EU’s timebomb set to explode

Date: 17/03/05

As it stands, the EU is falling short of its employment targets on all fronts. In the meantime, the 'demographic timebomb' that was the impetus for the agenda in the first place is becoming ever more threatening.

The European Commission's Employment Taskforce calculates that in 2030, the number of people in the EU25 above the age of 65 will increase by 55%, without anything like the necessary replacement rate of births. The global ageing unit of the Centre for Strategic and International Studies is even more pessimistic. By 2040, it claims, there will be more Italians over the age of 60 than of working age.

The combined squeezes of longer lives and fewer births meant that the EU's workforce was shrinking. Currently numbering some 303 million, by 2030 it will barely reach 280m. As a result, pension and social security schemes will struggle to cope, while economic growth will slow to less than 1%.

It is in this gloomy context that the Lisbon Agenda seeks to increase Europe's employment rate. Daniel Kasmir, human resources director for Manpower, one of the world's largest employment services companies, argues that the European labour market is typified by "social exclusion" and that the aim of the Lisbon Agenda should be "working towards social inclusion through flexibility".

Ann Mettler of the Lisbon Council think-tank says: "The European model of wonderfully social labour market just isn't working. It discriminates against young people, against old people, against women, low-skilled workers and immigrants."

The aim of the Lisbon Agenda was to get more people into work by focusing on the two biggest problem areas: older workers and female workers.

Even when it was proposed, a 50% employment rate for workers aged 55-64 seemed rather an ambitious total. The point is not so much that there hasn't been an increase, but that it has been nothing like as substantial as was hoped. The employment rate for 55 to 64-year-olds now stands at just over 40%. But the differences between the member states, such as Sweden's employment rate of 68.6% and Slovenia's 23.5%, is enormous. The Commission estimates that another 7m jobs for elderly workers will have to be created by 2010 in order to meet the target.

The Organisation for Economic Co-operation and Development (OECD) estimates that hidden, or even explicit, incentives in public pension schemes to retire early act as such a massive weight on employment rates for older workers, that their removal would result in a boost in all countries of some 15%.

The Commission has taken such evidence to heart and has pushed the member states to pursue policies for what it terms 'active ageing', a combination of pension reforms to reduce incentives for early retirement and 'lifelong learning strategies' to ensure that older workers are equipped to participate in the labour market. Kasmir is particularly scathing of the failure of the Lisbon Agenda to address the need for lifelong learning, citing "a lot of merry conversation but very little action".

But, if the language used to describe initiatives for older workers is the most urgent, it is undoubtedly because this is the area of the labour market where the member states have most clearly failed to act effectively.

Analysis feature in which the author says that the EU was falling short of its employment targets on all fronts. In the meantime, the 'demographic timebomb' that had been the impetus for the agenda in the first place was becoming ever more threatening.

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