EU auditors: How effective is EU's policy against long-term unemployment?

EU auditors: How effective is EU's policy against long-term unemployment?
Credit ECA audit, Source: Eurofound, based on Eurostat data.

Action against long-term unemployment in the EU member states is not targeted enough and an individualised approach to help unemployed people is not always applied, according to a new audit report published last week by the European Court of Auditors (ECA).

Long-term unemployment refers to persons who have been unemployed for at least 12 months. Not having a formal job for a long period of time can have severe consequences for the individuals concerned, such as a higher risk of poverty, social exclusion, and even health problems. From an economic perspective, long-term unemployment has a negative impact on growth and public finances.

According to the latest annual data available (2020), 35 % of the EU’s 15 million job seekers (5.3 million people) are long-term unemployed. The economic consequences of the COVID-19 pandemic could exacerbate the problem.

“We have found that EU-funded measures so far have reached many long-term job seekers, but were not specifically designed with them in mind,” said Lazaros S. Lazarou, the ECA member responsible for the report, at a press briefing (8 December).

In the EU, labour market policies are a national prerogative. The European Social Fund (ESF) is the EU’s main financial instrument for supporting member states’ active labour-market measures. During the 2014-2020 period, around €11.4 billion was allocated to addressing “access to employment”.

Was EU support effective?

The audit objective was to examine if ESF funding to tackle long-term unemployment was effective. The audit covered all member states but because of COVID-19 related travel and health restrictions on-the-spot visits could not be carried out and meetings were held by video-conference. The auditors examined four member states (Ireland, Italy, Poland and Slovakia) in greater depth.

They also looked into the individual cases of randomly selected individuals who had been out of a job for more than 12 months, but who had participated in an ESF-funded measure for the long-term unemployed. In total, ECA reviewed 78 such individual cases.

On the positive side, the auditors found that the ESF “access to employment” measures financed different interventions during the 2014-2020 period that benefited many long-term job seekers. However, they were not specifically targeted. Instead, long-term unemployed people (LTU) were treated as part of a larger group containing all unemployed or “disadvantaged” groups.

Moreover, the ESF measures did not necessarily reflect the scale of the problem in some member states. After the financial crisis in 2008, long-term unemployment peaked in 2013 with near 24 million. Although the economic recovery after the crisis saw LTU numbers improve at EU level on average, progress has been uneven, with significant disparities in LTU remaining between member states.

Eurostat data for 2020 show that seven member states were above the EU-27 average LTU rate as a share of total unemployment (35.4 %). Of these seven, Greece and Italy reached 66.5 % and 51.5 %, respectively. Three other member states (Belgium, Bulgaria and Slovakia) had an LTU rate as a share of total unemployment above 40 %, and Slovenia and France a rate of above 35 %.

An individualised approach is part of active labour market policies and particularly important for the long-term unemployed, who find it more difficult to (re)join the labour market. In 2016, during the previous budget period, this approach was endorsed by a Council Recommendation on long-term unemployment.

Such policies include four main categories: training, job search assistance including guidance and counselling, hiring incentives for private-sector employment, and direct employment programmes in the public sector.

On average, Eurostat estimates that the probability of transition into employment in 2020 is 11 % for the long-term unemployed and 25 % for the short-term unemployed.

The greatest differences between the long-term unemployed and the short-term unemployed were noted in Belgium and Hungary (more than 22 percentage points), whereas the smallest were in Denmark, Croatia and Sweden, where the figure was less than 10 percentage point

However, the auditors noted that although some public employment services applied the individualised approach for individual long-term unemployed as part of their national active labour market policies, there was no clear link between ESF  support and actions addressing the specific needs of the long-term unemployed.

The auditors found that the long-term unemployed who were supported in several member states had been under-represented by ESF measures when compared with the LTU rate in the same member states. Their analysis showed differences for 15 member states, in particular in Romania, Portugal, Hungary, France, Malta and Latvia, where the difference exceeds 20 percentage points

It is easier to return short-term unemployed people to the labour market. If labour market actions are not specifically focused, they entail the risk of prioritising individuals with a higher likelihood of employment to the detriment of those who are furthest from the labour market, such as the long-term unemployed (the so-called “creaming effect”).

Harassment is a major problem in most member states and up 10 % of the workforce might be affected of it. Did you look into the problems of people who have lost their jobs, sometimes for life, because of work harassment (bullying/mobbing)?

“That was outside the scope of the audit,” the audit team told The Brussels Times. “We didn’t look at the reasons of unemployment.” But ECA does not exclude it in future audits.  “ECA plans its work on a multiannual base. We can consider the suggestion for future audits, provided that there are EU policies or a budget involved.”

ECA issued three recommendations for the 2021-2027 programme period and the time of adoption (or amendment) of the new ESF programmes.

  • The Commission should insist that the member states target specifically long-term unemployed and their needs by means of ESF+ where national or regional LTU is high.
  • It should insist that member states should apply an individualised approach to all the long-term unemployed and
  • As part of the ex-post evaluation for the 2014-2020 period and the mid-term evaluation for the new 2021-2027 period, the Commission should evaluate the effectiveness of the ESF measures for the long-term unemployed.

The Commission accepted all recommendations without any caveats. Does their implementation require amendments of the ESF regulation so that support will be conditional on compliance?

The Commission does not have the legal power to enforce a change in ESF legislation which needs to be approved by the Council and the European Parliament,” the audit team replied.

“As the ECA report highlights, the employment policy is a national prerogative. The situation differs between member states as regards the LTUs, the approach chosen by country to deal with the problem as well as on the prioritisation of national or ESF financing which is implemented under shared management.”

“As a consequence, a legislative change asking for a “one-fit-for all” approach was not considered the most effective way to proceed and the ECA decided to focus its recommendation on the implementation phase of ESF expenditure), when the stakeholders are in the position to identify the more appropriate approach and actions to support LTU based on the specific needs on the ground.”

An EU source said that the Commission welcomed the audit and agreed that there is no need for changes in the ESF regulation.

“Supporting people, including disadvantaged people such as the long-term unemployed, is already at the heart of the European Social Fund Plus (ESF+). Therefore, no amendments to the ESF or ESF+ Regulations are necessary.”

“The Commission manages the ESF+ together with member states, and they are responsible to design programmes according to their needs. The Commission, when negotiating the new programmes, will recall the need for a better targeting of the support to the long-term unemployed, in particular in countries with a high rate of long-term unemployed people.”

The Commission also promises to continue to provide support and guidance to member states on how they can ensure an individualised approach in their activation measures for the long-term unemployed, including assistance for job search.

In addition, in its evaluation of the ESF programme for the 2014-2020 period, the Commission will identify good practices in supporting people in long-term unemployment and contribute to dissemination and raising awareness.

M. Apelblat

The Brussels Times

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