The European Social Model

July 2006

The origins of Social Europe

In the wake of the Second World War, European leaders looked for a framework through which to heal the conflicts between nations that have characterised the history of this continent. From six founding countries, the European Union has grown into 27 Member States with a unique system for decision-making and cooperation.
The Treaty establishing the European Community (TEC) set down fundamental social objectives:
- promotion of employment, improved living and working conditions ... proper social protection, dialogue between management and labour, the development of human resources with a view to lasting high employment and the combating of exclusion.

The EU Charter of Fundamental Rights includes chapters on freedoms, equality and solidarity, articulating rights to fair and just working conditions, social security and social assistance, equality between men and women, and trade union rights such as collective bargaining and strike action, among others.
The EU has brought not only a half century of peace but also economic and social progress. The central, underlying principle is one of solidarity and cohesion: that economic growth must serve to boost overall social wellbeing, and not take place at the expense of any section of society.

Ireland, for example - formerly one of the poorest countries in Europe - has benefited from EU support to become a dynamic and successful economy, even though it has failed to pass on this prosperity to all its citizens. Similar growth expansion is now visible in some of the newer EU Member States in eastern Europe.
Sustainable economic and social development also implies respect for the environment, and the wise use of natural resources.

Characteristics of the European Social Model

Social Europe's overarching objective must be to create a more equal society: ending poverty and poverty wages, guaranteeing fundamental human rights, essential services and an income that enables every individual to live in dignity.
The ETUC has identified five main elements:
- fundamental social rights, including freedom of association, the right to strike, protection against unjustified dismissal, fair working conditions, equality and non-discrimination;
- social protection, delivered through highly developed universal systems, and wealth redistribution measures such as minimum income or progressive taxation;
- social dialogue, with the right to conclude collective agreements, to workers' representation and consultation, and national and European Works Councils;
- social and employment regulation, covering, for example, health and safety, limits on working time, holidays, job protection and equal opportunities;
- state responsibility for full employment, for providing services of general interest, and for economic and social cohesion.

Why is the Social Model under attack?

Globalisation is intensifying competition for markets around the world. At the same time, in recent years, EU growth rates have not lived up to expectations. This has brought claims that in a more competitive environment, Europe can no longer afford the 'luxury' of strong welfare measures. The EU must cut spending on social protection and ease regulation for business if it is to compete with developing economies like China and India, it is argued.

The ETUC, in response, has warned EU leaders against imposing economic reform at the expense of workers' rights and living conditions. Fears that the European Social Model was under threat helped raise public suspicion of the EU, leading up to the rejection of the European Constitution in France and the Netherlands in 2005.

One social model or several?

Much debate in academic and political circles has focused on whether it is possible to talk of a single European Social Model, or whether there are actually five different models, offering divergent approaches, for example, to job security and social welfare.

The ETUC believes that while there may be some variations in implementation, common core values and principles underlie Europe's evolution. The EU is built on the principle of social partnership: a compromise between different interests in society to the benefit of all.

In adopting the social acquis - the body of European social policy legislation - all 25 EU Member States sign up to the same framework of rules. This is crucial for progress towards further European integration. The EU is aiming to achieve higher growth and prosperity through a single internal market for goods and services, but in this case it must also recognise the emergence of a single labour market, requiring regulation to establish a level playing field for all. Otherwise, this is the recipe for a 'race to the bottom', with workers paying the price of increased competition through declining standards and working conditions, and firms competing by lowering working conditions instead of by investing in innovation and knowledge.

The EU's social legislation creates an important safety net of minimum standards, preventing a downward spiral of social dumping.

It is true that some Member States, and in particular the Nordic countries, have been more successful in achieving high growth and low unemployment. The EU needs to learn from examples of 'best practice' and examine whether systems such as 'flexicurity' - whereby greater mobility between jobs is accompanied by active welfare measures - can be adapted more broadly.

Social Europe = the answer to globalisation

Social Europe should offer a framework for helping people to come to terms with change and its consequences.

In this context, the ETUC welcomed the European Commission's proposal for a Globalisation Adjustment Fund (GAF), to support workers hit by major industrial restructuring. However, the ETUC also insists that the GAF should be implemented in close consultation with the social partners in order to avoid overlap and confusion with existing adjustment measures, notably those specified through collective bargaining practice.

Workers who face redundancy need to know well in advance, to give them time to retrain or find another job. Sweden sets one of the longest notification periods in the EU (6 months after 4 years' tenure) and also has one of the highest employment rates in the world. Research proves that with more advance warning, people find new jobs more easily. EU information and consultation legislation and European Works Councils (EWCs) should keep workers in touch with developments in their workplace.

Adequate benefit systems enable workers to respond constructively to change, rather than trying to resist it.

High social standards benefit economic performance

European workers are already among the most productive in the world, and this is true in Member States with strong social protection policies. German labour productivity per hour is close to the US average, and France and Belgium are not far behind.

In a recent World Bank survey, 11 EU nations were among the top 30 most competitive countries in the world, with the Nordic and Baltic countries showing especially strongly. Denmark led the list, with the greatest economic prosperity, the highest employment rate and investment in social protection in the EU, unemployment at just 5%, and 80% of the workforce in trade union membership.
It is not surprising, therefore, that the EU-25 is also the largest global trading block and has been increasing its share of world exports. Over the last five years, exports to China have gone up by 87%.

Companies that involve employees in reforming work organisation reap the benefits in innovation and production performance. In Germany, manufacturing firms that modernised won a 8-30% labour productivity advantage over competitors.

Measures to enable people with family responsibilities, especially women, to play a full role in the labour market, make economic sense as well as improving the quality of people's lives. Some 56% of graduates from EU universities are now female, so it is important to enable them to use their knowledge and skills in the labour market.

Redistribution of wealth

Active policies to fight poverty and redistribute wealth contribute to higher levels of equality in Europe than elsewhere in the world (see figure below). Under an unregulated free market, 30% of the population would be at risk of poverty (OECD estimate). Social transfers bring this figure down to 10-15%, whereas in the USA it remains around 20-25%.

Figures tell the story

Although the USA has a reputation for high social mobility, enabling poorer people to become better off, the facts point to a different picture.
For example, 40% of the sons from poorest families in the USA remain in this poverty trap, compared with 25-30% in EU countries. The number of people living in poverty in the United States is rising by some 1 million per annum.

The value of knowledge

Europe can never hope to compete with developing economies like China through cutting wages and lowering working conditions - the pay gap is too vast. So the EU must focus on what it does best as a high-skill, knowledge-based economy.
This means investing in research and innovation, creating more high-quality jobs, and ensuring workers have the skills to fill them. Lifelong learning is a vital ingredient. In 2002, the European social partners agreed a framework of actions for developing lifelong learning.

A changing society

Better healthcare and social protection have helped Europe to achieve one of its goals in prolonging individual lifespans. But this brings with it the challenges of an ageing society, with an estimated 24 million more workers over 55 by 2030.
The EU must find ways to enable older people to stay in work if they so choose, and to enable them to live in comfort and dignity after retirement.
Europe also needs to guarantee security to migrant and mobile workers, who are increasingly vital to the EU economy.

Social dialogue: a productive factor

Far from holding back economic growth, social dialogue boosts innovation and productivity, improving workers' morale and giving them more control over the tasks they perform.

Dialogue between the social partners at European level, information and consultation between management and workforce, and EWCs in cross-border companies are important aspects of the European Social Model.
Policy-makers need to understand that workers' rights help to create a skilled and innovative workforce.

A global responsibility

The European Social Model is an example for the rest of the world of a society based on social justice and solidarity, where economic and social advancement take equal priority, and where decent work and social protection combat poverty and social exclusion. That is why the success of Social Europe is so important not only for European citizens, but also for developing just and fair political systems in other countries.