Cause and Effect in European Politics and Law

Is the European Social Model Dead?

Ralitsa Kovacheva, April 20, 2012

"The European Commission and I do not believe that the European social model is dead," European Commission President Jose Manuel Barroso told the European Parliament on 18 April. The same day the Commission adopted a package of documents dedicated to creating jobs and achieving higher employment in the EU. The Commission proposes specific measures to the member states, building on the guidelines in the Annual Growth Survey 2012 and aimed to achieve the objective of 75% employment by 2020 as set in the Europe 2020 strategy. “If the target is to be met, employment in the EU will have to increase by 17.6 million additional jobs from its current level”, the document reads. During the crisis, employment has fallen to 68.9%, 6 million jobs have been lost and the unemployment is climbing to 10.2% mark in February 2012.

In its communication "Towards a job-rich recovery" the EC identifies three areas of measures that countries can undertake.

Promotion of job creation and labour demand,

for example through employment subsidies, shifting taxation from labour to environmental, consumption or property taxes and support for self employment. The Commission recommends the countries to focus their efforts on areas with high potential for future jobs like the green economy, the health sector and information and communication technologies (ICT), where 20 million jobs could be created by 2020.

Reform of labour markets

to achieve greater flexibility and inclusion of more people, especially young people; to match the demand and supply of jobs through greater investment in skills and easier recognition of skills and qualifications within the EU. The Commission calls for removal of legal and practical obstacles to free movement of workers and specifically for removal of the restrictions on free labour market access for workers from

Bulgaria and Romania.

This issue was also debated in the European Parliament with the participation of Employment Commissioner Laszlo Andor. In response to persistent questions of Romanian MEPs why Bulgarian and Romanian workers were still restricted from working in 9 EU member states, the commissioner explained that labour mobility was regulated in the accession treaties of both countries and went through three phases. However, the Commission has invited the old member states to open their labour market faster than stated in the treaties (31 December 2013) and some countries have already done this, he added. According to him the arguments for keeping these restrictions were not convincing and the EC has already expressed this opinion to the Member States.

Other obstacles to labour mobility are restrictions on access to certain posts in public service, the lack of recognition of professional qualifications, the fear of losing out on social security and pension rights, tax obstacles etc. In all these areas, the EC is working on specific proposals, but ultimately the decisions will depend on the member states' will.

The Minimum Wage

The EC, however, clearly states that employment in itself does not guarantee escape from poverty, so it calls for setting decent and sustainable wages, as low-wage traps should be avoided. Here we find "the news" in the communication – the Commission recommends the member states to set minimum wages at appropriate levels. Most countries currently have minimum wages in place, but some like Germany have been strongly opposed until recently. However, there are signs of change in the German position on the issue, which was also confirmed by Commissioner Andor.

For the first time we call for the introduction of minimum wages, he told journalists, but hastened to explain that it was not about setting a uniform minimum wage in the EU. Asked if the Commission had changed its ideological software on the minimum wage, the commissioner replied: "We do not change our ideology, but go a step forward." He said the minimum wage was a good tool to support competitiveness, labour demand, as well as the fight against poverty.

The communication states that minimum wages should reflect the overall economic developments in the member states. It also recommends the possibility to use differentiated minimum wages, as already applied in several member states. There is no specific criterion for the precise level of wages in a particular Member State, EU Economic Affairs Commissioner Olli Rehn explained to the MEPs. He was provoked by a Slovak MEP, who said that his country produced the biggest number of cars per capita in the world, but the wages in the car industry were half than in the parent state of the automotive company. Employment Commissioner Laszlo Andor replied that if wages in Bratislava were really half that in the developed countries, this was a good result, because there were even bigger differences in terms of average wages between Northern Europe, Central Europe and the Balkans. But he denied this to be a form of discrimination against the countries of Central and Eastern Europe.

Once again, the EC stresses the need for enhanced coordination and monitoring of employment policies at European level in accordance with the EU economic governance. As decided at the European Council meeting devoted to employment in late January, each member state must submit a National Jobs Plan, as part of its National Reform Programme. The implementation of the plans will be subject to enhanced monitoring throughout the European semester. It should include measures to reform labour markets, link labour price to productivity, promote youth employment, provide opportunities for apprenticeships and traineeships for young people, remove barriers in protected sectors. The Commission plans to introduce a scoreboard of indicators to evaluate the implementation of National Jobs Plans, similar to the monitoring of macroeconomic imbalances.

In order to actively involve the social partners in employment policy making, the Commission proposes setting up an EU tripartite format for monitoring and exchange views on wage developments in relation to productivity, inflation and internal demand, unemployment and income inequalities.

Besides the communication, the EC's employment package includes nine Commission staff working documents: a labour market analysis; a quality framework for traineeships; a progress report on Youth Opportunities Initiative; evaluations of the employment potential of green green economy, health sector and ICT; a consultation paper on household services; a paper on labour markets reform. The package will be discussed at a high level employment conference taking place on 6-7 September 2012.

What again misses in the Commission’s extensive ideas is how to oblige member states to implement measures to promote employment, as was done regarding fiscal discipline (through the economic governance package, the new EC`s proposals especially for the euro area, the fiscal compact). But the first signs are creeping that the direction is the same - the introduction of a scoreboard of indicators for assessing implementation of member states` commitments, related to employment, by analogy with the monitoring of macroeconomic imbalances. As euinside wrote with reference to the EC`s Green Paper on pensions, after the budgetary coordination among the Member has been introduced it is inevitable the same to be applied to tax, pension, social and health care systems.

This is the only way the European social model not simply to be removed from its coma but to be reviewed and remodelled in a manner consistent with the new post-crisis European and global realities. The era of generous social benefits, distributed by national budgets, is over. What the EU must give to its citizens now is unrestricted and real work opportunities. As for the citizens, they have the most difficult task - to learn, to improve their qualifications, to actively seek for jobs and to work more and better. The European social model is dead, long live the European social model!