Economic Policy and Employment

Economic policy and employment are dealt with by the Treaty on the Functioning of the European Union.  The European Parliament and the Council may adopt a regulation establishing a procedure for the Council and the Commission to survey Member States’ economic policy (article 121); on the other hand, the European Council, the Council, the European Commission, the European Parliament, the Economic and Social Committee, the Committee of the Regions and an internal Employment Committee within the Council shall collaborate in order to set up yearly guidelines for the Member States to take into account in their employment policies (article 148).

On 29 April 2024, the European Parliament and the Council adopted a new regulation in order to grant effective coordination of economic policies and multilateral budgetary surveillance, that is, the procedure for the Council and the Commission to survey Member States’ economic policy, as previewed by the Treaty on the Functioning of the European Union.

Such procedure, commonly and legally known as the “European Semester”, aims to ensure sustained convergence of the social performance of Member States.  In particular, it entails the formulation and implementation of employment guidelines for Member States, including the principles of the European Pillar of Social Rights, and of the related country-specific recommendations.

For such formulation and implementation, the regulation refers to a social scoreboard plus the identification of risks to social convergence.  The Council performs an annual progress report of the socio-economic situation of Member States and addresses recommendations to them.

The European Pillar of Social Rights, proclaimed by the three EU institutions (Parliament, Council and Commission) on 16 November 2017, expresses principles and rights for the functioning of the labour market and the welfare systems in the European Union.  It reaffirms some of the rights already present in the Union acquis, but it also adds new principles which address challenges deriving from societal, technological and economic developments.

Before they can be considered to be legally binding at EU level, they need to be included in secondary legislation.  With the European Semester procedure, they have indeed been included, but not as clearly binding, since the result of the coordination procedure is the issuance of guidelines and recommendations, non-binding by definition (soft law).

In order to implement the principles proclaimed in the European Pillar of Social Rights, on 4 March 2021 the European Commission proposed an action plan with three headline targets, to be achieved by 2030:  78% of the population aged 20 to 64 should be in employment; 60% of all adults should be participating in training every year; and there should be a a reduction of at least 15 million in the number of people at risk of poverty or social exclusion.

The social scoreboard further outlines seventeen measures as concretisation of social convergence:  adult participation in learning during the last 12 months; share of early leavers from education and training; individuals’ level of digital skills; youth not in education, employment or training rate; so-called gender employment gap; income quintile ratio; employment rate; unemployment rate; long-term unemployment rate; gross disposable household income per capita growth; at risk of poverty or social exclusion (AROPE) rate; at-risk-of-poverty rate or exclusion for children; impact of social transfers (other than pensions) on poverty reduction; disability employment gap; housing cost overburden; children aged less than 3 years in formal childcare and self-reported unmet need for medical care.

Consequently, Member States must take into account those employment guidelines and recommendations, including the social scoreboard and risks to social convergence, when taking their main decisions in social and employment policy.

The European Parliament is granted participation in the European Semester procedure.  Parliaments of Member States, as well as trade unions and employers’ representatives are also involved.

Source of image:  Roxana Mînzatu