2023 was a good year to be working in Europe

2023 was a good year to be working in Europe in many respects, with over three-quarters of working-age Europeans in employment, unemployment at a record low and the economy continuing to create, for the most part, well-paid jobs. The verdict on living in Europe during the year was, however, more nuanced, with benefits of high employment not translating into clear improvements in the lives of Europeans. In large part this was due to the continued rise in the cost of living with access to affordable and adequate housing remaining unattainable for many.

These findings are reported in Eurofound’s 2023 yearbook, Living and working in Europe, which provides a snapshot of the latest developments in the work and lives of Europeans as explored in the Agency’s research activities over the course of the year.

While these employment developments are positive, labour shortages are putting a squeeze on business performance. This is a threat to economic competitiveness but also a wake-up call for governments and employers to invest more in work. For years, training and upskilling have been falling behind the accelerating pace of change as digitalisation sweeps through the world of work and the greening economy demands new skills.

There are other upsides. With more choices in the labour market, more workers are able to turn their backs on undesirable jobs. Gender discrepancies in the labour market are being chipped away as employment grows faster among women than men, narrowing the gender employment gap, albeit at a snail’s pace.

But for day to day living Europeans continue to face challenges. With earnings from work insufficient to keep pace with inflation, some are forced to forego the staples of a basic standard of living in these prosperous times with the issues of housing, care and access to other public services very much to the fore. Failure to share in the benefits of a relatively healthy economy contributes to public disillusion and disconnection from the political mainstream. Trust in government and in the EU is low, according to Eurofound findings from 2022, especially among rural populations. Inflation may be under control, but many Europeans continue to see the cost of living draining their incomes while others are sufficiently financially secure to be unaffected. Perceptions of inequalities, based on income, wealth, rural versus urban or native versus migrant, tend to corrode social cohesion.

Add in other contentious issues such as immigration – fears of which anti-immigration activists have fuelled in the face of political disunity – there is a prospect that political alienation will be reflected in the ballots cast in the European Parliament elections of 2024 – at a time when solidarity in Europe was never more critical.

‘There are many success stories for the European Union,’ says Ivailo Kalfin, Eurofound’s Executive Director ‘but there are clearly challenges - not least the goal of a just transition, one where none gets left behind. Rising to these challenges is the work of building social Europe, a task that must remain front and centre for the new European Parliament and Commission as they take the European project forward from 2024.’

Eurofound’s research captures the many dimensions of living and working in Europe. Each year, the Agency compiles a yearbook to provide a snapshot of the work and lives of Europeans as explored in the Agency’s research activities over the course of the previous year. This serves to inform the policy debate at EU and national levels.

More information:

Download the report Living and working in Europe 2023
Digital story Living and working in Europe 2023
10 reasons to Use Your Vote blog series
Topic page: Living and working in Europe
Event: Eurofound’s Annual Lecture 2024: Living, working and voting in Europe, 7 May 2024

Takeaways:

Mixed development in the European labour market

Women benefited more than men from the strong job creation after the lifting of COVID-19 lockdowns in 2021. By mid-2022, 1.9 million more women and 0.75 million more men were in employment in the EU than before the pandemic.
While job losses early in the pandemic were disproportionately borne by young workers, the employment rate for this group effectively rebounded in 2021 and 2022. This employment expansion among young workers may have occurred, however, mainly in low-paying, precarious jobs.
The total hours worked in the economy recovered more slowly than employment in the wake of the pandemic. While more people were at work in the EU in 2023 than in 2019, workers were working one hour less on average per week.

Factoring in the climate policy

Employment is projected to grow in the EU by 0.3% annually up to 2030, adding 6.7 million net jobs. Statistical modelling indicates that Fit for 55 policies will create more jobs than they destroy, adding 204,000 net jobs in that period.
Of the key sectors that drive the employment growth under Fit for 55 policies, construction comes out on top, attracting close to 40% of the associated investment expenditure and creating an additional 312,000 jobs, according to the projection.
The increased employment from Fit for 55 will occur mostly in mid-paid and mid–low-paid jobs, differing from recent patterns, where there has been a concentration of job creation in high-paid jobs.

Labour shortages intensify

The number of unfilled jobs in the EU reached a historic high in 2022, with a vacancy rate of 3%, more than double that of 2013. A third of managers say that labour shortages are a factor limiting production.
Labour shortages are particularly severe in construction, information and communication technology (ICT) and healthcare.
Different factors drive the lack of labour depending on the sector, so measures to tackle the issue need to identify and then target those drivers.
Labour shortages in the ICT sector arise largely from a mismatch between the skills workers bring to the market and the skills employers are looking for. A multiplicity of factors are driving labour shortages in the health and care sector, but low pay in many occupations and poor working conditions are significant contributors.

Job quality: Getting the balance right

Unsocial working hours, high work intensity and financial worries were three of the most common stressors experienced by workers in the EU in 2021. They were more prevalent in certain occupations and sectors: high work intensity, for instance, was widespread among managers across all economic sectors, whereas financial worries were most pervasive among lower-skilled employees.
These stressors are linked to a higher incidence of health problems, anxiety and exhaustion and poorer mental well-being among workers. Workers who experience them are also more likely to feel that work is putting their health at risk and to work when sick.
The negative effect of job stressors on health and well-being can be reduced by the positive and enriching attributes of work – known as job resources – such as trust in management and colleagues, support from colleagues, being consulted about objectives and work organisation, career opportunities, and opportunities to use one’s skills.

Is hybrid work here to stay?

Employees continue to work from home in much larger numbers than prior to the COVID-19 pandemic; hybrid arrangements, where staff work partly from home and partly onsite at the organisation’s premises, seem to be the preferred approach.
No magic formula exists for successfully putting a hybrid approach into practice; organisations are defining it as they go along, adopting new management practices and adapting their arrangements based on experience.
Many issues remain to be ironed out. Differences in access is one: for instance, managers and professionals are more likely to have a hybrid arrangement than other occupational groups. There are also concerns that workers who work from home might be regarded as lacking commitment and may miss out on opportunities for advancement and training.

Letting go is hard to do: Reasons for a right to disconnect

Four out of five respondents to a Eurofound survey said that they are regularly contacted by work outside of their contracted hours; over half feel obliged to respond.
Nearly half of workers said that such out-of-hours contact has a negative impact on their family life, while a similar proportion believe that it affects their health.
The presence of a right-to-disconnect policy at work appears not to have a bearing on whether employees are contacted out of hours or not. However, companies with a policy seem to be more sensitive to following favourable working time practices.

Minimum wages chase inflation

Member States across the EU increased their statutory minimum wages substantially for 2023 to try to keep pace with inflation. The biggest relative increases were set by central and eastern European Member States for the most part.
In real terms, minimum wages grew substantially only in Belgium and Germany, while they fell in nine Member States.
From a longer-term perspective, progress in raising real wages is most marked in the Member States that joined the EU in 2004 or later. Except for Malta and Slovenia, real minimum wages grew by between 45% and 195% in the period 2012–2023 in these countries.

Collectively agreed wages: Responses to high inflation

While nominal wages have risen since the pandemic, they have fallen behind inflation, meaning that real wages have actually declined.
Analysis of collective agreements in four sectors across three Member States found significantly higher wage increases in lower-paid sectors. The increases in one of these sectors, hospitality, may have been a response to labour shortages, which have pushed up wages.
The inclusion of wage indexation mechanisms in collective agreements, linking wage developments to actual change in the cost of living, has not been embraced by the social partners as such mechanisms would compromise their autonomy to negotiate on wages.

Industrial democracy in flux

Industrial democracy – the rights of employers and employees to participate autonomously and collectively in the decision-making that defines the employment relationship – is the core dimension of industrial relations systems in the EU.
A picture of polarisation emerges when the state of industrial democracy across the Member States is measured. On an index of 0–100, the five best-performing countries (Austria, Denmark, Finland, the Netherlands and Sweden) scored over 70, while the Member States in the last three positions (Estonia, Hungary and Latvia) scored below 35.
The Member States with the most marked improvement in industrial democracy since 2008 are Czechia, France, Lithuania, Poland and Slovakia. Industrial democracy has declined most in Greece, Hungary, Malta, Romania and Slovenia since that time.

Revitalising rural Europe

The socioeconomic gaps between rural and urban areas in Europe are widening. Low educational attainment and lack of digital skills in much of the rural population, two areas critical to maintaining resilience in the face of changing economic and social conditions, are particularly concerning. Depopulation and cuts in public and private services are among the factors that threaten the long-term sustainability of rural areas.
Rural dwellers have less trust in government and the EU compared with urban residents and are more likely to feel ignored by government, which threatens social cohesion.
Providing good-quality public services is fundamental to building the trust of communities in the state. Developing innovative ways of delivering public services and exploiting the potential of digital delivery is central to restoring the confidence of the rural population in political institutions.

Tense times for tenants

Increasing numbers of Europeans are unable to secure housing. Rising mortgage interest rates and high purchase prices have pushed many out of the house purchase market. People are remaining longer in the rental market as a result: 45% of 30–39-year-olds were renting in 2019, up from 38% in 2010.
Tenants are more disadvantaged than homeowners in many respects. For instance, housing costs are 45% higher for tenants on average than for homeowners, and in all Member States, tenants spend more of their income on housing than homeowners.
Governments are attempting to curb spiralling rents using various measures, including rent subsidies and rent controls, but these measures need to be applied carefully as they can favour some and disadvantage others. Social housing provides homes with low rents but waiting lists can be long.

Liveable spaces and places

Living in poor-quality housing and polluted environments damages people’s health and their quality of life. Across Europe, the quality of housing and neighbourhoods in general have improved over the past 25 years, although not always rapidly.
The eastern European Member States have made substantial strides in tackling damp and leaking housing, with the performance of some countries pulling ahead of that of their western European counterparts. Levels of environmental and air pollution are higher in western European Member States due in part to the greater scale of their economic activity.
Member States have, for the most part, converged in terms of indicators used to measure housing quality and pollution, meaning that their performance on these issues is becoming more similar.