The informal sector is growing in the European labour market

Millions of people are now living permanently on the edge of the labor market

By Mikael Lynnerup

Unemployment within the EU is relatively low and the number of jobs is at a historically high level. A large part of the population has good, secure jobs that provide a good income.

However, the growing economic surplus in society is becoming more unequally distributed, and many millions of people within the EU are now living permanently on the edge of the labor market.

The winners are the population groups who have large increases in the value of real estate, who have well-paid and secure jobs, and who have income from shares and securities, for example through a pension fund.

The losers are found especially in the younger generations, who with or without education often face a wall when they try to gain a foothold in the labor market.

In France, one in five workers under 25 is registered as unemployed.

It is even worse in Italy and Spain, where a third of young workers under 25 are unemployed.

In large parts of Europe, youth unemployment is more than twice as high as that of the population as a whole.

Wage income as a share of the total economy since 1970 in Germany (blue), France (red) and Italy (yellow). Source: Bruegel Policy Contribution, Issue n˚12, April 2017

In addition to growing youth unemployment in Europe, more than four million people live as undocumented citizens, who are typically young immigrants who have not been granted a residence permit, but who choose to stay here without papers rather than return home.
Without papers they can’t find a permanent job or permanent residence. They have no or very limited access to social services or education, and in many cases they have no access to health care. The number of “shadow citizens” in the EU corresponds to twice the total workforce in Denmark.

In large parts of Europe, the trade union movement is on the decline, and in places where trade unions still have an influence on maintaining proper pay and working conditions, it happens within a concept of “work” that is settled in a certain number of working hours in a certain workplace and at a fixed salary.

However, the concept of work that permeates labor market policy and a large part of social policy can be a barrier for those who have not yet gained a foothold in the labor market and for those who have lost it.

In the UK, around 20 percent of young people work as ‘self-employed’ or in jobs without an employment contract, without a minimum wage, without holidays, without fixed working hours, without pension savings, in short without all the regulation achieved in the traditional labor market over decades of hard political work.

Many of these semi-jobs are found in the vicinity of the global tech industry in the form of UBER drivers and Delivero couriers, in the media and advertising industry as well as in cafes, bars and restaurants.

The millions of young Europeans who have no traditional connection to the labor market are now being joined at a rapid pace by white collar workers – many in their forties or fifties – who have worked in some of the large, well-established industries, where automation and digital transformation now eliminates tens of thousands of jobs.

In 2019, over 60,000 employees in the financial sector in the major EU countries have lost their jobs on that account. This corresponds to the entire financial sector in Denmark being shut down from one year to the next.

Automation and digital conversion have also cost tens of thousands of jobs in the European car industry, and in the next few years, sector after sector can be expected to feel the effects of automation in the form of a lasting loss of millions of jobs.

At the same time, the transition leads to the creation of thousands of new jobs in software development and digital business development, but these are jobs aimed at people with a highly specialized higher education.

The bottom line:
The digital transformation in Europe is leading to a revolution in the labor market.
The number of people being kept artificially out of production is already to be counted in the millions.
The fort around the traditional labor market has come under massive pressure.



The future of women at work: Transitions in the age of automation
McKinsey Global Institute, June 2019

Something is seriously awry in the world of work
Financial Times, 19-09-2019

Europe’s Unauthorized Immigrant Population Peaks in 2016, Then Levels Off
Pew Research Center, 13-11-2019

Work in the age of intelligent machines
Financial Times, 26-06-2018

‘They are already citizens’: What will it take to bring Europe’s undocumented out of the shadows?
Horizon, EU Research and Innovation, 09-09-2019