Wednesday, April 20, 2011

[IWS] RAND: LIFE AFTER LISBON: Europe's Challenges to Promote Labour Force Participation and Reduce Income Inequality [20 April 2011]

IWS Documented News Service
_______________________________
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor----------------------
Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
________________________________________________________________________

 

RAND

 

Life after Lisbon: Europe's Challenges to Promote Labour Force Participation and Reduce Income Inequality [20 April 2011]

by Christian van Stolk, Stijn Hoorens, Philipp-Bastian Brutscher, Priscillia Hunt, Flavia Tsang, Barbara Janta

http://www.rand.org/pubs/monographs/MG1068.html

or

http://www.rand.org/content/dam/rand/pubs/monographs/2011/RAND_MG1068.pdf

[full-text, 93 pages]

 

The aftermath of the economic crisis of 2008 has undone much of the progress on improving employment and growth in Europe over the last 20 years. Vulnerable groups in particular remain at risk of poverty and not being in employment and education, especially in light of trends that have shaped the labour market including changes in educational requirements and the changes in work.

 

The insights from our analysis and review form a useful input into developing European policy discussions. The review concludes that policy makers should focus more on enabling social policy that allows individuals to achieve their full productive potential and participate in the labour market as a complement to welfare approaches such as social insurance. Evidence from Nordic countries shows that the increased use of enabling social interventions can make an effective contribution to mitigating against social risks such as sustained poverty and long-term unemployment. Moreover, as the review highlights these targeted policies do not need to impact other macroeconomic outcomes or other groups.

 

European action is important. Improving labour force market participation and addressing income inequality across Europe requires a concerted strategy to define the principles in employment and social policy and values and mechanisms that can facilitate effective policy coordination and exchange. It is obvious that Member States could learn from each other given the differences in income inequality and labour force participation rates in Europe. Further improvements also require better information on which particular policy responses are effective.

 

List of figures and tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . x

Executive summary . .  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii

CHAPTER 1

Introduction . .  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

CHAPTER 2

Looking at labour market developments in the EU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

CHAPTER 3

Understanding trade-offs in labour force participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

CHAPTER 4

Examining income inequality in the EU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

CHAPTER 5

Considering trade-offs between income inequality and a number of outcomes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

CHAPTER 6

An uncertain future: trends and policy challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

CHAPTER 7

Policy implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

List of references . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

Annex: Modelling association between labour market trends and labour market participation of young and old. .  . . . . . . . . . . . . . . . . . . . . 69

Contents

List of figures and tables

Figure 2.1 EU population, 1960–2060 . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Figure 2.2 Changing general EU population age profile,1990, 2008 and 2050 . . . . . . . . . . . . . . . . . . . . . . . . . 7

Figure 2.3 EU labour force participation rate, 1970–2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Figure 2.4 EU Female labour force participation rate, 1970–2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Figure 2.5 Proportion of migrants in the working age population, 1995 and 2005 . . . . . . . . . . . . . . . . . . . 8

Figure 2.6 Student numbers in tertiary education in EU-27 per 10,000 population,1998–2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Figure 2.7 Change in EU industry mix, 1998–2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Figure 2.8 Proportion of professionals in total employment, 1995–2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Figure 2.9 Gender pay gap as a percentage difference between mean pay of gender

groups, 1996–2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Figure 2.10 EU employment rate (as a proportion of total working age population), 1970–2009 . . . . .  . . . . . . . . . . . 12

Figure 2.11 Employment rates among Member States, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Figure 2.12 Trends in employment rates by educational attainment (1998–2008) . . . . . . . . . . . . . . . . . . . . . . 13

Figure 2.13 EU unemployment rate, 1970–2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Figure 2.14 Unemployment rates of Member States, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Figure 3.1 Real wage gap / pressure index, young and old, 1995–2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Figure 3.2 EU youth unemployment rates, 1970–2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Figure 3.3 EU employment rates for older people, 1970–2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Figure 3.4 15–24 age group as proportion of working-age population, 1990–2007 . . . . . . . . . . . . . . . . . . 19

Figure 3.5 EU employment growth, youth intensive sectors last ten years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Figure 3.6 EU employment growth, old age intensive sectors, 1998–2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Figure 4.1 Gini coefficients for EU-27 countries, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Figure 4.2 Change in Gini coefficient between 1996 (or earliest possible) and 2008 . . . . . . . . . . . . . . . . . 28

Figure 4.3 Income share ratio, 2008 . . . . . . . . .  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Figure 4.4 Change in income quintile share ratio between 1996 and 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Figure 4.5 At-risk-of-poverty rate, 2008 . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Figure 4.6 Change in at-risk-of-poverty rate, 1996/7 and 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Figure 4.7 At-risk-of-poverty rate by age, 2001 and 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Figure 4.8 At-risk-of-poverty rates of migrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Figure 5.1 Cross-plot of unemployment rates and Gini coefficients, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Figure 5.2 Cross-plot of unemployment rates and Gini coefficients, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Figure 5.3 Growth rate in labour productivity, 1997–2007 (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Table 3.1 Summary table showing preliminary findings for the relationship between youth

and older population employment rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Table 3.2 Associations between main drivers and labour market states of young . . . . . . . . . . . . . . . . . . . . . 25

Table 3.3 Associations between main drivers and labour market states of the old . . . . . . . . . . . . . . . . . . . . 25

List of figures and tables xi

Table 4.1 Laeken indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Table 4.2 Estimated gender wage gap, percentage raw gap explained by different returns . . . . . . . . 31

Table 4.3 At-risk-of-poverty rates for the EU-15, by household types . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Table 4.4 Returns to education, Ordinary Least Squares (OLS) and quantile regression estimates . . . . . . . . . . . . . . . . . . . 33

Table 4.5 Effect of structural changes on income inequality, by groups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Table 4.6 Levels and change of union centralisation in 14 European nations . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Table 4.7 Change in union membership rates (per cent) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Table 4.8 Trade union membership rates, by groups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Table 5.1 Growth rate of GDP and Gini coefficient, 2001–6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Table 5.2 Regional and national variation in GDP, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Table 5.3 GDP per hour worked, 2007 (US$) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Table 7.1 Overview of trends per review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

Table 7.2 Future trends and their challenges for EU labour markets and employment

policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59



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This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.

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Stuart Basefsky                   
Director, IWS News Bureau                
Institute for Workplace Studies 
Cornell/ILR School                        
16 E. 34th Street, 4th Floor             
New York, NY 10016                        
                                   
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