Download European policy of flexicurity, empirical analysis, political philosophy

European policy of flexicurity,
empirical analysis,
political philosophy, and
reform proposals
Prof. Dr. Dr. Andranik Tangian
Hans-Böckler-Foundation, Düsseldorf & University of Karlsruhe
[email protected]
SEE economic experts’ meeting, Sarajevo, April 7, 2010
Agenda
1. History of flexicurity and the conception of the
European Commision
2. Indicators for monitoring, analysis, and policy
implementation
3. Political economy and political philosophy of
flexicurity
4. Reform proposals
2
Share of atypical employment
in 2008 (%)
3
Idea of flexicurity
By analogy with the motto of the Prague Spring
1968 "socialism with a human face“:
Flexicurity is a flexibilization (= deregulation)
of labour markets with "a human face", that is,
compensated by social advantages, in
particular, for the groups affected
4
History of flexicurity 1995 – 2001
(security for flexibly employed)
Period from the first use of the word 'flexicurity'
(Prof. Hans Adriaansens, 1995) till the first
references to it by the EU
Labour market reforms in the Netherlands and
launching the academic flexicurity debate
Flexicurity is understood as a policy to protect
atypical workers against negative
consequences of labour market deregulation
Social partners do not participate in the debate
5
History of flexicurity 2001 – 2006
(flexibility-security trade-off)
Period till Green Paper: Modernizing labour law to
meet the challenges of the 21st century (2006)
Flexicurity is defined as flexibility-security trade-off
EU refers to flexicurity as balance between labour
market flexibilization and social developments
OECD and European Commission positively
mention flexicurity in analytical Employment
Outlook and Employment in Europe
Social partners start the discussion
6
History of flexicurity 2006 –2010
(security through flexibility)
The Commissions' Common Principles of
Flexicurity (2007): security through flexibility
Flexibility should provide 'more and better jobs',
because it improves economic competitiveness
and, consequently, facilitates creation of jobs
The EU officially adopts the flexicurity approach
with emphasis on flexibility and discusses it with
national governments and social partners
Beginning of public debate
7
The conception of the
European Commission
No contradictory interests (flexibility = security?)
Desired by both employers and employees
(internal flexibility = work-life balance?)
Guarantees better career chances (changing
jobs = promotion?)
Security is reduced to employment security
reduced further to lifelong learning (security
= lifelong learning?)
8
7 families of flexicurity indicators
Viewpoint
Countries
Years
Neo-liberal
Europe-16
Trade-unionist
Europe-16
European welfare
state
Precarious work
Europe-22
1990-2003 OECD
+MISSOC
1990-2003 OECD
+MISSOC
1995-2004 OECD+LFS
(Eurostat)
2005
EWCS 2005
Europe-31
Data
Quality of jobs and
Europe-31 2005
EWCS 2005
lifelong learning
Collective bargaining Netherlands 1995-2007 DUCADAM
Actual crisis
Europe-23
2008-2010 Eurostat +
OECD+IMF
9
1. Neo-liberal perspective
Social security, in %
Deregulation is
tradable against
social security
advantages
All employees:
Deregulation-only
instead of
flexicurity (except
NL and DK in the
mid 1990s)
10
Strictness of EPL, in %
2.1 Trade-unionist viewpoint
Social security, in %
Deregulation is
not tradable,
improvements for
flexibly employed
needed
Flexibly employed:
improvements in
social security in a
few countries...
11
Strictness of EPL, in %
2.2 Trade-unionist viewpoint
Layers:
1.Unemployment insurance
2.Public pensions
3.Paid sick leave
4.Paid parental leave
5.Paid holidays
... at the
price of
reduction of
the share of
normal
employment!
Size of employment groups, in % to total employment (Eurostat)
12
3.1 Welfare-state viewpoint
Total
decline of
European
social
security
by 2004
after
some
peak in
1995 –
2003
13
3.2 Welfare-state viewpoint:
Institutional situation
No
institutional
decline of
social
security in
1995 –2004
(example of
Germany,
moreover
NRR are
increasing)
14
3.3 Welfare-state viewpoint:
Accounting with mobility
Example of unemployment aid:
Previously:
90% get 700 EUR/Month (short-term unempl.)
10% get 300 EUR/Month (long-term unempl.)
National average = 700 * 0.9 + 300 * 0.1 = 660
Now:
Institutional improvement: All get 10% more aid
Mobility effect: the groups are 50% and 50%
National average = 770 * 0.5 + 330 * 0.5 = 550
15
4.1 Flexibility and precariousness
……………………………………………
16
4.2 Flexibility and precariousness :
Factual ≠ institutional flexibility
Strictness of employment
Work with no
protection legislation ~
contract ~
external numerical
outside legislation
flexibility (OECD 2004)
(EWCS 2005)
United Kingdom
0.4
130 of 875 = 15%
Switzerland
1.1
26 of 847 = 3%
Sweden
1.6
1 of 968 =0.1%
Germany
1.8
32 of 911 = 4%
…
...
…
Turkey
4.9
302 of 454 = 67%
17
4.3 Flexibility and precariousness
1.No country in the
flexicurity corner
2.Flexibilityprecariousness
dependence is
statistically certain:
Regression on
23788 employees
with P-value=0.0000
Flexicurity
domain:
no country
Conclusion:
flexicurity is hardly
attainable in practice
18
4.4 Flexibility and precariousness:
flexibility hits just employability
19
5.1 Quality of jobs: not high and
problems with lifelong learning
…………………………………………………..
20
5.2 Quality of jobs: below average
in flexible employment
21
5.3 Quality of jobs: Influence of
learning and of job stability
…………………………………………………
22
6.1 Trends in flexicurity-relevant
Duch collective agreements
23
6.2 Increasing share of
flexicurity-relevant Dutch CA
24
6.3 Evaluation of CAs
Evaluation of
collective
agreements with
respect to fair
compensation of
flexibility by
security
25
7.1 Flexicurity and the actual crisis
Institutional flexibility
1. Flexibility of regular employment (- EPL), Score
2. Flexibility of temporary employment (- EPL), Score
Factual flexibility
3. Share of atypical employment in total employment, %
4. Incidence of involuntary part-time workers in part-time employment,%
Social security
5. Total public social expenditure, % GDP
6. Social security, pay-offs, % GDP
Gravity of economic situation by 2010/aggravation 2008-10
7. -Output gap, % GDP
8. Public debt, % GDP
9. Bailout packages, % GDP
Gravity of social situation by 2010/aggravation 2008-10
10. Unemployment rate, %
26
7.2 Gravity of situation by 2010
SlopeFlex = 0.84
SlopeSecur= 0.32
R2 = 0.70
PF = 0.00
Flexibility and
flexicurity are
not
advantageous
Normalization of
employment
even with
social cuts is
better
27
7.3 Aggravation of situation 2008-2010
SlopeFlex = 0.94
SlopeSecur=-0.18
R2 = 0.33
PF = 0.01
Flexibility is not
advantageous
Generous social
security –
crisis ‘buffer’
Normalization of
employment
with social
cuts is better
28
Summary of empirical analysis
1. Flexibilization is absolutely prevailing
2. Improvements at the price of normal employment
3. Social security is declining
4. Flexibilization increases risks of precarious
employment and decreases employability
5. Europeans value job stability most of all and
Europe is not ready for lifelong learning
6. Social partnership evolves in the direction of
social patronage of employers
7. Flexicurity is not good in the crisis
29
Crises: Ricardo (1817)
Cause: credit expansion by banks
English industry booms, Englishmen spend more
Credit expansion by English banks
Prices grow, foreign goods become more attractive
English money is less needed but gold
Banks fail, no credit, crisis
Then again
English prices decrease, international demand grows
English industry booms, Englishmen spend more
No solution
30
Crises: Marx (1867)
Cause: overproduction due to exploitation
Exploitation = undepaying workers
Workers produce more value than can afford
To maximize profits, all should be sold out
Banks expand credit to purchase the goods
Credit charges exhaust the solvent demand
Low demand and overproduction, crisis
Solution: abolishment of capitalism, revolution
31
Crises: Mises (1912) & Hayek (1930s)
Cause: Central bank (= bankers’ bank)
Additional cash backs up simultaneous credit expansion of
commercial banks (otherwise banks-competitors force
imprudent banks to bankruptcy as Ricardo’s countries)
Violation of the natural interest rate which encourages/
discourages investments in heavy industry (reciprocally,
wages from heavy industry stimulate consumption and
production of consumer goods)
Crisis is not avoided but postponed and aggravated
Remark on Marx: underpayment results in investment (as
in socialist economy with no overproduction)
Solution: laissez-faire capitalism
32
Crises: Keynes (1936)
Cause: Savings
Demand is lower than supply (overproduction)
Reduction of production and of total income
Even lower demand
Downward spiral demand – supply – income – demand,
and crisis
Solution: governmental intervention to increase
demand, governmental programs, public works,
moderating taxation
33
Crises: Friedman – Schwartz (1963)
monetarist approach
Cause: Too high interest rate of the central bank
Demand is lower than supply (overproduction)
Reduction of production and of total income
Even lower demand
Downward spiral demand – supply – income – demand,
and crisis
Solution: Reduction of the interest rate even down
to the “negative” value (below inflation level)
34
Finances and real economy
Banks give more credit than can secure
Two harmful implications:
Violation of consumption-to-investment ratio
Increasing own profits at the cost of
constraining economic development
(contradiction between GDP 2%-growth and
5%-interest rate, especially bad for SMEs)
35
Promises of financial liberalisation
since 1970s
Increase living standards in the West by cheap
import
Enhancing Western presence in the third
world by export of technologies
Solution of poverty problem by creation of jobs
Promoting Western democracy
High returns for investors
36
Globalisation outcomes
Import is no longer cheap
Decline of Western competitiveness
Poverty problem in the 3rd world not solved
There, no democracy but corrupted regimes
But: high returns for investors
Even households at the 95th percentile – that is,
households richer than 19 out of 20 Americans –
have seen their real income rise less than 1
percent a year since the late 1970's. But the
income of the richest 1 percent has roughly
doubled, and the income of the top 0.01 percent –
people with incomes of more than $5 million in
2004 – has risen by a factor of 5. (Krugman 2006)
37
Improving competitiveness
since 1990s
Industries start to participate in financial
speculations
Invention of derivatives (financial producs based
on other financial products)
Invention of Hedge funds: Porsche – 'Hedge fund
with a car maker attached (Chang 2009)
Expansion of atypical employment
No perpetum mobile: But where do additional
profits come from?
38
Profits from financial liberty
European science, engineering, culture, education,
and even private property are historical
achievements, 'European heritage‘
If European economy remained closed then all the
gains would be redistributed within Europe
The financial openness means that the European
advantages work only for few private investors
rather than for the European population
39
Profits from atypical work
European Commission’s concept of flexicurity is
an indirect governmental donation to firms
from the tax-payers’ money:
Labour flexibility is profitable for employers
All expenses are recovered by the state
Governmental budget originates from tax-payers
40
Innovation in employment
relations
Old capitalism
Individual employer-worker exploitation: surplus
value due to purchase of the capacity to work
rather than end products
Modern capitalism
Circular relations: employer–worker–state–
employer with a money loop through legislation,
social security and tax systems
Collective exploitation: extended to relations of all
employers and all employees; income is
redistributed through all these systems
41
Consequences of financial liberty
Unfair income distribution
Crises, losses from not produced values
Foreign investments mean export of jobs:
Unemployment
Flexible and precarious employment
Worse working conditions
Loss of control over labour markets:
Employers are given a legal instrument for pressure on
European governments: ‘If you do not flexibilize
employment, we move jobs abroad’
42
Consequences of flexible employment
Bad career prospects and income insecurity
Mobility of workplace → complications of family life
Demographic problems and additional immigration
Increasing inequality (Brasilianization), vanishing
middle class (clan society), increasing social
tension, and criminality
Short tenure → lower manufacturing quality →
lower competitiveness of European economy
(which occupies the market niche of top-quality
products)
43
Trade unions:
No tradability of labour rights
The default assumption that everything can be
bought and sold, or exchanged, is wrong:
Social health (= the right to remain at work) is
exchanged for a treatment (= social security):
give your hand, and get a prosthesis instead
Every single compromise can look fair, but not
their sequence (tale about exchanges of horse
for cow, cow for sheep,…)
The whole history is the struggle for rights
(political, human, labour, authors), not single
advantages
44
Towards a majority-friendly Europe:
Change of political philosophy
Economic priorities are good primarily for
employers (increasing inequality, precarious
work, in-work poverty, decline of welfare state)
→ Actual sustainable development with economic
priorities is good for employers (minority) rather
than employees (majority), and is therefore nondemocratic
→ For a majority-friendly Europe, sustainable
social development is required (paradigm shift)
It needs a change of political philosophy
45
Instruments:
1 Flexinsurance
Employer's contribution to social security is
proportional to the flexibility of the contract
– Compensation of unemployment risks
– Motivation to hire employees more favorably
with no rigidly restricting labour market flexibility
– Flexible instrument to regulate deregulation:
adjustments need no new legislation
– Moral aspect: social justice
Prototypes of “dismissal taxes”
– Progressive: American experience rating
– Flat: Austrian Abfertigungsrecht
46
Instruments:
2 Workplace tax / bonus
The worse working conditions (“social pollution”),
the higher the tax paid by the employer
– Stimulation of improving working conditions,
particularly of flexibly employed
– Instrument to improve production quality
– Compensation of health and safety risks at work and
of bad working conditions
Prototypes:
– French precariousness premium at the end of a
temporary contract (10% of total earnings)
– Green tax which stimulates enterprises to consider
the natural environment (social environment)
47
Instruments:
3 Basic income
A flat income paid by the state to all citizens
regardless of their earnings and property status
–
–
–
–
Security measure / administrative simplification
Measure against bad jobs
‘Positive’ measure to make work pay
Discharging social tension
Prototypes:
–
–
–
Kindergeld in Germany paid to all parents
Solidarity pensions in Switzerland and Chile
Minimal wage
48
Instruments: 4 Politicization and
internationalization of unions
No strong left parties with strong political claims
easing collective bargaining on economic
issues → political engagement of unions, or
creating union’s parties
Multi-national companies are unattainable for
national unions → creation of union multinationals (e.g. Coca-Cola union, Ford union)
Accounting of bargaining outcomes, monitoring of
collective bargaining
49
Instruments:
5 Systemic reforms
Removing finances from the market: restricting
private sector to real economy, public (nonprofit) finances
Decommodification of labour and nature
50
Instruments: 6 Separation of
politics from economy
Putting social (majority) values beyond
economic (employer’s) values
Economy as instrument of politics but not its
driving force
Prohibition of politician’s profits from economy
51