Conference on The Future of Work, Employment and Social Protection
Annecy, January 18-19, 2001
The political response to the new challenges : raising the issues
Renate Hornung-Draus
Director
European and International Affairs
B D A (German Employer's Federation)
11054 BERLIN
Germany
Introduction
In my report I will summarize and comment on the main questions raised during the debate on the public responses to the
new challenges.
1. How can the Welfare State survive internationalisation?
Fritz Scharpf offered the following analysis of the situation: Globalisation leads to a decrease in employment in
internationally exposed sectors of the economy. Hence, the Welfare State can survive only if it manages to increase
employment in sheltered sectors of the economy. In Europe, Scharpf detects two successful models of coping with this
problem. The first one is the UK-model, which is characterised by low taxes, and a market approach for social services. In
the UK, low public spending on social services goes hand in hand with a transfer of previously "non-market activities"
(family work, childcare, public education, public infrastructure) to the market economy. This becomes visible particularly
in the high female participation rate in the labour market. The second model is the scandinavian one, which is based on
high taxes and high social spending, generating equally high employment rates. Continental Europe, is in the worst of all
situations, because it is situated somewhere in the middle between the UK and the scandinavian approach. In Scharpf's
view, continental European States must chose either one of these paths. Since the scandinavian approach of raising taxes
does not have sufficient political support, the only path to follow in order to increase the employment rate would be the
UK-approach of reducing taxes and public spending.
From the discussion on this analysis I would like to retain the following comments: First of all, the reality is less "black
and white" than presented in this paper: While all agree that a "Volksheim" approach of the comprehensive and all
pervasive Welfare State is no adequate response to the current challenges in continental Europe (and by the way it has
been fundamentally reformed in the scandinavian States themselves), the UK-model of low taxes and low public spending
is also showing serious adverse effects, not only on social cohesion, but also on the competitiveness of exposed economic
sectors: The very poor quality of the public educational system has generated a very poorly qualified workforce, which
sometimes lacks even the most basic skills, has a very low productivity and has therefore become a serious impediment
for foreign investors. The catastrophic state of public administration and infrastructure - think of the economic costs due
to the problems of the railway system or the incapability of public administration to contain BSE and the foot and mouth
disease - is a further indicator of the fact, that the transfer of public activities to the private market does not automatically
solve the problems of the Welfare State, and that too radical cuts in public spending can have adverse economic effects on
the competitvieness of the private sector, which needs efficient administrative and logistic infrastructures and a highly
productive workforce. Secondly, the notion of exposed and sheltered sectors has to be reviewed: Many sectors, which
were considered to be sheltered have become exposed to international competition, therefore a policy approach based on
such an assumption is dangerous.
2. Labour market regulation and employment rates
Freyssinet made the point, that empirically, there is no correlation between the degree of labour market flexibiliy, i.e.
deregulation, and employment performance. What is at stake in today's situation is not the question of regulation vs.
deregulation, but what kind of regulation is more efficient in terms of employment creation. From the companies
perspective, employment regulation must reduce transaction costs, while accomodating the need for more flexibility at the
company level.
Bernard Gazier made the point, that the different levels and modes of labour market regulation are being readjusted and
redefined. This refers to the question of legislation vs. negotiation, enterprise vs. sectoral/regional levels, etc. In some
countries we also see the emergence of new modes of regulation, e.g. national pacts for employment and competitiveness,
which complement legislation and build the consensus necessary for the reforms of the social systems. The EU-level
response to globalisation has led to an increased importance of the EU-level regulation, and finally regulation at world
level becomes more important, as has become clear from the debates around the liberalisation of world trade and the role
of the ILO in this context.
A further response to the the challenges of globalisation consists of introducing new subjects in the employment
regulation: The introduction of long term working time accounts, which has been agreed at e.g. in the Volkswagen group,
is showing new ways of realising flexible working time arrangements at company level. Another topic which will gain in
importance is employee participation in enterprise results.
Concerning the emergence of new actors for employment regulation, several speakers raised the issue of non-governmental organisations as partners in collective negotiations. However this raises the problem of the binding nature
of collective agreements: If agreements concern working conditions, the actors must be able to deliver what they have
agreed upon, and this is only possible for the parties to the employment contracts, i.e. workers and employers. What can
NGOs deliver in this respect? It seems that a clear distinction must be made in this context between negotiations, which
are binding on the signatory parties and can be concluded only by social partners with a mandate for collective action on
behalf of their members, and cooperation, which includes today already a wide variety of actors, e.g. companies, unions
and NGOs in the context of social standards in developing countries. It is essential that roles and responsibilities of the
different actors shoud not be confounded.
What should be the contents of labour market regulations? With the increasing diversity, discontinuity and dispersal of
work patterns and personal careers due to effects of globalisation, labour market regulation is changing its contents. If it is
to be employment conducive, it must take into account the companies' need to increase individual enterprise flexibility
while providing a framework which reduces/optimises transaction costs. Bernard Gazier made the point, that in an
environment characterised by the diversity, discontinuity and dispersal of the professional careers of individuals, labour
market regulation needs to focus more on the facilitation of good transitions between different activities in the labour
market, e.g. the transition from education to work, from one job to another job, from dependent employment to self-employment and vice-versa, from unemployment back into employment.
3. EU-level regulation
Tiziano Treu highlighted the fact, that the employment coordination process at EU level has already been very beneficial
to national developments, because it has led to substantial policy transfer in Europe. Concrete examples would be the
active labour market policy in the Netherlands and Denmark, which has inspired to a large extent the German reform of
labour market policy.
Concerning the more negative aspects of the European Union in this respect, Fritz Scharpf criticised EMU for creating
tensions because of regional disparities - e.g. Ireland. However, it was mentioned that such regional disparities existed
also at national level, and that they did not lead to a questioning of national monetary policy before EMU. Maurizio
Ferrera criticised, that EU-competiton law hindered regional policy via State aids or differentiated social security
contributions. A way has to be found to better reconcile EU competiton policy with the need to promote economic
development in poor regions of the EU.
4. Qualification
Christian Baudelot's comments focused on the educational system. In his view the educational system - particularly in
France - is too much concerned with general education and does not prepare sufficiently well for working life by
providing young people with professional skills. Therefore the public response to the challenges of globalisation had to be
to improve the link between the educational system and the labour market. On the other hand, information society is
characterised by the fact, that professional knowledge becomes obsolete more and more rapidly and has to be updated in a
process of lifelong learning. In this perspective, the general education, which should teach young people how to learn and
acquire knew competences throughout their working lives, becomes an important basis for lifelong learning and shouldn't
be discarded too quickly. John Morley pointed out that there was a public responsibility for good qualification, which
required that there should be a general access to good qualification.. He reminded of "Tinbergen's choice" according to
which the Welfare State, could use public spending either to qualify people, or to give supplementary income to poorly
qualified people.
5. Conclusion
As a conclusion from this panel we can retain, that we are probably experiencing a change in paradigms. As Robert
Taylor put it, the political responses in the 1990s were dominated by deregulation, privatisation, tax cuts linked with the
reduction of public spending and more spacifically of social spending. As could be seen from today's discussion, there is
an increasing awareness today of the importance of good public infrastructure (education, transport, communication,
administration) - which requires public spending - for the international competitiveness of companies. Furthermore there
is an increasing awareness of the importance of social cohesion and hence social spending for the sustainability of the
inernational competitiveness of Europe.
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