Shared Commitment for Employment - briefing

03 June 2009
by eub2 -- last modified 03 June 2009

The EU will make available EUR 19 billion of planned European Social Fund expenditure to support people hit by the economic crisis. Together with the European Investment Bank Group and other partners, a new EU loans facility will be set up to provide micro-credits for those who would usually have difficulty accessing the necessary funds to set up a business or a micro-enterprise.

What is the 'Shared Commitment for Employment'?

The European Commission is proposing an EU Shared Commitment for Employment: to face the crisis, we need a new and strengthened cooperation between all the key actors, including the EU institutions, Member States and trade unions and employers' organisations. Our shared commitment puts forward priorities and actions which we hope all actors can buy into and - when implemented and in conjunction with actions in other fields - should be an effective response to the crisis and growing unemployment. These priorities and actions are underpinned by suggestions on how to make best use of all EU financial resources available. The priorities and actions will need to be tailored to the changing labour markets and budgetary situations of each Member State. The Shared Commitment will also contribute to Europe's role in shaping the global effort of the international community towards recovery and sustainable growth.

Today's policy Communication is accompanied by:

• an analysis of measures already taken by EU Member States to fight unemployment since the start of the crisis;

• a detailed analysis of how various short-time working schemes are operating across Europe, including guidance on how to conduct effective short-time working arrangements, for the use of policy makers in Member States; and

• suggestions for Member States and national actors on how best to take advantage of the opportunities offered under the European Social Fund (ESF).

What does it aim to do?

The EU reacted rapidly to the crisis through the European Economic Recovery Plan. The first effects of the Plan are already promising. However, as labour markets continue to deteriorate in reaction to the economic downturn, additional action is needed.

The main goal now is to prevent high levels of unemployment, to boost job creation and to pave the way for sustainable recovery. This will only be achieved with stronger cooperation between all stakeholders, better policy coordination and mutual learning, i.e. with a shared commitment to develop and implement the right policies and actions. Today's Communication from the Commission sums up the most important issues; puts forward key priority actions to tackle the employment impact of the crisis and mobilises the relevant funding tools.

It also aims to ensure coherence between short-term and long-term objectives by making the best possible preparations for recovery and the measures proposed today are consistent with the Lisbon Strategy. Today's Communication will also help to prepare the next stage of the EU's Growth and Jobs Strategy for post-2010.

What is the link with the Employment Summit?

The Commission Communication "Driving European recovery" outlined a number of elements to help Member States design and implement appropriate and effective employment policies. On this basis, the Spring European Council and the three employment workshops held in Madrid, Stockholm and Prague in April 2009, as well as the debate held in the European Parliament in early May, helped define three key priorities: maintaining employment, creating jobs and promoting mobility; upgrading skills and matching labour market needs; increasing access to employment. Finally, the Employment Summit of 7 May allowed for an exchange of views on these priorities, and found common ground on 10 actions.

What will happen next?

Other EU bodies will have their say and the final version of the Shared Commitment should then be agreed and we will take a coordinated action together with all the Member States and social partners to implement it.

Europe must not just tackle the recession but turn it into an opportunity to create a more productive, more innovative, better skilled and lower carbon economy; one with open and inclusive labour markets, offering a more cohesive and equal society and jobs that are responsive to age, gender equality and work-life balance concerns. This cannot be a one-off effort but rather a continuous collective process.

The Commission invites the European Council to:

• agree on the three key priorities of the EU Shared Commitment for Employment;

• endorse the process for the implementation, by Member States, the Commission and social partners, of the actions proposed within each priority, taking into account the specific situation of each Member State;

• endorse the Commission’s proposals for better use of Community funds in response to the crisis.

What are the priorities set out by the Commission?

1. Maintaining employment, creating jobs and promoting mobility, including for example:

• short-time working arrangements accompanied by financial support for training and income loss;

• creating the right environment for entrepreneurship, innovation and self-employment;

• anticipation and management of business restructuring with the participation of companies, workers, social partners and public authorities;

• promoting mobility to reduce mismatches between skills offered and local labour market needs.

2. Upgrading skills, matching labour market needs, including:

• upgrading skills at all levels to address the short-term employment impact of the crisis and to pave the way for a lower carbon, competitive, knowledge-based economy;

• making education and training more relevant to labour market needs through proper analysis of those needs;

• support to SMEs and innovative businesses, who face a particular skills challenge, to run training schemes ;

• maintaining and developing apprenticeships in companies and the public sector.

3. Increasing access to employment, including:

• retaining and bringing more people into the labour market to prevent long-term unemployment and inactivity;

• reducing employers’ costs of hiring, and exploiting the potential of job creation especially for the low-skilled;

• reducing disincentives to work and hiring; improving the structure of tax and benefits to make work pay, including reducing the tax burden on second earners; providing incentives for the unemployed to set up their own business, e.g. through entrepreneurship training and micro-credits. Countries now facing inflows of returning emigrant workers due to the crisis should also facilitate their swift integration in the labour market.

To improve the chances of the disadvantaged to succeed in the labour market, there is a strong case for better cooperation between public authorities, public and private employment services, adult education services, social partners and civil society.

What are the main actions?

• To give young people opportunities, at least 5 million young Europeans should have the opportunity to enrol in a high quality apprenticeship in 2009-2010, so that there are at least as many places available as before the crisis (around 2.3 million each year), despite the economic slowdown. Companies should also continue to provide traineeship places to students to develop their employability.

• To keep people in employment, effective schemes for short-time working combined with training, based on Commission guidelines can help to maintain viable jobs with the support of the ESF.

• To immediately h elp the unemployed, an early opportunity for training or work should be provided to each unemployed person: within one month for young people under 20 years old, within two months for those under 25 years old, and within three months over 25 year olds. The ESF should support the achievement of these "new start" targets.

• To tackle long-term unemployment , people can be helped back into jobs, for example through lower non-wage labour costs for an initial one-year period, recruitment incentives, and stimulation of the demand for the low-skilled for instance in household and care services.

• To make workers' mobility easier , a new "Match and Map" service will go online to help citizens to find job vacancies matching their profile throughout the EU. The unemployed looking for a job in another Member State should be eligible to receive, for at least six months, the unemployment benefits they were entitled to in their country of residence.

• To u pgrade skills at all levels, effective life-long learning must be reinforced with resolute action to fight early school leaving, qualification frameworks based on learning outcomes, and validation of skills especially in sectors with high employment growth potential such as low carbon energy. ESF support can play a major role in all these areas.

• To i dentify tomorrow's jobs for recovery, a Commission sector-by-sector analysis of EU labour markets will provide a basis for exploring the establishment of EU Sector Skills Councils, bringing together business, social partners and public authorities.

• To e ncourage entrepreneurship and job creation , Member States must step up efforts to create business-friendly conditions, for example through a sustainable reduction in non-wage labour costs including taxation, research and infrastructure investments, cutting red tape and better regulation.

• To better a nticipate and manage restructuring , the Commission's Restructuring Toolkit provides the basis for developing with stakeholders EU best practices for coping with large-scale redundancies.

• To help small business es maintain and develop skills, a training guide for SMEs, who often face particular skills gaps in the labour market, will be prepared.

What funding is available at EU level?

European funds including the European Social Fund and the European Globalisation adjustment Fund should be fully exploited to support actions to fight unemployment.

The priorities and actions detailed above are underpinned by suggestions in the Communication on how to make best use of all EU financial resources available, in particular:

• EUR 19 billion for the ESF operations in 2009-2010 alone, to assist Member States in putting in place together with social partners rapid reaction packages focusing on the three key priorities;

• ESF national co-funding by Member States would not be required during 2009 and 2010;

• setting up, with the European Investment Bank group and other financial institutions, a new EU microfinance facility for employment, which could leverage approximately EUR 500 million in loans to promote small business creation and the social economy, giving a new chance to the unemployed and some of Europe's most disadvantaged groups to start their own business activity.

What are the ESF rapid recovery packages?

The ESF has huge potential to assist Member States in their efforts to fight the crisis and implement the actions in the Shared Commitment. It is the main EU instrument directly supporting its citizens: it already helps over 9 million people a year find jobs. To fully exploit its potential, its resources should be directed to the right priorities. This is the objective of the rapid recovery packages: to design the best plan supporting the recovery of each Member State with clearly defined ESF actions and a clear implementation plan. The Communication sets the general framework for such packages but the details will need to be worked out by each Member State, in co-operation with social partners and other stakeholders.

How in practice can the ESF support workers who lose their jobs or risk losing it?

The ESF offers a vast range of possibilities. Assistance can be targeted at workers directly, at companies undergoing restructuring or even companies who might be able to increase employment opportunities. Timing is key: the ESF should be used to provide early assistance, to avoid long-term unemployment settling in, for example when a worker is in a pre-redundancy period.

The ESF can help workers find a new job. Funds can be used to assess the current skills of workers and to identify the most suitable future training paths. Funds can also be used to provide job guidance and to identify possible employment opportunities – for example by actively helping in job search activities and then preparing workers for interviews. For the high-skilled unemployed, a new group of unemployed in this crisis, an option could be additional or complementary studies (including post-graduate studies), which the ESF can also finance.

Furthermore, the ESF can provide financial incentives to support mobility. For example, if a worker finds a job but it is far away from his/her previous job and/or place of residence, the ESF can finance - for a limited period of time - the transport costs of commuting to the new job or financially support moving houses.

The ESF can support temporary short-term working arrangements by financing training during the periods when workers are not working. Under certain conditions, the ESF may also finance employment subsidies for workers participating in training.

The ESF can support companies as they adapt to new labour market environments: for example, the ESF can support a company willing to analyse and assess its future development prospects, for example those relating to moving to a low-carbon economy. On the basis of such an analysis, the skills needs of the company and its workers can be determined. The ESF can also be used to help design and implement any necessary restructuring. The ESF can also provide employment subsidies for companies to recruit, for example, disadvantaged, disabled or young workers.

Support for traineeships, internships or apprenticeships can also be provided by the ESF. This can include help in making such opportunities available - for example, by financing a team of consultants/experts who build up a network of businesses willing to offer such opportunities for young people.

The ESF can help people set up their own business and provide mentoring in the early years, as well as financial support for the newly self-employed (e.g. through grants or micro-credits).

What are the advantages for Member States of not having to provide co-financing in 2009-10?

The pressure on public finances imposed by the crisis may be a serious obstacle to quickly implement rapid recovery packages in some Member States. There are cases where the lack of sufficient national resources to co-finance ESF actions is a real problem. That is why the Communication proposes a change for 2009 and 2010 when the crisis is expected to hit the economy and employment hardest: ESF actions can be financed 100% from the ESF budget. This takes away the burden of co-financing i.e. the need to add national resources to the ESF money. The proposal should also accelerate project implementation while reducing financial constraints, particularly in Member States where ESF co-funding represents a significant amount of overall social expenditure.

This should mean that more actions having a direct impact on the labour market will be implemented quickly. Our objective is to ensure that as many of the workers as possible who are made redundant are helped quickly to avoid the negative effects of longer spells of unemployment such as loss of skills or motivation. That is also why the new targets on how to quickly provide help are included in the Communication and the ESF can help Member States meet those targets.

What are the advantages of the new EU microfinance facility?

The new facility targets those who may have problems in obtaining finance to establish their own business or develop it further. Setting up your own business can be very attractive for some people e.g. the young, people active in care services or women.

However, today's crisis means that it is harder to access the necessary credit and capital to start your own business. The new facility should help counter that and provide funds for those who want to start a new business, only need small loans but may represent a higher risk from a bank's perspective and are thus unlikely to benefit from credit. The Commission proposal aims both to provide the banks with the required security to lend to people hit by the crisis; and at the same time, to provide potential borrowers with the advice they need on how to seize the new opportunities and build a successful business. The initiative, developed together with the EIB Group, will increase the availability of funding to support development of entrepreneurship, the social economy and micro-enterprises and will offer a new chance to potential entrepreneurs.

The facility can be supported by the ESF which can provide interest rebate support. This is a useful instrument which can be used jointly with the EIB/Commission microfinance facility. Member States are free to ensure coordination between the ESF actions and the funding offered under the microfinance facility to further increase the access to credit.

Source: European Commission