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Europe - 12 ways to boost job growth

21 September 2011

Asking for labour market reform to spur competitiveness, the European business federation (BusinessEurope) has identified a number of ready-to-use actions, which could bring the European Union (EU) back to work and lead the 27-country bloc closer to its strategic goal of raising the employment rate from 68% to 75%, specialist publication EurActiv reports.

Looking at what has worked best across Europe, notably Austria where unemployment is as low as 3.4%, BusinessEurope is trying to make the case that sound labour market reform can reduce unemployment, boost growth and restore debt-laden countries' public finances.

BusinessEurope Director-General, Philippe de Buck, commented "reforming the labour market is not an austerity issue, but it is key to boost the tax basis."

In March 2011, the EU unemployment rate stood at 9.5% or roughly 23 million people without jobs. Historically, the EU has struggled with long-term unemployment. Also, compared with the US, unemployment spells are longer. The share of people in long-term unemployment out of all unemployed reached almost 20% last year.

Delivering on the flexicurity policies seems essential. In this framework, allowing companies to have different forms of contractual agreements to meet current and future needs as well make permanent contracts employment friendly to stimulate hiring are crucial steps.

According to the World Economic Forum Global Competitiveness Report most EU countries have rigid labour markets.

One country in Europe that has suffered particularly in the recent crisis is Spain, said de Buck, who complains that Madrid has been over-protecting individuals with permanent contracts.

"We are against the uniformisation of labour contracts," argued de Buck, noting that improving flexibility does not create a precarious workforce, rather the contrary.

Eurociett, the Confederation of Private Employment Agencies, has found that external flexibility leads to job creation and not job substitutions.  This is reflected in OECD figures, which show that temporary employment in most cases is a stepping stone to permanent employment.

Structural reforms, however, should be twinned with the right incentives, like reducing the tax burden on labour, especially for those out of work, so that work becomes economically attractive compared to welfare treatments.

Taking the example of Sweden, which reduced tax on labour in 2007, BusinessEurope estimates that the immediate cut in tax revenues will be offset positively over time by an increase in the employment rate and ultimately higher tax revenues for the state.

Last but not least, the employers' organisation believes greater efforts should be made to reduce mismatches between in the supply and demand of skills.

This can be done by encouraging companies to provide apprenticeships, a programme which Germany has successfully implemented.

Steven D'Haeseleer, BusinessEurope Director for Social Affairs, said "the involvement of employers is not about taking over the role of teachers. It is about providing a context for the learning."

"This said, companies cannot substitute themselves to the public sector and the education systems across Europe must be improved."

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