Archive:Sustainable development - socioeconomic development

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Data from July 2015. Most recent data: Further Eurostat information, Database.

This article provides an overview of statistical data on sustainable development in the area of socioeconomic development. It is based on the set of sustainable development indicators the European Union (EU) agreed upon for monitoring its sustainable development strategy. This article is part of a set of statistical articles for monitoring sustainable development, which are based on the Eurostat publication 'Sustainable development in the European Union - 2015 monitoring report of the EU sustainable development strategy'. The report is published every two years and provides an overview of progress towards the goals and objectives set in the EU sustainable development strategy.

Table 1 summarises the state of affairs in the area of socioeconomic development. Quantitative rules, applied consistently across indicators and visualised through weather symbols, provide a relative assessment of whether Europe is moving in the right direction and at a sufficient pace, given the objectives and targets defined in the strategy.

Table 1: Evaluation of changes in the socioeconomic development theme (EU-28)

Overview of the main changes

Real gross domestic product (GDP) per capita in the EU has increased moderately both in the long term (since 2000) and in the short term (since 2009). The indicator’s continuous upward trend was interrupted by the start of the economic crisis in late 2008. Although the EU economy has since returned to growth, a fragile recovery is expected. Deterioration of economic conditions during the crisis has also affected other indicators in the ‘socioeconomic development’ theme. Labour markets were hard hit, with young people among the worst affected. Household savings have been strongly reduced in the short run, although disposable household income has improved moderately. Investment has also contracted, particularly in the short term. More favourable developments can be seen in some areas of competitiveness and eco-efficiency. Labour productivity has increased substantially since 2000, although some gains were reversed during the economic crisis. Energy intensity has improved even more steadily, both in the long term and short term. Investment in research and development (R&D) has increased only slightly.

Key trends in socioeconomic development

Recent changes in real GDP per capita indicate fragile recovery under way

In the long run between 2000 and 2014 real GDP per capita in the EU grew moderately by 0.9 % per year on average. Growth was more pronounced before the economic crisis of 2008. Between 1995 and 2007 real GDP per capita increased continuously at a rate of 2.2 % per year on average. As the financial and economic crisis took hold of the EU economy, however, GDP growth stalled in 2008 and by 2009 had contracted by 4.7 %. Swift implementation of fiscal stimuli and other policy actions at national and EU levels contained the worst effects of the crisis and restored economic growth in 2010 and 2011. Although real GDP per capita contracted slightly in 2012 and 2013, it increased again in 2014 by 1.1 %. As a result, in the short term between 2009 and 2014 the EU economy grew at an average annual rate of 0.7 %.

The crisis continues to weigh on investment in the EU

Between 2002 and 2014 investment (as a share of GDP) declined in the EU. This was most likely due to a loss of household and business confidence during the financial market turmoil and the economic crisis. The drop in total investment was somewhat offset by increased government spending in the first years of the crisis. However, since 2009 government investment has also declined as a result of fiscal consolidation efforts, driving total investment down further. Public spending cuts have also contributed to reducing adjusted disposable household income in the Member States hardest hit by the economic crisis. In the rest of the EU households experienced a continuous improvement in their disposable income in the period between 2003 and 2013.

The EU household saving rate was strongly subdued in 2014 compared with 2009 due to the negative effects of fiscal consolidation efforts on household disposable income. Since 2010 the household saving rate has been falling, which was also observed before the 2008 economic crisis. In the long run between 2000 and 2014 the indicator dropped moderately by 1.4 percentage points.

Gains in competitiveness due to higher labour productivity but subdued innovation

Labour productivity increased almost continuously between 2000 and 2013. Some gains were reversed between 2007 and 2009 as a result of the economic downturn, but in 2010 labour productivity rebounded to its pre-crisis level and has continued to grow. Energy intensity in the EU has also improved. It declined by 15.9 % between 2002 and 2013 as a result of absolute decoupling of gross inland energy consumption from economic growth Less favourable developments have been observed with regard to innovation. R&D expenditure as a share of GDP increased slightly in the EU between 2000 and 2013 but more rapid progress is needed to reach the 3 % target set out in the Europe 2020 strategy. Most of the increase in 2008 and 2009 came from the public sector, reflecting government efforts to support economic growth by boosting R&D expenditure. Since then R&D intensity has remained at about 2 % of GDP. In terms of eco-innovation activities, the majority of Member States performed lower in 2013 compared with 2010.

Muted labour market recovery

Between 2002 and 2014 the EU employment rate rose moderately by 2.5 percentage points, mostly due to strong labour market performance before the economic crisis. Short-term developments in the labour market have been much less favourable. The economic crisis and prolonged labour market stagnation held back employment between 2008 and 2013. Although the indicator picked up again in 2014, the EU is off-track to meeting the Europe 2020 target to reach a 75 % employment rate by 2020.

In 2014, the share of young people neither in employment nor in education or training (NEET rate) was equivalent to its 2009 level of 12.4 % and slightly lower than its 2002 level of 13 %. Although the NEET rate had been falling gradually before the crisis, it was driven up again with the start of the economic crisis largely due to the rise in youth unemployment. The overall unemployment rate in the EU followed a similar trend of falling gradually before the crisis and increasing sharply afterwards. In 2013 EU unemployment reached a record high of 10.9 % but fell slightly in 2014, indicating a possible labour market recovery.

Main statistical findings

Headline indicator

Real GDP per capita

Real GDP per capita followed an upward long-term trend, increasing by 0.9 % per year on average between 2000 and 2014. The EU economy shrank by 4.7 % between 2008 and 2009 as a result of the crisis but rebounded in the years after. Between 2009 and 2014 the real GDP per capita grew by 0.7 % per year on average, indicating a fragile recovery is under way.

Figure 1: Change in real GDP per capita, EU-28, 1996–2014 (% change on previous year) - Source: Eurostat (online data code: (tsdec100))

Real gross domestic product (GDP) per capita in the EU increased continuously at an average growth rate of 2.2 % per year between 1995 and 2007. This trend reversed with the start of the economic crisis in late 2008, and in 2009 a decline of 4.7 % was recorded. This was the strongest one-year drop of the past two decades. More recent developments have been tentative. Between 2009 and 2011, real GDP per capita picked up again, recording a moderate increase of 1.6 % per year on average. From 2011 to 2013, economic activity contracted by 0.8 % over the two years period before returning to positive growth in 2014. Between 2000 and 2014 real GDP per capita grew by 0.9 % per year on average, following an upward long-term trend. In the short term, since 2009, the average annual growth rate has been slightly lower at 0.7 % due to the protracted effects of the economic crisis. It should be noted that real GDP per capita has developed differently across EU Member States. Some economies, particularly the ones that had accumulated large macroeconomic imbalances before 2008, have been more exposed to the effects of the crisis and experienced larger dips in 2008 and 2009 as well as in 2012 and 2013, while others have been less affected.

• Is economic recovery under way in the EU?

Decisive policy actions at national and European level in response to the crisis alleviated some of the gravest short-term risks to the economy. These measures, including rescue packages for the most troubled economies, counter-cyclical fiscal stimulus and banking sector support, brought about moderate economic growth in 2010 and 2011 and helped improve confidence and financial conditions for sovereigns and banks (IMF, 2013, p.1). The moderate increase in economic activity in 2014 points towards a recovery. However, this is likely to be slower and more fragile than typical cyclical adjustments due to the severity of the recent economic slump. Certain negative factors stemming from the crisis, such as high debt, uncertainty and tight financing conditions have been slow to recede and remain a drag on investment and domestic consumption (OECD, 2014, p.18). As a result, real GDP per capita slipped 0.7 % in 2011–12 and remained subdued in 2013.

• Growth prospects turn positive but moderate

The EU is expected to gradually return to growth over the next few years, according to European Commission forecasts, reinforced by substantial improvements in the public finances, stronger domestic demand, lower oil prices and quantitative easing in the euro area (European Commission, 2015, p.10). The benefits of the necessarily tighter fiscal stance have started to show effect with debt-to-GDP levels falling in 2014 (European Commission, 2015, p.5). Overall improvement in public finances since 2011, especially in the countries which had some of the largest imbalances, has allowed the pace of fiscal consolidation to slow, reducing pressure on public and household spending. As the recovery gains ground and confidence returns to the market, investment conditions are expected to improve, especially in the private sector which declined sharply between 2008 and 2011. Business investment is a key driver of domestic demand and is important for restoring economic growth in periods of recovery. Although still low, business and household spending are set to rise gradually and support growth as the effects of the crisis recede. As a result, annual GDP growth is expected to accelerate to 1.8 % in 2015 and 2.1 % in 2016 (European Commission, 2015, p.1).

Figure 2: Change in real GDP per capita, by country, 2000–14, 2000–07 and 2007–14 (average annual change in %) - Source: Eurostat (online data code: (tsdec100))

• How GDP growth varies between Member States

Economic growth was positive in all EU Member States between 2000 and 2007, before the economic and financial crises aggravated market conditions. The strongest average annual growth rates were observed in some central and eastern EU Member States, namely Latvia (10.3 %), Estonia (8.4 %), Romania (7.4 %), Bulgaria (6.6 %) and Slovakia (6.2 %). In contrast, real GDP per capita in some Member States grew by less than 2 % per year on average. The lowest growth rates were observed in Italy (0.7 %), Portugal (0.9 %) and France (1.1 %). By 2014 growth stabilised in most Member States, but the drag on economic activity has lingered longer in some southern EU economies. The strongest decline in real GDP per capita between 2007 and 2014 was observed in Greece, Cyprus and Italy. These countries either had unsustainable pre-crisis balance sheets or were strongly affected by a real estate property bubble. Even in countries that did not accumulate external imbalances, such as Germany, economic growth deteriorated as a result of shrinking EU export demand and business uncertainty (European Commission, 2012, p.8). Economies of central and eastern Member States, which had more stable balance sheets before the crisis, grew more strongly between 2007 and 2014, despite the spill-over effects of more troubled economies. Poland performed exceptionally well and was the only EU economy to maintain economic growth during the crisis and thereafter. Between 2007 and 2014, Poland and Bulgaria had the fastest average growth rates per year (3.1 % and 2.0 % respectively), followed by Lithuania (1.9 %), Romania (1.8 %) and Slovakia (1.7 %).

Figure 3: The EU compared with other economies in the world, 2013 - Source: World Bank

• EU trends in GDP compared with other countries in the world

Moderate growth has returned to the EU and other major economies as the effects of the global crisis have slowly started to recede (OECD, 2014, p.18). However, economic performance has diverged across regions and recovery is expected to remain uneven. Among the advanced economies, growth in the United States has gained ground and is expected to remain strong due to improved domestic demand and lower energy prices (European Commission, 2015, p.138). Japan has experienced a weaker recovery from the economic recession due to reduced domestic demand and private investment (European Commission, 2015, p.140). However, the economy is expected to start growing again in 2015 and 2016. Regarding emerging market economies, growth rates have been significant in China, India and Indonesia. In contrast, GDP has contracted in Russia due to falling oil revenues and political tensions, and remained weak in Brazil and South Africa. Economic recovery has been slower in the EU than in other advanced economies. It is expected to remain weak largely due to the protracted effects of the euro area crisis, unfavourable investment climate and slow implementation of reforms. Nonetheless, the EU remains the world’s largest economy in terms of GDP (billion US dollars). In 2013, the 28 EU Member States together produced a GDP of 17.96 trillion US dollars, followed by the United States, China and Japan. EU living standards, as measured by GDP per capita, remain among the highest in the world, surpassed by Australia, the United States, Canada and Japan.

Economic development

Investment

Investment in the EU fell by almost two percentage points in the long-term period from 2002 to 2014. This was largely due to a sharp fall in private investment caused by the unfavourable effects of the economic crisis. In the short term, from 2009 to 2014, government investment also declined as a result of fiscal consolidation efforts, which drove total investment down further.

Figure 4: Investment by institutional sector, EU-28, 2002–14 (% of GDP) - Source: Eurostat (online data code: (tsdec210))

Figure 5: Total investment, by country, 2000 and 2013 (% of GDP) - Source: Eurostat (online data code: (tsdec210))

The share of GDP used for total investment in the EU has closely followed the economic cycle. Between 2002 and 2007 investment grew continuously, reaching a peak of 23.0 % of GDP in 2007. Since the economic crisis of 2008, however, the indicator has followed a downward trend. Over the long-term period between 2002 and 2014, it fell by almost two percentage points, from 21.7 % to 19.8 %. This was mostly due to a steep fall in business investment in 2009, although a decline in household investment also contributed. Total investment was further reduced by a decline in government investment between 2009 and 2014.

• How investment varies between Member States

Total investment had been improving in most EU countries before the crisis. Romania, Latvia and Estonia were the strongest performers, increasing their investment as a share of GDP by ten or more percentage points between 2000 and 2007. However, as a result of the crisis total investment was halved in Cyprus, Greece and Ireland and was strongly reduced in Spain and Portugal. Loss of investor confidence was also strong in Slovakia, Lithuania and Latvia.

• The crisis hit private investment hardest

The slump in total investment during the economic downturn was not a surprise because investment expenditure is normally a highly cyclical and volatile component of GDP. A series of negative economic events – the collapse of property bubbles, the financial and sovereign debt crises, the related economic recession, and uncertainty about the euro’s future – dampened business and business and consumer confidence . As a result, household and business investment declined to unprecedented levels across the EU between 2007 and 2013. In fact, private investment was the hardest-hit component of the EU’s GDP during the economic downturn (McKinsey, 2012, p.11). As lending standards tightened and a fall in asset prices reduced consumer wealth, households saved money instead of spending it on durables and housing (McKinsey, 2009, p.24). Business investment, in addition to the high economic uncertainty and a large decline in growth expectations, was also affected by reduced access to financing in the form of tightened credit conditions. This was especially the case for small and medium-sized enterprises (McKinsey, 2012, p.11). Government investment remained stable or slightly improved in the majority of Member States between 2008 and 2010. This was a direct result of counter-cyclical fiscal measures widely used in response to the economic crisis. However, in 2013 ambitious fiscal consolidation programmes led to government investment falling to unprecedented levels in Ireland, Cyprus and Spain, and to levels that were lower than in 2007 in the majority of Member States.

• EU investment trends compared with other countries in the world

The private investment crisis brought on by the economic downturn is not an exclusively EU phenomenon. Other major economies, including the United States and Japan, experienced a comparable contraction in private investment. However, in these two countries increased private consumption moderated the negative impact that this had on growth (McKinsey, 2012, p.11). Furthermore, in line with the EU’s expansionary policy in response to the economic and financial crisis, most major economies around the world embarked on unprecedented stimulus packages, ranging from 6 % of GDP in the United States to 12 % in China (ILO, 2011, p.2).

Disposable household income

Per capita gross disposable income of households in the EU increased by 24 % over the long-term period from 2003 to 2013. Short-term developments from 2008 to 2013 have also been positive at the EU level although some gains were reversed by the economic crisis. Households in crisis-hit Member States have experienced a marked deterioration in their position.

Figure 6: Real adjusted gross disposable income of households per capita, EU-28, 2003–13 (Purchasing power standards (PPS)) - Source: Eurostat (online data code: (tec00113))

Figure 7: Real adjusted gross disposable income of households per capita, by country, 2003 and 2013 (Purchasing power standards (PPS)) - Source: Eurostat (online data code: (tec00113))

Real adjusted gross disposable income of households per capita refers to the income available to households for spending and saving after paying taxes. It includes social benefits and social transfers in kind (goods and services provided by the government, such as education and healthcare). In the long run, disposable household income per capita in the EU expressed in Purchasing Power Standards (PPS) has increased markedly, from 16 366 PPS in 2003 to 20 307 PPS in 2013. Progress was slower in the short-run, from 2008 to 2013, due to effect of the economic crisis on labour market conditions and social spending. This short-term slowdown in growth has put more people at risk of poverty and social exclusion and has increased the share of long-term unemployed.

• How disposable income varies between Member States

In 2013, Germany and Austria had the highest disposable household income per capita in the EU, followed by France, Sweden and Belgium. Central and eastern EU Member States dominated the lower end of the spectrum. In Romania, Latvia and Croatia disposable household income per capita in 2013 was less than half that of Germany. However, some central and eastern EU Member States have been catching up with the rest of Europe in terms of income levels. Notably, in Lithuania, Slovakia, Latvia, Poland and Estonia disposable income per capita increased by more than 50 % and in Romania by more than 100 % over the period from 2003 to 2013.

• What impact did the crisis have on the material well-being of households?

Disposable household income deteriorated in a number of EU Member States with the start of the economic crisis. Households in Greece experienced by far the strongest decline between 2008 and 2013 (– 22.8 %), followed by Cyprus (– 13.8 %), Ireland (– 5.1 %) and the Netherlands (– 5.0 %). The steep decline was largely due to increased unemployment, reductions in working time and earning, falling income from capital and other sources (ILO, 2014, p.133). A scaling up of social protection schemes partially cushioned households from the immediate effects of the crisis. Benefit payments were increased automatically and additional fiscal stimulus was provided for vulnerable groups of the population (ILO, 2014, p.132). Social payments were increased in Ireland and Cyprus, for example, and tax reductions were introduced in most Member States (European Commission, 2012, p.2). However, from 2010 onwards fiscal stimulus measures were discontinued due to growing concerns over rising sovereign debt and fiscal deficits. Instead, governments focused on lowering public expenditure by reducing social payments (ILO, 2014, p.134). As a result, Member States that introduced some of the boldest cuts in social expenditure (such as Greece, Ireland, Portugal and Spain), have seen drops in household disposable income and crippling domestic demand.

Household saving

The household saving rate in the EU fell moderately in the long term between 2000 and 2014. In the short term between 2009 and 2014 the indicator dropped by more than two percentage points, offsetting the swift increase between 2007 and 2009.

Figure 8: Household saving rate, EU-28, 1999–2014 (%) - Source: Eurostat (online data code: (tsdec240))

Figure 9: Household saving rate, by country, 2000 and 2013 (%) - Source: Eurostat (online data code: (tsdec240))

The EU household saving rate climbed to 12.7 % in 2001 as financial distress from the economic slump of the early 2000s took its toll on consumer spending. This was followed by a prolonged, steady decline in the saving rate between 2002 and 2007, possibly driven by a combination of low interest rates and low and stable inflation, boosting customers’ demand for credit. Household savings started to pick up again in late 2008, due to the start of the economic crisis, and reached a decade-high of 13.0 % in 2009. This is not a surprise because the household saving rate is in general sensitive to uncertainty over the economy and interest rates. Since 2010 household savings have continuously fallen, reaching a record low of 10.5 % in 2014. As a result of the gradual decline between 2000 and 2007 and the steep fall since 2010, the indicator has developed unfavourably both in the long term (since 2000) and in the short term (since 2009). The short-term decline of more than 2.5 percentage points has been more substantial compared with the long-term fall of 1.4 percentage points. It should be noted that low levels of household savings are not necessarily undesirable in times of economic recession. Running down savings during a downturn indicates higher spending, which helps restore economic stability. Therefore, the drop in the indicator should be interpreted with caution in view of the recent economic slump in the EU. Although household spending is expected to increase in the EU with the improvement of economic conditions and the subsequent increase in real disposable income, there is a chance that the household saving rate could increase moderately in 2015 (European Commission, 2015, p.30). At the same time, savings are not likely to increase by much due to downward pressure from relatively low interest rates, improved labour markets, and less uncertainty.

• How household saving rates vary between Member States

In 2013, the saving rate of households across the EU Member States ranged from the negative (– 7.6 % in Cyprus and – 4.0 in Latvia) to 18.1 % in Sweden. Negative saving rates in Cyprus and Latvia indicate that on average households in these countries spent more than their regular income and financed the difference through credit, selling assets or running down cash and deposits. Average household saving rates were also low in Lithuania (2.2 %), the United Kingdom (6.4 %) and Denmark (6.7 %). The other end of the spectrum was dominated by a number of northern and western EU Member States with household saving rates well above the EU average (18.0 % in Sweden, 16.3 % in Germany, 14.7 % in France and 14.7 % in the Netherlands). The majority of Member States experienced a reduction in household saving rates between 2000 and 2013. The strongest decline occurred in Cyprus (– 17.8 percentage points), whereas in Sweden and Ireland the indicator increased by 11.3 and 9.5 percentage points respectively. Before the economic crisis of 2008, household saving rates across the EU were converging (Gregorini and Akritidis, 2014). However, they started to diverge as the recession took hold. Countries that were hard hit by the crisis, in particular those with housing bubbles, experienced strong reductions. Variations across countries could be the result of a combination of factors, including differences in income tax rates, inflation rates, pension systems, stock and housing prices, and real interest rates, among others.

Innovation, competitiveness and eco-efficiency

Labour productivity

Output per hour worked in the EU increased by 15 % in the long term between 2000 and 2013. In the short term, some productivity gains were reversed by the economic crisis but since 2010 the indicator has returned to an upward path.

Figure 10: Labour productivity per hour worked, EU-28, 2000–13 (Euro per hour worked) - Source: Eurostat (online data code: (tsdec310))

Figure 11: Labour productivity per hour worked, by country, 2000 and 2013 (EUR per hour worked) - Source: Eurostat (online data code: (tsdec310))

The output of workers per hour worked (labour productivity) in the EU increased continuously between 2000 and 2007. This trend was interrupted by the start of the economic crisis in 2008 and the following deterioration of economic conditions. As a result, labour productivity in the EU fell from EUR 31.3 per hour worked in 2007 to EUR 30.7 in 2009. A slowdown in productivity during recession could reflect weak investment under conditions of high economic uncertainty, resulting in slow capital accumulation (European Commission, 2010, p.48). Weak productivity could also result from companies retaining labour during the downturn, leading to underuse of labour and spare capacity. In 2010, labour productivity rebounded to its pre-crisis level and continued to grow in the following years, albeit at a very low rate. In 2013, output per worker increased to EUR 32.1 per hour against the backdrop of a slow economic recovery. During an economic rebound, productivity initially rises as firms increase the work intensity of employees instead of hiring new workers. However, as firms start taking on more workers this boost in productivity is likely to level off.

• How labour productivity varies between Member States

Almost all Member States benefited from increased labour productivity between 2000 and 2013. The only exception was Luxembourg where productivity fell marginally. Improvements in labour productivity were most pronounced in Latvia (100 %), Lithuania (89.3 %), Romania (86.7 %), Estonia (62.9 %) and Slovakia (61 %). This could be the result of more efficient use of labour or the accumulation of physical and human capital (ILO, 2014, p.11). It could also be due to a larger shift from industries and economic activities with low productivity levels to ones with higher levels, even if the activities have not become more productive themselves. Considerable differences in productivity can be observed across Europe. In 2013, Luxembourg and Denmark had the most efficient workers, producing an output of more than EUR 50 per hour. At the other end of the spectrum, labour productivity in 11 Member States was under EUR 20 per hour. The large divergence in productivity rates within the EU has been identified as an important structural weakness and one of the underlying causes of the economic crisis. Internal and external structural adjustment programmes, such as improving export performance and limiting unsustainable residential investments, are taking place in Ireland, Greece, Spain, Cyprus, Portugal and Slovenia. Wage growth in these countries did not match productivity gains before the crisis. These measures were introduced to rebalance labour productivity, boost competitiveness and improve economic performance (European Commission, 2013, p.25).

Eco-innovation

In 2013, ten Member States scored better than the EU average in terms of eco-innovation activities.

Figure 12: Eco-innovation index, by country, 2010 and 2013 (index EU=100) - Source: Eurostat (online data code: (t2020_rt200))

Innovation in environmental technologies, products and services (eco-innovation) differs substantially across the EU. In 2013, ten Member States performed better than the EU average in terms of eco-innovation activities. Finland, Sweden and Germany received the highest scores, forming the group of ‘eco-innovation leaders’ in the EU. However, these countries were not necessarily the best performers in terms of environmental outcomes as a moderate correlation has been observed between a relatively high eco-innovation score and material consumption and greenhouse gas emissions (Eco-innovation Observatory, 2013). At the other end of the scale, eco-innovation was least prominent in Bulgaria, Poland, Cyprus and Slovakia. The eco-innovation index shows how well individual Member States perform in eco-innovation compared with the EU average. It is based on 16 indicators in five areas: eco-innovation inputs, eco-innovation activities, eco-innovation outputs, environmental outcomes and socio-economic outcomes (Eco-innovation Observatory, 2011).

Research and development expenditure

R&D intensity in the EU rose by about 12 % between 2000 and 2013, mostly due to a boost from the public sector during the crisis. A gap of almost one percentage point remains to be closed by 2020 to reach the 3 % target.

Figure 13: Total R&D expenditure, EU-28, 1999–2013 (% of GDP) - Source: Eurostat (online data code: (tsdec320))

Figure 14: Total R&D expenditure, by country, 2000 and 2013 (% of GDP) - Source: Eurostat (online data code: (tsdec320))

Over the period 2000 to 2007 research and development (R&D) expenditure as a share of GDP (also referred to as ‘R&D intensity’) was relatively stable in the EU, remaining at about 1.79 %. Despite the slowdown in economic activity during the crisis, R&D intensity recorded a slight increase from 1.85 % of GDP in 2008 to 2.01 % of GDP in 2013. Although R&D expenditure as a share of GDP has improved both in the long term (since 2000) and short term (since 2008), much more rapid progress is needed to reach the Europe 2020 goal of 3 %. As of 2013, a gap of 0.99 percentage points remains to be closed.

• Which sectors have boosted R&D expenditure since the start of the economic crisis?

One reason for the increase in R&D intensity following the financial and economic crisis is the fact that GDP has fallen more rapidly than overall R&D expenditure (European Commission, 2013,  p.17). Additionally, individual Member States have acted to boost public R&D spending to counteract the effects of the crisis and stimulate economic growth (European Commission, 2011,  p.65). Between 2008 and 2009, government sector expenditure on R&D in the EU grew faster than the private non-profit sector and slower than higher education. In contrast, R&D expenditure in the business sector declined over the same period. However, business spending on R&D recovered in 2010 and has continued to grow. In 2012, the top European companies increased investment in R&D by 6.3 % compared with the previous year (European Commission, 2013,  p.7).

• How R&D expenditure varies between Member States

R&D expenditure as a share of GDP varied between 0.39 % and 3.31 % across the EU in 2013. Scandinavian countries, in particular Sweden and Denmark, as well as Finland, spent more than one percentage point more on R&D than the EU average. Out of this group, however, only Denmark managed to reach its national target under the Europe 2020 framework . At the other end of the spectrum, in ten Member States, mostly in the eastern and southern part of Europe, R&D expenditure was less than 1.0 % of GDP. Many Member States recorded a substantial increase in R&D intensity after the economic crisis. This was not only a result of slower GDP growth, but also reflected government efforts to support economic recovery and long-term growth by boosting public and private R&D investment.

• EU trends in R&D expenditure compared with other countries in the world

Despite the distance to the 3 % target set out in the Europe 2020 strategy, in 2012 the EU (2.01 %) was among the six best performers in the world concerning R&D expenditure as a share of GDP. According to Eurostat and UN data , South Korea was at the forefront (4.04 %), followed by Israel (3.93 %), Japan (3.38 %) the United States (2.81 %), Iceland (2.49 %) and Singapore (2.10 %) . Canada and Russia were behind the EU with R&D levels of 1.73 % and 1.13 % respectively. Regarding the business sector, the top European companies increased R&D investment by 6.3 % in 2012, which was above the world average (6.2 %) but below the growth by US firms (8.2 %) (European Commission, 2013,  p.5). The strong R&D performance of European businesses was largely driven by Germany, especially in the automobile sector.

Energy intensity

Energy intensity in the EU dropped by 15.9 % over the period 2002 to 2013 as a result of absolute decoupling of energy consumption from economic growth.

Figure 15: Energy intensity of the economy, EU-28, 2002–13 (index 2002 = 100) - Source: Eurostat (online data codes: (tsdec360), (tsdcc320) and (nama_10_gdp))

Energy intensity – the energy used to produce one unit of economic output – has declined substantially over the past decade. Between 2002 and 2013 energy consumption in the EU fell by 5.4 %, whereas GDP grew by 12.4 %. As a result, energy intensity recorded a drop of 15.9 % over the same time period, indicating absolute decoupling of energy consumption from economic growth. Decoupling energy consumption from economic growth is essential for reconciling economic and environmental goals. A decrease in energy intensity can be observed both in the presence of absolute decoupling (energy consumption falls despite economic growth) and relative decoupling (energy consumption grows at a slower pace than economic growth).

• Energy intensity remains responsive to swings in economic cycles

Energy intensity tends to follow the economic cycle. Between 2003 and 2008 energy intensity in the EU steadily declined, mostly because GDP was growing at a faster rate than gross inland energy consumption (relative decoupling). During the economic downturn, from 2008 until 2009, GDP contracted but energy consumption was also reduced due to suppressed consumption and production. As a result energy intensity continued to fall (– 1.2 %). The rebound in economic growth in the EU in 2010 (+ 2.0 % compared with 2009) was accompanied by a surge in energy consumption (+ 3.8 % compared with 2009). As a result, energy intensity increased for the first time since 2003, by 1.8 % between 2009 and 2010. However, energy intensity in the EU fell substantially by 6.7 % during the next three years as energy consumption fell rapidly while GDP continued to grow. This indicated an absolute decoupling of energy consumption from GDP growth. The 15.5 % reduction in energy intensity over the past decade has been influenced by improvements in energy efficiency (both in terms of final consumption and power generation) and a shift to renewable energy sources in the power generation mix. The rise in eco-efficiency, which is reflected in reduced energy intensity, has also resulted from structural economic changes within the EU. These include the transition towards a more service-based economy and less energy-intensive and higher value-added industries (EEA, 2012).

Employment

Employment

The EU employment rate increased by 2.5 percentage points in the long-term period between 2002 and 2014. The indicator improved only marginally in the short term between 2009 and 2014 due to the unfavourable effects of the economic crisis on labour markets. Overall progress has been slow and a gap of five percentage points remains to the Europe 2020 employment target of 75 %.

Figure 16: Total employment rate, EU-28, 2002–14 (% of age group 20–64 years) - Source: Eurostat (online data code: (tsdec410))

Figure 17: Employment rate, by sex, EU-28, 2002–14 (% of age group 20–64 years) - Source: Eurostat (online data code: (tsdec420))

Figure 18: Total employment rate, by country, 2000 and 2014 (% of age group 20–64 years) - Source: Eurostat (online data code: (tsdec410))

The share of persons aged 20 to 64 in employment in the EU increased steadily between 2002 and 2008, reaching a peak of 70.3 % in 2008. This trend reversed with the start of the economic crisis. The indicator followed the economic cycle with the usual time-lag as adjustments in the labour market took longer to respond to changes in aggregate demand (European Commission, 2012,  p.67). In 2009, the economic crisis fully hit the European labour market, bringing the employment rate back to the 2006 level of 68.9 %. In 2010 the employment rate continued to fall, before coming to a standstill at about 68.4 % where it remained until 2013. Between 2010 and 2013 the EU economy experienced jobless growth as most GDP growth was driven by increases in productivity and hours worked rather than employment (European Commission, 2012,  p.19). In 2014, employment picked up for the first time since the start of the crisis, reaching 69.2 %. However, because of labour market stagnation in the post-crisis years, the EU does not seem to be on track to reach its Europe 2020 employment target of 75 %.

• The gender employment gap is shrinking

Although the employment gender gap in the EU has decreased substantially over the past decade, women still tend to be less economically active than men. In 2014, the employment rate of women was still 11.5 percentage points lower than that of men. A number of factors contribute to this trend. The most important is the time women spend on childcare and other family responsibilities. This is especially the case in countries where childcare services are unaffordable or absent. Furthermore, the longer women are out of the labour market or remain unemployed due to care duties, the harder it becomes for them to find a job. Nevertheless, between 2002 and 2014 the EU employment gender gap closed by more than five percentage points. The strongest reduction occurred during the economic crisis, partly because traditionally male-dominated industries, such as construction and automobile, were the most affected by the crisis (European Commission, 2009,  p.36).

• Employment rates are lower among youths and older people

Youths and older workers generally have lower employment rates than other age groups. In 2014, the employment rate of young people aged 20 to 29 was nine percentage points below the EU’s total employment level (referring to the population aged 20 to 64). The employment rate of older workers aged 55 to 64 was even lower (17 % below the total employment rate). Nevertheless, employment of older workers has increased continuously over time, rising from slightly below 40 % in 2003 to above 50 % in 2014, in line with the Europe 2020 objective. In contrast, young people were less likely to be employed in 2014 compared with ten years earlier.

• Does better educational attainment increase employability?

The level of education is an important factor for explaining the variation in activity and employment rates between different labour groups. Employment rates generally increase with the level of educational attainment. In 2014, 82.1 % of people with tertiary education were employed, which was significantly higher than the EU average employment rate for the same year (69.2 %). In contrast, just slightly more than half (51.9 %) of those with at most primary or lower secondary education were employed. The rate for workers with upper secondary or post-secondary non-tertiary education was close to the EU average level at 70.1 %. Although the employment rates of different education subgroups have followed the same path over time, people with lower education levels were more vulnerable to job losses during the 2008 economic crisis. This is possibly due to the fact that sectors requiring lower qualification levels, such as the construction industry in Spain, the UK and Ireland, were hit hardest by the economic downturn. Recognising the importance of education for improving job market performance, the EU has adopted headline targets and policy measures in the areas of education and employment as part of the Europe 2020 strategy.

• How employment rates vary between Member States

There are substantial differences in the employment rates across the EU and the gap between the best and the worst performing countries has increased since 2000. In 2014, the employment rates in Sweden, Germany, the United Kingdom, the Netherlands and Denmark exceeded 75 %. In contrast, employment rates were less than the EU average of 69.2 % in 15 Member States. The lowest end of the spectrum was dominated by southern EU Member States, with Greece having the lowest average employment rate at 53.3 %, followed by Croatia (59.2 %), Spain and Italy (59.9 % each). These low rates are likely to reflect differences in economic development, demographic trends, labour market structures and policies across Member States, as well as the asymmetric impact of economic shocks.  

Young people neither in employment nor in education or training

The share of young people not in employment, education or training (NEET rate) declined slightly in the period between 2000 and 2014. The indicator reached a decade low of 10.9 % in 2008, before increasing again until 2012 as a result of the economic crisis and the related hike in youth unemployment.

Figure 19: Young people neither in employment nor in education or training (NEET rate), EU-28, 2002–14 (% of the population aged 15 to 24) - Source: Eurostat (online data code: (edat_lfse_20))

Figure 20: Young people neither in employment nor in education or training (NEET rate), by country, 2000 and 2014 (% of the population aged 15 to 24) - Source: Eurostat (online data code: (edat_lfse_20))

In 2014, 12.4 % of young people aged 15 to 24 in the EU were not employed and were not receiving further education or training (NEET rate). This exactly corresponds to the NEET rate of 2009 and it represents a slight reduction compared with 2012, when the NEET rate reached 13.1 %. Although no change can be observed in the short term between 2009 and 2014, the NEET rate fell slightly in the long-term period between 2002 and 2014. Reductions were much stronger before the economic crisis of late 2008 and the subsequent increase in the number of unemployed young people. Generally, in times of economic downturn youths tend to be among the most vulnerable groups on the labour market, along with migrants and low-skilled workers (Eurostat, 2015,  p.46).

• How NEET rates vary between Member States

In 2014, the share of young people aged 15 to 24 who were not in employment, education or training varied between 5.0 % and 22.1 % across the EU. The lowest NEET rates were in the Netherlands, Denmark, Luxembourg and Germany. At the other end of the spectrum, NEET rates were highest in some eastern and southern EU Member States. In Italy and Bulgaria every fifth person or more in the 15 to 24 year age group fell into the NEET category. Both countries generally have high shares of early leavers from education and training (Eurostat, 2015,  p.107). and low employment rates (Eurostat, 2015,  p.31)., which increases the risk for young people being excluded from the labour market. NEET rates decreased in majority of EU Member States between 2000 and 2014. The strongest improvements were in Bulgaria, Slovakia and Malta, where NEET rates fell by more than ten percentage points. In contrast, Cyprus, Spain, Portugal and other crisis-hit economies have seen rising NEET levels since 2008.

Unemployment

The EU unemployment rate increased by 1.3 percentage points between 2000 and 2014. This was due to a steep increase of more than three percentage points between 2008 and 2014.

Figure 21: Total unemployment rate, EU-28, 2000–14 (%) - Source: Eurostat (online data code: (tsdec450))

Figure 22: Unemployment rate by age group, EU-28, 2000–14 (%) - Source: Eurostat (online data code: (tsdec460))

Figure 23: Unemployment rate by sex, EU-28, 2000–14 (%) - Source: Eurostat (online data code: (tsdec450))

The unemployment rate in the EU has increased by 1.3 percentage points in the long term (since 2000), largely due to a substantial short-term increase in joblessness since 2009. Between 2000 and 2005 the EU unemployment rate was more or less stable at about 9 %. Over the next three years, unemployment fell steadily, reaching a decade low of 7.0 % in 2008. The economic crisis that took hold of the European economy in 2008 first hit the labour market in 2009. This reflects the normal delay with which labour markets respond to GDP fluctuations. As a result, between 2009 and 2013 the EU unemployment rate increased consistently, reaching a peak of 10.9 % in 2013. This upward trend reversed in 2014 when it fell slightly to 10.2 % due to improved economic conditions and stronger labour market.

• Youth unemployment and male unemployment affected most by the labour market downturn

A closer look at the unemployment indicator shows that young people aged 15 to 24 have been more strongly affected by labour market deterioration than other age groups. Between 2008 and 2013 youth joblessness increased by 7.8 percentage points, before falling to 22.2 % in 2014. Long spells of unemployment are particularly harmful for young people because they lead to skill erosion and prevent them from building up work experience. This diminishes their labour market prospects from an early stage. In light of these developments, young people are a high priority for policy action at the EU and national levels.

Since 2000, gaps in the unemployment rates of men and women have been closing. In 2014, the gender unemployment gap was nearly non-existent, mainly as a result of the pronounced increase in male unemployment compared with a small increase in female unemployment during the economic downturn.

• How unemployment rates vary between Member States

Pronounced differences can be observed in the labour market performances between EU Member States. In 2014, unemployment rates across the EU varied by more than 20 percentage points. The highest unemployment rates by far were observed in Greece (26.5 %) and Spain (24.5 %), followed by Croatia (17.3 %) and Cyprus (16.1 %). On the other end of the spectrum, Germany, Austria, Malta and Luxembourg revealed strong labour market performance with unemployment rates ranging between 5.0 % and 5.9 %. Due to the prolonged effects of the economic crisis, the average duration of unemployment and the share of long-term unemployed among jobseekers have increased in many vulnerable states. In Greece and Spain, the average duration of unemployment has reached nine and eight months respectively. This is likely to slow down labour market recovery due to deterioration of jobseekers’ skills and increased pressure on the public coffer (ILO, 2014,  p.25).

• EU trends in unemployment compared with other countries in the world

In 2014, the EU unemployment rate of 10.2 % significantly exceeded the average for Organisation for Economic Co-operation and Development (OECD) countries (7.3 %), the G 7 (6.4 %) and the United States (6.2 %). Joblessness in the EU was also more than twice as high as in Japan (3.6 %) and the Republic of Korea (3.5 %) . According to projections by the International Labour Organisation (ILO), only the US is expected to experience a sizable decline in unemployment figures in the medium term, whereas unemployment rates in other developed economies are expected to remain largely unchanged (ILO, 2014,  p.18).

Due to the significant spillover effects of weak growth in advanced economies, international labour markets were not immune to the economic downturn. According to ILO estimates, most of the increase in global unemployment in 2013 occurred in East Asia and South Asia, followed by Sub-Saharan Africa, whereas Latin American countries contributed only 1 % to the rise in global unemployment (ILO, 2014,  p.15).

Context

Why do we focus on socioeconomic development?

By promoting a prosperous, innovative, knowledge-rich, competitive and eco-efficient economy that provides high living standards and high-quality employment, socioeconomic development aims to harmonise the three main pillars of sustainable development: economic development, protection of the environment and social justice.

Gross domestic product (GDP) is the best-known measure of macro-economic activity and has been regarded by some as proxy indicator for societal progress. However, by design and purpose, it cannot be relied on to inform on all policy-related issues and its deficiencies as a measure of well-being have been increasingly recognised. Nevertheless, GDP is closely linked to a number of issues highly relevant for economic development, such as employment or R&D investment. Reflecting changes in consumption and production patterns, GDP growth is also linked to resource use and climate change, especially when not matched by similar increases in resource efficiency. Moreover, the availability of economic resources determines the potential of technological and scientific innovations needed for a switch to ‘low-carbon’ and resource-efficient economies.

The economic dimension of socioeconomic development is analysed in view of investment, disposable household income, net national income and household saving. Investment directly affects an economy’s prosperity because it contributes to the accumulation of capital goods, either in the form of physical capital or knowledge . Disposable household income is an important means for achieving higher living standards, so is crucial for pursuing the social objectives of sustainable development. Household saving also has an important role to play, particularly in ensuring resources and opportunities are shared fairly between generations. It determines the amount of financial resources available to invest in improving the stock of productive, natural and human capital.

An economy’s capacity for innovation, competitiveness and eco-efficiency is analysed through indicators on R&D, labour productivity, eco-innovation and energy intensity. R&D expenditure, through its links to education, innovation, employment, labour productivity and economic growth, is crucial for the prosperity and competitiveness of EU economies. The expansion of scientific and technological knowledge can help society tackle some of its most pressing challenges such as climate change, population ageing, labour market attainment and security of material supply. Eco-innovation allows economic prosperity to increase while preserving the environment and utilising natural resources more efficiently. The formation of human capital (the skills, knowledge and experience possessed by an individual or population) through education and training advances academic knowledge and innovative technologies, which in turn contribute to job creation, labour productivity and resource efficiency. Labour productivity is an important determinant of an economy’s future competitiveness and long-term economic growth.

Sustained economic growth, however, if not counterbalanced by eco-efficiency improvements, can damage the natural environment and jeopardise ecosystems, thus significantly affecting well-being in the long run. Sustainable development relies on ensuring economic prosperity while minimising environmental pressures and avoiding over-exploitation of resources. An economy’s energy intensity is important in this respect because it highlights progress in the decoupling of economic growth from environmental degradation. Employment is essential for the well-functioning and competitiveness of economies. Rising employment can help make society more inclusive by reducing poverty and inequality in and between both regions and social groups. Apart from generating the income needed to achieve good living standards, paid work provides opportunities for meaningful engagement in society, promoting a sense of self-worth, purpose and social inclusion. In contrast, high and persistent unemployment can lead to social exclusion, degradation of individual skills and increased poverty, which in turn slows economic growth. Young people are particularly vulnerable to weak economic conditions. Improving their education and employment opportunities is key to social inclusion and the sustainability of our economic systems.

How does the EU tackle socioeconomic development?

Socioeconomic development represents one of the seven key challenges identified under the EU Sustainable Development Strategy (EU SDS) (Council of the European Union, 2009). The policy imperative in this respect is the promotion of a ‘prosperous, knowledge-rich, competitive and eco-efficient economy, which provides high living standards and full and high-quality employment throughout the EU’. The Europe 2020 strategy (Commission communication, 2010) aims to tackle the short-term challenges of the crisis and prepare the EU economy for the coming decade. Under its priorities of smart, sustainable and inclusive growth, the strategy has set targets to increase EU expenditure on R&D to 3 % of GDP, increase energy efficiency by 20 % and raise the employment rate of 20 to 64 year olds to 75 % by 2020. These targets are supported by the Europe 2020 strategy’s flagship initiatives ‘Innovation Union’ (Commission communication, 2013), ‘Digital Agenda for Europe’ (Commission communication, 2010), ‘Youth on the Move’ (Commission communication, 2010), ‘An Agenda for New Skills and Jobs’ (Commission communication, 2010), ‘An Industrial Policy for the Globalisation Era’ (Commission communication, 2010) and ‘Resource Efficient Europe’ (Commission communication, 2011).

Further reading on socioeconomic development

• Eurostat (2015), Smarter, greener, more inclusive? Indicators to support the Europe 2020 strategy: 2015 edition, Publications Office of the European Union, Luxembourg.
• Eurostat (2013), Individual employment, household employment and risk of poverty in the EU: A decomposition analysis, Publication Offices of the European Union, Luxembourg.
• Eurostat (2013), Science, Technology and Innovation in Europe: 2013 edition, Publication Offices of the European Union, Luxembourg.
• European Commission (2011), Innovation Europe Competitiveness Report, Publication Offices of the European Union, Luxembourg.
• ILO (2015), Studies on growth and equity: An employment-oriented investment strategy for Europe, International Labour Office Research Dept., Geneva.
• United Nations (2010), Analysing and measuring social inclusion in a global context, United Nations publication, New York.
• OECD (2008), Sustainable Development: Linking economy, society and environment.

See also

• All articles on sustainable development

Further Eurostat information

Database

• Sustainable Development Indicators, see:

Socioeconomic Development

Dedicated section

• Europe 2020 indicators
• Sustainable Development Indicators

Methodology

More detailed information on socioeconomic development indicators, such as indicator relevance, definitions, methodological notes, background and potential linkages, can be found on page 37-72 of the publication Sustainable development in the European Union - 2015 monitoring report of the EU Sustainable Development Strategy.