Introduction

The Employment Package [1], published on 18 April 2012, is the European Commission’s response to the persistently high level of unemployment in Europe. It sets out a medium-term agenda for action, by the European Union and the Member States, to support a ‘job-rich recovery’ and reach the Europe 2020 Strategy goals. The Commission is right to focus on this daunting challenge and appears to be starting to heed the incontestable evidence of steadily rising unemployment figures and the weak economic outlook. The following ETUC comments are predominantly focused on the Towards a job-rich recovery Communication (‘the Communication’).

The ETUC recognizes a number of positive developments reflected in the Employment Package. In particular, we welcome the recognition that the new EU economic governance needs to be coordinated with employment and social policy and that the social partners must be more closely involved in this process. We also support the attention given to the following issues: the need to reinforce social dialogue within the EU governance; encouraging labour demand; addressing chronic youth unemployment; tackling labour market segmentation; identifying sectors with a potential for job-creation (green economy, health, ICT); investing in workers and skills; and renewing efforts to remove obstacles to the free movement of workers.

With unemployment in the eurozone reaching 11% and over 10% in the rest of the European Union (affecting over 25 million people), halting and reversing this devastating employment crisis is of the highest priority for the ETUC. The Employment Package represents a step in the right direction, but the ETUC is concerned that if the EU collectively continues the policy of austerity, many of the package’s more positive proposals will remain only that. While the Commission is right to emphasise that appropriate macroeconomic, industrial and innovation policies are important for employment growth, it is not proposing any Investment plan , nor is it taking into consideration the impact of trade policy. The ETUC insists on the need for coherence between employment, investment and external trade policies. Existing accompanying measures such as the Globalisation Adjustment Fund are not enough to mitigate the negative effects of Free Trade Agreements on employment in certain sectors. Without a shift in the EU’s policy orientation, the ETUC questions the ability to deliver the desired job-rich recovery. Labour market policies will not compensate for macroeconomic policy mistakes and the Employment Package will not operate in a vacuum nor, on its own, create the necessary conditions to foster job creation.

Austerity is having a negative impact on employment both in the public and private sectors. It is increasing inequalities still further and escalating poverty. Eighty percent of Europeans believe that poverty has increased in their country over the past year and only 14% are hopeful of seeing an improvement in their household’s financial circumstances in the coming year. [2] Ultimately, austerity is jeopardising any potential recovery. The ETUC has consistently argued that there are alternatives so we repeat our call for: a temporary freeze on new fiscal austerity in 2012 (and linked to this a moratorium on public sector job cuts to protect employment in the EU); a European Investment Plan focusing on structural investments and supported by new sources of finance including a financial transactions tax and Eurobonds; and that the European Central Bank should act as a lender of last resort [3].

Although the Employment Package presents some important positive policy developments, the ETUC regrets its disproportionate focus on supply-side measures. Increased labour market flexibility through employment deregulation remains the primary objective of proposed labour market reforms. It is also important to note that increasing labour supply at a time when there is an excess with such high levels of unemployment, will result in even higher unemployment in the short term.

Supporting job creation

Encouraging labour demand

The Commission is advancing some suggestions aimed at stimulating labour demand. The ETUC agrees that more efforts need to be channelled into making labour markets more inclusive and that specific measures are required to target vulnerable groups. In this context, the Communication pinpoints the use of hiring subsidies as a means of cushioning the unemployment effects of the economic crisis. The ETUC is concerned that this should not be promoted as or mistaken for an appropriate general policy for creating sustainable and quality jobs. Policy makers should avoid providing the wrong incentives which could encourage employers to lower productivity, training and pay so as to ensure eligibility for such schemes. The negative ‘revolving door’ effects of such subsidies, whereby workers are fired only to be rehired to take advantage of a subsidy, should also be taken into consideration.

Whilst acknowledging the EU’s limited competence in the field of taxation, the ETUC agrees that tax policy has a role to play in supporting job creation and believes that the focus should be on shifting tax burdens from labour to capital. We note the progress on the Common Consolidated Corporate Tax Base but in the absence of a minimum EU common corporate tax rate, the downward trend of corporate tax fosters tax competition and negative job relocation. Whilst ETUC endorses an approach which would shift taxes towards property and properly monitor redistributive effects, a shift towards consumption taxes would be counterproductive, ignoring the regressive impact of such taxes on income distribution. Similarly, the suggestion that employer social security contributions should be reduced is flawed and unbalanced, failing to take account of the impact this could have in weakening the revenue pillar of social security systems. Member States should instead be encouraged to strengthen these systems which constitute a fundamental aspect of the European social model and are the automatic stabilizers which proved effective in the early stages of the crisis.

The ETUC has previously called for increased efforts to tackle the causes of undeclared and informal work and welcomes the attention given to this issue, including the proposal to launch a consultation on establishing an EU-level platform between labour inspectorates and other enforcement bodies. An EU-level network of senior labour inspectors (SLIC) already exists; the consultation should therefore address whether there is a need for a new platform rather than improving the use of the SLIC network, with a formal structure for involving the social partners.

Additionally, the ETUC believes that in the context of a developing European labour market, a broader outlook is required encompassing the protection of workers, compliance with labour law and collective agreements and, within that framework, focusing on the most vulnerable workers such as migrants, the young and other workers in precarious employment. In all respects, labour inspectorates must be well resourced, particularly in times of crisis and the corresponding increase in their workload. In breach of ILO Convention 81 on labour inspectors, there is already a shortage of labour inspectors in a significant number of Member States and in some countries austerity measures have led to further cuts in their numbers.

Wages and job creation

Wage-setting: the ETUC welcomes the fact that by referring to real wage growth (and not just wage or nominal wage growth) in line with productivity developments, the Communication implicitly rejects the wage norm that the Competitiveness Pact adheres to. We also welcome the recognition of the need to boost wage growth where wages have “significantly lagged behind” such developments. However, the ETUC rejects the Commission approach whereby wages are seen as an instrument of competitive adjustment. We stress, instead, that wages and wage formation systems have a wider role to play and different objectives to pursue including:
providing security by not giving employers the right to cut (nominal) wages;
avoiding deflationary trends, implying that nominal wage cuts and freezes are to be avoided;
working as an engine for demand and growth through real wage increases and a fair distribution of income between capital and labour;
promoting the modernization of the economy: robust, rather than flexible, wage setting mechanisms are a powerful incentive for employers to seek solutions based on innovation and modernization instead of falling back on a simplistic and unsustainable strategy of wage cuts.

The fact that wages fulfil differing objectives implies that the role of autonomous social dialogue and the support of this dialogue through systems of coordinated bargaining are of crucial importance. The ETUC attaches the utmost importance to the European Treaty principles stipulating that the EU must strictly respect the national systems of industrial relations and has no competence regarding wages.

Growing in-work poverty is a phenomenon that must urgently be remedied. The ETUC maintains that a decent wage, coupled with decent working conditions, allowing people to live and work in dignity, is the most effective ‘incentive’ to taking up remunerative work. Whilst appropriately set minimum wages can help to prevent in-work poverty, we reject the implication in the Communication that a minimum wage equates to a decent wage. For the ETUC, a decent wage rather than a minimum wage should be the measure for ‘ensuring decent job quality’. Moreover, the Commission’s view on sufficiently ‘adjustable’ and ‘differentiated’ minimum wages floors is unclear and could be interpreted in a way which undermines a key principle of a minimum wage: i.e. to limit market competition which forces workers to undercut each other by installing a wage floor. The ETUC will not support the downwards adjustment of minimum wages in times of crisis when a stringent wage floor is more necessary than ever, as is happening in Greece for example.

Job creation potential in key sectors

Green economy: the ETUC has consistently promoted the transition to an energy and resource-efficient economy and the development of green jobs as response to the environmental challenge and as a key aspect of an alternative agenda to austerity in securing a sustainable economic recovery. The Employment Package rightly raises the issue of the employment potential in addressing climate change and we welcome its broad definition of ‘green jobs’ used. For the ETUC, the move to an energy and resource efficient economy must guarantee a Just Transition and we regret the Commission’s failure to address this crucial dimension. We stress the need for a high level social dialogue on climate and employment. More detailed comments are set out in the ETUC Resolution on Qatar COP18 [4].

Health and social care: the Communication provides a good description of the challenges facing these sectors which will need to be addressed if we are to harness their job creation potential and ensure that this results in providing quality employment. The ETUC stresses that any policy action in this area must start with the basic principle that healthcare and social services are services of general interest (public services). Citizens have the right to expect that they are of high quality, affordable and universally available. Related to this, the Commission’s failure to acknowledge the importance of the public financing aspects of these sectors and the need for public investment in the service quality to boost quality jobs and improve employment in the sector, is a major concern.

The ETUC emphasizes that the focus must be on the creation of quality jobs. The social partners at all levels have an essential role to play in developing the strategies and creating the right conditions that will allow the job-creation potential of the growth sectors as identified in the Employment Package to be realized. As regards health and social care, the recognition of the role of the social partners and the outcomes of the sectoral social dialogue on recruitment and retention and ethical cross-border recruitment in the hospital sector is welcome.

Mobilising EU funds for job creation

The ETUC welcomes the Commission’s general approach to mobilising EU funds for job creation. We support the orientation of all the funds towards achieving labour market objectives. However, the ETUC believes that the European Social Fund (ESF) must be the main instrument for implementing the Europe 2020 Strategy in the field of employment, labour market policies, mobility, education and training and social inclusion and that the four priorities for ESF use should remain clearly defined in the regulation. The ESF should also expand its support to the development of social dialogue, namely by improving the capacity building of social partners. In terms of governance, the European Social Partners have welcomed the new “European Code of Conduct concerning Partnership” which should serve as a guideline for the implementation of the structural funds regulations.

Restoring labour market dynamics

Labour market reforms: There are many examples where companies, working with trade unions, have delivered positive and innovative changes in adapting to the transforming global economic landscape. Whilst it is true that during the initial stages of the economic crisis the social partners agreed on and implemented effective solutions with the aim of cushioning the effects of the recession in the interest of companies and workers, a fundamental aspect of such negotiated approaches is that they were possible in those Member States with a well-established tradition of social dialogue. For the trade union movement this merely demonstrates the merits of strong social partners, with effective social dialogue and collective bargaining.

The ETUC has warned that focusing on a European concept of flexicurity would be unhelpful but the Commission has, nevertheless, sought to revisit the flexicurity agenda in the context of and as a response to the crisis. By continuing with the European flexicurity agenda (with the reference to a “single open-ended contract’ being repeated in the accompanying staff working document), the Commission is failing to send the clear message that, in a time of crisis, flexicurity is not the answer. Europe’s labour markets already have a high degree of flexibility but the quest for ever more flexibility has resulted in worker insecurity often linked to the rise in atypical forms of employment. There is evidence [5] that the flexicurity concept has failed to pass the test of the crisis, with rapidly rising unemployment with little or no corresponding security in the form of robust benefits, increased access to training and the necessary active labour market policies.

Moreover, the Commission even seems to be sliding backwards on the dimension of labour market security by invoking ‘time limits’ and ‘increased conditionality’ for unemployment benefits. In particular, presenting social security reforms which have contributed to an explosion of inequalities and poverty as ‘modern’ (Germany, Hartz reform) is disingenuous as is the claim that Member States that have both weak job and social protection constitute a ‘flexicurity’ cluster (CEE countries).

Whilst the Commission advocates that Member States should, despite budgetary constraints, maintain the pillars of flexicurity (e.g. unemployment benefit coverage) the reality does not support this. The ETUC questions whether the Commission is really able to reconcile the promotion of fiscal consolidation with the flexicurity agenda. Added to this, while it is generally accepted that strong social dialogue is a necessary element for the success of any genuine flexicurity model, we currently see a Europe-wide trend of attacks on collective bargaining and the resistance at European level to strengthening workers’ involvement.

The ETUC reiterates that labour market flexibility does not create more jobs, but simply transforms the existing work into precarious jobs and contracts: “Bad jobs drive out good jobs”. This actually undermines the recovery of the economy since workers in flexible, insecure contracts get paid less and save more because of the insecurity they are facing. Precarious work produces a weaker, not a stronger, recovery – as the Communication itself points out, during the crisis job losses were mainly concentrated on workers with fixed term contracts.

The ETUC does however believe that the Commission’s focus on the potential benefits of internal flexibility is positive. The ETUC has called [6] for an EU-level initiative, to be developed with the full involvement of the social partners, with the objective of maintaining jobs, protecting income and providing workers with an opportunity to maintain skills.

Labour market segmentation: the Commission rightly acknowledges the problem of labour market segmentation, excessive use of non-standard contracts and bogus self-employment but the ETUC regrets the lack of balance displayed in its approach to tackling the issue. Whilst the Commission remains focused on employment protection legislation (EPL) as an obstacle to job creation, the ETUC maintains that any balanced approach must recognise that precarious work is a consequence of too many loopholes in labour law, allowing some employers to undermine the stability of the work relationship and gain unfair competitive advantages over those who seek to respect worker protections. Rather than a general approach which seeks to weaken EPL, the Commission should focus on closing those gaps and ensuring equal treatment for all workers irrespective of contractual status and gender.

We emphasise the need to ensure that any initiatives in the context of the Employment Package are geared towards promoting gender equality generally and specifically addressing the gender pay gap and gender segregation in the labour market.

Delivering youth opportunities: the ETUC has repeatedly stressed the urgency of the situation regarding youth unemployment and in their Work Programme 2012-2014, the European Social Partners committed to negotiating a framework of actions on employment for young people as a priority. In a context in which flexibility is unilaterally imposed on young workers, the emphasis needs to be placed first and foremost on security. The ETUC is convinced that an approach focused on making ‘flexicurity’ a key element in addressing the labour market segmentation of young people is both risky and misguided. Active labour policies, guaranteeing the creation of quality jobs and averting any risk of social exclusion or discrimination against young people, implemented jointly with the social partners, should be promoted instead.

The ETUC supports the concept of a youth guarantee ensuring that every young person is offered training or a job within a set period of time. We look forward to the Commission’s proposal for a Council Recommendation on Youth Guarantees before the end of 2012. Within the framework of the youth guarantee concrete targets should be set e.g. for the reduction of youth unemployment within a precise time frame and to increase the EU budget for combating youth unemployment, including the ESF. The ETUC is also committed to a “European Charter on Internships and Apprenticeships” and welcome the Commission’s consultation on a Quality Framework for Traineeships to which we will submit a separate response.

Reinforcing social dialogue & collective bargaining

Strong social dialogue at all levels is a key element in finding relevant solutions to labour market and workplace problems and is as relevant in times of crisis as at any other. The Commission’s emphasis on reinforcing social dialogue is both welcome and timely. The ETUC underlines the need to support and spread collective bargaining as a tool for reducing labour market inequalities, ensuring decent work and wages, preventing social dumping and ensuring fair competition. Coordinated collective bargaining is an important engine for boosting aggregate demand and organizing a self-sustained process of economic growth. This implies and requires a national and sectoral approach to collective bargaining, in addition to action at company level.

In this context the ETUC also reiterates its demand that a legislative general framework instrument be developed, strengthening the rules on worker participation, ensuring that all the legal forms of company entity at the EU level are subject to binding regulations on worker participation in company boards and on information and consultation with worker representatives regarding cross-border issues [7].

The Communication rightly highlights that “strong social dialogue is a common feature in those countries where labour markets have proved to be more resilient to the crisis”. However, the actions of the Troika in those Member States subject to financial bailouts, and those of other Member States of their own volition, are in stark contradiction. The ETUC reiterates our concern that the economic crisis is being used by many Member States as an excuse to disregard trade union and workers’ rights [8], and dismantle industrial relations structures and processes thus undermining social dialogue and collective bargaining. The ETUC warns that these reforms may violate fundamental ILO, Council of Europe and EU norms and standards. The ETUC condemns the Commission’s failure to reacted more strongly to measures violating fundamental rights of the kind guaranteed in the EU Treaty and in the Charter of Fundamental Rights. We call for more visibility from the Commission in promoting and defending trade union rights, including safeguarding the right to strike.

Invest in skills

There is a clear consensus among policy makers and the social partners that investment in the education, training and skills of Europe’s citizens is a key condition for European prosperity. The ETUC agrees with the Communication’s emphasis on investment in skills, the need for anticipation of skills’ needs and the focus on developing lifelong learning (LLL). The ETUC has previously called for an individual right to training. Whilst the Commission is right to raise the issue of skills mismatches, the ETUC is concerned that the unemployment crisis should not be reduced to a question of skills’ mismatches and shortages. Merely matching the skills’ needs in the labour market, improving vocational education and training (VET) and the recognition of competences is not sufficient to create new and good jobs.

The ETUC also warns that the impact of the economic crisis, fiscal consolidation and corresponding public spending cuts, should neither be ignored nor minimised. A real and effective policy on LLL, VET and on training and education effects on labour market is impossible without appropriate funding. Structural funds can make an important contribution but are complementary and the Member States, regions and local authorities should provide the necessary resources to support the processes.

The ETUC also draws attention to the role of industry and the social partners in this area. The partnership principles should be strengthened, including clarification that this involves not only employers and VET providers, but also trade unions at all levels. The direct management of LLL/VET by trade unions through their own institutions/bodies/representatives should also be recognised and supported. Additionally, businesses must be encouraged to invest in not only their own but also the local workforce. Measures should be developed to assist SMEs in particular, for example, through pooling resources, to ensure that their workers have access to training and LLL opportunities. The impact of company practices, such in restructuring or relocating processes, on skills retention in a sector and in the locality should also be addressed.
Restructuring: the ETUC has repeatedly stressed the need for a legal framework on anticipation and management of change and restructuring and demanded EU action to implement this, most recently in our response to the Green Paper on restructuring [9].

Towards a European labour market

The ETUC believes that a European labour market must be founded on European ‘rules of the game’, combining open borders with adequate protection. These must ensure: equal treatment of local and migrant workers, no unfair competition on wages and working conditions; respect for national collective bargaining and industrial relations systems; equal access of all workers to social benefits; and proper instruments and tools for monitoring and enforcement of labour standards.

Mobility: the ETUC remains firmly committed to the principle of the free movement of workers and believes that voluntary mobility is to be encouraged and facilitated. Mobility should, however, be a right not an obligation and we are concerned at the disproportionate emphasis being placed on geographic mobility as a solution to unemployment. Mobility can contribute to improving an individual’s employment prospects but must not detract from the need for necessary investment at all levels in local development i.e. creating jobs where people live, particularly in areas of high unemployment.

We welcome the Commission’s focus on the obstacles to mobility and the free movement of workers. Removing obstacles is mainly up to the Member States, but the Commission should recommend guidelines and coordinate national and intergovernmental initiatives. We regret, however, the failure to emphasize the need for equal treatment, the obstacles posed by social and wage dumping and the need to ensure respect for national employment and labour law and industrial relations systems. The ETUC reiterates that the Commission’s proposals regarding the Monti II Regulation and the Enforcement of the Posting of Workers’ Directive do not resolve these problems [10].

The ETUC does not support the division of the EURES (the European employment services) between the ESF and the proposed new Programme for Social Change and Innovation (PSCI). The ESF should provide a minimum share for EURES activity, notably cross-border partnership, which is fundamental to removing obstacles to mobility and preventing social dumping across borders. Additionally, the mobility priority in the ESF’s use should be compulsory for the Member States. If EURES is, nevertheless, divided into two funds, the PSCI should be a subsidiary tool to support EURES cross-border partnership, together with the ESF; to achieve this goal, the partnership principle and minimum share must also be integrated in the PSCI [11].

Migration: the Commission recognizes the need to address the issue of migration, and whilst no concrete proposals are in this Communication, numerous legislative initiatives have been taken in recent years. For the ETUC, a coherent legal framework for migration, .including the need to avoid rights’ segmentation among different categories of migrants, combined with improved policy coordination of policy in this area is required. The Communication’s failure to address the obstacles to the mobility of third country migrant workers is also an important missing element.

Enhancing EU Governance

Reinforcing coordination of employment and economic policies: the ETUC has previously highlighted the need for more balanced economic governance and therefore welcomes the proposal to balance the new economic governance by strengthening its coordination with employment and social policies. This is also a necessity if the EU is to reach its Europe 2020 goals.

The proposals to build a benchmarking system on employment and a scoreboard of the implementation of the National Jobs Plans are useful. It should allow the transparent monitoring of employment performances and progress towards other Europe 2020 targets such as poverty reduction. To this end, the European social partners should be involved in setting the benchmarking and scoreboard criteria.

Improving the involvement of the Social Partners: involving social partners in the elaboration and implementation of economic and employment policies is essential. Moreover, the social partners should be consulted in a timely fashion prior to the publication of the Annual Growth Survey and in discussions to define the ‘main strategic priorities’ regarding employment policies rather than once already established.

For the ETUC, organizing a monitoring of wages at the European level can only be done under the following conditions: the autonomy of social partners is strictly respected, wages are not used as an instrument of competitive adjustment, the scope must be broad and include fiscal, monetary policy and qualitative determinants of competitive positions, that profits and their use are being monitored.

A stronger and improved macro-economic dialogue, including in particular an enlarged exchange on political level between the European and national social partners on the one hand and both employment ministers as well as ministers of finance on the other, is the right forum through which this closer involvement of social partners is to be organized. This also constitutes the forum through which social partners should be involved in the procedure on macro-economic excessive imbalances (scoreboard, alert mechanism report, in-depth country studies).

In all of this, the articles 153-5 TFEU, restricting the competence of the European Union on wages, and article 152, obliging the Union to respect the diversity of national systems of industrial relations and wage formation, need to be taken strictly into account. To do so, and in respect of the autonomy of social partners, any specific discussion on wage dynamics needs to be done at a bi-partite level between European social partners themselves, with the Commission facilitating such a dialogue in accordance with articles 152 and 154TFEU.