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Mr. László ANDOR "Evaluating flexicurity in the economic, employment and social crisis" High-level Conference on Flexicurity Brussels? 14 November 2011

European Commission - SPEECH/11/751   14/11/2011

Other available languages: none

SPEECH/11/751

Mr. László ANDOR

EU Commissioner responsible for Employment, Social Affairs and Inclusion

"Evaluating flexicurity in the economic, employment and social crisis"

High-level Conference on Flexicurity

Brussels? 14 November 2011

Madame Deputy Minister,

Distinguished guests,

Ladies and gentlemen,

It is my pleasure to welcome you to this Stakeholder Conference on Flexicurity.

This conference takes place at a moment when the EU is at a historical crossroads.

What initially started as a financial crisis in the United States has extended to Europe as a financial, economic, and more and more also a social crisis. And as recession fell upon fiscally vulnerable states, an unprecedented sovereign debt crisis has developed.

Europe's debt crisis is unprecedented not in the sense of states being for the first time in the history unable to repay their debts; not even in the sense of there being powerful regional knock-on effects. What makes the present crisis unprecedented is that it takes place in an institutional context of seventeen different Member States in a monetary union and in the context of a much larger integration project.

The euro zone is characterized by considerable asymmetries between monetary and fiscal decision-making, but any reinforcement of economic governance in the EMU has impact also on the 10 Member States which do not presently use the euro. In short, this crisis is challenging the unprecedented project of European construction in an unprecedented way.

The complex institutional context makes it difficult for the EU to respond to the economic and social dimension of the crisis in a vigorous way. But history shows that when they are most needed, workable European solutions can be found. This is certainly a transformational crisis: The manner in which we respond to it today and the institutional arrangements we develop will define the nature of the European project in the future. We will either come from it politically and economically reinforced or substantially weakened.

Crisis and key challenges in the labour market

The crisis brings significant challenges also to the European labour market:

  • First, as output enters a second dip, with a risk of protracted stagnation, the economy is unlikely by itself to pull employment up.

  • Unemployment is in fact rising again, having reached in September 9.7% in the EU-27 and 10.2% in the euro area.

  • Second, the structure of unemployment is changing in worrying ways, with young and low-skilled people being affected particularly hard. 43% of all unemployment is long-term unemployment. It is certain this will have longer-term implications for human capital accumulation and social inclusion.

  • Third, the crisis adds to on-going changes in the structure of the labour market as such, influenced by globalization and automation: We have seen a “hollowing out” of medium-paid jobs and declining labour intensity of the highest value-added activities. This means, among other things, that those at the top end of the labour market are getting an increasing part of the cake.

There is a need to promote excellence and better matching at the high end of the skills spectrum. But the truth is that most job creation can be expected in relatively low-paid – but ever more skills intensive – services.

Another key structural factor is the ageing of the workforce. This requires higher effective retirement ages and other ways of making maximum use of the knowledge and skills of older workers.

  • Fourth, as Member States walk a thin line between reducing debt and killing growth, the whole Europe comes to realize that public money is a precious commodity. It is, at last, becoming obvious that every euro spent from public budgets needs to be spent well. Cost-effectiveness and quality are conditionae sine qua non.

  • Fifth, however, the necessary investment to maintain a skilled workforce can only bear fruit if people put their skills to productive use through a job. Europe needs more growth and more job creation. But Europe cannot just wait for job creation to resume as a consequence of growth picking up. It has to make the most out of the potential of employment itself to provide a source of growth.

Having seen the Beveridge curve shifting upwards for nearly two years, Europe urgently needs to improve labour market matching. It must do so through well-targeted and high quality skills investment as well as improved labour mobility.

  • Sixth, economic growth is not possible without sustained aggregate demand, which has a strong labour market dimension too. To maintain sufficient aggregate demand, we need social peace and the necessary income base to boost the confidence of consumers and investors. The necessary deleveraging of the banking sector and capital reinforcement must not prevent credit from flowing again to the real economy. Business must have the environment and the incentives to create new jobs. But these cannot be only precarious jobs. And cost competitiveness must not be reduced to beggar-thy-neighbour dynamics.

  • Seventh, we need to ensure that the burden of adjustment processes – on the macroeconomic level as well as in the labour market – is distributed in a fair and balanced way. Compared to other parts of the world, Europe continues to be a relatively fair place to grow and live. But as we define our policy response to the crisis and to the economic restructuring of Europe, we need to be vigilant to prevent the erosion of our social model. Social dialogue plays an important role in this.

From Lisbon to Helsinki, from a university classroom to a textile manufacturing site, from a company owner to the lifelong civil servant, we may all have different ways of understanding and living the economic challenges. We may all have different answers. But we all agree that employment and labour market developments must be part of the solution. They are an essential ingredient for whatever recipe the EU finds to pursue its journey of integration.

Flexicurity

Ladies and gentlemen,

Four years ago, just at the eve of the crisis, flexicurity was agreed as a leading approach in EU labour market policy, and in fact an essential component of the EU economic and social model in the 21st century. It was recognised as a major policy breakthrough, putting an end to the traditional perception that there is a trade-off between flexibility of labour markets required by the dynamism of the globalized economy and personal economic security which is at the heart of the EU social model.

The concept of flexicurity has been based on a notion that robust active labour market policies, lifelong learning investment and modern social security systems can ensure security of employment and income, even if contractual arrangements become more flexible and job transitions more frequent, as required by the rapidly evolving economic context.

The world is certainly a different place today than in 2007 and so is the European labour market. But many of the employment problems we face now are not only the result of cyclical factors. They are the result of structural developments exacerbated by the crisis, of partial reforms enacted before the crisis, and the fact that our labour market systems have not been sufficiently adapted to these changes.

At the same time, as the intervention capacity of public budgets has been reduced by the crisis, it is more difficult to ensure the human capital investment necessary to strengthen competitiveness and build sustainable growth.

Discussing labour market reforms and the validity of flexicurity is therefore highly topical. In a period as transformative as this one, it is more than necessary to think how employment policy can help Europe emerge from the crisis with a stronger labour market.

However, today’s conference is not meant to serve as a venue for presenting a new concept or selling a re-vamped one. Today the Commission is not planning to re-state or unveil a policy agenda either.

Our goal is to listen to your views on flexicurity. It is to understand to what extent flexicurity helped Europe go through the crisis and whether and how it can be used as a leading concept of EU-wide employment policy in the years ahead.

The conference aims to identify points of convergence between us all, so as to explore possible ways forward. We will put forward more questions than answers. We would like to hear your answers.

Key questions to consider

Ladies and gentlemen,

Allow me then to start the debate highlighting the key questions that, in my view, require our attention during this conference:

  • First and foremost, while re-thinking flexicurity, it is necessary to take stock of the implementation of flexicurity measures in recent years. Has it really happened across Europe? To what extent? And what were the key factors shaping the implementation?

Let me be clear on this. By flexicurity measures, I do not mean relaxation of – in quotation marks – "firing and hiring" rules. And I do not mean either a simple extension of unemployment benefits in time. It is important not to mistake flexicurity for piecemeal or disjointed practices which did not seek to address the four components simultaneously. The question is to understand whether truly integrated flexicurity practices have developed in the EU, which economic conditions allowed for this, and how they have been governed.

  • Secondly, does flexicurity, as conceived in 2007, continue to help Europe address the challenges it faces now and those we expect in the horizon of 2020?

Is it the most effective way to deal with the consequences of economic restructuring, such as for example the recent cases of large lay-offs by Arcelor-Mittal or Nokia? Can flexicurity be the framework to manage our transition to a resource-efficient green economy? And can flexicurity provide the necessary policy response in a context of reduced job creation?

Looking ahead, can flexicurity help us achieve productivity increases and become more competitive while preserving our social model? And how can flexicurity help us achieve the 2020 employment target of 75% and create quality jobs?

  • Thirdly, does flexicurity, as expressed in the Common principles adopted in 2007, continue to be meaningful in an increasingly diverse Europe? Or do we need to tailor the concept even more according to the economic conditions prevailing in different Member States? In fact, does flexicurity still gather sufficient consensus among actors to provide a platform for structural reforms at EU and national level?

  • Fourth, if we believe that flexicurity is the right approach, how can the development and implementation of flexicurity be best governed? How should cooperation between public authorities and social partners look like? How can social dialogue be boosted at EU and national levels to help implement flexicurity strategies?

And finally, we should discuss whether flexicurity is the only answer. Can it be an all-encompassing solution or does it need to be supplemented by other measures in order to contribute to a higher level and higher quality of employment?

Do the current four components need to be expanded with new elements? Does the structure of flexicurity need to be revisited, putting more accent on other policy instruments such as internal flexicurity, taxation or labour mobility? Or should flexicurity be seen only as part of a larger employment policy agenda for the post-crisis era?

Ladies and gentlemen,

Moments of turmoil have always proved to be opportunities for great advancements in policy development. Despite the magnitude of the challenges in front of us, I am confident that we can collectively find a path towards a job-rich recovery and put aside our differences in order to find common ground on which to build the foundations of future prosperity.

As I mentioned, this conference is an important moment of reflection for the Commission. We will listen carefully to your views. They will help us nourish our own thinking so as to come with a policy proposal early next year.

Thank you very much for your attention and for your contribution to the debate.


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