How the EU is failing to improve the social situation of its population, despite its announcements
by Christine Mayrhuber
Social policy at the European level
From the very beginning, the development of the European Union pursued economic goals. The theoretical implication and political hope was that economic prosperity would automatically trickle down to the entire population. European social policy was not a separate issue, but was seen as a dependent variable of economic and liberalisation policies. It was with the introduction of the Single European Act in 1986 that European social policy began to gain in importance for the first time, with the adoption of specific regulations relating to minimum health and safety standards, the prohibition of pay discrimination and other social issues. Overall, however, emphasis remained on the competition-friendly design of (social) legislation in relation to the four fundamental freedoms (free movement of services, goods, capital and people). Employment and social policies remained primarily the responsibilities of the member states, and EU institutions were limited to defining a few general regulations, for example on anti-discrimination.
The EU lacks the objectives, competences, institutions and financial resources to pursue redistributive social policies or services. The European Social Fund (10 billion euros per year, 10 percent of the EU budget) is too small to be able to take on any kind of social equalisation role. Other structural funds, like the European Agricultural Fund for Rural Development (38 percent of the EU budget or 0.4percent of the EU’s GDP), have targets in different areas. The next EU budget (2021-2027) is intended to strengthen the Union’s social dimension through a merge of existing funds and special resources (called ESF+) that are reserved for fostering social inclusion. However, the new resources will not enable structural social change on a European level. Such a goal would necessitate balancing mechanisms within the Eurozone to prevent the ongoing adjustment processes between countries that occur via decreasing wages. These then further increase social and economic inequalities.
The liberalisation process in the single market has led to increasing income inequality, unemployment and poverty. The EU, for its part, has responded with numerous programmes: the European Social Agenda of 2000, the EU2020 goals of 2010 and the EU’s social investment strategy for growth and jobs were all intended to counteract the increasing levels of social polarisation and heal the damage of the crisis.
Yet even as these programmes are carried out and new ones are formulated, the stringent budget rules of the Stability and Growth Pact are putting pressure on national social regulations and spending. As part of its crisis management programme, the EU Commission demanded direct cuts in labour rights and the welfare system from the crisis-hit states. In other member states, this happened indirectly, via budgetary guidelines. Social inequality in Europe is becoming greater, not less. Even in those countries that survived the crisis relatively unscathed, income and wealth inequality is rising. The average rate of unemployment in the EU lay at 7.8 per cent in 2017 as a result of the crisis, but within the individual member states, it varies between 2.9 per cent in the Czech Republic and 21.7 per cent in Greece. Around 21 million people in the EU are unemployed, with one third of the population at risk of poverty or social exclusion.
Until the 1970s, the social security interests of workers and their families were anchored in the national welfare state. The welfare systems of the EU member states were characterised by social inclusion, and social policy increased the welfare status of individuals as well as the national economy. Policies were aimed at balancing the interests of work and capital. A high level of economic and social security facilitated people’s acceptance of trade liberalisation and the single market project. Today, as the economic and social protection of broad sections of the population dwindles, this acceptance is now decreasing. The rise of populist political parties and movements is one manifestation of this decreasing acceptance and solidarity.
Recent years have seen the introduction of a new EU social policy initiative, the “Pillar of Social Rights”. Like its predecessors, this initiative is at odds with and, above all, subordinate to European economic and budgetary policy. Sanction mechanisms exist only in relation to budgetary targets, not socio-political objectives. As such, the establishment of the new pillar does not represent a reform of the EU’s budgetary guidelines. Instead, it is a form of support for well-functioning labour markets at a point in time when there is not enough paid work within Europe and/or this paid work is not fairly distributed among the workforce. Instead, the structural problems of the labour market are addressed with guidelines for changing individual behaviour and job placement.
The European pillar of social rights
In 2015, President Juncker announced the creation of a “European Pillar of Social Rights” as a response to the impact of economic and social developments and the loss of confidence in the EU. It was discussed in the EU institutions, national parliaments, social partners and civil society and presented in spring 2017. The discussion process assessed whether existing EU legislation on employment and social issues needed to be changed in the light of new economic and labour market developments. However, the process was not intended to result in compulsory minimum European social standards, but to address areas that impede the deepening of the monetary union.
The design of the pillar covers three areas. The first of these, equal opportunity and access to the labour market, covers a broad spectrum including equal opportunities for education and employment, individual job search assistance, secure and adaptable employment and flexible working hours. The second, fair working conditions, addresses appropriate protection against dismissal, improved work-life balance and productivity-based pay. The third, adequate and sustainable social protection, covers the need for adequate minimum wages, unemployment and retirement benefits, equal access to (care) services and benefits for people with disabilities.
The topics are formulated in hard-hitting way, have a progressive ring and address many of the areas that display a pressing need for action in terms of the reintegration of large sections of the population into Europe’s economic prosperity. However, the pillar focuses more on outlining problem areas than defining specific measures for achieving the drafted minimum standards. This is exemplified, among other things, by the pillar’s central emphasis on individual responsibility. In spite of widespread and persistently high unemployment, uniform economic incentives are proposed as ways of promoting participation in the labour market. Improved individual job placement and higher-level qualifications are seen as routes to improving the economic situation of those affected. In short, unemployment is seen primarily as an individual problem and not a structural, pan-European one. But improved job placement for individual job seekers can never be more than a drop in the ocean. Furthermore, the new pillar addresses individual behaviour and private lifestyles as an aspect of the problem. In this regard, social policy is not about balancing capital and labour interests, but about influencing and controlling the behaviour of individuals. This development is not new, but the new pillar exemplifies it.
Another contradiction in the design of the new pillar is the goal of productivity-based pay. First of all, if this goal was not able to be achieved in the past in high performing countries like Germany or Austria, how could it possibly be achieved in countries or during periods with low economic growth rates? Secondly, we are observing unstable employment and income histories for a growing group of workers in addition to a growing number of self-employed. A producitvity orientation will not improve the economic situation for these groups.
The central focus of the EU lies on the conditions of the financial markets, the euro, sovereign debt and bank stability. Rather aptly, therefore, the draft social pillar states that Europe’s ambition should be to earn a “social AAA rating”. Even if this is intended in a symbolic manner, it raises the question as to how development is measured. Is it assessed from the perspective of profit-maximising financial markets, the sustainability of public finances, a re-distributive, empowering social policy or long-term equal opportunities? The social pillar includes progressive elements such as gender equality, proper pay and social transfers, labour market promotion and health and safety; however, the basic structures of the EU – competitiveness, price stability, financial market dominance or the European fiscal compact – are never called into question. At the same time, national social spending, which is economically and socially vital to large groups of the population, is under pressure due to the budget rules. While national room for manoeuvre in regard to social policy is limited by stipulations on budget discipline, no viable European social policy has been established in return – not even by the progressive-sounding social pillar. Instead, an instrumental understanding of social policy persists, with the belief that labour markets, welfare systems and social and labour law regulations should be aligned ever more closely with the production conditions of the economic and monetary union.
The severity of the social and economic problems in the EU necessitates preventive social policies and a reorganisation of economic and, particularly, budgetary policies. The “exploitability” of human labour and resources has reached its limits. Achieving social and economic shifts and social justice will require new standards of prioritisation in the economy and in society, with a rejection of the short-term profit interests of the few in favour of the long-term vital interests of the many as a key unifying principle. The European Pillar of Social Rights addresses the virulent social problems in Europe, but without subjecting them to structural examination and rectification.
European Commission (2016) Launching a consultation on a European Pillar of Social Rights, COM(2016), 127 final.
European Commission (2013) Towards Social Investment for Growth and Cohesion – Including Implementing the European Social Fund 2014-2020, Brussels.
European Commission (2017) Establishing a European Pillar of Social Rights, COM(2017), 201 final.
Starke, Peter; Wulfgramm, Melike; Obinger, Herbert (2016) Welfare State Transformation Across OECD Countries: Supply Side Orientation, Individualized Outcome Risks and Dualization, in: Wulfgramm, Melike; Bieber, Tonia; Leibfried, Stephan (Hg.) Welfare State Transformations and Inequality in OECD Countries, Transformations of the State, Vol. 1, Palgrave Macmillan, 19-40.