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Employment and Social Developments in Europe 2014
2. Productivity and the scoreboard for key employment and 1995–2013 period. Convergence can be
employment growth: social indicators (see Joint Employment analysed in two basic ways: in terms of
THE key to long-term Report 2014). Emphasis is put on overall levels (Beta-convergence) and in terms
convergence in the EU economic developments (as reflected by of variability (Sigma-convergence) as
GDP per head), employment and unem- described in Box 1. In this chapter con-
How has convergence between EU Mem - ployment rates, gross household dispos - vergence is mainly measured in terms
ber States in key employment and social able income (GHDI) per capita, poverty of variability, in order to provide an
dimensions evolved over recent decades, rates, and inequalities (S80/S20): assessment of the trends relating to key
and how does this compare with devel- variables, while convergence in terms of
opments in the United States? • GDP per head (GDPpc) provides a levels is more relevant to assessing the
broad indication of economic devel- catching up process (for a review of Beta
This section initially reviews trends in opment and relates to the various convergence, see, for instance, trends
convergence of key socioeconomic vari- factors that contribute to economic within EA-12 in ESDE 2013).
ables, followed by a comparison with growth or growth models, notably
developments in the United States. Next, productivity and employment trends Trends in GDPpc and GHDIpc are meas-
it reviews adverse developments in three (see Box 1). ured in constant prices since the focus
key socioeconomic dimensions that can is on convergence of real economic and
5
impact significantly on employment and • Employment and unemployment living conditions ( ). The literature on
productivity growth: i.e. trends in nominal developments, which are key con - growth initiated by Solow (1956) devel-
unit labour costs (ULCs); human capital tributors to economic growth (and oped the concept of ‘catching up’ that is
formation; private and public debt. indicate remaining unused poten - close to beta convergence. It should be
tial) and a central dimension of the noted that this type of ‘absolute’ conver-
2.1. Convergence EU2020 strategy. gence is not always easy to verify and a
trends in the EU since number of additional elements are taken
the mid-1990s • Household income per capita (gross into account, notably the possible endo-
household disposable income GHDIpc), geneity of total factor productivity (TFP)
How did the dispersion of labour mar- is a more direct indicator of the devel- growth. Other analyses of convergence
ket and social performance evolve over opment of the populations’ living stand - have been developed such as ‘conditional
recent decades in Europe? ards than GDPpc trends. growth’ (Mankiw et al., 1992) and more
generally the literature identifies a num -
6
This section reviews trends in the dis- • The rate of being at-risk-of-poverty- ber of dimensions of convergence ( ).
persion of key employment and social and-exclusion (AROPE), complemented
variables, placing emphasis on overall by monetary poverty rates (at the 60 % Since convergence can result from
economic development as reflected by: of the median threshold). changes in the dispersion within zones
GDP per head or per capita; employment as well as between zones, this chapter
and unemployment (and activity) rates; • Inequality (measured by the S80/S20 considers both overall convergence or
7
gross household disposable income per ratio), which indicates the extent to divergence development in Europe ( )
capita; poverty and inequalities. which overall economic and social (as reflected by the coefficient of vari-
developments are inclusive and ation), as well as the contribution of
2.1.1. Key dimensions is another key dimension of the trends within and between European
of convergence EU2020 strategy. zones to these overall developments
(see Section 1.2.1 below). For this, a
Identifying key dimensions … … and measuring convergence standard between-within decomposition
of total variance is used, along with the
Five employment and social dimensions The analysis covers 28 EU Member States decomposition of the Theil index (see
were selected for the analysis, reflecting and focuses, as far as possible, on the Box 1 and Annex).
5
( ) Furthermore, while entry into the euro is
conditional on fulfilling the Maastricht
criteria, the euro is intended to support real
convergence, defined in terms of per capita
GDP, by fostering economic integration (see
European Commission, 2008).
( ) See, for instance, Islam (2003).
6
( ) As far as possible in the EU-28 (with the
7
only exception being Section 1.2.1 which
focuses on developments in nominal unit
labour costs in the euro area).
204
2. Productivity and the scoreboard for key employment and 1995–2013 period. Convergence can be
employment growth: social indicators (see Joint Employment analysed in two basic ways: in terms of
THE key to long-term Report 2014). Emphasis is put on overall levels (Beta-convergence) and in terms
convergence in the EU economic developments (as reflected by of variability (Sigma-convergence) as
GDP per head), employment and unem- described in Box 1. In this chapter con-
How has convergence between EU Mem - ployment rates, gross household dispos - vergence is mainly measured in terms
ber States in key employment and social able income (GHDI) per capita, poverty of variability, in order to provide an
dimensions evolved over recent decades, rates, and inequalities (S80/S20): assessment of the trends relating to key
and how does this compare with devel- variables, while convergence in terms of
opments in the United States? • GDP per head (GDPpc) provides a levels is more relevant to assessing the
broad indication of economic devel- catching up process (for a review of Beta
This section initially reviews trends in opment and relates to the various convergence, see, for instance, trends
convergence of key socioeconomic vari- factors that contribute to economic within EA-12 in ESDE 2013).
ables, followed by a comparison with growth or growth models, notably
developments in the United States. Next, productivity and employment trends Trends in GDPpc and GHDIpc are meas-
it reviews adverse developments in three (see Box 1). ured in constant prices since the focus
key socioeconomic dimensions that can is on convergence of real economic and
5
impact significantly on employment and • Employment and unemployment living conditions ( ). The literature on
productivity growth: i.e. trends in nominal developments, which are key con - growth initiated by Solow (1956) devel-
unit labour costs (ULCs); human capital tributors to economic growth (and oped the concept of ‘catching up’ that is
formation; private and public debt. indicate remaining unused poten - close to beta convergence. It should be
tial) and a central dimension of the noted that this type of ‘absolute’ conver-
2.1. Convergence EU2020 strategy. gence is not always easy to verify and a
trends in the EU since number of additional elements are taken
the mid-1990s • Household income per capita (gross into account, notably the possible endo-
household disposable income GHDIpc), geneity of total factor productivity (TFP)
How did the dispersion of labour mar- is a more direct indicator of the devel- growth. Other analyses of convergence
ket and social performance evolve over opment of the populations’ living stand - have been developed such as ‘conditional
recent decades in Europe? ards than GDPpc trends. growth’ (Mankiw et al., 1992) and more
generally the literature identifies a num -
6
This section reviews trends in the dis- • The rate of being at-risk-of-poverty- ber of dimensions of convergence ( ).
persion of key employment and social and-exclusion (AROPE), complemented
variables, placing emphasis on overall by monetary poverty rates (at the 60 % Since convergence can result from
economic development as reflected by: of the median threshold). changes in the dispersion within zones
GDP per head or per capita; employment as well as between zones, this chapter
and unemployment (and activity) rates; • Inequality (measured by the S80/S20 considers both overall convergence or
7
gross household disposable income per ratio), which indicates the extent to divergence development in Europe ( )
capita; poverty and inequalities. which overall economic and social (as reflected by the coefficient of vari-
developments are inclusive and ation), as well as the contribution of
2.1.1. Key dimensions is another key dimension of the trends within and between European
of convergence EU2020 strategy. zones to these overall developments
(see Section 1.2.1 below). For this, a
Identifying key dimensions … … and measuring convergence standard between-within decomposition
of total variance is used, along with the
Five employment and social dimensions The analysis covers 28 EU Member States decomposition of the Theil index (see
were selected for the analysis, reflecting and focuses, as far as possible, on the Box 1 and Annex).
5
( ) Furthermore, while entry into the euro is
conditional on fulfilling the Maastricht
criteria, the euro is intended to support real
convergence, defined in terms of per capita
GDP, by fostering economic integration (see
European Commission, 2008).
( ) See, for instance, Islam (2003).
6
( ) As far as possible in the EU-28 (with the
7
only exception being Section 1.2.1 which
focuses on developments in nominal unit
labour costs in the euro area).
204
