MERRY CHRISTMAS AND HAPPY NEW YEAR

INTRODUCING THE DECENT EMPLOYMENT RATE

The European Centre for Workers'Questions EZA with the financial support of the European Commission has just published an interesting booklet with the promising title “Europe 2020 – How to meet the 75% employment rate target in a decent way?” (Contributions to Social dialogue 14). Not an easy subject but the three authors Tom Vandenbrande, Michael Schwarz & Hubert Cosey have succeeded in presenting the results of this research project from both EZA and the Higher Institute for Labour ofthe Catholic University of Leuven (Belgium) in a clear and straightforward manner.

The authors analyze the 'Europe 2020' policy regarding the target 75% of the 20-64 years-old to be employed in 2020. Today a very topical issue in the EU where unemployment rates are rising fast because of the economic crisis that followed after the financial crisis in the Eurozone countries. To find out what will be the employment rates in the EU in the year 2020 the researchers used the rather simple forecasting methodology assuming that the participation patterns of European citizens will show the same patterns as in the decade before ( the EU Lisbon agreement 2000 – 2010). Based on this methodology it is expected that “the employment rate will rise very moderately between 2010 and 2020 to achieve an employment rate close to 70% in 2020.”

The authors expect “that two elements are in favor of the employment target set by the European Commission for the next decade.” First of all, our forecast is encouraging for European policymakers, as the number of countries within target would increase from 5 to 6 countries and 8 other countries come close to the target in exercise. The number of countries with an employment rate of more than 10% below target would be reduced from eleven to six countries. Secondly, the opportunity given by the European Commission to translate the 75% target into national targets has been inspiring and possibly motivating individual Member States to work out a feasible national strategy with regard to employment rate progress.” (page 16 – 18)

The most important issue however is how to reach this employment rate of 75%? On this point the authors make some critical observations on the recipes offered by the European Commission. The European policy makers suggest 3 paths in the quest for more employment:

1. Reducing the cost of labour by reducing social security contributions, flexibility in entry wage setting, a wider use of in-work benefits..

2.Attract inactive people to the labour market: enhance greater internal flexibility, flex-time, extend day-care facilities, link unemployment benefits to training/job search etc...

3. Education and training: responsiveness of training to the labour market, support targeted training...

Regarding the number one proposal, that is to reduce labour costs, the authors come to a remarkable conclusion after analyzing EU labour statistics: “there is no strong relation between reducing the labour cost and a positive evolution of the employment rate in European Member States.” (page 21) This means that the idea of the European policymakers that work will become attractive for employers by reducing labour costs does not work so well. Therefore the authors propose an alternative way which is to make work more attractive for workers by ensuring decent jobs. “As workers have the prospect of a high-quality job, the reward of working time is bigger than the reward of free time, and more people will be motivated to invest their time in a job. So, raising the job quality will be positively linked to more workers and a higher employment rate.” (page 23)

This positive relationship between job quality and employment rate should be supported firstly by raising the human capital of workers. “Investment in training and learning opportunities increases individual productivity, but also the productivity of co-workers through spill-over effects. Secondly, workers' security induces economic growth. Elements such as job protection, safe working conditions, fair wages, and access to social protection may also increase productivity and participation, and therefore favor growth and labour supply. In addition, many security mechanisms work as automatic stabilizers, which are particularly helpful during economic downturns. “ (page 23-24)

Following these conclusions the authors look for ways how to make work attractive as an alternative way for creating more employment. The result is a list of elements that define work quality: work autonomy, work intensity, physical risk exposure, psychological risk exposure, level of team autonomy, meaningfulness of work, wages and social benefits, suitable working times, job security, skills development, career opportunities, voice.

Because of the foregoing it is not a surprise that the authors propose the development of a 'decent employment rate' that in the future will accompany the employment rate that is “calculated by dividing the number of people working in decent employment by the total population.” (page 49)

They call the unions “to promote actively the economic and social advantages for employers and employees that emerge through the introduction of good work quality policies... Workers' organizations should also insist that good practice examples from European countries are, where applicable, considered, promoted and possibly adopted by other Member States.” (page 50)

EUROPEAN BANKING UNION

In the night of 21 on 13 December, after fourteen hours of meeting of the European Council of the Ministers of Finance of the 27 European Union members, a compromise was reached on a European banking supervisor. Such a supervisor is needed because since 2008 many banks have been rescued by their governments. One of the main lessons of the credit crisis is that dozens of banks are to big to fail. The financial obligations of these banks are so significant that a bankruptcy threatens the entire financial system. If such a 'banking system' threatens to capsize, the government always must help. In recent years a number of governments (Spain and Ireland) have pumped so much money in their banks that they themselves have entered in payment problems. The European debt crisis was born.That is why the European governments now want to create a system for an orderly and timely remediation of unhealthy banks. This should prevent governments te be faced again with emergency situations in which they have no other choice than to put money into a bank. As a first step in June the European Government leaders decided that the European Central Bank (ECB) will be the European banking supervisor.

The principle agreement is that in the European Banking Union, the 200 European Banks with more than € 30 billion on their balance sheets (the so called 'systemic banks' that are to big to fail) and the banks receiving financial support from the state will be supervised by the European Central Bank ECB (Frankfurt, Germany). De non-euro countries Great Britain with London as a financial world centre, Sweden and the Czech Republic decided not to participate. All other non-euro countries are expected to participate in the EBC supervising system. All the involved banks together will guarantee each others savings and there will be a common procedure in case a bank is going to fall. The ultimate goal is that the taxpayers don't pay anymore for the rescue of a bank.

The € 30 billion limit is the result of a compromise between Germany and France. The latter wanted together with the European Parliament and the European Commission that all 6000 European banks would be controlled by the ECB. However, Germany did not want to put at risk the financial reserves of the about 1600 local and regional Landes- and Volksbanken. These smaller banks with their many financial reserves are influenced by local and regional authorities. It would be difficult for Federal Chancellor Agela Merkel to confront on gthis matter these local and regional politicians before elections in september 2013.

The main supervisor is thus the European Central Bank. This requires, however, the Convention for the ECB to be adjusted to make sure separation between the 'prudential supervision' on the health of the banks, and the "monetary control 'on the financial stability of the eurozone economy. The ECB in Frankfurt should hire a lot of new employees in order to perform the monitoring.

Another important measure is that at the moment the ECB indicates that the supervising system is working the so called European emergency fund EMS (European Stability Mechanism) can be authorised to give loans to banks without influencing the public debt of the country.

German Chancellor Angela Merkel called the agreement invaluable. "We will have a clear separation between the responsibilities for monetary policy and banking supervision." However, some critics are concerned that the political independence of the monitoring of the banks is not sufficiently guaranteed. They point to the need for proper procedures for this to ensure. The Cypriot Minister of Finance Vassos Shiarly Shiarly spoke of the agreement as a Christmas present for all of Europe. "According to him, the overall objective of the Bank agrees to restore confidence in the sector, he added.

FIRE IN BANGLADESH

For my international trade union work I have visited Bangladesh, which once included also a visit to various jute factories. These were state-owned enterprises in decline because  demand for jute was becoming lower and lower as a result of the growing use of for example plastic shopping bags.De working conditions were terrible, especially compared to those common in Europe. The local unions did their best but even in these state enterprises they could not change much. Women and children sat working on the oil contaminated floor. There were no decent bathrooms so workers -women and men alike – pooped and peed in the gutters along the outdoor walls of the factories. No pleasant sight.

These days once again there was a huge fire in a textile factory in which 122 people were killed. That were so many deaths that the disaster reached the international press and TV news worldwide. A trade union colleague in Bangladesh has send me some newspaper clippings with photographs. As you can read on the frontpage of the Daily Star since 1990 there have been no less than 33 major fires with a total of 500 deaths. You can read also that the day after the big fire in the Ashulia textile factory there was another fire in another factory, but fortunately without casualties. (See the clipping at the end of the article).

The lack of fire extinguishers, sprinklers and emergency exits on all floors caused so many deaths.  Of course, the management of the company is responsible for safety measures but apparently they are not interested to adhere to safety measures. Their goal is to produce as much as possible at the lowest possible costs. Obviously, the government should monitor compliance with safety measures but that seems not to function either. There is always the risk of corruption and bribery. Trade Unions can do little because who wants to take the risk to lose his or her job? Besides, the only unions admitted by the management are those that work together with the employer. These union leaders get privileges while the profits are not affected.

What should be done?  First of all (Western) companies should be put under pressure to make contracts with factories with decent labor conditions but at the end it is the local government that has to take severe measures to guarantee safety for the workers and to force employers to respect these measures. International assistance and support to the local unions in such countries are also important. Only in this way they can fight for decent work and wages without union members immediately having to fear dismissal or worse like losing their lives.

BEING EMPLOYED OR UNEMPLOYED THAT IS THE QUESTION

The euro area (EA17) seasonally-adjusted unemployment rate was 11.7% in October 2012, up from 11.6% in September. The EU27 unemployment rate was 10.7% in October 2012, up from 10.6% in September. In both zones, rates have risen markedly compared with October 2011, when they were 10.4% and 9.9% respectively. These figures are published by Eurostat, the statistical office of the European Union.

Eurostat estimates that 25.913 million men and women in the EU27, of whom 18.703 million were in the euro area, were unemployed in October 2012. Compared with September 2012, the number of persons unemployed increased by 204 000 in the EU27 and by 173 000 in the euro area. Compared with October 2011, unemployment rose by 2.160 million in the EU27 and by 2.174 million in the euro area.
Among the Member States, the lowest unemployment rates were recorded in Austria (4.3%), Luxembourg (5.1%), Germany (5.4%) and the Netherlands (5.5%), and the highest in Spain (26.2%) and Greece (25.4% in August 2012). 

Today in Europe unemployment is becoming a very serious problem not only in debt ridden countries as Greece, Spain, Portugal and Ireland but also in the other EU countries. Unemployment is a consequence of non- or negative economic growth and that is what happens today in most of the EU countries. Even Germany, having the strongest economy in the EU, is running the risk to enter in the dangerous area of non – economic growth. The question now is how to restore economic growth in the Eurozone?

What is most needed for economic growth is money or to say it more professional capital. Capital to invest in an economic activity that will generate jobs like a textile mill or a TV set factory. But what to do when there is no capital available to invest in one or another economic activity because money is needed for the payment of debts of many Eurozone countries? Besides, because of these debts many private investors dare not to invest in those countries. How to escape from this vicious circle of debts and frightened investors?

After a lot of European political quarreling special emergency funds were created to help over indebted countries like Greece, Ireland and Portugal with extra money because the markets are closed to them because of to high interests. Private investors don't want to take the risk to loose their money in a country that is over indebted. But this emergency money only serves to keep the government going on, it is not creating jobs and production. It is dead money.

Another way out could be the devaluation of the Euro to make products on the international market cheaper which will probably give a boost to the sales of these products and so production together with jobs will go up. But in the case of the Eurozone most exports go between the Euro countries themselves so benefits from devaluation will be low. The countries that export more to the global market like Germany are at the same time the strongest economies. They don't need a lower priced Euro. May be France and Italy will benefit somewhat from a lower priced Euro but the question is how much, especially when they don' t reform the labor market like Germany.

Another possibility is that the European Central bank starts to print money. In fact this is to a certain extent already happening by buying bonds from indebted countries through the European Central Bank. But this measure is meant to maintain international confidence in the Euro not to restart the economy. For that purpose much more money should be printed with the great risk of a sky-high inflation in the near future. Some economists belief this is the only option left for the Eurozone but because of its pre Second World War experiences Germany is absolutely against it. On the other side inflation is in fact a by the state organized way of social theft hurting most the weakest people in society like the unemployed and the retired people. They are the real victims of money with lower purchasing power.

The European Trade Union Confederation beliefs that the best way for the Eurozone to get economies growing again with the aim to create employment is major steps towards a more united Europe. They propose the creation of Eurobonds guaranteed by the European Central Bank. These bonds will provide fresh money to invest in the so-called green economy (electric cars, windmills, solar energy etc.) with the aim to create new jobs. However, there are some questions to answer. Are those Eurobonds trustworthy while they are also guaranteed by some countries with still a lot of debts? Are governments capable to invest money efficient and productive in these areas or will a lot of money be lost in inefficient bureaucratic control systems or even worse go to projects which at the end have no real economic future? In that case the Eurozone has only created a new debt burden.

Another policy proposed by the European Commission and supported by for example Germany are social and economic reforms on the labor market and the social security system. This kind of reforms does not activate economies and create jobs immediately. The big issue however is that these reforms are affecting long ago acquired social rights and that is what trade unions don't like. They insist that these reforms (working longer, more flexibility on the labor market, lower and shorter unemployment payment etc.) do not work and on the contrary will create new poverty. It will also affect the internal consumer market which means another setback for the economy. On the other side without these reforms together with education, technical innovation etc. Europe will lose competitiveness on the global market and without a global market Europe will loose part of its wealth.

While the trade unions look for solutions without losing the acquired social rights and stimulating the economic growth with public money to create new jobs, the European Commission and the Nordic European countries are looking for strong reforms on the labor market combined with lowering the debt burden by increasing the retirement age, making the labor market more flexible which means lower salaries and lowering unemployment benefits in time and amount. The next months will make clear who will win the game or will there be no winners at all?