The Social Charter HR Management

In terms of human resource management the Social Charter is the key indicator of EU legislation, as its proposals will have considerable impact on employee relations at international, national and local levels.

  • Origins and development

Much of the Social Charter is an amalgam and extension of the articles embodied in the various treaties that jointly created the EU: the Treaty of Paris, which set up the ECSC in 1952, and the Treaties of Rome and Paris, which created the EEC and EURATOM respectively in 1957. At the Paris summit in 1972 it was agreed that much importance should be attachedto reducing disparities of living conditions and improving the quality of life within the community.

This resulted in the creation of an ‘Action Programme’ in 1974, which became committed to the promotion of employment, upward harmonisation of living conditions, and the increased involvement of management and labour in the decisionmaking processes of organisations. This was to be achieved by coordinating provisions in the treaties with new initiatives. A number of economic problems were besetting the community, and the reaction by member states at the time was, at best, mixed. In this period of ‘Europessimism’, however, it can be argued that incremental agreements, particularly in areas such as equal opportunities, witnessed the foundation of what is still the most effective part of legislation embodied in the Social Charter (Lockhart and Brewster, 1992).

A revival of interest in the ‘social dimension’ occurred in the 1980s as a result of the debate over, and the subsequent agreement to, the creation of a single European market (SEM) under the Single European Act 1987. The creation of a unified market across 12 European states would have deep implications for the labour market and employment relationships, and therefore under the influence of Jacques Delors, the President of the Commission (1985–95), it was proposed that policies that addressed employment relations issues should be created. In December 1989 the Social Charter was finally adopted by the Council of Ministers (with the exception of the UK), and a Social Action Programme was set up to implement it. The UK eventually signed up to the Social Charter in 1997, when New Labour came to power.

The Social Charter provisions

The Social Charter states that:

The 12 main provisions are as follows:

  • Free movement. All workers have the right to free movement within the Union.
  • Employment and remuneration. All employment should be fairly remunerated. Workers should have an equitable wage – that is, a wage sufficient to enable them to have a decent standard of living (often interpreted as a minimum wage). Workers subject to atypical terms of employment (such as part-time work) should benefit from an equitable reference wage – that is, a wage in line with full-time employee remuneration.
  • Improvement of living and working conditions. The process must result from an approximation of conditions, as regards, in particular, the duration and organization of working time and forms of employment. The procedure must cover such aspects of employment as collective redundancies and bankruptcies. Every worker must have a weekly rest period, annual paid leave, and a contract of employment.
  • Social protection. Every worker in the Union shall have a right to adequate social protection and shall, regardless of status, enjoy an adequate level of social security benefits. Persons outside the labour market (those unable to work, e.g. retired, ill) must receive sufficient resources and social assistance in keeping with their particular situation.
  • Freedom of association and collective bargaining. Employers and employees have the right of association (that is, employers’ associations and trade unions) to protect their social and economic interests. There is also the right not to join. There shall be the right to negotiate and conclude collective agreements, and the right to collective action (such as strikes and lock-outs), subject to national legislation.
  • Vocational training. Every worker must have access to and receive vocational training, with no discrimination on grounds of nationality.
  • Equal treatment for men and women. This applies in particular in regard to access to employment, remuneration, working conditions, social protection, educational training and career development.
  • Information, consultation and participation of workers. These must be developed along appropriate lines, taking account of the practices in force in the various member states. This shall apply especially in companies or groups of companies with establishments in several member states. These processes must be implemented: when technological change occurs that has major implications for the workforce; in connection with restructuring operations or mergers; in cases of collective redundancy; and when trans-frontier workers in particular are affected by the employment policies of the undertaking where they are employed.
  • Health protection and safety in the workplace. Every worker must enjoy satisfactory health and safety conditions in the workplace. Appropriate measures must be taken to achieve further harmonisation of conditions in this area.
  • Protection of children and adolescents in employment. The minimum employment age must not be lower than school-leaving age, and neither of these can be lower than The Social Charter 645 the completion of the internal market must offer improvements in the social field for workers of the European Community, especially in terms of freedom of movement, living and working conditions, health and safety at work, social protection education and training.

Whereas, in order to ensure equal treatment, it is important to combat every form of discrimination, including discrimination on grounds of sex, colour, race, opinions and eliefs, and whereas in a spirit of solidarity it is important to combat social exclusion. 15 years of age. The duration of work must be limited, and night work prohibited under 18 years of age. After compulsory education young people must be entitled to receive initial vocational training of reasonable duration.

  • Elderly persons. Every worker must, at the time of retirement, be able to enjoy resources affording him or her a decent standard of living, and those not entitled to a pension must be provided for.
  • Disabled persons. All disabled people must be entitled to additional measures aimed at improving their social and professional integration. These measures must address vocational training, ergonomics, accessibility, mobility, means of transport and housing.
  • Difficulties of implementation and interpretation

The implementation of the Social Charter has proved to be more controversial than the debate over what it should contain, although these processes are inextricably intertwined (Hughes, 1991). Implementation hinges on the influence and interpretations of:

  • political parties and groupings;
  • national governments;
  • employers and employee bodies;
  • multinational corporations;
  • the economic and political climate;
  • the ambiguities and imprecisions of Charter policies.

Deciding on the provisions of the Social Charter was, and still is, a difficult process given the varied opinions within the EU in terms of political and economic ideology. Margaret Thatcher’s Conservative government was the most prominent and vocal opponent. Given her neo-liberalist position she was never happy with the Social Charter per se, and raised many objections to proposals, ultimately refusing to ratify it in 1989 – the UK being the only government of the 12 member states not to do so.

John Major, her successor, continued this policy and demanded that the Maastricht Treaty should have a separate protocol for the Social Chapter, as the Social Charter is also called, upon which member states vote separately. However, Tony Blair’s Labour government has completely reversed this position: it has subscribed to all the provisions of the Social Charter, and finally ratified the treaty on behalf of the UK when elected in 1997.

Nevertheless, Mr Blair has continued to advocate many of the deregulatory policies of the previous Conservative administrations. The process of amendment and change is still continuing, and past and present efforts to please Margaret Thatcher and other critics have meant that the original proposals from the mid-1980s have been watered down, some considerably.

The implementation of the Charter under the Social Action Programme has also been significantly revised, and the biting recession of the early 1990s had another slowing effect on its implementation. Thus Jacques Delors, and other parties of the opinion that a strong social dimension is an important part of the Single European Market, have had to revise their views on the timetable for implementation. It is now agreed, even by its strongest advocates, that the full Charter will take a very long time to complete, if at all (Piachaud, 1991; Goodhart, 1992; Milne, 1992b.)

Although a great deal of the Social Action Programme has been accepted, the consultation process has ensured that many of the original proposals have been diluted, and some have been blocked entirely. Even if the Social Charter had been accepted in principle by all member states, interpretation of the directives is problematic. Directives rather than regulations were deliberately used in framing the Charter in order to allow for national differences and the accommodation of existing laws.

As one commentator accurately notes, ‘responsibilities for such implementation often rest with national governments who have a reputation for giving variable priority both to implementation and enforcement’(Butt Philips, 1988). In addition, some of the directives are so vague that they are open to wide interpretation. The provision for ‘information, consultation and participation of the workforce’ has many varied interpretations, ranging from works councils in Germany, Belgium and the Netherlands to multifarious practices in the UK, covering schemes as representative as works councils to organisations that give the workforce the bare minimum of information.

Yet the CBI claimed that British organisations already conform adequately to the provisions of this directive. Another directive, the Transfer of Undertakings (Protection of Employment) or TUPE, has caused considerable controversy over interpretation in the UK. This directive (2001/23/EC) protects employees’ pay and conditions when an undertaking is transferred as, for example, when privatisation of government and local government services takes place. ‘If the directive applies a successful bidder must take over staff on their existing terms and conditions which will reduce scope for saving through lower pay or staff cuts’ (Willman, 1993).

This would in effect UK governments under Major and Thatcher argued that the directive did not apply to contracting out, but the European Court of Justice has forced the government to amend the existing law that covers this situation, the new wording of which, trade unions believe, extends protection to cover many public sector and former public sector activities. There is also the problem of enforcement.

The EU has no inspectorate, and relies heavily on member states’ ability and willingness to enforce directives, which, as we have already noted, can vary widely. The most common way is through legal action by individuals or groups via the Commission. These actions take time to investigate, prepare and process through the Court of Justice. Leaving the enforcement to individuals or groups often means that such contraventions of directives depend on the strength of mind of individuals and groups in bringing the action, who may be subject to pressures not to protest, particularly if it is against their employer.

However, as Singh (1999) states: ‘there is little doubt that the European Court of Justice continues to give rulings in employment law cases which have a profound impact on national legal systems’.

  • Labour market trends in Europe

Along with the difficulties of implementing the social agenda are the problems associated with a constantly changing labour market. As we have seen in the previous chapter on international HRM, there have been numerous influences on the way that economies and organisations are developing, thanks to – among other things – the increasing intensification of world competition for global markets and the impact of new technology.

In addition, demographic changes have witnessed declining birth and falling mortality rates with the consequent effect that the EU population is ageing and so too therefore is the workforce. This has considerable implications for future labour supply. Will there be put an end to private contractors depressing their pay and conditions to lower bid costs when competing for contracts against the public sector. Contractors are increasingly jittery about the lack of clarity and are reluctant to bid for contracts without knowing the extent of their liabilities. (Weston, 1993) enough young people to fill employment positions in the future?

This looks not to be a problem at present, given the high percentage of youth unemployment across Europe. Another effect of these changing demographics is that social welfare measures such as pensions and health will take up increasing resources of the member states. There have also been significant sectoral shifts over the past 20 years, with a continuing decline in agriculture and the old ‘smoke stack’ industries such as coal, iron and steel, textiles, shipbuilding and traditional engineering.

This in turn has caused high unemployment in regions where these industries once thrived. In contrast, new ‘high tech’ industries (such as computer technology and communications) have arisen, along with a considerable increase in financial services and the service sector generally. The demand for the old traditional skills has thus been in deep decline, while demand for skills relevant to the newly predominant sectors has witnessed a steep rise in this ‘new European economy,’ as this trend has been recently dubbed. Technology has also reduced the demand for unskilled and semi-skilled workers as many of these jobs become automated.

In attempts to maintain competitiveness, employers have increasingly introduced new work forms and contracts of employment. Flexibility, not only in job functions but in numerical terms and hours of work, has witnessed a considerable increase across Europe. Atypical work has also increased significantly, with more part-time, short- and fixed-term and temporary contracts.
There have also been increasing levels of unemployment among women, the young and ethnic minorities, as well as increases in the long-term unemployed, especially in depressed regions and among workers aged over 50.

This general picture is complex and while, for example, there is a rise in female unemployment there has also been a percentage rise in women participating in the labour market. But as some observers have pointed out, women are much more likely to be employed in less well-paid and less secure jobs than men (Rees, 1998). The picture is also complicated by the variations between EU regions. The La Dorsale regions (London, Belgium, Frankfurt, Luxembourg and Milan), the East–West core regions (Paris, Frankfurt and Berlin) and the Arc Mediterranean (Barcelona, Marseilles and Rome) are characterised by high growth and low unemployment.

By contrast, low growth and high unemployment zones are on the periphery of the EU: for example, most of the UK excluding the South East, Midlands and East Anglia, Southern Italy, Greece and Southern Spain (Sapsford et al., 1999). The European Social Fund has tried to compensate for these divergences in the past by directing funds to those areas with particularly high unemployment rates, especially among the long-term unemployed.

  • The regulation–deregulation debate

These problems and how to resolve them are part of a wider debate that emerged strongly in the 1980s, rooted in the differing ideological viewpoints concerning degrees of regulation of labour markets. Essentially, two main opinions predominate: the deregulationists or neo-liberals, and the regulationists or interventionists. These two stances are a polarised simplification of varied political positions.

There are prominent trade unionists who view some of the provisions as undermining collective bargaining by a greater emphasis on individual rights and consultative arrangements (Gospel, 1992). There are some employers who believe that the full adoption of the Social Charter will bring order and the advantage of homogeneity to a European-wide market. Nevertheless, the argument to date has been based on the regulatory and deregulatory schools and median positions.

  • The deregulationists or neo-liberal school

The minimalist or deregulatory school was strongly advocated by Margaret Thatcher in the 1980s and John Major in the 1990s, as well as many employer groups and conservative or right-wing political parties. It posited the view that government and legislative interference prevents the efficient operation of the labour market. In political terms the minimalists see the Social Charter as a ‘socialists’ charter’ and Delors, its past champion, as an ‘old-fashioned bureaucratic socialist’. Deregulationists believe that ‘prosperity, progress and liberty presuppose economic freedom’ (Marsland, 1991). Economic freedom means freedom from any regulatory influences that might hinder the industrial and commercial competitive process and therefore the operation of the market.

In economic terms, the neo-liberals see the provisions of the Charter as creating the conditions for ‘Eurosclerosis’, a hardening of the free flow of labour-market arteries. The Eurosclerosis view emanated from the 1970s and 1980s, when the EU states were perceived as doing less well economically than the United States. ‘Reaganomics’ (the policies of Ronald Reagan, US Republican President 1980–88) argued that abolishing or moderating regulatory restrictions had freed up the labour market and had lowered unemployment by enabling the creation of more jobs. ‘Thatcherism’ (the policies of British Conservative Prime Minister Margaret Thatcher, 1979–91) had attempted similar deregulatory measures in the UK with comparable success in the 1980s, or so claimed her supporters.

Such Social Charter proposals as a minimum wage would create a rigid high-wage economy with small differentials where workers would be priced out of a job. ‘Furthermore, legally based labour rights and employment protection schemes have gone too far, leading to high labour costs which in turn cause redundancies and discourage hiring (Teague, 1991: 4). The cost to employers of implementing this and other provisions would have the effect of decreasing jobs and slowing the labour market.

For example, the UK Conservative government claimed that 100 000 jobs would be lost in Britain in implementing maternity rights for women and safeguards for working hours and part-time working contained in the Charter. Other critics believe that the imposition of a Europe-wide Social Charter would not benefit those for whom it was intended – the poorer workers (Addison and Siebert, 1991, 1992). They argue that ‘it will not succeed in making the desired transfer to disadvantaged groups. Since mandated benefits work at the level of the firm, rather than at the level of the tax transfer system, firms will tend to make countervailing moves which frustrate the redistributive aims of the policy’ (Addison and Siebert, 1992: 511).

They also claim that the unskilled will lose out as a result of better safety protection because ‘they were the ones doing the unsafe jobs for high pay; now the unsafe jobs have been removed, wages have been reduced but the skill gap remains’. In addition, the attempts to impose uniformity on nations with diverse systems of social legislation will impede competition . Most minimalists do support some of the measures in the Social Charter to varying degrees, namely:

  • freedom of movement of workers;
  • provision of training;
  • harmonisation of qualifications;
  • pensions to become portable;
  • help to the less favoured regions through the Social Fund;
  • schemes to help the long-term unemployed.

They remain, however, strictly against measures to regulate the labour market, which they believe should be made freer by clipping the power of trade unions, reducing the government role in industrial relations, and increasing forms of flexibility.

  • The regulationists

The regulationist or interventionist position is generally held by those who believe that if the single European market is to create a free market in terms of a competitive ‘level playing field’ for goods, industry and services, then the same principle should apply to the social dimension to prevent the exploitation of various work groups or giving one organisation or economy an advantage over another in the naked drive towards profit.

Unregulated markets would lead to poorer countries and employers holding down ‘wages and social benefits to limit imports from richer member states and at the same time increase their exports to those countries. Such a strategy would amount to exporting domestic unemployment . . . Such action would inevitably force richer countries to check real wage growth and streamline existing labour market regulations triggering a price and cost reducing war inside the community (Teague, 1991: 7).

From this would ensue redundancies and high unemployment. This is one version of what has come to be called social dumping. A second and concomitant view of social dumping envisages
An example of this was the exposure by a television documentary of the high incidence of illegal child labour in Portugal, which had the effect of removing manufacturing jobs from the UK shoe industry as labour costs were so much cheaper in Portugal. Consequently, many British companies choose to manufacture there rather than in the UK (Twenty Twenty Television, 1993).

Another example seized on by the regulationists to illustrate their argument was the decision by the Hoover Company to transfer its production facilities from Dijon, France to Cambuslang, near Glasgow, Scotland. Hoover president, William Foust, claimed that the prime motive for moving the company’s whole production facilities was that nonwage labour costs added only 10 per cent to the cost of employing a worker in Scotland as opposed to 45 per cent in France (Goodhart, 1993).

A further example is Bowater, the UK-based packaging group, which shifted production of some of its cosmetic packaging to the UK from Italy and France. ‘The company has calculated national ratios for average employment costs at its plants, from managing director down to apprentice. If the UK is 100,’ says Michael Hartnell, Bowater’s Finance Director, ‘Italy is 130, France 140 and Germany 170’ (Jackson, 1993).

The regulationists claim that such practices play off one national workforce against another in an attempt to bid down labour costs. The deregulationists point out that companies will be attracted by cheap labour costs because they reflect maximum efficiency in terms of productivity. However, despite the examples referred to above, by the end of the 1990s there was not a great deal of evidence that social dumping is wide- spread in Europe. There have been more significant shifts globally from Europe and North America to Asian and South American states, thus reinforcing the view that Europe is part of a global economy.

Some also claim that these ideological tensions are reflected in the differences between the Commission, served with the responsibility of implementing the social agenda, and the European Parliament, representative of the national interests of member states (Towers and Terry, 1999). By the latter part of the 1990s the power balance in many European states and in the European Parliament had shifted to the centre left as conservative and right-wing governments were replaced by parties of a more social democratic orientation.

Consequently there was a re-emphasis on the idea of social partnership and what the Blair government in the UK has called the ‘Third Way’, a ‘position between the Old Left and the New Right’(Pierson et al., 1999). Thus while social concerns and welfare measures have been revisited, it is in accordance with the need to create proactive labour markets that do not create barriers to entrepreneurship and job creation. This emphasison creating a social dialogue between the social partners of the EU (trade unions, employer associations, governments and EU agencies) led, through a series of meetings, to the Amsterdam Treaty.

  • The Amsterdam Treaty, 1997

The Amsterdam Treaty was an attempt to prepare the EU labour force to deal with a world where work design, organisational forms and labour markets are constantly changing and, most importantly, in the process to decrease levels of unemployment. By the mid-1990s the social affairs agenda of the EU was in need of a fresh impetus. As Padraig Flynn (Commissioner for Employment, Industrial Relations and Social Affairs, 1995–99) stated:

White Papers were published, and a number of meetings of member states were held at the instigation of Flynn to hammer out a social affairs strategy in an attempt to movethe process forward. Major mistakes were pinpointed in past attempts to implement social policy. First, there was an absence of coordinated economic policies, which have failed to keep pace with European integration.

Governments have operated independently of one another and so fiscal and monetary policies were not integrated at EU level. This was sometimes damaging in social and economic terms. Second, there has been an inability to modernise the labour market to keep pace with the changing conditions of modern economies. There was a number of moribund proposals and a general lack of interest in the Member States in dynamically pursuing the social agenda. In addition, DGV (Directorate-General V for Employment, Industrial Relations and Social Affairs) badly needed to improve its image.

In far too many instances, there was too much emphasis on drawing down budget funds rather than making effective use of them. (European Commission, 1999a: 3) The response to the first mistake was to establish European Monetary Union (EMU), establishing convergence and coordination of economic policies, in order to prevent fluctuations in exchange rates and reduce shocks to the European economy.

The response to the second problem was to make reduction of unemployment and the generation of new employment opportunities an explicit goal of the EU by giving them the status of an ‘issue of common concern’. The Amsterdam Treaty ‘constitutionalised’ employment issues, that is, brought them within the sphere of EU competence, by including employment as a separate Title within the Consolidated European Treaty, thus allowing the formulation of a European Employment Strategy (EES). The general aims of the EES are:

  • to create a realistic strategy for social affairs;
  • to make the process of convergence of social policy more effective across the EU;
  • to have more effective monitoring based on national action plans with specific objectives and targets;
  • to place emphasis on an integrated approach ‘across a number of policy fields instead of isolated measures and “quick fixes’’’ (European Comission, 1999a: 7).

The four pillars upon which this new strategy is based are designed ultimately to provide solutions to the high levels of unemployment among the young, ethnic minorities, women and the long-term unemployed as well as the unemployed in general by preparing people for economic and labour market changes. These pillars are:

  • Employability. This is concerned with investment in human resources within a new active policy: how to cover the skills gap in Europe and create attachments to the world of work for the young and long-term unemployed and other groups who are less competitive in the labour market so that they do not drift into exclusion. Equally important is the enhancement of the skills and motivation of people in order to deal with the rapidly changing world of work, and to create in turn successful industries and a successful EU economy. Emphasis is placed on active rather than passive support.
  • Adaptability. This is concerned with how to strengthen the capacity of workers to meet the challenges of change and how to change the organisation of work in such a way that structural adjustment can be managed and competitiveness maintained. This means also investment in lifelong learning, and reforming contractual frameworks to take into account new emerging work forms, but maintain the right balance between flexibility for enterprises and security for workers.
  • Entrepreneurship. This is concerned with how to create a new entrepreneurial culture and spirit in Europe by encouraging self-employment, cutting red tape, reforming taxation systems, and identifying new sources of jobs, especially at local level and in the social economy. This encapsulates a series of measures to make it easier to start and run a business, to develop new jobs, and tap the employment potential of the information society.
  • Equal opportunities. This is concerned with how to create conditions where men and women have equal responsibility and opportunities in family and working life, and how to respond to the demographic challenges that require us to maintain conditions of growth through high female participation in the labour market.
  • The Lisbon Summit and the Stockholm Council

The Lisbon Summit in 2000 set a strategic target for the EU to become the world’s leading ‘knowledge economy’ by 2010. It also identified the key conditions for fulfilling this goal as being:

  • upgrading of skills;
  • participation in lifelong learning;
  • gender equality;
  • promotion of high-quality jobs.

Underlying all of these was the key goal of increasing the rate of employment across the EU. Raising the employment rate was seen to be crucial to both the EES and the Lisbon Strategy by stimulating more rapid economic growth and enabling the European social model to be maintained by providing a sounder basis for financing pension and other social welfare provisions (Goetschy, 2002).

This led to the Lisbon Summit marking a new stage in the development of the EES in that for the first time the Council of Ministers set specific employment targets for member states to achieve by 2010. Among the most important were that 70 per cent of the working-age population of the EU should be in employment by 2010, including 60 per cent of working-age women. In 2001 the Stockholm Council confirmed the Lisbon employment targets but added intermediate targets to be achieved by 2005 – an overall employment rate of 67 per cent and 57 per cent for women – and a new requirement to raise the employment rate for older workers to 50 per cent by 2010.

This reflected the fact that the employment rate among the prime working-age group, i.e. 25–55-year-olds, is already 77 percent (European Commission, 2002: 173). Therefore it is perceived that there is more scope for increasing the employment rate among women and older people, since on the basis of figures for 2001 this is currently low at 38.5 percent and 54.9 per cent respectively (European Commission, 2002: 173).

These are ambitious targets. The overall employment rate fell during the recession of the early 1990s and although it recovered from 1995 onwards, it was at the same level in 1999 as it had been in 1991 – just over 62 per cent. The employment rate for people aged 55–64 followed a similar pattern and was only 1.5 percentage points higher in 2001 than it had been in 1991. Employment among women has shown stronger growth, from 50.2 percent in 1991 to 54.9 per cent in 2001 (European Commission, 2002: 173).

In order to achieve these targets, policy has not only to provide incentives for unemployed workers to rejoin the labour market but also to encourage those already in work not to withdraw from it, especially women and older workers who are more likely to do so. According to Goetschy (2002), this has led to a growing focus on the need to improve the quality as well as the quantity of jobs, since ‘(t)he decision to remain in the labour market depends very much on the quality of work...’.

  • The European employment strategy: key policy issues
  • Unemployment and social policy

During the 1990s increasing importance was attached to reducing unemployment and increasing the EU’s capacity to create jobs. The Commission produced a White Paper on growth, competitiveness and employment in 1993, which ‘focused on training, flexibility in the labour market and work reorganisation’. In 1994 the main business of the Essen summit was how to reduce unemployment and create more jobs.

Significantly, its recommendations included reducing the non-wage costs of employment such as social security charges and, implicitly, costs of redundancy (Gill et al., 1999: 315). This thinking subsequently informed the employment chapter of the Amsterdam Treaty of 1997, which defined the current employment strategy of the Union. The main aim of the treaty was to deal with unemployment not just by advocating welfare support and funding but actively closing the gap between job vacancies and the unemployed. Unemployment in the EU has compared unfavourably with the major economies and the G7 average, as Table illustrates.

These figures clearly indicate that the combined EU economies have been less successful in tackling unemployment than the USA, Japan and the G7 nations, and critics of regulationism have pointed to the better performance of economies such as the USA and UK. They strongly advocate deregulationist policies in order to facilitate job creation and bring unemployment down.
The question of what approaches to take to tackle unemployment has divided the social democratic governments that came to power in the EU in the 1990s.

The European Employment Strategy represents a significant development in this respect in that, through the open method of coordination, it sets out a common set of strategic goals for member states while allowing for national differences in the policy approaches that are designed to achieve them. In particular, it places considerable emphasis on the need for more flexibility with respect to types of employment contract and the organization of work and working hours, and on the need to reduce the non-wage costs of employment to employers. Three main issues can be identified in discussions of the wider significance of the employment strategy for the future of the social policy within the EU.

Firstly, the strategy has been seen as a reorientation of the ‘social Europe’ project since the 1989 Social Charter. This involves moving away from a preoccupation with workers’ rights in employment and instead prioritising the need to reduce unemployment (Gill et al., 1999). This shift reflects the influence of those who see certain aspects of the existing framework of employment rights and social protections within the member states as contributing to unemployment and hindering the creation of jobs (see European Commission, 1999b: 20).

Unemployment in the EU and the major economies (percentages)

Unemployment in the EU and the major economies (percentages)

The second point concerns how far these changes amount to a long–term programme of labour market deregulation and convergence towards the US model of social policy, based on economic liberalism and individualism and the pursuit of labour market ‘flexibility’. Certainly the Commission does not see labour flexibility as being in competition with labour market regulation per se.

Thus, when discussing the need for member states to create ‘the conditions in which the flexible firm can exist’, it advocates ‘reforming, where necessary, the rules governing contractual relationships’ between employer and employee. But it goes on to say, ‘This does not mean deregulating labour markets but permitting the existence of various types of work contract, all on an equal footing, with none offering particular advantages over any other’ (European Commission, 1999b: 20).

This offers the prospect of regulations to ensure that ‘flexible workers’ share the same rights in employment as ‘standard’ workers. An example of this is the 2002 Temporary Workers Directive. This requires member states to remove ‘unnecessary’ political and bureaucratic obstacles to the wider use of temporary agency workers, but also states that agency temps should not be employed on worse terms and conditions than they would be if employed directly by the organisation using their services.

In the light of this, some analysts have suggested that we should not interpret the changes as a simple move towards deregulation of labour markets and society. Rather than a straightforward move to deregulation, analysts have observed an attempt at reregulation of labour markets and society (Gill et al., 1999). This means changing the form of regulation. Indeed, there may be more state intervention in some areas, such as training, to improve economic performance and compensate for market failure.

On the other hand, others have argued that pressures for deregulation have been mounting within the EU for some time. Social protection and employment rights are under pressure from European competition law and from the perceived need to reduce costs in order to sustain international competitiveness (Barnard and Deakin, 1998). Such pressures appear to be reflected in the bias of most National Action Plans towards the ‘employability’ and ‘entrepreneurship’ pillars, with much less being done to address issues of ‘adaptability’ and ‘gender equality’ (Goetschy, 2002: 408).

Thirdly, the strategy has been seen as redefining European social policy increasingly in terms of employment policy. This redefinition has been described as a shift away from the traditional view of the welfare state in which social policy and welfare can be seen as independent of the economy (Pierson et al., 1998; Barnard and Deakin, 1998). In the traditional view, social rights and social protection are seen to be desirable in themselves and tend to be based on a redistributive ethic.

That is, taxation of the better off should finance social benefits for the worse off as well as paying for communal services such as health, education and pensions. Social rights and social protection may aid economic performance, but this is not their main justification. According to a number of analysts (Pierson et al., 1998; Barnard and Deakin, 1998; Standing, 1999), the employment strategy of the EU involves a significant move away from this traditional idea of the welfare state.

It replaces it with the concept of the ‘workfare state’, in which social policy is subsumed within, and subordinated to, the needs of the competitive economy. Rather than emphasising redistribution of income and the provision of tax-financed benefits to support the disadvantaged in society, the workfare state emphasises policies aimed at equipping and encouraging and, if need be, forcing disadvantaged individuals to be active producers, either as employees or as selfemployed entrepreneurs.

The effects of such a reorientation of social policy at the EU level are difficult to calculate, since historically the EU has had little impact on welfare state policy at national level. If member states should retain a traditional concept of the welfare state, this will limit the impact of the change in EU policy. However, it seems to be the case that the reorientation of social policy at EU level is, in part at least, a reflection of and a response to similar reorientations within the member states.

Since the 1980s there has been a growing tendency among member states to limit their financial obligations to their citizens, especially the less well off. This is reflected in reductions in the relative value of minimum wages, social security benefits and pensions by cutting the link with average earnings (Standing, 1999). Therefore there seems to be a strong case for arguing that EU employment policy reflects the growing pressures for economic liberalization and labour market flexibility that have been manifesting themselves on a global scale for some time. European Monetary Union may intensify these pressures.

  • European Monetary Union

The possible adverse effects of EMU on employment policy have caused these two issues to rise to the top of the EU agenda. In general, two positions have been taken: that of the optimists, and that of the pessimists. The third stage of EMU, leading to full monetary union, was completed in 1998 with 11 of the 15 member countries joining. Convergence criteria required participating member states to preserve price inflation within certain limits, to restrict national debt to 60 percent of gross domestic product (GDP), and to confine budget deficits to no more than 3 per cent of GDP.

Optimists see this as another opportunity for further convergence and harmonisation of economic and social policy in the wake of the single European market of 1992 and in the spirit of the Amsterdam Treaty. Pessimists believe that, in striving to maintain these criteria, economies will create higher unemployment ‘by eliminating exchange rate flexibility as a means of adjustment’ (Towers and Terry, 1999):

While there are built-in monitoring processes in the operation of EMU, it also has a deregulatory dimension, and this could clash with EU social aims. Barnard and Deakin (1999) see these developments as In other words, such measures could benefit employers more than workers by removing protections. It is not surprising therefore that the EU employers’ association UNICE, as one of the Social Partners, has been more cooperative than in the past in participating in the social dialogue.

Up to late 2003 the more pessimistic prognostications have not been fulfilled, mainly because the monetary convergence criteria have been maintained without undue stress. However, if economic difficulties were to arise, then there could well be serious implications for European social and employment policy.

  • Equal opportunities

As we have noted, equal opportunities (EO) is one of the pillars of the Amsterdam Treaty proposals. It is concerned with eliminating the gender gaps and the development of a social infrastructure to enable better reconciliation between family life and working life. It is also concerned with developing a framework to respond to the demographic changes that shape economic and social life.

The continuing absence of good, secure, reasonably paid work for large segments of the working population could then have major adverse political consequences for the progress or even cohesion of the EU. an attempt to lock member states into a path of economic development based on economic convergence around tight budgetary controls and the maintenance of price stability. Labour flexibility . . . is the corollary of this process. Some of these reforms, it is clear would be deregulatory, in the sense of removing indirect labour costs through reforms to employment protection legislation and the tax benefit system.

Equal opportunities is a complex issue: merely making it a pillar of EU social policy will not necessarily resolve all the questions about gender differences in the labour market. The principle of equal treatment for men and women was embodied in the Treaty of Rome 1957, and is one the 12 provisions of the Social Charter (see above). While some progress has been made on these issues, the situation within the EU varies widely between member states, with the Scandinavian countries having the most progressive legislation and Greece the least. As Leat (1998) states, there are three types of equality, each of which varies in terms of progress towards implementation:

  • Equality of opportunity may encompass pre-work experience and circumstance as well as opportunities to compete for work and for advancement within a particular employment organisation.
  • Equality of treatment may encompass such issues as the allocation of tasks, working conditions, issues of harassment and conditions governing dismissal.
  • Equality of outcome is likely to encompass issues of pay and other substantive termsand conditions of employment, as well as quotas of the working population.


Each of these types of equality has had varying degrees of implementation across the EU, and some member states will have to make considerable progress if harmonization is to be achieved. Recently, emphasis has been placed on the concept of mainstreaming, which ‘involves the incorporation of EO issues into all action programmes and policies from the outset. It moves beyond equal treatment and positive action approaches to EO’ (Rees, 1998: 4).

One of the key actors in the field in forging EO initiatives has been the European Court of Justice (ECJ), which has become involved in resolving individual cases that in turn set precedents for future judgments across the EU. For example, indirect discrimination was demonstrated in the Bilka-Kaufhaus judgment. This deemed that the exclusion of part-time workers from a company pension scheme (made up mainly of women workers) was indirect discrimination.

The Hill and Stapleton judgment concerned women who moved from job sharing to full-time work but were placed on a lower pay scale despite the fact they had worked at the company as long as full-time workers, who were paid more (Barnard and Deakin, 1999: 365). Women were also helped indirectly by the UK government’s recent adoption of the minimum wage, which helped many female workers to raise their salaries.

The preponderance of women in atypical and lower-paid work has considerable implications for the satisfactory operation of the EO provisions of the Amsterdam Treaty. If the entrepreneurial agenda is overtly deregulatory, in that it is seeking the removal of social charges and other potential restrictions on business start-ups, this could well clash with attempts to maintain and improve protective legislation.

Rees (1998), however, argues that

  • Vocational education and training

In order to fulfil the Amsterdam Treaty’s pillars of employability, adaptability and entrepreneurship, considerable reliance has been placed on vocational education and training (VET) as tools to enable the creation of a more skilled and educated workforce, able to respond and adapt to the demands of a rapidly changing and increasingly competitive world. The Social Commission has emphasised the active nature of VET proposals, in contrast to the passive measures associated with the Social Charter.

The need to create a more employable workforce and in turn reduce unemployment places a huge emphasis on the ability of VET initiatives to equip people with the requisite skill and knowledge for a world of high technology, increased communication, and growth in the service sector, as well as enabling them to deal with the forms of flexibilisation demanded by neo-Fordist systems.

How this is achieved depends on initiatives to help the individual, the organization and the economy – a theme running through Part of this book. Such initiatives may come from the EU, from national governments, from organisations or from individuals themselves. The role of the EU and national governments often rests on political positions. Britain has strongly advocated a neo-liberalist position over the past 20 years: successive governments have adopted a voluntarist approach, which encouraged rather than compelled organisations and individuals to train. Germany, Sweden and France.

Human resource management and Europe While the legal framework for EO is essential, it is inevitably limited in its effectiveness. Positive action projects, while creating spaces for women and being laboratories for the development of good practice, appear to be precariously funded, provision is adhoc, and there are few linkages to mainstream providers. It is mainstreaming which is likely to have the most significant impact on developing women’s skills and the rigidities of gender segregation in the labour market. It also has the potential capacity to move beyond gender into other dimensions of equality, such as race and disability.

contrast, have advocated more compulsory initiatives, including legislation to increase levels of training. Neo-liberalists claim that the persistence of high unemployment levels in many European countries testifies to the failure of these compulsory initiatives (Addison and Siebert, 1991; Marsland, 1991).

Success has been mixed in the past, with the much-vaunted German dual system (see Chapter 9) receiving a considerable degree of praise and attention, but Leat (1998) suggests that ‘attempts to directly transpose the German arrangements to member states with different traditions, cultures and maybe even different production systems and strategies may not be at all successful’.

The dual system in Germany and the reliance on internal markets in French and Italian companies have been successful but only for those who have employment. The core problem of moving the unemployed, and in particular the long-term unemployed, into work has proved more problematic in these economies. Provision of the requisite skills for them to gain employmen has been no easy task, and even if the skills are acquired there is no guarantee of work in regions where traditional industries have declined and little new industry has replaced it.

Regini (1995) has drawn attention to the diversity of strategies that companies use to gain competitive advantage, ranging through forms of flexible mass production (or mass customisation) to flexible specialisation, neo-Fordism, diversified quality production and the traditional small firm. Each will require its own mix of skills, and will in turn impose its own particular demands on the labour market, but at the same time will be subject to the characteristics of the existing supply of labour nationally and locally (Leat, 1998: 240). Institutional theorists would add that historical, cultural and institutional forces will also serve to shape the particular nature of a country or region’s VET.

All this makes for considerable difficulties in meeting the aim of harmonisation of EU social policy, and given these constraints it is unlikely to see convergence within the near future. The Amsterdam Treaty’s proposals imply a mix of approaches, finding a marriage point between EU suggested policy, local prevailing conditions, and responses to a rapidly changing global competitive environment.

  • Social partnership and social dialogue

As mentioned earlier in this chapter, the term ‘Social Partners’ refers to representative organisations of employers and employees at EU level and, more recently, at the level of the member states. ‘Social dialogue’ refers to processes of consultation and negotiation between the Social Partners on matters of EU policy formulation and implementation. The Protocol procedure (see above) represents the most developed form of social dialogue at EU level.

Social dialogue is seen as an example of a neo-corporatist approach to policy-making. This in turn is linked to social democratic principles of state action. Social dialogue does not include negotiation over pay and does not cover the right to strike. Therefore it should not be seen as EU-level collective bargaining. The concept of social dialogue within the European Community goes back to the 1960s and 1970s but was undeveloped at that time.

Obstacles to the development of social partnership and social dialogue during the 1970s and 1980s

  • Fundamental disagreements between the Social Partners on the issue of social/employment policy within the EU.
  • The Partners’ lack of a mandate to bargain on behalf of workers and employers in member states.
  • Partners were not fully representative of employers or workers at the sector level.
  • The Partners lacked authority over their constituent members.
  • Both sides needed to satisfy the national interests of their members.
  • The lack of appropriate EU institutions to promote social dialogue and enforce subsequent agreements.

Measures to promote social partnership and social dialogue 1985–2001

Measures to promote social dialogue were developed during the 1980s and 1990s in order to stimulate progress towards an integrated European Social Policy. In addition, there was growing commitment to the principle of subsidiarity, the principle that decisions should only be taken at EU level if it could be shown that the objective cannot be achieved by action by individual member states.

Subsidiarity also involves trying to formulate EU policy initiatives in such a way as to give member states as much scope as possible to interpret and implement them in the light of their own national circumstances. The promotion of social dialogue was one effect of the influence of the subsidiarity principle, which required the Social Partners to have increased influence on the formulation of EU policy and its implementation at national level.

  • The 1985 ‘Val Duchesse’ process. This was introduced by the Commission under Jacques Delors. It provided for Joint Committees consisting of representatives of the social partners to be appointed by the Commission as required, and for Informal Working Parties to be established on a voluntary basis by the Social Partners themselves. These bodies could issue non-binding ‘Joint Opinions and Recommendations’.
  • The 1991 protocol procedure. The protocol procedure aimed to strengthen social dialogue through:
  • A procedure whereby the Commission has to consult the Social Partners formally before presenting legislative proposals to the Council of Ministers.
  • The protocol procedure, which allows the Social Partners to negotiate framework agreements – European Community Agreements – on matters identified by the Commission. These can then be implemented through national collective bargaining procedures or else the Social Partners can ask the Commission to put the agreement as a proposal for decision by the Council of Ministers.
  • Sectoral Dialogue Committees 1998. The Joint Committees and Informal Working Parties established under the Val Duchesse process were abolished in 1998 and replaced by Sectoral Dialogue Committees. These have the right to be consulted on any EU-level developments that have social policy implications. They are also charged with promoting social dialogue at sectoral level. This is an attempt to encourage the Social Partners to negotiate more binding sectoral framework agreements in place of non-binding joint opinions that required subsequent legislation.
  • 2001 Lisbon Summit. At the Lisbon Summit it was decided that the Social Partners should play a more active role in the development and implementation of the European Employment Strategy. As a result, the Social Partners at EU level have been given responsibility for implementing two of the employment guidelines under the ‘adaptability’ pillar of the EES. These are modernisation of work organisation, and enhancing the contribution of lifelong training and learning to worker adaptability.

The partners are supposed to negotiate agreements on both of these issues. In addition, Lisbon encouraged the Social Partners to contribute more fully to the EES by:

  • developing benchmarking processes for existing employment guidelines;
  • negotiating framework agreements and issuing joint opinions on particular guidelines;
  • proposing some new guidelines of their own;
  • monitoring the participation of the Social Partners at national level in developing and implementing National Action Plans. The effectiveness of social dialogue mechanisms
  • The evidence on the effectiveness of mechanisms to promote social dialogue is mixed. Some have argued that the protocol procedure introduced in 1991 has had little effect in strengthening social dialogue. The protocol procedure has a number of limitations:
  • National procedures for implementing agreements are weak and EU legislation states that they are to be implemented by collective bargaining according to the rules of each member state. Thus there is no obligation on states to apply the agreements directly or establish rules for their implementation (Hall, 1994).
  • Member states’ representatives in the Council of Ministers are reluctant to give legislative backing to regulations that they have not been involved in developing (Hall, 1994).
  • Social Partners themselves have reservations concerning European Community Agreements. The ETUC is concerned that European Community Agreements do not undermine national collective bargaining arrangements. UNICE is hostile to sectorallevel Community Agreements (Keller and Bansbach, 2001).
  • Sectoral Dialogue Committees so far comprise the old Join Committees and Informal Working Parties in a new guise – old wine in new bottles. There is little likelihood that the new structures will lead to more binding agreements because the Commission has no power to force the Social Partners to negotiate and because UNICE has no proper organisation at the sectoral level (Keller and Bansbach, 2001).
  • The outcomes of social dialogue since the 1991 protocol procedure have been limited, with only three successful framework agreements being reached during 1991–9. Also, the regulatory force of these agreements has been weak, with agreements containing many exemptions and opening clauses, allowing member states effectively to opt out of them. Traditional legislation remains the main vehicle of social policy (Keller and Bansbach, 2001). One recent example is the issue of temporary workers, where dialogue broke down in 2001 and the issue became subject to formal legislative procedures in the form of the Temporary Workers Directive (Gilman and Broughton, 2002).
  • There is little evidence of negotiation between national governments and Social Partners over National Action Plans for employment, except where there is an existing framework of national negotiations over economic and social policy. Thus, where social partnership and social dialogue have been undeveloped in the past, they continue to remain so (Leonard, 2001).

The pessimists also point out that most of the obstacles of the 1970s and 1980s remain.

In particular, UNICE re

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