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Robert Stehrer

Employment Structures in the EU New Member States: The Impact of Output, Productivity and Structural Change. Robert Stehrer

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Robert Stehrer

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  1. Employment Structures in the EU New Member States: The Impact of Output, Productivity and Structural Change Robert Stehrer Project ‚Industrial Restructuring and Implications for Labour Markets in the New EU Member States‘, commissioned by EU DG Employment, Social Affairs and Equal Opportunities, Contract No. VC/2003/0367 EUKLEMS meeting, Helsinki, June 2005

  2. Topics • The employment problem in a phase of catching-up • The aggregate level • Structural features • The U-shaped pattern of employment dynamics • Employment patterns by occupations and educational attainment levels • A disaggregated forecasting model • Forecast scenarios 2003-2012

  3. Overall situation in NMS Employment Unemp. Part. GDP growth rates rates rates rates 1996 2003 2003 2002 1995-2004 2003 2004 CZ 69.3 64.7 7.8 70.5 2.4 3.7 3.8 HU 52.1 57.0 5.9 59.5 3.4 3.0 3.9 SI 61.6 62.5 6.7 68.1 4.1 2.5 4.2 SK 61.9 57.7 17.4 69.5 4.8 4.5 4.5 PL 58.4 51.2 19.6 64.9 4.7 3.8 5.4 EE 64.9 62.9 10.0 68.3 5.0 5.1 6.2 LT 60.3 61.1 12.4 69.9 4.3 9.7 6.6 LV 57.1 61.8 10.6 69.8 5.1 7.5 7.8 BG 54.0 52.5 13.7 62.5 1.6 4.3 5.6 RO 65.5 57.6 7.0 64.2 2.8 4.9 7.9 EU-15 60.3 64.3 8.1 70.3 0.8 2.2

  4. The employment problem in a phase of catching-up (1) • The aggregate picture

  5. NMS-10 EU-15 Employment GDP Employment and GDP growth 1995 = 100

  6. Employment trends, 1995-20041995 = 100 * 2001/2002 new methodology in Romania.

  7. Employment trends, 1995-20041995 = 100

  8. Productivity levels in NMS economic sectors, 2002relative to EU-15(gross value added per employed person at PPPs, EU-15 = 100)

  9. The employment problem in a phase of catching-up (2) • Sectoral patterns

  10. Industry OutputEmployment Output and Employment, 1995-2003 Agriculture

  11. Financial and Business Services OutputEmployment Output and Employment, 1995-2003 Basic Services (Trade, Restaurants, Hotels, etc.)

  12. Growth by sectors, 1995-2002 in % p.a. NMS-7 Poland

  13. NMS-4 NMS-7 PL Divergence of employment shares from EU-15 structure, 2003

  14. NMS-4 NMS-7 PL Employment growth in sectors, 1999-2003

  15. Decompositional analysis (1), 1997-2002(Employment change in component/Employment level in 1997)/Number of years Employment Productivity Output Structure CZ -0.70 -0.42 2.66 -0.71 HU 1.23 -2.62 4.70 -0.21 SI 0.04 -3.28 4.33 -0.32 SK -0.72 -3.04 3.59 0.01 PL -1.84 -4.24 3.30 -0.11 EE -0.88 -5.01 6.02 -0.14 LT -2.14 -4.88 4.82 -0.66 LV -0.08 -4.26 5.95 -0.23 BG -1.13 -6.22 7.10 0.32 RO -3.27 -3.71 1.52 -0.81 EU-15 1.44 -0.79 2.66 -0.25

  16. Labour market developments in NMs –Explanatory framework based on structural dynamics Types of structural dynamics: • (i) Productivity dynamics: differentiated by sectors depending upon the scope for productivity catching-up (gap) • (ii) Output dynamics: relative growth/shrinkage of sectors which are under-/over-represented (structural deviation) • (iii) Sectoral and aggregate employment dynamics: result from (i) and (ii) • (iv) Further consequences: adjustments in the demand and supply of skills

  17. Stylized U-shaped pattern of employment Employment levels Time (1) Overall high productivity growth (2) Strong presence of sectors with declining output shares and strong productivity growth (1) Lower productivity growth (smaller gap) (2)Increasing weight of sectors with strong output growth and lower productivity growth Convergence in output structures (with more advanced economies) and general productivity catching-up

  18. Employment by occupations and educational attainment levels

  19. Employment by educational attainment • Sectoral adjustments • Change in occupational structure within sectors • Change in educational structure by occupation & sector • Labour supply adjustment in educational attainment

  20. Educational structure of total labour force, 15-64, 2003

  21. Primary education Secondary education Tertiary education Total employment Hungary:(Index: 1992 = 100) Employment by educational categories1992-2003 Czech Republic:(Index: 1993 = 100) Poland:(Index: 1992 = 100) 2003

  22. Decompositional analysis (2) 1997-2002(Employment change in component/Employment level in 1997)/Number of years

  23. Comparison to EU-15 • BCHS jobs are overrepresented in sectors (especially Agriculture) • Medium educated are overrepresented in all sectors • Medium educated are overrepresented in occupational categories • supply side plays an important role

  24. A disaggregated forecasting model of employment in catching-up economies

  25. Labour demand • Overall GDP growth • Sectoral labour productivity dynamics: • Catching-up towards EU-15 • Structural change: • Convergence in output shares towards EU-15 average • Convergence in occupational structures within sector • Speed of convergence depends on initial gap and estimated parameters

  26. Speed of convergence(estimated from large country sample 1975-2002) On average ~23 years to close the productivity gap by half Half-time: Productivity Output shares Agriculture 35 years 58 years Manufacturing 23 years 18 years Retail 35 years 30 years Business services 17 years 43 years Public services 20 years 18 years + long-term ‚exogenous‘ trends

  27. Productivity levels in % of EU-15 by country and sector, 2002(the further behind, the faster you grow) arithmetic mean EU-15 = 100

  28. EU-15 mean Output shares, 2002Overrepresentation in Agriculture and ManufacturingUnderrepresentation in Services

  29. GDP growth rates to keep employment constant

  30. Employment levels (GDP growth rate: 4 % p.a.)(2002 = 1) NMS-4 Poland, Estonia Latvia, Lithuania Bulgaria, Romania

  31. The importance of GDP growth(Employment 2012 in per cent of 2002) Note: variable scenario assuming ex =0.02 and beta=-0.03 (GDP per capita)

  32. Forecasts of changes in employment levels, 2002-2007 and 2007-2012(GDP growth rate: 4% p.a.)

  33. EU-15 2002 Poland 1998 2012 2012 2012 1998 1998 1998 2012 1998 Slovenia 1998 2012 2012 2012 2012 1998 1998 Dynamics of employment shares,1998-2012 Czech Republic Romania

  34. Occupation and Education Change in demand for occupations and educations: • Convergence in occupational structures by sectors to EU-15 mean • Assumption of constant educational attainment structure by occupation and sector (no displacement effect)

  35. Low Medium High Employment developments by educational categories, 2002-2012(based on 4 % GDP growth per year)

  36. Changes in demand structure by education, 2012, indices 2002 = 1

  37. The supply side Change in labour supply (Terry Ward and Pawel Gajewski) • Working-age population: -0.5 % p.a. • Supply of low-educated: -1 to -3 % p.a. • Highly educated: +1 to +3 % p.a. • Effects on participation rates?

  38. Summary points (1)Labour market developments in NMS • Low employment elasticity compared to EU-15 • Strong sectoral reallocation of employment which results from • sectoral (output) convergence and • differential productivity catching-up dynamics • Overall longer-term pattern: U-shaped aggregate employment path • Effects on skill demands: • Strongly negative employment trends of the least qualified • Rise in the demand for highly skilled • Supply adjustments in educational attainment – age cohort effects

  39. Summary points (2): Future developments • Tension between productivity catching-up (potential is still high), sectoral convergence and employment growth • Jobless growth may continue • How to transform high productivity growth rates in even higher output growth rates? • Structural problems: • Low educated • Regional imbalances • Age cohorts

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