Progressive Economic Policy for Europe

No Economic Recovery without Social Recovery - Plea for a Social Deal for Europe

by Oliver Röpke

The EU’s marathon summit in Brussels in July 2020 raised high expectations. They were not disappointed: Despite rejection of some of the Commission’s proposals, the volume of funding approved at the meeting – under the multiannual financial framework (MFF) and the Next Generation EU recovery fund – represents a historic paradigm shift. It is a project without parallel in the history of the EU, with one crucial caveat: It lacks a collective vision for a social Europe.

The European trade unions already have such a concept. In May 2020 the Workers’ Group in the European Economic and Social Committee (EESC) published an ambitious Strong, Social, Sustainable and Inclusive Recovery and Reconstruction Plan. As well as laying out short- and medium-term measures for overcoming the economic, social and political crisis, the document outlines a new socio-economic model for Europe.

Social Europe is a precondition for economic recovery

After initial shock and paralysis, the EU responded decisively to the corona crisis. As well as additional credits from the European Investment Bank (EIB), a new, crisis-specific credit line was introduced in the European Stability Mechanism (ESM). At the beginning of April 2020 the Commission also presented its SURE model for funding short-term working and similar measures across the EU. Even at that stage the aspect of solidarity was striking: the Commission will borrow on the financial markets to fund SURE credits. The instrument relies on a construction already used in the European Financial Stability Mechanism (EFSM) during the financial and euro crisis. Article 122 of the Treaty on the Functioning of the European Union (TFEU) permits financial support “in a spirit of solidarity” in response to “exceptional occurrences”. That, it must be said, also points to a clear deficit in the European treaties: solidarity should be a fundamental principle of European politics rather than the absolute exception.

The supreme principle is solidarity

From the trade union perspective an ambitious social agenda is the order of the day: a European framework for good pay and working conditions for all workers, with functioning collective bargaining systems and high standards of participation and co-determination for workers, their representatives and their trade unions. The “post-Covid” economic recovery must go hand in hand with upward social convergence. And these must be simultaneous. After the financial and euro crisis, the Covid-19 pandemic highlights yet again the value of a strong social dialogue especially during times of crisis. While nobody wished for this crisis, it does offer an opening for a fundamental correction. Trade unions and workplace representatives are vital actors in this process: Their place is at the heart of any new “Economic and Social Deal”.

Effectively implement the Social Pillar

The European Pillar of Social Rights forms the basis for a social recovery – but it needs to be implemented in full. EU Jobs and Social Rights Commissioner Nicolas Schmit has already initiated a number of important projects. Now the next concrete steps must be laid out in specific terms in the action plan for implementation of the social pillar that the Commission is currently preparing. The German EU Council Presidency has also incorporated some of the most important social policy demands into its programme. These include a European framework for fair minimum wages and effective minimum income schemes (“Grundsicherung”) in the member states, and a European unemployment reinsurance system.

These demands are supported by the Workers’ Group in the EESC (with concrete proposals) and fundamentally welcomed in statements by the Committee as a whole. They will play a decisive role in deciding whether the EU will finally move towards becoming a social Europe and prove its worth not only as the guardian of the internal market but also – especially in crisis – as the protector of the workers.

Social recovery more pressing than ever

At this juncture it is impossible to predict the medium- and long-term impacts of the Covid-19 pandemic. But the latest assessments suggest that the economic collapse will be considerably deeper than initially expected in spring 2020 – and more unevenly distributed. The repercussions for workers will be correspondingly dramatic. Unemployment is rising across Europe, despite earnest interventions using short-time models. Many workers are having to cope on significantly smaller incomes. This will also be reflected in the at-risk-of-poverty rate. And of course those who were already unemployed before corona will find it even harder to find new work.

So a social recovery is just as urgently needed as the economic recovery. The following three European initiatives now need to be implemented at the European level:

  • A European framework for minimum wages at a high and fair level, to guarantee good work and benefit all workers. Ideally agreed collectively between unions and employers’ organisations, but imposed by legislation if necessary;
  • A European framework for minimum income schemes, placing a duty on all member states to provide adequate basic benefits;
  • European minimum standards for national unemployment insurance systems, which are currently inadequate in many member states (net replacement rate and duration).

“A crisis is an ideal time to raise pay”

The source of this statement is not a handbook for trade union negotiators, but the Financial Times of 12 July 2020. While this might sound provocative for sectors that are fighting for survival, hit hard by massive short-time working and redundancies, it makes real sense in the macro-economic context. The Covid-19 crisis has made it absolutely clear that workers in atypical and precarious employment need special protections. Too often they are excluded from social safety nets that would otherwise cushion loss of income or employment. There is no evidence that branches with low wages and/or precarious employment cope better with the crisis. Quite the contrary in fact, these workers are the first to be affected by massive health risks at work (for example in the meat industry), job losses and inadequate wage-replacement benefits. It is time to end the model based on precarity and low wages once and for all – across the whole EU.

Fair minimum wages are the order of the day – for social and macro-economic reasons

Commission President Ursula von der Leyen’s initiative for “a fair minimum wage” in the EU is currently proceeding under Social Rights Commissioner Schmit. The EESC is naturally part of the consultation process and has prepared recommendations for a possible Commission initiative. Its Opinion does not mince its words: “Ensuring decent minimum wages in all the Member States would help in achieving a number of EU objectives including upward wage convergence, improving social and economic cohesion, eliminating the gender pay gap, improving living and working conditions in general and ensuring a level playing field in the Single Market.” Especially in the crisis, raising minimum wages can also serve an important macro-economic stabilising function.

Ending wage and social dumping requires wage convergence

No-one in the European trade union movement is suggesting a uniform European minimum wage. What we are talking about is binding wage floors at levels that ensure a decent standard of living for workers and their families – whether they are in Germany, Austria, Bulgaria or Spain. It is unacceptable that the closing of wage differentials in central and eastern European has slowed again. A signal of solidarity is also needed towards our colleagues in central/eastern and southern Europe, where collective bargaining systems have often been permanently weakened and minimum wages unilaterally reduced.
As of January 2020 the monthly statutory minimum wage in the member states ranged from 312 euros to 2,142 euros – without delving into significantly larger differences in actual wages. The monthly minimum wage is less than 600 euros in most of the eastern member states. Despite efforts at the EU level (new Posting of Workers Directive, European Labour Authority), combatting cross-border wage and social dumping will require clear upward convergence. So a social Europe requires an initiative for fair minimum wages.

Strengthening collective bargaining is a core issue

Whatever becomes of these initiatives, collective bargaining and union negotiating power must be treated as core issues. The coverage of collective agreements has been declining across Europe for years, with enormous variation between member states. Statutory minimum wages are always the second-best option. It is vital that any European framework has absolutely no negative effects on functioning collective bargaining systems. That means not making the statutory minimum wage a legal requirement in countries with well-functioning collective bargaining systems. Commissioner Schmit has made that promise. It now needs to be codified in law, in order to finally put the calamitous rulings of the European Court of Justice behind us (Laval, Viking, Rüffert, Henry am Zug).

High minimum social standards are essential

Both the Commission and the German Council Presidency have announced concrete plans for a European unemployment reinsurance system. But the macro-economic stabilising function of such an instrument needs to be supplemented by a social policy component. Unlike the SURE instrument, the proposals for unemployment reinsurance should be tied to an initiative for minimum social standards in national unemployment insurance systems. National unemployment insurance provides a safety net for workers in the event of redundancy and offers protection from poverty. At the same time, unemployment benefits automatically function as counter-cyclical stabilisers.

Urgently needed: More upward convergence also in social protection

The European Pillar of Social Rights calls for “adequate unemployment benefits of reasonable duration” in the event of unemployment (item 13). Certain member states are nowhere near that bar; the maximum entitlement in Hungary for example is just ninety days, even for a worker who has paid contributions for many years. There are also enormous differences between member states in the level of benefits (net replacement rate). The German and Austrian trade union confederations (DGB and ÖGB) and the Austrian Chamber of Labour (AK) have therefore prepared a model for introducing such minimum standards via an EU directive, without harmonising the national unemployment insurance systems. The proposal includes a net replacement rate of at least 75 percent, a minimum duration of one year, a minimum coverage rate and a legal entitlement to (re)training in the event of unemployment.

EESC for EU-wide minimum standards for unemployment insurance

The EESC supports these demands and has proposed a concrete model for the incremental introduction of corresponding European standards. It also supports an EU-wide directive to improve standards in the national unemployment insurance systems, in the event that concrete objectives in the scope of the European Semester or a Council recommendation fail to produce tangible improvements. The Commission and also the German Council Presidency should definitely take up these demands when the discussions about basic social protections and EU-wide unemployment reinsurance begin. Here again, there can be no economic recovery without social recovery.

Time to end the prioritisation of market freedoms over fundamental social rights!

We cannot conclude without mentioning another central and fundamental demand of the trade unions (and the social democratic parties): The inherent defects in the EU treaties, which grant precedence to market freedoms over fundamental social rights, must finally be corrected. The struggle for a social Europe and the fight against wage and social dumping cannot be fully successful until a social progress protocol has been anchored in primary law, including the principle that in case of doubt fundamental social rights must take precedence over the economic freedoms of the Single Market. If Commission President von der Leyen maintains her position that treaty amendments are not to be ruled out, this question could surface sooner than one might expect in the scope of the Conference on the Future of Europe. The European trade unions in the European Trade Union Confederation and the Workers’ Group in the EESC will unequivocally reject any treaty amendment without a social progress protocol.

(Translated from the German)

About the Author

Oliver Röpke is President of the Workers’ Group in the European Economic and Social Committee (EESC) and since 2008 head of the European Office of the Austrian Trade Union Confederation (ÖGB) in Brussels.

The views expressed in this article are not necessarily those of Friedrich-Ebert-Stiftung.



Editorial Board

Division for Economic and Social Policy

Dr. Andrä Gärber
Sina Dürrenfeldt
Max Ostermayer
Dr. Robert Philipps
Markus Schreyer

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