Zwei Frauen stehen auf einer Treppe. Von unten kommt ihnen auf der Treppe eine dritte Frau entgegen. Treppengeländer, Fassaden- und Dachfenster sind verglast.
IPGGutenbergUKLtd –

Press Release, , : Inflexible labor markets prevent new stable jobs in many EU countries

Labor market reforms can bring down governments. In almost no other policy field are legislative amendments so contentiously debated. This can currently be observed in France. Other EU countries, too, have sensitive work ahead of them if Europe is to achieve its goal of 75 percent employment by 2020.

Especially in the countries rated as inflexible, the study finds a high need for further labor market reforms. However dependent a national economy may be on the overall economic environment and diverse individual factors, the shaping of employment protection, unemployment insurance, and qualification measures has an impact that reaches beyond economic adaptability. The prospects of employees and job seekers, too, are decisively influenced by the mobility of the national labor market.

Temporary jobs not always a stepping-stone to permanent employment

A direct comparison between Germany and France, for example, illustrates just how strongly the chances of entry into the labor market depend on its mobility. Employees in both countries enjoy relatively strong employment protection. Partly as a result of this, one in every two unemployed persons in these countries must settle for a fixed-term employment contract when entering or reentering the labor market. While in France this is accompanied by a high minimum wage and rigid wage-setting, employment protection in Germany is accompanied by flexibilizing measures at the company level – substantially increasing advancement opportunities for fixed-term employees in the country. In a given year, 36.3 percent of workers in Germany with temporary contracts achieve the transition into permanent employment. In France, only 10.6 percent achieve this – the lowest rate in the EU comparison. The EU average is 33 percent.

As in France, this transition is achieved by only a low percentage of workers in Poland, the Southern European countries, and the Netherlands. Potential goes untapped above all in countries in which an especially high rate of fixed-term employment contracts coincides with a failure of the stepping-stone function. One such case is Poland, where 84 percent of the unemployed obtain only temporary contracts on reentering the labor market and just 18.5 percent of fixed-term workers find permanent employment in a given year. In Spain, Portugal, the Netherlands, and Slovenia as well, over 70 percent of the formerly unemployed are hired into only temporary positions (EU average: 48 percent).

Inflexible labor markets inhibit advancement opportunities

The lack of prospects for a permanent job provides little motivation to employees. Europe-wide, the risk of losing one’s job is more than four times as high for temporary workers as for those with a permanent employment contract. Additionally, a fixed-term contract often goes hand in hand with less further training and lower wages. "That's bad for productivity and certainly not in the interest of either employees or employers," says Aart De Geus, chairman of the Bertelsmann Stiftung and former Dutch employment minister.

According to the study, creating sustainable jobs requires, not least, high investment in a qualified and flexible workforce. The especially flexible labor markets in Scandinavia manage to link mobility with high job security and low wage inequality. "The more mobile, the better, would be too simple a formula," says De Geus. "What's needed is a healthy balance between security and incentives. A good employment policy is always an orchestration of many different parts." In Scandinavia, an activating labor market policy and high spending for occupational training and development lead to career advancement for many workers.

In Estonia, Sweden, the UK, and Germany, workers are also more mobile than in the other EU countries. In Estonia, for example, 12.7 percent of employees change jobs in a given year and the probability of occupational change is above 7 percent. France, in contrast, shows corresponding change rates of just 4 and 1.7 percent.

Additional information

The Bertelsmann Stiftung works to promote social inclusion for everyone. It is committed to advancing this goal through programs aiming to improve education, shape democracy, advance society, promote health, vitalize culture and strengthen economies. Through its activities, the Stiftung aims to encourage citizens to contribute to the common good. Founded in 1977 by Reinhard Mohn, the non-profit foundation holds the majority of shares in the Bertelsmann SE & Co. KGaA. The Bertelsmann Stiftung is a non-partisan, private operating foundation.

The present study of the Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI) in Essen compares the mobility of the labor markets in 23 EU states. The study is based on EU-SILC data from 2011 to 2013. It examines the change between labor market conditions such as employment and unemployment; the change between labor market conditions and contract types (looking at fixed-term and permanent employment separately); occupational mobility; and wage mobility.