EU Social Policy Flashcards
Nations have differing priorities (for this employment and welfare aim) (3)
Labour markets
Social securtiy
Leisure e.g some want more leisure like Germany (42 days), some want more work
How is social policy decided
B) why is this method good, name an example
QMV
B) a single country can’t veto measures e.g UK forced to accept Working Time Directive 1990s.
So EU social policy good for worker rights like WTD but constrained by subsdiarity - since relies on own country who may enforce it differently or not at all
Treaty of Rome seeked to establish (7)
Freedom of movement for workers
Freedom of establishment
Equal pay
Rights for migrant workers
Paid holidays
Living & working conditions
Vocational training
ESF initial steps - what did they offer (3)
Pretty limited:
Financial support for temporarily unemployed
Support for migrant workers
Localised retraining (i.e in areas impacted by structural change)
Limited as target groups were narrowly defined (temporarily unemployed, migrant workers and localised training for areas with structural change)
How did they progress
Then saw more progress with the SEA 1986 and SEM
(Social policy saw bigger developments 1980 onwards)
Economic integration from SEM creates winners and losers. How?
Some regions lose out to other more competitive regions due to competitive effects of the SEM
Export oriented sectors like manufacturing and financial services access a larger market! (Now have passporting rights. Worse-off is low skilled industries since moved to countries in EU with cost-advantages)
Thus need for social policy to address these inequalities
So there are losers.
What does the willingness of losers to accept economic integration (from SEA 1986 and SEM) depend on?
Willingness to accept depends on winners readiness to compensate losers.
(Since they should balance the inequality! Believe a safety net was required for losers in order to get political support of economic integration)
EU founders believed
B) why?
Full harmonisation of social policies (between member states) was not a necessary component of economic integration. Just keep benchmarks
Also social policy impact is limited… focus on increasing productivity
B) subsidiary principle (localised decisions are best, and so full harmonisation across countries is not necessary e.g may not be well fitted country specific)
Why did EU founders think productivity more important?
B) example of why subsdiary principle is good, and perhaps full harmonisation is bad (Feldmann)
If country had high productivity, they could pay for the extensive social policy. Hence why better to increase productivity rather than pursue social policies! (RMB Germany 106.3 100.2)
B) Feldmann found harmonisation of working conditions across states was regressive for low-skilled workers (substitution effect - expensive to meet minimum working conditions and so swap to capital)
Non wage benefits (Social policy) examples (5)
Pensions
Flexibility e.g work from home
Health insurance
Right to disconnect - e.g in Portugal illegal for firms to contact workers outside working hours, in France have legal right to ignore emails sent
Sick pay
Diagram showing impact of increase in non-wage benefits on the labour market.
Real wage Y axis
Quantity of Labour X axis
Shift downwards (fall) in labour demand
2 categories that comprise T (the social policy) that firms have to cover.
Government charges e.g NI contributions towards their employees pensions
Private chargers e.g giving holiday to workers, or private pension
That was closed economy social policy. What happens in an open economy (SEM) following social policy.
More elastic demand since more integration and competition between workers, so more responsive to a change in wage
So wages fall (lower than closed economy W1.
Does empirical evidence agree to this (lower real wage in open economy/SEM?) and why?
B) specific example Germany
No, higher real wages in SEM have been seen due to efficiency benefits from integration
(Draw 3 SEM diagrams, fall in AC i.e firms are more productive from SEM !!!) so draw 3SEM diagram also for trade creation as a benefit of integration in enlargement topic
B) 2019 study found $1046 of annual per capita income increases was directly attributed to SEM! (Supports idea of open economy/SEM creating efficiency benefits and higher wages!)
3 types of approaches countries made towards labour market
and which countries did which approach?
Free market - UK and Ireland
Collective bargaining i.e unions (towards worker protection) - Germany
Statutory framework to protect workers (since collective bargaining was week) - France, Portugal, Spain, Greece
So social policy does not have to be harmonised. Since subsidiary principle; some high prod states have high wages and can thus fund it.
But what was instated
Benchmarking, a minimum thresholds e.g 20 days holiday
What did Dearden argue
SEM needs greater competitiveness via flexible production techniques to remain globally competitive with Japan, US etc. (Japan had JIT production technique)
Flexible production techniques require…
Stable motivated and trained workforce, THUS AN ARGUMENT FOR SOCIAL POLICY!!!
Dearden was FOR social policy!
So they need to be stable motivated and trained.
What does return on training depend on/require
Long term relationship between firm and employee
E.g at Volkswagen only 28 hr working week
So, German vs UK view on social policy
German - social policy can be viewed as enhancing productivity rather than making countries uncompetitive (by increasing T) (UK, which believes in free market)
(Hence why they spent 22% labour costs are SP, compared to 17%)
Highest labour productivity country
Ireland (181 scored on baseline 100)
Germany 106.3
UK 100.2
Germany vs UK % of labour costs on non-wage costs (social policy)
17.1% UK
22.6& Germany
So Germany do spend more on social policy (benefits for workers)
UK vs Germany export % of world total
3.5% UK
7.67% Germany
Germany doubles exports of UK
Other issues of social policy (7)
Social dumping
Potential threat to European social model (variable geometry)
Dual labour markets
Effectiveness (Social Charter, Maastricht could opt out)
Effectiveness of social policy (national policy)
Funding insufficient
Political will exists
Social dumping
Firms may move to countries with lower social protection to avoid higher costs associated.
French moved to Glasgow
Threat to European Social model (variable geometry)
Different approaches across EU states, intervention (yes to social policy) vs laissez faire.
E.g post Brexit will UK lower social protection in order to remain competitive???
Dual labour markets (insider-outsider problem)
Social policy has different effects on different sector.
There are high wage high prod sectors, but also low wage unskilled sector (with unstable employment e.g through zero hour contracts)
So social policy would be bad for low wage sectors cases as it increases costs further for firms who will demand less labour
Scandinavian approach to social policy
People are more willing to pay higher taxes to help everyone, if they get benefits too e.g Sweden Free University,
Denmark flexicurity
Building on SEA 1986: which act followed
B) problems with this act
Social Charter 1989 was first major attempt at social policy. Problem was
B) Not legally binding; UK opted out (free market view RMB!) thus variable geometry - 2 speed/tier EU
Maastricht treaty 1991 followed. Outcomes?
Binding, but UK opted out again. Subsidiarity still central
Effectiveness of social policy depends on what
Subsidiarity (National sovereignty) limits EU’s impact: decisions are locally so limits EU’s ability to enforce binding regulations, since relies on national gov to implement and comply.
Order of reform
TOR
ESF
SEA 1986 (EU founders belief…)
Social charter and Maastricht
France’s work week
35hrs one of lowest in EU
Greeces’ social policy
Offers subsidised summer camps for children to allow parents to work (good for those low income who can work without interruption)
Important: Studies like Feldmann see social policy can be detrimental to the very people social policy has been there to support (unintended consequences)
Harmonisation of working conditions increased costs for firms, substitution effect: swapped low-skilled for capital.
Thus, low-skilled even worse off, who need the social policy the most!
Links back to how EU founder believed full harmonisation is not needed!
Example of Scandinavian approach: of long standing relationships and willing to pay high taxes if get benefits in return.
Flexicurity Denmark - they spend 3.74% of GDP on labour market policies and so need high taxes (highest). What is it?
B) Is this successful tho?
Little protection from dismissal, but has active labour market policies to help workers transition e.g retraining
B) Successful as has one of highest employment and lowest unemployment rates. They trust EMPLOYMENT SECURITY RATHER THAN JOB SECURITY, and thus are willing to pay taxes!
Has EU social policy increased employment ages 20-64 from 2023 to 2024Q3
EU employment rate:
75.3 to 75.9%
Employment creation (employment growth rate)
Increased to 1% from 0.9
Overall main benefit and main constraint to EU social policy
EU has successfully addressed worker rights e.g QMV for WTD in 1990s which regulate working hours breaks etc…
But subsidiarity (National sovereignty) limits EU’s impact: decisions are locally so limits EU’s ability to enforce binding regulations, since relies on national gov to implement and comply.
