Structural reforms and macro-economic policy - ETUC

Structural reforms and macro-economic policy
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to increase and promote collective bargaining and
trade unions' involvement in providing all workers
with sufficient access to training and lifelong
learning.
B. Supporting upward mobility and career
transition for displaced workers
The table below shows what happens to retrenched
workers in the EU and the US. It refers to an ongoing
policy discussion, with opponents of social welfare
and wage protection rules arguing that the US
labour market model is superior to the European one
since a higher share of retrenched workers return to
work in the US. In the US, labour resources that are
being ‘freed up’ by globalisation and technological
progress are put back to work to a larger extent than
in Europe. The hypothesis is that US workers are
more willing to take pay cuts when moving to
another job because they have less labour market
and social protection to fall back on. In the US for
example, one quarter of displaced workers accept a
pay cut of more than 30%, whereas this share is
much more limited in Europe.
What happens to displaced workers?
Level of industry European Union United States
Share of workers
back into work 57% 65%
two years later
Share of workers
without a pay cut 46% 35%
Share of workers
with a pay cut of 7% 25%
more than 30%
Source: OECD (2005)
There is however another way to interpret these
figures. While the rate of transition into a new job is
an important criterion, it is not the only one on which
to evaluate successful adjustment. Much also
depends on what kind of jobs are being taken. If
workers who until recently had no difficulty whatsoever
functioning in a productive organisation find
themselves in lower paid jobs with a substantially
lower level of productivity, then this also represents a
waste of productive potential and human resources.
Globalisation offers the opportunities of enhanced
productivity and growth. But these opportunities can
only be fully seized if as many retrenched workers as
possible move into new and productive jobs.
The danger of human resources going to waste
during restructuring processes can be illustrated by
what happened to workers laid off by MG Rover
(Armstrong K, 2006). Eight months after redundancy,
a third of workers laid off were still unemployed.
Over half did find new full-time jobs but their new
jobs paid them £3,523 a year less and almost half of
them think their new jobs are worse.
What can labour market policy do? To provide new
and fulfilling jobs to a maximum of retrenched
workers, there is a need for job transition arrangements
offering displaced workers retraining and job
search assistance with the aim of developing the
skills of retrenched workers and getting them into
jobs matching their upgraded skills.
Collective bargaining in several Nordic countries
shows a promising way forward. In Sweden and
Finland, collective agreements at national and crossindustry
level establish the right of productive reinsertion
for every retrenched worker. The basic idea
is not to have fired workers fall into the ‘black hole’ of
unemployment and leave them there for one year
before offering help, but to provide them with active
assistance immediately. From the moment notification
of lay-off is given, Swedish and Finish workers
are offered job counselling, job search assistance,
retraining, even (paid) job traineeships in other firms.
These rights to productive career transition are
supported and organised by social partner funds
financed by employer contributions in the form of a
percentage of each company's wage sum. In practice,
these funds and their activities work in close cooperation
with the public employment service and, in
case of collective redundancy, they set up offices on
the shop floor. If managed successfully, this kind of
labour market arrangement helps prevent an
increase in structural unemployment. Workers being
fired are not left to their fate and are much less
exposed to the risk of longer inactivity spells turning
into long-term and structural unemployment.
C. Tackling the gender gap to unleash Europe’s
hidden employment potential
A recent study from Goldman-Sachs (2006) argues
that policy makers are too pessimistic on Europe's
growth capacity and that they tend to neglect the
potential contribution to growth by the female
labour force. Goldman-Sachs starts its analysis by
observing that female participation rates in young
cohorts are just as high in the big five EU countries as
they are in the US. Southern countries (Spain, Italy),
traditionally countries where male employment and
participation dominate, are no exception to this. As
shown in the graph below, 2003 female participation
rates are even slightly higher in Spain than they are
in the US.