The Hidden Potential Of Europe’s Economically Inactive

Anna Ludwinek

More than one in four working age adults in Europe are classified as economically inactive. They are not included in official employment statistics, are often economically and socially marginalised, and lack the resources to participate fully in society. This is despite the fact that most of them would like to work in some way or another. As the economic recovery gains traction in Europe it is important to focus on opportunities for those who find themselves furthest from the labour market.

Raising employment levels remains a key EU objective. All Member States subscribe to the European Employment Strategy and the Europe 2020 targets. There has been an entirely justifiable emphasis from policymakers on people out of work following the financial crisis, finding clear pathways towards meaningful employment. Yet, despite the overall employment focus, there has been little attention given to a group of people outside of the labour market who do not feature in the unemployment statistics: the so-called inactive population.

Looking at the numbers, it is a substantial population in Europe. At EU level, Eurostat data shows that in 2015 27.5% of people aged 15–64 years were economically inactive. And, although the figures have been steadily declining from 31% in 2002, this is still a considerable group so far neglected in the policy discussion. Indeed, in most EU countries, there is a substantial section of the population that is not working and does not figure in unemployment statistics but retains employment potential.

Even in countries with low unemployment such as Sweden, Germany, and the Netherlands around 20% of the population is inactive. This jumps to alarmingly high levels of over 30% in Italy, Belgium, Ireland, Malta and Romania to name just a few.

This inactive population is heterogeneous so different characteristics of such people should be kept in mind when trying to design re-activation policies. In some countries, such as Austria, Cyprus, Greece and Ireland, homemakers form a particularly large group. Ireland also has a relatively large proportion of people with a disability among the inactive and that is true too of Belgium, the Czech Republic, Denmark, Estonia, Finland and others.

Many hurdles to cross

The wide heterogeneity among the inactive population means that they also face very different barriers to re-integration into the labour market. Knowing and understanding those barriers is critical for policymakers tasked with designing policies and/or initiatives that can effectively address those challenges.

Eurofound’s report highlights some of the key barriers for the four subgroups of the inactive: in education, homemakers, retired or disabled. Lack of work experience is most common among people in education and homemakers, and less of an issue for the disabled and retirees of working age. Homemakers and retirees are most likely to have a low-level of education. Disabled people and retirees more often report having a health problem. About half of disabled people who are inactive report a high level of social exclusion. What is common to many countries is that large numbers of inactive people face multiple barriers to employment and this makes activation policies ever more challenging. For example, inactive people with a low-level of education and those caring for elderly people often have to care for children as well. Inactive people who feel socially excluded often lack work experience, have physical or mental health problems, act as sole carers for elderly relatives or are at risk of depression.

Despite the many hurdles that inactive people may face on their path to a job a significant majority report that they would like to work. Moreover, as many as 70% said they would like to work 16 hours or more per week. This may indicate that a lot of inactive people are looking for a fairly substantial and a meaningful type of work rather than a mere few hours. It could also mean that this desire or willingness to work is motivated by one’s financial situation. Retirees and people unable to work due to illness or disability are least likely to express a desire to work. However, even among these groups, the majority wants to work (76% of the disabled and 63% of retirees); a high proportion even want to work 32 hours or more (47% of the disabled and 38% of retirees of working age).

This positive desire to work should encourage policymakers encouragement to seek more actively for policies and initiatives that capitalise on this motivation.

However, designing tailored activation policies means challenges for service providers tasked with labour market integration; for many of them, the inactive are an entirely new target group largely overlooked until now. One of the main challenges for service providers, in particular public employment services, is that of locating and reaching out to the inactive population to offer support services as there may be no mandatory requirement to register with public employment services. This is the case in Austria, Ireland and Bulgaria where efforts are being made to reach out and encourage inactive people to register. The challenge is all the greater as, due to the economic crisis, service providers report being already stretched and lacking sufficient resources to deal with even more potential clients. In addition, they operate in highly challenging labour markets, where in a number of countries, job opportunities are still scarce, especially for those who have been outside the labour market for a long time. In some countries service providers point to poor work-related capabilities (such as failing to adapt to work schedule) as a barrier which needs addressing. The location also matters: in a number of countries, for example Finland, the jobs are unevenly distributed and the public employment service highlights an unwillingness to travel for work as a potential barrier. On the other hand, service providers also cite employer attitudes and even overall lack of confidence among employers in institutional channels to fill vacancies. They may face issues, such as mental health or care responsibilities, that require coordination of different services; this seems to be problematic in several countries.

Out of the box

National and local policymakers should acknowledge the challenges that many public employment services face in trying to reach out to the inactive population and address their often complex needs. This is a role that goes beyond the standard and typical array of services they offer. Policies could seek to strengthen the capacity of local labour offices, as well as encourage stronger links with other services such as social care and healthcare, and even reach out to civil society to offer a more comprehensive range of services.

Most countries do not address the inactive population as a priority issue. But there is an increasing need for policies tailored to them. An example of an innovative and holistic approach is a multi-stakeholder-driven initiative called Convergence rolled out in France. It is a pilot project to test a new support mechanism that coordinates three public social services: employment, housing and health. An evaluation that looked specifically at the Paris-based operation (which had 236 participants) highlighted the intensified collaboration between different agencies involved in tackling social inclusion. These partnerships increased public access to adapted services in health, housing and employment, and ensured greater continuity in the support provided.

Another interesting example comes from Amsterdam where the municipality introduced ‘perspective jobs’ (perspectiefbanen), the aim of which was to help 115 long-term inactive people find employment over 2015 and 2016. To minimise the risk of competition, the scheme targeted jobs where shortages were expected – mainly in construction, technical jobs and ICT. Employers get a €8,500 subsidy per year for every person employed under this scheme for a maximum of two years, and a once-off €3,000 ‘bonus’ if the temporary job is turned into a contract of at least six months.

Finally, in the Czech Republic ‘children’s groups’ (a form of childcare) were introduced in an attempt to enhance the work–life balance of women and to help them re-enter the labour market following maternity leave. These groups have been designed for pre-school children from the age of one. They can be established by employers, churches, local administration bodies, NGOs, universities and other relevant organisations and are financed by the providers. The costs are partly tax-deductible.