Transcript people.ds.cam.ac.uk

Mr. Massimo M Beber
Fellow in Economics
Sidney Sussex College
Cambridge CB2 3HU
[email protected]
http://people.pwf.cam.ac.uk/mb65/mpes
European Economics
Lecture 3
EMPLOYMENT RELATIONS:
FROM JOBLESSNESS TO FLEXICURITY
(Provisional Version: last updated 22hOctober 2007)
M.Phil. in Contemporary European Studies 2007/8
©Massimo M Beber 2007
Lecture Outline
• The employment contract between economic
efficiency and social objectives
• The disappointing historical and comparative
performance of Europe’s labour market
• Explanations of persistent unemployment
• National differences in labour markets
institutions
• A European employment policy?
Unemployment – Key Facts
• Inversion in long-term labour market performance
between USA and Europe since the 1980’s
• Aggregate EU performance dominated by “bad 4”
• Some notable success stories (Ireland, Finland,
Spain, UK, Nordic countries)
Labour market: economic issues
• Imperfect information (insiders and outsiders;
efficiency wages)
• Human capital formation (firm-specific
knowledge etc.)
• Power imbalance between the parties
• Direct impact of unemployment on sociopolitical stability
Labour Market: ethical issues
•
•
•
•
Discrimination (gender, age, race, education…)
Fairness (minimum wage, working conditions)
Identity (joblessness, status of job held)
Thus both economic and ethical reasons make
employment relations an institution-rich
economic arena, including specifically
– trade union involvement
– statutory protection of individual workers’ rights
Basic Definitions and Yardsticks
• Redefining the “working age”: the advantage of smooth
transitions
• Workforce and Population of Working Age (PWA): the
Participation Rate
• Unemployment and Workforce: the Unemployment Rate
• Employment and PWA: the Employment Rate
• Unemployed and Inactive and PWA: the Non-employment
(Inactivity) rate
Basic Unemployment Ratios 2007
90%
80%
82%
73%
77%
70%
60%
50%
40%
32%
27%
30%
21%
20%
7%
10%
5%
0%
Participation
Non-Activity
Unemployment
Source: Calculations from AMECO Database
EU-15
USA
Japan
4%
83%
81%
79%
77%
75%
73%
71%
69%
67%
65%
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
Labour Force as % of Population Aged
15-64
TRENDS IN LABOUR FORCE PARTICIPATION
Source: data from AMECO Database Ch 1 (October 2006)
EU-15 (incl. WG)
EU-15
USA
Japan
The Non-Activity Rate: Not finding, or not looking
The Unemployed and Inactive as %
of the Population of Working Age
40%
38%
36%
34%
32%
30%
28%
26%
24%
22%
20%
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
Source: calculations from AMECO data
EU-15
USA
Japan
2003
2004
2005
2006
2007
19
60
19
62
19
64
19
66
19
68
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
Unemployed as % of the labour
force
EUROPEAN UNEMPLOYMENT IN THE BIG FOUR
14
12
10
8
6
4
2
0
Source: AMECO Database (October 2006)
France
Italy
West Germany
UK
Germany
USA
19
60
19
62
19
64
19
66
19
68
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
Unemployed as % of the labour
force
EUROPEAN UNEMPLOYMENT SUCCESSES
18
16
14
12
10
8
6
4
2
0
Source: AMECO Database (October 2006)
USA
Denmark
Ireland
Sw eden
Netherlands
Explanations of Persistent
Unemployment
• European experience since the 1980’s
– increase in unemployment
– cross-country heterogeneity
• Dissatisfaction with the “New Classical”
explanation
– monetary misperception could lead to temporarily
higher unemployment during disinflation;
– but inflation had stabilized at relatively innocuous
rates by the mid-1980’s
NAIRU EXPLANATIONS
• a “competing claims” theory of involuntary
unemployment when inflation is stable
• an implicit “policy menu” of
– labour and product market reform
– improved public services
– stable terms of trade (but see commodity shocks)
Hysteresis (or: History matters)
• Cyclical deviations may have persistent effects
through
– insiders becoming outsiders
– workers becoming discouraged
– capital scrapping
Europe’s Labour Market Models
• Continental Model (Austria, Belgium, France,
Germany)
• Mediterranean Model (Portugal, Spain, Italy,
Greece)
• Nordic Model (Scandinavian Countries,
Netherlands)
• Anglo-Saxon Model (Ireland, UK)
• A Central European Model?
Source: OECD DELSA Newsletter, no. 3 (October 2006).
EU Labour Market Objectives
EU Employment Policy-Making:
the three-pillar structure
• 1) Employment rights through Community
legislation
• 2) “Law via collective agreement” as a prenegotiated alternative to 1);
• 3) the European Employment Strategy
• Major lift through the Amsterdam Treaty
Employment Title (1997), then Lisbon (2000)
• Nevertheless “a Cinderella of the European
integration project”
The EES: a Typology
Legal Form
Mandatory
Non-Mandatory
Implemen
tation
Rigid
Harmonizing
Regulation (Pillar I)
Targeting (Pillar II)
Framework Directive Moral Suasion (Pillar
Flexible
(Pillar II)
III)
Source: Rhodes (2004).
Pillar 1: EU Legislation
• main obstacle the structural one of national
differences
• original treaty basis in discrimination
• SEA added QMV and “Social Protocol” covering
health and safety, working conditions, and equality at
work
• Amsterdam added consultation rights
• Right of association, strikes and lock-outs remain
explicitly outside Community Competence
Pillar 2: law via collective agreement
• Derived from the 1980’s Commission
“sporadic” support for Euro-corporatism
• Legally based on 138-9 TEU (1991)
• allows social partners to request a Council
decision on a collective agreement matter
• also allows for directives to be implemented via
collective agreements and “national practice”
The European Employment Strategy
• Open Co-ordination (peer pressure in the
absence of treaty competence)
• Activation and Mutual Obligation
• Employment Guidelines, Recommendations on
Employment Policies
• National Action Plans
• Joint Employment Reports
• An “innocuous exercise in Euro-Verbosity”?
Conclusions
• Europe’s aggregate labour market performance
compares unfavourably both internationally, and
with some notable internal success stories.
• National institutions still play a significant role,
reducing the scope for a European employment
policy.
• The focus of policy responses has shifted from
financial support of unemployment to active labour
market policies (welfare into and with work)