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EU Social Policy ref: social policy Mar 09. (1) Introduction Broad definition in EU compared to UK Employment & living conditions (welfare) Nations have.

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Presentation on theme: "EU Social Policy ref: social policy Mar 09. (1) Introduction Broad definition in EU compared to UK Employment & living conditions (welfare) Nations have."— Presentation transcript:

1 EU Social Policy ref: social policy Mar 09

2 (1) Introduction Broad definition in EU compared to UK Employment & living conditions (welfare) Nations have differing priorities re: labour markets social security leisure & other social aspects

3 Social aspect in Treaty of Rome economic and social progress low priority not specific Developments in future, particularly single market

4 (2) 1950s-1970s Little progress beyond TOR TOR, despite deficiencies did seek to establish freedom of movement for workers freedom of establishment equal pay rights for migrant workers

5 paid holidays living & working conditions vocational training established ESF (1960)

6 ESF Initially limited financial support to temporarily unemployed migrant workers localised retraining

7 1971 reforms financing from State levies to EUs own resources 2 broad objectives facilitate employment adjustment from EU policies help overcome structural problems experienced by regions / groups, eg young job seekers vocational training more important

8 Greater activity Several minor developments SEA - main impetus for change

9 (3) 1980s: Social dimension of the SEM Social policy: Counterbalance to SEM Integral part of econ policy Strengthens social cohesion Economic integration creates winners and losers Willingness to undertake economic integration depends on the winners readiness to compensate the losers

10 Argued safety net required for broad political support Argued prerequisite for economic integration

11 Social policy & productivity EU founders believed full harmonisation of social policies not necessary component of integration the division of wage & non-wage costs (ie: social policies) have limited impact

12 Assume initially no social policy & closed economy wage W, employment level L Adopt raft of social policies Raises cost of employing workers by T Result:lower wage (W1) & employment (L1) Important: wage incl wage & non-wage costs

13 Closed economy Real wage Labour D w L S

14 Closed economy Real wage Labour D w L S D1 w1 L1 T

15 Non-wage benefits include Part of wage taken as benefits rather than take home pay Limit working hours (eg Working Time Directive, French 35 hr week) Maternity, paternity & sick leave Pension benefits Holidays TUPE

16 Open economy Now, consider open economy More elastic demand (now D2) greater integration in goods mkt greater competition between workers Wage falls below W1 if social policies, (non-wage )cost = T greater burden of (T) falls on workers

17 Open economy Real wage Labour D w L S D2 w1 L2 T W2

18 Open economy + productivity gain Empirical evidence suggests integration has simultaneously seen higher real wages, due to efficiency benefits from integration Gains from SEM incl. raised productivity value of workers to firm rises D3

19 More than counteracts more elastic demand Real wage rises to W3 & employment rises to L3 EU examples…

20 Open economy + productivity gain Real wage Labour D w L S D2 w1 L2 W2 D3 L3 W3

21 Other issues: Social dumping Movement of jobs to countries with lower social protection, reflected in lower overall labour costs Hoover, Dijon - Glasgow 1993 Argued concerns misplaced France 1960s Productivity must be considered – high wage sectors can maintain comparative advantage Division between wage & non-wage costs can be left to States

22 Wages and productivity in 2005 (Germany = 100)

23 Other issues: End of the European Social model? Today – some argue lower wages & social protection in CEECs a threat to the European Social model Flexibility Regulation v laissez faire Regulation dual labour markets /Insider-outsider problem High wage productivity sector & low wage unskilled sector (with unstable employment) Eg Youth unempt UK employment more open to outsiders

24 France v Anglo-Saxon approach Scandinavian 3 rd way

25 Social Charter 1989 not legally binding opt out by…

26 (4) 1990s and beyond TEU / Maastricht Treaty Binding Social Protocol (chapter) Opt out Subsidiarity still central

27 White Paper for Growth, Competitiveness and Employment 1993 Social Action Programme Treaty of Amsterdam 1997 European Employment Strategy (EES) 1997 Lisbon Agenda ( )

28 EMU Lack of downwards real wage flexibility Conflict OCA theory Pre-EMU devalue for international competitiveness EMU makes impossible Employment may move to low cost countries. EU examples…… Increased productivity may be solution

29 (5) Social policy: Effective? Fragmented EU policy National policies important eg mutual recognition of qualifications - major task Employment creation? Unemployment? YOU get data from EU Commission/Eurostat 1990s – shift to promote employment European Employment Strategy (EES) 1997 Lab market & other measures, eg entrepreurship

30 Slight participation and reduced unemployment See Martin J, What works among active labour market policies: Evidence from OECD countries experiences, OECD Occasional Papers, 1998 Funding Political will Some success

31 Source The Lisbon Scorecard VIII, Is Europe Ready for an Economic Storm?, March See section on Employmenet and Social Inclusion


33 Benchmarking suggested as way to create EU wide social policy Leave States to design, but meet minimum threshold Scharp F, European integration, democracy and the welfare state, Jnl of European Public Policy, 1997

34 (6) Social Policy & Business …

35 (7) Conclusion Fragmented Main development 1980s+ Does globalisation indicate move away from social policy? Lisbon Agreement ties social cohesion to increased competitiveness

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