Economic recovery in Europe remains a far-off prospect. GDP growth has eased substantially in the EU and turned flat in the eurozone, with leading indicators suggesting that even once-resilient economies such as Germany may fall into negative growth. This is reflected in the EU’s labour market performance: the unemployment rate is higher now than it was two years ago, and the most recent data shows that the working-age employment rate has dropped.
Europe’s labour market has deep underlying issues. Several decades of globalisation and technological change, which the institutions governing the labour market have struggled to catch up with, have hollowed-out middle-income jobs and created a disconnect between overall productivity growth and wages. Low pay, in-work poverty and job insecurity are widespread, while at the same time employers are struggling to fill many highly-skilled vacancies.
Understanding in-work progression in Europe is vital to finding a solution to these problems. Improving individuals’ prospects for promotion and advancement offers a route out of in-work poverty for those workers stuck on low pay. Furthermore, if Europe’s skills needs are to be met, the existing workforce needs more and better in-work training and lifelong learning, and the skills of entry-level workers must likewise be improved. Finally, the impact of job insecurity and involuntary underemployment can be mitigated if individuals are able to progress into permanent and full-time jobs.
This paper explores how rates of in-work progression vary across European economies, using comparable international data for the period 2004–2011. In it, we focus on four dimensions of in-work progression.
1. Occupational progression
Looking at the structure of career pathways in European countries, we found that relatively few workers are able to ‘leapfrog’ the middle of the occupational skill distribution: in most European countries fewer than 5 per cent of low-skilled workers move into a highly-skilled occupation over a four-year period. Most workers progress into higher-skilled occupations incrementally, moving from low-skilled jobs to those in the middle of the distribution, and from the middle to highly-skilled jobs.
We found evidence that men are more likely to progress than women, which confirms the findings of existing research which has suggested that women face considerable barriers to career progression. A lack of flexible working provision alongside insufficient public support for childcare means that many women are forced to take lower-skilled positions, often on a part-time basis, with fewer opportunities for advancement.
Our findings also show that, in most European countries, progression rates fall as individuals age. Older workers tend to place a higher premium on job security, whereas for younger workers the accumulation of labour market experience translates more quickly into opportunities for promotion into higher-skilled work.
There is considerable variation in rates of progression across countries, due to a variety of factors. Countries differ in terms of occupational structure. Some countries, such as Belgium, have high rates of progression supported by an even spread of jobs across skill levels, whereas in others, such as the UK, a relatively small share of jobs fall into the middle of the skill distribution, which feeds into lower progression rates.
Since middle-skilled jobs tend to be most prevalent in the manufacturing industry, the relative size of that sector is likely to be important. However, our findings show that the occupational distribution within sectors also varies between countries. For example, not only does Belgium have a relatively large manufacturing sector, but Belgian manufacturing firms also tend to employ more mid-skilled workers. A similar pattern can be observed in the business services, retail and hospitality sectors. This implies that the international disparity in progression rates is not entirely due to differences in the industrial mixes of each country, but also reflects differences in business models and human resources practices at the sub-sector and firm level. We found that in many countries with high rates of occupational progression, employees reported favourable promotion prospects, and individuals were more likely to progress while staying with their current employers. This suggests that human resource practices such as the design of career pathways may be important factors in determining occupational progression rates.
2. Earnings progression
Movement up the earnings distribution is important, as it mitigates the effects of income inequality and allows individuals and families to escape low pay and working poverty. We found that earnings progression rates tend to be higher than occupational progression rates. However, progression does appear to slow down towards the top – workers are considerably more likely to move from the bottom to the middle of the earnings distribution than from the middle to the top.
Earnings mobility is closely linked to individuals’ other labour market characteristics, such as their ability to increase their hours or to move to a higher-paying job through promotion or by changing employers.
3. Hours progression
Progression from part- to full-time hours is an important means by which workers can increase their earnings, but it tends to occur less often in those countries where part-time work is more prevalent, particularly northern European countries and the UK.
This is not necessarily a bad thing: these countries’ labour markets are more inclusive, particularly in terms of having higher part-time employment rates among women, who are less likely to progress into full-time work than men. There appears to be a trade-off between gender equality in employment and hours progression.
However, rates of hours progression are also linked to institutional factors. For instance, greater support for meeting family care commitments through publicly funded or provided childcare, and more flexible working opportunities, would help families who want to increase their hours to do so. The way in which second earners are treated in the tax and benefit system also has a large impact on families’ – and particularly women’s – hours preferences.
4. Contract progression
In many European countries, particularly those in southern Europe, temporary contracts were growing more prevalent before the recession, and their rise has continued since. This has fed in to the ‘dual labour market’ phenomenon, wherein many workers find themselves cycling between fixed-term positions as they are unable to secure a permanent and stable position. This has been linked to the relatively strict protections that employment legislation affords to permanent employees in southern Europe, which may have caused many employers to turn to temporary contracts as a means of building flexibility into their workforce.
Our analysis supports this hypothesis. We found the lowest rates of progression from temporary to permanent positions in southern European countries such as Greece and Spain, as well as in France and the Netherlands. By contrast, for those in eastern and northern Europe, temporary work is more likely to offer a stepping-stone into regular employment: in many of these countries, more than half of temporary employees moved into a permanent job over a four-year period.
Conclusion and implications
There are already signs that despite Europe’s faltering recovery, demand for highly-skilled labour is outstripping supply. This is especially true in many specific, highly-specialised occupational groups such as ICT professionals. At the same time, the number of jobs in the middle of the occupational distribution is shrinking, a trend which is expected to continue. This is likely to have an effect on career pathways, and if it is left unchecked it may exacerbate existing skills shortages.
Employers will therefore have to adapt in order to fill highly-skilled vacancies. They must pursue a combination of:
- engagement with the education and training system, in order to equip labour market entrants with those skills in demand
- greater provision of in-work training to their current workforce, and
- designing career pathways so that individuals can progress within and across employers from a wider variety of starting occupations.
Forthcoming IPPR research within the New Skills at Work Programme will look at progression at the firm level, outlining current best practice in human resources in relation to occupational progression.
National governments must also play their role by designing labour market institutions to support progression. These must pursue the objectives of:
- breaking down the dual labour markets of southern Europe to facilitate transitions into permanent positions
- encouraging the adoption of flexible work practices across industries and occupations, and
- designing training, childcare and in-work benefit systems that foster labour market inclusion and progression.