Employment and Social Developments in Europe (ESDE) 2023

3. Labour Market Developments

3.1. Employment trends

The labour market in the EU remained resilient, despite the difficulties faced by the economy in the second half of 2022. Growth in GDP was accompanied by an increase in total employment, by 2.0% in the EU and 2.3% in the euro area. As a result, 213.7 million people were employed in the EU in 2022, 166.1 million of whom were in the euro area. The numbers of people employed increased in all Member States. The strongest increases were recorded in Ireland (+6.6%), Malta (+6.3%) and Lithuania (+5.1%), with the lowest in Romania (+0.1%), Poland (+0.4%), Germany and Bulgaria (+1.3% for both).

The sectors that contributed most to employment growth in 2022 were trade, transport, accommodation and food service, and technical, administrative and support activities. In those two areas, the numbers employed grew by 1.5 million and 0.8 million, respectively. In relative terms, employment increased most in information and communication (+5.1%), a sign of the high demand for advanced skills in the labour market. It rose by 2.5% in construction and 1.1% in industry, and declined by 1.6% in agriculture. The number of self-employed people grew by only 0.6%, compared to 2.2% for employees.

In 2022, the number of total hours worked overtook the 2019 level and increased more than employment. Hours worked rose by 2.8% in the EU and 3.4% in the euro area. However, hours worked per person remained 1.2% and 1.7%, respectively, below 2019 levels (i.e. before the sharp drop in 2020 due to the use of short-term work schemes during the COVID-19 crisis). Hours worked per person were already declining before 2020, at least partly due to the impact of automation (Chart 1.4). ⁽³¹⁾

Employment growth in the EU is expected to remain solid but slow in the next two years as a consequence of the deceleration in economic growth. According to the latest European Commission forecast, employment should grow by 0.5% in the EU and by 0.6% in the euro area in 2023, while it should see an increase of 0.4% and 0.5%, respectively, in 2024, a slightly better performance than predicted for other advanced economies. ⁽³²⁾ Employment rose in 2022 in the US (+3.7%) and the forecast is positive for 2023 (+1.0%), before an uptick of +0.1% in 2024. Employment is instead projected to stagnate in Japan and the UK (-0.1% and -0.2% in 2023, respectively, and -0.1% and +0.3% in 2024), after growth of +0.2% and +1.0%, respectively, in 2022 (Chart 1.5).

The employment rate for people aged 20-64 reached record levels in the EU in 2022. It rose by 1.5 pp in the EU (74.6%) and by 1.7 pp in the euro area (74.1%) (Chart 1.6), but most of this increase occurred in the first half of the year. The highest rises were recorded in Greece (+3.7 pp), Ireland (+3.3 pp), and Estonia (+2.6 pp), while the employment rate grew least in Luxembourg (+0.7 pp) and France (+0.8 pp). The EU Porto target aims to achieve an employment rate of at least 78% in the EU by 2030, and six Member States (Denmark, Estonia, Ireland, the Netherlands, Slovakia, and Sweden) are already at or above their national target.

In 2022, the gender employment gap (the difference between the employment rate of women and men aged 20-64) declined slightly, to 10.7 pp, 0.2 pp less than in 2021. The employment rate of women rose to 69.3%, while that of men grew to 80.0% for the first time. More progress is needed to meet the European Pillar of Social Rights action plan objective to halve the gender employment gap by 2030 compared to 2019.

The employment rate rose for all age groups in 2022. Compared to 2021, it grew by 2.0 pp for workers aged 15-24 (young workers) (to 34.7%), by 1.4 pp for those aged 25-54 (core workers) (to 81.8%), and by 1.8 pp for those aged 55-64 (older workers) (to 62.3%) (Chart 1.7). This meant that the employment rate for younger workers surpassed pre-pandemic figures, at 1.2 pp higher in 2022 than in 2019. ⁽³³⁾ During the same period, the employment rate increased by 1.6 pp for core workers and by 3.7 pp for older workers, arguably as a result of demographic factors (more active cohorts have replaced previous ones) and pension reforms in several Member States. ⁽³⁴⁾ The gender employment gap was far wider for older workers (12.5 pp) than for either core workers (10.5 pp) or young workers (4.7 pp).

In 2022, the employment rate rose for people aged 25-54 across all educational levels. The increase was most notable among those with up to lower secondary education, ⁽³⁵⁾ at +1.9 pp (to 63.3%). Despite the implied reduction in the gap, rates remained highest for people with medium-level vocational education ³⁶ (84.6%, +1.3 pp) and for those with tertiary education (89.7%, +1 pp), who are typically more likely to have the skills required to obtain a job in the labour market.

For recent graduates with at least upper secondary education, the employment rate recorded a sharp increase in 2022, rising by 2.8 pp compared to 2021, to 82.4%. Greece and Italy had the lowest rates (slightly above 65%), while the rate was above 90% in four Member States. ⁽³⁷⁾ In 2022, the gap between men and women in the employment rate of recent graduates was 2.2 pp (81.3% for women, 83.5% for men). In 2022, 60.1% of recent vocational education and training (VET) graduates had benefited from work-based learning and 79.7% were in employment.

The rise in employment was primarily driven by an increase in permanent and full-time workers. The share of temporary employment among workers aged 15-64 in the EU collapsed in 2020 during the COVID-19 pandemic and did not revert to the same levels in 2021 and 2022: it reached 12.1% in 2022, stable compared to 2021 and still 1.1 pp below the 2019 rate. About 23.9 million people worked on a temporary contract in the EU in 2022, 1.7 million fewer than in 2019 (25.6 million). The impact of temporary employment on employment growth declined in the second half of 2021 and 2022 because non-permanent jobs lost during the pandemic were not recovered in some sectors (e.g. manufacturing, construction, accommodation and food, wholesale and retail) due to weak job creation. ⁽³⁸⁾ In 2022, temporary work increased most among people with up to lower secondary education (460 000 more workers, to 6.4 million), but remained largely stable for people with higher educational levels (9.9 million people with upper secondary education, and 7.5 million people with tertiary education). The proportion of part-time workers aged 15-64 in the EU fell 0.1 pp in 2022, compared to 2021, to 17.6%, well below the 2019 rate (19.3%). There were almost three million fewer people working part-time in the EU in 2022 than in 2019 (34.7 million and 37.4 million, respectively). ⁽³⁹⁾ More people working full-time could represent a sign of improved working conditions, which might in turn help to address labour shortages. The proportion of workers in temporary and part-time employment remained far higher among women (13.4% and 28.4%, respectively) than men (11.0% and 8.2%, respectively). The gender gap increased by 0.1 pp in temporary employment (to 2.4 pp) and decreased by 0.3 pp in part-time employment (to 20.2 pp). Chapter 2 discusses trends and developments in different forms of employment in greater detail, broken down by sectors and occupations with labour shortages.

There are strong differences in employment between the general population and vulnerable groups, such as people with disabilities and Roma. In 2022, the disability employment gap decreased by 1.7 pp from 2021, but remained very high, at 21.4%. According to a survey from the European Union Agency for Fundamental Rights (FRA), the rate of Roma people aged 20-64 in paid work is below the official employment rate for the general population in eight Member States analysed. ⁽⁴⁰⁾ In 2021, the highest rates of employment for Roma were estimated in Hungary (62%, a gap of about 17 pp) and in Italy (61%, a gap of about 2 pp), with the lowest rates in Spain (25%, a gap of about 43 pp) and Portugal (31%, a gap of about 45 pp).