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Speech - Labour law - cornerstone of Europe’s social dimension

European Commission - SPEECH/13/841   21/10/2013

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European Commission

László ANDOR

European Commissioner responsible for Employment, Social Affairs and Inclusion

Labour law - cornerstone of Europe’s social dimension

Commission Labour Law Conference/Brussels,

21 October 2013

Excellencies,

Distinguished guests,

Ladies and gentlemen,

It is my privilege to welcome you to this Conference.

I have organised this conference because I am firmly convinced that we would all benefit from an exchange of views on how European labour markets have changed over the last five years, how well European labour law addresses the challenges we expect to face over the coming years, and whether anything can be improved in this respect.

When this Commission began its term of office in 2010, our main priority was to lead the European Union out of the economic and financial crisis and to achieve a job rich recovery and smart, sustainable and inclusive growth. This is still the case. The Europe 2020 Strategy sets ambitious targets for increasing employment and reducing poverty. We have put in place the European Semester, the Employment Package and the Social Investment Package in order to guide the Member States in implementing their structural reforms, including their labour market reforms. Just two weeks ago, the Commission presented a Communication on Strengthening the Social Dimension of the Economic and Monetary Union.

Through these initiatives we have addressed the evolving employment and social challenges in a systematic manner and from the perspective of pan-European interest.

However, it is clear that the on-going economic crisis has significantly worsened the employment situation both quantitatively and qualitatively, has deteriorated living standards and has undermined social cohesion.

Job creation during the double-dip recession mainly involved short-term and part-time employment at lower salaries, while many permanent and better-paid jobs were destroyed.

With the collapse of domestic demand and the intensification of globalisation and longer-term structural trends, such as growing constraints on the use of natural resources, most European companies have faced intense competition, and many have had to restructure or close.

This situation has in turn increased the pressure on employment and working conditions. From the perspective of many individual companies, reducing labour costs has become increasingly important.

The macroeconomic effect of such company-level adjustments is, however, a more complicated question. Reducing labour costs has contributed to depressing aggregate demand. Moreover, reducing investments in human capital and in the quality of working conditions can have adverse long-term effects on productivity and therefore growth.

What is clear is that European labour markets have become more polarised during the crisis, with many medium-paid jobs disappearing in favour of lower-paid and less-protected jobs, while the top segment of the labour market has continued to do well.

Such growing inequality involves many economic, social and political risks. I believe, therefore, that it is time to address the issue of working conditions and to reflect on what needs to be improved if we want to restore economic growth in Europe and ensure that it is smart, sustainable and inclusive.

European labour law plays a key role in guaranteeing decent working conditions. It was initially designed to ensure that the introduction of the EU's Single Market did not lead to a lowering of labour standards or distortion of competition. Today, labour law also plays a key role in ensuring that a high level of employment and sustained economic growth are accompanied by a continuous improvement in living and working conditions throughout the European Union. Labour law has become a cornerstone of Europe’s social dimension.

However, many stakeholders have responded to the crisis by calling for more flexibility and less EU regulation. And that has spurred increasingly concern in others at the risk of social dumping.

It is therefore useful to refresh our thinking on whether and why we still need labour law at EU level. Could we not just let countries opt out and do their own thing?

Personally I firmly believe that EU labour law — especially in the present juncture — plays a key role for two main reasons.

First, because the EU is not just a market.

It is a social market economy underpinned by a core of social values and goals, including social protection, improvements in Europeans’ living and working conditions and social dialogue.

Second, because common rules are essential to preventing distortion of competition within the Single Market and to stopping the erosion of labour standards.

Common rules and labour standards guarantee a level playing field for workers and companies across the EU.

The Union doesn’t pluck EU labour law standards out of thin air.

They are based on our rich heritage of national labour legislation and the longstanding collective-bargaining tradition in many Member States.

But they also draw inspiration from the International Labour Organisation’s body of minimum standards on employment, which have been the reference point for the working world for almost a century now.

This point deserves special mention at today’s conference and I look forward to hearing ILO Director-General Guy Ryder’s angle on the subject in a short while.

Several years ago, the Commission opened a debate on the modernisation of EU labour law. It underlined the need to combine flexible labour markets with better protection of both national and transnational workers. Since then, legislation has been adopted to guarantee equal treatment for temporary workers and to improve workers’ information and consultation in transnational companies. We launched a review of the Working Time Directive, which is currently being re-assessed after the social partners’ attempt to negotiate an agreement. And very important negotiations are under way on the proposed Directive to improve the enforcement of the principles laid down in EU law on the posting of workers. This is a key instrument for tackling social dumping. I appreciate the sterling efforts of the Lithuanian Presidency, and especially Mrs Pabedinskiene, to bring the Member States to an agreement. Unfortunately last week's Council of Employment and Social Affairs Ministers did not reach agreement. Time is now really of the essence. I take this opportunity to point out that if no agreement is found soon, all parties will lose out: there will be no improvement in the protection of posted workers and no increase in transparency and legal certainty for service providers.

The Commission is also undertaking an ambitious programme to evaluate the effectiveness of the existing body of EU labour legislation. More than half has already been covered.

This evaluation work is essential if we want to ensure that legislation adopted 20 or 30 years ago is still fit for purpose. We have to endeavour in particular to identify any unnecessary regulatory costs, but we must not forget the benefits — including for SMEs.

When discussing the future of EU labour law, we must not overlook the Member States’ very important role both in the implementation of common EU rules and in their enforcement in practice.

And we must be attentive to some far-reaching national reforms, often triggered by the economic and employment crisis.

These reforms are based partly on the Country-Specific Recommendations addressed to Member States during the EU's yearly economic policy-making cycle, the European Semester.

We must ensure that these reforms do not result in a race to the bottom in terms of labour standards and that the social partners at national level are properly informed and consulted before key decisions are taken.

Ladies and gentlemen,

This conference aims to stimulate debate on the way ahead as regards EU labour standards and to help us identify the key objectives for our action.

Today we will focus on three main issues.

Undeclared work

The first issue is undeclared work, which will be the topic of Stream I.

Undeclared work is the most harmful form of social dumping.

It undermines competition, deprives workers of social protection and denies governments tax and social security revenue.

That is why it is high on the EU agenda.

Undeclared work is a problem in all Member States, though finding exact figures is by definition difficult.

The recent Commission Report on Tax Reforms estimates the size of the shadow economy in the EU at around 15% of GDP, with peaks of around 30% in some Member States.

But those estimates are often based on a broad definition and on comparisons of macro-economic indicators without any reality check.

In order to address undeclared work, we need to raise awareness of the problem, to put in place preventive measures and to improve enforcement and control measures.

The Commission is currently working to establish a European platform to prevent undeclared work.

The platform would seek to improve cooperation by bringing together Member States' enforcement bodies — the labour inspectorates and social security, tax and migration authorities — with employers' representatives and trade unions, in order to share information and best practice and to identify any future steps in this area.

Labour-market segmentation

The second issue is labour-market segmentation.

Unfortunately many people have lost their jobs in the past five years as a result of the economic and financial crisis, and people in temporary jobs have been particularly hard hit.

While the percentage of temporary employees has followed the labour market’s ups and downs, the percentage of employees on temporary contracts in 2008 to 2012 varied significantly among the Member States, ranging from 5 to 17%.

We need to focus our attention on employees, especially young people, on temporary contracts because many of them — around 6 out of 10 temporary employees in the EU — would prefer permanent contracts but simply cannot find a permanent job.

Part-time work has also continued to grow throughout the crisis, which results in many workers ending up in precarious situations and being more likely to lose out on important social rights.

The growth in such contracts has increased labour-market segmentation, and long-term acceptance of such contracts should not be taken for granted.

Many part-time workers would like to work more hours and are therefore only in this situation for lack of an alternative.

Stream II will offer an opportunity to look at recent labour-law reforms to introduce more flexibility in the way the labour markets function and at the role of EU standards.

It will also concern the pros and cons of such recent concepts as the single open-ended contract and the need for a floor of rights.

The first EU-wide evaluation of legislation on fixed-term and part-time work will be presented at this Conference and will provide food for thought and discussion.

It should also feed into the next round of the European Semester.

Anticipating and managing change

The third issue is the anticipation and management of change.

Over the five years to the first quarter of 2013, 2.8% of jobs in the EU disappeared across all sectors, although the rate of net job losses was lower in the second downturn after spring 2011 than in 2008 and 2009.

According to the European Restructuring Monitor, announced job losses have outnumbered job gains in every quarter since the first quarter of 2008, and continue to do so in most sectors.

In a global economy, where companies need to adapt constantly to new challenges, it is crucial for management and labour to work together to smooth out the process.

Workers’ rights to information and consultation on company matters that have a direct bearing on employment and working conditions must be guaranteed, especially today when job stability is decreasing. This will be discussed in Stream III.

To make sure EU legislation on worker information and consultation is “fit for purpose”, the Commission has undertaken a “fitness check” of the relevant Directives.

The results will be presented this afternoon. The discussion should also help in drafting the future Commission Communication on Quality Framework on anticipation and restructuring, which will also frame the current legislation on employee information and consultation.

Ladies and gentlemen,

There is ample evidence to suggest that the EU's most productive and competitive economies — the Nordic countries, The Netherlands, Austria and Germany — have managed to combine a comparatively high level of social regulation and protection with flexibility-enhancing measures and dynamic social dialogue between employers' representatives and trade unions.

I am convinced that labour protection has to go hand-in-hand with economic growth.

I am also convinced that our labour law can benefit employers, employees and consumers.

But there are many questions to answer.

Are the instruments I have just presented to you under the various Streams enough? Should we go further?

Should we aim for new standards at EU level?

Are workers and companies sufficiently informed about the existing rights and obligations? Should we do more to raise awareness?

Are workers' professional experience and contractual relations well-documented and traceable? Would a "workers' card" detailing a worker's employment history be helpful?

I hear a lot about black listing of those who stand up to protect workers' rights. What is the best way to address this?

I look forward to hearing your views of the challenges facing us, based on your day-to-day expertise and the situation in your Member State.

Your comments and ideas will feed into the drafting of our future proposals and initiatives.

Thank you.


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