The impact of the crisis The impact of the crisis on the labour marketon the labour market
&&Labour market Labour market
segmentation and recent segmentation and recent reformsreforms
Klara StovicekKlara StovicekEuropean Commission, DG ECFINEuropean Commission, DG ECFIN
Labour market developments in the EU
European Commission (2012): EU Employment and Social Situation Quarterly Review, June, forthcoming.
215,000
220,000
225,000
230,000
q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1
05 06 07 08 09 10 11 12
000's persons
15,000
20,000
25,000
30,000
- 6 MillionsEmployment (Lhs)
Unemployment (Rhs)
Large diversity across EU countries
Outlook
Weak, no substantial improvements over forecast horizon
Young unemployment rate:
In 2011:21.3% in the EU, about 45% in Spain and Greece
2008-2011
Young: at high risk of unemployment
• Labour market entrants
• High exposure to temporary jobs
• High concentration in cyclically-sensitive industries
• … But also pre-existing structural weaknesses, including employment protection legislation (EPL)
ukse
fi
sk
si
ro
pt
pl
atnl
mt
hu
lu
lt
lv
cy
it
fr
esel
ie
ee
de
dk
cz
bg
be
0
10
20
30
40
50
0 10 20 30 40 50Unemployment rate 25-64
Un
em
plo
yme
nt
rate
15
-24 2011
EPL reforms 1990-2008EPL indicator (OECD): liberalisation of fixed-term contracts
plhu
ieuk
fr
atfi
es
nl
pt
el
dk
be
dese
it
0
1
2
3
4
5
6
0 1 2 3 4 5 6
2008
1990
Temporary contracts
plhuie
uk
fratfi
esnl
pt
el
dk
be
dese
it
0
1
2
3
4
5
6
0 1 2 3 4 5 6
1990
2008 Permanent contracts:
individual dismissals
European Commission (2010): Labour market and wage developments in 2009
Young: temporary jobs frequent where EPL for permanent contracts is high
(individual dismissals)
EPL reforms since 2008
At the top of the structural reform agenda in several Member States, e.g. ES, IT, PT
Objectives: to reduce labour market segmentation, foster job creation and ease labour market adjustment:
by reforming and promoting permanent contracts
• Easing dismissal rules (individual and collective dismissals)
• Reduction of costs of dismissals and uncertainty related to dismissals (individual and collective dismissals)
• Enhancing the efficiency of the dispute settlement procedures
by revising temporary contracts
EPL reforms since 2008: individual dismissals
• Simplification of notification procedures (IT, PT)
• Clarification and broadening of the scope of justified dismissals
Dismissals on economic grounds:
Justified if revenues or sales fall for 3 consecutive quarters (ES)
Include also dismissals based on organisational reasons (ES)
Employers are not obliged to look for a compatible job within the firm to prevent dismissal anymore (PT)
A tenure rule (last in first out) is abolished if more than one worker in a section is at risk of redundancy (PT)
Dismissals based on incompetence:
Justified also in case of no changes to the work place or nature of a job (PT)
Justified for qualified employees if they fail to meet agreed objectives (PT)
PERMANENT CONTRACTS
EPL reforms since 2008: individual dismissals
• Reduction of costs and uncertainties related to justified dismissals
Severance payments:
Reduced from 30 to 20 days per year of work (ongoing discussion to reduce further to 10 days); a minimum of 3 months of pay independently of tenure is abolished; a maximum is set at 12months (PT)
Maximum wage to calculate severance payments is limited to 20*minimum wage (PT)
Creation of a portable fund to create incentives to job-to-job mobility, under discussion (PT)
Creation of the Wage Guarantee fund (FOGASA) to contribute to severance payments in case of firms with less than 25 workers, up to 1 year (ES)
PERMANENT CONTRACTS
EPL reforms since 2008: individual dismissals
• Reduction of costs and uncertainties related to unjustified dismissals
Severance payments:
Reduced from 45 to 33 days per year of work, a maximum is reduced from 42 to 24 months (ES)
Interim wages during the trial against unfair dismissal:
Capped at 12 months (IT, PT)
Abolished if the employer opts for severance payments (ES)
Reinstatement:
Its scope is reduced in firms with more than 15 employees (IT), including as a result of procedural errors (IT, PT)
PERMANENT CONTRACTS
EPL reform since 2008Update of the EPL indicator •Based on the OECD standard methodology (indicators are indicative, not official OECD figures!)• Only for selected countries
• Not all features of the EPL reforms are captured by the indicator
Results: EPL was reduced in the countries which have the strongest segmentation (fixed-term, self-employment)
Own calculations based on the OECD methodology
0
1
2
3
4
5
PT SI
CZ
DE
SE
LU
NL
SK
PT
afte
r re
form E
S
FR AT
KO
R
EL
ES
afte
r 2
01
0 r
efo
rm FI
ES
afte
r 2
01
2 r
efo
rm PL
EL
afte
r 2
01
0 r
efo
rm HU
JPN IT BE
IE a
fter
refo
rm DK IE
IT a
fter
refo
rm
AU
S
CA
N
CH
E
UK
US
A
Permanent contracts:
individual dismissals
Conclusions (1)
• The impact of the crisis on labour market developments has been uneven across countries and demographic groups
• The crisis gave a decisive push to the recent EPL reforms, which would be very difficult to implement otherwise
• The impact will be country specific, depending on how agents will internalize reforms
• Relevant are also complementarities with other reforms (e.g. those that address collective bargaining, unemployment benefits, internal flexibility, apprenticeship and training)
Conclusions (2)
• Slovenia has a country specific recommendation (CSR) in the area of EPL: “Adjust employment protection legislation as regards permanent contracts in order to reduce labour market segmentation, in consultation with social partners and in accordance with national practices. Further tackle the parallel labour market caused by student work.”
• Thank you