After 10 years of stagnating and declining growth rates, the economic forecasts for Europe are looking somewhat more optimistic, albeit with a high degree of uncertainty. Growth is stabilising at around 1.5%, unemployment is declining and employment rates seem to be on the rise. However, while this may be an improvement in relation to the 10 previous years of dire forecasts, the number of unemployed remains unacceptably high, now standing at 20 million, and employment levels are stagnating. Seen in absolute terms, therefore, there seems little reason to be optimistic about the economic and social situation in the European Union. The last seven years of austerity and deregulatory structural reforms have resulted in a lack of GDP growth, a rise in unemployment, damaging low rates of investment (both private and public), stagnating wage growth and cuts in social policy programmes. […]
While real wage developments were more dynamic than productivity growth in 2016 this is largely due to the weakness in productivity growth, as well as low inflation rates. In addition, minimum wage growth outstripped the average real wage growth, indicating that wages at the bottom of the scale grew faster than the average and, furthermore, grew faster in Member States where the minimum wage level is lower. However, despite this growth, in most countries the minimum wage remains too low for even a full-time worker to sustain a decent standard of living. Furthermore, the deregulatory reforms in industrial relations systems that have been implemented in many countries have created framework conditions that make pursuing a solidaristic wage policy and wage-led economic growth all the more difficult. A solidaristic wage policy has three requirements: appropriate minimum wages, all-encompassing collective bargaining systems and strong trade unions. The European Union appears to be showing divergence on all three indicators, thereby making upwards wage convergence an even more challenging prospect. In order for Europe to get back on to a sustainable growth path that ensures upwards convergence, a shift towards expansionary policies is needed which would raise demand through higher public and private investment, higher public spending and higher pay levels based on a solidaristic wage policy.
The slow and uneven economic recovery is reflected in the labour market indicators. While headline figures will tell us that a higher proportion of the working age population was in employment in 2016 than at the outbreak of the crisis and that unemployment is decreasing, a closer look at more detailed indicators tells us a quite different story. Many of these improvements are driven by demographic processes rather than improved labour market performance. Between 2008 and 2016 the actual number of jobs declined, with 180,000 fewer people in employment in 2016. The picture is even more negative when we look at the data; there appear to be increasing divergences between different groups of workers as well as different countries. Older workers above 65 years of age increased their labour market participation, reflecting either a more sustainable working life or a lack of income from pensions. Young people and those with a low level of educational attainment continue to face a very difficult situation in the labour market, and long-term unemployment remains persistently high and on the rise. Meanwhile, an increasing proportion of those who are in employment find themselves locked into short-hour jobs with low income and therefore at a greater risk of poverty despite working. In general, the risk of in-work poverty has intensified during the past nine years, with workers finding it increasingly difficult to escape temporary work. While social spending has increased, it has not been enough to offset the negative consequences of the austerity policies that have been pursued.
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