Europe needs far-reaching reforms of labour market, tax, and education policies to ensure that its workforce and welfare states remain resilient in the face of accelerating digital, green, and demographic transitions, according to a new report from the EU-funded Project WeLaR.
The report, “Building resilient and inclusive labour markets in Europe: unpacking policy synergies and challenges”, calls for a New European Social Pact that reconnects economic policy with social justice, democratic legitimacy, and inclusive prosperity. Outlining a comprehensive vision for preparing the European workforce for the future, the researchers argue that the scale and pace of change require more than policy fine-tuning. Instead, they call for a shift in perspective: labour market and social policy must be seen as strategic investments, not as costs.
“We are witnessing the slow-motion disruption of the European Social Model,” said Ramón Peña-Casas, Director of Research at the European Social Observatory (OSE) and co-author of the report. “Digital technologies are redefining the workplace, climate policy is restructuring entire sectors, and demographic ageing is straining the very foundation of our welfare systems. It’s no longer a question of whether change is coming: it’s here, and the institutions that held the post-war model together do not have the tools to navigate these changes.”
These changes should come with a political and institutional commitment to redefine the European social model to reaffirm the centrality of social rights, empower local actors, and build legitimacy for far-reaching reforms. These must be forward-looking, aligning labour market policies with ecological goals, technological innovation, and demographic realities, the researchers say.
The study offers a wide-ranging set of policy recommendations. It urges governments to focus on creating inclusive labour markets where job quality is treated as a central policy objective. The report calls for action to reduce in-work poverty, close gender and ethnic gaps, and address growing precarity, especially in sectors most exposed to automation or green restructuring. Current trends in non-standard work, especially in the platform economy, highlight the need for social protection systems that are not tied to traditional forms of employment.
Another major theme of the report is the urgent need to invest in skills. While much has been said about lifelong learning and the digital divide, the report highlights a persistent gap in access to training for low-skilled, older, and migrant workers. The study emphasises that skilling initiatives must be tailored, accessible, and supported by structural measures such as paid training leave, individual learning accounts, and recognition of prior learning.
“Lifelong learning must move from aspiration to infrastructure,” said co-author Dalila Ghailani and senior researcher at OSE. “That means embedding it into the fabric of work and welfare systems, not treating it as a luxury.”
Territorial inequalities receive special attention in the report, which argues that regional disparities, often rooted in deindustrialisation, depopulation, or weak infrastructure, could be further exacerbated by the green and digital transitions. The study calls for more ambitious place-based policies, including targeted use of EU cohesion funds, support for local social economy actors, and stronger coordination between national and subnational levels of government. These territorial strategies must focus not only on economic recovery but also on social infrastructure and community resilience.
The report makes a case for reimagining public services as foundational to labour market participation. Access to quality childcare, eldercare, education, healthcare, and housing are described not just as social goods, but as essential conditions for people to participate in work, training, and society. These services, the authors argue, should be publicly funded, universally accessible, and embedded in local contexts to respond to communities’ specific needs.
Financing all of these measures requires a fundamental shift in fiscal thinking. The report argues that current fiscal rules and budget constraints often discourage precisely the kind of investments needed for long-term resilience. It recommends treating spending on skills, care, and inclusion as growth-enhancing investments, to be protected and expanded in EU fiscal frameworks. Redistribution mechanisms, including progressive taxation, green transition taxes, and the elimination of loopholes, are essential tools to fund inclusive policies and sustain public trust.
Democratic legitimacy is a final, cross-cutting theme of the report. Social dialogue, collective bargaining, and civil society engagement are presented not as optional features but as prerequisites for successful reform. The study argues that the complexity and potential divisiveness of the twin transitions demand participatory policymaking and shared ownership. In particular, it warns of the risks posed by algorithmic management, surveillance technologies, and AI systems in the workplace. Ensuring transparency, accountability, and worker voice in these areas will be crucial to maintaining fairness and social cohesion.
“Europe is at a crossroads: we can either manage these transitions with fairness, or risk social fragmentation,” said co-author Sebastiano Sabato and senior researcher at OSE. “The choices we make now will define the kind of society we become.”
Ramón Peña-Casas, Dalila Ghailani, and Sebastiano Sabato (2025) Building resilient and inclusive labour markets in Europe: unpacking policy synergies and challenges. Deliverable D7.1. WeLaR project 101061388 – HORIZON.
You can read the Report here
