Progressive Economic Policy for Europe

Reset EU – Renaissance of a Social Europe?

by Gabriele Bischoff

It’s the convergence, stupid!

“The European social model has already gone,” said ECB President Mario Draghi in 2012 in light of rising youth unemployment across Europe. Commission President Jean-Claude Juncker, by contrast, bubbled superlatives in 2015, claiming a social “Triple-A” for his plans for a European Pillar of Social Rights to guide the next round of Eurozone convergence. Improving working and living conditions is one of the overarching objectives of the EU treaties, and social Europe is closely bound up with the concept of upward convergence.

Commission President Ursula von der Leyen has been banging the same drum. Her application speech to the European Parliament in July 2019 outlined her programme: a framework for minimum wages in Europe, an EU-wide unemployment reinsurance scheme and a “European child guarantee” to combat child poverty and improve participation for disadvantaged children.

Just eight months later the European Union found itself facing the greatest economic and social challenge since its founding. We can safely assume that the economic impact and social and political repercussions of the Covid-19 pandemic will lead to deep changes in the EU. The question is, will the Union press ahead with concrete projects to bring about economic and social consolidation? Or will it fall back into old ways and prioritise economic competitiveness above all else? The recovery plan for Europe – Next Generation EU – gives grounds to hope that the EU is seeking both economic and social consolidation. Might this even open a window of opportunity to replace the austerity policies of late with a new social policy agenda?

EU standards for living wages and social security – is that feasible?

The motto of the current German Council Presidency – “Together for Europe’s recovery” – focuses on coping with the Covid-19 pandemic and tackling the major challenges of the era. The objective is to make Europe stronger, fairer and more sustainable. The trio presidency of Germany, Portugal and Slovenia has also set itself the goal of promoting long-term upward convergence in the EU and strengthening social cohesion.

The consequences of the corona crisis will dominate the political agenda. The Commission has already adopted a proposal for a permanent unemployment reinsurance scheme, along with measures to combat youth unemployment, which the latest figures show rising to worrying levels in certain countries.

Upward convergence through fairer wages

Living wages are central to the fight against social and financial inequality in EU countries, and political action is more than overdue. A survey in 2016 found that 52.4 percent of EU citizens (EU28) had difficulty making ends meet. After the second-stage consultation the trade unions gave majority support to a minimum wage directive and called on the Commission to act. Most of the employers’ organisations remain critical of the initiative.

The Commission published a proposal for securing minimum standards for legal minimum living wages on 28 October 2020. This represents a quantum leap for convergence. Unfortunately, the Commission’s proposal does not demand a level of at least 60 percent of the respective national median wage. In many member states – not least in Germany – that would have meant a significant increase compared to the current level of minimum wage. On a positive note, the Commission’s proposal includes measures to strengthen collective bargaining.

The Commission’s proposal does not go far enough. The European Parliament has worked on improvements and formed a broad coalition for legal minimum wages in the EU. This will be necessary to receive the required support in the Council. The Scandinavian countries expect guarantees to protect their well-functioning collective bargaining systems and preserve free collective bargaining. The European Parliament has already called for a framework of this kind for minimum wages and asked the Commission to act.

A permanent instrument for future crises

The debate about European unemployment insurance is certainly not new. But the context of pandemic response offers an opportunity to take the first steps towards establishing such a stabiliser. The EU’s temporary SURE instrument grants member states soft loans to help them cope with the sudden increases in public spending required to preserve employment. The next step would be to make good on the Commission President’s promise to create a real unemployment reinsurance scheme.

Even if SURE is a good first step, the programme leaves out too many workers, especially those on temporary contracts. In many countries, this especially affects young people. It is therefore important to take the next step and create a real, comprehensive unemployment reinsurance scheme.

A framework for adequate minimum income in all member states

The objective of the 2020 Strategy was to dispel the threat of poverty and social exclusion for 20 million people in the EU. That target was clearly missed. Too many EU citizens are currently inadequately protected. In many member states deficits affect the adequacy and coverage of the national safety net. The level of support is often insufficient, and particular groups such as young people, homeless people, asylum seekers and migrants are often excluded. A study for the European Parliament reveals that the differences in minimum social security remain very large: Almost 119 million people in the European Union (23.7 percent of the population) are at risk of poverty or social exclusion.

The European Anti-Poverty Network deserves much of the credit for putting the project “European Minimum Income Network” on the EU’s agenda and campaigning for an EU framework directive to ensure that adequate and accessible minimum social security systems are available everywhere in the Union. At the same time, however, the Commission is proceeding much more cautiously than on the question of minimum wages. Currently it sees no legal basis for the proposal.

Many member states depend on mobile employees

Mobility between EU states has grown steadily since the introduction of full freedom of movement of labour for EU citizens in the 1970s. More than 17 million EU citizens currently work in a state other than their nationality (4.2 percent of the total working population in 2018); 1.5 million are “frontier workers” who commute daily or weekly to work in a different member state. The corona crisis has demonstrated how heavily economies depend on mobile employees, for example in agriculture, construction and healthcare. Paradoxically these are largely sectors where pay is worst and exploitation most intense.

Certain employers exploit cross-border mobility to undercut legal standards and pay using chain subcontracting, posting abuse and clandestine employment. The complexity and opacity of these mechanisms hampers enforcement. The abuses in the European labour market have increased the political pressure to a point where regulatory action had to be taken at the EU level. In the current and past legislative terms, this has led to important legislative initiatives such as the reform of the Posting of Workers Directive and the Mobility Package which ensures that the host country’s pay and working conditions apply to all posted workers.

A number of regulatory loopholes remain in the EU and in the member states, however, as demonstrated by the scandalous treatment of the mostly eastern European contractors at Tönnies and other meat factories exposed by Covid-19 outbreaks and the situation of seasonal labourers in European agriculture. They urgently need to be closed.

A European Parliament Resolution in June 2020 emphasised how the minimum wage differential between the member states (from €12 in Luxembourg to €2 in Bulgaria) and the lack of convergence endanger European stability. Low wages in southern and eastern Europe function as a push factor; in many cases migration is the only perspective for earning a living. While these member states struggle with the effects of brain drain, destination countries suffer downward pressure on wages. This endangers not only the acceptance of freedom of movement in Europe but also confidence in the European project and its promise of prosperity.

Social minimum standards for economic stabilisation and social cohesion

Upward convergence on wages paired with fair rules for mobility tackles the problem at the roots and can create a balance between the interests of economic actors and the needs of workers. Reform of the Directive on Posting of Workers was an important first step. Now the Regulation on the Coordination of Social Security Systems must finally also be reformed.

The so-called Regulation 883 is the heart of European social policy and was the first social regulation at all. It is based on the premise that social security for mobile workers must be ensured despite differences between national systems. It contains rules for coordinating social insurance entitlements that mobile workers acquire in different countries in the event of illness, unemployment or retirement. The objective of reform is to reduce the risk of loss of benefits, avoid double social insurance payments, and combat abuses associated with posting. Reform of Regulation 883 would represent a quantum leap in a period of (protracted) crisis and would demonstrate that the European social model definitely has a future.

No European future without a proper social union

The proposed Conference on the Future of Europe offers an opportunity to move beyond crisis mode and involve the EU’s citizens in shaping its future. The core concern is to strengthen Europe’s capacity for action and to create a more democratic, more social and more sustainable Union. The debate about the social union is a part of that.

For years, the European trade unions have been calling for treaty amendments, specifically a social progress clause to ensure that fundamental social rights are (finally) placed on an equal footing with economic liberties. In cases of conflict the fundamental social rights should enjoy precedence. Progressive parties support such a treaty amendment. In view of the existing problems amendments to the European treaties should not be excluded. We must also hope that the insight that initiatives to reduce inequality, for example through a European framework for minimum wages and incomes, “have better chances of success if countries act in concert” continues to gain ground.

The reset in European social policy occurred at the beginning of this legislative term. Now it is time to grasp the opportunity and progress towards a real upwards convergence with a new social policy agenda.

(Translated from the German)

About the Author

Gabriele Bischoff  is Member of the European Parliament since July 2019, Vice-Chair of the Committee on Constitutional Affairs (AFCO), Member of the Committee on Employment and Social Affairs (EMPL) and substitute Member of the Committee on Economic and Monetary Affairs (ECON).

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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