The European Social Dimension in Perspective

From the outset, the European project has been characterized by a double imbalance. First, it has been dominated by the logic of economic integration, with the social element essentially constituting a by-product of any associated benefits. Second, social policy has been limited, both in terms of scope and of procedures for adopting legislation requiring unanimity within the Council. Therefore, there have always been two aspects to the debate on creating a social Europe: rebalancing the economic dimension with the social and developing an ambitious social program.

Mobilization of the concept of a social dimension at European level has generally coincided with moments when the European project was going through a difficult period. Here we examine how the development of the social dimension, especially since 2005, has responded to the particular challenges of the time, thus becoming a symbol for restoring faith in the entire project and showing that it is not just about economic integration but also social progress. What led the European Commission to propose the European Pillar of Social Rights? What impact could such developments have on the European social dimension?

Building the social dimension in a historical perspective

Around every 15 years an ambitious proposal of rebalancing and renewing is adopted. The first attempt was in 1973/74, with the first social program and the use of Treaty of Rome provisions (gender equality article, Article 235 allowing for the unanimous extension of competences). There was then a fertile period in 1988/89, with the Community Charter of the Fundamental Social Rights of Workers, followed by an ambitious action program.

Then, in the early years of the new millennium, a rethinking of the whole European political system took place, with the adoption of a Charter of Fundamental Rights and the negotiation of a Constitutional Treaty. Finally, the presentation in 2015/16 of a pillar of rights and principles and a (very) small-scale social program could represent the fourth attempted relaunch of social Europe.

Each attempt has had its particularities and principal actors.

The first was made in a context of strong social mobilization at the beginning of the then economic crisis. It was the result of an analysis on the part of national governments and the Commission that ignoring the social was no longer possible. Two EU flagship policies were developed: gender equality and health and safety at work.

The second was a consequence of the project of a ‘large internal market’ and the pledges of the Commission President, Jacques Delors, simultaneously to develop its social dimension. A non-binding Charter made up of 12 sections was adopted, alongside an action program of almost 50 measures, including more than 20 of a binding nature. This approach was a defensive one in the face of increasing liberalization and deregulation, and designed to counter the effects of globalization. As in the first case, the initial push lasted only six to seven years, finally breaking down due to the necessity of respecting the Maastricht criteria for entry into the Economic and Monetary Union (EMU) and reforms of the labor market and social protection, which often go hand in hand.

The third attempt was more complex and ambitious but also less successful. The logical consequence of monetary integration and the impossibility (at least historically speaking) of having a currency without a state was an attempt to redefine the fundamentals of European integration. This happened principally through the acceleration of political integration via the negotiation of a (quasi) constitution intended to create a shared demos, as well as a Charter of Fundamental Rights expressing common values. Initially, it was not very clear what place there was for the social in the constitutional debate, and great effort was required to get it onto the EU agenda. This was an easier task when it came to the Charter of Fundamental Rights, but the rights included were already established and so brought little or no innovation or progress, even in the 2007 Lisbon Treaty. This also ran out of steam after six to seven years following the revision of the Lisbon Strategy and the European Employment Strategy (EES) of 1998 in 2004/05.

And so, 15 years later and almost 30 years after the Charter of Fundamental Rights, the EU now says it wants to make a new attempt at rebalancing and developing the social dimension. This project is to be realised in the form of a European Pillar of Social Rights (EPSR) comprising rights and principles distributed between 20 domains that are supposed to safeguard and enhance the acquis communautaire.

From early beginnings to recent developments

2005 marked a turning point in the European approach to the social dimension: with enlargement, strong economic growth and higher employment, it was eclipsed by issues of how to increase productivity and competitiveness. Basically, competitiveness was not regarded as separate from the social dimension, but rather as a necessary precondition for social progress. Two lines of thinking are illustrative. André Sapir, in a 2005 Bruegel paper on European social models, marked the transition from interpreting the social dimension as a legitimate objective in itself to an approach whereby social policy should evolve in parallel with economic competitiveness. The post-2007 emphasis on flexicurity also confirmed the need to make social policy fit the demands of the economy.

The European Court of Justice (CJEU) seriously undermined the industrial relations system and employment law in several member states in key cases such as Viking-Laval-Rüffert and Commission v Luxembourg. Its decisions challenged a long-standing assumption that economic integration fell within EU competence whereas social policy was a matter for the member states and national social rights, such as freedom of association, the right to collective bargaining and the right to strike, could not be challenged at the supranational level. Hence the period preceding the 2008 economic crisis became an ‘impasse’ characterized by expansive rhetoric about the need for a ‘European Social Model’ with, however, few signs of a social strategy at the heart of EU decision-making processes.

The crisis sparked a new impetus. Several member states effectively strengthened their social protection systems and extended measures allowing employers to retain staff rather than issue redundancies in an early response – unlike the EU per se. This impulse, however, came to an end in 2010: first, the Lisbon Strategy was replaced by the Europe 2020 strategy, which highlighted employment, training and the fight against poverty; furthermore, the majority of EU member states started to adopt austerity programs and, finally, the Greek crisis highlighted the weakness of the governance system behind the euro. Together, these three elements pointed to a new era in the way the social dimension was to be defined and handled at EU level.

The main change resulted from strengthening economic governance. The financial and economic crisis which plunged numerous EU member states into a fiscal crisis led to financial market pressure not only on the countries in question but also on the euro and hence Europe in the broader sense. The European Commission produced a set of regulations and directives on the coordination of budgetary policies, macroeconomic imbalances and structural policies, bringing indirectly a uniform definition of social policy guidelines. National fiscal frameworks were required to align themselves as far as possible with the new economic governance structure and to follow the new set of rules on budget deficits, debt ratios and the like or face fines. These very binding mechanisms gave the Commission and Council more power to determine how the member states drew up their budgets and hence how they could define and finance their social policies.

Between 2008 and 2014, the European social agenda came to a halt both in terms of soft law and binding legal provisions. The only initiatives that got off the ground were the European youth guarantee and the social investment agenda in 2013. Certain ideas were put forward but swiftly buried, such as a European unemployment benefit system. This does not mean that social policy as such was no longer on the agenda: rather the reverse in fact. The economic governance system described above brought country-specific recommendations (CSRs), and half of these related to employment and social policies. The recommendations advocated decentralising collective bargaining, raising the retirement age, tying wage developments to productivity and so on. Very few dealt with improving access to social protection or guaranteeing that the most vulnerable people enjoyed the benefits of the welfare state system. By establishing a supranational governance based on the Stability and Growth Pact, the EU created a system which guided the way in which national governments were meant to reform their welfare state, industrial relations system and labor market. The social dimension was seen as merely an adjustment factor in relation to restructuring and economic difficulties.

After 2005, then, Europe not only lacked a central social policy agenda – it also undermined some of the fundamental principles on which social policies had been based, notably the principle of equality between workers on the same territory and the ability of the member states to use social security as an automatic stabilising factor. Before, there had been an implicit division of tasks: market effectiveness at European level and legitimate redistribution at national level, a split summed up by David Natali in 2015 as: ‘Adam Smith at European level and Keynes at national level’. Now Europe seems to be geared more towards Adam Smith, or even Friedrich Hayek, with the market as sole compass at European and national level.

2015 – A new departure?

The next period was marked by the Brexit debate. Brexit was partly a vote to reject a non-social Europe and rules on freedom of movement that were regarded as too lenient. In this sense, the potential contraction is certainly linked to poor handling of enlargements.

The UK vote to reject the EU and migrants was not an isolated event. In central Europe, Viktor Orbán in Hungary and the Law and Justice Party (PiS) of Jarosław Kaczyński in Poland were both anti-European and anti-migrant, without respect for liberal democracy but with a pro-social agenda for their citizens. This became the new reality: the rise of populist and far-right, pro-social movements.

Under Jean-Claude Juncker the Commission had only eight social democratic members out of 28. And at the 2014 European Parliament elections anti-European parties gained ground. Doubts emerged and fears multiplied about the future of the European project. This led Juncker to launch the idea of a ‘Triple A’ social Europe to show that his predecessor's era and blind austerity were over.

In social matters, this led to the adoption, in November 2017, of a European Social Pillar (EPSR) incorporating a set of rights and principles in 20 areas that were supposed to guarantee and improve the acquis communautaire: ‘the European Pillar of Social Rights is about delivering new and more effective rights for citizens’. It embodies 20 principles which are structured around three categories: equal opportunities and access to the labour market, fair working conditions and social protection and inclusion. With 15 documents in total, the result is neither very organised nor very clear. Several proposals (regarding work-life balance, employment contracts, access to social protection, etc.) make up the draft of a work program. The latter two principles aimed to ensure a minimum of rights for all workers, whatever their status, including in the platform economy which often uses bogus self-employed people. In any case, it marked the beginning of a reflection on work and employment contracts in a digitized economy.

The other angle of action was intended to ‘socialize’ the European Semester with a Social Scoreboard (statistical indicators) aimed at giving a more social ‘coloring’ to the EMU. The Commission and Council maintained that they wanted to revive European social dialog. However, BusinessEurope, the main business lobby, disagreed with all the proposals linked to the Social Pillar, giving little cause for optimism.

In terms of a federative concept, the notion of social investment was partially taken up by the Commission in a 2013 package. It was promoted and developed by a series of intellectuals close to left-wing think tanks, such as Anton Hemerijck, Bruno Palier, Frank Vandenbroucke and Gøsta Esping-Andersen. A key idea is that the social dimension represents an investment, particularly if Europe pursues preventive rather than remedial policies. This is best illustrated by childhood where massive investment could increase human capital and reduce inequality and even violence.

A change of tone has come in a political environment which had hardly altered and even deteriorated in view of Brexit and the divisive refugee issue. The proclamation of the EPSR and the adoption of a new directive on posted workers in May 2018 appeared to indicate that the period of massive deregulation was over and there was a return, if not to a an agenda for a social Europe, then at least to one in which competition based on wages in the same territory was to be avoided. Even more interestingly, a more fundamental change was taking place as a result of changing preferences in many Central and Eastern European Countries (CEECs).

The initiatives seemed to signal that finally, after 20 years of to-ing and fro-ing, Europe is returning to the fundamental principles that had governed the EU from the outset. In the absence of European social harmonization, the member states were empowered to develop the protection that they felt necessary at national level and not be faced with unfair competition at home between workers with differing rights, and measures protecting businesses who were trying their hardest not to respect fair competition. It remains to be seen how big the room for maneuver the member states have regained with regard to spending and policy making.

What of the future?

If we wish to maintain and enhance the European social model, we need to act now on three complementary fronts: we need to put social matters back on top of the European political agenda; we need to complete the EMU and endow it with stabilization mechanisms; and we need to change the orientation of economic policies.

The last point is obviously key. A new form of European governance must be made to serve not the financial markets but the transition from a society which is over-consuming energy and raw materials and undervaluing labor to one based on better jobs, increased energy efficiency, renewable energy, durability of products, systematic recycling of materials, transformation of production chains: the transition to a low-carbon society. We need to devise a European roadmap to achieve this between now and 2050.

This can happen only if we create institutions which promote solidarity and limit the power of the marketplace. Such institutions need to support a process of convergence in a new, complex globalization phase and the urgent need for ecological transition. Above all, the social stalemate can be broken through open, democratic dialog and new stakeholder groupings. The EPSR forms a good basis for this approach but is far from sufficient.

More specifically, we think it is necessary to:

Place social matters at the heart of European policy

The aim is to ensure that action is effectively focused on the economic and social convergence program for which the EU is mandated by the Treaties (Article 151 TFEU). We need to reassert the fact that EU institutions are strictly bound by fundamental rights. For economic ‘freedoms’ not to restrict fundamental social rights, a Social Protocol should be added to the European Treaties.

In that context, the EU and the member states must take action in the following fields in particular:

• Fixing wages is a national competence. It must therefore be implemented in line with national labor relations systems and practices, duly respecting the autonomy of the social partners and collective bargaining. However, it is also necessary to promote national coordination so that, in the medium term, wages can comply with EMU constraints instead of forcing a radical decentralization (strengthening of the institutions).

• A minimum social income should be established in each member state, based on common European principles and allowing people to live in dignity (market limitation).

• A tripartite European platform should be created in order to assess in general terms how social dialog and collective bargaining are supported in the member states and evaluate how European social dialog agreements are transposed and implemented at national level (strengthening of the institutions).

• It is necessary to reaffirm the principle of ‘equal pay, equal rights’, the guarantor of fair competition, respect for workers’ rights and labor law and European industrial relations systems (convergence).

• Social protection systems must be afforded the means of playing their redistribution role to the full through benefits and universal access to quality social and health services, irrespective of income. Performance indicators should be established for social protection systems in order to measure progress (access to healthcare, working poor, etc.) and fix common targets (market limitation).

The EU must step up the improvement of working conditions and health and safety and propose a new health and safety at work program together with minimum quantitative targets for the labor inspectorate (strengthening of institutions, role of the state).

Corporate governance must be changed at European level, in particular:

• European rules are necessary to improve transparency and make subcontracting chains truly genuine. In particular, a European instrument regulating the joint and several liability of user undertakings (‘chain liability’) and of intermediaries in the case of temporary work should be proposed/established (convergence).

• Workers’ representatives should be installed in businesses, with genuine powers to foster the green transition (new institution).

• Management methods based on untenable workloads and schedules should be reviewed so as to combat illness linked to stress, burn-out, suicide (democracy).

• To that end, a common pillar of rights and obligations to assist companies in the handling of their restructuring operations is required (role of the state).

• Binding social and environmental clauses must be included in public works contracts (market limitation).

Complete the EMU

The aim of the new European governance must be to stabilise the eurozone by expanding the role of the ECB as lender of last resort and allowing the issue of eurobonds as well as by implementing country growth programs. However, in the medium term, a detailed assessment of social stability mechanisms in the eurozone is required. There needs to be an in-depth analysis of the different aspects of introducing an unemployment reinsurance scheme at eurozone (or EU) level for workers who are victims of asymmetric shock (institution). It is also necessary to encourage the gradual emergence of forms of European social protection, in particular by strengthening the European Globalisation Adjustment Fund in order to counter new risks (institution).

We need to return to a pluralist approach. This is why it would be useful to initiate a debate on these challenges, respecting diversity of approaches, for example by creating a European economic analysis council, on the lines of the French model, or major reference centres, as in Germany. The European institutions must return to providing an open forum for discussion of possible future scenarios, instead of being a machine which imposes a biased and unilateral view of the world (democracy).

Finally, progressive and redistributive fiscal regimes which contribute to the financing of social protection schemes and the green transition are essential:

• harmonizing the corporate tax base and minimum tax rates for businesses (for example by introducing a minimum rate of 25% – the current average in Europe);

• introducing a financial transaction tax (FTT) covering not only equities but also bonds and derivatives;

• resolutely combating tax competition and tax evasion; common principles should be laid down for the taxation of income and wealth (including digital economy).

The EU must promote and coordinate investment in research, applied research and innovation; it must contribute towards implementing coordinated, regulated industrial policies and open-source patent systems (market limitation).

The EPSR has introduced and laid the foundations for pushing forward many of the above-mentioned proposals and can as such give new life to the social dimension. However, future developments will very much depend on the prevailing cyclical and structural situation.

A first possibility is that the economic outlook improves, the troubles caused by Trump and May subside, and the retreat of the populist waves or even the EU restored to public favor lead to a return to ‘business as usual’; in other words, the social dimension falls by the wayside.

Alternatively, this confusing period could lead to several advances on social issues but still no real rebalancing between the social and the economic.

A third possibility is that awareness of the risk of a new global financial crisis, the continuous distrust in any real positive effects from the EU, persistent unemployment in a number of member states and a worrying international climate will lead to a regrouping of strategic actors. These actors would then succeed in structuring long-term change with the aim of rebalancing the social and the economic.

The dominant reading of the prevailing situation will determine the real potential of the Social Pillar: damp squib, yet another series of incomplete results, or first step towards sustainably strengthening the social dimension.

Note: This article is based on Jepsen, M. and Pochet, P. (2018) Le socle social en perspective historique, OFCE Revu, 158(2018)