European Policies of Economic Adjustment and their Impacts on Job Security and Employment

1
European Policies of Economic Adjustment and
their Impacts on Job Security and Employment

• Website http//www.stanford.edu/weiler/ERT_websi
  te.htm.
• Marina Bourgain
• European University Institute

2
Main points

• (1) EU From hard law to soft law.
• (2) EU- Past actions to accompany sectoral
  employment evolution.
• (3) EU- The future of cohesion policies.

3
Main interpretations of the Welfare State

• lt1gt The provision of welfare services by the
  state
• A set of government programs that attempts to
  protect the health and the well-being of its
  citizens .
• in particular when they are unemployed, ill, or
  elderly
• especially those in financial need.
• lt2gt An ideal model
• A "safety net" is not enough nor are minimum
  standards.
• Aims to reduce the impact of economic
  inequality.
• Is universal, because it covers every person as a
  matter of right.
• The responsibility is comprehensive, because all
  aspects of welfare are considered.
• The state assumes primary responsibility for the
  welfare of its citizens.

4
Andre Sapir 4 EU-Welfare models (2005)
Type Characteristics Level of employment Level of poverty
Anglo-saxon UK-IRL last resort, linked to work, LM unregulated, weak unions.gt Efficient BUT poverty high high (lack of educ-stdd)
Rhineland Continental FR,DE,AU, BL,LX protection (employment, unemployment, pension, sickness). Legal support for LM or strong unions. gt Equitable lower lower
Mediter-ranean GR, IT, SP, PO old age spending, heavy regulation. gt  NOT sustainable  lower higher
Nordic SW, DK Universal LM unregulated. Strong unions gt Efficient Equitable high low
5
Labour market policies

• In Europe today, the search is for the right
  balance of flexibility, stability and security to
  accommodate structural change and worker's need
  for security
• In Organized Market Economies (EU),
• as opposed to Liberal Market Economies,
• the difficulty resides in the capacity to put in
  place comprehensive and dynamic instruments
• allowing for flexibility without alienating the
  social consensus to which these countries aspire.

6
Growing Anxiety over Job InsecurityFrances
opposition to CPE - EU-constitution

• CPE Contrat Première Embauche
• First Employment Contract
• Comment
• Perdre les
• Elections
• How to loose the elections

7
(No Transcript)
8

• The Equality of chances French Law, Art. 8,
  institutes the CPEContrat Première Embauche
  First Employment Contract
• for youths under 26
• creates a two-year probation period
• during which they can be fired without cause.
• 9th of March 2006 bill was approved on (by 329
  for 159 against). It is an extension of the
  already existing CNE for Small Entreprises
  passed last June.
• Start of the unrests. Recourse for
  unconstitutionality (03/30
• 2nd of April - Psdt Jacques Chirac signed the
  bill into law while announcing its inoperability
  pending revision (end of April). All trade unions
  want its withdrawal.
• Sarkozy (Interior and UMP-Psdt) linked the Nov
  and March unrests calling for constitutional
  reforms, including a stronger Parliament and a
  more accountable President. Boost his image as
  the candidate of Rupture for the presidential
  elections next year.

9
National-Laws Promoting Employment and the ECJ

• GERMANY
• Abolished the limit on FT-contract duration
• For workers 52y
• ECJ opinion Case C-144/04 Mangold vs Helm
  (introduced by AG-München)
• German law is contrary to Community Law
  National legislation must insure the full effect
  of the non-discrimination principle.
• // TzBfG Art. 14 3

• FRANCE
• Ordinance n 2005-892
• When establishing the size of a company,
• Excludes employees under 26y
• Suspended by the F-State Council
• Pending ECJ-decision as to its conformity with
  directive 2002/14 (workers information
  consultation).

10
(1) Europe from hard law to soft law

• The European Economic Community
• is a Regulatory Machine,
• not a spending spree.
  (G. Majone)

11
DG Employment and Social Affairs(Vladimir Spidla)

•    Activating the Social Policy Agenda  
  Developing Quality at Work   Promoting
  Employment   Improving Economic Performance  
  Investing in people through the ESF
•    Enhancing Skills through Training  
  Eliminating Discrimination   Achieving Gender
  Equality   Combatting Racism and Xenophobia  
  Empowering People with Disabilities  
  Integrating the Excluded   Strengthening Social
  Dialogue   Building an Enlarged Social Europe  
  Acting in Europe for Global Progress

12
Social Acquis Communautaire

• General Principles in the Treaty Free movement
  of workers, Gender Equality (Art. 119),
  Non-Discrimination (Art. 13 Amsterdam Treaty to
  combat any discrimination based on sex, race,
  ethnic origin, religion or belief, disability,
  age or sexual orientation) (Art.4 TEU)
• Regulations Free movement of workers, Gender
  Equality
• Directives on Collective Redundancies (1975,
  1992,1998), Transfer of Undertaking (1977,
  1998,2001), European Works Council (1994),
  Parental Leave, Fixed-Term Contracts, European
  Society (2001), Information Consultation
  (2002), Non-discrimination (2002)
• Advice Green paper on Corporate Responsibility

13
Social Acquis Communautaire (2)

• Procedures for decision-making at unanimity
  ex-Art. 100 Harmonization of laws distorting
  the Common market ex-Art. 235 Necessary action
  for the functioning of the Common market
• 1986-SEA-Procedures for decision-making at
  majority - in health and safety
• 1993- Maastricht Agreements by the ESP
• 1995 Entry of Sweden and Finland Social /
  Economy/Employment under Integrated approach
• Amsterdam Treaty in 1997 Employment Chapter
• Lisbon 2000 - Open Method of Coordination
  European Employment Strategy

14
Probability that a Social Directive is not
transposed after its deadline(Linos p.16 dataset
of 50 social directives 1982-98)

15
Economic and employment indicators, EU, Japan and
the USA, 2003-4
EU25 Japan USA
GDP growth 2.0 3.4 4.2
Inflation (CPI) 1.9 0.2 1.4
Employment rate (2003) 62.9 68.4 71.2
Employment growth 0.2 -0.2 0.9
Unemployment rate (Eurostat definition) 9.1 4.8 5.5

16
Employment Levels in the European Union, USA and
Japan
Total Employment Level (15-64 years old) Total Employment Level (15-64 years old) Women Women Older People (55-64 years) Older People (55-64 years)
1979 2003 1979 2003 1979 2003
EU-25 EU-15 62.7 62.9 64.3 45.0 54,1 45.3 38,8
Japan 70.3 68.4 53.6 60 61.0 64
USA 68.0 71.2 54.9 67 54.6 55
17
(No Transcript)
18
(No Transcript)
19
OCDE- Employment Perspectives (1999)
Indicators of Employment Protection strictness lt0-6gt Unemployment level Employment level
New-Zealand (0.4) 8 68
Sweden (4.5) 6 76

• Little or no association between EPL strictness
  and overall unemployment. However, EPL may be
  more strongly associated with the demographic
  composition of employment and unemployment and
  its duration.
• gt Youths and women appear to bear a larger share
  of the burden of unemployment.
• gt Research suggests that stricter EPL raises
  employment for prime-age men.

20
2000- European Employment Strategy (EES)

• Defined following Target
• Overall employment rate of 70 in 2010
• Women employment of 60 in 2010
• Older workers (55-64) of 50 in 2010

21

• The Open Method of Coordination (OMC) and the
  future of Social Europe

22
Quid Open Method of Coordination

• The OMC is a new approach to EU-governance
• based on benchmarking national progress
• towards commonly agreed objectives
• and organized mutual learning.
• 1- Define common objectives
• 2- Develop a mutual feedback process of planning,
  examination, comparison and adjustment of the
  policies of member states.

23
Defining features of OMC

• Joint definition by EU member states of initial
  objectives, indicators, priorities or guidelines,
  and sometimes targets.
• Nl reports or Nl action plans (NAPs)to assess
  performance against objectives and metrics and to
  propose reforms accordingly.

24
OMC and democracy

• The Open Method of Coordination aims to promote
  the participation of the widest possible range of
  actors in policy formulation, implementation and
  evaluation
• NGOs, trade unions, experts ...
• from all levels European, national, regional,
  local levels

25

• OMC is a mechanism for experimental learning
• Peer review of national plans through mutual
  criticism and exchange of good practices, backed
  up by recommendations in some cases.
• In light of experience gained during
  implementation -gt Periodic re-elaboration of
  plans -gt and, less frequently, re-elaboration of
  broader objectives and metrics.

26
Fields of application OMC

• Social protection
• Social inclusion / fight over poverty
• Pensions
• Health, care for the elderly (not yet formalized)
• Disability (under discussion)

27
Fields of application OMC (2)

• Education/ Training- common objective for
  national systems
• Immigration/ asylum- OMC as a tool for
  monitoring/ complementing implementation of
  EU-legislation
• Other dimensions of the Lisbon-strategy- RD
  innovation, knowledge-based and information
  society.

28
OMC- Employment Results so far

• EU missed the intermediate employment rate target
  of 67 in 2005.
• However four Member States (DK, NL, S, UK) have
  already achieved the 70 employment rate at their
  national level.

29
Results-2- Women

• Having said that, the employment rate for women
  continues to improve and is on track to meet the
  2010 target of 60.
• Seven Member States (DK, NL, A, P, FIN, S, UK)
  currently meet or exceed the 2010 target of 60.

30
The Employment Challenges

• In some member states the employment rate of
  older workers is less than 33, in particular
• Belgium, France, Italy, Luxemburg, Austria.

31
Pace of Progress on Employment
EMT-Rates in 2004 () Low pace of progress since 1997 Close to average High pace of progress since 1997
gt 70 DK, SE, UK, NL
65-70 AT CY, DE, PT, FI, SI ES, IT
lt 65 CZ, EE, LT MT, PL, SK BE, EL, HU, FR, LU, LV

• Explanation Pace of progress is defined as the
  percentage point change in the employment rate
  between 1997 and 2004
• a) Low progress the employment rate increased
  below the EU25 average minus half of the
  (un-weighted) standard deviation

32
Has employment become more flexible in Europe?
Defining Flexibility External versus
InternalInternal flexibility means the
adjustment within jobs or firms, while the
employment relationship is maintained.

• A- The long-term employment relationship has not
  disappeared in Europe
• Job-tenure as a mesure of Job stability.
  Over 1992-2002, tenure averaged
• 10 y. in Europe (11y. FR-DE , 12y. IT, 13y.
  GR)
• 6.6 y. in the USA 8 y. in the UK 12.2
  y. in Japan
• B- But a growing dual labor market
• New Flexible forms of employment FT, PT, work
  through a Temporary Work Agency are becoming
  regular forms of employment.
• It concerns women, youths, older workers more
  than prime-age-men. Job flexibility has
  increased at the margin.

33
Has employment become more flexible in Europe?
1950-2000 EU-15 Workforce in 3 main sectors
(agric-ind service) as a percentage of total
workforce
34
Main points

• (2) EU- Past actions to accompany sectoral
  employment evolution.

35

• 1951 European Coal and Steel Community (ECSC)
• 1957 Common Agricultural Policy (CAP)
• Both have their own fundings

• Heavy Industry
• Agriculture (40 workforce)

36
European Coal and Steel Community (ECSC)Paris
Treaty 1951

• Preamble 1. CONSIDERING that world peace can be
  safeguarded only by creative efforts commensurate
  with the dangers that threaten it, 4. ANXIOUS
  to help, by expanding their basic production, to
  raise the standard of living and further the
  works of peace, 5. RESOLVED to merge of their
  essential interests to create the basis for a
  broader and deeper community among peoples and
  to lay the foundations for institutions which
  will give direction to a destiny henceforward
  shared,
• HAVE DECIDED to create a EUROPEAN COAL AND STEEL
  COMMUNITY
• The foreseeable consequences of Modernization and
  Building a common market for Coal and Steel were
  companies downsized, closed, relocated
  increased competition, mergers and acquisitions.
• The title III of the ECSC-Treaty enclosed
  procedures to control Mergers (ch.6 7)
• and for social provisions (Art.46) incl. on
  financial aid (Art.56) and on wages (Art.68)

37
ECSC Title III-Economic and social provisions
Art. 46 General provisions

• The High Authority / Commission shall study the
  possibilities for re-employing workers made
  redundant in existing industries or through the
  creation of new activities
• it shall assess the possibilities for improving
  working conditions and living standards for
  workers
• The Commission may at any time consult
  governments, the various parties concerned
  (undertakings, workers, consumers and dealers)
  and their associations, and any experts. These,
  in turn shall be entitled to present any
  suggestions or comments to the Commission on
  questions affecting them.

38
ECSC Title III-Economic and social provisions
Art. 56-2 - Financial Aid provisions

• 1. In case of exceptional large labor reduction,
  the Commission shall provide non repayable aid
  towards
• monthly allowances to workers (early retirement
  or temporary inactivity or until they find
  employment)
• financing of vocational retraining and/or
  resettlement of workers
• 200 000 co-financed houses were built.
• 900 000 miners benefited from aids for training,
  relocation, and housing loans (until 1997).

39
ECSC Title III-Economic and social provisions
Art. 68 - Wages

• 1. The methods used for fixing wages and welfare
  benefits are the competence of the companies and
  the Member States subject to the following
  provisions
• .
• 2. if undertakings are charging abnormally low
  prices because they are paying abnormally low
  wages, OR
• 3. if wage reduction entails a lowering of the
  standard of living of workers and at the same
  time is being used as a means for the permanent
  economic adjustment of undertakings or as a means
  of competition between them
• Then, the Commission shall make appropriate
  recommendations to the undertaking or the
  government, at the expense of the undertakings,
  to benefit the workers in order to compensate for
  the reductions.

40
Has employment become more flexible in Europe?
1950-2000 EU-15 Workforce in 3 main sectors
(agric-ind service) as a percentage of total
workforce
41
Agricultural population (FAO)
1950 1960 1970 1980 1990 2000 2010
Italy 21 (80) 15 10 (45) 7 5 (20) 3 1.8
Germany 16 (50) 11 7 (19) 5 3 (7) 2 1.3
France 13 (68) 10 7 (30) 4 3 (10) 2 1.2
Greece 4 2.5 1.7 1.2 (25) 0.8
Spain 14 7 5 3 (17) 1.8
Portugal 4 3 1.9 1.4 (28) 1.0
Poland 13 7 (35) 6
UK 3 2 1.5 1.4 1.2 1.0 0.8
42
CAP- A flagship of European collaboration

• France, before agreeing to free trade in
  industrial goods, insisted on a system of
  agricultural subsidies during the negotiations on
  the creation of a Common Market.
• The 6 MS were net importers of agricultural
  products.
• The need to ensure food security became
  particularly important during the Cold War era.
  Food shortages and price instability were
  frequent in the 1950s.

43
Common Agricultural Policy (CAP)Part of the
EEC-Rome Treaty 1957

• Objectives Art. 33 (ex Art. 39-1957) (a) to
  increase agricultural productivity by promoting
  technical progress and by ensuring the rational
  development of agricultural production and the
  optimum utilization of the factors of production,
  in particular labor
• (b) thus to ensure a fair standard of living for
  the agricultural community, in particular by
  increasing the individual earnings of persons
  engaged in agriculture
• (c) to stabilize markets (d) to assure the
  availability of supplies
• (e) to ensure that supplies reach consumers at
  reasonable prices.
• The foreseeable consequences more competition
  a Common Market for agricultural goods
  fewer workers increase productivity through
  technical progress and optimum
  utilization of labor
• Employment in the agriculture sector has
  collapsed due to productivity increase. Between
  1970 and 1990, the number of farmers in Europe
  halved.

44
The six main mechanisms of CAP

• 1- Price support guarantees minimum prices set
  by agricultural ministers
• 2- (Since 1988) Production control quotas (e.g.
  on milk) and "set aside" (refers to land)
• 2- Import taxes to ensure external prices
  cannot undercut internal EU prices
• 3- Intervention by storing surpluses or selling
  them over time
• 4- Stock disposal to dispose of surpluses by
  other means (e.g. Free Food Scheme)
• 5- Subsidized exports (often resulting in a
  destabilization of prices in third countries)

45
European Budget Revenues 2004
46
European Budget Expenses 2004
47
EU funds for other economic sectors ? The
proposed Globalization fund or Shock-absorber fund

• 7 bn euros over 7 years
• Goal to help workers retrain if they loose their
  job as part of a significant corporate
  restructuring in order to soften the impact of
  globalization

48
Main points

• (3) EU- The future of cohesion policies.
• The concept of social cohesion relates to
  poverty, inequality and social exclusion.

49
Social cohesion

• Objective of an ever-closer union of the people
• Objective of promoting social cohesion
• Regions under Objective 1
• The EU is co-funding projects in regions where
  the GDP/inhabitant is lower than 75 of the
  European average GDP/inhabitant.
• European Social Model is determined by the
  interaction between competitiveness, solidarity
  and mutual trust

50
European regional policies in light of recent
location theories by Diego Puga
51

• NOTES

52
The EU-employment question since the 1970s

• 1984 approx. 4 millions LT-unemployed.
• 1985 Action Program for
  employment
• 1993 approx. 17 millions unemployed
• 1986 - The Single European Act gave new impetus
  to social policy, especially in the areas of
  health and safety at work, dialogue with the
  social partners and economic and social cohesion.
• 1989 First Commission report on Employment in the
  EU
• 1993 OECD Employment Strategy
• 1995 Entry of Sweden and Finland brought the
  Scandinavian model economic, social and
  employment policies seen as complementary.
• 1997- Amsterdam Treaty introduces a chapter on
  Employment. Incorporate the Maastricht Social
  Protocol.
• Art. 13 refers to the adoption of provisions on
  non-discrimination. It authorizes the Council,
  acting unanimously, to take appropriate action to
  combat any discrimination based on sex, race,
  ethnic origin, religion or belief, disability,
  age or sexual orientation.

53
(No Transcript)
54
EU-12 mio USA mio Japan mio
Agriculture 1983 11 9.2 3 3.5 5 9.3
1992 8 5.8 3 2.9 4 6.4
Indust. 1983 43 35 28 28 5 9.3
1992 46 33 29 24 4 6.4
Servi. 1983 67 55 69 68 32 56
1992 86 61 85 73 37 59
55
Secteurs affectés par les  grandes
restructurations France / Allemagne
56
(No Transcript)
57
Is OMC effective ?Ambiguities and assessment
criteria

• - how to establish clear causal connections
  between policy and performance ?
• Does OMC enhance the EU problem-solving
  capacities?
• - in identifying common challenge ?
• - in building consensus around objectives ?
• - in developing agreed upon metrics ?
• - i n identifying promising policy approach?
• - in achieving measurable performance
  improvements?

58
A Real Impact ?

• Causal effects are hard to determine
• - changes in member states' policy orientation
  often preceded launch of OMC processes (EES)
• - member states themselves helped to define OMC
  objectives, guidelines and approaches.

59
Still we observe

• Broad shifts in policy thinking of member states
• - wide adoption of EU-concepts and categories
  (employment-levels instead of unemployment-level,
  lifelong-earning, gender mainstreaming)
• - but subject to local inflection and
  interpretation
• gt we better speak of a two-way interaction than
  one-way impact.

60
The Mechanisms of domestic influence

• Persuasion / mutual socialization influence of
  foreign examples in domestic reform debates.
• Peer pressure 'naming and shaming.
• Strategic use of OMC by domestic actors
• -gt national governments, agencies, opposition
  parties, organized interests, NGOs
• Influence depends on public awareness and broader
  attitudes towards the EU.

61
OMC and democracy ?

• But the OMC processes, objectives, guidelines and
  recommendations are "authorized" by elected
  member states governments.
• The civil society (trade unions, NGOs, local
  associations) has only a limited role
• Most of the work is done by unelected committees
  of national civil servants and Commission
  officials (EMCO, SPC, EPC)
• Finally, the representative democratic
  institutions (EP, national parliaments) have a
  limited role
• And there is still a low public awareness within
  member states.