Jobs in Europe

ILO says over 2.1 million jobs could be created with EC investment plan

The success of Juncker’s EC plan to create jobs and boost Europe’s competitiveness depends on its design and the allocation of funds.

News | 28 January 2015
GENEVA (ILO News) – Over 2.1 million new jobs could be generated by mid-2018 under the three-year investment plan put forward by European Commission (EC) President Jean-Claude Juncker, said the International Labour Organization (ILO).

An ILO report entitled An Employment-Oriented Investment Strategy for Europe, shows that a combination of public and private sector investment worth 315 billion euros might foster Europe’s competitiveness and help tackle the jobs crisis. Success depends, however, on how the programme is designed.

Director of the ILO Research Department, Raymond Torres, indicated that the plan “can complement the monetary measures recently announced by the European Central Bank, by encouraging enterprise investment, growth and job creation.”

But in order to make a significant dent on unemployment, the plan must first include a significant portion of private investment, especially among job-rich small enterprises. And second, it should address the wide disparities in unemployment that exist across the EU, so that economies with greater need can benefit from the fund. In the absence of these two conditions, the plan will make little or no difference to the EU employment outlook.

In addition, it is crucial for the plan to be accompanied by a longer-term employment strategy that focuses on quality jobs and balanced reforms.

A fragile and uneven employment outlook

The investment plan comes at a time when the European employment situation remains fragile and uneven.

On average, the unemployment rate stands at around 10 per cent, close to 3 percentage points above the rate reached before the start of the global crisis in 2008. Moreover, half of those unemployed have been without a job for more than a year. Women and youth are disproportionately affected.

There are also wide cross-country disparities, with unemployment rates in Southern Europe and parts of Central Europe stubbornly high. As of the third quarter 2014, the unemployment rate in Spain was over 23 per cent and in Greece above 25 per cent. Three years prior, both countries had unemployment rates of 8 per cent.

“These developments have imposed huge economic and social costs, with the worst impacts in Southern Europe but with damage to households and working people across the region,” said Sandra Polaski, ILO Deputy Director-General for Policy. “The urgency to address these losses increases with every passing day.”

People who have been unemployed for long periods of time are more likely to become discouraged and leave the labour market altogether. Weak demand in Europe affects enterprise investment, thus hampering competitiveness.

And as skills erode, workers’ employability deteriorates – making it increasingly difficult for workers to find a new job when the labour market begins to recover. This issue is of particular relevance for youth.

Avoiding “business as usual”

The challenge is to ensure that policy-makers at the EU level avoid a “business as usual” scenario that would result in funds being diverted away from countries and sectors that are most in need.

For instance, between 2007 and 2013 high-unemployment countries benefited from less than a third of European Investment Bank (EIB) funding. Private investment is weak in crisis-hit countries. An inflow of resources in these countries would encourage a reallocation of resources towards more strategic and high-impact activities, and away from low value-added sectors.

The ILO report stresses the importance of the decision to fast-track the legislative process, so that implementation can start as early as mid-2015.

Balanced, sustainable and credible solutions are best achieved when government, employers and workers’ organizations collaborate. Coordination and dialogue are needed both within and across countries.