Labour Market and Wage Developments in Europe 2024

In the past few years, we have witnessed a remarkably resilient EU labour market, with an all-time low unemployment rate and strong employment growth, despite a difficult economic context and heightened geopolitical tensions. More recently, this strong labour market performance has translated into favourable wage developments, with gradual increases in real wages towards the end of 2023. This has allowed households to regain some of the losses in purchasing power experienced over previous years.

However, four main challenges that could undermine European labour markets and resilience endure. First, labour and skills shortages remain acute, particularly in sectors which are key for the green and digital transitions, but also in education, care, construction and transport. As a consequence, we may experience slower adoption of new technology and reduce firms’ demand for labour. Second, real wages are not yet back to their level of 2019 and many lower and middle-income households still feel the effects of the cost-of-living crisis. Third, the long-lasting weakness in productivity growth, innovation, and investment limits the room for wages to grow and could hinder future job creation, as emphasised in the Draghi Report on ‘The future of European competitiveness’. Fourth, the last two decades have seen a nominal decline in the portion of national income allocated to employees as compensation. Thus, this raises questions on how to ensure a fair sharing of the burden of the remaining social challenges between firms and workers.

This year’s report on Labour Market and Wage Developments in Europe sheds light on the key measures we must take to ensure that the EU labour market provides high quality jobs and fair wages for its citizens. Policies should focus on guaranteeing fair working conditions and adequate wages, while supporting workers to gain the skills they need, thereby boosting productivity and competitiveness. Equally important is the integration of those furthest away from the labour market – such as women, young people, persons with disabilities and those with a migrant background. We must also empower businesses to harness the full potential of new technologies, creating the conditions for strong labour demand and quality jobs. Moreover, adequate minimum wage protection and effective collective bargaining are essential, including to support low-wage earners.

The report provides an in-depth analysis of how the labour market participation of older people can be improved. Although their employment rate has increased markedly, even allowing for significant cross-country differences, it remains below that of prime-age workers, in particular for women and persons with disabilities. Projections show in particular that women who have been outside the labour market for a major part of their lives, often due to raising a family and caring responsibilities, will still represent a large share of the population of inactive non-retired older people by 2030. To address these issues, we need not only to adopt a more targeted and tailored approach to activation and skills policies, but we should invest in the provision of high-quality and affordable services, from childcare to long-term care for older people to address the root causes of the problem. Pension reforms that promote flexible yet fair retirement pathways that guarantee adequate incomes can also be a measure to encourage women to remain in employment longer. In addition, by providing flexible working arrangements, reasonable accommodation at work, and policies against age discrimination, older individuals can benefit from better employment and working conditions.

It is time to intensify our efforts to preserve our social model, including by supporting adequate wages, introducing effective and innovative policy solutions to keep the EU’s labour market performing strongly, and boosting European competitiveness. The role of the EU remains critical in promoting fair wages, adequate working conditions, training and collective bargaining. These objectives will be at the core of the Quality Jobs and Skills agenda, a central priority of this new Commission’s mandate.