PM+: Labour market efficiency must be a key employment priority for EU Member States

All the evidence shows that efficient labour markets actually drive economic growth, says Eurociett's Denis Pennel

By Denis Pennel

22 Jun 2015

A key priority for the European commission's forthcoming update of the guidelines for employment policies should be to drive member states to modernise their labour markets and set in place a framework fit for the needs of the twenty-first century.

The 2014-15 World Economic Forum report on global competitiveness found red tape and labour market regulation to be among the key factors hindering European competitiveness. The commission's own data confirms that those countries which modernised their labour markets – such as Sweden, Germany and the UK – have withstood the impact of the recent economic crisis and are recovering more quickly than markets such as Spain, Portugal and Greece which persisted with outdated and inflexible labour regulations.

The development of well-regulated forms of flexible work – including a balanced approach to the regulation of agency work and the removal of any unjustified restrictions - will promote job creation and ensure that markets fully benefit from the intermediary function that agency's play.


A second priority should be to encourage a broader diversity of labour contracts. In today's volatile and unpredictable economic climate, companies need to be agile and able to adapt their workforce according to demand. Labour markets need to embrace different forms of contract in order to enhance labour market participation and boost youth employment. This is already a reality in many EU markets and reflects a different approach to work/life balance among both employers and workers.

In the Netherlands less than 50 per cent of people work under an open-ended full-time contract, while more than 40 per cent are employed part-time, leading to a low unemployment levels. High unemployment tends to go hand in hand with high levels of undeclared work which damage economies, companies and workers.

Driving more inclusive labour markets will serve to stamp out undeclared work by bringing more people into the formal economy and pushing up tax revenues as a result.

Introducing a diversity of labour contracts will also require member states to update and adapt their social protection systems in order to provide comparable access for all workers – regardless of their labour contract. Earlier this year UNI Europa, the European trade union federation for private services, together with Eurociett, representing the employment and recruitment sector, signed joint recommendations to policymakers on agency work.

Along with balanced regulation and adaption of social protection systems was the fostering of portability of rights – particularly for short duration contracts -; enhancement of access to social protection and working conditions; better information on best practice and better data collection.

Encouraging greater cooperation between public and private employment services should also feature in the commission's guidelines. Public-private partnerships (PPP) reduce labour market segmentation and facilitate transitions within the labour market – transitions from unemployment to work, from short assignments to longer careers, and from slowing industries to growth sectors.

It also enhances the support available to unemployed people, and at no extra cost to the tax payer. The European commission's partnership between employment services (PARES) initiative prompts PPP and the sharing of best practice among private and public employment services. It has been successful at EU level, but needs further follow-up at national level.

Successful examples of PPP can be found across the member states. In the UK for example, job seekers that have not secured employment after six months of signing on with the public employment services are transferred to the private employment sector for a more tailored approach.

In the Netherlands, the opposite approach is taken and those newly seeking work are sent immediately to the private employment sector to find them a job.

Evidence from both the commission and the organisation for economic cooperation and development (OECD) confirms that efficient labour markets actually drive growth. The commission employment guidelines must urge member state strategies to drive labour market reforms, thereby expanding labour market participation and driving job creation - even against a background of relatively modest growth.


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