Transcript EU Social Policy - The Economics Network

EU Social Policy
ref: social policy
Mar 09
(1) Introduction
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Broad definition in EU compared to UK
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Employment & living conditions (welfare)
Nations have differing priorities re:
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labour markets
social security
leisure
& other social aspects
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Social aspect in Treaty of Rome
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economic and social progress
low priority
not specific
Developments in future, particularly
single market
(2) 1950s-1970s
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Little progress beyond TOR
TOR, despite deficiencies did seek to
establish
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freedom of movement for workers
freedom of establishment
equal pay
rights for migrant workers
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paid holidays
living & working conditions
vocational training
established ESF (1960)
ESF
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Initially limited
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financial support to temporarily
unemployed
migrant workers
localised retraining
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1971 reforms
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financing from State levies to EU’s ‘own
resources’
2 broad objectives
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facilitate employment adjustment from EU
policies
help overcome structural problems experienced
by regions / groups, eg young job seekers
vocational training more important
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Greater activity
Several ‘minor’ developments
SEA - main impetus for change
(3) 1980s: Social dimension of
the SEM
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Social policy: Counterbalance to SEM
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Integral part of econ policy
Strengthens social cohesion
Economic integration creates winners
and losers
Willingness to undertake economic
integration depends on the winners
readiness to compensate the losers
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Argued ‘safety net’ required for broad
political support
Argued prerequisite for economic
integration
Social policy & productivity
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EU founders believed full harmonisation
of social policies not necessary
component of integration
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the division of wage & non-wage costs (ie:
social policies) have limited impact
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Assume
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initially no social policy & closed economy
wage W, employment level L
Adopt raft of social policies
Raises cost of employing workers by ‘T’
Result:lower wage (W1) & employment
(L1)
Important: wage incl wage & non-wage
costs
Closed economy
Real wage
S
D
w
L
Labour
Closed economy
Real wage
D
S
D1
w
T
w1
L1 L
Labour
Non-wage benefits include
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Part of wage taken as benefits rather
than take home pay
Limit working hours (eg Working Time
Directive, French 35 hr week)
Maternity, paternity & sick leave
Pension benefits
Holidays
TUPE
Open economy
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Now, consider open economy
More elastic demand (now D2)
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greater integration in goods mkt greater
competition between workers
Wage falls below W1 if social policies,
(non-wage )cost = T
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greater burden of (T) falls on workers
Open economy
Real wage
S
w
T
w1
W2
D
D2
L2
L
Labour
Open economy + productivity gain
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Empirical evidence suggests
integration has simultaneously seen
higher real wages, due to efficiency
benefits from integration
Gains from SEM incl. raised productivity
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value of workers to firm rises D3
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More than counteracts more elastic
demand
Real wage rises to W3 & employment
rises to L3
EU examples…
Open economy + productivity gain
Real wage
S
W3
w
D3
w1
W2
D
D2
L2
L L3
Labour
Other issues: Social dumping
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Movement of jobs to countries with lower
social protection, reflected in lower overall
labour costs
Hoover, Dijon - Glasgow 1993
Argued concerns misplaced
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France 1960s
Productivity must be considered – high wage
sectors can maintain comparative advantage
Division between wage & non-wage costs can be
left to States
Wages and productivity in 2005
(Germany = 100)
Country
Bulgaria
Croatia
Czech Republic
Estonia
Hungary
Latvia
Lithuania
Poland
Romania
Slovakia
Slovenia
Weekly private sector earnings
5
22
19
13
20
7
10
16
7
15
33
Labour productivity
32
57
66
54
69
46
51
63
36
60
77
Other issues: End of the European Social
model?
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Today – some argue lower wages & social
protection in CEECs a threat to the European
Social model
Flexibility
Regulation v laissez faire
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Regulation ‘dual labour’ markets /Insider-outsider
problem
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High wage productivity sector & low wage unskilled
sector (with unstable employment)
Eg Youth unempt
UK employment more open to ‘outsiders’
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France v Anglo-Saxon approach
Scandinavian 3rd way
Social Charter 1989
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Social Charter 1989
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not legally binding
opt out by…
(4) 1990s and beyond
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TEU / Maastricht Treaty
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Binding
Social Protocol (chapter)
Opt out
Subsidiarity still central
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White Paper for Growth,
Competitiveness and Employment 1993
Social Action Programme 1995-2000
Treaty of Amsterdam 1997
European Employment Strategy (EES)
1997
Lisbon Agenda (2000-2010)
EMU
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Lack of downwards real wage flexibility
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Conflict OCA theory
Pre-EMU devalue for international
competitiveness
EMU makes impossible
Employment may move to low cost
countries . EU examples……
Increased productivity may be solution
(5) Social policy: Effective?
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Fragmented EU policy
National policies important
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eg mutual recognition of qualifications major task
Employment creation? Unemployment?
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YOU get data from EU
Commission/Eurostat
1990s – shift to promote employment
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European Employment Strategy (EES) 1997
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Lab market & other measures, eg entrepreurship
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Slight participation and reduced
unemployment
See Martin J, ‘What works among active
labour market policies: Evidence from
OECD countries’ experiences’, OECD
Occasional Papers, 1998
Funding
Political will
Some success
Source The Lisbon Scorecard VIII, Is Europe Ready for an Economic Storm?, March 2008.
See section on Employmenet and Social Inclusion
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Benchmarking suggested as way to
create EU wide social policy
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Leave States to design, but meet minimum
threshold
Scharp F, ’European integration,
democracy and the welfare state’, Jnl of
European Public Policy, 1997
(6) Social Policy & Business
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…
…
…
(7) Conclusion
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Fragmented
Main development 1980s+
Does globalisation indicate move away
from social policy?
Lisbon Agreement ties social cohesion
to increased competitiveness