ANNUAL REPORT 2008 - Polymer Bank Notes of the World

Chart A Euro area real GDP and totalemployment growth(annual percentage changes)5.03.04.02.53.02.02.01.51.01.00.0-1.00.5-2.0 0.01996 1998 2000 2002 2004 2006 2008Source: Eurostat.real GDP (left-hand scale)total employment (right-hand scale)Chart B Breakdown of growth in hoursworked(in percentage points, unless otherwise indicated)43210-1-2-3part-time employmentfull-time employmentpart-time hoursfull-time hourshours worked (annual percentage changes)-32002 2003 2004 2005 2006 2007 2008Source: Eurostat.43210-1-2An increase in part-time work is also likely to be observed during a downturn, for a number ofreasons. First, the weakening of economic activity may lead to changes in the structure of theeconomy, including a shift towards those sectors that are typically more reliant on part-time jobs.Second, employers may modify the hours worked in line with changes in output demand, to theextent that previously full-time positions are transformed into part-time jobs. 2 Third, workerswho would prefer to work full time may be forced to consider part-time work because they cannotfind a full-time position. Finally, additional workers may enter the labour market as householdmembers take up part-time jobs to compensate for the unemployment or under-employmentof the main worker in the household. 3 However, these cyclical effects are not always easy toidentify in the data, since part-time employment growth has followed a clear long-term upwardtrend in the euro area, in large part owing to labour market reforms aimed at fostering increasedlabour force participation (see Chart D).Meanwhile, the potential supply of labour is likely to grow less rapidly as a result of an economicslowdown. It is a well-known phenomenon that some workers become discouraged from seekingwork as they see the number of available jobs fall. The nature of the current slowdown mayresult in some reallocation of workers away from those sectors worst affected by the downturn(e.g. financial services, real estate and construction, as well as the car industry), while theresulting mismatch – as people take time to retrain and relocate – may result in a slowdownin labour supply. Looking ahead, cyclical downturns can have a negative long-term effect onlabour supply growth through the atrophy of skills. This problem becomes particularly acute ifindividuals remain unemployed for a long period of time: the longer they remain unemployed,2 For the most part, Eurostat’s Labour Force Survey distinguishes between full-time and part-time employment on the basis ofrespondents’ assessments.3 See, for example, H. Buddelmeyer et al., “Why do Europeans work part-time? A cross-country panel analysis”, Working Paper Series,No 872, ECB, February 2008.68 ECBAnnual Report2008