Opinion of the European Economic and Social Committee on ‘The effect of the economic and financial crisis on labour force distribution among production sectors, with special regard to SMEs’

(exploratory opinion)

2011/C 218/01

Rapporteur: Mr PEZZINI

Co-rapporteur: Mr HAVLÍČEK

On 15 November 2010, the permanent representative of Hungary to the European Union, Mr Péter Györkös, asked the European Economic and Social Committee, on behalf of the future Hungarian presidency, to draw up an exploratory opinion on

The effect of the economic and financial crisis on labour force distribution among production sectors, with special regard to SMEs.

The Consultative Commission on Industrial Change, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 4 April 2011.

At its 471st plenary session, held on 4 and 5 May 2011 (meeting of 4 May), the European Economic and Social Committee adopted the following opinion by 153 votes to 5 with 11 abstentions.

1.   Conclusions and recommendations

1.1   The EESC highly commends the attention that the Hungarian presidency is giving to a crucial issue for organised civil society, namely the impact of the current economic and financial crisis on the labour force and its distribution among production sectors, with special regard to SMEs.

1.2   The EESC recalls that it has often presented its views on the problems facing SMEs, which, together with the public and social economy sectors, constitute the warp and weft of Europe's economy and labour market.

1.3   The consequences of the global economic and financial crisis have impacted heavily on SMEs even if they have often reacted with greater flexibility and innovative solutions.

1.4   The EESC considers that the EU could do more to support SMEs beyond making statements of principle. There is now a real need for consistent and coordinated EU action on a range of priorities aimed at improving operational conditions on the internal market and at internationalising SMEs.

1.4.1   Among the priority actions, the EESC identifies: developing the potential of new entrepreneurship, especially among women, youth employment and support for the Youth on the Move flagship objective.

1.4.2   Recommends that an annual SME conference be held to take stock of the situation of SMEs in Europe, particularly as regards employment. This flagship conference should involve a range of national and European professional associations and all the European institutions.

1.5   In particular, the EESC calls for a roadmap to create – as of now – the necessary conditions for the development of new innovative enterprises and support for existing SMEs in order to contribute to creating new jobs, which are needed to emerge from the crisis, and in order to return to sustainable growth. The measures adopted should be programmed at the European, national and regional levels, and should include commercial and non-commercial or social economy enterprises. Alongside this roadmap, provision should be made for the training of unemployed workers and young people to access these new jobs.

1.5.1   The EU, in agreement with the Member States, could support, in convergence regions, the use of Structural Funds aimed at to supporting SMEs.

1.6   The EESC believes that the internationalisation of SMEs must be stepped up in order to increase their access to new markets and, therefore, their job-creation capacity.

1.6.1   Access to new markets should be preceded by solid trade agreements setting out simple ready-to-use procedure protocols for SMEs.

1.7   The EESC considers it essential to promote an entrepreneurial culture and a spirit of initiative in an environment that supports entrepreneurs, understands market risks and values human capital.

1.8   Training, knowledge and qualifications transfer, new working methods and the development of openness to change have to be encouraged, especially during this crisis, in order to save jobs and increase the role that workers play in strengthening their companies.

1.9   The EESC stresses the importance of public procurement, in compliance with social and environmental standards, as a means to support the survival of businesses and local jobs. It should be a requirement to ‘Think Small First’ in a crisis where substantial numbers of jobs are at stake. The appropriate, responsible and intelligent use of public sector demand should foster open competition and innovation.

1.10   The EESC calls for the strengthened development of clusters and sectoral groups of SMEs. Contract and knowledge sharing between large and small businesses could result in innovative leaps, through sectoral and other networks.

1.11   The EESC recommends that in order to make the most of sectoral flagship initiatives, their development should be improved with respect to technology, employment, investment, and the optimisation of human resources.

1.12   The need to develop new financial instruments must be recognised. The EESC believes that the financial challenges and other aspects of the crisis facing SMEs have been aggravated by an inability to develop new measures. Instruments such as JEREMIE, JASPERS and JESSICA need to be strengthened.

1.13   According to the EESC, the Commission should speed up the ‘fitness checks’ on existing legislation, thereby setting an example to Member States, in order to reduce the cumulative effects of legislation, compliance and costs.

1.14   The Committee believes that legislative proposals should be subject to prior analysis, in order to assess their impact on competition through operational, EU and national impact assessments.

1.15   The EESC asks the Commission to emphasise and step up its involvement in the promotion of new low-carbon emission technologies and the green economy, which are a source of new and better jobs.

1.16   The Committee believes that it would be useful to support and promote the spread of international and sectoral networks, for creativity and innovation leaders. With this in mind, recommends that the Enterprise Europe Network should not only provide general information and advice, but also have a sectoral role and be given administrative functions as a one-stop shop.

1.17   The EESC calls for the adoption of a European SME statute and implementation at Member State level of the Small Business Act, on which it has previously issued an opinion, to be expedited.

2.   Introduction

2.1   Following the economic crisis in 2008, positive SME trends which had emerged between 2002 and 2008 came to a sudden halt, with job losses in 2009-2010 estimated at 3,25 million (1).

2.2   The EU unemployment rate stood at 9,6 % in 2010, and was still worse in the public, transport and telecommunications sectors. There was a slight expansion in the retail and manufacturing sectors, whereas the youth labour market (15-24 age group) remained depressed, with unemployment hovering around 21 %, i.e. at its highest since the beginning of the crisis.

2.2.1   Furthermore, the economic crisis and factors including globalisation, technological progress, demographic ageing and the gradual transition to a low-carbon and low-particulate economy have triggered rapid changes in the qualifications and skills required on the labour market, with strong growth in new occupations.

2.3   At the sectoral level, the recession has accelerated the ongoing employment shift from the primary and basic manufacturing sectors to the service sector, with forecasts of substantial reductions in employment in primary industry and farming, as well as expected job losses in the manufacturing and production sectors during 2010–2020. On the other hand, employment is set to rise in the service sector, especially in services to industry and market services. Increases are expected in distribution and transport, and in the hospitality, catering, tourism, health, education and security sectors.

2.4   Regarding job profiles, the trend that seems set to be consolidated and increased by 2020, should be in middle and senior management (40 %), i.e.: senior managers, professionals and technicians in so-called ‘knowledge and skill-intensive jobs’.

2.4.1   The most significant reduction is expected to be in the number of workers with low formal skills or lower skills. It has been shown that employment in sectors that produce capital goods are more vulnerable to general economic crises due to the particular importance of skills, since these sectors are often associated with specific skills.

2.5   The Committee has frequently reiterated (2) that ‘the crucial role played by small and medium-sized enterprises (SMEs) in the EU economy is universally recognised’ and has stressed (3) that ‘as economic output, innovation and employment depend increasingly on SMEs, the development of entrepreneurship among young people should be a priority’.

2.6   There are over 20 million independent enterprises in the EU. Over 99 % of them are SMEs with fewer than 250 employees. The vast majority (92 %) are micro-enterprises with fewer than ten employees. Furthermore, SMEs also account for over 67 % of employment in the EU (4). Many of those SMEs which survived the crisis only did so as a result of the commitment of their staff.

2.7   Furthermore, we need to bear in mind that numerous obstacles are liable to hinder the emergence of new entrepreneurship and the creation and rapid development of innovative SMEs, not to mention the ability to conduct the full employment policy. These obstacles include:

2.8   In 2009, the number of large businesses that registered reductions in employment levels was twice that of small businesses, and three times that of micro businesses. These figures confirm the stabilising influence that the latter types of businesses have on economic cycles.

2.9   Nevertheless, EU labour market trends continue to show marked imbalances from country to country, with unacceptable youth unemployment levels: while the average EU rate for 2010-2011 may settle around critical levels above 10 %, labour force distribution by sector, region, and above all, by age bracket, is a far greater cause for concern.

2.9.1   The most recent Employment in Europe 2010 report reveals the young to be the main victims of the crisis, with a strong impact on unemployment in the 15-24 age group, which reaches and exceeds 30 % in some Member States.

2.10   Analysis of trends in European labour force distribution in the various sectors (5), by age group, gender and type of business, indicates that:

2.11   Figures indicate that the situation is slightly better in EU15 with respect to overall employment rates (63,4 % / 65,9 %) and female employment (54,1 % / 59,9 %).

2.12   Providing young people of both genders with skills and new qualifications is an objective of the EU Youth on the Move programme, although it seems inadequate in light of the extreme magnitude of the problem and the need to integrate this initiative with others in order to create new activities and businesses.

2.13   Through its Consultative Commission on Industrial Change (CCMI), the Committee has already given its opinion on the crisis' impact on employment in the manufacturing sector, the automobile industry, the textile industry, the metalworking industries, the aeronautic industry, the cultural and creative industries, the shipping and shipbuilding industries, the coal and steel industries, the domestic appliance industry and others in the forestry, farming and service sectors.

2.14   SMEs have a strong presence, alongside large companies, in all sectors, including the manufacturing sector (out of 2 376 000 European businesses, 2 357 000 are SMEs), the construction sector (2 914 000 out of 2 916 000) or the wholesale and retail sectors, car and motorcycle repairs and household goods (a total of 6 491 000 out of 6 497 000), not to mention real estate services, catering, the hospitality sector and transport.

2.15   The EESC emphasises that large, medium-sized and small businesses are entirely complementary, as can often be seen in the quality of subcontracting, the efficiency of outsourcing and the creation of innovative spin-offs.

2.16   Significant opportunities to create new jobs through SMEs in the public, private and social economy sectors, as a way out of the crisis and towards sustainable and competitive economic growth, exist in some service sectors in particular (8):

2.17   Although the regional distribution of SME contribution to EU added value and employment for the 2002-2007 period does not seem to reveal many differences in employment terms, the SME contribution in terms of added value shows marked differences between EU12 and EU15, with a higher labour productivity gap between SMEs and large enterprises in the new Member States than in the old Member States.

2.18   Furthermore, in addition to creating new jobs, SMEs, as important vehicles for scientific and technological knowledge spillover, contribute significantly to the economy's growth and innovative performance by transferring and marketing ideas and discoveries. On this issue, it is worth noting that, at the EU level, the new approaches advocated by the ‘Think Small First’ principles and the Small Business Act have yet to be fully applied, especially at the regional and national level.

2.19   The Committee calls for the strengthened development of innovation clusters of SMEs with high growth capacity, as instigators of innovative leaps, through network systems with the capacity to put high quality user-friendly products on the market rapidly.

2.20   The cornerstone for the development of SME competitiveness is support for their internationalisation on global markets and the development of their internal market potential by ensuring a level playing field in terms of competition and operational conditions.

2.21   Whereas, on average, SMEs account for over 50 % of GDP, they only account, on average, for 30 % of exports outside the EU, even though their contribution is often included in global value chains.

2.22   Furthermore, considerable emphasis has been placed on simpler access to credit. The EU has supported governments, financial institutions and large companies during the crisis, whereas little, if anything, is being done to support SMEs and the creation of productive and sustainable employment at the local level. Instruments such as JEREMIE, JESSICA and JASPERS should be strengthened.

2.23   The EESC stresses that EU governments should vigorously support:

2.24   More specifically, the EESC advocates speeding up the ongoing review in order to facilitate access to EU research and development programmes.

2.25   Market failure to promote sustainable jobs, the development of entrepreneurship, innovation and sustainable economic growth needs to be addressed through dynamic action packages capable of addressing and supporting the creation, growth and exit from the market of businesses, under appropriate, clear and transparent conditions.

3.   General comments

3.1   This exploratory opinion is a response to a request from the Hungarian presidency for an opinion on the effect of the financial and economic crisis on labour force distribution among production sectors, with special regard to SMEs.

3.2   The EESC believes that in order to look for a way out of the crisis and play a key role in globalisation, we need immediate, consistent and coordinated EU action that puts words into practice on a range of priorities aimed at improving operational conditions on the internal market and on global markets. Such action should support SME innovation, restore the entrepreneurial spirit, be capable of identifying new directions for training and up-skilling the workforce and should enable the labour market to adapt to the new challenges.

3.3   In order to be able to make their full positive contribution to employment, even in the new context of globalisation, and despite the ongoing international crisis, SMEs must also be able to compete on an equal footing, not least in terms of:

3.4   The EESC sees a need to rationalise and simplify administrative and regulatory procedures for setting up businesses, especially at the national level, in order to ensure that existing businesses can benefit from technological and commercial opportunities and that new SMEs are able to create new jobs, thereby giving full and concrete application to the ‘Think Small First’ principles and the Small Business Act.

3.4.1   Furthermore, it is necessary to adopt a European SME statute and to study the European cooperative society, in order to promote it.

3.5   It is necessary to facilitate the internationalisation of SMEs, increasing business participation in research partnerships and ensuring access to foreign markets.

3.5.1   This objective should also be pursued through a strategy that facilitates the development of international networks of creativity and innovation leaders, i.e. executives, researchers, members of the liberal professions, in order to promote synergies and improve internationalisation in the liberal professions.

3.6   It is necessary to promote an entrepreneurial culture, a spirit of initiative and female entrepreneurship, developing the necessary strategic and management skills, and improving training.

3.6.1   It also seems advisable to introduce a roadmap, with twice-yearly statistics on European SME economic and social variables.

3.7   Lifelong training for management staff and the workforce should result in qualified and well informed human resources in a framework that encourages equal opportunities for men and women. The EESC calls for priority EU, national and regional action against youth unemployment by creating more apprenticeship opportunities, quality work placements and graduate sponsorships, especially in the sciences, and by holding a campaign to improve perceptions of jobs in industry and manufacturing and entrepreneurial initiative, especially among women.

3.8   The Committee is convinced that the innovation absorption capacity of SMEs must be fostered. There is a need to strengthen knowledge and skills networks and to develop a new generation of industrial districts, and infrastructure for technology transfer and worker mobility between industries, research centres and universities, also with regard to the European Institute of Innovation and Technology (EIT), which must incorporate SMEs.

3.9   The Committee is of the opinion that the development of sectoral flagship initiatives should be better coordinated in terms of technology, investment and the training and development of human resources.

3.10   European labour markets will come out of the crisis profoundly changed. This is why workers and entrepreneurs must be equipped - with the appropriate skills and support - to adapt to a changing situation. ‘The crisis has wiped out any past progress so we urgently need to reform labour markets, make sure skills are in line with demand and working conditions are right for job creation.’ (11)

(1)  2010 Report on European SMEs under pressure.

(2)  Cf. EESC opinion on The different policy measures, other than suitable financing, that would help SMEs to grow and develop, OJ C 27, 3.2.2009, p. 7; EESC opinion on How to support SMEs in adapting to global market changes, OJ C 255, 22.9.2010, p. 24; and EESC opinion on the Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions - Think Small First: A Small Business Act for Europe, OJ C 182, 4.8.2009, p. 30.

(3)  Cf. EESC opinion on The post-2010 Lisbon Strategy, OJ C 128, 18.5.2010, p. 3.

(4)  Source: Eurostat.

(5)  Eurostat - Labour market indicators / European Union 27 – 2010.

(6)  Eurostat age group 15-64.

(7)  Eurostat age group 15-24.

(8)  Cf. Hartmut Schrör: Enterprise births, survivals and deaths - employment effects (EUROSTAT, Statistics in Focus, 44/2008).

(9)  Cf. EESC opinion on European industrial districts and the new knowledge networks OJ C 255, 14.10.2005, p. 1; EESC opinion on 0The role of technology parks in the industrial transformation of the new Member States OJ C 65, 17.3.2006, p. 51; and EESC opinion on Industrial change, territorial development and responsibility of companies OJ C 175, 28.7.2009, p. 63.

(10)  Cf. Simplified access and structures regarding the Market Access Database (MADB).

(11)  Cf. Mr László Andor, EU Commissioner for Employment - IP/10/1541 – 23.11.2010.