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Employment and Social Developments in Europe 2014
policy intervention ( 112 ) across various firms by facilitating the growth of indus - is embedded into a more comprehen-
policy domains, including: education and trial clusters. sive strategy which also uses educational
training; employment and social security; investment to strengthen overall labour
mobility and migration; and industrial Research findings tend to emphasise the productivity, and hence growth. Finally,
113
and regional development( ). role of employers in reducing skill mis- we may improve the usage of human
match ( 116 ) by offering attractive working capital by helping firms to lower labour
Education and training systems could conditions, including performance pay, costs in the most vulnerable segment
be more responsive to labour market complex job tasks and learning opportu- of the labour market. But again, policies
needs, equipping graduates with good nities. However, it is unrealistic to expect are most effective when they are part
basic skills, promoting a variety of routes all employees, notably new ones, to have of a policy package that also includes
for qualifications (e.g. VET), and providing all the required skills for the available policies supporting growth in addition to
early career guidance to help students jobs. Employers can overcome this by investment in human capital.
make more informed choices. They could becoming more involved in education
also encourage adult and lifelong learn- and training systems, notably by provid- Given the precarious labour market situ -
ing, with companies playing a bigger part ing quality apprenticeships. Another way ation for young people in Europe, simu-
by providing more work-based training. to improve the match is to improve com - lation of policy measures in this section
panies’ human resource and recruitment concentrates on young cohorts (aged
Employment and social policies can policies to attract and select talent, and below 24).
117
improve mobility and more efficient to facilitate internal labour mobility ( ).
matching by passing social security 4.1. Forming HC:
rules that allow easy transfer of social Employers and workers have a joint Investment in education —
security rights. Active labour market poli - interest in investing in skills. Their rep- the case of Germany
cies can help job-seekers, notably the resentatives (employers’ organisations
low-skilled, obtain relevant skills and and trade unions) often combine their The decisive role of formal education
shorten unemployment spells, although (sector-specific) knowledge of the labour in human capital formation has been
activation should not be led by a ‘work- market to identify skill gaps and develop confirmed by many studies. Previous
first’ approach ( 114 ). Good quality labour joint solutions. They may jointly develop simulations using DG EMPL’s Labour
market intermediaries, such as public training curricula or organise paritarian Market Model show that young people
employment services (PES), which sup- funds (e.g. financed through social secu- graduating from higher educational have
port good matches and provide neces- rity contributions) to provide training. In better labour market outcomes leading
sary guidance and job-counselling, play doing so, they overcome problems of to higher economic growth ( ). These
119
115
a very important role ( ). collective action and positive spill-overs exercises show the impact of opting for
associated with skill investment. higher education although, since higher
Industrial and regional development poli - education comes at a cost, it involves
cies can reduce skill mismatch, mainly 4. Policies and their personal choices. From an individu-
by influencing the labour demand side. impact: Evidence from al’s perspective, there is not only the
Stimulating innovation and the creation the Labour Market cost, which can be particularly high in
of high-level jobs helps utilise the poten - Model some countries, but also the question
tial of Europe’s high-qualified workforce. of foregone earnings and the possibil-
This is also achieved by supporting firms This section uses DG EMPL’s Labour ity of missing out on career opportuni-
that rely on high-skill, high-productivity Market Model (LMM) to demonstrate ties during the period of study. For the
product strategies and exploiting syner- how different policies can help in form- great majority, however, these costs are
gies between skills and high-productivity ing, maintaining and using human
typically weighed against the long-term
capital ( 118 ). We show how investment gains from higher education in terms of
in education helps in forming human enhanced job opportunities, higher earn-
( ) Intervention is needed due to various market capital. When it comes to maintaining ings, better recognition and better work -
112
failures preventing efficient reduction of human capital, investment in training is ing conditions.
mismatch by labour market adjustments an efficient tool — particularly when it
alone, such as the lagged nature of
skill supply relative to demand; positive DG EMPL’s model can take on board
spillovers (‘externalities’) in human capital ( ) World Economic Forum (2014), Cappelli the endogeneity of education ( 120 ),
116
outcomes; disincentives to investment in (2014), CEDEFOP (2012b).
training by enterprises and recruitment 117 which assumes that, before starting
deficiencies; missing insurance markets ( ) World Economic Forum (2014), Berkhout et their careers, people decide on which
for skill investment and intergenerational al. (2012).
transmission of education and training. ( ) LMM is a general equilibrium model covering educational path to follow, namely low,
118
(European Commission, 2012a). 14 EU countries and is used to show the medium or high education ( 121 ), given
( ) Berkhout et al. (2012); European impact of labour market policy measures
113
Commission (2012a), World Economic Forum on important internals such as employment,
119
(2014). unemployment, wages, but also GDP and ( ) European Commission (2014e), Chapter
productivity. It has a particular focus on
114
( ) According to the World Economic Forum the labour market, and includes a detailed 1, Section 6.1 for Germany; Employment
(2014), activation strategies should move picture of the institutional surroundings in and Social Developments in Europe 2013;
away from the ‘work-first’ to a ‘learn- the different countries. LMM distinguishes Peschner and Fotakis (2013), Section 4.2.1
first’ approach and take into account eight age groups and three skill-levels (in on the example of France.
120
the long-term consequences of training the sense of educational levels). It also ( ) Berger et al. (2009:1), pp. 27–28.
and placement decision on individuals’ considers the impact of firm-training on ( ) According to the International Standard
121
employability and adaptability. individual labour productivity. For more Classification of Education 1997: ISCED 0-2
( ) European Commission (2012a, 2013d); detail, see Berger et al. (2009:2), p. 9. For a (low), ISCED 3-4 (medium), ISCED 5-6 (high).
115
World Economic Forum (2014); Berkhout et short explanation of LMM, consult European See http://epp.eurostat.ec.europa.eu/cache/
al. (2012). Commission (2010). ITY_SDDS/Annexes/educ_esms_an5.htm
124
policy intervention ( 112 ) across various firms by facilitating the growth of indus - is embedded into a more comprehen-
policy domains, including: education and trial clusters. sive strategy which also uses educational
training; employment and social security; investment to strengthen overall labour
mobility and migration; and industrial Research findings tend to emphasise the productivity, and hence growth. Finally,
113
and regional development( ). role of employers in reducing skill mis- we may improve the usage of human
match ( 116 ) by offering attractive working capital by helping firms to lower labour
Education and training systems could conditions, including performance pay, costs in the most vulnerable segment
be more responsive to labour market complex job tasks and learning opportu- of the labour market. But again, policies
needs, equipping graduates with good nities. However, it is unrealistic to expect are most effective when they are part
basic skills, promoting a variety of routes all employees, notably new ones, to have of a policy package that also includes
for qualifications (e.g. VET), and providing all the required skills for the available policies supporting growth in addition to
early career guidance to help students jobs. Employers can overcome this by investment in human capital.
make more informed choices. They could becoming more involved in education
also encourage adult and lifelong learn- and training systems, notably by provid- Given the precarious labour market situ -
ing, with companies playing a bigger part ing quality apprenticeships. Another way ation for young people in Europe, simu-
by providing more work-based training. to improve the match is to improve com - lation of policy measures in this section
panies’ human resource and recruitment concentrates on young cohorts (aged
Employment and social policies can policies to attract and select talent, and below 24).
117
improve mobility and more efficient to facilitate internal labour mobility ( ).
matching by passing social security 4.1. Forming HC:
rules that allow easy transfer of social Employers and workers have a joint Investment in education —
security rights. Active labour market poli - interest in investing in skills. Their rep- the case of Germany
cies can help job-seekers, notably the resentatives (employers’ organisations
low-skilled, obtain relevant skills and and trade unions) often combine their The decisive role of formal education
shorten unemployment spells, although (sector-specific) knowledge of the labour in human capital formation has been
activation should not be led by a ‘work- market to identify skill gaps and develop confirmed by many studies. Previous
first’ approach ( 114 ). Good quality labour joint solutions. They may jointly develop simulations using DG EMPL’s Labour
market intermediaries, such as public training curricula or organise paritarian Market Model show that young people
employment services (PES), which sup- funds (e.g. financed through social secu- graduating from higher educational have
port good matches and provide neces- rity contributions) to provide training. In better labour market outcomes leading
sary guidance and job-counselling, play doing so, they overcome problems of to higher economic growth ( ). These
119
115
a very important role ( ). collective action and positive spill-overs exercises show the impact of opting for
associated with skill investment. higher education although, since higher
Industrial and regional development poli - education comes at a cost, it involves
cies can reduce skill mismatch, mainly 4. Policies and their personal choices. From an individu-
by influencing the labour demand side. impact: Evidence from al’s perspective, there is not only the
Stimulating innovation and the creation the Labour Market cost, which can be particularly high in
of high-level jobs helps utilise the poten - Model some countries, but also the question
tial of Europe’s high-qualified workforce. of foregone earnings and the possibil-
This is also achieved by supporting firms This section uses DG EMPL’s Labour ity of missing out on career opportuni-
that rely on high-skill, high-productivity Market Model (LMM) to demonstrate ties during the period of study. For the
product strategies and exploiting syner- how different policies can help in form- great majority, however, these costs are
gies between skills and high-productivity ing, maintaining and using human
typically weighed against the long-term
capital ( 118 ). We show how investment gains from higher education in terms of
in education helps in forming human enhanced job opportunities, higher earn-
( ) Intervention is needed due to various market capital. When it comes to maintaining ings, better recognition and better work -
112
failures preventing efficient reduction of human capital, investment in training is ing conditions.
mismatch by labour market adjustments an efficient tool — particularly when it
alone, such as the lagged nature of
skill supply relative to demand; positive DG EMPL’s model can take on board
spillovers (‘externalities’) in human capital ( ) World Economic Forum (2014), Cappelli the endogeneity of education ( 120 ),
116
outcomes; disincentives to investment in (2014), CEDEFOP (2012b).
training by enterprises and recruitment 117 which assumes that, before starting
deficiencies; missing insurance markets ( ) World Economic Forum (2014), Berkhout et their careers, people decide on which
for skill investment and intergenerational al. (2012).
transmission of education and training. ( ) LMM is a general equilibrium model covering educational path to follow, namely low,
118
(European Commission, 2012a). 14 EU countries and is used to show the medium or high education ( 121 ), given
( ) Berkhout et al. (2012); European impact of labour market policy measures
113
Commission (2012a), World Economic Forum on important internals such as employment,
119
(2014). unemployment, wages, but also GDP and ( ) European Commission (2014e), Chapter
productivity. It has a particular focus on
114
( ) According to the World Economic Forum the labour market, and includes a detailed 1, Section 6.1 for Germany; Employment
(2014), activation strategies should move picture of the institutional surroundings in and Social Developments in Europe 2013;
away from the ‘work-first’ to a ‘learn- the different countries. LMM distinguishes Peschner and Fotakis (2013), Section 4.2.1
first’ approach and take into account eight age groups and three skill-levels (in on the example of France.
120
the long-term consequences of training the sense of educational levels). It also ( ) Berger et al. (2009:1), pp. 27–28.
and placement decision on individuals’ considers the impact of firm-training on ( ) According to the International Standard
121
employability and adaptability. individual labour productivity. For more Classification of Education 1997: ISCED 0-2
( ) European Commission (2012a, 2013d); detail, see Berger et al. (2009:2), p. 9. For a (low), ISCED 3-4 (medium), ISCED 5-6 (high).
115
World Economic Forum (2014); Berkhout et short explanation of LMM, consult European See http://epp.eurostat.ec.europa.eu/cache/
al. (2012). Commission (2010). ITY_SDDS/Annexes/educ_esms_an5.htm
124
