Report

Labour slack in the EU – Around 50 million people

The unemployment rate is an important and well-publicised measure of labour market performance in developed market economies. It is currently high in the EU compared with other developed countries and still well above its historical average nearly a decade a er the beginning of the global financial crisis. But focusing exclusively on the unemployment rate fails to take account of other numerically important manifestations of labour market slack (or simply labour slack), defined in this report as the shortfall between the volume of work desired by workers and the actual volume of work available. These other indicators have grown significantly since the crisis and have been slower to respond to the recovery than the unemployment rate itself. This report provides a broader measure of labour slack in the EU, based on EU Labour Force Survey data that cover involuntary part-timers and inactive people with some labour market attachment as well as the unemployed.

Key findings

  • Four-fiths of the jobless population of working age (15–64 years-old) in the EU are inactive as opposed to unemployed. Many have some form of labour market attachment, and many indicate that they would like to work, are seeking work or are available to work. In addition, part-time work has been growing in most Member States and so, too, has the share of part-time workers who would like to work longer hours.
  • There were close to 23 million unemployed people of working age in the EU in 2015 but around 50 million people in a broader category of labour slack, encompassing inactive people wishing to work and underemployed, involuntary part-timers as well as the unemployed. Labour slack has been slower to unwind than unemployment following the upturn in labour market performance since 2013.
  • The estimated labour slack rate in the EU rose more between 2008 and 2015 (from 11.8% to 14.9%) than the unemployment rate (from 7.1% to 9.5%).
  • Beyond the unemployed population,the largest category of labour slack was involuntary part-timers (nearly 10 million in 2015, approximately one in four part-timers), followed by those who were available and wanting to work but who were not seeking work and therefore considered inactive rather than unemployed (nearly 9 million in 2015).
  • Involuntary part-timers were more likely to have started their current job within the last year and to work in basic or lower-level service occupations and sectors (for example, household work). They were also more likely to be women, although this is mainly a result of the greater female share of part-time workers overall. Looking just at the part-time population and controlling for other factors, men were more likely than women to be working part time involuntarily.
  • Among inactive people available for but not seeking work, the main reason given for not seeking work is ‘discouragement’, the belief that no work is available. This has increased, markedly so for men, since 2008, most likely as a result of the severe impacts of the recession on predominantly male-employing sectors such as manufacturing and construction. The strongest determinants of belonging to this category were age – the older, the more likely – and the time elapsed since one’s last job. Despite rapidly increasing rates of older worker participation, there remains a sizeable potential workforce among older people willing to work but discouraged from doing so. The fact that there is such a steep age gradient for discouragement could imply barriers (perceived or actual) of age discrimination or of obsolete skills.
  •  While employment and participation rates have grown for women and older people in recent years, they have declined for core-age men (25–54 years-old), traditionally the category with the strongest labour market attachment. This decline has been most marked in the USA, but a milder version of the same phenomenon can be observed in EU Member States as well. At least two circumstances conducive to inactivity among core-age men appear to have gained importance in recent years: self-reported discouragement (probably related to depressed labour demand in traditionally male-employing sectors) and self-reported disability.
  • Involuntary part-timers were more likely to have started their current job within the last year and to work in basic or lower-level service occupations and sectors (for example, household work). They were also more likely to be women, although this is mainly a result of the greater female share of part-time workers overall. Looking just at the part-time population and controlling for other factors, men were more likely than women to be working part time involuntarily.
  • The variation in increased labour market performance across EU Member States a er 2008 is also evident in broader labour slack trends. Two Member States in particular stand out in the analysis: Italy and Germany. The labour slack rate in Italy was almost double that of the unemployment rate; a quarter of the working-age population were either unemployed or in one of the other labour slack categories. In 2015, over a half of the EU’s discouraged workers were located in Italy. On the other hand, the improved labour market performance in Germany is even more evident when measured in terms of labour slack than unemployment. There were, for example, almost a million fewer involuntary part- timers in Germany in 2015 than in 2008.

Chosen excerpts by Job Market Monitor. Read the whole story atEstimating labour market slack in the European Union – Executive summary | Eurofound

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