Employment Policy

Since 1997, unemployment in Europe has been on the retreat. Despite this improvement, job creation remains one of the Union's key objectives. A high level of employment is a prerequisite for social justice and social cohesion.

According to Eurostat, average unemployment in the European Union was 9% in January 2000. An estimated 15.5 million persons were unemployed, as opposed to almost 18 million in 1997.The improvement in the job situation in Europe is partly due to faster growth since 1997 (2.5% growth in 1997, as opposed to 1.8% in 1996, which was confirmed in 1998 (2.6%), in spite of a slowdown in 1999 (2.1%)), and partly to the various actions taken in the framework of the European employment strategy.

The EU´s employment policy

The Community employment strategy was worked out at the Luxembourg, Cardiff and Cologne European Councils. During these summits the Heads of State and Government of the 15 Member States stressed their commitment to combating unemployment.

A new employment title was introduced by the Amsterdam Treaty, according to which promotion of employment is a "matter of common concern" of the Member States and one of the Community's goals. In order to make the most of these new provisions, the Heads of State and Government decided to immediately apply the new provisions introduced by the Amsterdam Treaty in support of the coordinated employment strategy, without awaiting their entry into force on 1 May 1999. This strategy is based on:

• the consideration of employment in the formulation and implementation of Community policies and activities,
• the introduction at Community level of coordination mechanisms comprising:

1. an annual joint report on employment by the Council and Commission, on the basis of which the European Council adopts conclusions,
2. adoption by the Council, acting by a qualified majority on a proposal from the Commission, of guidelines on employment which must be consistent with the broad guidelines on economic policy,
3. a system of monitoring implementation of the guidelines, similar to that for economic policies, and that may result in recommendations to the Member States in the area of employment policy,
4. creation of an Employment Committee to promote coordination of Member States' employment and labour market policies and to formulate pertinent opinions,
5. possible adoption by the Council, acting by a qualified majority, of incentive measures, particularly in the form of pilot projects.

The Luxembourg process

The Luxembourg European Council of November 1997 examined best national practices in fighting unemployment and laid the foundation for future Community action in the field of employment. The so-called Luxembourg process involves the coordination of Member States' employment policies in the shape of employment guidelines and National Action Plans. The Commission proposed an initial series of guidelines for 1998, which were adopted by the European Council.

These guidelines rest on four pillars:

• entrepreneurship,
• employability,
• adaptability,
• equal opportunities.

These guidelines are translated into national policy by the National Action Plans (NAPs) prepared by the Member States and submitted to the Commission and Council for examination. The results of the analysis of the National Action Plans are published each year in the joint report on employment.

After examination of the first NAPs by the Commission, which revealed a certain number of shortcomings and lacunae, and publication of the 1998 joint report on employment containing an initial evaluation of the implementation of the national plans, the Commission presented the amended guidelines for 1998 with a view to clarifying a number of points. In the context of the 1999 guidelines the European Council has called for more effective action in the following areas:

• focus on active measures,
• lifelong learning,
• making the most of the job creation potential of the services sector,
• reconciliation of work and family life,
• a labour market open to all.

The NAPs, which were inspired by the 1999 guidelines, were prepared in spring 1999 and submitted to the Commission at the end of May1999.

The Cardiff process

At the Cardiff summit the Heads of State and Government stressed the importance of sustained and durable growth in promoting job creation. Hence, in order to make the most of growth, they decided to put in place an improved macroeconomic dialogue on economic reforms in tandem with the coordinated employment strategy.

Drawing on the Commission's Cardiff I and Cardiff II reports, which are based on contributions from the Member States and the in-depth work of the Economic Policy Committee and the Horizontal Group on the Internal Market, the European Council stressed the importance of embracing reforms aimed at improving competitiveness and the working of the markets for goods, services and capital. The goal is to reduce the number of useless rules at national and European level in order to minimise the burdens on small labour-intensive firms and to facilitate the creation of new businesses.

The Cologne European Council of June 1999 consolidated the European employment strategy and created the basis for a Community employment policy which takes account of all the economic factors that affect the employment situation.

The Cologne process

At the Cologne summit the Heads of State and Government acknowledged the independence of macroeconomic policy domains while emphasising the interplay of decisions taken at macroeconomic level.

The main objective of the European Employment Pact, known as the "Cologne process" is to encourage dialogue between all the parties involved in macroeconomic policy and to strengthen their confidence in order to encourage growth and job creation.

The pact emphasises the need for a balanced mix of macroeconomic policies via:

• financial policy which must respect the principles of the stability pact and at the same time channel public funds towards investment and competitive jobs,
• controlled pay increases in line with productivity gains,
• monetary policy oriented towards price stability.

There is a need for macroeconomic dialogue between the social partners and the budgetary and monetary decision makers in the institutions on how to flesh out the economic policy mix. This dialogue must respect the independence and autonomy of all the parties involved in pay negotiations and in monetary, budgetary and tax policies. Hence the European employment policy embraces all the Union measures in the field of employment.