Responsibility for policy in the field of employment, social affairs and inclusion is shared between the EU and its member countries. The European Commission’s role is limited to coordinating and monitoring national policies, promoteing the sharing of best practices in fields like employment, poverty, social exclusion and pensions, and enacting laws and monitoring their implementation in areas like rights at work and coordination of social security schemes.

After five years of economic crisis and the continuation of recessionary pressures in 2012, unemployment has hit new peaks not seen for almost twenty years, household incomes have declined and the risk of poverty or exclusion is on the rise according to the 2012 edition of the ‘Employment and Social Developments in Europe Review’.

The impact of the crisis on the social situation has now become more acute as the initial protective effects of lower tax receipts and higher levels of spending on social benefits (the so-called “automatic stabilisers”) have weakened. A new divide is emerging between countries that seem trapped in a downward spiral of falling output, fast-rising unemployment and eroding disposable incomes, and those that have so far shown good, or at least some, resilience. The latter tend to have better-functioning labour markets and more robust welfare systems.

Growing Eurozone divergence

Unemployment rate in the EU and US (06-13). (Source: Eurostat, National Accounts. Seasonally adjusted data [une_rt_m])

The average EU unemployment rate climbed to almost 11%. There is a new pattern of divergence, which is most striking between the Northern and the Southern parts of the Eurozone. The unemployment rate gap between these two areas was 3.5 percentage points in 2000, fell to zero in 2007, but has thereafter widened fast to 7.5 percentage points in 2011.

1. Declining household incomes, long-term exclusion risks

The absence of tangible recovery has put household incomes under pressure in the majority of Member States and concomitantly increased the risks of long-term exclusion. To prevent rising poverty and long-term exclusion from becoming entrenched, policies need to be tailored to specific country situations and population groups that are most at risk.

2. Crucial role of welfare and tax system design

While there were no optimal solutions for tax shifts from an integrated employment and social policy point of view, an appropriate design of welfare systems increases the desirability of certain tax shifts. According to the ‘Employment and Social Developments in Europe’ review,  the analysis of minimum wages shows that countries with higher minimum wages have not priced the low skilled out of a job and on the contrary tend to have higher employment rates for them. Such analyses invariably take multicausal situations and reductionistically ascribe the results to a single cause. Minimum wages might also have the potential to narrow the gender pay gap according to the same report.

3. Skills

In some countries, especially in the southern part of the European Union, the match between skills and jobs is sub-optimal and/or has worsened over time. To reduce the skills mismatch, countries need to invest more efficiently in education and training, spend better on active labour market policies and support the creation of high-skilled jobs in growth sectors such as the green economy and technology, information and communications technologies and healthcare.

Responsibility for policy in the field of employment, social affairs and inclusion is shared between the European Union and its member countries. The European Commission:

  • coordinates and monitors national policies;
  • promotes the sharing of best practices in fields like employment, poverty and social exclusion and pensions; and
  • makes laws and monitors their implementation in areas like rights at work and coordination of social security schemes.

The European Commission has set up funding mechanisms to improve the generic current labour market and social challenges and rising inequalities within Member States.

The European Commission provides funding for projects relating to employment, social affairs and social inclusion through the following programmes:

  • European Social Fund (ESF)
  • PROGRESS Programme
  • European Globalisation Adjustment Fund (EGF)
  • European Progress Microfinance Facility (Progress Microfinance)
  • Pre-Accession Assistance (IPA) for countries that have not yet acceded to the European Union

The European Social Fund is Europe’s main instrument for supporting jobs, helping people get better jobs and ensuring fairer job opportunities for all European Union citizens. It works by investing in Europe’s human capital – its workers, its young people and all those looking for a job. ESF financing of EUR 10 billion a year is improving job prospects for millions of Europeans, in particular those who find it difficult to get into the labour market.

The European Union is committed to creating more and better jobs, as well as a socially inclusive society. These goals are at the core of the Europe 2020 strategy for generating smart, sustainable and inclusive growth in the European Union. The economic crisis that Europe is experiencing is making this goal more challenging to meet and the ESF is playing an important role in meeting Europe 2020’s goals, and in mitigating the consequences of the economic crisis – especially the rise in unemployment and poverty levels.

However, the ESF is not an employment agency – it does not advertise jobs. Rather, it funds tens of thousands of local, regional and national employment-related projects throughout Europe. There is a great variety in the nature, size and aims of ESF projects and they address a wide variety of target groups. There are projects aimed at education systems, teachers, schoolchildren, young and older job seekers, and at potential entrepreneurs from all backgrounds. People from all walks of life are the focus of the ESF.

Public and private organisations can apply for ESF projects under project calls issued by the ESF Managing Authorities in their country. The European Commission sets funding priorities, but project selection is finally the responsibility of the individual Member State, which is directly involved in selecting projects.

The PROGRESS programme is a financial instrument supporting the development and coordination of EU policy in the following five areas:

  • Employment;
  • Social inclusion and social protection;
  • Working conditions;
  • Anti-discrimination; and
  • Gender equality.

PROGRESS is open to EU countries, candidate countries and potential candidate countries, and the EFTA/EEA countries (Norway, Iceland and Liechtenstein). The programme cannot support individuals’ private projects on a case-by-case basis – such projects might be able to find funding opportunities from the European Social Fund (ESF) or the European Progress Microfinance Facility.

The following types of organisation can respond to a ‘call for proposals’ or a ‘call for tender’, provided they meet the criteria in the technical specifications of the call:

  1. national authorities;
  2. local and regional authorities;
  3. public employment services;
  4. national statistics offices;
  5. specialised bodies, universities and research institutes; and
  6. employers’ / employees’ associations and non-governmental organisations.

With up to € 500 million available each year, the European Globalisation Fund helps workers find new jobs and develop new skills when they have lost their jobs as a result of changing global trade patterns, e.g. when a large company shuts down or a factory is moved to outside of the European Union.

The European Globalisation Fund helps by providing one-off, time-limited individual support through financing measures such as job-search assistance, career advice, tailor-made training and re-training, mentoring and promotion of entrepreneurship. Individual workers made redundant can benefit from schemes set up by national governments to help them. EGF funding cannot be used to keep enterprises in business or to help them with modernisation or structural adjustment.

The European Progress Microfinance Facility (Progress Microfinance) launched in 2010, increases the availability of microcredit – loans below € 25,000 – for setting up or developing a small business. Progress Microfinance does not directly finance entrepreneurs but enables selected microcredit providers in the EU to increase lending by:

  • issuing guarantees, thereby sharing the providers’ potential risk of loss; and
  • providing funding to increase microcredit lending.

The microcredit providers may be private or public banks, non-bank microfinance institutions and not-for-profit microcredit providers. One can apply for the Progress microfinance through one of the existing microcredit providers in the Member States. Progress Microfinance is supported by the European Commission and the European Investment Bank, and managed by the European Investment Fund.

IPA provides financial assistance to help candidate countries and potential candidates to introduce political and institutional reforms needed to meet EU membership requirements. More specifically, the Human Resources Development policy area of the IPA prepares countries to programme, manage and implement ESF funds. Like the ESF, IPA also helps to improve the skills, create more and better jobs, and increase social inclusion and equality.

For more information about our Employment, Social Affairs & Inclusion services, please contact us here.