THE STATE OF THE EUROPEAN UNION Towards a new legislative term

THE STATE OF THE EUROPEAN UNION 78 Ukraine. In addition, the socio-economic situation hin- ders the rapid transformation of European economies in the course of digitalisation and the targeted greenhouse gas reduction of 55 per cent by 2030 compared to 1990 levels, and climate neutrality by 2050. Stable labour markets In the first quarter of 2023, a total of 216.1 million peo- ple were in employment in the EU, 5 million more than before the pandemic in the fourth quarter of 2019. In 2022, the EU reached a peak employment rate of 75 per cent among all 20–64-year-olds, just three percent- age points away from the 2030 target of 78 per cent set out in the EPSR Action Plan launched at the 2021 Social Summit in Porto. This figure is already exceeded by some member states, with the Netherlands (83 per cent), Sweden and Estonia (both 82 per cent) leading the way. The Member states with the lowest employ- ment rates – Italy (65 per cent), Greece (66 per cent) and Romania (69 per cent) – have also recently shown steady improvements in the labour market. This development shows the stability of the employ- ment sector, which has come through the pandemic far better than in the case of the economic slumps before in the euro and the financial crises, and has also out- performed the US labour market. It has done so with the help of the temporary European short-time work instrument Support to mitigate Unemployment Risks in an Emergency (SURE) (European Commission 2023b). So far, employment in the EU has defied the slowdown in economic growth. This is also due to the increased demand for goods and services after the end of the lock- downs and mobility restrictions, which, however, led to an increasing shortage of skilled workers. This is reflected in the unemployment figures, with unemployment as a share of the labour force stand- ing at 5.9 per cent in the EU in May 2023. This is a decrease, albeit a small one, of 0.2 percentage points compared to the previous year’s value. However, dif- ferences in unemployment rates in May 2023 between Member states remain high, ranging from 2.4 per cent in the Czech Republic and 2.7 per cent in Poland on the one hand, to 12.7 per cent in Spain and 10.8 per cent in Greece on the other. The employment gap between the sexes has narrowed slightly across the EU from 0.7 to 0.5 percentage points over the year. The youth un- employment rate for 15–24-year-olds remained broadly unchanged at 13.9 per cent in the EU between May 2022 and May 2023. For the broader definition of un- employed 15–29-year-olds, 2022 marks the lowest level since the data series began in 2009, at 6.3 per cent. The rate of young people aged 15-29 neither in employment nor in education or training (NEET) in the EU also fell to 11.7 per cent in 2022, almost one percentage point lower than before the start of the pandemic in 2019. But, given the declining economic growth, the European Commission expects these positive trends to reverse in 2023, or at least to enter a stagnant phase (European Commission 2023c). Due to demand and inflation, labour costs in the EU have increased by 5 per cent in 2022 compared to the previous year, most of which is due to nominal wage increases. However, since these could not compensate for the much higher inflation, real wage losses have re- sulted for employees. Only in Bulgaria and Hungary was it possible to fully compensate for the inflation levels in 2022 through very high wage increases; in all other Member states real wage losses were recorded, ranging from –1.1 per cent in France to –8.3 per cent in Estonia, with the EU at –4.3 per cent compared to the previous year. This development is relevant from a socio-political point of view because inflation has a particularly heavy impact on the lower wage segment, as it increases the cost of living and leads to a worsening of real income inequality (Müller et al. 2023). Persisting social divergences The higher costs of living also increase the risk of pov- erty or social exclusion, especially for low- and middle- income households. However, the lagging indicator of the at-risk-of-poverty or social exclusion (AROPE) rate shows only a small increase of 0.5 percentage points from its low of 21.1 per cent of the population of all EU countries in 2019 to 21.6 per cent in 2020, 21.7 per cent in 2021 and again 21.6 per cent in 2022. These values point to a relative stability of the AROPE in the EU and can be explained by the far-reaching policy in-