Finance and Economy

Social Vulnerability: the Price of Full Employment?

Remembering Dany Cohn-Bendit’s outburst in the plenary session during which he referred to the European Commission as a “neoliberal Taliban”, as well as my public debate with the Directorate-General for Economic and Financial Affairs (DG EcFin) of the same Commission. Was this choice of language excessive? Was this an electioneering and populist drift by the Greens? One might think so. But what about when it is the DG EcoFin itself that is letting its mask slip? In a recent report focusing on the sensitive subject of labour market reforms within the European Union, it did not hesitate to publish its hit list of reforms which were both “favourable” and “unfavourable” for employment.

To give a brief and candid overview, everything that weakens the collective bargaining power and capacity of employees, postpones permanent employment contracts and makes it easier to dismiss employees, restricts their rights to unemployment benefits and of course, cuts salaries, etc., are all presented as favourable to employment and therefore positive. It does not matter that these reforms create job insecurity: in Germany, the use of this “shock treatment” has been accompanied by a 2% rise in the percentage of the population at risk of poverty or social exclusion. We are a long way off decent work!

It is often said, and quite rightly so, that European treaties say one thing and do quite the opposite. The best example of this is Article 3(3) of the Treaty on European Union which stipulates that: “The Union shall establish an internal market. It shall work for the sustainable development of Europe based on balanced economic growth and price stability, a highly competitive social market economy, aiming at full employment and social progress, and a high level of protection and improvement of the quality of the environment. It shall promote scientific and technological advance. It shall combat social exclusion and discrimination, and shall promote social justice and protection, equality between women and men, solidarity between generations and protection of the rights of the child.”

It must be noted that, as a guardian of the Treaties, the Commission chooses to give precedence to a highly competitive social market economy at the expense of a high level of protection and improvement of the quality of the environment; it would rather have full employment than social progress. In doing so, it is choosing a side, and it is certainly not the side of the weak. This is a political choice rather than a strategic one and it is not the choice that we Greens would make.

The good, the “LABREF” and the ugly

Towards the close of negotiations on the Lisbon Treaty, an article commonly known as the “horizontal social clause” was introduced in order to guarantee that when drafting and implementing European policies, it would, from that point onwards, become imperative to ensure that said policies contributed towards a high level of health, education and employment. As this provision is embedded within the European “Constitution”, it therefore offered a safeguard against the neoliberal drifts which have been present since the Single European Act (1986).

The respite – if even there was one – was all but short-lived, as poignantly demonstrated by the new framework for economic and social policies which the European Union has been working towards for three years for countries in financial difficulty or those that are susceptible to macroeconomic risks (from the housing-price bubble to the slump in salaries). The European Commission, which is supposed to be the guardian of the Treaty, is blatantly ignoring this article and is therefore disrespecting the mandate entrusted to it by the Heads of State and Government.

In light of this, alongside a group of senior officials working on behalf of the Economic Ministers, the Directorate-General for Economic and Financial Affairs has developed a methodology called “LABREF” as a means of assessing structural reforms affecting the labour market within the Member States, the developments from one year to the next, and for drawing comparisons between the two. And although neither the DG Employment nor the Employment Committee have been involved in this concept in any way, it will essentially form the basis upon which proposals for recommendations to governments will be formulated. The database is structured around 52 areas sub-divided into nine broad categories: labour taxation, unemployment and other welfare-related benefits, active labour market policies, job protection, pension systems, wage setting, working time, immigration and mobility.

A recent publication issued by the Commission itself explains how it will assess reforms (Labour Market Development, 2012, p. 104 et seq.). It divided these reforms into two categories: “employment-friendly” and other reforms, i.e. those that are not employment-friendly. The reforms that are looked upon favourably and encouraged are those which most notably seek to:

  • reduce the bargaining power of trade unions, such as the decisions taken by the Belgian government relating to wages imposed upon social partners;
  • reduce collective bargaining power and promote the decentralisation of negotiations and derogations from agreements at a higher level; such as the EU’s recommendations to Belgium in June 2012;
  • reduce generosity with regard to unemployment benefits/tighten eligibility conditions such that these are applied with the same degression as unemployment benefits;
  • relax conditions for dismissal to be observed by employers; shorten the notice period and reduce the severance payment period; extend the probationary period;
  • increase the maximum duration for the retention of a job under a temporary or permanent contract;
  • reduce the pension amount or increase taxation;
  • lower the minimum wage as has been ordered in Greece (to the tune of 22% (!)) among countless other conditions imposed in exchange for European financial assistance;
  • abolish bonuses and other performance-related pay, which has contributed to the German wage moderation;
  • reduce the taxes levied on overtime – in the famous words of Nicolas Sarkozy: “work more to earn more”;

The manner with which the technocrats of the Commission (and also the Council) believe that the reforms fall under one category or another, does not only reveal that the Commission is not as ideologically neutral as it pretends to be, but also that its assessments may go against what is prescribed by European legislation. Thus, by setting the supposed benchmarks, the directives governing working time[1], collective dismissals[2] or temporary work[3], are preventing employers from abusing their position of power to impose working conditions upon their personnel that could not be classed as “fair”. In this way, by undermining the basis of acquired social rights, the Commission is itself creating this centrifugal movement with regard to European construction – something which a large number of citizens, not only those in countries in financial difficulty, no longer understand and which the founding fathers who wanted to establish a “closer union among the peoples of Europe” fought against.

The following three images show the evolution of reforms over the course of the previous decade. The rising bars indicate the number of reforms that the Commission looks favourably upon; those that look like falling stalactites refer to the measures which are classed as unfavourable. The global image is therefore one of a Europe where job protection (with the exception of Anglo-Saxon countries which are already largely unregulated and Central and Eastern European countries) is on the decline, much to the dismay of workers; where unemployment benefit schemes are becoming increasingly unfavourable; where access to early retirement has become more difficult; where working hours have become more flexible and where active employment policy measures have become standard.

However, a study conducted in 2007 on behalf of the Commission warned against structural reforms on the labour market (flexibilisation) which are placing workers in competition with one another and making them fear downward social mobility, whilst also giving rise to a profound sense of injustice, particularly if they have “emotionally” invested in their company, as these reforms ultimately favour the extreme right and encourage withdrawal (SIREN, Socio-economic change, individual reactions and the appeal of the extreme right, 2006). The election results in Greece marked by the arrival of an overtly neo-Nazi party to parliament, and in France (with the regrettable but remarkable result of Marine Le Pen and the UMP’s shift to the right), as well as the stubbornly high abstention rate at the European elections, all serve to confirm the interrelations identified in the study and indicate the extent to which the Commission, as a driving force behind the proposals, is playing a dangerous game: that of European disintegration.

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