The present draft Joint Employment Report is the second elaborated since the launch of the Luxembourg Process. It is based on the Commission’s analysis of the Member States’ implementation reports on their 1998 National Action Plans (NAP) for Employment and on the examination of how the 1999 Employment Guidelines have been translated into revised NAPs for 1999. Its aim is to assess compliance by the Member States with commitments set by the Employment Guidelines, and to undertake a first evaluation of policy efforts and of their impact on labour markets. The present Report will form the basis of the Joint Employment Report that the Commission and the Council will jointly submit to the Helsinki Summit in December 1999.

The Report is structured in two parts. Part I offers a comparative overview of Member States’ performance under each of the four pillars of the Employment Guidelines and a thematic assessment of whether policies implemented by Member States comply with the individual guidelines, and the role and degree of involvement of the various actors in this process. Part I also highlights some examples of good practice identified by the Member States, which will be subject to a more detailed evaluation, with the purpose of improving the quality of labour market policies.

Part II presents a description of the key employment challenges facing Member States, and an assessment of the policy measures implemented in each individual Member State in the light of its NAP 1998, as well as of new policies initiated in reference to the 1999 Employment Guidelines.

The analysis contained in this Report underpins the recommendations addressed to Member States which the Commission is proposing this year for the first time following the entry into force of the new Treaty on 1 May 1999. The Commission has been mindful of the need to ensure consistency between these recommendations and those set out in the Broad Economic Policy Guidelines drawn up under Article 103(2) of the Treaty. Furthermore, Member States are required to implement their employment policies in a way which is consistent with the Broad Economic Guidelines in accordance with Article 126 of the Treaty.

• The employment performance of the EU as a whole is improving, but progress varies across individual Member States. In 1998, the EU achieved an average growth rate of 2,9 % and generated 1.8 million jobs. For the first time since 1990, employment went up in all Member States, although in Germany this annual increase was only marginal. The growth of employment in the Union was accompanied by a continuing fall in unemployment to 9.9% of the workforce in 1998. This trend has continued into 1999. The fall in unemployment has been much the same for women and men.

• Major structural challenges persist in the Member States' labour markets. The last four years of economic recovery have done little to improve the low employment rate in the Union, which, at 61%, is still lagging considerably behind that or our main trading partners, the US and Japan. Low participation in employment concerns in particular prime-age women and older people. The employment rate of women, at around 51%, is still 20 percentage points lower than that of men. For older people in the age bracket between 50 and 64 years, the employment rate amounted to only 47.6%. Long-term unemployment remains a persistent and severe problem, affecting 5.2 million people in 1998. While unemployment of young people has continued to fall in 1998, more than 4.3 million young people are still unemployed, representing an average share of 9.3% of youth population. Unemployment continues to affect women more than men, and the gender gap remains over 3%.
• The Member States are responding to the challenges by adopting more preventive and active strategies. There is now a clear move towards a preventive approach in combating youth and adult long-term unemployment, but some Member States are more advanced than others in setting up the necessary framework for complying with the EU - level targets: to offer to all young and adult unemployed a new start before 6 or 12 months of unemployment. Four different situations emerge from the analysis: Sweden, UK, Austria, Denmark, Netherlands and Ireland, have complied or are about to comply with at least one of the common targets. France, Spain, Portugal, Finland and Luxembourg have set in motion a reform process which is expected to bring about results in line with the guidelines and before the agreed deadline of 2002. More progress is expected from Germany, regarding the prevention of adult long term unemployment , while there are delays in implementation in the cases of Belgium, Greece and Italy.

• Tax and benefit systems are being reviewed, but progress is slow. Reforms in the tax and benefit systems are a means to provide incentives for participation in working life, in particular for women and older workers. To meet this challenge, a number of Member States are in the process of reviewing, and to some extent reforming, their tax and benefit system. Given the high expectations, however, the overall response appears to be weak. Further efforts are warranted in order to move from passive income support to active measures supporting employability.
• Member Sates are recognising the crucial role of lifelong learning. Investment in education and training are key to developing the strength and flexibility of EU enterprises and the employability of the EU workforce in a context of fast technological changes affecting the nature and organisation of work. Participation in lifelong learning activities remains, however, inadequate and concrete targets are lacking in many Member States. Comprehensive strategies and concrete action by Member States and social partners are therefore required to raise the skill levels across the Union.
• Member States report on a large number of initiatives to improve entrepreneurship, but the lack of precise targets and deadlines, as well as the scarcity of comparable indicators, make the assessment of achievements rather difficult, including as regards job creation in services. Most Member States refer to measures associated with the promotion of the information society and care services. Overall, measures taken by the Member States in 1998 fail, however, to address in a comprehensive and adequate way the need to develop the services sector. Also, more needs to be done to enhance local development and the job creation at local level. The role of small businesses in providing the major impetus for economic growth and job creation is generally recognised, and Member States reported on some encouraging progress in reducing the administrative burdens which hamper their job creation potential. The need to make the taxation system more employment friendly was generally recognised in the implementation reports, but concrete initiatives are scarce and national targets for the reduction of fiscal pressure on labour have not been set by many Member States.
• More progress is required in the promotion of adaptability through modernising the organisation of work, where the social partners have a particular responsibility. Encouraging adaptability of businesses and their employees is key to enhancing the innovative capacity, productivity and competitiveness of businesses, on one hand, and the security of their workers, on the other. The response to this broad challenge has been rather disappointing and mostly focused on the issue of working time. With a few exceptions, the participation of social partners in promoting adaptability needs to be more proactive in all Member States and more concrete initiatives are called for.
• Reinforced policy efforts should be directed to the persistent lack of equality between women and men in the labour market. There is ample room for improvement, in particular for actions to close the gender gaps in employment, unemployment and pay, to redress the unbalanced representation of women and men across sectors and occupations, and to improve care for children and other dependants. The indicators presented in this Report tend to highlight women's persistently poor labour market position compared with men.
• Progress made in defining and using common indicators for the European level commitments, needs to be pursued and developed. The Luxembourg process is based on the setting of verifiable objectives and deadlines in employment-policy making both at European and at national level without which real progress cannot be measured and transparency ensured. This requires the development of a comprehensive set of indicators for measuring and monitoring policy efforts and evaluating policy impact. Building on recent progress, further work needs to be done in 2000 to reach agreement on a comprehensive monitoring system.
• The partnership approach must be further developed. The social partners play a crucial role in the making and implementation of labour market policy, both nationally and locally. Their involvement at all levels throughout the employment process is central to channelling structural change into more and better jobs. Based on the traditions of partnership in the different national contexts, the social partners have participated in a variety of ways in the NAP process. However, concrete action initiated by social partners to transpose the Employment Guidelines into effective outcomes appears to be rather weak. Scope for the involvement of local and regional actors arises under all the pillars. Although partnership approaches are very varied across the Union, all Member States agree on the need to develop the territorial dimension of their employment policies, in particular through local partnerships.
• Disseminating good practice
• The exchange of good practice is an important aspect of the Luxembourg process. Good practices show how Employment Guidelines can be transposed into national or regional contexts. They are also meant to speed up the learning process at EU level by sharing experience, by building on success and learning from past failures. A peer review exercise is underway, which will produce a multilateral assessment of the best practices indicated in last year's Joint Employment Report.

The Member States presented 27 cases of good practice in their 1999 implementation reports, of which 7 are described in this Report. The selection was based on the availability of some monitoring and evaluation. The examples are, by pillar:

• "Inserjovem" and "Reage" initiatives in Portugal
• Activation of benefits in Belgium
• Additional school support scheme in Greece
• Work place support for persons with disabilities in Sweden

• The Single Counter in the Catania Municipality in Italy

• Labour foundation in the construction industry in Asturias (Spain)

• Development of children's day care in Finland

This Report is the first to be formally submitted in accordance with Article 128 of the Amsterdam Treaty. Its purpose is to present the conclusions drawn from the examination of the measures taken by Member States to implement the Employment Guidelines, in the light of their employment situation. It provides the basis for the Joint Employment Report that the Commission and the Council will jointly submit to the European Council meeting in Helsinki in December 1999.

The Report is structured in two parts. The first offers, for each of the four pillars of the Employment Guidelines, a comparative overview of Member States' performances, including a thematic assessment of the policies and measures undertaken under the National Action Plans. It also highlights some examples of good practice that Member States have identified in their implementation reports.

The second part presents, for each Member State, a detailed analysis of the policy measures implemented under the 1998 National Action Plan or announced in the revised 1999 NAPs, in the light of its employment situation. The Report includes, to the extent possible given the short time that has elapsed since the actual launch of the implementation of most new policies and measures, a first assessment of the outcome of each Member State's National Action Plan.

The policy measures considered in this report are those that were in force or planned by 31 May 1999, i.e., the date of submission of the national reports. In some cases, new policy initiatives or developments in implementation have been announced after that date. These have been referred to only insofar as it has been demonstrated that implementation has started, but no assessment can be made at this stage. The analysis and conclusions included in this Report provide the basis for the new Employment Guidelines for 2000 as well as for the Commission's Recommendation to the Council for recommendations addressed to Member States on the implementation of their employment policies.

1. The Employment Guidelines for 1999

With the adoption of the 1999 Employment Guidelines, the Luxembourg process entered in its second year of implementation. The 1999 Employment Guidelines maintain the integrated and multi-annual approach and the four-pillar structure geared towards improving employability, entrepreneurship, adaptability and equal opportunities.

They have been strengthened in a number of areas, as a result of the examination of the National Action Plans undertaken in 1998.

• Particular emphasis has been put on achieving tangible progress in promoting equal opportunities between women and men, in particular by a gender mainstreaming approach across all pillars.
• The importance of lifelong learning in the development of a skilled and adaptable workforce is reinforced and Member States are called upon to set targets to achieve progressively higher participation rates in lifelong learning.
• A new guideline specifically addresses the need to fully exploit the jobs potential of the services sector, in particular in the area of information technologies and in the environmental sector.
• More emphasis is placed on the need for an examination of the tax-benefit systems in order to provide incentives for the unemployed and inactive individuals to take up work or training opportunities.
• Furthermore, supporting measures are sought for older workers to increase their participation in the labour force and for a labour market open to all, including disadvantaged groups and individuals.
•  

1. The National Action Plans for 1999

The 1999 Employment Guidelines served as a basis for the preparation of the 1999 National Action Plans (NAPs). The Council Resolution requested Member States to submit by the end of May implementation reports describing in detail the main measures taken to implement the 1998 National Action Plans and the adjustments made to take into account the 1999 Employment Guidelines.

In the first quarter of 1999, a series of bilateral seminars were held with each of the fifteen Member States to discuss the preparation of the revised NAPs . A broad range of government departments, as well as the representatives of social partners and, in some Member States, also the regional authorities, participated in the seminars and subsequently were to varying extents involved in the actual revision of the NAPs. The bilateral seminars served to highlight the main strengths and weaknesses in the employment situation of each country and to launch a debate around the most significant policy issues arising from last year's assessment of the NAPs. Given their positive results, the bilateral seminars are likely to become a permanent feature of the process.

 

2. Progress in setting common indicators

The Luxembourg process requires the setting of verifiable objectives and deadlines in employment-policy making both at European and at national level. This in turn requires the development of a comprehensive set of indicators for measuring both policy efforts and outcomes as regards the Employment Guidelines.

In monitoring the Employment Guidelines, three objectives are pursued:

1. Assessing whether the policies implemented in the context of the Employment Guidelines are producing the desired impact. For this purpose, a set of basic performance indicators measuring trends in employment, unemployment and some key macro-economic variables were developed and already used in the 1998 Joint Employment Report.
2. Measuring the policy efforts undertaken by the Member States in transposing the EU-level operational targets set in the first three guidelines on prevention and activation into national policy and evaluating their effectiveness. This calls for common policy indicators developed on the basis of administrative data on beneficiaries of employability policies and on stocks and flows into and out of unemployment.
3. Monitoring the progress achieved by Member States over the medium-term towards more structural goals as set by the Employment Guidelines. This needs to be done with the help of structural (performance) indicators for areas such as education and training, entrepreneurial activity, employment in services, taxation and equality of opportunities between women and men.

Significant progress has been achieved in 1999 with respect to common policy indicators. A set of indicators for the first three guidelines on prevention and activation was agreed in May by the Commission and the Member States under the auspices of the Employment and Labour Market Committee (ELC), and submitted to the Cologne Summit. The Member States were asked to step up the adaptation of their monitoring systems so as to provide data in accordance with the newly agreed indicators in their 1999 implementation reports, thus allowing for a more objective assessment of progress towards the common policy targets.

However, further work still needs to be done, with the aim of reaching an agreement on a comprehensive monitoring system. This will require both the further development of appropriate indicators and the improvement of data collection systems by expanding the capacities at national and European level.

4. Involvement of the Social Partners

The social partners have a crucial role to play in the making and implementation of labour market policy, both nationally and locally, and are called on to play an active role at European level in the implementation and assessment of the progress made under the Employment Guidelines.

At European level

The social partners are regularly invited to discuss employment and social matters with the Commission and other EU Institutions. The Standing Committee on Employment, which dates back to 1970, has served as a forum for discussion between the Council, the Commission and the two sides of industry. In March 1999, the Committee was reformed and streamlined in order to become an operational instrument for ensuring the consistency between the Employment Guidelines and the Broad Economic Policy Guidelines. The reformed Committee is composed of European social partners organisations, the Council and the Commission.

This reform underlines the importance given to the role of social partners within the European Employment Strategy since the launch of the Luxembourg process. They are represented in other fora, such as the different Social Dialogue committees, and since the Cologne Summit, the new structures created for the macro-economic dialogue.

This institutional framework at the European level provides ample opportunities for the Commission to inform the Social Partners and involve them in the discussion of the Employment Strategy. The present Report will certainly provide important inputs to such discussions.

At national level

The social partners have been better consulted and implicated in the process of establishing the NAPs than last year. The 1999 NAPs show that social partner action within a supportive framework is increasing and is proving to be an effective way forward both on life-long learning and on the modernisation of work organisation. This is the case when Member States take on commitments within their sphere of competence in order to support the process, leaving room and/or giving incentives for social partner action, e.g. in Netherlands and Luxembourg. This is also true to varying extent for Ireland, Finland, France and Belgium. Isolated calls on the social partners to take action are rarely effective.

In general, the social partners have participated in the preparation of the NAPs and implementation reports. In some Member States, specific bodies have been established for that purpose, e.g. in Denmark, France and Sweden. Furthermore, in Austria and Denmark the social partners have made their own joint contributions to the 1999 NAPs indicating clear commitments. In Belgium, the interprofessional agreement 1999-2000 tackles wages, employment and training in the perspective of the 1998 NAP. However, in most cases, the social partners' participation remains rather procedural and there is much room for improvement in establishing effective partnerships in support of national strategies.

The most comprehensive partnerships in the NAP process take the form of tripartite agreements between the social partners and governments or of bipartite social partner agreements covering a wide range of issues, such as wage moderation, the improvement of mechanisms for lifelong learning and work organisation. Most of these agreements were made during 1998 or before and are currently being consolidated and developed via concrete actions within the established framework.

Regarding the tripartite approach, in Luxembourg the 1998 NAP was the result of an employment pact between government and social partners. This pact included obligations for the social partners to address employment in all agreements and each of the employment guidelines in their collective bargaining. In Finland, the latest employment and income pact has been the result of a tripartite co-operation, where central components are moderate pay rises and a government promise to cut income tax for employees and payroll taxes for employers. In Italy, a comprehensive social pact between the social partners and the government was signed in December 1998 following similar agreements in 1993 and 1996, reinforcing social concertation structures. In Ireland, the Partnership 2000 agreement between the social partners constitutes a framework for consideration of a wide range of issues. In Germany, the new government has set up, together with the social partners, the Alliance for Jobs, Training and Competitiveness with the aim to reduce unemployment and increase the competitiveness of the economy.

Specific Contributions under the Guidelines

In some Member States, social partners have found common ground on issues under the employability pillar. The common positions by the Austrian social partners reflect their tradition of co-operation. The major part of it deals with improvement in education, vocational training and further training. The pact for older workers should also be mentioned. In the Netherlands, the social partners and the government have concluded an agreement in order to reinforce the apprentice system and in Germany the discussions in the context of the tripartite Job Alliance (Bündnis für Arbeit) have inter alia also been focused on the creation of more apprenticeship places. In Sweden, the social partners and the government concluded a tripartite agreement on upgrading of skills for employees.

In most Member States the social partners are increasingly involved in the administration of employment offices and the operational bodies of various programmes under the NAP, mostly within education and training. This is most evident in Denmark. In some Member States this co-operation has been widened to other fields, e.g. an entrepreneurship assessment agency in Sweden and the new employment centres in Finland.

On adaptability, a more significant contribution would be expected. In several Member States, the social partners have been closely involved in, or linked to, specific policies, either through consultation or through collective agreements. This has been the case for example in Belgium, Germany and France. Such policies however, almost exclusively concern working time issues.

Part-time work is another important issue addressed by the social partners. In Spain, the government and the trade unions concluded an agreement in 1998 with the view to strengthening the position of part-time workers. This issue has been discussed by the social partners in many Member States, including Netherlands and Germany.

 

5. Involvement of Actors at Local and Regional Levels

Overall, all NAPs stressed the need to develop the territorial dimension of employment policies. The involvement of local and regional actors concern all four pillars of the guidelines with, however and unsurprisingly, a stronger emphasis on guideline 12.

Generally speaking, almost all the Member States are in the process of decentralising, through local PES, the delivery of policies mainly decided and financed at national level. However, there is a strong tendency to build working partnership with different types of local actors.

As for federal Member States - Belgium, Germany, Austria - or Member States with strong regional institutional competencies - Italy, Spain - there is a sharing of competence under almost every guideline, and therefore, the regional authorities are involved in the preparatory phase of the NAPs as well as in their implementation.

In the Scandinavian countries, there are consolidated mechanisms such as the regional labour market council which promote a better taking into account of the regional and local specificities. In other Member States, such as UK, France and Portugal, the emphasis is on the development of partnerships with regional and local authorities, the voluntary sector and bodies representing small firms as well as on the building of new decentralisation tools, such as the Regional Development Agencies in England, the strategic local planning in Wales, or the social inclusion partnerships in Scotland. In this context Portugal also promotes the development of Regional Employment in Alentejo, Madeira, Azores, and Oporto Metropolitan area.

The role of the municipalities is also enhanced by several NAPs (Netherlands, Sweden, Denmark, Finland, Belgium and Portugal for the metropolitan area of Oporto). In the Netherlands, where the municipalities are responsible for the reintegration for people who only receive social security benefit, the Municipalities receive funds for the development of comprehensive inclusion approaches which can be freely allocated. In Belgium, regional and federal Authorities co-operate with the local authorities for the development of Local Employment Agencies and "Maisons de l'Emploi".

Finally several Member States report on the importance of local partnership approaches, such as the ADM in Ireland, or the Agences Locales pour l'Emploi and Maisons de l'Emploi in Belgium. There are also some insights on the development of new type of partnership based on the EU experience of Territorial Employment Pacts. TEPs are designed in Austria to better pool the forces of active labour market policy in a designated area. Others – Italy, Greece, Spain, Portugal - promote a more global territorial dimension involving the participation of a whole range of local actors.

 

6. Equal opportunities bodies

Although specifically mentioned in the agreed format for the implementation reports, only three countries (Germany, France and Portugal) mention the involvement of equality bodies in the preparation of the NAP. Finland refers to "interested groups", and the UK to "wide consultation, including bodies representing disadvantaged groups". In Luxembourg, the "Comité de travail féminin" (in the form of consultation) will be involved in the follow-up of the implementation of the NAP as will the "Instituto de la Mujer" in Spain and the Equal Opportunities Department of the Italian government.

 

7. Budgetary commitments

Information on financial resources allocated to support the implementation of the 1998 NAPs varies greatly between Member States. In some cases, budgetary data are comprehensive but the information is not presented in a way that allows for any in-depth analysis. The request to present the data in a common systematic way has not been followed. In the absence of such data, a cross-country analysis is not possible and a comparable assessment is therefore restricted to whatever data is available for the individual country. The information and data supplied by the Member States is reviewed in Part II of the present Report.

8. Implications of the new Treaty

The Treaty of Amsterdam entered into force on 1 May 1999 and this means that the Title on employment is fully applicable this year for the first time. Its entry into force has implications at various levels:

• Firstly, the Treaty provides for a wide consultation of European institutions and bodies. The Employment Guidelines, drawn up every year on a proposal by the Commission, are subject to consultation of the European Parliament, the Economic and Social Committee, the Committee of the Regions and the Employment Committee, prior to their adoption by the Council.
• Secondly, Article 128 of the Treaty provides for the possibility that the Council, acting on a recommendation by the Commission, makes recommendations to Member States on the basis of the examination of the National Action Plans.
• Thirdly, Article 130 of the Treaty foresees the establishment of an Employment Committee with advisory status to promote co-ordination between Member States on employment and labour market policies. It will take over the work largely carried out so far by the Employment and Labour Market Committee and the latter Committee will be dissolved.

Taken as a whole, 1998 confirmed the continuing recovery in the EU economy, the rate of GDP growth going up from 2.7% in 1997 to 2.9% in 1998. However, from mid-year onwards, the recovery lost some momentum. This essentially reflects the direct and indirect impact of the sharp deterioration in the world economic situation on exports and investment in the Union. Given the underlying strength of the EU economy, some improvement of the external economic environment and confidence-building economic policies, economic activity is expected to improve again. GDP growth is now forecast to reach 2.1% in 1999 and to accelerate further to 2.7% in 2000.

Current economic conditions are favourable to growth and they provide the basis for higher growth and employment. It is essential that the currently favourable investment conditions, in terms of comparatively high profitability and low interest rates, are fully exploited. Investment in infrastructure, knowledge and skills should be enhanced to accelerate the transition to a high-technology, high-skilled and service-based economy. In particular, it is necessary to move quickly into new promising sectors, so that growth in the EU is accompanied by a satisfactory level of job creation.

As recommended in the Broad Economic Policy Guidelines, creating the conditions for high and sustainable growth and employment, which is primarily a matter for Member States, will require a comprehensive and coherent strategy that consists of three mutually-reinforcing key components:

• sound macroeconomic policies that are conducive to growth, employment and price stability, involving full respect of the Stability and Growth Pact and appropriate wage developments;
• policies to improve the overall functioning of labour markets and in particular to promote employability, entrepreneurship, adaptability and equal opportunities by means of a steadfast, prompt and transparent implementation of the Employment Guidelines, and
• economic reforms that enhance the efficiency and flexibility of goods, services and capital markets, reinforce private sector confidence, benefit consumers and favour an environmentally-sustainable growth path, involving a close monitoring of the Single Market, a vigorous competition policy, regulatory reforms and more efficient taxation and benefit systems. Given that economic reforms can imply adjustment costs, the reform agenda should attempt to reconcile efficiency and equity considerations.

The number employed in the Union increased by 1.8 million in 1998, or by 1.2%, twice the rise in 1997 and the highest rate of growth since 1990. Moreover, also for the first time since 1990, employment went up in all Member States without exception, although in Germany the rise was marginal.

Despite the growth in employment, the number in work in 1998 was still over 600,000 below the peak reached in 1991. Four years of economic recovery and continuous expansion in employment, therefore, have not yet offset the three years of decline between 1991 and 1994.

As a result, the employment rate (the number employed relative to the population aged 15 to 64) in the EU in 1998 was 61%, a rise of ½ percentage point on the 1997 level, but still 1½ percentage points below the level at the onset of the recession in 1991. In terms of full-time equivalents, the employment rate rose by less than ½ percentage point to 55.7% in 1998.

The four years of net job creation since 1994 have, therefore, done little to raise the low rate of participation in the Union, which is a particular problem for inactive prime-age women, and older people. In 1998, the employment rate of women was only around 51% of women of working age, and still 20 percentage points below that for men. However, there is a rising trend for the Union as a whole (the female employment rate was only 49.5 % in 1994). For older people, the levels of participation in employment clearly decrease after 50 years of age (the employment rate for the age bracket 50-64 is now 47.6%, one percentage point higher than in 1995) and particularly after 55 years (36.5%).

In the EU in 1998, 17 % of those in employment worked part-time, 58 % of them voluntarily. In relation to 1994, both percentages increased, respectively by 1.4 and 2 percentage points. However, in 1998, for the first time during the present recovery, the number of full-time jobs in the Union increased by more than the number of part-time ones. In the Union as a whole, 54% of the net additional jobs were full-time. Most of these were taken by men. For women, almost 75% of the increased number of jobs in 1998 were part-time, leading to a further rise in the proportion of women working in such jobs, to 33% of the total employed, or 2.2 percentage points higher than in 1994.

The number of people working in jobs with fixed-term contracts increased significantly in 1998, continuing the trend towards temporary employment which has been evident since the onset of recession in the early 1990s. Over a third of the increase in employment in the Union was accounted for by temporary jobs – 36% in the case of men, 35% for women - which now account for almost 13% of all employment, up from less than 11% in 1991.

The growth of employment in the EU was accompanied by a continuing fall in unemployment, from just over 10½% in 1997, and a peak of just over 11% in 1994, to an average of 9.9% of the workforce in 1998. Unemployment has continued to decline during the first six months of 1999, to reach 9.4% of the work force in June 1999 (equivalent to 16 million people).

The fall in unemployment in the EU in 1998 amounted to a reduction of some 1 million over the year. Given the increase in the number in work, this implies that around 40% (some 700 000) of the net addition to jobs was taken by new entrants to the labour force, or by those who previously were not actively looking for work and who had, therefore, not been recorded as being unemployed. This proportion is slightly lower than for the recovery period as a whole, largely reflecting an increase in rate of net job creation relative to the growth of population of working age. Of the 4.2 million net additional jobs created between 1994 and 1998, 60% (almost 2.6 million) went to those who had not been in the labour force before.

The fall in unemployment in the EU during 1998 and the first few months of 1999 has been much the same for women as for men. Since the peak rates reached during 1994, unemployment of men has fallen by some 2% of the work force, whereas for women, it has declined by 1½% and the gap between the two rates at the EU level, is now just over 3 percentage points (11½% for women, just under 8½% for men).

Unemployment of young people under 25 has continued to fall in 1998, although the relative level of youth unemployment still varies markedly across the Member States. The gap between youth and adult unemployment, however, remains wide and in relative terms has narrowed only slightly over the present recovery. At the last count, the average share of youth unemployment in total population in the age bracket 15-24 was 9.3% in the EU, down from 9.9 % in 1997. More than 4.3 million people young people were unemployed in 1998, of which 2.5 million (almost 60%) had been without a job for at least 6 months.

The fall in the overall rate of unemployment in the EU in recent years has been accompanied by a slow decline in the number of long-term unemployed. The rate of long-term unemployment in 1998, at 4.9% of the labour force, was not much lower than in 1994 (5.2%) and the number affected, almost 8.4 million, was only 4% less than four years earlier when unemployment was at its peak. The share of the unemployed who have been out of work for a year or more, at 49½%, was higher than in 1994 (47%) and slightly above the level in 1997, indicating that the long-term unemployed have the greatest difficulty in finding a job even in a situation of falling unemployment.

The number of very long-term unemployed in the EU, those who had been looking for a job for two years or more, was actually higher in 1998 than in 1994 (5.2 million as against 4.8 million, an increase of over 7%) and, in relation to the total unemployed, significantly higher (31½% as opposed to 26½%).

In 1998, the European Union generated 1.8 million net jobs. Just three Member States (Spain, France and the UK) together created approximately 1 million of them (Chart 1). By adding three other Member States (Netherlands, Portugal and Italy), more than 75% of the total net job creation in the EU in 1998 is accounted for.

Relative to 1997, all Member States increased the numbers in employment in 1998, Particularly strong employment growth (above 2% ) could be observed in Ireland, Greece, Luxembourg, Spain, Netherlands, Portugal, Finland and Denmark. By contrast, just a very slight increase was registered in Germany, and Italy.

Since the onset of the present economic recovery in 1994, all Member States with the exception of Germany have been able to take advantage of the overall improved economic conditions, and increase their employment levels (Chart 2). Six of them, however, have achieved particularly robust average growth of 2% or more, comparable to that of the US: Ireland, Luxembourg, Netherlands, Spain, Denmark and Finland. Ireland in particular was able to reach an average employment growth rate of 5%, thanks to average GDP growth exceeding 10%.

It is quite significant that none of the four major economies in the EU – France, Germany, Italy and the UK - can be counted among the Member States with more dynamic employment performance over the 1990s. The low or negative rate of net job creation in these economies, which together account for 70% of employment in the Union, is the major reason why employment in the EU as a whole has been so modest. In two – Italy and Germany - the number in work in 1998 has not yet recovered to the level reached in 1991. In the case of Germany, this evolution reflects to some degree the consequences of the reunification process.

There are, however, signs of improvement in the four major economies. This is particularly the case in France, where the number employed increased by just under 1½% in 1998, the highest growth rate since 1989. In Italy, the number rose by ½%, having not increased at all in 1997, while in Germany, it went up, even if marginally, for the first time since unification. As to the UK, the improvement started much earlier, and an average employment growth of 1.2% has been achieved since 1994.

Given the overall sluggish employment performance and the continuing growth of working-age population, the employment rate in 1998, at 61%, was 1½ percentage points below the level before the onset of the recession in 1991, and just 1% above the level at the end of the recession in 1994.

Across the Union, the employment rate was highest in Denmark (79%), with those in the UK, Austria and Sweden also being over 70% (Chart 3). The growth in employment rates was highest in economies which had a lower starting point in 1994: Ireland, Finland, Spain, Portugal and Netherlands, in all of which the overall employment rate increased by 3 percentage points or more. Conversely, in Germany, Italy, Luxembourg, Austria and Sweden the employment rate did not improve, and it improved only marginally in France, Greece and Belgium.

In terms of full-time equivalent employment, the highest rates in Europe are to be found in Denmark, Austria and Portugal, all of which have rates at or above 65%. France, Ireland, Greece and Germany have rates close to the EU average of 55.7%, whereas Italy and Spain (47.9%) have the lowest rates. Since 1994, the average FTE employment rate in Europe has remained practically the same, suggesting that the average time worked has decreased proportionally to the increase in the total number of jobs.

1.2.2. Unemployment

Between 1997 and 1998, unemployment fell in the EU as a whole and also in the majority of Member States (Chart 4). Improvements were especially significant in the two countries with highest unemployment in 1997 – Spain (from 20.8% to 18.8%) and Finland (from 13.1% to 11.4%) – but also in a few countries with low or average unemployment, like Ireland, Netherlands, Portugal and Sweden. In all these countries the unemployment rate (ILO definition) declined by more than one percentage point.

Exceptions to this overall positive trend are to be found in Greece, Italy, Belgium, Luxembourg and Austria. In Greece, where the increase in 1998 was of nearly 1 percentage point, the unemployment rate was brought above the EU average, while Italy has now the second highest unemployment rate in the EU. Part of the rising unemployment rates in these countries can be explained by the higher activity rates in 1998 compared with 1997.

While for the Union as a whole the improvement in 1998 appears as a continuation of a trend dating back to the onset of the economic recovery in 1994-95, this is by no means the case with all Member States. Six Member States - Ireland, Netherlands, UK, Denmark, Portugal and Finland - have succeeded in bringing their unemployment rate down from the level reached in the mid nineties. In these countries improvements in the labour markets are of a long-standing nature which suggests the effects of structural reforms, in addition to the positive impact of economic recovery.

As measured by the ratio of youth unemployment to youth population the improvement in 1998 was widely spread, with an average fall from 9.9% to 9.3% in the EU as a whole, and moderate to strong declines in the majority of Member States (Chart 5). Reductions of one percentage point or more were witnessed in France, Netherlands, Ireland, Portugal, Spain and Sweden, whereas in Austria, youth unemployment stabilised at the 1997 level and Greece was again the exception with a sharp increase similar to the rise in overall unemployment.

The reduction of youth unemployment in 1998 continues the declining trend that has been observed since 1994 for the large majority of Member States. The exceptions are Austria and Germany, where relatively low levels of youth unemployment have been maintained throughout the period, and Italy and Greece, where no improvement has been registered in their already high initial levels of youth unemployment.

In 1998, only a few Member States managed to reduce significantly long-term unemployment, as measured by the long-term unemployment rate. In Portugal, Ireland and Spain the LTU rate declined by more than one percentage point, and in Finland, the UK and Netherlands the reduction was still above half percentage point. Spain however still presents the highest level of long-term unemployment in the EU (Chart 6).

Worrying signs are shown by Greece but also by Belgium where the LTU rate increased in 1998, whilst in several Member States having high to average levels of long-term unemployment, like Italy, France, and Germany, no improvement could be observed in 1998.

When appraised over a longer period, long-term unemployment appears as a persistent problem. In six Member States, long-term unemployment is now even at higher levels than in 1994. In contrast, the UK, Denmark, Netherlands, Portugal, Ireland Finland and Spain have managed to decrease long-term unemployment steadily, and bring it below its 1994 level.

Member States are called on to undertake concrete action to attain the following objectives:

• Implementing a preventive approach so as to reduce significantly the inflow of young and adult unemployed persons into long-term unemployment (guidelines 1 and 2);
• Strengthening active labour market policies and reviewing tax and benefit systems so as to reduce the number of people dependent on benefits (guidelines 3 and 4);
• Developing partnership as a framework for the provision of training and the expansion of possibilities for lifelong learning (guidelines 5 and 6);
• Facilitating the transition from school to work, by reducing early school leaving and equipping young people with marketable skills (guidelines 7 and 8);
• Promoting a labour market open to all, by giving special attention to the needs of the disabled, ethnic minorities and other disadvantaged groups (guideline 9).

For the EU as a whole, 3% of GDP was spent in 1998 on labour market policies, of which 38% on active policies (mainly training, youth programmes, rehabilitation programmes, subsidised employment schemes addressed to the unemployed and the administration of public employment services). The remainder was spent on income support benefits for the unemployed and early retired workers.

As shown in Chart 7 this pattern has been remarkably stable over time. However, in recent years, and partly in response to widespread policy advice by the European Commission and international organisations like the OECD, EU governments have tended gradually to put proportionally more resources in the financing of active policies. Since 1992, when labour market policy spending per unemployed person reached its peak, the Union as a whole has spent less on income support policies, while maintaining average spending with active policies broadly constant.

Across Member States the situation is quite mixed, both in terms of the financial importance of labour market policy and in terms of tendency.

Six Member States spend 4% of GDP or over on the labour market - Denmark (5.6%), Netherlands, Ireland, Finland, Belgium and Sweden - of which only the last achieves a balanced distribution between active and passive policies. All the other five countries spend more than 2/3 in passive income support (see chart 8).

Six other Member States spend less than 2% of GDP on labour market policies - Italy, Portugal, Austria, UK, Luxembourg and Greece - of which only the first two spend more or less the same on active and passive policies. Germany, France and Spain are close to the EU average.

However, the share of expenditure in GDP gives a distorted view of the real importance of active policies in the different Member States, since the number of unemployed people to which such policies are addressed varies substantially .

One way of standardising active spending is to express it as a ratio to the unemployment rate (see chart 9). The Member States that spend proportionally more with active policies in favour of the unemployed are Netherlands, Denmark, Sweden, Ireland and Portugal (all above or close to 0.2% of GDP per percentage point of unemployment). The Member States who spend less are Spain, Greece and the UK (all below or close to 0.05%).

While (standardised) expenditure on active policies in the EU as a whole has remained relatively stable since 1992/93, the evolution by Member States has been quite diverse. Sweden and Germany have reduced markedly their average expenditure on active policies, whereas Netherlands, Denmark and Ireland have increased theirs. The other Member States have shown smaller variations, with France, Austria and Spain showing an increasing trend, and Portugal, Belgium, Finland, Italy and Greece a decreasing one.

Expenditure on active policies in relation to unemployment may be seen as an indicator of the policy effort undertaken by national authorities in upgrading the skills of the unemployed and providing them with job opportunities. However, other factors, e.g., the quality of training, the relevance of training to labour market needs and the motivation of participants in training may all also have a strong impact on people's employability.

More broadly, active policies are not alone in bringing about low unemployment. This is also the outcome of other important institutional and economic factors, such as the tax-benefit system, and the way it is articulated with the provision of active policies, the strength of labour demand or the flexibility of the labour market.

Chart 10 presents standardised active policy expenditure and the unemployment rate plotted together. For the majority of Member States, spending in active policies is negatively correlated with unemployment. However, the same chart also suggests that the US and Japan and, in the EU, Austria, Luxembourg, UK, and to a lesser extent Portugal, have managed to reach low unemployment rates, with relatively low average spending in active policies per unemployed person.

While confirming the overall positive influence of active policies promoting employability in bringing down unemployment levels, these results also draw attention to the decisive role played by other policies, in support of the integrated approach contained in the Employment Guidelines.

High levels of educational attainment are a key enabling factor for achieving performing and adaptable labour markets. They are also a facilitating factor for further learning in adulthood and an advantage, when it comes to upgrading skills and knowledge. Overall, EU Member States have invested heavily in initial education and as a result have a comparatively highly educated and productive workforce. Over several decades, a lengthening of school education has been observed, and on average, the time length of formal schooling varies between 14 and 16 years, whereas full-time compulsory education varies between 8 and 11 years.

Young people in all Member States reach today higher levels of education than did previous generations, as shown by the widening gap between levels of education among generations (see chart 11). In 1997, according to the Labour Force Survey, 46% of people aged 24-34 had completed upper secondary education compared with 32% in the 45-64 age group.

Although a catching-up effect has been observed in southern Member States, where growth rates in educational attainment have been higher than in northern ones, significant disparities remain. Four countries (Spain, Greece, Italy and Portugal) still have 60% or more of their population at a low level of educational attainment , whereas in Austria, Denmark, Germany and Sweden only 25% of the population or less are at that level. By contrast, a comparison across the European Union between male and female rates of educational attainment shows that in almost all countries young women are now coming close to, or even exceed, the educational levels attained by men.

Lifelong learning after initial formal education and training is crucial for maintaining a highly skilled and adaptable workforce in the EU. However, participation rates in further training and education are generally low and do not provide a uniform pattern. In 1997, only 7.5% of the employees in the EU received training during the previous four weeks. Participation rates vary from country to country from a few percentage points in roughly half the Member States to over 15 % in Denmark, Finland and Sweden. Countries which have well-developed systems of initial education and training, like Germany, Ireland, Italy and Austria, have participation rates below 10%.

Participation rates of different age groups in the labour force are also very divergent. Older workers appear to participate less in training activities, with most training going to younger age groups, especially those around the early thirties. Whereas only 2.5% of workers between 55-59 participate in training or education, for those aged between 25-29 and 30-34 the rates are 10% and 8% respectively.

Participation in lifelong learning activities also reflects strongly the initial levels of educational attainment. Those with higher qualification are four times more likely to participate in training than those with a low level of qualification. Overall, the above data point to the possibility of rising skill gaps, in the form of increasing demand arising from a rapidly developing information society for a better skilled and trained workforce.

With an ageing population, the need to retrain and upskill to improve employability becomes crucial if the EU is to avoid skill shortages. According to the Commission report on job opportunities in the Information Society, skill shortages are already emerging and up to 500,000 jobs are currently vacant for lack of an appropriate supply of skilled labour.

Despite the steady improvement of education systems, which has been responsible for the extension of initial education, a number of young people leave the education system too early, either on the completion of basic education or by dropping prematurely out of their studies. In either case, these young people enter active life with very inadequate skills and will remain throughout their entire working lives particularly vulnerable to unemployment or social exclusion. By adopting as a proxy for school drop-outs the number of young people having left education with a low level of attainment, the average drop-out rate in the EU is 18% in 1997 (see chart 13). The problem of dropping out of school early is more serious in Italy, Luxembourg, Spain and Portugal, where 30% or more of the young cohorts leave school with only the most basic skills. Early school leaving among males tends to be more frequent with young men, except in Austria and Germany.

2.2. Assessment of National Action Plans

Progress in implementation is evident in respect of guidelines 1 to 3, where the establishment of clear targets and deadlines has helped to focus policy and to mobilise efforts. In several Member States, there is evidence that preventive policies have been put in place systematically or expanded since the beginning of 1998 in response to the commitments made at the Luxembourg Summit. Such is the case of Denmark, Ireland, Austria, France, Spain, Portugal, Finland, Netherlands and Luxembourg. Other Member States such as the UK and Sweden , had already policies in place complying broadly with the new requirements. Despite different points of departure, and a few cases of delayed or questionable implementation, there is now a clear move towards a more preventive approach in order to combat youth and long-term unemployment more effectively.

In a few cases, the implementation of new measures can be associated with positive outcomes in terms of lower inflows into long-term unemployment. However, a longer time span is necessary to assess the impact on the employment situation.

In contrast with this encouraging outcome, the implementation of policies in response to the guidelines where no quantified target has been set continues to offer reasons for disappointment. Most NAPs lack well defined objectives and time schedules, and innovative policies and initiatives are the exception rather than the rule. The positive examples to be highlighted are :

• the UK, Ireland, Netherlands, Austria and Finland for the reforms of tax-benefit systems,
• Belgium, Finland, Spain, Austria and Netherlands for partnership agreements on training;
• Ireland, UK and Portugal for policies to combat early-school leaving;
• Germany, Austria, Portugal for their efforts on apprenticeship.
• Under the employability pillar, new or enhanced guidelines were introduced in 1999 with respect to lifelong learning and policies addressed to disadvantaged groups and individuals such as disabled persons and ethnic minorities. While the assessment has to concentrate on the measures announced rather than on achievement, the results are not particularly encouraging. On lifelong learning, most Member States did not present a comprehensive strategy or set a target in accordance with the definition agreed in 1999, as requested by the guideline. Particularly worrying is the fact that those Member States with less deficiencies in terms of participation of workers in education and training tended to be among the first in suggesting an articulate policy. Therefore, the guideline is not promoting major policy change, as expected. The only Member State which has fully complied with the guideline is the UK.

The lack of comparable data describing the scale or nature of the needs of disabled people and ethnic minorities is a serious handicap for assessing policies addressed to these groups. The most articulate policy responses in the NAPs to the new guideline 9 are to be found in Sweden, UK, Denmark, Netherlands and Germany.

The assessment of implementation of guidelines 1 and 2 has been undertaken with the help of qualitative information and policy descriptions, as well as quantitative indicators wherever these are available, on the basis of the two following criteria:

• Implementation - Have new policies and programmes incorporating the preventive approach been fully or partially implemented (i.e. made operational, in terms of concrete provision of individual offers)?
• Compliance - Can the common targets be realistically achieved in the given deadline so as to fulfil the objective of reducing significantly the inflow into long-term unemployment?

In addition, the information provided by Member States on the rate of inflow into long-term unemployment (as presented in Table 1) has been used in order to establish a relationship with the outcome. This aspect is further explored in Part II of the Report.

Not all Member States are at the same stage of implementation. For most, 1999 is the year of take-off or of implementation of the new programmes initiated last year. Some Member States however seem to have taken a more gradual approach. Due to the specific institutional arrangements adopted for the whole process of implementation in Belgium and Luxembourg, despite some first steps already taken in 1998, the new preventive approach is just being launched. In Greece and Italy, the effective implementation of the preventive approach necessitates the reform of their respective employment services. Other Member States are now in the process of extending the coverage of the new preventive policies in accordance with pre-defined plans: Spain, Finland, Austria, France and Portugal.

All these Member States have launched the preventive approach simultaneously for the young and the adult unemployed. Others have opted for a two-stage process, where priority was given to the programmes addressed to the young unemployed. That is the case of the UK, Ireland, - Netherlands Germany –and Denmark, which find themselves in different stages of implementation.

There is now a clear move towards a more preventive approach in combating youth and adult long-term unemployment, but some Member States are more advanced than others in setting up the necessary framework for complying with the common targets: to offer to all young and adult unemployed a new start before 6 or 12 months of unemployment, respectively. Four situations can be distinguished in this regard. Sweden, Austria, the UK, Denmark, Ireland and Netherlands have complied or are about to comply with at least one of the targets. Other Member States - France, Spain, Portugal, Finland and Luxembourg - have set in motion a reform process which is expected to bring about results in line with the guidelines before or by the agreed deadline of 2002. More concrete progress is expected from Germany regarding the prevention of adult long-term unemployment. Finally, concerns can be raised in respect of the delays in implementation in the cases of Belgium, Greece and Italy.

On the basis of the information provided in the National Action Plan reports, Sweden, Austria and the UK seem to fulfil the EU-wide targets, despite very different policy mixes:

• Sweden makes intensive use of education and training, in addition to job search assistance, from the early stages of unemployment. Only 3.9% of the young unemployed and 5.3% of adults are not offered jobs or employability measures of some kind before 6 or 12 months(non-compliance rate). Sweden scores well in terms of output with rates of inflow into long-term unemployment of 3.5% and 5.4% respectively for young unemployed and adults, among the lowest in the Union.
• In Austria, implementation of new preventive measures has been undertaken in a satisfactory way. Very few unemployed cross the 6 or 12 month threshold without being offered a new start. Measurable efforts have also been undertaken to increase attendance of apprenticeship, support training and other programmes of vocational training for the young unemployed. Austria displays one of the best performances in the EU regarding the inflow into long-term unemployment and is on good track to achieve its national target of halving this rate.
• The UK concentrates on job search assistance to help the unemployed back to the labour market before they cross the 6/12 month threshold through the JSA scheme. The New Deal programmes for young and adult unemployed persons intervene respectively at 6 and 24 months, consisting of a range of measures including intensive counselling, training and subsidised jobs. Earlier access to such programmes is provided to a small share of adult unemployed, either because they are at higher risk or in the context of new pilot schemes. The UK claims a non compliance rate of zero both for young and adult unemployed, which is linked to strict benefit sanctions. In the UK, 18% of the young unemployed and 12% of the adult unemployed crossed the 6/12 months threshold.

In all other Member States, progress is being made at different rates, but given the scarce information provided on policy input indicators, assessment in terms of whether it is sufficient to address the problem and meet the common targets, has to be done mainly on the basis of interpretation of the qualitative information supplied.

Denmark, Ireland and Netherlands have operationalised the delivery of active programmes for all young unemployed before the 6 month threshold, but are still short of the common targets in respect of adult long-term unemployed:

• Denmark can be considered as fulfilling the target of the guidelines on the basis of the description of the existing preventive policies addressed to the young unemployed. However, no data are supplied to confirm compliance. As to the adult unemployed, the anticipation of activation from 24 to 12 months will be implemented in full in 2000.
• Ireland is implementing the preventive strategy in a phased approach, with the initial focus being given to the young unemployed. The individual process starts with a vocational guidance interview carried out just before the end of the 6 month unemployment period, and is followed by referral to training, job or personalised job search assistance. Therefore, the majority of intensive employability measures take place only after the 6 or 12 month periods. From the recorded data for the first 4 months of implementation, it is possible to infer an average non-compliance rate of 7.5% that is the share of the cohort of young unemployed which crosses the 6/7 months threshold without having been offered any action.
• Netherlands has implemented a preventive policy in regard of young people, that builds on earlier experience with the WIW scheme. However, no data are supplied to confirm compliance. A supplementary effort is presently being made to individually address jobless young people presenting specific difficulties. The implementation of the approach intended for the prevention of adult unemployment has started in several areas and is gradually extended to be fully in place by 2002.

Five Member States have started the operational delivery of preventive policies for young and adult unemployed persons based on individual job action plans, in accordance with the principles laid down in the guidelines:

• Last year Portugal implemented a thorough reform of the labour market policy on the basis of the preventive approach, which has yielded promising results as only 5.8% of young people and 1.8% of adults becoming unemployed were not offered actions before reaching 6 or 12 months unemployment (non-compliance rate) in the regions covered by the new policies (representing about one third of all unemployed). However, the number of those who did not come to the interview triggering individualised prevention remains quite high and more substantial progress is still required to achieve lower inflows into long-term unemployment (17.3% and 15.9% for young and adult unemployed respectively).. The National Action Plan 1999 foresees the extension of the new policies to 75% of the total population in 1999, and 100% in 2000.
• In 1998, Spain achieved and even exceeded by 7 to 10% its target defined in terms of offers of "actions" but no sound relation can be established with the number of unemployed to address in each of the target groups. The objective for 1999 will demand a stronger progression (by 15 to 17% depending on the type of action) but considering the increase in the budget allocated to the whole first pillar for 1999, sufficient means should be available to back this progression. In 1998, 25% of the actions were offered to young unemployed before they reached the 6 months threshold, 42% to adults before the 12 months threshold and 30% to long-term unemployed, a distribution which is expected to remain the same in 1999.
• On the basis of the progression observed since the launching of the preventive approach in October 1998 (increase of 68% between the last quarter 1998 and the first quarter 1999) France seems set to meet its objectives in terms of number of beneficiaries of offers of a new start (850000 for the whole year 1999). In accordance with its policy orientations, France, like Spain, includes the long-term unemployed (and people at risk of exclusion) in its target group for the "new start". However, in contrast to Spain, these represented the bulk of the beneficiaries during the 6 first months of implementation (75%). A much better balance between preventive and active measures is necessary in order to block inflows into long-term unemployment. The share of beneficiaries of preventive measures is expected at least to increase gradually to 60% in 1999. In 1999, the new start should cover half of the young target group, and a third of the adult target group.
• In January 1998, Finland launched an activation policy centred around the offer of a job seeking plan to all unemployed before the 6 or 12 months threshold, which is planned to be fully implemented by the end of 1999.Based on interviews with the unemployed job-seeker, an individual job-seeking plan is worked out jointly. This plan offers various active programmes and progress is to be assessed at regular fixed-term interviews.
• In Luxembourg, where unemployment levels are low, new initiatives resulting from the adoption of the law on implementation of the NAP are being launched. These initiatives strengthen the preventive approach embedded in current measures. Presently only 6.4% of the young unemployed and 11.2% of adults reach the six and twelve months threshold respectively without being offered a job or unemployability measure. However, the current level of inflow into long-term unemployment still offers scope for improvement.
•  

Notes:

* No policy input indicators have been supplied to confirm implementation

Germany is expected to carry out in 1999 and 2000 significant progress so as to comply with the two common targets. Priority has been given to the prevention of youth unemployment in its wider sense, mainly through the extension of apprenticeship. Progress has been registered with the creation of additional apprenticeship places. The new programme to fight youth unemployment reflects an additional step towards a preventive approach more in line with the first guideline and early results are encouraging. As regards the prevention of adult long-term unemployment, early activation is being implemented more forcefully. A national target has been set in terms of reducing the inflow rate into long-term unemployment by 10%, which looks relatively modest by comparison with the common target set in the guidelines.

Finally, three Member States present both delays in the implementation of the new preventive policies and policy specifications that fall short of the requirements.

• The target population chosen by Belgium for the preventive actions seems insufficiently large to meet the objectives of guidelines 1 and 2. Priority has been given to interventions towards the less qualified persons and, in some regions, adult unemployed persons aged 45 and more are excluded. Therefore, at this stage, not all young and adult unemployed are benefiting from preventive policies. The moment of intervention for adult unemployed is set at 12 months, which may be insufficient given the high initial rate of inflow into long-term unemployment. Also, a date for the launching of the new policies addressing guideline 2 has not yet been set.
• Italy has started implementing its new preventive policy. However, in terms of both individual guidance interviews and beneficiaries of employability measures, the annual targets have only been partially met (40% to 55%). This seems mainly accountable for difficulties encountered in the decentralisation of the public employment services. Already half of the new regional agencies are operational for the implementation of the preventive approach and the effective completion of the reform of the employment services was scheduled for July 1999. However, Italy must also cope with the inefficiency of some of the measures offered to adult unemployed and the overall reform of the benefit system envisaged to back the preventive approach.
• Greece is now starting to implement individual guidance interviews. The targets in terms of personalised interviews and beneficiaries of employability measures were only partially met (30% to 40% take-ups in one of the main measures offered in the preventive approach). Decisive progress can only be achieved with the effective reform of the employment services. This is ongoing but no precise deadline has been put forward. The challenge is therefore considerable, especially when account is taken of the intention to strengthen the activation of long-term unemployed.

A crucial factor for the assessment of progress is the provision of administrative data in accordance with the common policy indicators agreed between the Commission and the Member States. While many Member States have made a noticeable effort in improving their monitoring systems, so as to provide the data with the required level of detail, the situation is still far from satisfactory, as it does not allow for a thorough evaluation of compliance with the common targets. Table 3 summarises the situation.

In most cases, the absence of sufficient quantified data is due to the lack of an appropriate monitoring system. This seems to be especially the case with Italy, Greece, Netherlands and Germany. The challenge is all the greater as the present deficiencies of the monitoring systems reflect the late implementation of the preventive approach. In other cases, the time elapsed since the launch of the new programmes was considered insufficient (France), or simply no explanation was given for the absence of data (Denmark). In many cases also, the consistency of the data remains questionable.

There is clearly scope for improvement in this respect, particularly the provision of flow data for assessing compliance with the targets set in guidelines 1 and 2. Despite the clear improvement in quantified information on active measures for guideline 3, difficulties of interpretation still persist. Some Member States have not yet provided data in accordance with the agreed indicators, and others have interpreted these in a way that limits comparison with other Member States. It is expected that next year all Member States provide information on the basis of common definitions.

Guideline 3 establishes a benchmark for the use of training and other similar active measures in upgrading the skills of the unemployed. The benchmark has been defined as the average of the best performing Member States. On the basis of the statistical data available by the time the first guidelines were drafted the benchmark has been set at 20%.

The activation ratio has been agreed as input indicator for this guideline. It is defined as the annual average number of previously unemployed participants in active measures divided by the number of registered unemployed persons. Measures include training (including facilities to return to the regular education system or adult education), as well as "similar measures" defined so as to include subsidised work experience, job schemes as well as start-up incentives for unemployed. On the basis of the given data, three groups can be distinguished (Table 4):

• Eight Member States - Sweden, Belgium, Denmark, Germany, Ireland, Spain, Luxembourg, Finland, and Spain - indicate that the 20% goal has been exceeded. The data provided look plausible and broadly comparable in the light of the above described input indicator. The average for these Member States is about 45%.
• Italy, Netherlands and the UK likewise indicate that they have exceeded the 20% goal. However, these claims fail to be supported by convincing data, as Netherlands does not provide information on the input indicator while Italy and UK base their estimates mainly on sums of flow data instead of yearly averages of participants. In addition, for the calculation of the activation rate, the UK includes programmes with components of vocational counselling and job search assistance, which the Commission could not consider for the sake of comparison with other Member States.
• France, Austria, Greece and Portugal recognise that the 20% goal has not yet been reached. These Member States indicate how they want to reach this goal and which steps have been taken; Whilst Greece intends to use the whole range of activation measures to reach the target, Portugal focuses on training measures.
• These figures confirm that Member States have quite different points of departure as regards the level of participation in active measures. More interestingly, they show a huge discrepancy between participation in training and other types of activation, like subsidised employment and temporary work schemes for the unemployed. This discrepancy is especially huge in Belgium, and Ireland.

Although some temporary work schemes may contain some elements of in-the-job training and contribute therefore to raising skills, many can be considered as promoting employment in "secondary" or "intermediate" labour markets, often for beneficiaries of social protection previously out of the labour force, rather than seeking an effective re-insertion of the unemployed into the open labour market. It is therefore open to question whether such measures, however justified they may be to tackle high numbers of long-term unemployed or inactive people at national or regional problems, do effectively address the European guideline.

Public Employment Services play a key role in the implementation of the employability pillar of the Employment Guidelines. They act both as important service providers themselves and a focal point in a wider system of service providers combining services of different organisations into one package, tuned to the individual needs of unemployed job-seekers. The implementation reports clearly indicate that the European employment strategy is contributing positively to the ongoing modernisation of national delivery systems for employment services.

Whereas some Member States had already initiated reforms during the 1990s, in others, and especially in the Southern Member States this reform process has just recently taken off. Greece is establishing a nation-wide network of Employment Promotion Centres for providing active services to unemployed job-seekers. The regional devolution and de-monopolisation of the Italian Public Employment Service is now underway and seems to be approaching a decisive stage. For Spain a similar process has been reported.

In many Member States new employability policies oriented towards an individualised approach of unemployed job-seekers and prevention of long-term unemployment are triggering major changes in the service model operated by Public Employment Services. Several Member States describe how PES services become more explicitly articulated into successive stages, starting shortly after registration with an interview in order to diagnose needs and prospects and to formulate an individual action plan, subsequently providing more intensive assistance to those at risk of long-term unemployment, and thereafter monitoring continuously the progress made towards (re-)integration into employment.

In a large number of Member States additional resources have been made available for achieving the targets of the employability pillar. These give more opportunities to the PES to refer unemployed job-seekers to special employment measures. Often the PES themselves are also given additional staff for implementing the individualised service model ( as in France, Germany, Ireland, Luxembourg, Portugal and Finland). Also more elaborate use of modern information and communication technology has been mentioned as a key factor of modernisation by Germany, Greece and Italy.

The percentage share of training is an important aspect to consider in the assessment of the quality of activation efforts. In recognition of this aspect, some Member States have defined the national target in terms of the participation rate in training measures only.

The indications left by the analysis of expenditure in active labour market policy suggest that, at least for some Member States, more resources have been spent in active policies. This is the case in Denmark, Netherlands and Spain, and, to a lesser extent, Germany.

Improving the incentive structure of the tax and benefit system is a common concern among Member States. Several countries are in the process of reviewing and to some extent reforming their tax and benefit system based on medium-term strategies spanning several years. However, given the growing importance given to this issue in the Broad Economic Policy Guidelines and in the 1999 Employment Guidelines, the overall response has been weak. Policies in this field need to be strengthened and further efforts are warranted in order to improve the employability of the work force and encourage employers to recruit. A thorough evaluation of performance on the basis of actual implementation of policies adopted will be carried out in next year's report.

In general terms, the policy orientation is towards strengthening the economic incentives for work, bringing elements of activation into the tax and benefit systems, in combination with measures aiming to raise labour demand for marginalised groups of the labour market. While only a limited number of Member States have made modifications in the benefit system, affecting inter alia duration and eligibility rules, almost all have initiated reductions in income tax or employee's social contributions in order to make work pay for all segments of the labour market.

UK and Ireland have adopted a policy based on in-work benefits, and plan to strengthen this policy as one of the key instruments to provide incentives for unemployed or inactive people to seek and take up work. France, Austria, the Netherlands and Portugal have introduced or reinforced the possibility for all unemployed or specific target groups to receive in-work benefits.

Furthermore, work incentives may be increased by an extension of the work-related social protection system. Elements connected to work such as contributory (social insurance) benefits and income security may influence the decision to seek and take up a job. Several Member States have taken steps to build in work incentives within the social protection system. For example, the UK has extended certain rights to workers that were previously excluded, such as those on low paid or with short-term contracts, and a minimum income guarantee for lone parents who take up work. The Netherlands has improved the protection for workers taking up flexible contracts.

The importance of strengthening work incentives by reforming unemployment benefit systems has been highlighted by several Member States, which over recent years have been moving in the direction of reduced replacement rates, tightened eligibility rules and a strengthening of job availability requirements. However, major policy changes are scarce. Only the UK, Italy, Luxembourg, Belgium and Spain have announced changes, albeit in most cases of limited scope. The majority of Member States seems to prefer to reduce real net replacement rates, and thereby increase the incentive to take up jobs, by targeted tax reductions, tax credits or other in-work benefits, instead of extensive reforms of the unemployment benefit system.

The initiative of Netherlands and Sweden to set national targets concerning benefit dependency rates for the working-age population and the share of social security spending are welcome.

To tackle the problems of low participation and early retirement of older workers, Denmark, the Netherlands, Finland and Austria have adopted comprehensive programmes based on a clear strategy considering both the demand and the supply sides of the labour market. In Sweden, where the share of older workers in long-term unemployment has been rising, a public temporary employment scheme for unemployed over 55 has been introduced, and in Germany, where a similar scheme is already in force, the duration of support has been increased from 3 to 5 years.

Few Member States provide detailed financial and other information on how the ESF supports the Employment Guidelines and the NAPs.

Some Member States mention the ESF contribution under each appropriate guideline while others provide a summary of the ESF support. Only Finland provides information at all levels, and gives sufficient detail on how the ESF is supporting the guidelines and the NAPs. Therefore, a horizontal assessment of the priorities supported by the ESF is not possible.

The NAP exercise only started in 1998, in the middle of the current ESF programming period, when most of the financial commitments in the Member States had been made. Against this background, the room for manoeuvre to provide strategic support for the Guidelines was limited. As to the forthcoming programming period 2000-2006, some Member States express their intentions to focus the Fund interventions more strategically on the Guidelines and the respective NAP.

Among the Structural Funds, it is the operations of the ESF that are more directly and explicitly aimed at underpinning the Employment Guidelines and the National Action Plans. It is the main EU-level financial instrument for supporting human resources development and labour market policy and hence, for helping Member States to develop and implement the Employment Guidelines.

The Structural Funds Regulations for the period 2000-2006, and the Guidelines for their operation, require Member States to integrate the programming of the Structural Funds interventions, in particular ESF-supported programmes, with the implementation of the Employment Guidelines and more generally, the European employment strategy. Thereby, they will contribute to the overall objective of economic and social cohesion.

The five policy fields of ESF intervention in the coming period are: promoting employment through active labour market policies; promoting an inclusive society, open to all; promoting lifelong learning; developing adaptability and entrepreneurship; and promoting positive action for women.

For the next programming period 2000-2006, the ESF resources allocated to Objective 3, EQUAL and innovative measures will amount to about € 27 bn, to which must be added the ESF participation in Objectives 1 and 2 programmes. The EQUAL Community initiative will be geared towards supporting employment and social cohesion, but the other initiatives - URBAN, LEADER and INTERREG - will also help create a positive framework for job creation.

Guideline 5 urges the social partners to conclude agreements in order to increase the possibilities for training, work experience, traineeships or other measures to promote employability.

While a majority of Member States report on agreements concluded by the social partners, most of these relate to very specific sectors and/or specific activities aimed at improving employability. In only a few cases, information has been provided as to whether these agreements are new.

The most concrete agreements are provided by Belgium, Finland, Spain, Austria, the Netherlands – and to a lesser extent – Germany and Italy. Since these plans not only describe general joint targets, but refer to real agreements between the social partners, they best meet the intentions of the guideline.

Three countries presented this year broad based agreements aimed at increasing possibilities for training and other employability measures. They are Belgium, Ireland and Italy, However, no details on measures already taken or to be taken in future as a result of these agreements are mentioned.

Ongoing negotiations or intentions in specific areas with or between social partners are mentioned by Austria, Belgium, Spain, France, Germany, Netherlands, Luxembourg and UK.

A few quantitative and binding targets and indicators are reported under this guideline. Belgium will increase the percentage of total salary spent for training purposes, while Denmark will increase private training places and create more jobs on special termsew initiatives under this guideline were mentioned only by Austria. Among the new measures mentioned are: training leave, increased use of social partners institutes for further training and development apprenticeships and vocational training schools.

Guideline 6 calls on Member States and Social Partners to develop possibilities for lifelong learning, in particular in the area of information and communication technologies. The availability of training for all workers, and in particular for older workers is also highlighted.

Lifelong learning has been defined by the Member States and the Commission as encompassing all purposeful learning activity, whether formal or informal, undertaken on an ongoing basis with the aim to improve skills, knowledge and competence. However, most Member States still tend to define lifelong learning in a rather narrow sense. Netherlands, Ireland and Greece are the only countries embracing the broadest concept of lifelong learning, which is the closest to the definition agreed with the Member States.

This is reflected in the lifelong learning strategies proposed by the Member States. Although some Member States explain why lifelong learning is important or indicate specific target groups or areas for development, a clear strategy is presented only by the United Kingdom, Netherlands and Finland. These countries also underpin their strategy with broad-based learning measures. Ireland has also defined a comprehensive lifelong learning strategy and implementation measures are in the planning phase. A strategy for lifelong learning appears to appeal mostly to those Member States who already have high rates of participation in lifelong learning activities and high levels of educational attainment. The remaining majority of Member States choose to list a number of activities or new initiatives which are mostly unrelated to each other and rather correspond to particular needs in some areas.

Examples of such initiatives are:

• Certification of skills : a priority in France, Ireland, Netherlands, Germany, Finland and Portugal (introduction of accreditation systems).
• Training in new information and communication technologies: Italy and Sweden already take action while others, Netherlands, UK, Austria and Finland are introducing new measures.
• Learning possibilities for older workers : specific plans or activities are envisaged in Netherlands, Finland, the UK and Austria.

Member States remain generally quite vague on how a partnership approach plays or could play a role in furthering continuing education and training. Only Netherlands, Austria, Italy and Denmark specify the role the social partners are playing in implementing lifelong learning.

Besides the definition of a concept and a strategy for lifelong learning, the guideline asks Member States to set a national target for participation in lifelong learning. A quantitative target is set by nine Member States: Austria, Sweden, Italy, Belgium, Denmark, France, Greece, Portugal and the United Kingdom. Except for Greece, these Member States also commit themselves to reaching precise quantitative goals. Targets are defined in terms of:

• achieving a certain level of educational attainment (Sweden, UK, Greece),
• participation in adult learning (UK, Austria, Italy, Denmark, Portugal, France, Greece); and
• funding to be earmarked for lifelong learning (Austria, Greece, Belgium).

The vast majority of Member States present or mention a strategy for promoting the Information Society. In some cases comprehensive strategies are already implemented and are fully co-ordinated with the NAP. Other Member States are still at the planning stage, and in a third group, strategies exist but have yet to be co-ordinated with the NAP. All Member States acknowledge that there is an increasing shortage of "Information Society" professionals in all sectors. This problem is being tackled from two main perspectives: specific efforts in the education and training systems; and the creation of new business - with support from public authorities. However, the implications of the new technology for the adaptability of enterprises and workers are hardly addressed.

Seven Member States are creating task forces or observatories to identify the sectors with skill shortages and to adapt the education system. Increasing the proportion of female students in new technologies is identified as a priority by some Member States. Basic training in information technology is underlined by all. The majority of Member States are increasing school connections to the Internet with accompanying training of teachers (Sweden, Finland, France) and incorporation of information technology into the school curriculum (Ireland, Portugal, Denmark). The opportunities for technical training, both for school leavers and in conversion courses for older workers, are less evident in the actions mentioned.

As far as new jobs are concerned, most plans stress the need for a simplification of procedures and the reduction of red tape for business start-ups. They see the use of information technology as an important tool to achieve this. The French (NET enterprise) and UK (Access Business Initiative) systems are already in place.

Depending on their situation regarding participation in education, Member States have set different priorities in relation to the issue of early school leavers. Most Member States address the reduction of school failure at all the levels of their education and training system and seek to ensure the provision of a minimum level of educational qualification to all young people. They are therefore developing comprehensive strategies in which a better preparation and adaptation to working life is seen as a means to achieve the overall improvement of educational achievements, the clearer illustration of this approach being the UK. In addition, a few Member States, like Portugal, Ireland but also the UK have yet to overcome a significant problem of dropping out before the end of compulsory schooling .

Due to the scarcity of quantitative targets and indicators (only Belgium and Sweden provide comparable quantitative information and France, Portugal and Greece present a rather comprehensive set of indicators for monitoring purposes) and the absence of a clear definition of the problem to address, it is extremely difficult to make an assessment of the efforts undertaken in relation with the priorities.

Examples of initiatives taken to reduce early school leaving are:

• targeted intervention against early school leaving and school failure in economically and socially disadvantaged areas (Portugal, UK, France, Italy, Ireland) or in big cities (Netherlands);
• alternative curricula or special classes (Greece, Ireland, Portugal, France), with the provision of specific individual support to pupils and students encountering learning difficulties;
• strengthened orientation and guidance at different levels of the education system (Greece, Spain, Austria), notably through more individualised approaches (Netherlands, Denmark);
• early identification of pupils at risk of failure (Sweden, Italy);
• actions targeted to the most disadvantaged groups, including ethnic minorities (UK) and young people with disabilities (UK, Germany, Spain, Austria).

Most Member States are increasing the flexibility of their education system through the creation of new bridges between the different components in view to facilitating "re-routing" and providing an appropriate educational achievement to all young people. In some cases, this goes together with the extension of practical training in working situation to address those young people at risk of failure. Portugal, Sweden and the UK are developing measures to enable the return to education of those young people already at work, despite a low level of educational qualification, so as to prepare them better for their future careers and minimise the risk of unemployment.

Moving from school to work can be facilitated by such objective factors as a high quality and level of initial education, the existence of a flexible labour market that incorporates outsiders and a strong overall demand for labour. It is therefore difficult to assess how the accession to the labour market, and in particular the ability to find a job within a reasonable delay after leaving school, is influenced by the type of training or the nature of the skills provided during such training.

In the absence of longitudinal data on the transition process allowing for such clarification, it is possible however to measure the employment probabilities of new school leavers. In the EU, 62 % of school leavers find a job within a year after leaving education. Female school leavers have however only a 59% chance to find a job, compared to 64% of their male counterparts. This figure hides further wider divergences among Member States: employment probabilities for school leavers are as low as 36% and 31% in Finland and Italy respectively and as high as 80% and 86% in Denmark and Germany.

The strategies developed to improve the preparation and adaptation of young people to working life give a key role to the improvement of the technical and vocational training systems. Sweden is the only Member State which also put emphasis on the increase of higher education graduates to answer its labour shortages.

All the Member States tend to favour the development of in-house training. Luxembourg, Austria and Germany are pursuing the modernisation and expansion of their apprenticeship systems (through the addition of new trades, a better anticipation and adaptation to the changes of existing qualifications). Germany increased public support to the SMEs and the New Länder and met the quantitative target it had set for 1998 whilst Austria has both extended the offer of apprenticeship places in new trades and implemented its special aid programme to accommodate young people who fail to find an apprenticeship place. In Denmark, thought is being given to countering the persisting decrease of apprenticeship places registered over the last years.

The participation in apprenticeship has also progressed in several Member States where it is not the main component of vocational training, like in Portugal which has met its quantitative target, the UK, Ireland, Belgium and Luxembourg. Spain and Italy mainly focus on the development of labour-training contracts.

Several initiatives are being taken to improve the provision of technical and vocational training:

• Revision of curricula at upper-secondary levels in view to include the acquisition of "key social qualifications" (Austria);
• Introduction of practical training at post-secondary level (Sweden, Netherlands, Austria, Finland, France, Greece);
• Reform of technical and vocational programmes either to facilitate and extend access or to up-date and adapt their content (Denmark, Luxembourg, Spain and Portugal);
• Italy intends to implement its new system of quality standards to improve the quality of its vocational training and has recently introduced by law, provisions ensuring that all young people, up to the age of 18 take part in vocational training programmes.
• France and Spain are also acting to reinforce the links between education and the business world by setting up new structures to better follow and anticipate the changes in occupations and qualifications and adjust accordingly their education and training curricula.

Nearly all Member States are giving priority to preparing young people for the use of new information and communication technologies and have accordingly launched or prepared schemes to equip schools with these technologies, including in some cases (Sweden, Germany) special provision for the appropriate training of teachers. New measures have been launched in the case of Denmark and Netherlands.

This new guideline for 1999 requires Member States to give special attention to the needs of the disabled, ethnic minorities and other groups and individuals who may be disadvantaged, and develop appropriate forms of preventive and active policies to promote their integration into the labour market. The present assessment is based on measures already implemented or announced. Next year's report should contain a more developed assessment . However, policy development and analysis are severely hampered by a lack of data describing the scale or nature of the needs of disabled people, ethnic minorities and other groups and individuals in the labour market. Only Sweden, UK, Germany, Netherlands and Denmark collect comprehensive data on one or both of the two main groups.

Overall, responses have been poor and lacking focus. A coherent set of policies combining integration and non-discrimination is called for. The majority of Member States, which has failed to address the need for measures to combat discrimination, should consider how to deal with this in future. Equally, most Member States need to take steps to ensure that disadvantaged groups and individuals benefit effectively from mainstream active and preventive labour market measures, in addition to providing specific, tailored programmes linked, for example, to language skills. In addition to a better identification of needs as mentioned above, this requires, as a first step, effective monitoring of the participation of disadvantaged groups in such measures in relation to, for example, their share in the workforce or in unemployment (as is done in the UK and the Netherlands) and the setting of targets to be achieved by the PES and other agencies.

Disabled people are among the target-groups that benefit most from labour-market spending. In 1998 Swedish unemployed disabled people accounted for 15% of the participants in active labour market measures. Greece has stated that 10% of places under the first three guidelines will be earmarked for disabled people.

Notwithstanding some impressive measures, the mostly piecemeal initiatives listed are unlikely to adequately translate the political commitment taken by Member States to move from a dependency-oriented approach to more active and preventive employment and labour-market policies. These call for a comprehensive and multi-faceted approach. In that context, one should acknowledge the commitment made by some Member States (Germany, UK, Spain, Italy and Luxembourg) to better target employment and labour market policies, within the mainstream approach, to make them more tailored to the specificities of disabled people.

The fresh priority given by UK and Luxembourg to health and safety policies to prevent the occurrence of occupational accidents and diseases - along the same lines as the Netherlands continues to implement – is welcome Supported employment aimed at helping disabled people find and retain a job on the open labour market is also being given more and more attention. However, in the absence of evaluation results, it is premature to draw any conclusions as to whether or not employment policies for disabled people meet their objectives.

Member States have interpreted the reference to ethnic minorities in different ways, with some (UK, Netherlands) using a broad definition to encompass "visible minorities" (i.e. people who appear to be of foreign origin, irrespective of their nationality), while others restrict the scope either to non-nationals or non-EU nationals (Germany, Sweden ) or to national minorities (Ireland, Finland, Austria ). While this heterogeneity may, to some extent, reflect the different ethnic mixes of the Member States (though little monitoring data is provided to support this), it also leads to a lack of comparability between the NAPs.

Member States have also variously interpreted the introduction to the Guideline, with only Sweden, the UK, Netherlands, Belgium and Denmark responding to the call for a coherent set of policies combining measures to both promote integration and combat discrimination. In these cases important actions include: anti-discrimination legislation, marketing the value of diversity to business and ensuring ethnic minorities have access to mainstream active labour market measures in proportion of their share of unemployment.

In many cases, it is not possible to judge the scale of the effort in Member States as no data is provided on the financial or other resources devoted to the integration effort. Examples of employability measures delivered by PES or training institutions in this area include:

• language training (Finland, France, Denmark, UK, Germany, Belgium, Sweden),
• targeted counselling (Germany, Sweden, Austria),
• enhanced education for young people (Ireland, Denmark, Sweden, Greece, Finland),
• start-up grant for immigrant entrepreneurs (Sweden),
• validating foreign qualifications so they can be used on the domestic labour market Sweden).
• The plans of Member States to improve the labour market position of "other disadvantaged groups and individuals" are, in general, most unsatisfactory. A number of countries refer to a number of such groups (former prisoners, homeless, drug or alcohol addicts, juvenile offenders, individuals with AIDS, single parents etc) No programmes individually tailored to the needs of the particular groups have been presented - except for some groups in Ireland and the UK.

Member States are called on to undertake concrete action to attain the following objectives:

• To make it easier to start up and run businesses (guidelines 10 and 11);
• To exploit new opportunities for job creation (guidelines 12 and 13);
• To make the taxation system more employment friendly (guidelines 14 and 15)

There is a widespread recognition of the role of SMEs as the main generators of new employment. In the European Union, over 99% of business employ fewer than 250 people and represent 66% of total employment. The contribution of SMEs to employment is significant in every Member State, but it tends to vary with economic structure. In Greece 86% of jobs are provided by SMEs whereas the corresponding percentage is 56% in Denmark, Finland and the UK. The development of employment between 1988 and 1997 has shown that employment in large enterprises is more vulnerable to business cycle fluctuations than is employment in SMEs. In addition, there is a general agreement that small businesses have substantially increased their share of total employment in developed economies in recent years.

In the EU as a whole the importance of SMEs in employment varies widely between sectors, being more important in catering, personal services, construction and retailing. Three sectors with the highest growth in the recent past (business services, personal services, hotels and restaurants) are characterised by a large share of SMEs. Future job growth in these sectors is likely to be associated with the growth of SMEs.

In 1997 some 15% of all those in employment in the Union were self-employed. About one third of these have employees which represent 5% of total employment in the EU. High levels of self-employment, however, should not be taken as an index for a developed entrepreneurship culture or of a dynamic business structure, made possible by high flexibility in product and service markets. Rather it may simply reflect the weight of traditional agriculture or retail trade activities, or in certain cases represents hidden forms of employment.

The importance of self-employment varies widely across the EU, with some Member States - Spain, Ireland, Italy and Portugal - having rates above 20% and Greece over 30%. However, the self-employed with employees do not represent more than 5% of total employment.

The idea that self-employment tends to increase as a response to a difficult situation in the labour market does not seem confirmed by the evidence. No evident correlation can be established between the levels or growth of self-employment and unemployment. Variations in the rate of self-employment across Member States should be primarily attributed to differences in economic structure, legislation, openness to trade, skills, tax-benefit systems, as well as the entrepreneurial climate.

In many Member States, the creation of new firms faces considerable difficulties, such as complex and multiple regulations, imposed at different layers of the administration (central, regional, local) and by different departments (health, labour, tax, etc.), often with very little co-ordination among them. Other factors play an inhibiting role for the creation and further development of business and particularly of SMEs, such as inadequate access to financing, limited availability of information and advice, insufficient training or the high marginal cost of contributions to social security. Also, the majority of self-employed persons never create further jobs due to various constraints and difficulties they face.

A recent study, commissioned by the European Commission to fill some of the gaps in comparable data on obstacles to entrepreneurial activity, has provided information about the total number of procedures needed for company registration as well as the average time delays for company registration in all Member States and the US.

Charts 15 and 16, drawn on the basis of information from this study, show that there is real scope for improvement in the majority of Member States as regards company registration procedures, and that further efforts are needed in order to promote the creation and development of business.

Excluding the UK, Luxembourg and Denmark, which seem to have a very effective business registration system, enterprise creation in other Member States has to go through more lengthy administrative procedures compared to the US.

As regards the number of procedures for company registration, the differences between Member States are striking, as it ranges from 28 in Greece to only one in Denmark.

The seriousness of obstacles to business creation in certain countries becomes more evident if charts 15 and 16 are examined together. The situation in Greece, Italy and Spain calls for an intensive effort on the part of policy makers to reduce obstacles associated with the creation of new business. Apart from the three best performing Member States (Denmark, UK, Luxembourg) in all others more than 5 weeks of delay or more than 5 different procedures are needed for a new company to start-up.

Low overall employment rates are associated with low employment rates in service sectors. In modern economies, such as EU Members States or the US, employment in agriculture and industry is stagnating or declining, while new jobs are mainly created in the tertiary sector. Therefore, future increases in the overall employment rate in the EU will be driven by an expansion of jobs in services. The scope for this seems substantial. Employment in services accounts for only 39.2% of working age population in the EU in 1997, while it accounts for 54.2% in the US (see chart 17). This difference alone accounts for more than 36 million jobs.

In Denmark, Sweden and UK, employment in services already amounts to 50% or more of working-age population, while in the southern European countries and in Germany, this percentage remains below 40%. Over time, there has been a clear trend towards increasing employment in services in the majority of Member States, but progress since the mid-eighties has been more modest in Italy, Germany and France. In Sweden and Finland, where the service sector employment rate fell by more than 3 percentage points, employment rates also went down in all sectors and, particularly, in industry.

Expansion of jobs in services is often associated with the working-poor phenomenon or, in other words, to the expansion of low productivity, low skill jobs. The reality is more complex, however. A close inspection of the employment gap between the EU and the US reveals that both low-productivity, low-pay sectors - such as hotels and restaurants, retail trade - and high-productivity, high-pay sectors - such as business services, education - contribute to this gap.

Countries with high employment rates tend to have high levels of employment in all service sectors. In the context of increasing overall employment rates, there is particular scope for increasing job creation in services in many Member States.

Chart 18 shows the skill structure of employment in services in 1997, defined by the employment rate, subdivided by skill levels . High employment in the services sector in the EU is not matched by an overrepresentation of low skill workers.

Countries with high employment rates also have high employment in occupations requiring a low level of skills: Denmark has 18% of working age population employed in low skill services occupations, and the three best performers (Denmark, Sweden, UK) an average of 16% . In Belgium, Germany and Greece, only 10% of working age population is employed in low skill services.

On the other hand, there is a wide margin of manoeuvre for improving the employment rate for people with high skills. Within Europe, the three best performers in high skilled services (Denmark, Sweden, Netherlands) employ an average of 24% of working age population in high skilled service occupation: the corresponding figure for the EU as a whole is 17%, and for Germany 18%, France 17.4% and Italy 13.4%.

The level of total taxation in relation to GDP varies between Member States. Taxes account for a little under 50 per cent of GDP in Belgium, France, Finland and Austria, and significantly more than 50 per cent in Sweden and Denmark. In Spain, Portugal and Greece overall taxation amounts to less than 40 per cent of GDP, while only Ireland, at 32 per cent, has a rate comparable to that of the US.

Between 1994 and 1998 the ratio of total taxes dropped significantly in Ireland, Luxembourg and the Netherlands while total taxation has increased in Sweden, the UK, Portugal, Greece and France. In the rest of the Community total taxation has remained fairly stable.

Chart 19 shows total taxation in Member States in 1994 and changes in tax levels between 1994 and 1998. Except for Ireland, tax reductions in recent years have taken place primarily in Member States that in 1994 had a level of overall taxation at or above the EU-average. Nevertheless, major differences still remain.

The level and composition of the overall tax burden has a fundamental bearing on economic activity. It is generally the case that the higher the level of taxation, the higher is the risk of distortive effects in the functioning of economies. However, high tax levels are mostly linked to high levels of current and previous public spending on transfers, investments and services. The impact of taxation must therefore be seen in relation not only to the level and composition of taxation, but also to the composition of spending. Some countries with high levels of employment may well have high levels of taxation on account of the need to finance high levels of public investment and services, as for instance in some Scandinavian countries.

If overall taxation is high in the EU, taxes on labour are especially so. The implicit tax rate on employed labour measures the share in total gross wages of taxes on employed labour, including employers' and employees' social security contributions and income taxes. The implicit tax rate is high on average, although the situation varies among Member States. Recent developments in most Member States show a gradual increase in the implicit tax rate.

On average in the EU, the implicit tax rate on labour in 1996 amounted to 43 per cent, which is 8 percentage points higher than in 1980. Between 1994 and 1996 only four Member States managed to reverse the long-term trend toward higher taxes on labour. The Netherlands has lowered taxation on labour substantially, although from a high starting point, while minor reductions have been witnessed in Ireland, Denmark and Finland. Between 1996 and 1998 a number of other Member States, including France and Italy, have made efforts to reduce labour taxation, although the burden has been largely shifted to consumption taxes.

The general rise in labour taxation may be partly due to increased expenditure on welfare payments; indeed, there is often a formal link between the two. Another explanation may lie in increased market integration and the attendant risk of a gradual shift in the tax burden from mobile to less mobile tax bases via harmful tax competition.

The relationship between labour taxes and employment is a complex one. The final incidence of labour taxes, and hence their effect on employment and unemployment, depends on a large array of institutional and behavioural factors, including the reactions of the Social Partners and the monetary authorities.

Taxes on labour drive a wedge between what workers receive and what firms pay. The effect on labour supply is ambiguous in theory. Higher marginal tax rates reduce the benefit from working extra hours (the ‘substitution’ effect), but may make it necessary to do so in order to maintain a reasonable income (the ‘income’ effect). High average labour taxes affect the decision as to whether work at all, and will tend to encourage inactivity and participation in the informal economy. Empirical evidence suggests that, while taxes are not the main factor determining labour supply, they may have a significant negative effect in the case of some groups, particularly women.

The effect on labour demand is clearer: in relatively rigid labour markets where there is real wage resistance, higher taxes will increase labour costs, thereby directly reducing the demand for labour and reducing it further by inducing substitution of capital for labour. Thus, in the short term, the effect of taxes on labour is clearly to reduce employment and to increase unemployment, other things being equal. In the longer term, however, the tax burden will fall increasingly on employees, limiting the growth of take-home pay over time. The long-run impact on unemployment is therefore less certain.

In general, there is some empirical evidence, although it is not conclusive, that the tax burden is partly passed on to firms in the form of higher labour costs, and hence lower profitability, investment and employment. But in the case of low-skilled, low-paid individuals, the evidence is much stronger. There is widespread agreement that, in relatively rigid labour markets, high labour taxation leads to higher structural unemployment for workers in this category.

Thus, on the whole, cuts in labour taxes would be expected to increase the demand for and possibly the supply of labour, and to reduce structural unemployment among low-skilled workers. This effect will be magnified if tax cuts are targeted at the lower end of the wage scale, which would also make them much easier to finance than across-the-board reductions.

In order to maximise the beneficial employment effects, reductions in labour taxes should preferably be financed by reduced expenditure. An alternative would be to shift the tax burden away from labour towards other tax bases, such as environmental or consumption taxes. However, shifting the tax burden limits the impact on employment because taxes on consumption also form part of the tax wedge on labour, albeit less directly. In addition, of course, the inflationary impact of higher indirect taxes must be taken into account.

This pillar is about promoting an enterprise culture and an environment supportive of entrepreneurship in the EU. Such improved conditions will foster business start-ups and allow enterprises to create more jobs.

Overall, the 1999 implementation reports build on the general recognition that small businesses provide the major impetus for economic growth and job creation. Therefore, the reports illustrate where Member States stand with regards to the adaptation of their business environment to entrepreneurial initiative and to the needs of SMEs. Most are limited to developing strategies adopted earlier and shifts in priorities have been the exception.

Many plans - in particular those of Ireland, Italy, and Sweden - include a description of the economic and employment context, underpinning their choice of individual measures.

In comparison to 1998, more Member States seem to have made an effort to involve various stakeholders in identifying new activities and formulating policy. Social partners were involved in particular in relation to territorial/employment pacts in Greece and Italy, as well as chambers of commerce or other private sector representatives in Greece, Netherlands and the UK.

Quantitative information provided in the implementation reports is generally poor and does not allow for comparative analysis of outcomes of existing activities. Exceptions are France and to some extent Ireland. Austria, lists particular indicators under each guideline. In general, the presentation of measures lacks an analytical background, or an indication of the priorities being addressed.

In summary, the NAPs presented by Finland, UK, Netherlands and Sweden are of high quality. In particular, Finland, with the Decade of Entrepreneurship has made an effort to present the strategies in a coherent and integrated way. However, Germany, Greece, and Portugal will require improvements next year: Germany fails to adequately address guideline 10, Greece should further adapt the Structural Fund Programme priorities to the guidelines, and Portugal should convey a more complete and integrated overview of policies under this pillar.

In the majority of Member States the excessive number of registration procedures and other formalities creates difficulties for the creation and the running of businesses. Overall the EU lags behind the US in this respect and most Member States need to cut red-tape in order to succeed in developing SMEs.

There are, however, signs of encouraging progress. Some NAPs include quantified indicators and fixed targets with regard to the administrative burdens on business. The idea of establishing "one-stop shops" for enterprises represents an improvement in the practical arrangements, and a clear majority of Member States have already established or intend to establish such centres. The concrete structure and tasks of these establishments differ in the individual Member States, and even have different objectives, some aiming to simplify administrative procedures, others providing advice and information. The common expectation is that they make it easier for those who want to start a business to establish themselves. Some Member States go beyond this and, like the United Kingdom, try to accompany businesses after the start-up phase. In Greece, the country with the largest number of procedures for new businesses, no concrete measures are reported, to address this problem although there is a general commitment to supporting small business. Concrete examples of simplification measures are:

• The "Single Business Windows", in Spain, shortening the average time for the formalities involved in establishing a company as a legal entity from 81 to 25 days.
• The Enterprise Formality Centres (CFE) in Portugal, reducing the time necessary for the incorporation of a company from about 6 months to 20 days.
• The "guichets uniques" in France enable entrepreneurs to create a business in only one day and may even do this at a distance by using "minitel".
• The single counter in the Catania Municipality in Italy.

In general, the use of electronic reporting, which makes life easier both for SMEs and authorities, is included in the vast majority of the NAPs. Examples are to be found in Denmark and Finland.

Denmark, Sweden, Spain, Netherlands and Italy have set particular targets for the reduction of administrative costs to enterprises. Portugal and France refer to the fulfilling of the objectives set in the1998 NAPs.

The costs of hiring employees, to which guideline 10 makes reference, is referred to by only a few Member States: Belgium, Netherlands, Luxembourg and Greece intend to change their taxation systems in order to promote recruitment.

As regards the incorporation of SME-needs into the law-making procedures, a number of Member States have introduced Business Impact Assessments into their legislative procedures. Regrettably, the NAPs do not give indications of the effects of such impact assessments on the legislative process, despite the fact that some of these schemes have now been in existence for a number of years. Examples are to be found in Austria, Germany and United Kingdom, (Small Business Service).

As regards access to finance, Member States have reported on recent actions taken in the field of equity and loan finance for small businesses:

• Ireland launched Seed and Venture Capital measures, which also encourage new venture capital players to enter the Irish Venture Capital market.
• Denmark supports a network of consultants assisting SMEs in using financial instruments.
• Greece set up mutual guarantee societies and Venture Capital funds to make access to loan and equity finance easier for small businesses.
• Finland supports the creation of new businesses through start-up grants at favourable interest rates, with a particular attention for requests from women entrepreneurs.
• A new Enterprise Fund in the United Kingdom increases the offer of Venture Capital and loan guarantees for new and young SMEs and also co-operates with private Business Angels.
• Germany emphasises the fund raising of Venture Capital Funds for investments in technology based SMEs.
• Funds are available in France for venture capital investors supporting business start-ups.

Member States increasingly recognise the importance of self-employment as a solution for insertion into working life, particularly of individuals with the required skills and motivation. For individuals, a "self-employment break" can act either as useful experience to his previous "employee" status or as the first step to the formation of a new business. A supportive environment, including social protection and technical assistance and guidance, is necessary.

Several Member States refer to specific programmes aiming to promote self-employment. Most of these programmes address various target groups such as women, young people, the unemployed or immigrants who in some countries have considerable difficulties in entering, or in returning into, the labour market and help them to establish themselves as entrepreneurs. In order to offer incentives for the "emergence" of undeclared enterprises and workers, Italy has introduced "wage realignment contracts" providing for a gradual alignment of economic, social security and contributory treatment to the level which is usual in formal contracts.

Undeclared work has been considered by all Member States. The focus varies in the different Member States in line with the particular level of undeclared work and the extent of existing approaches. Some Member States consider undeclared work as a separate horizontal issue, while others deal with it in the context of the pillars on entrepreneurship or employability. In the Communication on Undeclared Work (COM(98)219), the Commission identified good practices in the integrated approach of Denmark, France and Netherlands. Italy and Portugal report innovations , again using an integrated approach.

Some Member States concentrate on repressive measures, such as increasing the inspection of worksites (Germany, France, Luxembourg), increasing sanctions (Germany, France and Portugal), changing legislation, in particular to allow better monitoring of so called contractual chains (Germany, France, Austria) and in general, ensuring more effective enforcement (France, Portugal, UK). The promotion of better co-operation between different branches of the administration is considered important - in particular greater data exchange.

Others adopt preventive measures and measures favouring the emergence of undeclared activities, such as the reduction of marginal tax rates or non wage labour costs (Denmark, UK, Spain) and adjusting regulations with regard to telework, fixed term contracts, etc (Portugal, UK). Some Member States mention help for self-employment and creation of enterprises (Spain, Portugal), reducing the administrative burden on employers (UK, Belgium), promotion of local development initiatives (Italy, Spain), introducing the system of service vouchers (Belgium) or new 'realignment contracts' (Italy). An active role for professional organisations and the social partners is mentioned by France, Italy and Finland.

Equipping future entrepreneurs and business owners with the skills required for managing their business is of crucial importance for their success, but it appears that this aspect is not prominent. The adjustment of government policies includes, however, support and advice services which are offered to enterprises. Interesting examples are the network of Business Support Teams which helps new employers in dealing with tax and social insurance matters and the Employers Helpline, provides the same service to the self-employed. Both initiatives are provided in the United Kingdom. The French "Net enterprise project" will allow businesses to make their declarations relating to employment by using the Internet. In Finland also, the administration takes care of all the employers contributions in return for a fee. A project for an Integral Plan for the Business Promotion of the self-employed, with the aim to offering business information and expert advice from specialised consultants over the period of a year is reported by Spain.

The majority of Member States have launched particular measures to encourage women to become entrepreneurs. Some have targeted schemes such as the promotion of start-up advice for women in Austria, Sweden and Finland, and the concept "Women on the Net" in Germany.

Guideline 11 also provides for the reduction of obstacles to moving to self-employment. One such obstacle is the insecurity of income levels, especially in the first few years. Improving social protection for the newly self-employed, by maintaining income security for individuals who make the transition from unemployment into self-employment, provides an incentive to take up an entrepreneurial activity because it reduces the risk of the newly self-employed in the case that his activity fails.

Several Member States have introduced adjustments to social security systems with this objective: Belgium, Greece, Netherlands Germany, and Luxembourg indicate that they maintain unemployment benefits during the initial stages of self-employment in order to sustain income provision to the unemployed who want to start up their own businesses. France and Greece are also considering ways to reduce the levels of social security contributions in the early years of the operation of a new business. Countries such as Finland and the UK offer one-off payments to the unemployed who want to start their own businesses.

Only a few countries consider taxation issues to improve financial aspects of the set-up and early phases. France offers VAT exemptions and tax relief for micro firms. Sweden is still considering a rather wide range of possible changes.

The guidelines urge Member States to take a wide approach and to encourage entrepreneurial awareness across society, but concrete measures in this regard are still the exception. A strategic approach has been developed in Austria and Germany. In order to increase the business start-up rate in this country and to boost the public status of self-employment, the Austrian Government plans to carry out a range of measures. Among other measures, it is planned to offer more business training in schools and universities. Virtual start-up centres and entrepreneurial colleges should help to prepare for business plan competitions. Germany is attempting to incorporate entrepreneurship aspects into university curricula. Other measures in this field are being planned in Spain, Italy, Ireland and Sweden.

Member States have committed themselves to exploring new possibilities for job creation, notably at the local level and in new sectors.

One of the most interesting messages from the 1999 NAPs is that a considerable number of countries have embarked on a devolution process, which also affects enterprise policies and the regional development strategies. The United Kingdom is a well-known example of such a change, but devolution - the transfer of responsibilities from the national to lower levels - is also taking place in Sweden, Spain and Italy. By bringing policy decisions closer to businesses and individuals, devolution is expected to play a positive role in promoting new activities at the local level. It is also expected to promote the importance of territorial employment pacts or other varieties of social partnerships at regional or local level aiming at job creation and development of business.

While territorial employment pacts, in principle, are implemented at a regional level, the Netherlands is presenting the most explicit local policy . There, the national Government and the cities cooperage in a "Cities Policy". Its main aim is to restore the balance in urban development and to revitalise the relationships between the various urban functions. It includes a partnership between the local authority, employers and the employment authority. In Germany, in almost all Länder, regional development concepts are drawn up as a starting point of structural policies at the initiative of the regional actors.

The concept of social entrepreneurship is acquiring greater importance and several Member States report on activities in this field. Spain mentions the expected approval of the new co-operative law in 1999 and provides indicators. Italy has enhanced the use of the social co-operatives, the volunteer-service organisations and the associations in the fight again social exclusion. Italy also mentions the different legal, fiscal and financial measures of its specific Social Economy support policy. Belgium quotes specific initiatives like the legal definition of specific Social Economy enterprises for reintegrating people ("entreprises d'insertion"), the improved access of Social Economy enterprises to public procurement, etc. Ireland will introduce in the latter half of 1999 a dedicated Social Economy programme involving the social partners.

A subsidy scheme which supports the employment of long-term unemployed by municipalities is at present being implemented in the Netherlands, and by 1 January 1999, had led to the employment of about 34,500 people. Similar schemes continue to be activated in Germany. Another example is the Danish Home Services scheme, which covers an estimated 10-12,000 part-time employment, corresponding to 4,000 full-time jobs. In France, the first results of the programme "Nouveaux services-emplois jeunes" look very promising as it has already created 160,000 jobs in different areas (i.e. associations, local authorities, schools and security police). The target for 1999 is to create another 90,000 jobs at the cost of 2.13 bn Euro. The estimated employment effect of the Finnish National Forest Programme, which aims to increase the annual use of domestic roundwood by the Finnish wood-processing industry and has been adopted in 1999, is 35-40,000 work-years. These examples show that initiatives at the local level and the social economy can play an important role in providing jobs which help certain groups to enter or to return into the labour market.

In this guideline Member States are called on to provide framework conditions which allow for the full exploitation of the employment potential of the services sector. The response of Member States to this new guideline has been largely disappointing. Policy approaches are piecemeal and only countries like the Netherlands present interesting ideas and approaches.

All the Member States recognise the importance of action at the local level - and local and regional issues are playing a growing role in the plans of several Member States. The determination of employment policies remains mainly a national prerogative; local and regional authorities are, however, to differing degrees, involved in the planning phase of the NAPs in the majority of Member States. Some Member States have announced the development of local and regional plans based on the Employment Guidelines, and in Spain plans have already been approved.

All Member States have structures in place to implement employment policy measures at the local level. In some cases the implementation is carried out by the local public employment service (France, Greece, Germany, Belgium), in other cases the implementation is delegated to local and regional authorities – or is in the course of being delegated (Finland, Sweden, Netherlands, Italy). In Finland and Sweden, local partnerships also have a responsibility for implementation.

New forms of territorial organisations are also emerging, to ensure that employment measures are implemented in the way most appropriate to the potential and needs of the particular area.

In general, Member States have shown a willingness to develop specific policies for supporting the services sector. An exception is the United Kingdom which aims at providing a positive framework for all sectors and does not target one particular sector.

The Member States tend to associate the services sector, on one hand, with the promotion of high skilled jobs in the information society, and on the other with the promotion of jobs in the health care sector. Ireland, Finland and Austria refer to ongoing or recently finished work to identify future growth areas. A distinction is also made between public services and private services.

One practice which links training for entrepreneurship with the services sector is being reported by Spain. There, training measures to promote the entrepreneurial spirit and business skills are being adopted to encourage the entry of young people into the enterprise world and the setting up of small businesses in the service and environment sectors.

Italy, and Austria consider specific deregulation in order to increase both supply and demand in the services sector. The approach differs slightly but the main areas are addressing opening hours for shops/business and ease of access to and licence requirements within various – professional and crafts – fields.

Many Member States confirmed the job creating potential of the Information Society and hence focussed their NAP on availability of funding for start-ups. However, the framework conditions favourable to job growth have only been touched upon – competitive infrastructure, legal clarity (e.g. electronic signatures), equal treatment of delivery systems (paper and electronic) and availability of skills. While some Member States use ICTs in order to enhance efficiency and simplify administrative procedures particularly for SMEs, the potential role of the public sector as a driving force for e-commerce has not been taken up. France has launched a new strategy with predetermined targets, while Spain and Germany are finalising theirs.

In taking account of the employment potential of the environmental sector, Sweden and France seem to be significantly in front as the issue is part of several activities. Germany has reported a major rise in employment in environmental services and has launched particular programmes. Greece mentions environment as an issue under the Territorial Pacts, but is vague on details. Despite a strong wish from Member States to include the potential of this sector a lot do not mention the issue under this guideline (e.g. Denmark , Ireland, Netherlands, Luxembourg, United Kingdom).

In line with the Guidelines, Denmark and Germany have set national targets aiming at gradually reducing the overall tax burden in the years to come. The main objective is to make the taxation system more employment and environmentally friendly and to promote entrepreneurship. Greece alone raises reservations on the positive effects that a shift in taxation away from labour to other tax bases would have on employment growth.

In the 1997 Communication on Environment and Employment (COM(97)592) the Commission argued that an improved environment and better employment performance can go together because greener production creates new job opportunities in the environmental sector. In addition, increasing taxes on pollution may allow for lower taxes on labour. The 1999 Employment Guidelines included orientations to encourage the potential for employment in the environmental sector and to examine the possibility of using pollution taxes to lower taxes on labour.

Overall, it is encouraging that Member States generally recognise that employment and environment are linked by the need to encourage and adapt to structural change. A move towards implementing labour market measures that integrate environmental concerns is evident from experience within a number of Member States. This is usually linked to ecological tax reform. However, there is uneven support for increases in energy taxation and Greece explicitly rules this out. In general, better quantification of the size of shifts in the tax burden and on how the revenues are used would be useful.

Few Member States aim for additional employment through environmental measures, but a growing number of Member States are starting to exploit synergies between their environmental policies and the promotion of employment opportunities. Measures such as subsidy schemes or market incentive programmes that target directly the creation of jobs or the provision of training towards jobs in connection with improvements in the environment have been introduced in a few Member States.

The environmental industry in Member States, in particular with regard to renewable energy, energy saving measures and innovative environmental technologies is increasingly recognised as offering employment potential and attractive export opportunities, not only for clean products, but also for services and clean production processes.

Tax reforms in recent years within the EU have primarily involved reductions in the tax burden on labour. The scope and pace of these reforms in Member States vary greatly. Considering the amount of calls for review of the tax system, the extent of reform has been modest. However, several Member States are in the process of compensating reductions in taxes and charges on labour by raising taxes on energy in line with the employment guidelines.

Finland has reduced income tax from 1996 and plans to make further cuts. Italy and Denmark will continue pursuing a policy towards lower income taxes. UK has introduced a cut in income tax from 1999 and plans further reductions to be implemented next year. Austria, the Netherlands, Germany, Ireland, Luxembourg, Spain and Sweden either have recently taken steps to reduce income tax or are in the process of reviewing the tax system.

The Netherlands, Germany, France, Italy, and Spain have in recent years gradually reduced social charges and plan to make further cuts in the coming years. Other Member States - UK and Finland intend to introduce reductions in social charges in the near future.

In Belgium social charges has been cut gradually for several years and the national objective is to align, within 6 years, the burden of employer’s charges to the average of the three main neighbouring countries.

Labour tax cuts may have an impact on employment growth, in particular if targeted at low-paid and unskilled workers.

Unemployment particularly hits workers with low professional skills. In most Member States, social security contributions and payroll taxes are proportional or even regressive with respect to the gross wage, since they may have sizeable fixed components, which decrease as gross wages increase. As a result, the relative cost of low-skilled workers is high in the EU, thereby hampering the demand for unskilled workers. A re-structuring of the system of social contributions would encourage employers to hire unskilled workers, while maintaining or even increasing net wages.

In general terms, targeted cuts in income taxation introduced by Member States have been motivated by supply-side problems like unemployment- and poverty traps while Member States have applied targeted reductions in social contributions in order to help low-skilled labour and the long-term unemployed to regain employment.

Several Member States – Belgium, Denmark, France, Austria, Finland, Germany, Netherlands, Greece and Sweden – have already or plan to lower tax on labour in favour of low-paid and unskilled workers. A range of labour market programmes involving a reduction of labour costs, like the tax credit in France, is being adopted in Member States, targeted at low-skilled workers promoting low productivity jobs primarily in the social economy. Moreover, some countries - Italy and the Netherlands - have applied additional targeted measures such as rebates for employers if recruiting long-term unemployed.

The Netherlands, France, Finland and Italy support a targeted reduction of VAT on labour-intensive services as a means to promote employment. Furthermore, it is expected to help combating undeclared work.

France has already adopted small-scale programmes in order to exploit the employment opportunities in the labour-intensive services sector by offering tax credits or exemptions of social contributions. Finland is undertaking experimental projects in different regions, providing tax reductions for private households or subsidising companies which offer services for private households. Denmark is opposed to introducing a lower VAT-rate on labour-intensive services but favours subsidies targeted to certain services performed for private households.

A majority of Member States are reluctant to introduce a reduction in VAT, as it may not entail a proportionate fall in prices, leading to tax revenue losses but no job creation. Furthermore, the problem of properly defining labour-intensive services is highlighted.

Member States and Social Partners are called on to undertake concrete action to attain the following objectives:

• To modernise work organisation (guidelines 16 and 17)
• To support adaptability in enterprises (guideline 18)

The response to this pillar remains disappointing. There is little evidence to suggest that the Social Partners have taken initiatives to the extent required in response to the invitation in Guideline 16 'to negotiate at all appropriate levels agreements to modernise the organisation of work'. One explanation for this may be that action taken at levels other than national has not been reported and modernisation of work organisation is, in any event, an on-going process which is difficult to quantify.

While implementation of this pillar is underpinned by partnerships in Austria, Finland, Ireland, Italy and Netherlands, there is little evidence that a comprehensive strategy embracing a partnership approach with the social partners and developing efforts to modernise the regulatory framework has been undertaken by any Member State. Luxembourg has taken a horizontal approach modifying its collective agreements legislation; these must mention, or otherwise considered non valid, the results on training and work organisation of the negotiations. Despite the lack of an overall approach, there has been some progress in individual areas. For example, measures have been taken to adjust the balance between flexibility and security, particularly in Netherlands. In Germany, Greece and Italy, the tendency is towards increased flexibility whereas in the United Kingdom the tendency is towards improvements in worker's protection. In the case of Spain, notwithstanding efforts to reverse the trend, temporary contracts still represent a significant share of the total. Although in a few countries, measures have been taken with regard to the reduction of working time, voluntary part-time work tends to be featured more strongly.

Little progress can be seen in relation to the introduction of more adaptable forms of contracts and modernising the regulatory framework except for the interesting developments in Italy, where employment rights are being extended to "para-subordinate" workers. In the UK, steps are being taken to extend employment rights to workers who are not normally covered by employment legislation. In Finland the legislation covering Contracts of Employment is being substantially revised. There are also examples of developments in relation to telework.

Regarding human resources, the Member States do not demonstrate systematic approaches to re-examining obstacles to investment in human resources, and only a few Member States provide for new incentives. Netherlands and Spain have introduced additional tax exemptions linked to specific targets for continuing training. The more common approach of Member States consists of a re-orientation of public training and consultancy support.

While Netherlands, Ireland, Finland and Denmark have established an overall approach to the modernisation of work, France has focused on work reorganisation mainly through working time reduction and a strong involvement of social partners.

In the UK, Portugal and Greece initiatives and actions are limited and social partners do not appear to be playing the role devoted to them by the Employment Guidelines.

Development of a better organisation of work through social partnership frameworks has been pursued in a number of Member States. Concrete outcomes of these initiatives are reported in a fragmentary manner:

• The most established of these is the MOC (Management Organisation and Competence) in Denmark which aims to promote organisational innovation by facilitating access to support services, continued training programmes and interaction with higher education institutions.
• In Finland, the National Workplace Development Programme which aims at promoting co-ordination and networking of workplace research and development now covers 460 enterprises and is being extended to the period 2000-2003.
• 'Partnership in Action at Enterprise Level' in Ireland which includes 'New Work Organisation' is jointly managed by the Social Partners, with the National Centre for Partnership, and is partly funded by the European Social Fund.
• In the United Kingdom, the Social Partners i.e. the Confederation of British Industry (CBI) and the Trades Union Council (TUC) have both become members of the UK Work Organisation Network which was set up in May 1999 with the aim of supporting the development of new forms of work organisation and initiating awareness raising activities.

As previously stated, social partners negotiations at levels other than national are not systematically reported by the Member States in the NAPs. This hinders any comprehensive overview of developments in this area.

The establishment of collectively agreed frameworks on working time, within which Social Partners at the local/enterprise level negotiate specific implementation provisions, seems to be a growing trend and is most evident in Finland, Austria and Italy.

In 1998 in Sweden, the Social Partners agreed on a number of collective agreements at sectorial level which provide that wage increases could alternatively be exchanged for shorter working time (to be agreed at company level). Such agreements were particularly common in the manufacturing sector where they have contributed to more flexibility.

Legislative initiatives, on the other hand, have been reported by a number of Member States - Belgium, France and Luxembourg- in respect of working time. In France following a legislative initiative, weekly working hours will be reduced by negociation to 35 hours/week. By Spring 1999, an important number of companies and sectors have reached agreements on the way to proceed with reduction in working time before enforcement of the law. Many of these agreements include other aspects related to the organisation of work; forms of contracts, family responsibilities, company flexibility and distribution of working time throughout the year.

In many Member States, the promotion of part-time work has been the subject of agreements by the Social Partners or government legislation. This is the case in Spain where, in November 1998, the Agreement on Promoting Stable Part-time Employment was signed by the government and the main trade unions (but not the employers). The agreement came into force in 1999 and the number of permanent part-time contracts is expected to reach 200,000 in 1999 (165,000 in 1998). This new part-time contract allows for up to 77% working hours of normal contracts plus the possibility of "complementary hours". Social protection and retirement provisions for these workers are enhanced and there is a reduction for the employer in social security contributions.

In the Netherlands, with almost 40% of the labour market working part-time, this is a significant labour market policy instrument. A recent survey showed that 19% of over 100 agreements analysed by the Labour Inspectorate included provisions for part-time work and changes in working hours.

In Germany the amended law on part-time employment for older workers aims at softening the transition into retirement.

In Italy, a 1999 ministerial decree provides for financial incentives in the form of a reduction in social security to promote part-time work. The government target is set at 8% of total employment (7.3% in 1998). Intensified efforts to make part-time work attractive have also been taken up in a number of other Member States, in particular Austria and Portugal.

Governments and the Social Partners continue to make efforts, often in a fragmented way, to improve both flexibility and security. Building on earlier developments, the Netherlands has implemented employers and trade unions proposals in a new Flexibility and Security Act

The UK implementation report refers to progress towards establishing a new balance between flexibility and security. Measures taken include the introduction of a National Minimum Wage, changes in unfair dismissal rules and the implementation, or planned implementation, of Community legislation, including the Working Time Directive and the agreements on part-time work and parental leave. The Employment Relations Bill contains proposals for new rights and changes in family-related rights, aimed at making it easier for workers to balance the demands of work and the family.

In a number of Member States - Germany, Greece and Italy - greater flexibility is being introduced.

In Italy, the Pact of December 1998 between the government and the Social Partners gives continuity to previous agreements, with the overall objective of making the Italian labour market more flexible. De facto, according to the implementation report more than 50% of new entrants in large firms are on fixed term contracts or part-time work.

However this trend towards increased flexibility might have reached an excessive proportion in Spain, where more than 90% of new contracts are temporary with a high rate of turn over. A law has been passed, based on a social partners agreement in 1997, to support an increase in the number of permanent contracts, which represent two-thirds of the total.

In Sweden, a report of the telework committee was submitted to the Government in autumn 1998 which identified positive initiatives to be taken without any legislative change. In Italy, legislation permitting telework in the public sector was adopted in 1998. In Denmark, new collective agreements on telework have been signed and now cover more than 1 million employees.

Few Member States responded in any detail to Guideline 17 which may be interpreted as a sign of lack of progress. The most interesting developments were the following:

• Italy intends to adopt legislation which aims at guaranteeing a minimum protection with respect to regular contract payments, continuing training, health and safety, and trade union rights to those para-subordinate workers who, although formally bound by self-employment schemes, have a relationship of continuing collaboration with a single principal contractor.
• The UK is planning to extend statutory employment rights to categories of workers without traditional contracts of employment who are not at present covered e.g. agency workers, homeworkers and labour-only subcontractors.
• Spain, as already mentioned, adopted a new type of part-time contract providing more flexibility for the employer and a better social protection for the employee.
• 4.5. Supporting adaptability through in-company training – guideline 18

As regards in-company training, six Member States address tax measures. Germany and United Kingdom refer to the full tax deductibility of all training costs incurred by enterprises and therefore consider that no further action is necessary at tax level.

Other Member States - Austria, Netherlands, Spain and Portugal - plan an increase in exemptions for training expenses in order to stimulate training. Netherlands and Spain link such incentives to specific targets for vocational training in the enterprise, including apprenticeship training, access to higher vocational training, training for older workers and in the non-profit sector - Netherlands) or additional exemption for enterprises that increase their training expenses -Spain.

The United Kingdom and Belgium have recently introduced other financial (non-tax) incentives for in-house training. In the UK enterprises have access to Small Firm Training Loans for vocational training and consultancy advice for training. Belgium has recently introduced alternative funding mechanisms (levy-credit schemes, training vouchers), which are already traditional in other Member States. Luxembourg has recently adopted a law foreseeing fiscal support and subventions to encourage in-house training.

Various member States - Portugal, Italy, Sweden, Spain and Greece - plan to foster the renewal of skill levels through restructuring and re-orienting existing public infrastructure to provide continuous training. Spain has linked the publicly financed and collectively managed provision of continuous training to systematic and tailored planning of training at the enterprise level. Similarly, Greece has restructured state-run training offers in accordance with the needs of an economy principally based on SME's.

Other Member States have strengthened information and guidance for enterprises as well as the exchange of valuable practice. Ireland has created a Training Networks Programme in order to assist companies in identifying and addressing their human resources development needs through the exchange of experience and best practice. In addition, a quality standard called Excellence Through People for high performing enterprises has been established. In Finland, the Ministry of Trade and Industry has developed models for personal training plans appropriate for SME.

Five Member States refer to budget commitments for implementing this guideline (Spain, Finland, Ireland, Italy and Sweden), whereas only Belgium and Spain foresee indicators to assess the success of the action taken.

The guidelines in this pillar call Member States to undertake concrete action to undertake the following objectives:

• To implement a gender mainstreaming approach (guideline 19);
• To tackle gender gaps in employment, unemployment, pay and representation in certain sectors and occupations (guideline 20):
• To reconcile work and family life (guideline 21);
• To facilitate reintegration into the labour market (guideline 22).

Gender problems in the labour market remain serious. A particular cause for concern is the very low employment rates for women in Spain, Italy and Greece. In these cases, the employment potential of women is considerable. Unemployment gaps have been increasing across the EU, and they are relatively higher in Greece, Italy, Netherlands, Belgium, Spain, Luxembourg and Denmark. Sectoral and occupational imbalances in the distribution of jobs are striking across the EU particularly in Finland, Sweden, Denmark and Spain. The gender pay gap is a problem in most Member States. The indicators presented below tend to highlight women's rather poor labour market position compared with men. There are very few cases where women in Member States have, on average, achieved parity with men.

In 1998 the proportion of women employed in the EU was still only around 51% of women of working age, some 20 percentage points below the rate for men in the European Union. However, women have accounted for 2.6 million (62%) of the net increase in jobs since 1994 but, in 1998 employment of men in the Union increased slightly more than that of women.

Changes in employment rates for women should be seen in the context of the level of overall employment, so it is encouraging that two countries - Spain and Ireland - that were among the bottom four in a ranking of women's employment rates in 1994, have enjoyed the fastest growth in women's employment rates since then (see chart 21) - although they started from a very low base. That focuses particular attention on those other countries with very low employment rates for women who have not been able to achieve much growth i.e. Luxembourg and Italy. However it is worth remembering that only Denmark and Sweden can make a favourable comparison with the employment of women in the USA - the majority of Member States fall well below that level.

Chart 22 shows the gap between the employment rates of men and women standardised by the male employment rate. As a result of higher employment growth for women, most countries are making significant progress in reducing the gap. The progress made by three Member States with large gaps (Spain, Greece, Ireland) is noteworthy.

Developments in women's employment tend to be linked more to trends in inactivity rather than in unemployment. Particular national unemployment-benefit policies and cultural differences seem to play a large role in explaining women's' unemployment rates. They generally tend to encourage women to remain outside the labour market. However, the increased female labour supply cannot be absorbed by the increased females job opportunities.

Chart 23 shows the share of unemployment for the under-represented gender compared with the experience of the over-represented gender e.g. Dutch men in 1998 were 40 percent less likely to be unemployed than Dutch women. The gap remains worrying in a number of countries: particularly in Greece, Italy, Netherlands, Belgium, Spain, Luxembourg, and Denmark. Three countries have succeeded in reducing both employment and unemployment gaps: Greece, Ireland and Germany.

Although getting women and men into the labour market is the main priority of the employment strategy the segregation of genders in employment remains a major concern. High levels of segregation represent a limitation in the scope for applying the full range of women and men's talents to the labour market.

An important distinction exists between vertical and horizontal segregation, in the former women and men are segregated into hierarchical layers, in the latter into distinct sectors. An index of segregation into occupations has been derived, and this picks up elements of both horizontal and vertical segregation. It shows that across the European Union gender-imbalance in individual occupations (ISCO three digit occupations - 1998) accounts for around one quarter of all European Union workers - see chart 24.

The index of gender imbalance shows that three countries (Finland, Sweden and Denmark) with relatively high employment rates for women also have relatively highly segregated occupational structures. Similarly, countries characterised by low female employment tend to have a more favourable gender segregation situation, with the exception of Spain. This evidence suggests a structural trade-off between achieving high rates of demand for female workers and ensuring that all types of job are accessible to both women and men. However, it should be recognised that a segregated labour market with high employment rates for women is preferable to one with less segregation but low employment rates for women.

Chart 25 shows at the European Union level the ten occupations with the highest rate of gender imbalance, the size of the bubbles representing the numbers of people involved. An analysis at the country level often reveals a similar picture: the dominance of women in caring professions and the dominance of men in building and agriculture jobs.

Women often combine work with caring duties and this will tend to influence selection, training and promotion opportunities and at least partially explain the lower wages observed in all Member States of the Union. Until men take up significantly more of the caring load this stereotyping of women is likely to continue.

Data from the 1995 Structure of Earnings Survey in Chart 26 shows that across the EU Member States included in the survey, women are paid on average 76% of men's wages in terms of hourly wages (and 72% in terms of monthly wages). Although this gender gap stands for all Member States, it seems more balanced in the Eastern Länder of Germany, Denmark, Sweden, Luxembourg and Belgium, and less balanced in Greece, Netherlands, Portugal, Austria and UK.

However, the Earnings Survey from which these data are drawn has not a full coverage. The public sector and important sectors where women are in majority, such as health, education and personal services, are not covered. Also, only full-time earnings are considered. Alternative and apparently more solid evidence about the degree of inequality between men's and women's earnings is now being drawn from the European Household Panel (ECHPS). According to the first results now available from the Panel, which covers all activities and employees working more than 15 hours a week in 13 Member States, women's hourly earnings represented 83% of men's in 1995, with a more serious gap in the private sector (75%) than in the public one (91%) – see Chart 27.

Across Member States, while the new evidence confirms the existence of a gender pay gap problem in the UK and in Netherlands, and a more balanced situation in Denmark and Belgium, it invites further analysis in order to assess the performance of other Member States on a solid basis.

Differences in average wages of women and men reflect not only pay discrimination, in the sense that women are paid less for equal work, but also structural differences. Women and men tend to have different jobs, different age structures (working women are on average younger) and there is also a difference in the education level and the type of education. While most of these factors are correlated with wages, for others (e.g. education levels) evidence is more difficult to interpret. A conclusion that can be drawn form the present data in terms of overall gender differences is that women are not in equal work positions, they are in lower paid positions, and this problem tends to be more serious in some countries than in others.

5.1.5 Influence of parenthood on employment by gender

While the presence of children in the household markedly reduces women's employment rates, there is evidence suggesting that the opposite is true for men. The employment rates of men aged 20 to 44 are higher if they are in a household with a child.

Of the 12 Member States for which data is available for 1998 or 1997 (see table 8) Portugal, Belgium and Austria show the most egalitarian performance, on the basis of a comparative index. These three countries also have the highest employment rates for mothers with a child under the age of six amongst the 12 surveyed. The three countries showing the worst performances on the comparative index are Ireland, Germany and Luxembourg – but these three have proposed substantial improvements to childcare facilities. Spain, Italy and Greece also give cause for concern: they have very low employment rates for mothers of young children. Their ranking on the comparative index is mid-table - that is largely because they also have the three lowest employment rates for women without children.

Overall, it can be said that Member States have reinforced action in 1999 compared with 1998. This is partly due to a development of their existing plans and partly as a response to the expanded 1999 guidelines, especially the new guideline on gender mainstreaming.

Successful economic and employment policies can benefit both women and men and that has been true in the case of Ireland, the Netherlands and Denmark since the early 1990s.

A few countries hold out the prospect of significant improvements. As a country with particularly severe problems, Italy deserves credit; developments over the next couple of years will be awaited with interest. Austria, Portugal and Sweden are also making major commitments across the equal opportunities pillar.

All Member States plan to apply or have already applied gender mainstreaming. The degree to which this is carried out and the quality of presentation of these efforts differs considerably, from general political statements to more operational measures – as shown in table 9.

Understanding the gender implications of existing policies requires extensive analysis. Most Member States recognise that and are working to deepen their understanding of the gender impact of employment measures - Spain, France, Luxembourg - and the improvement of statistics - Belgium, Germany, France, Italy, Austria, Portugal, Sweden, Finland and Spain.

Successful gender mainstreaming also requires awareness raising amongst policy makers - France, Austria and Sweden - and a pervasive commitment to gender equality which all Member States seem to recognise. When they do not limit themselves to these political statements, but go on to implement mainstreaming, real progress can be made. Germany presents a particularly comprehensive approach to mainstreaming, while Ireland is still at the early planning stage.

Three Member States - Belgium, Ireland and UK - do not seem to have integrated the equality objective explicitly into pillar 1. Portugal provides a particularly clear overview of gender mainstreaming in pillar I. In almost all guidelines of the first pillar, the equality objective has been integrated.

Approaches adopted by other Member States include giving statutory rights to access to active labour market policies - Denmark, Germany - or positive action to ensure equal access - France.

Ensuring boys and girls have the same educational experiences is an important issue for Netherlands and UK. Netherlands and Austria also intend to promote the greater involvement of women in lifelong learning.

Tax-benefit policy is particularly important to activate and give incentives to women and men, particularly those who are currently inactive . Income tax and benefit changes in Sweden, UK, Netherlands and Ireland are likely to encourage more women to take jobs. However, it is disappointing that so few reports address the gender issue in the context of tax-benefit incentives

Denmark, Greece, Austria, Portugal, Finland, Sweden and the UK have mainstreamed gender in pillar II. Other Member States do not provide information. The measures announced are in general positive actions, mostly qualitative and largely confined to guideline 11. Austria, Finland and the UK have attempted to analyse and elaborate measures taking into account ex-ante their effects on gender. Denmark plans to do so.

The lack of adequate data collection systems and procedures for assessing gender impact explains why so few countries provide detailed information. Most Member States are improving their statistical systems in order to fill this gap.

In pillar III, some Member States - Belgium, Germany, France, Ireland, Italy and Sweden - mention the role and contributions of social partners in the process of gender mainstreaming. Denmark mentions the trend in agreements concluded by the social partners, to give a higher priority to a more flexible organisation of working time in order to allow women and men to better reconcile work and family life. However, considering the important role of social partners in the implementation of the guidelines in general and on adaptability in particular, their weak and often non-existent contribution is surprising.

As a conclusion, it can be stated that the aim of gender mainstreaming in the four pillars of the guidelines is underway, but further efforts will be needed to achieve a full integration of the equality dimension. Many Member States are still in the preparatory or early stage of this process. Particular problems exist because of the absence of statistical data. Application of gender impact assessment needs to be further developed. No targets or indicators to monitor success have been specifically mentioned.

Although increasing the employment rate of women is an objective of crucial importance, six Member States do not give direct attention to this aim under guideline 20 – see table 10, and only a few - Greece, France, Austria, Luxembourg and Spain - focus on the specific objective of reducing the gender unemployment gap under guideline 20. However, most Member States seem to be tackling this issue within the measures taken under pillar I.

The aim of reducing excessive segregation in the labour market has become the major policy objective of this guideline. Table 10 shows that the three countries with the highest levels of segregation: - Finland, Sweden and Denmark - are presenting measures to improve the situation. The Danish (and also Belgian) approach of targeting bottleneck areas deserves attention as it tends to work with the grain of market forces to increase women's employment, often in sectors and occupations where women are underrepresented. Only Greece, Austria and Netherlands do not present measures to combat segregation. Measures range from diversification of education, training and occupational choices (France, Sweden, UK, Spain) to legal backing for positive action (Italy, Luxembourg). In Belgium (Flanders), bottleneck occupations are targeted to promote a higher participation of women. Women applying for these occupations are offered specific actions such as, pre-training, separate training modules and support structures (including flexible childcare).

It is interesting to note that some countries mention the improvement of opportunities for women in management positions in the public administration. This idea is well developed in France. As an important employer, governments can set a good example by tackling segregation in public administration.

While most measures focus on increasing the supply of female labour in sectors or occupations that are male-dominated, others focus on increasing the demand for women in male dominated sectors and occupations. None of the Member States provide information on the effectiveness of these measures. Experience in the European Union suggests, however, that a policy-mix involving both types of measures is the best guarantee of achieving results in tackling the segregation of the labour market.

The reference to policies to promote equal pay for equal work or work of equal value and to diminish differentials in incomes is new in the 1999 Guidelines. The response has been generally positive. However, some Member States where a relatively high wage gap has been identified (see section 5.1.4) either do not propose any measures - Netherlands, Greece – or propose measures that are too general for addressing the problem at stake. In the UK, while progress can be expected with the introduction of a national minimum wage, given that women tend to be in lower paid jobs, its effects on demand remain to be assessed.

Noteworthy policy responses include that of France where the Government intends to publish a practical guide on equal pay addressed to those who are involved in wage bargaining in enterprises. An intensive training on equal treatment legislation for social partners and control services (services d'inspection) is also envisaged. Austria plans an amendment of the Equal Treatment Act that provides for improved tools to enforce mandatory equal treatment; non-discriminatory job-evaluation models will be developed in the future.

At a more advanced level, in the inter-professional agreement (1999-2000) in Belgium, social partners committed themselves to review systems of job classification, if they cause inequalities between both sexes. In Finland, the collective agreement that ends in January 2000 includes a special provision for women and low-paid jobs. The social partners are promoting equal pay by devising and introducing systems for assessing job demands in individual companies and sectors. In Sweden the Equal Status Act has stipulated since 1992 that all enterprises with more than 10 employees shall prepare action plans on equal opportunities. In Finland this ceiling is 30 employees.

It is clear that the commitment of Member States to promoting family-friendly employment policies varies widely. Only in Sweden and Finland do workers with small children have the right to work part-time (it is envisaged in Netherlands). Campaigns and codes of good practice to encourage businesses to adopt more family-friendly policies are more widespread.

Under this heading important efforts are made or are planned by those countries with a considerable lack of childcare provisions: Germany, Greece, Ireland, Netherlands, Austria, Portugal, Italy and the UK. Denmark, Finland and Sweden and to a lesser extent Belgium and France have very developed systems of public childcare provision, even for very small children. However, Denmark and Sweden are still attempting to improve the situation.

A limited number of Member States - Belgium, Greece, Spain, Finland and Sweden - mention that they intend to increase care facilities for the elderly. It is striking that concrete initiatives on care for all other dependants (disabled, sick relatives) are lacking in nearly all the implementation reports (see table 11).

Greece makes no mention of parental leave in their implementation reports, and in the UK this will not be introduced until December 1999 (the deadline for the UK's implementation of the Directive is 15.12.99). Very generous parental leave is granted in Sweden and in Finland, and the latter is considering how to increase the number of men who take advantage of their right to parental leave, for example by reserving one month for fathers (this is already the case in Sweden). New legislation concerning family leaves has been amended in Finland with a right to miss work for compelling family reasons which is not restricted to children only. A number of Member States - Belgium, Greece, Spain, France, Netherlands, Ireland, Austria and Sweden - have flexible parental leave, for example the ability to take part-time work with reduced payment. In Luxembourg, this has been incorporated in the law on parental leave. Laws on parental leave are being prepared as well in Italy and Portugal. Denmark is one of the few countries to make the connection between parental leave and flexible or family-friendly employment practices. Spain is preparing legislation on reconciliation of family and work including flexible maternity leave and an integral programme of family support.

This guideline, which remains unchanged from last year, did not receive much attention by the Member States this year. Measures presented are often limited to the issue of reconciliation of work and family life, active labour market policy and increased efforts in training. Tax and benefit changes that increase the financial incentives to move into work are also mentioned.

Attention to single parents as a group is important in this context; in Spain and the UK they are mentioned as a specific group targeted by policy. The UK highlights the New Deal for Lone Parents as a scheme designed to improve job prospects and the employability of lone parents. The return of those who took parental leave to their former job is an issue raised by some countries. Activating tax-benefit systems - Denmark, France Netherlands and the UK - can provide incentives to returnees to consider low-paid jobs, whilst for others generous parental leave schemes help to maintain attachment to employers. It is worth highlighting the few Member States who do propose indicators - Belgium, Greece, France, and Austria.

The aim of the present section is to illustrate how the Employment Guidelines are being transposed into concrete policy action across the Union, by presenting examples of good practice, as suggested by the Member States in their NAPs. A full list of suggestions can be found in Annex 1. In selecting the following examples, priority was given to those cases for which a minimum monitoring or evaluation effort has been carried out. Policies that were subject to appraisal in the 1998 Joint Employment Report were not considered. Most of them have been selected for more in-depth evaluation in the "peer review " which the Commission has initiated in collaboration with Member States.

The purpose of the peer review is to submit policies which are considered by individual Member States as examples of good practice to multilateral and independent expert assessment, with a view to their dissemination. The Commission, having recognised the potential of using this method, has launched a programme of peer reviews of employment and labour market policies in co-operation with Member States and under the aegis of the Employment and Labour Market Committee (ELC).The essence of this method is an examination of the transferability of a policy presented by a "host country" by several interested "peer countries". The core activity in each Peer review is a seminar complemented by a site visit. It is a structured activity based on a number of expert papers prepared in advance specifically for this exercise. The conclusions of the evaluation will be published by the Commission

The selection of good practices for review has been made in accordance with the following process. Firstly, Member States have been asked to confirm their willingness to participate as host countries in peer reviews of their own good practices. Secondly, each Member State has been asked to express four preferences for participation as peers in the review teams on the basis of the list of candidate policies. The most frequently preferred policies have been selected for the peer review process in such a way as to ensure a balanced participation of all Member States during the year. The following peer reviews had already been carried out by July 1999:

• Reduction of non-wage labour costs, particularly for low-paid labour (Netherlands);
• Women Entrepreneurship - Business Advisors for Women (Sweden);
• Promoting Continuous training in Micro- and Small Enterprises (Portugal);
• Activation and individual employment service (Finland).

For the second semester 1999, a second series of peer reviews is planned including the following policies:

• "New Services – Jobs for Young People" programme (France);
• Lifelong learning policies (UK);
• Policies for the promotion of self employment (Germany and Italy);
• Active policies against youth unemployment (Denmark and the UK);
• Reduction and reorganisation of working time (France);
• Social Partners Agreement on employment stability (Spain).

1. "Inserjovem" and "Reage" initiatives (Portugal)

Objectives

These two initiatives incorporating the preventive approach required by guidelines 1 (Inserjovem) and 2 (Reage) have been developed and implemented in 1998. The implementation of the preventive approach has involved a major innovation in the form of a fully new model of intervention by the PES.

Policy mechanisms

The preventive approach involves addressing every young and adult unemployed person before they reach 3 or 6 months unemployment in order to define an individual employment plan. Depending on the individual's situation, the intervention of the PES consists either in direct placement into a job, in counselling phased according to the individual's difficulties and needs (three levels of counselling exist ranging from the support to job search to more intensive guidance) or in placement into vocational training or in existing employment programmes.

This new model implied the setting-up of a specific team of professional counsellors and technicians (insertion team) in each employment centre, to ensure the preparation, the management and the follow-up of the individual pathway which is formalised in the personal employment plan agreed between the unemployed and the insertion team. All information regarding the individual's active participation and the follow-up of the individual plan are registered in a follow-up agreement. The new model also involved a complete reshuffling of the PES information system to monitor the early identification of those at risk and ensure a systematic statistical follow-up of implementation.

Framework conditions

The implementation of the preventive approach is implemented in the framework of territorial pacts and regional networks for employment. By the end 1998, it concerned 11 networks and 3 pacts covering 25% of the total continental population and 30% of the registered unemployed. The foreseen extension of the regional networks should mean that 75% of the population will be covered by the end of 1999 and 100% by 2000. The principal innovation in this original approach is that it ensures a strong involvement of the local SMEs and allows the effective use of existing partnerships, notably with the education system, to provide both training opportunities and the certification of the training followed by the unemployed.

Evaluation/monitoring results

The first results available on the basis of the common policy indicators agreed between the Commission and the Member States are encouraging: only 5.8% of young people and 1.8% of adults had not been offered any action before reaching 6 or 12 months unemployment (in 12 of the regions presently covered by the new approach). However, the number of those who did not attend the first interview triggering the personal employment plan remains quite high (nearly 50% of the young and 44% of the adult unemployed). This probably reflects remaining weaknesses in the benefit system which only covers some of the job seekers and the still insufficient share of the PES in the job vacancies market.

2. Activation measures (Belgium)

Policy context

The creation of work for very long-term unemployed by means of subsidised (temporary) employment has been an important point on the political agendas of the regional and federal governments in Belgium for several years. Several instruments have been launched: WEP+, Smet-jobs, LAE (Local Agencies for Employment), social employment for persons receiving a subsistence level allowance (art. 60), social employment in the private sector (art. 61) and WEP-privé. All are based on the awareness that, in addition to a lowering of the wage costs, initiatives have also to be taken concerning obstacles on the supply side (through intensive counselling, training, employment habituation and real labour experience).

Local Agencies for Employment (LAE)

The LAEs respond to the need for services not yet met by the market, mainly from households but also from non-commercial associations and municipalities. By offering the opportunity to acquire useful work experience, the LAE system creates re-integration opportunities for long-term unemployed, who cannot be easily integrated in the labour market. The financing of the jobs is assured by the activation of the unemployment allowances/subsistence level allowance and by a reduction in taxes

At the end of June 1998, 552 municipalities in Belgium, 94% of the total, had a recognised LAE. The number of users is about 110,000. The number of employees has risen to 41,000, about 83% of whom are female. The amount of work realised equals 12 million hours. All these indicators show rapid and continued growth since the first year of implementation, 1995.

The success of the system can partly be explained by its flexibility, the link with training opportunities, constant improvements (such as the introduction of a labour agreement) and expansion (via the system of the service vouchers). The question arises as to whether job placement through LAEs may represent some unfair competition with "standard" jobs in the normal economy and whether participants will be able or willing to work within the normal economy without subsidy , which is the ultimate purpose of the measure.

The Smet jobs

The so-called "Smet-jobs" create, since March 1998, supplementary jobs in services, essentially in the private sector, and are equally oriented towards long-term unemployed. Funding is assured by the activation of the unemployment allowances and by the exemption of the social charges normally paid by the employer. The unemployed person receives a work contract and is employed in a normal company for a maximum period of three years, receiving a wage comparable to his colleagues'. In order not to bind the employee too tightly to a Smet-job, the contract can be cancelled by each of the parties subject to seven days notice. The existing personnel cannot be replaced by employees operating in the framework of a Smet-job.

In March 1999, there were more than 6,000 employees involved, equally spread among men and women. About 71% of the Smet-jobs are half time jobs. In 1999 this measure will cost about € 60 million (58% is wage subsidies, 42%, reductions of social contributions).

The Smet-jobs are equally spread across sectors. In 75% of the projects, the employers are SMEs. Larger companies are already obliged to recruit a certain percentage of apprentices and low qualified unemployed in the framework of other labour market measures or in the context of collective agreements.

The main risk of Smet-jobs is that they may not lead necessarily to stable employment as companies are not obliged to transform these jobs in permanents ones or to train Smet-job holders who might therefore not be able to acquire the knowledge and skills needed to obtain a stable job in future. Given the short time elapsed since its implementation, it is still too early to evaluate the measure on this point.

3. Additional school support scheme (Greece)

Objectives

This pilot measure is part of a wider reform of the general education curricula and aims at reducing school failure and drop-out rates in compulsory education.

The measure combines different actions: individualised support to pupils having poor school performance through the provision of specific teaching either during school time or during - summer holidays; specific training of teachers and diversification of the educational material; broader action such as the improvement of the physical infrastructure of schools, notably of their technological equipment; organisation of information seminars for the local authorities and bodies and provision of counselling to the parents of pupils encountering difficulties.

Evaluation/Monitoring

By addressing the problem at the first levels of the education system, the measure can contribute to improving the quality of basic education and to ensuring better chances for those who continue at further levels.

The implementation started in school year 1997/98 in 34 schools (involving 7000 pupils) and is to be progressively extended to cover 102 schools by the year 2000. During the first stage of implementation, pupils benefiting from a special learning support represented roughly half of the total (3774). Other quantitative data are available regarding the different actions carried-out (information seminars, teachers involved, amount of teaching hours delivered for the specific support) and/or their immediate results in terms of equipment and teaching material.

The measure appears to have a positive impact on pupils' motivation for learning and on their self-esteem as well as on the pupil-teacher relationship. It also benefited indirectly to other pupils by improving their educational environment. It has apparently been targeted at areas showing the highest levels of drop-outs and school failure. However, the information provided is insufficient to assess the full scale of the problem in Greece and the effectiveness of the measure (drop-out and failure rates in these areas) cannot be compared with the initial situation.

4. Support at the work place for persons with disabilities (Sweden)

Objectives

To integrate disabled people into jobs and maintain others in their current posts. To acting as a cutting edge for the development of approaches using new technology.

Policy mechanisms

A framework is determined nationally by the Swedish Labour Market Board (AMS), and implemented throughout the labour market administration. The practical development commonly happens at the local level, that is, at an employability institute which engages technical consultants when necessary.

The development of new approaches often occurs in co-operation with the social insurance office, which also has some funds at it disposal and can contribute to the costs. Other actors are drawn from institutions and organisations that are on the cutting edge of rapid technological developments.

Evaluation

On average, more than 10 developmental work places are created every year. In turn, they have led to the installation of about 400 computer-equipped work places a year for disabled persons.

Detailed monitoring information is not currently collected on the programme, however, qualitative studies suggest that it has been effective in its objectives.

Pillar II - Entrepreneurship

5. The "Single Counter" to assist companies start-up in the Catania Municipality (Italy)

In Italy, as in several other Member States, delays in company start ups and the excessive number of procedures for new business are a major concern. On average, more than 100 days are required for a new company registration and new entrepreneurs need to pass through more than fifteen different procedures.

The major goal is to succeed in streamlining administrative requirements and achieving a progressive and considerable reduction of the burdens on enterprises. In pursuance of law no. 59/1997 and law no. 191/1998 (the so-called "Bassanini laws"), Italy has undertaken to deregulate and streamline 122 procedures laid down in over 400 administrative provisions.

In particular, the Government passed the "Single Counter" regulation. This regulation combines all the procedures relative to the localisation, implementation, extension, reorganisation and operation of all production sites, including commercial facilities. The Single Counter regulation shall become operational in 1999.

However, at local level there are already success stories of administrations using the Single Counter concept. In Catania Municipality (Sicily), the Single Counter has been operational for two years within the Investia Catania Project and can be mentioned as an example of good local practice. 252 projects have been submitted to this Single Counter and 40 initiatives that have already been started, with an overall investment in excess of € 120 Million and the creation of 1,700 new jobs. As a rule, all the permits for new enterprises or for the extension of existing enterprises are issued within 60 days. This initiative has been welcomed, in particular, by entrepreneurs.

Pillar III - Adaptability

6. Labour Foundations for the construction industry in Asturias (Spain)

Objectives

The Foundation is a non-profit structure established in 1988 through the collective labour agreement between social partners in the construction sector. Improving workers' employability is part of the global strategy aiming at improving the competitiveness of the companies.

Policy mechanism

The Foundation directly contributes to the improvement of workers' employability through its vocational training schools which provide initial vocational training, continuous training for the employees of the sector and training for the unemployed. Another important action is the provision of placement services through its own placement agency which was set up in 1997 following the deregulation of the PES.

The Foundation also contributes to securing employment by providing financial assistance to the workers having high seniority in the sector or the same company. This mechanism, which has probably gained in importance since the recent legal decision of freezing seniority bonuses, enables a redistribution of seniority labour costs within the sector and thus ensures more balanced competition between companies.

It operates through two funds allocated respectively to each of these main functions and is resource by monthly contributions from the companies and workers (4.5% of the gross wage cost) and subsidies from public administration and institutions. The training activity also benefits from the financial support of the national public employment and training agency.

Framework conditions

The Foundation has been set up in a region and a sector particularly affected by the recession since the mid-nineties and suffering from both high unemployment and acute shortages of skilled labour. The construction sector may have a particular importance as a substitute to the traditional declining industries such as steel and coal mining.

Evaluation results

Evaluation mainly concerns the effectiveness of training for labour market integration and shows the positive effect of a training adapted to the needs of the companies and sector: the placement rate of trainees was 74% over the 1994-98 period; 62% of the job offers actually filled by the placement agency were taken by trainees. However, there is still a shortage of skilled labour, in particular of experienced skilled labour, which apparently accounts for the rather low coverage of the job offers managed by the placement service (55% of the 743 job offers).

Pillar IV - Equal Opportunities

7. The Development of Children's Day Care (Finland)

The availability of children's day care makes it easier for both parents to have jobs.

The national government sets the framework and municipalities implement provision. The local authorities spend around € 1.3 billion a year with another € 0.4 billion coming from central government subsidies.

All children under 7 years of age have the right to a full-time, municipal child-care place. Although provision is subsidised, charges related to income are payable. For children under 3 years of age it is also possible to get support for home care if parents choose that option. Children attending school receive a free warm meal at school.

In Finland subsidised child-care services of high-quality have made it possible for mothers with small children to participate in the labour market – often on a full time basis. In 1998 the labour force participation rate among women aged 25-54 was 84 per cent (among men of the same age it was 90 per cent). Only 16 per cent of women and 7 per cent of men worked part-time in 1998.

The cost of the child-care services is estimated by the Government to be 1.5% of GDP, that is a significant component of total general Government expenditure (around 51% of GDP).

The general view in Finland is that the day care services provided by municipalities and free meals at school are, indeed, of high quality. This makes it easy for parents to make the decision to leave their children in day care, and allows women to work full time in the labour market.

The Government is extending child care services by arranging free pre-school education for all children who are 6 years of age in year 2000. No costs are presented in the NAP, but the measure will be implemented within the existing budget framework for 2000-3.

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• Local Employment Agencies
• Activation of unemployment benefit in enterprises (Smet-jobs)
• Professional transition programmes (PTP)

• Youth measures of activation

• Partnership training in Thuringia
• Bilateral vocational training projects
• Initiative "Women give new impetus for technology"

• The OAED Employment Promotion Centres
• Additional school support

• Labour foundation in the construction industry in Asturias
• Economic Development Agency of La Rioja

• Negotiated reduction of working time
• "New Services – Jobs for Young People" programme

• The "Single Counter" to assist companies start-up in the Catania Municipality
• The Territorial Employment Pact of Lecce

• Measures en faveur de l'emploi des jeunes
• Aides à l'embauche des chômeurs
• Formation, reconversion et adaptation professionnelles en faveur des chômeurs

• Flexibility and security
• Deployment of Job-seekers (Youth) Act

• "Inserjovem" and "Reage" initiatives
• Training of long-term unemployed, including beneficiaries of the guaranteed minimum income
• National Programme of Traineeships

• Securing the availability of labour
• Children's day care
• Implementation of the reform of labour market policy

• Support at the work place for persons with disabilities
• Equal opportunity plans

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The performance indicators comprise 9 selected indicators for each country 1994,1996-1998 . These indicators are:

Employment rates by gender

Full-time equivalent employment rates by gender

Unemployment rates by gender

Youth unemployment ratio by gender

Long-term unemployment rate by gender

Employment growth

Real GDP growth

Labour productivity growth

Real unit labour costs

The employment rate represents persons in employment as a percentage of the population of working age.

The source for employment data is the Eurostat benchmark series, in the age bracket of 15-99. The benchmark series consists of the best available statistical data to aggregate employment. The national statistical institutes and Eurostat have agreed that, currently the best statistical sources for monitoring trends in total employment are :

• Community LFS: (B, EL, IRL,UK)
• national LFS annual average ( E, I, A, P, FIN, S )
• national accounts ( D, F, L ),
• labour accounts ( NL ) and registers ( DK )

Population data comes from the European Labour Force Survey, in the age bracket 15-64.

For all member states except Austria, Netherlands and Denmark, the gender breakdown is achieved by weighting the total by LFS gender distribution for each year concerned. In the former case a gender breakdown exists. For the 1998 series the gender breakdown of 1997 in the benchmark series have been used for these countries . In the case of Ireland 1997 LFS gender breakdown have been used.

Full-time equivalent employment, which equals the number of full-time equivalent jobs, is defined as total hours worked divided by the average annual number of hours worked in full-time jobs within the economic territory .

The full-time equivalent employment rate is calculated by dividing the full-time equivalent employment (as defined above), by the total population in working age.

The source is Eurostat LFS. In the case of Ireland the 1998 figure have been obtained by using 1998 benchmarks and ratios from 1997. For Sweden, Austria and Finland the same method have been applied but it is the 1995 ratios to 1994 benchmark data.

The information relates to a reference week, which is chosen to be as far as possible representative of the situation throughout the year.

The Community Labour Force Survey contains information on the hours worked in a person’s main employment (first job) and also, for persons with more than one job, those worked in a second job. To obtain the total number of hours worked it is necessary to add together the hours worked in the first and second jobs.

Employed persons with a second job are also added to the denominator to provide a more exact calculation.

Unemployment rates represent unemployed persons as a percentage of the labour force. The source is Eurostat, " Harmonised Unemployment " . All data are yearly averages.

Youth unemployment ratio represents youth unemployed as a percentage of youth population. In this case the age bracket is 15-24. The indicator comprises two sources. Youth unemployment data are taken from Eurostat, " Harmonised Unemployment " which provides yearly averages, in order to avoid bias caused by young persons leaving or taking a break from education in Spring, normally the time of the year chosen for the Labour Force Surveys. The population figures are taken from the European LFS. For Ireland 1998 the population figure of 1997 is used. The population figures for Austria, Sweden and Finland 1994 are taken from national sources.

This indicator represents long-term unemployed as a percentage of the labour force (compare unemployment rate ). All unemployed 12 months or more are taken into account. The source is LFS. For Austria, Sweden and Finland all 1994 figures correspond to 1995.Comprises of all employed aged 15 and over.

The source is the "Benchmark series" and the figures are growth rates corresponding to yearly changes and to the 1994/1998 average growth.

The source is DG II economic data pocket book and are collected from Eurostat New Chronos3. The latest updates available have been used (1/7/99). The figures are growth rates corresponding to yearly changes and to the 1994/1998 average growth

Labour productivity: % change p.a. in GDP at constant market prices per person employed.

The source is DG II economic data pocket book and are collected from Eurostat New Chronos. The latest updates available have been used (1/7/99). The figures are growth rates corresponding to change from one year to another and a 1994/1998 average.

Defined as nominal unit labour costs deflated by GDP price deflator

The source is DG II economic data pocket book and are collected from Eurostat New Chronos. The latest updates available have been used (1/7/99) . The figures are growth rates corresponding to change from one year to another and a 1994/1998 average.

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The diamond-chart approach is used in this report to present a synthetic and comparative assessment of Member States' employment performance. It consists of the presentation of a set of selected indicators, describing the performance of each country, in the form of a four-axis diamond. The position of each Member State is determined by its relative location vis-à-vis reference standards within the EU, which are defined as the average of the three best performances for each indicator in 1998. Two diamonds are presented portraying respectively the employment and unemployment performances. The larger the diamond, the more favourable the situation for the Member State concerned.

This method provides:

• a simplified presentation of multiple performance indicators regarding employment as well as unemployment;
• a snapshot of the relative weaknesses and strengths of each country's labour market situation, allowing identification of the major policy challenges;
• the possibility of a comparison over time of labour market performances, allowing for the detection of progress or decline with respect to each individual indicator.

The full results of the exercise are presented in Part II of this Report, where the diamond charts of each Member State are included in the respective country fiche.

The selection of the diamond axes for inclusion in the analysis is conditioned by the basic performance indicators agreed for monitoring the Employment Guidelines. For the diamond describing the performance in terms of employment, the following four indicators were retained: average employment growth rate over the last five years, employment rate, gender gap between employment rates and the employment rate of workers in the age bracket 50-64. For the diamond describing unemployment, those selected were: the unemployment rate, the youth unemployment ratio (young unemployed as a ratio of young population), long-term unemployment rate and gender gap between unemployment rates.

The choice of indicators being largely determined by the political priorities defined in the Employment Guidelines, it is inevitable that they are in some cases correlated between themselves (for instance, the overall unemployment rate will tend to reflect the youth unemployment ratio and vice-versa). While such correlation's, where they exist, may affect the comparisons of the size of diamonds across countries, they do not, however, compromise the three purposes of this methodology as explained above.

The original data was transformed in order to make it suitable for use in the diamond charts. The axes depict performance in relation to reference standards. In each case the underlying labour market indicators for the years 1998 and 1994 are transformed into index values with a common scale in which the highest value corresponds to the average of the three best performing Member States (best practice – see table below) and is always equal to "1" and the lowest value is equal to "0.1". The index values for the other countries reflect their relative position in the field between best and worst practice.

Thus a higher score is always indicative of better performance. The countries with the best performances receive a score of "1". Worst practice receives a score of "0.1", and a score of "0.55" indicates performance at the midpoint of the range defined by best and worst practice, i.e. if the lowest unemployment rate is 5% and the highest 15%, then a country with an unemployment rate of 10% is scored as "0.55" on the index scale for this indicator. It is important to emphasise that the reference standards here, in contrast to theoretical benchmarks, are always relative to the performance of the other countries included in the comparison (here 15 EU Member States). Thus each of the performance index measures compares the performance of an individual country with the performance of the universe of all other countries included in the exercise in the reference year. In this report the year 1998 was used for the purpose of identifying best practice.

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