and social models might be challenged by these profound changes in our labour markets. If the Summit had addressed this, real progress could have been made.
The discussion should have been directly linked to the future of the Lisbon Agenda. It is already becoming apparent that employment targets which were designed for better economic times cannot be met in the midst of a deep crisis. Starting the discussion on how the Lisbon Agenda could be refocused to deal with the long-term impact of the crisis on labour markets would have been a worthwhile exercise.
The Summit was a golden opportunity to focus on these long-term issues as well as putting forward more ambitious policies to deal with the immediate unemployment crisis – and the EU cannot afford to go on missing such opportunities if it wants to be seen as a relevant and important player in addressing European citizens’ concerns.
Fabian Zuleeg is a Senior Policy Analyst at the European Policy Centre.

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