Explanatory Memorandum to COM(2023)459 - EU labour market statistics on businesses - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2023)459 - EU labour market statistics on businesses. |
|---|---|
| source | COM(2023)459  |
| date | 28-07-2023 |
•Reasons for and objectives of the proposal
Labour market statistics on businesses (LMB) are official statistics that describe the functioning of businesses in relation to labour markets. The areas covered by LMB mostly relate to the level, composition and evolution of labour costs, the distribution and structure of earnings (including the gender pay gap), and job vacancy statistics.
Timely, reliable, and comparable European labour market statistics on businesses are needed for the EU to fulfil the tasks assigned to it under Articles 2, 3 and 4 of the Treaty on the Functioning of the European Union (TFEU). European labour market statistics on businesses are required for the design, implementation and evaluation of EU policies, in particular the coordination of economic and employment policies (Article 2(3)), monetary policy (Article 3(1c)), social policy (Article 4(2b)), and economic, social and territorial cohesion (Article 4(2c)), as well as equal pay for male and female workers (Article 157(1)).
LMB on the level and structure of labour costs have been collected since 1959 1 , with a periodicity of 2 to 4 years based on specific legislation for each data collection, and covered different economic sectors (industry, wholesale and retail distribution, road transport, banking and insurance, services). Council Regulation (EC) No 530/1999 introduced systematic collections of data on the level and composition of labour costs (labour cost survey) for 2000 and at 4-yearly intervals after that. The same act established the statistics on the structure and distribution of earnings (structure of earnings survey) for 2002 and for a representative month in that year, and at 4-yearly intervals after that. Before Regulation (EC) No 450/2003 of the European Parliament and of the Council of 27 February 2003 on the labour cost index was adopted, the data on the evolution of labour costs had been collected on a voluntary basis since 1996. Similarly, Regulation (EC) No 453/2008 of the European Parliament and of the Council established job vacancy statistics as a regulated data collection. Earlier on, they used to be collected on a voluntary basis.
The evaluation conducted by the Commission has shown that the current legal framework of the three acts mentioned above has significantly improved labour market statistics on businesses overall. Those statistics were deemed coherent, efficient, broadly comparable over time and across EU countries, and reliable. They are widely used by organisations and policymakers at all levels.
However, some limitations of the statistics that were recognised already at the time of adoption of the legal acts (missing parts of the economy) became more salient as EU policies developed, and their monitoring required more precise indicators. For instance, LMB are used for monitoring Sustainable Development Goals 2 , the European employment strategy, the European Pillar of Social Rights 3 and the European Semester. In addition, the recent directive on adequate minimum wages 4 , a directive on pay transparency 5 and the Council recommendation on the establishment of national productivity boards 6 have highlighted the need for unbiased and comprehensive statistics in the field of earnings and labour costs.
The information collected in several LMB data sets is biased due to the incomplete coverage of the public sector (or parts of it) and micro firms. For several Member States, businesses with one to nine employees are not covered in the structure of earnings survey or in the labour cost survey. This creates biases in key statistics such as the average and median earnings, which are used to derive the gender pay gap or to assess the adequacy of minimum wages. Moreover, the lack of a legal obligation to provide information on the gender pay gap became more problematic as the current data collection is voluntary and does not cover all EU countries or all the required variables. This creates a risk for monitoring gender equality and fair working conditions.
Therefore, the data currently provided to Eurostat cannot be used to their full potential: EU aggregates cannot be calculated for the whole economy and cross-country comparisons will continue to be hampered until all EU countries fully extend the LMB coverage.
The coverage of the whole economy will improve the accuracy of some statistics used as principal European economic indicators (labour cost index, job vacancy rate) or for the Sustainable Development Goals and European Pillar of Social Rights (gender pay gap, median earnings used to assess wage adequacy). Moreover, the collection of annual gender pay gap data should be regulated to ensure future data transmissions and improve its quality. Lastly, the timeliness of some LMB datasets should improve (e.g. the labour cost index) and some existing information gaps be filled (e.g. number of hours worked).
There are also opportunities for simplification with greater use of administrative data and innovative sources (such as web scraping) and better integration among LMB once the legal framework has been unified.
•Consistency with existing policy provisions in the policy area
The policy context for LMB has steadily evolved over time. In 2009, the Commission published a Communication to the European Parliament and the Council with its vision for the production method of EU statistics for the decade (2010-2020) 7 . This document looked at the key changes in the business environment of the European Statistical System and the implications for policymaking. It highlighted the importance of an integrated system that enables countries to gather data from different sources, increasing the availability and reach of the analysis. It also underlined the importance of increasing the quality of the data as many external sources do not match the expected requirements for European statistics.
In 2014, the Commission (Eurostat) began the process of modernising social statistics. This led to the adoption of a framework regulation for European statistics relating to persons and households, based on data at individual level collected from samples of persons and households 8 . In addition, on 27 November 2019, the European Parliament and the Council adopted the Regulation on European business statistics, repealing 10 legal acts in the field of business statistics 9 . The LMB is at the intersection of both domains, belonging to social statistics in terms of topic covered and to business statistics according to the type of respondents (enterprises). This initiative on LMB should complete the modernisation of social statistics.
This unified legal framework will provide systematic references to the corresponding concepts used in closely related domains such as the national accounts and European business statistics. Since their adoption, the legislation in both domains has been updated and their methodology has been revised (European system of accounts 2010, European business statistics Regulation). Therefore, it is now necessary to align LMB to bring consistency across the domains and provide clarity to the users of LMB legislation, including the statistical offices of Member States.
•Consistency with other EU policies
LMB indicators are used to monitor major European policies, such as the European Pillar of Social Rights and the UN Sustainable Development Goals (SDGs). The gender pay gap is an SDG indicator under goal 5 ‘gender equality’ and is part of the Pillar’s dashboard (principle 2). The right to fair wages and adequate minimum wages is listed under principle 6 (‘Wages’).
LMB provide key information for monetary policy (labour cost index) and will be used to support the recent directive on adequate minimum wages and the directive on pay transparency.
With this proposal, the legal framework for LMB will be further aligned with those EU policies and legislation as they are new or have evolved since the current LMB legislation was adopted.
•Legal basis
The legal basis for this proposal is Article 338 i TFEU, which provides the legal framework for European statistics. In accordance with the ordinary legislative procedure, the European Parliament and the Council adopt measures for the production of statistics where such statistics are necessary for the EU to carry out its role. Article 338(2) sets out the requirements for producing European statistics, stating that they must conform to standards of impartiality, reliability, objectivity, scientific independence, cost-effectiveness and statistical confidentiality without putting an excessive burden on businesses, authorities or the public.
•Subsidiarity (for non-exclusive competence)
The European Statistical System (ESS) provides an infrastructure for statistical information. The system is designed to meet the needs of multiple users in democratic societies. Among, the main quality criteria, European statistics must be consistent and comparable. Comparability is very important for LMB because of their crucial role in supporting evidence-based economic, social and cohesion policies. Member States cannot produce consistent and comparable statistics without a clear European framework in the form of EU legislation that sets out common statistical concepts, reporting formats and quality requirements. The objective of the proposed action cannot be achieved satisfactorily by Member States acting alone. Action can be taken more effectively at EU level by means of an EU legal act, ensuring the comparability of statistics in the areas the proposed act covers. The data collection itself can be done by Member States.
•Proportionality
The proposal complies with the proportionality principle. It will ensure the quality and comparability of European LMB collected and compiled applying the same principles across Member States. It will also ensure that European LMB statistics remain relevant and are adapted so that they respond to user needs. The regulation will make the production of statistics more cost-effective while respecting the specific characteristics of Member States’ statistical systems. In accordance with the principle of proportionality, the proposed regulation is restricted to the minimum required to achieve its objective and does not go beyond what is necessary for that purpose.
•Choice of the instrument
The proposed instrument is a regulation.
Given the proposal’s objectives and content, a regulation is the most appropriate instrument. Important EU policies such as macroeconomic convergence, social cohesion, price stability and gender equality inherently depend on comparable, harmonised and high-quality European labour market statistics on businesses. These can best be ensured by regulations that are directly applicable in Member States and do not need to be transposed into national law first.
•Ex post evaluations/fitness checks of existing legislation
As part of this initiative, the Commission evaluated the current LMB legal framework consisting of Regulations (EC) No 530/1999, (EU) No 450/2003, (EC) No 453/2008 and their implementing measures.
On the positive side, the evaluation shows that LMB allow collecting high quality information that are widely used for the intended purposes. The strengths of LMB lie in their coherence, efficiency, comparability and the fact that they are well established, reliable and widely used by organisations and policymakers at all levels. One of the current legal framework’s weaknesses is that it does not cover data collection on the gender pay gap. The lack of a legal obligation to provide annual information on the gender pay gap has become more problematic as the voluntary data collection infringes on its quality and brings risk factors to following up the European Pillar of Social Rights, EU monitoring of goal 5 of the UN Sustainable Development Goals and monitoring the gender equality strategy and the directive on pay transparency. Some Member States have not provided any annual gender pay gap data.
Another weakness of the current legal framework is that it does not capture significant actors of the EU economy, such as micro firms. Some shortcomings of the LMB that were already identified when the legal acts were adopted remain. These shortcomings were addressed in different ways in the existing framework (by requiring feasibility studies that could have led to an amendment of the legislation or by providing financial support for creating the capabilities needed) but were not resolved for some data collections. Therefore, the information collected is biased in several LMB, in particular due to the incomplete coverage of some sectors of the economy or of micro-enterprises. As a result, the data provided to Eurostat cannot be used to their full potential: EU aggregates cannot be calculated for the whole economy, and it is difficult to compare countries.
Moreover, there is room for improving the timeliness and frequency of LMB data. The results of the stakeholder consultation show that the frequency of the structure of earnings survey and the labour cost survey is not sufficient anymore for some users. They also believe that the timeliness could be improved for both surveys as well as for the labour cost index.
Another shortcoming is that LMB, with an increased focus on evidence-based policy making, became important over time for improved analysis. The existing legislation focuses on data needs for the policy priorities at the time when the initiative was originally developed. Over time, these priorities have evolved, and the current LMB no longer cover policy breakdowns or variables sufficiently. Most notably, the gaps confirmed in the stakeholder consultation focus on a series of variables that, when included in the structure of earnings survey, would allow for a better analysis of the microdata and the derived gender pay gap. Lastly, more granular data on job vacancies was considered necessary.
An additional weakness of the current legal framework is that it is not adapted to make use of new sources in Member States and at EU level. The LMB regulations did not envisage the use of innovative data as a possible source because they were not available at that time. Therefore, the current quality reporting framework is not fit for assessing those new data sources. Moreover, the increased use of administrative data that has been observed in recent years would require proper documentation, which is not possible through the existing quality reporting.
Finally, the framework’s definitions, concepts and approaches in related statistical domains are not aligned. Although individual LMB are internally coherent, the legal architecture could be simplified by replacing the three framework regulations currently in force with one consolidated text to ensure full harmonisation and consistency across all LMB data collections.
•Stakeholder consultations
The consultation strategy mapped key stakeholder profiles in three main groups: (i) providers of source data (such as holders of administrative data) and respondents (data providers in businesses participating directly in the data collection); (ii) statistics producers (mainly national statistical institutes); and (iii) statistics users.
The consultation included the following activities: public and targeted consultations, a targeted workshop, interviews with key stakeholders and desk research.
The stakeholder consultation successfully reached the intended stakeholder groups (except administrative data providers, individual enterprises employing less than 10 people, and media organisations). The burden on enterprises related to LMB was assessed indirectly via the national statistical institutes, and some business associations also gave their views. Given the subject’s technical nature, respondents’ overall engagement was considered sufficient to support the back-to-back evaluation and impact assessment of LMB.
Feedback from the consultation showed support for the Commission’s initiative and acknowledged that matters had significantly improved since the previous policy action on LMB. However, it also helped identify statistical gaps and new statistical needs that the current legal framework cannot meet. The actions that all stakeholder groups considered a priority were: regulating data collection on the gender pay gap, improving the coverage of LMB and improving timeliness. The main proposal on which producers and users had diverging views was increasing the frequency of the 4-yearly data collections (structure of earnings survey and labour cost survey). This was perceived to be too burdensome for the respondents (businesses) and too costly for national statistical institutes. However, it was seen as bringing great added value to users.
•Collection and use of expertise
The LMB review was presented and discussed with Commission expert groups to seek advice and input on the progress of the evaluation and impact assessment. These were mostly meetings of Eurostat-led expert groups with the participation of Member State experts, namely the Labour Market Statistics Working Group and the ( group of the European Directors of Social Statistics ). The European Statistical System Committee 10 was also kept informed of progress.
Eurostat carried out this evaluation with support from a study contracted to ICF SA, Belgium. This support study provided the preparation of the evaluation and impact analysis, the analysis of the public consultation, and the organisation and analysis of stakeholder consultation activities (except for the public consultation that was prepared by Eurostat).
•Impact assessment
The impact assessment for this initiative 11 received a positive opinion with reservations from the Regulatory Scrutiny Board on 20 January 2023 following a written procedure 12 . A revised version of the impact assessment report addressing the reservations was endorsed in writing by an interservice steering group on 13 March 2023.
The general objective set out in the impact assessment is to produce LMB that are up to date, relevant, comprehensive in coverage of all economic sectors, comparable across Member States and consistent with related statistical domains. This can be broken down into three specific objectives aligned to the problems outlined above:
·adapt the regulatory framework to allow for flexibility in meeting emerging needs, publish more timely statistics, and promote the use of innovative sources and methods (whose quality has been duly assessed);
·extend the coverage of statistics to the whole economy, and ensure gender pay gap data are provided by all Members States;
·improve the consistency with related statistical domains.
Policy options have been developed by grouping detailed policy measures that address the specific objectives.
Option 0 is the baseline scenario.
In option 1, the data collections specified in the three existing regulations are integrated under a new single framework regulation that also covers the gender pay gap. Definitions, concepts and approaches are aligned, and an overall planning is set up to better synchronise data transmissions. Except for the new legal basis for the gender pay gap, all improvements that go beyond a mere recast of the current legislation would remain voluntary. As a result, option 1 does not address emerging needs. It would only partially address the existing coverage gaps or slightly improve the timeliness of LMB data for a few voluntary countries.
In option 2, the coverage is extended to micro businesses for the structure of earnings survey (only for collecting the main information to limit burden) but not for the labour cost survey. The scope of both those surveys is extended to the NACE section ‘Public administration and defence; compulsory social security’, and job vacancy statistics cover the whole economy in all countries. Timeliness is slightly improved for the quarterly labour cost index and for the 4-yearly structure of earnings survey but not for the labour cost survey. The frequency of both surveys stays as it is in the baseline. Developing a legal basis for the gender pay gap and covering emerging needs is also part of this option. This option also ensures improved quality reporting for all data collections and better harmonisation and planning via the integrated framework regulation.
Option 3 exhaustively tackles the need for improvement and harmonisation of all LMB as expressed by stakeholders. It includes all identified policy measures or the most ambitious ones when alternative ones were envisaged. These measures are related to coverage, timeliness, high frequency of surveys on the structure of earnings and labour costs, quality reporting, use of administrative data and innovative sources, alignment of concepts across LMB domains, making gender pay gap data collection compulsory and covering emerging needs. That means that the coverage of both surveys is extended to micro firms and to the NACE section ‘Public administration and defence; compulsory social security’, and job vacancy statistics cover the whole economy. The timeliness of the structure of earnings survey shows a significant improvement, while the labour cost survey shows a moderate improvement; the timeliness of the labour cost index also improves. In this option, LMB benefits from improved quality reporting and better harmonisation and planning through one integrated framework regulation.
A qualitative assessment of the four options selected for the impact assessment was carried out. It assessed proportionality, followed by effectiveness, efficiency and coherence.
According to the estimates based on information from the national statistical institutes, option 3 creates a significant increase in the burden on businesses, and this leads to an 88% increase in their costs for answering surveys. Option 2 results in an 11% increase in the burden on businesses. In option 3, the costs for data compilers increase by 64% against 12% in option 2. Option 1 creates a negligible increase in the burden on and costs for businesses and national statistical institutes.
All the options ensure proportionality. Although option 3 covers more ambitious proposals, such as doubling the frequency of two data collections that currently take place every 4 years, it was not considered realistic given the current need to limit costs and burden. As a result, it is unlikely that this option could be implemented currently by the European Statistical System. While option 3 is the most effective, it is also the most expensive and places the highest burden on businesses. According to data providers, the implementation of option 3 would also raise serious difficulties in the field. Option 2 was identified as addressing the needs of data users and providers in the most cost-efficient way. The preferred option is therefore option 2. The legislative proposal is in line with this option.
•Regulatory fitness and simplification
The favoured option (option 2) will lead to simplification and more efficiency in the three following ways.
(a)Merging the existing three framework regulations into one single legal act.
(b)Fostering the use of alternative administrative sources and modern digital techniques, including web scraping and automatically transferring payroll data, which will play a role in mitigating the burden on enterprises in general and small and medium-sized businesses (SMEs) in particular. This could be achieved by extracting earnings and labour cost data from the payroll systems of companies and job advertisements from internet. New administrative and innovative data should also help cover emerging needs.
(c)Only collecting variables on apprentices from those countries where they represent a sizeable share of all employees (more than 1%).
By extending the structure of earnings survey proposed in option 2 to micro firms, the burden increase for all SMEs amounts to 0.24% of the current average burden every 4 years. This is based on an average sampling rate of 2.5% for SMEs. Moreover, the extension will cover only limited information and be balanced by a simplification of the labour cost survey on apprentices.
The proposed option is fully in line with the principle of digital-ready policymaking: digitalisation is at the core of statistical processes in the European Statistical System (‘digital by default’). Specific measures will be implemented digitally (web forms, digital processes, IT programmes) to minimise the costs for national statistical institutes and the burden on respondents.
•Fundamental rights
The impact assessment identified a potential positive indirect impact on fundamental rights. Better quality of statistics on the gender pay gap (including better data on people working in micro firms) would improve fundamental rights policies.