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As the EU prepares to unveil a major initiative to provide greater job security for workers in the “gig economy” today, new research highlights the scale of labour market shifts that have seen people move into precarious forms of employment since the financial crisis.
A new report from Bank of America Merrill Lynch titled “Job Quality and Escape Velocity” shows much of the impressive falls in eurozone unemployment over last three years has been underpinned by jobs of “deteriorating quality”.
This afternoon, the European Commission will present its plans to tie workers such as Uber drivers or Deliveroo couriers in to their national welfare systems, ensuring they receive unemployment benefits and health insurance. (More on that from the FT’s Jim Brunsden here).
This push towards “social Europe” comes after the EU has been under fire for not doing enough to protect the continent’s workers at the expense of big multinationals and a fixation on increasing “competitiveness” as the best way to restore the health of its member economies (usually code for keeping a lid on wages).
By opening up a consultation with trade unions and employers, the commission’s initiative seeks to address one of the most significant developments in advanced world economies over the last decade – the shift away from traditional full-time employment.
High unemployment has scarred the eurozone in the wake of the sovereign debt crisis and has been most acute in the bloc’s weaker, southern economies such as Spain, Greece, Portugal and also France. Still, in recent months, the average eurozone unemployment rate has fallen steadily to an eight-year low of 9.5 per cent.
“The improvement in the quantity of jobs has been offset by a significant deterioration in their quality”, says Gilles Moec, European economist at BAML.
The bank’s research describes the transformation in the continent’s labour force in recent years. It finds that a measure of “core employment” – which strips out part-time and temporary work – has been steadily shrinking as a share of the overall workforce and remains below its long-term historical average despite overall employment levels rising.
“The near-entirety of the rebound in the headline employment rate since 2013 can be ascribed to ‘lower quality’ jobs”, adds Mr Moec.
Precarious job security has become a major political theme in the eurozone’s largest member states during a key election year. Populists such as France’s Marine Le Pen have promised to “repatriate” industrial jobs by reviving manufacturing while greater liberalisation and reduced taxes on the self-employed are key planks in centrist Emmanuel Macron’s plans to revamp the French economy.
Away from the politics, economists also warn that rising levels of flexible employment, where employees have less bargaining over their wages, will keep a lid on inflationary pressures. It is an issue that has begun to exercise policymakers at the European Central Bank, who have pinpointed weak wage growth as one of elusive elements in the current economic upturn.
Real income growth in Italy has shrunk over the last decade and remains below its pre-crisis level in the Netherlands. In the UK, the Institute for Fiscal Studies has said Britain will have suffered more than a decade of no real earnings growth since the financial crisis this year.
Rising part-time employment, at the expense of full time work, is generally a mark of early stage recoveries, notes Bert Colijn at ING.
“Employers give out temporary contracts before regular contracts and that shows during a job recovery”, said Mr Colijn.
“Especially after such a long dragging crisis with looming breakup risk, businesses could be tempted to take that option for a longer period of time.”
Labour markets with a rising share of gig-economy workers also calls into question much of the consumer-driven growth that has underpinned European economies over the last two years.
“Access to consumer or mortgage credit is difficult for [these] workers,” adds Mr Moec.
“The euro area economy is clearly on the right track, but the recovery is actually still in its early stage. The high number of part-time workers still in the system suggests that the scars of the Great Recession are still there”.