How unions and labour rights are being squeezed by
by Markus Koza
The role of the EU in setting wage policy
Officially speaking, the competences of the EU in regard to labour and social matters are limited to a small number of areas. The EU has the power to set minimum standards for employee protection, such as maximum working hours or the protection of certain groups. It also has competences in some areas of social labour law, such as anti-discrimination law and the Posted Workers Directive, which regulates the conditions under which employers may send employees to other countries. Finally, it participates in regulations pertaining to the EU Works Council, which guarantees information and consultation rights for employees of cross-border companies. EU directives also secure employee rights in the event of businesses being transferred from one owner to another.
Wage policy, the right to organise and the right to strike – which are of central importance to trade unions and employees – do not lie within the EU’s area of competence, as is clearly stated in the Treaty on the Functioning of the European Union. However, the EU Charter of Fundamental Rights does lay out the core rights of workers and trade unions: the “right to collective bargaining” between employers’ associations and trade unions, the right to unionisation and the right to take “collective action to defend [employee] interests, including strike action”.
All this said, the influence of the EU institutions on labour rights and wage policy cannot be reduced merely to these official areas of competence, because the economic integration process has far-reaching consequences for labour rights, wage policy and the role of unions. The European Monetary System has limited the powers of national fiscal and monetary policymakers and established a narrow margin for currency fluctuations, which has in turn limited the power of revaluing and devaluing national currencies as a tool for maintaining competitiveness. Since member states can no longer devalue their currency to reduce the price of exports and thus protect their production systems, wage policy – i.e., how wages and salaries function as costs in the production process – has increased in importance in terms of its influence on international competition. Trade unions, wages and social systems have come under increasing pressure. The introduction of the euro made wages a key adjustment variable in the battle for sales markets.
The single market and the liberalisation of public services (e.g. postal services and electricity) brought about a worsening in employment and income conditions and a huge reduction in numbers of staff. The restrictive budget policy introduced in connection with the Maastricht criteria exacerbated these developments. Since the 1990s, there has been a general and noticeable decline in the wage share (the share of wages in GDP), a trend that can be traced back to the integration process. Atypical employment and unemployment are increasing in almost all EU countries.
The role of the European Court of Justice (ECJ) in setting employment standards should not go unmentioned. While, in the past, the ECJ issued decisions in favour of employees – e.g. in issues of anti-discrimination and equal treatment – there were many occasions on which justice was dispensed in favour of economic interests to the detriment of basic trade union or social rights. This occurred particularly with regard to the provision of cross-border services and questions of wages and social dumping, as in the Viking and Laval cases. At any rate, the setting of priorities at EU level was clear – and was only made it clearer by the crisis.
Labour rights and wage policy under economic governance
Once the EU’s economic crisis policy came into effect, policies on working conditions and wages in the member states changed. Following the introduction of “economic governance”, the competences for wage policy and labour rights shifted. New rules were established in pursuit of a more binding coordination of European economic policy. Under the economic governance framework, recommendations were issued to member states by the EU Commission and the Council and mechanisms for enforcing structural reforms and reducing budget deficits were implemented. Semi-automatic sanctions have been established to punish violations of European regulations.
Wage policy plays a central role in the new system of economic governance. It has affected workers in two main ways, the first of these being that the austerity policy has a direct impact on public sector wages. Austerity programmes are frequently comprised of wage freezes, wage restraint and cuts to the civil service. In many countries, public sector wage agreements serve as a model for private sector negotiations, with the result that cuts in the public sector affect the entire spectrum of employees.
As a second and compounding factor, one of the stated aims of the European institutions is to make the member states of the EU and the Eurozone not only outwardly more competitive, but also more competitive in relation to one another. The imbalances between high-export countries and those who import their goods can be traced back to changes in wages. The Commission therefore requires that countries who import large quantities of goods and services undergo internal devaluation – that is, lower production costs, especially in terms of wages.
That this new policy of wage intervention is not, as some may presume, a “paper tiger”, is made clear by the large-scale involvement of European institutions in national wage policies. These institutions clearly disregard the EU treaties – both by intervening on country-specific recommendations and by prescribing specific measures to countries as part of so-called “rescue packages”. In recent years, wage-related policy demands have been made on 18 EU member states as part of the European Semester, with the EU Commission demanding a more moderate degree of wage development from Finland, Italy and other countries. In Sweden, the Commission seeks for the low-wage sector to be expanded, while several other countries (Italy, Belgium and Spain, to name a few) have received recommendation to shift their wage bargaining to company level. A series of measures related to the euro rescue have been imposed on Greece, Portugal, Ireland and Cyprus – wage cuts to the civil service, cutting or freezing minimum wages, the extension of working hours, the weakening of protection against unfair dismissal, and new forms of precarious employment.
The attacks on collective wage agreements and labour rights have not been without effect: between 2008 and 2013, 19 out of 27 EU countries saw their collective bargaining coverage fall. In some places, the consequences have included massive decreases in real wages and a continuous decline in wage rates.
Union demands and EU plans
Trade unions and civil society are resisting these developments, calling for a fundamental change of course in economic policy, the strengthening of social security systems and the implementation of a social union in Europe. They seek to facilitate sustainable, employment-promoting socioecological infrastructure investments by means of a golden investment rule: the exclusion of this type of expenditure from government debt. At the same time, trade unions are seeking to strengthen the social dimension of the EU by proposing a treaty amendment that gives priority to basic social rights over economic freedoms. One of the key goals of the trade unions is, naturally, the preservation of their role as an agenda-setting and countervailing power – and the fight is a tough one, especially in the crisis-hit countries. Ultimately, the structural reforms sought by the EU are aimed precisely at weakening trade union power – from collective agreements to social security systems to opportunities for co-determination.
But the attacks on trade unions and collective agreements are not limited to the crisis-hit states. Under the pretext of crisis management, governments across Europe are seeking to implement reforms that would otherwise be politically impossible, including restrictions on the right to strike, legal intervention in collective agreements, the shifting of wage bargaining to company level, the dismantling of the civil service and the extension of working hours. And there is no end in sight. In 2016, the presidents of the EU institutions called for the establishment of national competition boards to increase the pressure for further labour market reforms. The unions’ criticism of these plans was correspondingly vigorous. Nevertheless, in June 2016, EU finance and economics ministers issued a recommendation that EU countries establish productivity boards – a weakened version of competition boards, but still with a focus on competitiveness, cost developments and thus also wages.
Thanks to Brexit, however, a new dynamic has emerged. Only a small group surrounding the Commission is in support of a further deepening of ties; many member states are seeking to keep the status quo, while others are pushing for disintegration. But the pressure on unions, wages and labour rights will not abate. On the contrary: there is a move to permanently weaken trade unions as both an agenda-setting and a countervailing power. The sentiment was perhaps expressed best by a member of the conservative Spanish government, who stated openly that the aim is for unions to “fall like the Berlin Wall”.
Read the next chapter → “Implications”