We need to take practical steps right across Europe if we are to streamline our labour markets and create new jobs to replace the millions lost so far, says Ernest-Antoine Seillière, who sets out a four-point recovery plan
In those balmy days before the financial crisis struck, Europe’s labour markets were in a healthy state. Private sector companies had created 10m jobs between 2006 and 2008, and with employment rates on the increase unemployment had by the beginning of last year sunk to its lowest level in over 20 years.
But that was then, for the crisis has had a savage impact on the EU’s labour markets. Now that we are in the deepest recession in decades, unemployment rates for both skilled and unskilled workers are climbing fast.
Job losses in the EU, warns BUSINESSEUROPE’s Spring 2009 Economic Outlook, are expected to reach 4.5m this year, with Spain and the UK each accounting for almost 1m unemployed people. By 2010 Europe’s unemployment rate could reach 10%. Unemployment will not strike every EU country equally, but it is clear that the majority of them will be faced with unemployment rates of over 10% by the end of this year. Forecasted unemployment in countries like Spain could rise to 16-19% by December.
All this is inevitably going to have a really severe impact on our social protection systems. They are already struggling with long-term financial sustainability problems because of shrinking working-age populations and higher dependency rates, and they will now be coming under even greater pressure as the proportion of unemployed people rises.
Any chances Europe has of a speedy economic recovery will depend on our agreement on a concerted response. We at BUSINESSEUROPE have therefore set out a four-pronged strategy for dealing with the crisis.
The first priority must be to restore companies’ access to finance. This is indispensable if we want to ensure the survival and future development of companies both large and small. Unless they have access to credit there will be no economic recovery, and without economic recovery there will be no job creation.
Second, EU member states must adopt and implement effective recovery programmes. Bold, well-designed and targeted economic stimulus packages are needed, and should look to the future with new infrastructure, by investing in research, development and innovation, and by improving the functioning of our labour markets.
But these recovery programmes are just building blocks. The third measure needed is to speed up structural reform. The present crisis should not be allowed to cloud our view of the long-term challenges facing Europe. Instead, the crisis should act as a catalyst for reforms to structurally improve Europe’s competitiveness in a rapidly changing international environment where major new trading partners have already emerged. In other words, our short-term emergency measures must be consistent with the ambitions goals that were set nearly a decade ago in the EU’s Lisbon strategy.
Back in 2000, the Lisbon strategy was launched with the aim of transforming Europe into "the world’s most competitive knowledge-based economy" by 2010, and in 2005 was revised to focus on the creation of more growth and jobs. Despite the good results in terms of jobs created since 2005, there is widespread agreement that the Lisbon strategy has not fully lived up to the ambition of boosting both employment and productivity. BUSINESSEUROPE’s Spring 2009 Reform Barometer found that although Austria, Finland, the Netherlands, Norway and Cyprus had made good progress in improving their employment rates, Hungary was Europe’s worst performer. Weak progress was also registered in Latvia, Denmark, Slovenia, Bulgaria, Germany, Portugal and Belgium. Now that it’s experiencing its worst rise in unemployment in decades, it is abundantly clear that the EU has no chance of reaching its own employment target by next year.
This doesn’t mean we should give up on the Lisbon strategy. It's obvious that its reforms and its disciplines are as crucial as ever to unlocking Europe’s growth potential. That means we must actually step-up the rate of investment in R&D and innovation, and make improving the EU’s regulatory environment a higher priority than at present, while above all achieving a true single market.
The fourth and last part of BUSINESSEUROPE’s proposed response to the crisis is resisting all forms of protectionism, whether inside or outside the EU. A well-functioning EU single mar is the key to growth and the creation of more jobs. For every job apparently saved by protectionism, many more are lost in the longer-term. The message must be that we should all stand up against any actions that restrict the free movement of services, goods, capital and workers.
We have witnessed recently how tensions on the labour market have led to actions against foreign workers. While workers are understandably concerned about their jobs in the current difficult circumstances, we cannot tolerate obstacles to the free movement of workers. The posting of workers directive prevents social dumping. Although this was recognised by a Forum organised by the European Commission in October 2008 a lot could still be done to improve its practical implementation. This is the duty of national governments.
We’re going to need extraordinary measures because we face unprecedented challenges in our labour markets. That means timely, targeted yet temporary measures to cushion the impact of the economic crisis on employment. Three specific types of practical intervention are called for: First, working hours flexibility will be an important measure for companies to take if they are to keep their workforce in the downturn, but still have them readily available when the upturn comes. Companies across Europe are already avoiding laying off employees by using temporary measures, and by March 700,000 workers in Germany were on shorter a week and France expects 330,000 workers to be doing the same by the end of this year. Second, although it won’t be at all easy during the recession, greater investment in education and training is going to be essential if European workers are to be better equipped to move into new jobs. For without a pool of sufficiently-qualified people, the next economic upswing won’t be sustainable. Third, it will be essential to keep the cost of labour under control if we are to foster job creation and avoid even higher unemployment.
Of course, emergency measures have to be taken to improve the situation, but we must also be aware that this is a crisis that will have a long-lasting impact. Whole business sectors and industries are likely to be profoundly changed by it. Workers will be forced to leave shrinking industries and move into jobs in sectors with greater growth potential. So the crisis is set to reinforce the need to rapidly implement the so-called flexicurity approach. A year and a half ago, in December 2007, EU leaders adopted some common flexicurity principles to improve both job flexibility and security. Now the time has come to act on these, because the conclusions of the European social partners’ joint labour market analysis in October 2007 are today more relevant than ever. Flexicurity offers a way of facilitating transitions in the labour market.
The past few years were marked by a resistance to change that considerably slowed much-needed labour market reform. So the current crisis should be seen as an opportunity to demonstrate how effective flexicurity can be.
Job-friendly social protection systems and investment in lifelong learning are key ingredients in enhancing flexibility and making our labour markets function better. It’s going to be the EU countries that implement these policies that will emerge stronger from the crisis. Just as companies can help speed the way to Europe’s economic recovery by retaining their human capital and further developing skills, public authorities and trade unions also share responsibility for addressing the crisis. Social partners have an important role to play in designing and implementing effective responses, and we all know from experience that constructive social dialogue can ensure that both companies and workers will suffer less in a crisis. That’s why the European social partners – BUSINESSEUROPE with the European Association of Craft, Small and Medium-sized Enterprises (UEAPME), the European Centre of Employers and Enterprises providing Public services (CEEP) and the European Trade Union Confederation (ETUC) – have agreed on a new Social Dialogue Work Programme for 2009-2010. By negotiating an agreement on inclusive labour markets, monitoring the implementation of the common principles of flexicurity, drafting a joint opinion on the post-2010 Lisbon strategy, we hope to make a real contribution to overhauling Europe’s labour markets and making them more efficient.
We Europeans have to view the crisis as an opportunity to move ahead with structural reforms, and improve our competitiveness in the global market place. If we can do this, the EU will come out of the crisis stronger and better prepared to seize the opportunities the global economy offers.