Commissioner for Employment, Social Affairs and Inclusion
A strong employment agenda – the pathway to economic recovery
Dinner speech at the Conference "Jobs for Europe: The Employment Policy Conference"/ Brussels,
6 September 2012
Ladies and Gentlemen,
We have a full day behind us, with a number of distinguished speakers and outstanding keynote addresses, including from the Presidents of the European Parliament, European Commission and European Council.
I would like to take a few minutes to share with you ten points, bringing together various threads that were developed today and hopefully inspiring your further discussions.
My first point is that job creation must be an absolute priority of the European Union. For Europe's people, the EU must be more than just a market place. The EU must also set the highest standards for people's quality of life. In the face of growth that is likely to remain low for many months and perhaps years to come we need to step up employment policy to deliver new, sustainable jobs and maintain or transform existing ones.
With a weak economic recovery, unemployment threatens to remain persistently high, rising further above today’s 25 million. The crisis is also likely to continue to impact various groups of workers in different ways and will, in particular, further increase the risk of marginalisation for young people. Long-term and structural unemployment are likely to worsen, leading to erosion of skills, and in turn weighing down on productivity, competitiveness and therefore economic growth. Against the background of slow GDP recovery, there should be no doubt that employment policy and all its institutions and actors – European and national - play a key role from both macroeconomic and microeconomic perspectives. Making progress towards the Europe 2020 target of 75% employment will be more difficult in a low growth scenario, but also more necessary.
My second point is that we cannot make job creation the real priority without changing the prevailing macroeconomic paradigm. The model of economic and monetary union we inherited did not create strong foundations for either economic prosperity or social cohesion. Instead it has brought us the so-called process of 'internal devaluation', which contradicts many of the principles the EU should stand for. We need to build a genuine "EMU 2.0", reshaping not only the general macroeconomic model but also the macroeconomic dimension of employment policy.Many adjustments are necessary to correct existing macroeconomic imbalances and reallocate labour to more productive and sustainable activities, these adjustments cannot be one-sided, and aggregate demand must not be ignored in this process. Our economies will only pick up if there are enough people working, earning and spending. In other words, we need to remember that putting people to productive work creates growth. We also have to restore labour's share in total income.
This is why, in the April 2012 Employment Package, we have sought to rebalance the EU's employment strategy to develop the demand side of it
Of course, a key practical question is, what does this mean for countries that need to prove their creditworthiness in order to be refinanced. And if we add up strict fiscal stance in seventeen euro area countries, each of which needs to prove itself to the markets, does this not result in highly contractionary policy overall?
Some interesting ideas have been advocated from various sides over the summer. Olli Rehn spoke just three days ago about “tools to deal with asymmetric shocks” in the context of a fiscal union. Others have suggested that the European Commission itself should be able to run deficits that would counterbalance the surpluses amassed by individual countries in their adjustment process.
My point of view is that an EU level unemployment insurance structure can be a logical element in this new EMU 2.0 as an automatic stabiliser mechanism effective in the short-term. I am convinced that we should work to set up urgently such a European unemployment benefit scheme as we develop the next phase of Economic and Monetary Union.
My third point is that in a slow growth scenario, we cannot simply wait for growth to create jobs. Productivity is important but we need to find ways to integrate those whose work, perhaps just temporarily, is less productive. That is why the Commission has emphasised and developed the demand side of labour market policy in its April 2012 Employment Package. We have argued that job creation has to become a cornerstone of the European Employment Strategy, and of broader economic strategy, in order to achieve our 2020 objectives and targets.
In particular, the Package focuses on stepping up job creation by using a mix of policy measures acting on the demand side, such as cost determinants (taxes, subsidies, wages), EU structural funding and development of key job-rich sectors, notably the green economy, ICT and healthcare sectors.
A good starting point for deploying demand-side measures is to consider what the economic and social needs over the coming years will be, and whether enough labour is employed to address these needs.
Heads of State and Government have explicitly agreed to integrate National Job Plans in their National Reform Programmes in 2013. These National Jobs Plans should partially be devoted to measures aiming at job creation through demand-side instruments.
Fourth, retaining or transforming existing jobs is more important than ever before if we are to strengthen aggregate demand and move towards the 75% target of Europe 2020. A fully integrated European industrial policy is a key element for retaining jobs in the real economy. Facilitating industrial modernisation in the peripheral areas of Europe can play a strong role – cohesion policy needs to be more effectively geared to this objective. The social dimension of restructuring - investment in human capital via training and re-skilling - makes a major contribution to the success of any industrial policy and is crucial in an economy based on high value-added activities. Moreover, structural change – especially the greening of the economy - and company restructuring need to be anticipated and managed in a smart and socially responsible way, if companies are to maintain their competitiveness in the transition towards a resource efficient economy while minimising the social costs.
This brings me to my fifth point, that social dialogue must remain the fundamental coordination method and is essential for the European social model. Social dialogue also improves economic resilience and helps employment at the macro level, as well as at the level of an enterprise. Social dialogue must take place on all levels, from the enterprise through sectoral and national levels to the EU level. Those who believe that social dialogue contradicts economic competitiveness should think again.
I personally attach great importance to the European Commission’s role and responsibility to promote social dialogue. In this context, I will have the pleasure tomorrow to invite Guy Ryder, newly elected Director General of the International Labour Organisation, who is also here with us today, to conclude our conference. The ILO's tripartite character is unique and we have had excellent cooperation in the era of Juan Somavia, whose video message to our conference you have been able to see today. I therefore hope that Guy Ryder’s participation at this conference is a sign of the beginning of another era of close cooperation.
Two months ago, the ILO and OECD issued important reports regarding the situation of labour markets in the European Union and the euro area. What is - in my view - striking, is that the analysis of both organisations clearly underlines the role of social dialogue and collective bargaining institutions for recovery from the crisis. They stress how well-coordinated bargaining institutions can contribute to good structural performance and labour market resilience.
The Employment Package proposed that the social partners should be involved more closely in setting priorities and in shaping and implementing employment policies, including in the context of the European Semester. The Commission also wants to identify suitable ways of engaging with the social partners at national and EU level on wage developments. I have proposed the setting up of a European tripartite format for the monitoring of wage developments in the Union. Such a tripartite exchange of views would supplement — and become an integral part of — EU economic, employment and social governance. Needless to say, this would be done in full respect of the autonomy of social partners and for national practices of collective bargaining.
My sixth point is that the social economy provides the ultimate example of social dialogue at company level. Entrepreneurship can be collective as well as individual. Social objectives cannot simply be external to the business enterprise and imposed through legislative measures. The social economy opens pathways towards a more participatory model of the economy, with internal flexibilities and strong commitment to employment security and social welfare of the employees/members.
During the crisis, cooperatives and other participatory enterprises have provided a number of good examples to the rest of the economy about how to manage change and how to retain or even create jobs. One specific sub-set of the social economy are social enterprises, which are pioneers of inclusive employment and of innovative ways to address social needs. Support to further development of the social economy is clearly part of an agenda for a job-rich recovery.
Seventh, having mentioned inclusive labour markets, I want to highlight the problem of labour market segmentation, notably along age and gender lines. Segmentation deprives people of opportunities, reduces economic productivity and undermines social cohesion. We need to not only fight discrimination in the labour market but also apply focused policies and intervention against segmentation. For a dynamic labour market, we need to bring down remaining legal barriers, but it does not mean that we should be blind to differences in terms of labour market opportunities and needs of various groups, like age groups. Age and gender specific intervention is important to create an inclusive economy which is also more productive.
Labour market segmentation has been perhaps the key challenge addressed by recent labour market reforms in several Member States. The Commission has been advocating the introduction of a single open-ended contract in countries with most segmented labour markets.
Young people are certainly among those most at risk in the labour market, and increasingly run the risk of being marginalised. This fact has immediate consequences, but also medium and long-term implications. The youth unemployment situation is alarming and totally unacceptable. Employment policies need to deliver better outcomes for young people. For this, we need adequate instruments, such as Youth Guarantees (that youngsters are offered a job, training or further education within four months of leaving school) and a quality framework for traineeships.
My eighth point tonight is that a necessary counterpart of any structural labour market reform is investment in people. We have highlighted this in the Employment Package but it is always worth recalling this again: structural reforms are about improving the functioning of the economy and society, and this does not happen overnight. Investment is needed to implement reforms. A Youth Guarantee, a well-functioning lifelong learning system and an increase in the effective retirement age are just a few examples of structural reforms where investment is crucial.
We are in the middle of a fervent discussion on the EU’s future Multiannual Financial Framework. For employment, education and inclusion policies – and therefore also for the implementation of many country-specific recommendations – the key instrument of the EU budget is the European Social Fund. The Commission has proposed a reinforced budget for the ESF at a minimum of 25% of the Cohesion Policy budget, i.e. at about 84 billion euros for 2014-2020.Whether this crucial provision will be agreed in the discussions in the Council and European Council is now to a large extent a responsibility of stakeholders such as employment and social ministries, employment services, social partners and civil society.
We all know the ESF is a crucial tool in many Member States for making progress on the employment, education and poverty reduction targets of Europe 2020. Therefore we all need to do our part to promote and defend the ESF in the on-going negotiations.
Ladies and gentlemen,
The Employment Package and this conference seek to build a European agenda for job-rich recovery. I have discussed in detail several key requirements for a job-rich recovery in general, so let me devote my remaining two points to the new European dimension of our policy.
My ninth point is about our need for a truly European labour market to be developed and managed. Improved matching between labour availability and vacancies across borders is crucial for both productivity and employment in Europe. Free movement is an important freedom - people can vote with their feet against conditions they do not want to accept. The Commission has emphasised that there is a great potential for a genuine European labour market, even if we will never reach American levels of transcontinental mobility . Our biggest challenge is therefore an upgrading of the EURES system: we need to transform EURES into a genuine pan-European recruitment and placement tool. The need for this reform was strongly supported by Heads of State and Government at the last European Council. The European Council also clearly supports the scaling up of EURES to develop mobility schemes for young people. We have started this spring with the Your First Eures Job programme, but more needs to be done.
My tenth and final point is that the governance of EU employment policy must be strengthened in order to maintain the place of the social market economy in a genuine EMU 2.0 . In the Employment Package, we emphasised the need to strengthen attention to employment issues within economic governance. This also means stepping up coordination, surveillance and peer pressure to deliver on National Job Plans. A poor employment situation in one Member State affects others too, and the Europe 2020 employment target has been established for a good reason. Neither is it a surprise that the number of country-specific recommendations on employment policies has significantly grown from the 2011 to the 2012 European Semester.
Using effectively the potential of our labour resources and reducing unemployment is a matter of economic stability and has to be addressed as Europe strives to build a genuine Economic and Monetary Union. I am deeply convinced that in order to achieve a fully accomplished Economic and Monetary Union, it is also time to give EMU a true employment and social dimension.
Employment and the social situation cannot continue to be considered simply as adjustment variables, the last things to improve if all the rest works well. Stability and growth require sustained demand, which in turn depends on the employment and social situation. Stronger action on employment and social issues in the EU are also needed for maintaining political unity and social cohesion.
We need to go ahead with enhanced coordination of employment (and social) policies in the euro area and open to all Member States.
The agenda for a job-rich recovery we have set out is about bringing together reforms and investments, connecting macro- and microeconomics and creating synergies between different policy fields. But most of all it’s about bringing people together. Social partners, national parliaments, companies, a number of different ministries, regional and local governments, EU institutions, labour market institutions – we all have to work together in order to put people to work and in that way generate a recovery in Europe.
Thank you for your attention, and I look forward to our further discussions tonight and tomorrow.