The return to social Europe is urgently needed to address problems in five key areas: combating environmental damage and climate change, reforming globalisation, regulating financialised capitalism, reducing material inequalities and reconciling economic change with workers' needs for security. This last now needs to include restoring normal life in the wake of the coronavirus. These have to be addressed with the full panoply of policy tools common to both national and European levels. There is however one important one where the EU alone has exceptional competence – the setting of standards. This topic will be addressed first.
Standards are not normally at the forefront of political debate, usually being relegated to technical discussions. It is however through standards that a good deal of the regulation needed to restrain excesses of market behaviour can be achieved. The EU has become the world's leader in developing international standards for goods and services. It needs that competence to establish its own norms for the single market and it has taken this expertise to the level of wider international trade agreements. It has left the US behind in this process, with less need for international trade and generally more lax internal quality standards. Because the EU is the world's biggest single market, many producers elsewhere include EU product standards wherever they are trading. This gives the union extraordinary power. It can use its position as the world's leading trading bloc to introduce improved standards in the trade agreements it signs with countries across the world.
Standard-setting is therefore a key political arena for reconstructing social Europe. Standards establish criteria firms have to meet if they want to sell into a particular market. They are therefore not vulnerable to the usual objection to regulation – that it leads firms to move their investments to countries with the lowest regulatory conditions. Firms will not exclude themselves from opportunities to sell, especially into a market as large as the EU.
At present EU standards are mainly concerned with the quality of the end-product of a production process. They have been far less concerned with the quality of the processes themselves. This issue was raised in the 1980s during initial debates over the single European market by trade unions and social-democratic parties seeking to include quality of the working environment in standards. It was defeated by business lobbies, and conservative and liberal parties, principally on the grounds that it would put the interests of groups of workers in a limited number of industries before the general consumer interest in lower prices. This was short-sighted and needs to be reversed. Process standards can serve general interests far wider than those of consumers alone – as will become clear.
Combating environmental damage and climate change
The problem of negative externalities reaches a truly global scale with climate change, the rapid decline in biodiversity and other forms of major environmental damage. This issue must now stand at the top of all political agendas. The European institutions themselves are preparing ambitious targets for reducing carbon emissions and other forms of environmental damage – but these will need vigorous political support by left-green alliances, as they will be contested at every stage by powerful business lobbies. The EU does not have a good record of resisting corporate pressure. Governments in the US are likely to continue to provide an ostensibly more 'business-friendly' environment by ignoring the evidence on climate change and the UK is threatening to use its position outside the EU but on its doorstep to mount a competitive challenge by weakening environmental and social regulations. Strong nerves and considerable public campaigning will be needed to turn European ambitions into realities.
In the past environmental policies have been a stumbling block to co-operation between social democrats and greens. The former have prioritised the interests of workers in polluting industries and lower-income consumers, who face higher prices if the goods they buy have to meet stronger standards. Greens have of course prioritised the environment. This dilemma is however declining in importance. 'Green' technologies are opening up new opportunities for the production of goods that protect the environment and use resources more efficiently.1
While it remains true that we need to reduce various kinds of energy-wasteful consumption, the days have passed when green politics was seen as an enemy of economic growth, in two respects. First, the more that low-carbon or carbon-neutral sources of energy can be developed, the fewer changes we in the advanced world shall need to make to our way of life, and the fewer obstacles people in the developing world will face as they try to join us in that way of life. For example, the improvement of electric vehicles will very soon reduce our reliance on the internal combustion engine, eliminating dilemmas such as that faced by the French government when environment-friendly fuel taxes produced the gilets jaunes reaction among a rural and small-town population heavily dependent on motor vehicles.
Secondly, the design and manufacture of quality, energy-efficient products is a high-value-added activity, requiring high-level skills and infrastructures. This is the future for European manufacturing. Producers located in parts of the world that take the lead in higher product standards have strong incentives to develop high-value-added products that will meet those standards. As the higher standards spread to other parts of the world, these firms maintain a first-mover advantage. An example is the prime role of Danish producers in wind-farm technology, following the adoption of ambitious carbon-emissions targets by Denmark.
Europe is excellently placed to take that lead in green technologies, given that the US, Russia, Brazil, Australia and some other countries are currently opting out of concern for the climate and the environment. Before long manufacturing products for these technologies will earn returns on investment in the market, but public action is needed to create the market in the first place. A good environment is one of those public goods the market itself cannot create. It is therefore essential to expand the EU's strong funding of research and development into environment-friendly technologies.
At the same time, adjustment to the new forms of production will threaten the security of workers in industries facing major change. As Susanne Wixforth and Reiner Hoffmann (respectively head of the European and international department and chair of the Deutsche Gewerkschaftsbund) have recently argued2, a strong social policy for assisting these workers must be part of environmental policy. They therefore endorse the European Council's coupling of these issues in its new strategic agenda. Exceptional measures are needed to support the populations of regions dependent on coal and vehicle production through transitions to new activities, as the European Trade Union Institute has proposed.3
There is considerable hypocrisy when western countries claim to have reduced their emissions of carbon dioxide and other pollutants, because they have ceased to produce certain kinds of goods and instead import them from other parts of the world which then continue the polluting activity, usually under worse conditions. Given the global impact of pollution, this achieves nothing. Here is a leading example of where European standards need to add quality of production processes to those of products themselves, both within the single market and in global trade. The shared human interest in avoiding inhabiting a threatened planet is considerably more general than the consumer interest in having the lowest possible prices. Standards are needed to ensure that goods entering the EU are produced with methods that avoid specified kinds of emission.
Reconstructing economies and societies after the pandemic will sharpen the tensions around environmental policy. On the one hand there are those, in Europe and beyond, arguing that the desperate need to return to profitable activity means that all concern with meeting standards that will slow that process down must be cast aside. They are saying the same about labour standards, planning standards and almost anything that tries to raise quality. On the other hand the vacuum left by the disappearance of so many firms and jobs provides an enormous opportunity for the diversion of activities needed for the green economy. The government and EU support so many industries need, in order to resume profitability, must be made dependent on their adopting an environmental turn. The biggest and most obvious example is that airlines and the aircraft industry need to be persuaded to put more effort into lower-energy air travel. It is vital that this view prevail, as it brings long-term gains ; the anti-standards approach of 'immediate profitability at all costs' would leave a legacy of a damaged planet and deteriorating standards of many kinds, all for very short-term gain.
Reforming globalisation
Globalisation – provided it is regulated – is necessary to continued growth of prosperity around the world. As developing economies succeed in selling more goods to the advanced ones, so the incomes of their populations rise and they in turn buy more goods and services from us. Our growth depends on an expansion in the scope of markets, not on protectionist measures to limit trade with the rest of the world so that we can continue producing in and selling to our own small spaces.
Protectionism is not only selfish – trying to keep the world's poorer countries excluded from any chance to improve their lot by trading with us – but in sectors where national economies can support only a very small number of firms it also strengthens the power of national capitalist producers by shielding them from external competition and increasing the dependence of consumers on them. The wealthy will always find ways of securing access to international markets ; it is working people who suffer the restrictions on consumers of economic protectionism.
The virtually unregulated globalisation that we have experienced in recent years has however damaged societies, in both the advanced and developing worlds. The vast labour resources of the newly industrialising countries have enabled their firms to keep the prices of products low, by providing very low wages and appalling working and environmental conditions. The general lack of democracy and of strong civil societies in those parts of the world has prevented opposition to this situation. This has had a doubly negative impact on working people everywhere, with bad working and living conditions in developing economies and disorienting and rapid changes among producers in the already industrialised world, unable to compete with the low prices.
For neoclassical economists these negative externalities are 'friction' – transitional problems which are resolved as the market adjusts and can be eased by limited social-policy measures. When transitions are prolonged and complex, however, imposing shocks, the secondary social effects are long-lasting and go way beyond friction. These include a rise in xenophobia, which cannot be easily remedied through unemployment pay and retraining programmes.
We need to act now to prevent further damage, first by slowing the globalisation process and, secondly, by developing intelligent responses to the now predictable disruption unregulated globalisation causes. This is primarily a task of standard-setting, constituting another major field where the EU's leading role must be extended to production processes. There must however also be wider international action.
At present countries can enter the regime of the World Trade Organisation (WTO) and enjoy increasingly tariff-free trade, provided they meet certain trading criteria such as the elimination of state subsidies to firms. These rules must be extended to include conventions of the International Labour Organisation (ILO). There are eight key conventions, two on each of four themes: freedom of association (to join trade unions), prohibitions on forced labour, similar prohibitions on discrimination against ethnic and other minorities, and others on child labour.
Substantive and not merely formal guarantees of trade union rights would further help workers demand safe and healthy working conditions and reasonable working hours. Failure to abide substantively by ILO conventions should be as severe a barrier to a country participating in the WTO's tariff regime as failure to comply with free-trade rules. A fully competent and well-staffed international inspection regime and court of verification must accompany the introduction of such rules ; there is widespread evasion of even the WTO's limited agenda, worsened by the recent decision of the US government to undermine the organisation's judicial capability by refusing to nominate judges to its appeal process.
Extending WTO rules to embrace labour standards would not constitute a protectionist policy, since as a country brought its standards up to the mark it would automatically be entitled to the free trade made possible by WTO rules. These measures would slow the pace of globalisation and therefore, admittedly, slow down improvements in the standards of living of consumers in both the advanced and developing worlds. But this is a necessary price to pay if labour standards are to be maintained, the environment protected and radically disruptive consequences of change avoided. A process that is slowed down eventually does happen, but damage done by allowing unregulated markets to continue can be irreversible. The EU must use its economic leverage to press these changes at the WTO.
Globalisation has not been the only cause of job losses in the advanced economies. These have mainly been the result of automation and robotisation and the shift of employment from industrial to services activities as labour productivity in the former advances more rapidly than in the latter, many of which depend for their effectiveness on the presence of human staff. The disruptive effects of these changes, together with those of globalisation, are partly geographical, as some of the most dynamic new services activities, as well as advanced new manufacturing, have different geographical requirements from those of industrial society. Firms in them often like to cluster to take advantage of the tacit knowledge flows essential to innovation. They also attract staff by locating themselves in attractive cities, capitals and other places with high-quality natural and constructed environments.
Former manufacturing and mining towns then suffer major population decline, losing their young and better educated people to the new economy in the successful cities. The legacy of this process goes far further than transitional friction. Whole cities and regions are left behind, their remaining populations living without hope for the future, becoming deeply resentful. Meanwhile, the prosperous, thriving cities themselves become over-crowded and expensive to live in. Economists argue that eventually these increased costs will lead to a decline in such cities and the movement of firms to new locations, balancing everything out. But this process can take a very long time indeed, especially given the preference of innovative firms to cluster and the tendency of governments to make the problem worse by devoting attention to enhancing existing points of strength rather than developing new ones.
These processes are at work within Europe as a whole, as well as individual countries. There is a danger that large parts of the south and east of the continent are becoming giant left-behind regions, with the resentment created being turned against the EU itself. European and national territorial economic policies have to find ways of fostering dynamism within a wider range of territories, based around the Nordic idea of regional innovation networks that link firms with universities, other research centres and local and regional government to develop the necessary physical and human infrastructure. Even improvements to local physical environments, not immediately related to production processes themselves, can be effective in attracting high-quality employment. These policies, requiring attention to public and other collective goods, will not emerge from the neoliberal monopoly of economic thought; nor will they result from the imposition of austerity on governments desperately needing to spend to raise the quality of their economic and social as well as physical environments.
As work in manufacturing in the advanced economies was undermined by the combined effects of globalisation and robotisation, people increasingly found opportunities in personal services, work involving personal links between service provider and client being obviously less threatened by those forces. One of the unkindest cuts bestowed on us by Covid-19 is the fact that it is precisely those personal link activities that are most menaced by the need for social distance. One answer will be a move back into manufacturing – not to be achieved by ruinous protectionism but by governments encouraging the productive industries needed by the green economy. Another will be the strengthening of publicly financed, high-quality employment in care services, the poor quality and insufficient staffing of which was a major factor in spreading the virus among elderly and other vulnerable people.
A further, less welcome, answer that firms in personal services sectors are finding exacerbates a trend already well under way before Covid-19 struck – the use of flexible labour markets with easy hire-and-fire and false self-employment. This enables activities such as restaurants and hairdressing to expand cautiously post-virus with reduced numbers of clients at any one time, and with occasional tightening of controls as the disease makes periodic returns. Firms are able to reduce their fixed labour costs, but at the expense of extreme insecurity among workers in those sectors. Measures to combat this insecurity will be discussed below.
Regulating financialised capitalism
Central to globalisation has been the role of deregulated financial capitalism, the disruptive effects of which are exacerbated by the ‘shareholder value’ model of business. Under this Anglo-American model— which has triumphed over many others recognising a range of stakeholders in companies—the sole legally-recognised interest in a firm is that of shareholders. In theory firms can maximise shareholders’ profits only if they satisfy customers, since a firm with unhappy customers will lose market share. But this works only under conditions approaching perfect competition. Where competition is limited—because there are too few competitors, or it is difficult for customers to switch suppliers or customers cannot easily acquire knowledge of product quality—that identity between shareholders’ and customers’ interests fails.
Worse, in a financialised economy shareholder value is less determined by profits from the sales of products than market expectations of future profits, which might have little relationship to actual product sales and are therefore further removed from the need to satisfy consumers. For example, many internet-based firms experience very large stock-market evaluations before they have sold a single product, the evaluation being based on speculative future expectations. Senior managers are under constant pressure to deliver strong increases in shareholder value through these means, or they will be displaced in takeovers. Unless pressure to provide quality to consumers is equally strong, consumer interests will never triumph over those of shareholders. This explains much of the shabby service quality that giant firms mete out to their customers, particularly after the initial sale.
Advancing consumers’ interests is already established in EU standard-setting and has recently begun to bite on some of the issues presented by the internet giants. It needs to go further: policy-making in this field is too often vulnerable to corporate lobbying, leading to rights being reduced to hardly useful minima. Examples are the very minor rights offered in the European Air Passenger Rights Regulation and the weak EU food-ingredient labelling rules, which have followed the industry’s preference for barely explained lists in small type. Standards for consumers are an arena where—provided they are strong, meaningful, well publicised and attributed to the union—the benefits of the EU to ordinary citizens can be made clear and understandable.
Banking regulation raises issues that go beyond social-Europe policies, but a major task of social policy is to protect people from the consequences of disruptive change. This includes protecting general public and non-financial businesses from the harm done to them by high risk-taking by financial institutions, a major negative externality of finance-driven capitalism. As we learned after 2008, when this risk-taking arrived at crisis point, public policy moved to shore up the banks, as their collapse would have meant universal disaster.
The burden of saving them fell on ordinary people and firms. There is now great moral hazard in that, knowing this, banks have few incentives to avoid a future crisis. With high risk-taking they can have several years of high profits, followed by a crisis from which they will be protected. If its centrality to the wider economy means that the financial sector has to be granted special protection, then its activities embody elements of a collective good, the safeguarding of which cannot be left to private actors alone but requires regulation.
Important steps in this direction have been EU proposals for a financial-transactions tax, which would not only reduce the incentive of investors to make large numbers of high-speed transactions but would also contribute to funding social-policy and public projects. The left must work to secure agreement on the introduction of such a tax across the EU. There are fears that it would weaken Europe’s attraction as a base for financial activities. It is therefore important that favourable trade agreements should be offered to countries and regional trade organisations willing to introduce similar schemes—again taking advantage of the EU’s leadership on standards.
Reducing material inequalities
A key concern of current EU and many national social policies is the avoidance of ‘social exclusion’. Measures to reduce exclusion range from attempts to tackle various forms of discrimination—on grounds of gender, ethnicity and, most recently, sexual orientation and identity—to egalitarian strategies for preventing the bottom 10 or 20 per cent of the income distribution from falling further behind everybody else. The former have been more prominent, as policies to reduce barriers that cannot be justified in economic theory have been supported by neoliberals as well as social democrats; those for reducing economic inequality, usually requiring public spending financed by taxation, are not however endorsed by neoliberals.
In a study of changes in employment policy under successive British governments, Davies and Freedland4 described one area of exception from the strong general trend towards labour-market deregulation: improved rights for women, members of ethnic minorities and the disabled. The central motivation they perceived was the neoliberal one of reducing inequality by eliminating barriers to entry into the labour market, not the provision of rights as such. The emerging consensus between neoliberals and social democrats in the 1990s and 2000s meant that the definition of inequalities that needed remedying shifted from the economic to the cultural.
Today there is a new factor. The earlier shift forms part of the complaint of some of those who claim to have been ‘left behind’ by recent changes: the victims of the processes of disruptive economic change and the overlapping group of that bottom 20 per cent whose living standards are gradually falling behind. Particularly in the rhetoric of xenophobic parties and movements, claims to having been ‘left behind’ can also mean being ignored, or even discriminated against, by not being included in the ethnic and gender categories which have been the main targets of anti-discrimination and equal-rights legislation.
In particular, older, male workers belonging to the historically dominant ethnicity of a country may complain that nobody cared or even noticed as the industries in which they used to be employed disappeared, the quality of life in their cities deteriorated and their living standards declined. Even those who continue to enjoy stable and prosperous working lives might fear that measures to improve the conditions of the formerly socially excluded will threaten their positions.
Nearly all European and other advanced societies are experiencing major expressions of resentment, and occasional acts of violence, resulting from these phenomena. An ugly zero-sum conflict is looming. We are likely to see a policy backlash that reduces or even reverses the attention being paid to women and various minorities, leading to a new worsening of their position. When this backlash is led by xenophobic and other socially conservative governments, they will do little actually to reverse the economic decline of the male ex-industrial working class, as these governments usually follow a neoliberal economic agenda uninterested in reducing inequality. All they offer the ‘left behind’ is a licence to express resentment and hatred against the groups whose problems of exclusion have recently been recognised. Granting such a licence costs nothing, and therefore requires no taxation to fund it.
It is not surprising that some very wealthy people will usually be found behind campaigns of this kind. The only cost they present is the risk of violence when the encouragement of resentment goes too far. At that point some xenophobic governments will persist in their encouragement, becoming truly fascist; others will take fright and try to restrain the monsters they have unleashed.
For the broadly defined left, anti-discrimination issues must continue to demand attention. Given the leading role that women are likely to play in the future of such a left, their concerns retain importance. Today in many countries a large part of the low-paid workforce comprises women as well as immigrants and their descendants—which is one reason why people from some political positions specify the native male working class as their concern. No party of the left can neglect their problems.
It is however essential that the right not be allowed to succeed in inciting a false conflict between all these underprivileged groups. Issues of material inequality not only must share priority with other forms but also must be seen to overlap with them. The so-called white, male working class shares with most women and immigrants an interest in the redistribution of wealth and income, and in protective social policy.
The new high-tech, largely post-industrial economy by no means dispensed with the need to confront material inequalities, as Third Way politicians tended to believe. If anything, these acquire a new importance. Some geographical aspects of this have already been discussed above, as has the way in which low-paid workers maintained vital services during the lockdowns, sometimes dying as a result. There is therefore currently intensified awareness of the evils of inequality. This moment will pass, and we shall return to the more selfish society that neoliberalism preaches. Political forces of the left and centre therefore need to seize this moment now.
Increasingly prominent are also the imperfect competition and downright monopoly being produced by the network and platform economy of the internet, which are generating vast fortunes for a tiny elite, as well as high incomes for their key personnel. Also, at the very time when inequalities have been increasing in the labour market, taxation policies have exacerbated rather than reduced them. According to studies by the OECD5, almost everywhere there has been a decline in the rates of the corporation and capital-gains taxes that fall on the wealthy, combined with an increase in tax-avoidance measures that mainly favour them, against increases in the income, value-added and other taxes that fall on the mass of the population. Very wealthy people are able to redefine their incomes as capital gains, a device that is not available to the mass of earners. When capital gains are taxed far more lightly than normal incomes, taxation systems become regressive.
This has happened as governments have engaged in a fiscal race to the bottom, competing against each other to attract companies and the global super-rich to come to their countries. Such races are futile, as are the equivalent deregulatory races of the kind which the UK wishes to pursue outside the EU. As all participants join in the competition there is a downward spiral, whether in corporate-tax rates or product, environmental and labour standards, at the end of which everyone has lost except the corporate rich.
The ability of corporations to use the internet to locate their fiscal base in a manner which bears no relation to the location of their actual activities is exacerbating this process. This can be clearly seen in the fiscal strategies of internet giants such as Apple, Facebook and Google, and also in platform-based firms such as Amazon, which compete in positions of total privilege against normal firms who pay a range of income and property taxes based on where they actually do business.
It is vital that this growing taxation bias towards certain kinds of wealthy individuals and corporations is reversed. It is distorting the economy as well as producing social injustice. The OECD’s proposal in October 2019 to change the basis of taxation, from notional headquarters chosen solely for tax minimisation to location of sales, is rich with potential. The EU must embrace it enthusiastically and use its standard-setting power to include acceptance in its trade agreements.
Reconciling the future of work with workers’ security
During the 1990s and 2000s a tacit social compromise developed between neoliberals and social democrats, based on a certain interpretation of some important new ideas for labour and social policy. A key component was the analysis of ‘new social risks’ (NSR). This took the optimistic view that the nature of risks in workers’ lives had changed, since the basic problems of need and insecurity of 20th-century industrial life had been addressed by the welfare state.
Social policy for an industrial society had been based on a large manual working class, driven by ‘breadwinner’, ethnically-native males, whose lives were threatened by various forces which might undermine their ability to earn a living to support their families in the labour market: unemployment, redundancy, sickness, disablement, old age. The continuing relevance of this model was challenged by a post-industrial, globalising economy. Since many, sometimes a majority of, jobs in the services sectors were held by women, the male-breadwinner model had broken down. The new, post-industrial economy had produced on the one hand a need for people to accept frequent job change and on the other a mass of opportunities for them to do so. Risks in the new economy were opportunities, not threats.
Workers would have the chance (and obligation) frequently to change jobs, with multiple chances to retrain. Education levels needed to rise, as the new economy had a growing need for skilled workers. Less-skilled workers could improve their ‘employability’ through active-labour- market policy (ALMP) measures, of help with job search, work orientation and initial training—policies pioneered in Sweden since the 1970s. Men and women would both have opportunities in the workforce, provided social policy afforded help with child and elderly care.
Taking on these new tasks would not add to the burden of public spending, as in a prosperous economy less money would be needed to confront the ‘old’ risks. Further, the new social spending should cease to be treated in national accounts as consumption, but as investment. From this emerged the idea of a social-investment welfare state (SIWS).
It was also argued that in the new economy of rapid change laws and trade union practices designed to give workers security in their current jobs were neither necessary nor desirable. The UK and US economies, it was claimed, had shown the superiority of ‘easy fire, easy hire’: if employers could easily fire workers, they would be more ready to hire them. This would create more employment, and in dynamic new sectors, than the historical European approach of making it easy for workers to retain their current jobs.
Many social democrats did not take readily to this idea but were attracted to the related concept of ‘flexicurity’. Based on positive labour-policy experiences in the Netherlands and Denmark, this proposed that workers should give up the security of employment-protection laws in exchange for strong policies of retraining and other forms of ALMP, designed to help redundant workers find new jobs. This led to the same conclusions as the arguments derived from NSR and SIWS analysis, promising a strong public-policy commitment to help workers qualify for new work opportunities if they lost their existing jobs.
While these were all policies to be developed by individual nation-states, a strong role was also seen for the EU. Europe as a whole needed to improve its economy and the quality of its workforce if it were not to fall behind the US. In particular, the weaker economies of southern and central Europe needed to become dynamic and efficient if they were not to hold the union back.
The crash of 2008 was a rude awakening for the blithe optimism of this view of the post-industrial economy. Many workers were, and continue to be, faced with serious insecurity without much hope of finding attractive alternative jobs. Even before that there was reason to doubt a benign vision of the new economy. With financialisation firms are likely to alter their identities and business models frequently, confronting those working for them with job loss or disconcerting change. The pace of technological advance further makes skills redundant at an increasing rate.
While many firms still value the acquisition of skills and experience by long-serving staff, others have discovered that they can dispense with this, and prefer rapid turnover or the use of formally self-employed persons, temporary staff or workers with highly variable and destabilising working hours—strategies that avoid acceptance of the obligations of employers to provide full social insurance and other employee rights. In a global economy, large enterprises are able to locate themselves fiscally where they can find the lowest tax rates and the least onerous regulatory regimes. The industrial-society model of social policy assumed enterprises with a stable identity, geographical location and fiscal base, employing a workforce with similar stability. All this is becoming difficult to sustain.
Not only did these factors challenge the adequacy of NSR analysis, but matters were not helped by the fact that it was interpreted through a neoliberal lens at the EU and most national levels. Flexicurity was commended but its meaning became diluted as it was reinterpreted to mean flexibility without much security. Observers failed to register that the much-cited Danish model covered both old and new risks—generous unemployment pay and strong trade unions as well as the ‘new’ measures. EU policy and the European Court of Justice became particularly hostile to co-ordinated bargaining, even though this had been the bedrock of the success of the Danish and other Nordic systems. No attention was paid to the fact that unemployment pay might need to become more generous if workers were to lose job security and sometimes find themselves between positions. Further, far from the original Swedish ALMP, ‘activation’ increasingly came to be interpreted as meaning the same as US ‘workfare’—forcing people into uncongenial and often very low-paid work by withholding benefits.
For many poorer workers the ‘old’ risks had never gone away, and they returned with a vengeance to far more after 2008. But that disaster was to be dwarfed 12 years later by the coronavirus. Millions of insecure workers—and even many of those who thought they were secure—have discovered their extreme vulnerability. However sophisticated our technology and institutions have become, our lives are still vulnerable to forces of nature – as indeed the climate crisis has also shown. The very rich may be able to use their wealth to escape to safe places somewhere on the planet, but the great mass of us have little chance of taking action as individuals against these great challenges. We are dependent on the support of each other, sometimes through voluntary efforts but often through a mobilisation of resources only states and groups of states can organise. It is very difficult now to contend that in the financialised global economy, with companies driven by shareholder value, workers with diminished security face exciting challenges rather than menacing dangers.
Looking to the future, the state of work in the new economy seems even more problematic. There are the geographical distortions in work prospects, already discussed. It is additionally claimed that artificial intelligence will make the work of large parts of the workforce, including some of the highly skilled, redundant. These people will become a surplus population, unable to earn a living and therefore needing a citizen’s income—paid irrespective of whether one works or not—to survive. Guy Standing adds a further twist to this, arguing that work can be provided for all only under increasingly degraded conditions, and that a citizen’s income should therefore be used to enable some people not to be required to work at all.6
However, people dependent on a citizen’s income would be highly vulnerable to drastic income loss should the political consensus that had introduced it change, as is likely. It is possible that the day will come when the labour of most us will become redundant. But a central lesson of history has been that, when technological improvements make some forms of labour redundant, humans find new things to do for each other. This is likely to be especially true for economies where an increasing number of jobs concern the delivery of personal services. Provided entrepreneurs have enough scope to innovate, and governments provide enough support through improving workers’ skills and accepting responsibility for their security, this model should continue. Maintaining and expanding care and educational services, many of whose jobs can be neither provided in the market nor replaced by technology, is essential for this purpose.
It is important that labour-related social policy avoid the naive optimism of the NSR approach and the pessimism of those who have given up on finding a future for work. Democratic citizenship has been achieved, not because we have been granted it by a benign regime, but because our society needs us. We contribute our labour power and skill, and it is in exchange for this that we proudly, not gratefully, expect various rights.
If work is central to citizenship, it is a highly important collective good. But it is not a collective good that can be secured by the state just providing jobs, or even through Keynesian demand management—though recovering from the damage wrought by Covid-19 will require precisely that kind of action for several years to come. The state can however ensure that its activities do not hinder job creation in the market but instead provide incentives for it. The point is to facilitate a working population able to compete in open labour markets, but with various forms of state support. The normative base of these is citizenship entitlements, not ‘welfare hand-outs’.
An enhanced social-investment welfare state
Today’s advocates of the SIWS, in particular Anton Hemerijck7, do not speak of a cost-neutral shift from old- to new-risk policies but the need for an integrated approach. The valuable insight that social spending which improves economic quality should be regarded as investment remains but not at the expense of social protection. This marks a shift from a neoliberal to a fully social-democratic interpretation of the new policy approach.
The same adjustment can be achieved elsewhere. Job-protection rights, which assume a stability of employment in a worker’s existing organisation, are certainly becoming outmoded in a labour market subject to so much change, not to mention in economies where the need for lockdowns to combat Covid-19 has destroyed so many firms and jobs, but they have to be replaced by genuine flexicurity, where workers are supported by generous transitional unemployment pay and strong trade unions. ALMP must not be equated with workfare and negative sanctions but with positive help. Trade unions must not be regarded as part of some past of the labour market; they are now needed more than ever, in the context of changes that threaten workers at many levels, from the low-skilled to senior professionals.
A final support for citizens’ dignity in a period of difficult labour markets is a statutory minimum wage. If rigorously enforced, this has a secondary advantage of preventing the use of immigrants to drive wages down—a frequent claim of groups seeking to provoke antagonism to immigrants. There needs to be a Europe-wide component to minimum-wage strategies (adjusted of course for local costs of living) to prevent unfair competition from, and exploitation of workers within, the poorer countries of the union. The experience of countries with well-organised schemes is that they do not cause unemployment.
Opposition to the minimum wage has often come from strong trade unions, who feel that their role would be undermined if the state set and enforced minimum wages. This was the case in the UK and Germany until unions weakened, when they then became enthusiastic advocates. At present the still very powerful unions of the Nordic countries are the main obstacles to a European minimum wage. It is essential that they understand the importance of maintaining wage levels in countries without strong unions; otherwise low wages in these will eventually undermine their own strength.
So far this discussion has assumed traditional employment relationships, with identifiable employers and employees—the former having certain obligations to the latter, to maintain a safe working environment, to contribute to social-insurance schemes and to recognise laws concerning parental leave, discrimination and other rights. Increasingly firms are extricating themselves from these obligations by redefining themselves as not being employers, or not being legally based in the country where the work takes place, and redefining their workers as freelance service providers rather than employees, or keeping them on contracts that do not reach the threshold for acquiring rights. The profits of such firms are increasing at the expense of those that accept obligations as employers and pay taxes.
The use of temporary and so-called self-employed labour does nothing to move an economy on to high performance levels propelled by skilled, experienced workforces—rather the reverse. It thus constitutes a negative externality for labour policy. It is necessary to reverse the highly perverse fiscal and regulatory incentives that encourage firms to behave in this way, and instead stimulate them to follow the path of strong flexicurity.
To do this requires replacing social-insurance charges on employers by those on ‘users of labour’.8 This would recognise the new fluidity and flexibility of corporate employment practices, while not allowing these to become means for avoiding obligations. All firms and other organisations defined as being users of labour services and coming above a size threshold for exemption should be required to make social-insurance payments based on the numbers of hours of labour service that they use—irrespective of whether the contract they have with the labour providers concerned is an employment contract. By concentrating on ‘use of labour’, this approach addresses the erosion of the sharp distinction between dependent employment and self-employment embodied in much labour and social-insurance law and practice stemming from the industrial period.
Users of labour would have significant parts of their insurance charges remitted if they accepted the following obligations towards their labour providers: (i) certain basic rights; (ii) a full employment contract containing all mutual obligations of an employment contract as currently defined in law, including protection against unfair dismissal and redundancy compensation; (iii) contracts without time limits; (iv) guarantees of training and other forms of skill-enhancement compatible with the SIWS agenda, and (v) recognition of and acceptance of bargaining with autonomous trade unions representing providers of labour services. The aim is to incentivise labour users to move up market and provide ‘good work’, though possibilities for less favourable conditions have to be left open to ensure the net result is flexible and is not a reduction in employment.
It will be objected that imposing charges on users of precarious labour would discourage firms from providing those down-market jobs that offer the only possibilities of sustaining many low-skilled people in work. The importance of this can be exaggerated. Firms which are using inferior employment terms merely to avoid fiscal burdens could be expected to respond immediately to the reversed incentives. Those just wanting to make use of genuinely casual employment will not be affected, as their workers would come below the hours threshold and remain in the precarious economy. In recognition of this, workers able to find only marginal work but genuinely available in the labour market for more substantial posts (not students or retired people) should be eligible for full unemployment benefit while holding marginal jobs below the threshold.
There might still be some net job loss in the short term, as firms adjusted to the new situation. Setting the values of remissions of social-insurance charges would need to have regard to the likely effect on employment, just as do bodies establishing minimum wages. As more firms took advantage of the remissions to improve the quality of the employment they provided, there would be an overall gain in productivity and in consumer confidence as more people entered the more secure forms of employment, as well as a gradual phasing out of employers’ social-insurance charges as such. This should eventually stimulate demand, and therefore have further beneficial employment effects.
European economies need to avoid becoming trapped in an equilibrium of providing increasing employment but only at the cost of insecure terms, and therefore of low skills and reduced productivity. To avoid firms keeping precarious labour conditions by removing their employment to countries not reforming social insurance in this way, the basic form of a reformed system would have to be established across the EU, with individual governments free to vary the size of levies and exemptions. This would help upgrade the use of labour across Europe. Further, in today’s services-based economies much work has to be provided at the point of use. Social-insurance charges levied at the point where the labour is performed would not be vulnerable to capital flight on these grounds.
There need to be reciprocal obligations on workers and other individuals. All adult persons living in an EU country, irrespective of whether they were in paid work or not, would be required to contribute to the social-insurance fund. Their contributions would not be differentiated according to their labour-market status (non-workers would pay as much as workers; self-employed persons would pay the same as employees) but would vary according to income level, whatever forms that income took.
All persons contributing to the fund would be eligible for an income from it when unemployed but seeking a job, incapable of or retired from work, taking on specified unpaid parental and other care responsibilities, or engaging in other unpaid work generally agreed to be socially desirable. They would also be eligible to participate in free public ALMP programmes, including those for starting and developing small businesses. Immigrants would have to be included even if they were not citizens; otherwise they would become vulnerable to sinking into the shadow economy and suffering from various forms of social exclusion.
Subject to the need for firms that avoid responsibilities to make a financial contribution to maintaining an orderly labour market, the costs of employment security need to shift away from employers to the state, as there is today a priority on ensuring that jobs are provided, a priority made more intense by the destruction of jobs during the struggle against the virus. Taxation systems that are based on numbers of employees do not help to achieve this. For southern-European countries in particular there is a need to move from high social-security charges and strong job-protection laws (which throw the burden of workers’ security on to the employer) to generous unemployment support and the SIWS agenda. It might have been acceptable for employment protection to be borne by employers when the latter were benefiting from protectionist walls maintained by governments, as in the major periods of postwar industrial development in southern Europe and elsewhere, but in open labour markets it becomes a major hindrance.
All these arguments imply citizenship rights for those who are preparing to work, who are working, who would work if they were not sick or disabled, who have worked until they are old or who are engaged in care responsibilities. The last includes full-time parents. Chiara Saraceno9 has warned of the negative consequences of an entirely employment-based approach to citizenship for parenthood.
The SIWS agenda addresses this issue directly with its emphasis on childcare but recognition of the role of parenthood within a work-based model of citizenship needs to go further. Social policy must recognise the right of a parent of preschool children to be a full-time parent—helping to prepare the next generation of working citizens— and to receive public financial support, even if they have a partner in paid employment. Such rights have been partly recognised for mothers and the idea of paid parental leave from work for limited periods is beginning to be accepted for fathers too.
Already in 2001 Alain Supiot anticipated these issues of the disintegration of standard employment terms and the problematic position of parental work, in a report sponsored by the European Commission.10 It had however little influence on European policy-makers—certainly in comparison with the often disastrous advice of neoliberal economists. It is high time his report was dusted off the shelf and taken seriously.