Analytics, Employment, EU – Baltic States, Legislation, Markets and Companies

The European Commission has proposed guidance to the EU member states in order to assist them to reduce long-term unemployed people and help them quicker return to work. Following the relaunch of the Youth Employment Initiative this May, this is another concrete initiative in the context of the Commission’s broader economic and social agenda, which seeks to strengthen job creation, economic recovery while providing social fairness in Europe.

Background

Long-term unemployed (LTU) currently represent 5% of the EU’s active population; though the share of LTU in the active population varies strongly among the EU states ranging from 1.5% in Austria to 19.5% in Greece.

The longer LTU people remain out of the labour market, the more difficult it is for them to be hired again. Of the 12 million long-term unemployed in the EU, more than 60% have already been out of work for two consecutive years. Each year, one in five stops trying to find a job and becomes inactive. This implies a serious risk of poverty and social exclusion for the unemployed and their families.

Although they make up half of the unemployed, only an estimated 20% of active labour market programmes are allocated to LTU and in many states they do not have access to individualised services. Programmes offered to LTU often do not sufficiently involve employers; only one third of EU states coordinate the action of their employment and social services.

There are two definitions involved in this unemployment category: first, LTU, as the share of unemployed persons since 12 months or more in the total number of active persons in the labour market (active persons are those who are either employed or unemployed). Second, a very long-term unemployment rate, VLTU as the share of the unemployed persons since 24 months or more in the total number of active persons in the labour market.

Existing measures for tackling LTU

A number of measures are already in place at EU level:

·                     Recommendations are given within the framework of the European Semester, which is main instrument in the annual exercise of economic policy coordination among the EU states;

·                     Up to 10% of the European Social Fund can be used to support long-term unemployed people in the period 2014-2020;

·                     The European network of Public Employment services is cooperating to exchange good practices.

The new recommendation will complement and reinforce these activities.

The Investment Plan for Europe has the potential to create millions of new jobs. But even when new jobs are created it is often very difficult for long-term unemployed to successfully re-enter the job market.

Therefore the proposal for a Council recommendation presented in mid-September 2015foresees that all jobseekers who have been jobless for more than 12 months receive an individual assessment and that they receive a job integration agreement, offering them a concrete and personalised plan back to work before reaching 18 months of unemployment.

Marianne Thyssen, Commissioner for Employment, Social Affairs, Skills and Labour Mobility, underlined that the new recommendation on long-term unemployment was one of the most difficult and acute challenges caused by the economic crisis, affecting more than 12 million people in Europe.

She added that the main aim of the recommendations is to eradicate the risk of poverty and social exclusion for a significant number of EU’s population. It’s the EU and the states’ obligation to bring them back to work; the EU cannot resume to economic recovery while leaving so many Europeans behind. She added that the new proposal would make a difference for them with the full support of the member states, social partners and employers.

Three key step to reduce LTU

The proposal looks into the services that are offered to LTU to help them to re-enter the labour market and proposes specific actions to strengthen them. It draws on best practices gathered by the EU states.

The three key steps in the recommendation are the following:

·                     Encourage the registration of long-term unemployed with an employment service;

·                     Provide each registered long-term unemployed with an individual in-depth assessment to identify their needs and potential at the latest at 18 months of unemployment;

·                     Offer a job integration agreement to all registered long-term unemployed at the latest at 18 months.

Thus, the job integration agreement should consist of a tailor-made plan to bring the long-term unemployed back to work. Depending on the existing services in each EU state it can include: mentoring, help with the job search, further education and training as well as support for housing, transport, child and health care services or rehabilitation. It should be delivered through a single point of contact to ensure the continuity and consistency of the support. It should also clearly outline the rights and responsibilities both of the unemployed and of the organisations providing support.

The proposal also calls for the active involvement of employers through partnerships with the public authorities, enhancing the range of services they can receive, as well as offering them targeted financial incentives. EU member states can implement these recommendations with the support of the European Social Fund.

The Commission's proposal will now be submitted to the Council for discussion and adoption. As soon as the EU member states reach an agreement, the implementation of the LTU measures outlined in the Commission’s recommendation will start.

More information on the LTU’s recommendations:

= Proposal for a Council Recommendation on the integration of the long-term unemployed into the labour market;

= Long-term unemployment: Commission proposal for a Council Recommendation – frequently asked questions;

= Country factsheet: long-term unemployment in the EU;

= DG Employment & Social Affairs: News item;

= Main reference: European Commission guidance to the member states to better help long-term unemployed return to work. Press Release IP-15-5565, 17 September 2015. In:

http://europa.eu/rapid/press-release_IP-15-5565_en.htm

Additional information on long term unemployment

On 17 September 2015, the Commission proposed recommendations for the Council of Ministers configuration with an additional information in the form of “frequently asked questions”. A short review of the main features concerning LTU follows below.

= The need to deal with the long-term unemployment (LTU)

Long-term unemployment is an acute problem because the longer people are out of work the more problematic it is to return. Data shows that the long-term unemployed, i.e. people who are out of work for over a year, have about twice as low chances of finding employment than the short-term unemployed. Many of those unemployed for a year or more risk leaving the labour market altogether. And each year, a fifth of them even stop trying to find a job and are classified as inactive.

This trend needs to be reversed to ensure that the long-term unemployed can benefit from the economic recovery. Tackling long-term unemployment in the EU would contribute to sustainable growth and cohesion. It would reduce the impact of higher social assistance and lower tax revenues on public finances. It would also open a way out of poverty for both the workers affected and their families, as half of those finding a job also escape the risk of poverty.

= Situation of long-term unemployment in the EU states

The situation varies significantly across the member states: in 2014, this unemployment rate ranged from 1.5% in Austria and Sweden to almost a fifth of the total labour force in Greece (19.5%). 

Table: Long-term and very long-term unemployment rates in 2014 of the active population aged 15-74 years (in %)

Notes to the table: The long-term unemployment rate, LTU is the share of unemployed persons since 12 months or more in the total number of active persons in the labour market. Active persons are those who are either employed or unemployed.

The very long-term unemployment rate, VLTU is the share of the unemployed persons since 24 months or more in the total number of active persons in the labour market.

Long-term unemployment rates increased in all Member States except for Germany since 2008, as shown in the figure below:

Figure: Change in LTU rates EU-28, 2008-14

= The long-term unemployed in the EU today

Long-term unemployment affects a variety of people. Workers with low qualifications and third country nationals are twice as likely to experience long-term unemployment, while people with disabilities and disadvantaged minorities such as the Roma are also disproportionately affected.

LTU is three times higher among low qualified workers than among those with high qualifications; it affects slightly more men (54%) than women (46%).

The age distribution of the long-term unemployed is quite even, with slightly higher rates before 30 and after 55. Older workers have more stable employment and are overall less affected by unemployment. However, when they become unemployed, they have higher risk to remain so.

Long-term unemployed as share of unemployed, by country and age groups, 2013

The diversity of situations requires support tailored to the needs of each person. This requires a differentiated approach and a broad tool box matching the individual barriers to work.

= LTU’s main obstacles to labour market integration

On the one hand, they are due to structural and cyclical elements such as a lack of investment limiting job creation and a lack of responsiveness in the labour market. On the other hand, they are related to insufficient support to help the long-term unemployed get back to work.

Present LTU’s recommendation focuses on the issue of insufficient support from employment and social services to the long-term unemployed and addresses its root problems:

·                     Insufficient activation coverage: Although long-term unemployed people make up 50% of unemployment, only an estimated 20% of active labour market programmes are allocated to them. In addition, many LTU people are not registered with employment services, with rates reaching 50% in some EU states, and have therefore no access to any job finding support measures.

·                     Wrong focus of long-term unemployment programmes and insufficient employers' engagement: In many countries, programmes are not focusing enough on bringing people back to the labour market and they are not geared to employers’ needs. In some countries the focus lies on public works schemes (about 31 % of current spending on active labour market measures for the long-term unemployed in 2012), which do not always open pathways back to the labour market.

·                     Limits of individualised service: Individualised services such as assessment, profiling or clear action plans are not always accessible to the long-term unemployed.

·                     Discontinuity of services to the long-term unemployed: during the unemployment period, long-term unemployed see the support they receive shifting from public employment services to social assistance authorities. When responsibilities are not clearly allocated between agencies, case histories might not be transferred and coordination of services is limited. These discontinuities can delay an effective support for return to work.

The structural barriers to integration are also addressed through other existing and new instruments such as the European Semester, a forthcoming Commission skills initiative and the European Fund for Strategic Investments (EFSI).

= Expected results from recommendations

The key result expected is an increase in the transition rates from LTU to employment by making the services provided to the LTU people more effective, in particular in the EU states with higher numbers of long-term unemployed and less support available to them. It should help to reduce the gaps in current transition rates between the low performing EU states and well performing ones.

LTU is one of the most significant causes of poverty: chances to exit poverty are linked to the chances of successful transitions to employment. Half of the LTU who will take a job are expected to escape the risk of poverty.

The present recommendation should help EU states improve the services they offer by ensuring a personalised approach and a clear identification of rights and obligations of the unemployed and the organisations providing support.

In particular, the recommendation is expected to:

·                     Increase the number of long-term unemployed registered at the employment services and receiving support;

·                     More individualised support through a re-assessment of their needs and employment prospects and a job integration agreement;

·                     Strengthen continuity in support through a systematic referral to services, measures and benefits through a single point of contact;

·                     Create a stronger link between benefits and activation.

·                     More employers will engage in programmes targeting long-term unemployed.

While the recommendation can make a difference in the quality, accessibility and relevance of the support received by the LTU, it is no substitute for macroeconomic instruments to solve structural issues on the labour market.

In some EU countries the recommendation would make a difference; in states with high transition rates to employment they have already in place the elements proposed in the recommendation. The impact will be higher in EU states with weaker support structures and higher rates of LTU. However, there is scope in most of the EU states for improving the performance of the support for long-term unemployed in the three aspects identified: coverage, discontinuity, and activation design.

Table: Good examples and positive results in states already implementing similar approach

= Encouraging people to register

Registration of the long-term unemployed with public employment services (PES) decreased slightly from 77 % to 73% during the crisis and the registration rates vary widely among the EU states: in some, this rate is below 50%. The LTU people that are not registered with a PES have no access to job finding support measures.

Table: Registration of the long-term unemployed in 2014 (%)

The Commission’s recommendation will provide incentives for the long-term unemployed to register with an employment service by clarifying the support linked to the registration:

·                     An individualised service which responds to the needs and expectations of each individual;

·                     A concrete perspective of getting back to the labour market;

·                     A single point of contact, where they can access all services, measures and benefits.

= Long-term unemployed assessed

As integration problems are due to multiple factors, the LTU require individualised support tailored to their needs and potential. To design this support, an in-depth assessment of the individual situation is necessary. The recommendation proposes to put in place an in-depth individual assessment for each registered LTU at the latest at 18 months of unemployment. The assessment should include a skills audit and lead to counseling and guidance based on the person’s employment track, job search history and evolving employment barriers. The results of the assessment should form the basis for designing the job integration agreement.

An assessment at the latest at 18 months of unemployment does not preclude individual assessments at earlier stages of the unemployment spell.

= Job integration agreement

The job integration agreement is a written agreement between the unemployed person and a single point of contact offering a plan for return to work at the latest at 18 months of unemployment and registered at an employment service. It will detail the services offered by different organisations responding to the jobseekers needs and will spell out mutual rights and obligations both for the beneficiary and the organisations involved.

The interventions offered in the agreement will be tailored to the needs of the individual as identified in the in-depth individual assessment and will be built on measures available at national level (job search assistance, training, work experience, mentoring, debt counseling, rehabilitation, child and health care services, migrant integration support, housing and transport support). It will be offered to all long-term unemployed outside the remit of the Youth Guarantee.

Looking at transition rates from unemployment into employment, it is possible to observe a large drop between 12 and 24 months of unemployment; 18 months has therefore been chosen as a relevant timing for intervening to reverse this trend. Most EU states are offering interventions similar to the one proposed in the recommendation act within the same period.

= The single point of contact

The single point of contact should be the reference point for the LTU and provide them with guidance and simplified access to benefits, employment and support services through the personal contact with a single individual counselor.

EU member states should set up institutional arrangements so that a coordinated range of services can be delivered to the long-term unemployed to ensure continuity and consistency of the support offered by different agencies (public employment services, social services and municipalities). It should facilitate the smooth and secure transmission of relevant information concerning jobseekers’ support history and individual assessments between service providers, in compliance with data protection legislation.

Establishing a single point of contact can be achieved in different ways. It can involve a wider organisational restructuring such as joining up contact with clients, integrating offices or the transfer of organisational functions between agencies. But it can also be set up through inter-institutional cooperation, based on cross-referrals and data exchange.

The experience of countries that established single points of contact confirms its positive effect on extension of both registration and coverage of employment services (for example United Kingdom, Germany, Denmark and Estonia).

= Member states’ financing the recommendation’s implementation

Implementation can be supported by the European Social Fund (ESF). Measures under the European Regional Development Fund (ERDF) could also be mobilised to support the objectives of the initiative (e.g. investments in infrastructure for employment services, or support for self-employment and start-ups). Proactive programme management through existing mechanisms foreseen by the Common Provisions, European Social Fund and European Regional Development Fund Regulations (e.g. reallocating funds within a priority axis, aligning programming and project selection criteria) could support the efforts of the EU states.

In addition, any EU member state wishing to provide additional funding to implement a new Country Specific Recommendation on LTU could address a re-programming request to the Commission.

= The role of European Social Fund (ESF) in supporting implementation 

The recommendation will serve as a quality reference for ESF interventions under the current programming. It will improve the allocation of ESF funds and its effectiveness. It thus complements and reinforces the ESF interventions.

On the basis of current programming for 2014-2020, the unemployed will constitute at least 41% of the allocations supported by the ESF, and at least 25% of these will be for the long-term unemployed.

The minimal estimates are specific in each EU state having chosen to set targets for the LTU; the share will most likely be higher, as it is not an obligation to programme for all common indicators.

The ESF allocations for 2014-20, allow room to increase the financing of support to long-term unemployment and to enhance its efficiency. Under the investment priority on active labour market measures, over €11 billion were programmed for 2014-20, with particularly high shares in Slovakia, Finland and Ireland. Under the investment priority on increasing the capacity of labour market actors, € 980 million were programmed, with higher allocations in Italy and Romania. Another €13 billion were programmed under the social inclusion priority, with higher shares in Netherlands, France, Ireland and Belgium. Additional funds have been programmed under the European Regional Development Fund for investment in employment services and social infrastructure.

= The relation between the new initiative and the Youth Guarantee

The Youth Guarantee (YG) was established by the Council in 2013 to address high levels of youth unemployment and inactivity resulting from the crisis and to improve school to work transitions. It aims to provide every person up to 25 years old with a quality offer for training, an apprenticeship or a job within four months of leaving education or being unemployed.

Present recommendation follows an approach similar to the one of the YG, proposing an intervention model based on an individual, coordinated offer, but it targets those outside the scope of the YG. The two initiatives are therefore fully complementary.

Most Public Employment Services (PES) recognise a significant impact of the YG initiative on their delivery capacity.  

See: EC (2014), the Role of PES in the Delivery of the Youth Guarantee; PES Network Self-assessment Report on PES capacities to implement the Youth Guarantee.

By proposing a clear framework for citizen relevant action, the Youth Guarantee prompted public administrations to deliver additional services for young people.

Recommendation’s control in the EU member states

To monitor the implementation of the recommendation, a set of indicators and guidelines for evaluating its progress, including a reporting mechanism, will be agreed within the Council’s Employment Committee.

Monitoring would be partly based on existing indicators in the Joint Assessment Framework of the European Employment Strategy and in the PES Bench-learning process. Additional data would be collected through the delivery organisations (mainly the PES) in line with current EU member states practice.

The effectiveness of the initiative will be monitored against the specific objectives defined, which relate e.g. to the share of LTU people that are supported and the share that move to employment afterwards. The effectiveness of the initiative will be further assessed by an evaluation of the action taken in response to this recommendation, and report to the Council.

The Commission's proposal will be discussed in the Council, under the Luxembourg presidency. Once EU member states agree, the measures foreseen in the recommendation are expected to be rolled out.

Reference: European Commission, MEMO/15/5562, in:

http://europa.eu/rapid/press-release_MEMO-15-5562_en.htm?locale=en.