Employment and Social Developments in Europe (ESDE) 2024

1. Introduction ⁽⁴⁾

In a context of still high, albeit diminishing, inflation in the EU, economic growth in 2023 was sluggish. The expansion of real Gross Domestic Product (GDP) slowed significantly due to the erosion of real wages per employee, falling external demand, strong monetary tightening, and partial withdrawal of fiscal support⁽⁵⁾ Real GDP increased by 0.4% in 2023, after expanding by 3.4% in 2022. According to the European Commission’s Spring 2024 Economic Forecast, GDP is projected to expand by 1.0% in 2024 and by 1.6% in 2025. Annual inflation in the EU peaked at 11.5% in October 2022, before decelerating to 3.4% by the end of 2023, largely reflecting developments in energy prices. The resulting easing of inflation in food and non-energy goods and services, together with direct support measures, reduced the burden on households.

Despite these economic challenges, the labour market stayed robust in 2023, with a 1.2% increase in employment. The EU employment rate (individuals aged 20-64) reached its highest-ever level, at 75.3%. In parallel, unemployment levels remained at record lows of 6.1%. The labour market situation of notably young people, long-term unemployed people, and people in vulnerable situations all showed signs of improvement, but with significant differences to the general population. Despite these positive developments, employment growth is expected to be limited in 2024 and 2025, in a context of moderate economic growth. Improved participation in the labour market for women and underrepresented groups, such as low-skilled people, older workers, young people, people with a migrant or minority racial or ethnic background, and persons with disabilities, remains a challenge.

Labour market tightness persisted in 2023. The job vacancy rate, an indicator of unmet labour demand, remained elevated following a significant increase since 2021, but there was a slight decline in 2023 within the EU, particularly in industry and construction. The highest rates were evident in ‘administrative and support service activities’ (which include temporary employment agencies), ‘accommodation and food service activities’, ‘construction’, ‘professional, scientific and technical activities’, and information and communication. Labour market slack continued to recede.⁽⁶⁾ The recently adopted Action Plan on Labour and Skills Shortages ⁽⁷⁾ ( ) identifies five policy domains for actions to tackle labour and skills shortages. These include the activation of underrepresented groups, boosting workers’ skills acquisition to improve skills matching, ensuring better working conditions and employment quality, strengthening fair intra-EU mobility, and attracting more talent from outside the EU.

Participation of adults in formal or non-formal learning has witnessed only a modest increase in recent years. In 2022, 46.6% of people aged 25-64 in the EU engaged in education or training activities, including guided-on-the-job (GOTJ) training, ⁽⁸⁾ during the 12 months preceding the survey, an increase of 2.9 percentage points (pp) compared to 2016 (43.7%). The main reason indicated by respondents for not participating was not seeing the need for training. Those willing to participate reported barriers such as training schedule, family reasons, and costs.⁽⁹⁾ Promoting skills development and providing support for training and education remains a priority to provide more opportunities for upskilling and reskilling.

Social expenditure as a share of GDP increased in response to the COVID-19 pandemic's economic and social challenges, then subsequently declined somewhat. In 2020, public expenditure shifted towards social, health and economic priorities. This considerable expansion played a crucial role in mitigating job losses by implementing income support schemes and reinforcing existing social protection systems at the onset of the pandemic. Public expenditure on labour market policies reached a record high during the COVID-19 pandemic, at nearly 3% of GDP, but decreased in subsequent years. While expenditure on social protection benefits ⁽¹⁰⁾ increased in nominal terms, it decreased in real terms in 2022 due to inflation.

Easing inflationary pressures, together with the effects of tax-benefit systems, improved real disposable income in 2023. Primarily driven by the impact of elevated inflation on real wages, real gross disposable household income (GDHI) declined in the latter half of 2022, but showed signs of recovery in 2023. This positive development was predominantly attributed to the reduced negative effects of taxes on income and wealth, as well as to an increase in real compensation of employees. Inflation in essential items such as food and clothing can disproportionately affect lower and middle-income groups, and tax-benefit systems significantly contributed to augmenting individuals' income in 2023. This underscores the significance of social protection systems and government intervention in mitigating the financial repercussions of crises, poverty and inequality for EU households.

At-risk of poverty or social exclusion (AROPE) rates decreased slightly in 2023 (2022 incomes) and income inequality remained stable. However, these two indicators do not fully capture the declines in real household incomes and loss of purchasing power resulting from persistently high inflationary pressures in 2022. This is reflected in the severe material and social deprivation (SMSD) rate, which increased slightly during 2021-2023, particularly for those with the lowest incomes. Finally, energy poverty ⁽¹¹⁾ increased over the last two years overall, and more strongly for households at risk of poverty.

Going forward, labour market and social outcomes will be affected by subdued growth, persistent labour shortages and demographic challenges. Rising geopolitical tensions are expected to strain global and European economic growth in 2024, with disruptions to international trade. Labour shortages are anticipated to remain at record highs, posing an increasing constraint to growth. Demographic changes shaped by increased longevity and persistent low fertility are expected to have a substantial impact on the EU population. Between now and 2050, the EU is expected to lose one million people of working age each year, on average, falling to 258 million by 2030 and 236 million by 2050. This will result in a persistent pressure from labour and skills shortages, with particularly high demand for healthcare and long-term care workers. The EU social model risks becoming more imbalanced, with the sustainability of the EU pension and health systems called into question and reduced intergenerational fairness for future generations. At the same time, the health status of workers is one of the key determinants of labour force productivity.

This chapter explores the latest employment and social developments in the EU. The next section discusses the macroeconomic context, the following one presents labour market developments and trends in participation in adult learning, and the final section explores income and living conditions. This year’s chapter places a special focus on public expenditure.