The impact of the crisis on employment

People are working fewer hours, and times are hard for workers on temporary contracts and people with lower levels of education

Auteurs : | Ecrit le 14/04/10 | envoyer par mail | Imprimer | Document Joint

The economic crisis has hit the European labour markets, resulting in falling employment levels and rising unemployment in almost all Member States of the European Union. Underlying the general trends in the aggregate figures, a number of striking features characterising the employment situation have come to light during the recent crisis. How flexible are the labour markets across Europe in absorbing the crisis without firing people e.g. by lowering hours worked and making more use of part-time workers ? Are workers on temporary contracts hit harder than those on permanent contracts ?

Are there differences in job losses by level of education of people ? And how many people managed to find a job against the trend ? Recent data (second quarter of 2009) from the European Labour Force Survey (LFS) helps to shed light on these issues. This publication is the second in a series analysing the effects of the current economic crisis on the labour market in Europe.

Job losses still limited compared to the fall in GDP

The economy shrank between the second quarters of 2008 and 2009 in all Member States except Poland. The EU as a whole, as well as the euro area, recorded a fall of almost 5 percent in real GDP. Inevitably this has also impacted on the labour market, where reduced demand for labour has resulted in job losses.

In conformity with the decline in GDP, most Member States recorded a reduction in the number of persons employed. Luxembourg was the only country where employment levels increased (+1.3%) in this period.

However, the contraction of production has not been matched by a corresponding fall in employment. In the 27 Member States of the EU, employment levels contracted on average by "only" 1.9% (-1.8% in the EA16). Still four Member States experienced a worse trend in their employment than in their GDP figures between 2008Q2 and 2009Q2 (Table 1). Poland recorded a GDP growth rate of 1.1%, while employment decreased by 0.7%. In Greece the economy shrank by 0.3% and employment by 1.0%. In Spain, the number of persons employed fell by 7.1%, and economic output by 4.2%. Finally, Ireland saw GDP decrease by 7.3%, while employment decreased by an even greater margin (-8.3%). In all the other 23 countries the sharply negative trend in output was cushioned to some extent on the labour market. A striking example is Lithuania, where a sharp fall of 21.1% in GDP lead to a decrease in employment levels of 6.7%. Among the large Member States, Germany in particular shows a sizeable gap. The output was reduced by 5.9%, which resulted in a decrease of only 0.1% in the number of persons employed.

It is common for GDP growth and employment to evolve differently, both in terms of size and timing (employment levels react to economic developments with a certain time-lag). There are various reasons for this, some of which are more relevant in times of economic crisis like the one that is currently being experienced. At such times, employers can make use of arrangements such as putting employees on part-time working or reducing the number of hours worked in other ways so as to avoid having to fire (more) people, and thereby protecting their human capital. In some countries this has been facilitated by governments taking on (some of) the costs involved in the use of temporary short-time schemes. Some statistical evidence for reduced hours worked and increased part-time work is found and described in the following sections.

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Ecrit le 14/04/10 | envoyer par mail | Imprimer | Document Joint