It is now proverbial that the coronavirus recession was better managed from the point of view of macroeconomics than the previous major crisis in Europe: that of the eurozone. Austerity has been by and large avoided, and social cohesion has been better preserved through solidarity at all levels. Where the distinction has to be particularly highlighted is the field of employment. Temporary job-saving schemes, inspired by Germany’s Kurzarbeit, have become a kind of European trademark, but various national governments, especially the more progressive ones, are now going beyond and endeavouring in enacting better conditions for labour.
The government of Belgium has recently moved to introducing greater flexibility of the working week, but without changing the total hours. Employees will have an option to work longer days to earn a three-day weekend. Companies can turn down a request by an employee for a condensed working week, but employers will need to justify their response in writing. Hoping to introduce a more dynamic and productive economy, the Belgians also introduced new rules on night working. The Belgian employment reform also includes an extension of the right to disconnect and an expansion social protection for platform workers, all framed in a medium-term strategy that aims at bringing up employment from 71 per cent to 80 per cent by 2030.
The shorter working week has been in the focus of reform thinking also elsewhere since more and more practical experiments show positive effects in terms of less stress and lower risk of burnout, and a better overall work-life balance. And in various countries, measures have been taken to bring the self-employed under the umbrella of social security. In Finland, entrepreneurs have been temporarily entitled to labour market support if their full-time work ended, or if their income decreased due to the pandemic, which appears to be a temporary support hard to phase out.
German Labour and Social Affairs minister Hubertus Heil came out in favour of allowing employees to work from home for a minimum of 24 days per year. Such requests could only be blocked on the basis of operational reasons. The employment agenda of the coalition government also aims at setting a reasonable limit to revolving fixed-term contracts, enhancing pay transparency, and bringing the church labour law in line with the state labour law. All this in addition to the flagship policy of raising the minimum wage by October 2022 to 12 euro per hour.
Spain, where the 2012 reform represented an archetype of neoliberalism, now appears to be in the vanguard of progressive protection of young workers and the workforce engaged in the platform economy. The new labour law was just narrowly passed, but it grants more power to trade unions in bargaining contracts and also lowers the number of workers on temporary contracts. Contrary to the reforms ten years ago, when the right-wing Spanish government was adamant to reduce unemployment through internal devaluation, the road chosen by Labour and Social Economy minister Yolanda Diaz is to boost employment by better protection. On the other hand, the politics of this reform also shows that it takes a miracle to approve a labour reform that breaks old dogma.
While the reforms mentioned have been devised, framed, and negotiated in a national context, they also reflect the evolution of labour market policies at EU level. The EU Employment Strategy originates from the late 1990s. Recommendations to member states often relied on the concept of ‘flexicurity’, a kind of combination of flexibility and security of employment, when the second component is supported by public investment in active labour market policies. Though it was considered a success in the country of origin, Denmark, eventually it appeared not easily transferable, partly because of the costs involved, but also because of the sequencing problem: measures towards flexibility (meaning: reduced protection) were implemented faster and with greater certainty than those enhancing the security of employment.
Exactly ten years ago, with the European Commission’s Employment Package, the ‘flexicurity paradigm’ was replaced with that of dynamic and inclusive labour markets, in order to reach the employment targets set by the Europe 2020 strategy (75 per cent in the 20-64 years age group). This document was adopted amidst the deepest existential crisis of the Economic and Monetary Union to show the way to a job-rich recovery. Explaining the importance of demand-side labour market interventions, internal (as opposed to external) flexibility, and the job creation potential in the context of green, digital, and demographic transitions, much of it can be a useful guide also in the post-corona economic environment as well. This was the first EU document to propose that all EU countries should have a mechanism to set adequate minimum wages, preparing the ground for more ambitious initiatives in this field, like the directive in the legislative endgame in the EU today.
The intertwined evolution of employment policies at national and EU levels points towards the rise of a European Labour Model, that gives preference to the adjustment with the working time (as opposed to the retirement age or the level of employment) in times of economic crises and managing transitions through investment as opposed to flexibility and taking advantage of the vulnerability of the peripheral workforce. Under the same paradigm, there is no room for a trade-off between employment levels and salaries. Decent salaries are not seen as threats to competitiveness or the level of employment, rather they are essential to attract talents, incentivise training, lead the way on strategic sectors, and also help maintaining the essential domestic demand.
For the success of such of model, social dialogue in all countries must be strengthened, which is a challenge in the East in particular. In the Southern European countries, commitments to reduce youth unemployment and inactivity need to be taken seriously, with adequate support from the EU. Policymakers also have to factor in that, while ten years ago Europe was entering a deflationary environment, today, the challenge is rising inflation, which makes collective bargaining difficult and possibly calls for new tools to be deployed by national governments. In a context of raising prices, the progressive ambition to protect the purchasing power of work incomes as well as social benefits and increase the stagnating wage share becomes even more pertinent.
Finally, the war in Ukraine is most certainly a dramatic development for our continent which also changes the backdrop for employment and social policies. There is a moral obligation on EU nations to provide military aid to the government of Ukraine and to support the millions of refugees, as well as those who became displaced in their own country. The risk that cannot be ignored here is that issues not directly linked to the war effort suffer delays or become side-lined. Even without reshuffling the policy agenda, the war causes a shift of incomes towards the military sector; the profits in the armament industry will increase, while domestic welfare budgets come under pressure. It would be a great mistake to allow the inevitable trend of securitisation to cause a setback in the progressive development of labour markets and welfare states, at the national as well as at the European level.
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