General labour market conditions in the EU and its Member States
Policy implications
As emphasised by the Competitiveness Compass, investing in human capital and closing the innovation gap with other major economies are essential for strengthening the competitiveness of the EU economy . R&D drives innovation, while a skilled workforce fosters its diffusion. Policies that promote educational attainment (tertiary education and vocational education and training), quality jobs and lifelong learning, while improving the match between supply and demand of skills, are essential to support sustainable productivity growth. This is particularly vital for the green and digital transitions and to underpin competitiveness across all sectors, as outlined in the EU Competitiveness Compass and the Clean Industrial Deal .
The Union of Skills provides a strategic framework to address skills needs across the EU. President Ursula von der Leyen’s political guidelines and Mario Draghi's report on The Future of European Competitiveness call for adapting education and training systems to meet evolving skill demands, particularly in sectors vital for the green and digital transitions . Upskilling and reskilling are crucial to support restructuring and promote a just transition, including in the context of demographic change. Improved access to high-quality adult and lifelong learning support labour mobility, job matching and productivity growth. Launched in March 2025, the Union of Skills is a strategic initiative to boost EU competitiveness through investments in human capital, fair mobility, and mutual recognition of different types of training . Under the Basic Skills Action Plan, the European Commission aims to improve basic reading, mathematics, science, digital and citizenship, promoting excellence from early childhood years to adult learning. By 2030, the target is to reduce underachievement in these areas to below 15% and raise the top performance to at least 15%. The STEM Education Strategic Plan addresses challenges in science, technology, engineering, and mathematics, aiming to unlock opportunities and ensure the EU’s technological leadership, preparedness, and global competitiveness, including by raising female participation in these fields.
Continued focus on adult learning and continuing vocational education and training is key to upskill the ageing workforce, and support workers in sectors undergoing restructuring. The Union of Skills will continue to promote individual learning accounts to help people adapt and acquire the skills needed to move into new occupations. At the same time, the rollout of micro-credentials will be expanded to facilitate skill acquisition, ensure they are trusted, understandable, digitally accessible and comparable across sectors and countries. Timely implementation of these new initiatives will improve workforce adaptability to structural changes – especially those driven by the green and digital transitions – while fostering smoother labour reallocation, higher productivity and competitiveness, improved working conditions across the EU. A new European Strategy for Vocational Education and Training has been announced to enhance the attractiveness, quality and inclusiveness of VET.
Unlocking the full potential of the EU workforce and attracting skilled talent from outside the EU is also essential, particularly in the context of an ageing population. This involves tapping into underrepresented groups and facilitating international talent mobility. The Skills Portability Initiative will explore ways to facilitate the recognition of qualifications and the free movement of talent within the EU . To further enhance mobility, the Commission will consider a legislative proposal to remove barriers to cross-border labour mobility, including unregulated professions. It will also explore actions to simplify, expand and modernise recognition processes for regulated professions. Other initiatives to better attract and retain skilled non-EU workers to the EU, such as the EU Talent Pool and Talent Partnerships will help connect job seekers from outside the EU with employers experiencing skill shortages, ensuring a more efficient match between global talent and EU labour market needs . At the same time, long-standing initiatives such as EURAXESS continue to play a key role in helping researchers worldwide identify opportunities in Europe. The platform provides support for relocating, working, and pursuing career development within Europe. In addition, the Choose Europe initiative is specifically aimed at attracting researchers, by promoting Europe as a destination for excellent research and innovation.
Enhancing job quality is essential, especially for workers in low-wage jobs within sectors with low productivity growth. They account for close to 20% of private sector employment. Improving job quality, including wages, for these jobs would not only enhance working conditions for these workers but also help alleviate acute labour shortages that are prevalent in many of these occupations. This is particularly relevant in labour intensive sectors or occupations requiring more manual skills or with higher health and safety hazards . Several EU initiatives aim at promoting fair working conditions and adequate wages, including the Directive on adequate minimum wages , the Directive on transparent and predictable working conditions and the Strategic Framework on Health and Safety at Work . The forthcoming Quality Jobs Roadmap will further support fair wages, good working conditions, training and fair job transitions for workers and self-employed .
The decline of manufacturing calls for a policy response centred on innovation and knowledge-intensive activities. Through the Clean Industrial Deal , the European Commission aims to revitalise the industrial base by supporting skill development, unlocking clean energy investment, fostering clean technologies uptake, and promoting AI diffusion across firms and SMEs. Shifting from the traditional 'take-make-dispose' model to systems based on reuse, repair, remanufacturing, and recycling, enhances economic diversification, secures access to critical materials, and creates jobs in sectors like maintenance, logistics, and eco-design. It also fosters new value chains and cross-industry innovation. In doing so, the EU can position itself as an attractive hub for manufacturing, including for energy-intensive industries, and strengthen its industrial leadership in high-growth sustainable sectors. This transformation is supported by Horizon Europe (2021–2027), the EU’s flagship research and innovation programme with a budget of EUR 95.5 billion. It analyses the impact of the green, digital, economic and demographic transitions on society and funds technologies and solutions that drive them. By fostering collaboration between research institutions, businesses, and public authorities, it accelerates innovation uptake across sectors. A proposed successor programme for 2028–2034 aims to enhance Europe’s global competitiveness and the impact of research and innovation in delivering strategic policy priorities.
Policies should foster productivity to create jobs, strengthen resilience, and boost competitiveness while advancing the green transition. Reversing the decline in manufacturing requires targeted measures to foster innovation, modernise production and accelerate the adoption of advanced technologies. This includes increased public investment in R&D and incentives for firms to adopt productivity-enhancing technologies. The growth of high-tech industries also relies on a skilled workforce. The InvestAI initiative aims to mobilise EUR 200 billion to scale up artificial intelligence across sectors. Building on this, the AI Continent Action Plan will promote AI use in strategic industries and strengthen capabilities and skills . Ensuring a skilled workforce that meets the demand of high-productivity growth sectors, particularly those driven by deep technologies, is key to accelerate technology adoption and underpin reindustrialisation . At the same time, sectors with structurally lower productivity but high societal value, such as health and education, remain key to ensure a resilient, competitive and inclusive economy.
Boosting productivity across all sectors requires balanced regulations. As indicated in the Competitiveness Compass, reducing regulatory and administrative burden will improve business dynamism and attract investments. The Compass also promotes streamlined access to EU funds and simpler administrative procedures. On 26 February 2025, the Commission adopted proposals to cut red tape and simplify rules for EU citizens and business, aiming to reduce the administrative burden by at least 25% for firms and by at least 35% for SMEs . Furthermore, well-designed employment protection rules, job search assistance, and financial security during unemployment can ease transitions and reduce uncertainty, increasing workers’ readiness to adapt. Stable employment relationships encourage firms to invest in training and workers to gain new skills. Combining employment protection with targeted retraining and reskilling help address skills gaps, promote transferable skills, and support a smoother and fairer transition to an economy undergoing rapid structural change.
In light of the shift in US trade policy, opening new export opportunities and investing in strategic sectors would contribute to strengthening the resilience of the EU economy. Heightened trade policy uncertainty and higher US tariffs could adversely affect employment, in particular in some sectors and Member States. Closer collaboration with other trading partners, including India, Mexico and Mercosur, could offset some of these possible negative impacts. In addition, in line with the Competitiveness Compass, Europe must continue to pursue policies to reduce its reliance on single or highly concentrated suppliers across key strategic sectors. Recent initiatives to bolster European capacities in these areas include the Clean Industrial Deal and the EU Action Plan on Critical Raw Material. In her 2025 State of the Union address, the President announced additional initiatives including an Industrial Accelerator Act for key strategic sectors and technologies.
Effective protection should support workers during job transitions, while promoting early job search. Short-time work schemes were highly effective during the pandemic in cushioning demand shocks and preventing mass unemployment. However, they are less suited to manage structural changes, such as those driven by technological progress, which reduce labour demand in mature industries and require labour reallocation. In such cases, income support should be linked to policies which promote better job matching and facilitate the search for employment for workers transitioning between jobs (see Chapter 3). As part of the Union of Skills, the Commission will launch a Skills Guarantee Pilot to help workers in restructuring sectors or at risk of unemployment to develop their careers in other sectors and/or companies . The Commission has also proposed extending the scope of the European Globalisation Fund to workers at risk of imminent job displacement, while the mid-term review of Cohesion Policy presents an additional opportunity to reallocate ESF+ resources . Furthermore, active labour market policies, focusing on upskilling, reskilling, job search assistance and career counselling, can provide affected workers with a pathway toward quality jobs.