Flexicurity in a context of restructuring
Introduction
The Thematic Review seminar, „Flexicurity in a context of restructuring‰, held in Brussels on 27 September 2006, opened the autumn semester of the Mutual Learning Programme of the European Employment Strategy. Globalisation and the continuing introduction of new technologies mean that workers and enterprises have both the need and the opportunity to adapt. Flexicurity, combining labour market flexibility with a high level of social security, is one frequently-advocated way forward for Europe. The seminar was hosted by the European Commission (DG Employment, Social Affairs and Equal Opportunities-DG EMPL) and attended by government delegates, national and European stakeholders and social partners from EU member states, Bulgaria, Croatia and Romania.
The Thematic Review was opened by Antonis Kastrissianakis, Director of DG EMPL. He pointed out that restructuring is an ongoing process in all EU Member States. Job losses are an inevitable impact of this, but international competition and technological change also create new production opportunities and opportunities for better jobs. So the adaptability of workers and enterprises needs to be improved, as do the effectiveness and quality of human capital investment. The 2005 Communication from the Commission on restructuring and employment points out that social cohesion is a distinctive characteristic of the European social model. The novelty of the flexicurity approach is that it places the emphasis on improving both flexibility and security at the same time. Assessing Member States‚ national reform programmes in early 2006, the Commission concluded that the objective of improving the adaptability of workers and enterprises was not yet receiving enough attention. The Commission is therefore seeking agreement with the Member States and the social partners on a set of common flexicurity principles.
Maarten Camps, Chair of the EU Employment Committee, said it has been working on the subject of flexicurity in recent months and will certainly continue to do so. It will be assessing how Member States are performing on this and what lessons can be learnt. For the EU Economic Policy Committee‚s Labour Market Working Group, Catherine Julien-Hiebel on behalf of Chair Susanne Ackum focused on the macroeconomic and fiscal implications of flexicurity. While lessons can certainly be learnt from the Danish and other experiences of flexicurity, these are not, she said, automatically transferable to other countries. Hence the need for a cautious approach.
Restructuring and flexicurity ˆ the macro level
Thematic experts Jens Henrik Haahr and Paul Swaim reported on research conducted for the Commission and the OECD. They discussed in particular the three main elements of flexicurity: flexible labour markets (more flexible conditions for hiring and laying off employees, enabling companies to respond quickly to market changes while achieving a better match of jobs and skills); income security (through a generous welfare system, helping to ensure that flexibility does not adversely affect social cohesion); and active labour market policies (with a strong element of lifelong learning and training). A distinction was made between employment security, which governments must promote, and job security (a long career in the same job), which workers can no longer necessarily expect. Flexicurity alone will not ensure smooth restructuring. Growth-promoting policies are also needed. But flexicurity does enable faster and better adaptation to external economic pressures.
Country examples and sectoral experiences
Austria ˆlabour foundations Austria‚s labour foundations (Arbeitsstiftungen) are a successful model for the solution of regional structural and labour market problems, through interaction between different labour market actors, notably the social partners. One type of labour foundation is the implacement foundation, which trains unemployed people specifically to meet the current labour needs of participating firms. The modules offered are mainly vocational guidance, active job search and qualifications training. On-the-job training is always included, and is provided in the firm where the person is subsequently to be hired. Participants receive increased unemployment benefits. By September 2006, there were 47 implacement foundations in Austria. At one foundation, 70% of participants were working full-time within a year of completing the courses and a further 21% were working part-time. Financial support for the foundations comes mainly from European sources, particularly the European Social Fund. The country‚s public employment service is strongly involved. Some of Austria‚s nine federal states also contribute.
Slovakia ˆ the special guarantee fund and active policies The aim of the guarantee fund is to help employees when their employers become insolvent. It was set up in line with the European directive on this issue. Employers pay into the fund. The benefit guaranteed to a worker in 2006 is a maximum of approx. •1365. But the fund‚s outlays have been relatively low, due to active labour market policies under which employment services cooperate with companies experiencing difficulties in order to reach a compromise aimed at avoiding dismissals or finding alternative employment. Nine national projects, co-financed by the European Social Fund, aim to improve educational qualifications and assist the most disadvantaged. Around •65m were spent on active labour market policies in 2005. 216,422 jobs were created and 63% of the registered unemployed took part in the projects and programmes.
The UK approach The current British approach to employment promotion has five main strands: economic stability; flexibility and diversity, on the labour market but also on the product and capital markets; making work pay, particularly through tax credits aimed at breaking the poverty trap and through the introduction of a minimum wage; active labour market policies; and education, lifelong learning and skills. The biggest recent large-scale redundancy in the UK was at MG Rover in April 2005. A package totalling some •260m was used mainly to help people back into work through employment support and training, but it also included time-limited support for suppliers, community support, measures to help retain manufacturing skills and measures to support enterprise investment and growth in the region. By July 2006, about 70% of those made redundant were back in work.
Sectoral and company level ˆ the role of the social partners
For the most part, the social partners have been involved in the design and sometimes the implementation of social redeployment policies, thematic expert Sanja Crnkoviæ-Pozaiæ stated. As restructuring is rooted in regional development issues, the range of stakeholders who should be involved has widened. The role of the social partners, in the narrower sense, has varied considerably from one European country to another. An important lesson to be learnt from the Danish case is the high level of trust established, which is essential to the planning and implementation of such complex policy mixes as flexicurity. Faster adjustment, coupled with more institutional support for victims of redundancy, can be enabled through flexicurity. It is not a solution in itself, but it can be used as a tool by interest groups to reach agreement on a desirable outcome. Evaluation is needed at all stages, including implementation.
Views of the European social partners
Ronald Janssen (European Trade Union Confederation) recalled Europe‚s post-war social contract that workers would cooperate in raising productivity and, in return, would receive a fair share of the returns from growth and economic activity. Now, we have declining growth in many parts of Europe and a labour share of GDP that is falling. Flexicurity is seen as a way of creating a new paradigm which can once again reconcile the interests of business and workers. Hence the current interest in this model, but it must be made to work both for workers and for enterprises. The main focus should be on upward flexibility.
Renate Hornung-Draus (European employers‚ federation, UNICE) argued that the old social contract, based on a male standard worker who spent eight hours a day at work for 45 years, needs to be updated. One challenge that we are facing today in the context of flexicurity is how to revise labour law so that it does not create an insider/outsider problem. If labour protection is too high, the threshold between an unemployed worker and employment is also too high. Another challenge is to promote the diversification of work forms, such as independent work, but do social security systems tied to the employment contract fit the new economic reality? The social partners adopted orientation points for socially responsible restructuring in 2003. There are also joint social partner reports on managing change.
Concluding remarks
Antonis Kastrissianakis said the time has now come to move from statements to action. In the annual progress report in January 2006, the Commission presented the idea of a common set of principles on flexicurity. The Council endorsed that proposal, and the European social partners have embraced the idea with enthusiasm. Flexicurity will be at the heart of the Commission‚s new Green Paper on the evolution of labour law, and of a Communication to be published later this year on the evolution of labour markets. The Employment in Europe report, to be published by the end of October, will contain a chapter on flexicurity, and the Commission is also expecting to receive in October the national reform programmes in which each Member State will present its flexicurity profile. On this basis, the Commission will bring together its assessment in the annual progress report in December 2006. The identification of some typical situations in Europe with regard to flexicurity should lead into active discussion with the social partners and the Member States at the beginning of 2007. The Commission hopes that it will be in a position to publish a Communication on a common set of principles on flexicurity in Spring 2007.
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