Labour Market and Wage Developments in Europe 2024

Foreword

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.

Explore the foreword

Executive Vice-President Roxana Mînzatu

Executive Vice-President Roxana Mînzatu
Social Rights and Skills, Quality Jobs and Preparedness

Summary and main findings

Since 2019, EU employment has increased by 5.5 million people despite economic challenges.

The increase in the EU labour force has been the main driver of employment growth.

The labour market also seems to have benefited from some structural improvements but in the medium-term, low productivity growth could jeopardise these favourable trends.

Explore the summary and main findings

Chapter 1

General labour market conditions in the EU and its Member States

In the first half of 2024, economic growth gained momentum with GDP expanding by 0.3 % in the EU and the euro area in both the first and second quarters. Annual GDP growth in the EU is projected to reach 0.9 % in 2024 and improve to 1.5 % in 2025. Geopolitical tensions and the persistent inflation in the United States are near-term downside risks for inflation and economic growth, while private consumption and external demand are expected to support growth. The labour market is expected to remain strong with unemployment hovering around its historically low rate of 6 % in both years.

Learn about labour market trends in the EU

Chapter 2

Wages and labour costs developments in the EU and its Member States

Wage developments since 2022 have been shaped to a large extent by the pace of inflation and the challenging economic environment. The high inflation in 2022 sparked by the energy crisis led to a delayed increase in nominal wages, resulting in significant losses in real wages and households’ purchasing power. Despite low unemployment rates and the implementation of support measures, living standards for workers and their families declined sharply and a number of social indicators deteriorated. However, inflation rates dropped in 2023 due to lower energy prices, and real wages started to recover mildly in the second half of the year, driven by robust nominal wage growth and falling inflation. Real gross disposable household income already started to increase at the beginning of 2023, also thanks to support measures. Looking forward, wage growth is likely to be constrained by the fragile growth context, with uncertainty around future inflation dynamics and increased concerns around productivity and competitiveness.

Discover wage and labour cost trends in the EU

Chapter 3

Promoting the labour force participation and employment of older people in the EU

The EU is undergoing a major demographic transformation. People are living longer, and their health is improving. Life expectancy in the EU (currently at 78.9 years for men and 84.2 years for women) has been increasing, together with improvements in health and work capacity. At the same time, declining fertility rates contribute to an ageing population and a shrinking working-age population, which hampers the EU’s growth potential and jeopardises the sustainability of its social welfare model. However, over the past decade, the increasing employment of older workers (aged 55 to 64) has outweighed the impact of ageing on the labour supply.

Learn how the EU supports older workers

Chapter 1

Labour market remained strong

Despite sluggish economic growth in 2023, the labour market remained strong. After a temporary dip in the second quarter of 2023, employment growth rebounded on a quarter-on-quarter basis reaching 0.3 % in the third quarter and 0.2 % in the fourth quarter (0.2 % and 0.3 % for the euro area). Yearly employment growth declined slightly from 1.3 % in the fourth quarter of 2022 to 1.1 % in the fourth quarter of 2023, still above pre-pandemic levels. Consequently, over 2.6 million jobs were created in the EU in 2023 (2.4 million in the euro area). By the last quarter of 2023, the employment rate (20-64) hit a record of 75.5 % (74.9 % for the euro area), and the activity rate rose to 80.2 %, up by 0.7 percentage points (hereafter pps) compared with the previous year (75.5 % for the euro area). This good labour market performance also continued in the first half of 2024, with the employment rate reaching 75.8 % in the second quarter of 2024 (75.3 % in the euro area).

Explore the labour market trends in the EU

Annualised growth rates for GDP, employment and productivity in periods of positive GDP growth

Chapter 2

Developments in real wages

However, despite the expected increases in 2024, real wages could still be 1.1 % below their pre-pandemic levels, with wide differences across Member States. The gap compared with their 2019 levels is expected to remain particularly large in Italy, Greece (which display low nominal wage growth) as well as Czechia (which faces very high inflation), Germany, France and Finland. Nonetheless, real wages in many Member States in southern and central and eastern Europe are converging towards the EU average. Notably, the gap in compensation per employee in purchasing power standards relative to the EU average is projected to be lower in 2024 than in 2019 in all central and eastern European Member States. By contrast, in southern European Member States, this gap is set to decrease sizeably only in Portugal, while it is expected to grow in Greece, Cyprus and Malta.

Learn more about the developments in real wages

Real wage changes (%) compared with pre-pandemic levels (2019)

Chapter 3

Expected change in population ageing

The rising share of inactive people with disabilities or long-term illness is expected to exert a limited negative effect on the overall activity rate. The trend of a growing share of inactive people with disabilities is largely a direct consequence of an increasing effective retirement age, as health problems worsen with age. The increasing use of disability schemes and other alternative schemes to exit from the labour market is also linked to the tightening of retirement schemes. However, the increase in inactivity due to disability is predicted to decrease the active population by around 0.2 million by 2030 and 0.4 million by 2040, indicating a high net positive effect of pension reforms on the labour market activity of older people.

Discover more about how the EU supports older workers

Expected change from 2022 (in millions) in non-retired people in the EU

Expected change from 2022 (in millions) in non-retired people in the EU

Analysis

Conclusions

General labour market conditions in the EU and its Member States

The EU labour market has remained resilient despite subdued growth in 2023 and early 2024.

Labour market trends in the EU

Conclusions

Wages and labour costs developments in the EU and its Member States

Despite a rebound in real wages since the second half of 2023, some social effects of the high inflation period persist for low-income and lower middle-income households.

Wage and cost trends in the EU

Conclusions

Promoting the labour force participation and employment of older people in the EU

People between the ages of 55 and 64 participate in the labour market more than in the past.

Support for older workers in the EU