The Role of Dynamic Employment Policies in the European Labour Market

Abstract

In the last 15 years, impressive developments have take place in the labour market both in the EU and Central and Eastern European (CEE) countries. The shrinking of the labour force and declining rates of participation are common both to the old and new EU Member States, due to the sharp decline in labour demand and to specific demographic trends. Although situations vary in each CEE transition economy, there are some common characteristics. The remarkable fall in GDP at the beginning of the transition period, caused by privatization and restructuring, was accompanied by a sudden decline in employment. After an analysis of labour market developments and trends in the old and new EU Member States, this paper concentrates on the development of employment policies. The aim of new dynamic and innovative employment policies is rapid job-creation and solving the unemployment problem in flexible and challenging economic and labour market conditions. As the effects of institutions and policies on labour market performance are country- and time-specific in CEE countries and Western Europe, a comparative cross-country analysis is presented. Dealing with dynamic employment policies in EU Member States, some positive examples are examined as the lessons and policy recommendations for future development in CEE countries. The conclusion of analysis is that only an integrated policy approach can solve the problem of structural unemployment caused by a mismatch between labour supply and demand.