EU Social Policy

Question 1

Nations have differing priorities (for this employment and welfare aim) (3)

Answer 1

Labour markets
Social securtiy
Leisure e.g some want more leisure like Germany (42 days), some want more work

Question 2

How is social policy decided

B) why is this method good, name an example

Answer 2

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

Question 3

Treaty of Rome seeked to establish (7)

Answer 3

Freedom of movement for workers
Freedom of establishment
Equal pay
Rights for migrant workers
Paid holidays
Living & working conditions
Vocational training

Question 4

ESF initial steps - what did they offer (3)

Answer 4

Pretty limited:

Financial support for temporarily unemployed

Support for migrant workers

Localised retraining (i.e in areas impacted by structural change)

Question 5

Limited as target groups were narrowly defined (temporarily unemployed, migrant workers and localised training for areas with structural change)

How did they progress

Answer 5

Then saw more progress with the SEA 1986 and SEM

(Social policy saw bigger developments 1980 onwards)

Question 6

Economic integration from SEM creates winners and losers. How?

Answer 6

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

Question 7

So there are losers.

What does the willingness of losers to accept economic integration (from SEA 1986 and SEM) depend on?

Answer 7

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)

Question 8

EU founders believed

B) why?

Answer 8

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)

Question 9

Why did EU founders think productivity more important?

B) example of why subsdiary principle is good, and perhaps full harmonisation is bad (Feldmann)

Answer 9

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)

Question 10

Non wage benefits (Social policy) examples (5)

Answer 10

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

Question 11

Diagram showing impact of increase in non-wage benefits on the labour market.

Answer 11

Real wage Y axis
Quantity of Labour X axis

Shift downwards (fall) in labour demand

Question 12

2 categories that comprise T (the social policy) that firms have to cover.

Answer 12

Government charges e.g NI contributions towards their employees pensions

Private chargers e.g giving holiday to workers, or private pension

Question 13

That was closed economy social policy. What happens in an open economy (SEM) following social policy.

Answer 13

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.

Question 14

Does empirical evidence agree to this (lower real wage in open economy/SEM?) and why?

B) specific example Germany

Answer 14

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!)

Question 15

3 types of approaches countries made towards labour market

and which countries did which approach?

Answer 15

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

Question 16

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

Answer 16

Benchmarking, a minimum thresholds e.g 20 days holiday

Question 17

What did Dearden argue

Answer 17

SEM needs greater competitiveness via flexible production techniques to remain globally competitive with Japan, US etc. (Japan had JIT production technique)

Question 18

Flexible production techniques require…

Answer 18

Stable motivated and trained workforce, THUS AN ARGUMENT FOR SOCIAL POLICY!!!

Dearden was FOR social policy!

Question 19

So they need to be stable motivated and trained.

What does return on training depend on/require

Answer 19

Long term relationship between firm and employee

E.g at Volkswagen only 28 hr working week

Question 20

So, German vs UK view on social policy

Answer 20

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%)

Question 21

Highest labour productivity country

Answer 21

Ireland (181 scored on baseline 100)

Germany 106.3
UK 100.2

Question 22

Germany vs UK % of labour costs on non-wage costs (social policy)

Answer 22

17.1% UK
22.6& Germany

So Germany do spend more on social policy (benefits for workers)

Question 23

UK vs Germany export % of world total

Answer 23

3.5% UK
7.67% Germany

Germany doubles exports of UK

Question 24

Other issues of social policy (7)

Answer 24

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

Question 25

Social dumping

Answer 25

Firms may move to countries with lower social protection to avoid higher costs associated.

French moved to Glasgow

Question 26

Threat to European Social model (variable geometry)

Answer 26

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???

Question 27

Dual labour markets (insider-outsider problem)

Answer 27

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

Question 28

Scandinavian approach to social policy

Answer 28

People are more willing to pay higher taxes to help everyone, if they get benefits too e.g Sweden Free University,

Denmark flexicurity

Question 29

Building on SEA 1986: which act followed

B) problems with this act

Answer 29

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

Question 30

Maastricht treaty 1991 followed. Outcomes?

Answer 30

Binding, but UK opted out again. Subsidiarity still central

Question 31

Effectiveness of social policy depends on what

Answer 31

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.

Question 32

Order of reform

Answer 32

TOR
ESF
SEA 1986 (EU founders belief…)
Social charter and Maastricht

Question 33

France’s work week

Answer 33

35hrs one of lowest in EU

Question 34

Greeces’ social policy

Answer 34

Offers subsidised summer camps for children to allow parents to work (good for those low income who can work without interruption)

Question 35

Important: Studies like Feldmann see social policy can be detrimental to the very people social policy has been there to support (unintended consequences)

Answer 35

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!

Question 36

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?

Answer 36

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!

Question 37

Has EU social policy increased employment ages 20-64 from 2023 to 2024Q3

Answer 37

EU employment rate:
75.3 to 75.9%

Question 38

Employment creation (employment growth rate)

Answer 38

Increased to 1% from 0.9

Question 39

Overall main benefit and main constraint to EU social policy

Answer 39

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.