The European Commission will suggest on Wednesday that European Union countries could subsidise new hiring and move away from taxing labour to taxing consumption, property or pollution as a way to help create jobs and therefore help growth.
The Commission, the European Union's executive arm, will present a series of ideas on how to boost jobs in the 27-nation bloc as the EU economy is expected to grind to a halt this year - just when it needs to grow to help to service Europe's large public debt.
In a paper entitled Towards a job-rich recovery, to be adopted on Wednesday, the Commission notes that to meet targets that the EU set itself, the bloc would have to create 17.6 million new jobs by 2020.
There are now 24.5 million people without jobs in the EU. One of the ways to reduce that number could be to subsidise new hires, especially from vulnerable groups like young people, a draft of the Commission paper, obtained by Reuters, said.
Creating the right kinds of incentives and hiring subsidies should motivate employers to engage in net new recruitment, thus creating jobs that would otherwise not be created, the paper said.
Another way was to reduce the tax wedge on labour - the amount in various taxes and fees employers must pay to employ a person which makes hiring expensive.
The Commission said this could be done in a way that would be neutral for the budget, but shifting the taxes the government needs to collect to consumption, property or pollution.
In many member states there is scope for reducing employers' social security contributions which account for a lion's share of the tax wedge, the paper said.
Further ideas include support for self-employment and business start-ups, fighting undeclared work, raising the amount of money workers take home against other benefits that they get and, where productivity gains allow, increasing wages.
Setting appropriate minimum wage levels, good dialogue between companies and trade unions, flexible working hours that can be shortened or lengthened depending on the state of demand for a company's products or services were also helpful.
The Commission estimated the energy efficiency and renewable energy sectors alone could create 5 million jobs by 2020.
Another area where demand for labour will grow is health care and social care, because European societies are ageing, the Commission said. But such workers need better training and more money.
The Commission identified information and communications technology (ICT) as another area where demand for workers was greater than supply, noting that higher ICT literacy among workers and firms will require a considerable education effort.
The Commission said some financing for job creation through various methods could come from the European Social Fund, the European Regional Development Fund, the European Progress Microfinance Facility and the European Globalisation Adjustment Fund.
The EU should also make better use of its internal market, which allows workers to move within the bloc seeking jobs.
Mobility of workers in the EU continues to face important obstacles, the Commission said, listing cultural problems like language skills, finding housing and facing discrimination.
There were also some formal obstacles, as nine EU countries had decided to restrict the right of workers from Bulgaria and Romania to get jobs without a work permit until the end of 2013.
EU workers are also put off from moving across borders by concern that they might lose their social security or pension privileges at home and because their professional qualifications are often not recognised elsewhere in the European Union.
(Reporting by Jan Strupczewski)