New scientific studies by IBS researchers as part of the WeLaR project
March 5 2025
We present the findings of IBS researchers on changes in the labour market, which is strongly influenced by migration, the energy transition, the effects of the war in Ukraine and the COVID pandemic.
WeLaR – Welfare systems and labour market policies for economic and social resilience in Europe – is a three – year research project funded by the Horizon Europe Framework Programme that aims to examine the impact of digitalisation, globalisation, climate change and demographic shifts on labour markets and welfare states in Europe.
As part of our research, we have recently published studies on current and pressing issues on the labour market, including:
NEETs in the digital age
A surprising 60% of young people in the European Union who are not in education, employment or training (NEETs) have very low digital skills, which are essential for securing a stable, well-paid job. NEETs currently make up around 11% of 15-29 year olds in the European Union, although this percentage varies greatly between Member States.
The WeLaR study shows that NEETs with low digital skills fall into two groups. The first group consists of people with a lower level of education who have a history of physically demanding work, mainly men. The second group consists of better-educated people who work in positions that require social interaction but still lag behind in terms of digital skills, mainly women.
Training programmes aimed at improving the digital skills of NEETs show potential, but their overall impact is modest. The most significant benefits were observed among well-educated NEETs with low digital skills. For less educated people, the lack of basic skills can overshadow the benefits of the training itself.
The study calls for a combined approach, including early intervention programmes to reduce the dropout rate and tailored upskilling measures for specific subgroups and the integration of training with broader support services such as mentoring and labour market policies.
Publication: Mateusz Smoter and Wojciech Szymczak (2024) NEETs in the digital age.
Post-COVID developments in remote work, migrations, and self-employment in the EU
According to the study, the majority of employees in the European Union have remained in their home countries and on traditional employment contracts, despite predictions that remote working would lead to a sharp increase in cross-border working, digital nomadism and self-employment.
Governments and companies around the world are implementing hybrid working, requiring employees to return to the office at least part of the time. The previous jump in the share of remote work from 5% before 2019 fuelled expectations of a boom in cross-border work.
Remote working was also expected to increase cross-border employment, but the study did not show a significant increase in the number of Europeans working for foreign companies while staying in their home country. The number of digital nomads – those who work remotely from a country other than their employer’s location – has clearly increased since Covid-19. While digital nomadism has received widespread media attention, their overall share of the national workforce has not exceeded 0.2% in any EU country except Luxembourg.
Some experts also speculated that remote work would push more workers towards self-employment, as companies may prefer to hire freelancers instead of full-time employees. However, the study shows that self-employment rates in the EU remained stable at 12.4% between 2019 and 2022, with no significant increase related to the development of remote working. The authors speculate that remote working opportunities may even improve the relative attractiveness of regular employment contracts.
The Distributional Effects of EU Carbon Pricing.
The European Union’s plan to achieve climate neutrality and to extend the emissions trading system (ETS) to buildings and road transport in 2027 could exacerbate economic inequality. Without a strong redistribution policy, household consumption – the ability of people to purchase goods and services – could decline significantly in some regions, according to a study conducted as part of the EU-funded WeLaR project.
In their latest report, ‘The Distributional Effects of EU Carbon Pricing’, WeLaR researchers from ZEW, IBS and LISER have developed economic models to assess the impact of upcoming changes in ETS policy on companies, employees, households and the economies of 100 European regions.
The results show that the expansion of carbon prices can hit regions particularly hard whose production structure is based on carbon-intensive production. On the other hand, richer regions with greener and more diversified economies will be better prepared to absorb the economic costs associated with the transition.
Carbon prices will disrupt employment and lower real wages, forcing some workers to change jobs or move because higher production costs force companies to downsize or close. On average, real wages could fall by around 5%, with the most affected areas seeing sharp declines of up to 10%. This is likely to cause migration.
The EU has established the Social Climate Fund, an ETS2 revenue reallocation instrument that can mobilise at least €86.7 billion in public funding between 2026 and 2032. Part of these funds can be used to directly support household incomes to counteract the unintended consequences of ETS expansion.
Researchers from WeLaR investigated how the use of carbon revenues could reduce the financial burden on households associated with ETS2. It turned out that such an approach could significantly reduce inequality, especially in countries where such transfers make up a large part of the disposable income of lower-income households.
In addition to redistribution, researchers also point out that investing in new clean energy technologies can help lower carbon prices and make achieving the EU’s climate goals less costly. Therefore, climate policy should also strengthen incentives for investment in research and development in the private sector.
