By 2010, the European Union hopes to have achieved an employment rate of 70%. But with a high amount of regulation in the European labour market, can this only be achieved by deregulation, and an introduction of greater market flexibility? Job creation and flexibility are said to go hand in hand. If you don’t have flexibility, it’s said, you don’t get sufficient job creation. But this statement isn’t entirely true for the European labour market. There are other important factors to consider. There are social and cultural factors, as well as the amount of able people not in work.
These include members of the EU population who are able to work who for a number of various reasons are choosing not to work. These reasons are crucial to achieving the 70% employment rate. To achieve the 70%, the EU should look to other countries where the employment rate is 70% and above, such as the US. Since 1975, the EU has trailed behind both the United States and Japan in terms of job creation. Since then, the average annual rate of job creation has been about 0. 5%. Why does the US do better than the EU in terms of job creation? It has to do with a lot of factors, and not just with labour market flexibility.
But what is flexibility, exactly? It is often interpreted as the extent to which a firm can hire or fire its employees. In this sense, the US is said to be a lot more flexible than we are in Europe. The US worker does not have the same amount of employee rights as an EU worker. The EU has legislation which covers many different workers, from part time, to parents being able to take unpaid time off with no repercussions. In the US, it is easier to hire or fire an employee due to the lack of these rights. But in terms of total job turnover, the EU average is between 18% and 25%. 1 This figure is in step with the US and Canada.
So, if the flexibility is different, but the same percentage of turnover is the same, there must be some other factors that need to be taken into consideration. One of the factors is better economic growth. The US has had an average 2. 9%2 GDP growth since 1991, as well as a relaxed flexibility in terms of the labour market. The benefits are clear, since January 1993, the US has created over 6 million new jobs. In the same period in the European Union, it has created rather less than half a million net. 3 But in the EU however, the annual GDP growth for the same period of time is 2. 0%.
This shows that it is not just the deregulation of the market. As a whole, the US has high employment in the service sector industry, with a high proportion of females working in that sector. The impact of less flexible EU labour markets relative to the US has primarily been in creating fewer jobs in service sectors, The EU recognised the problem, and decided to focus on the level of employment and employment creation. But it wasn’t until November 1997, at the European Jobs Summit in Luxembourg that the EU dealt with the problem as a whole. It introduced the European Employment Strategy (EES).
This is defined as “the process by which the European Union defines common objectives in relation to employment policy and detailed guidelines for the development of the employment policies of Member States. “4 There were four main parts to the EES, all of them designed to increase the level of employment in the EU. These were: Employability, Entrepreneurship, Flexibility/Adaptability, and Equal Opportunities. The Employabilty part would aim towards improving the employability of people, making them more attractive to prospective employers. It would tackle the unemployment in the youth sector by giving training.
It would also give training to those who were in long term unemployment, as well as help them with their CV’s, which would make them more marketable to employers. The Entrepreneurship would give access to jobs, thanks to the simplification of administration and the reduction of tax burdens, enabling more small and medium enterprises to go into business. The Adaptability would enable businesses and workers to cope better with change in the technology and the markets. The Equal Opportunities would prove to be highly important, as it would attempt to fill the gender employment gaps, as well as bring together work and family life.
These main pillars of the European Employment Strategy would pave the way for the Lisbon aim of 70% employment rate, as they faced some of the major reasons why the unemployment rate in the EU was unfavourable in comparison to the US. To attain the Lisbon aim of creating approximately 16 million jobs by 2010, it is certain that the European rate of increase of employment will have to at least double. A higher rate of economic demand means a higher rate of employment. It is certain that the figures of recent years will have to improve dramatically, as well as a confrontation of important challenges.