Structural reforms and macro-economic policy - ETUC

More documents

Recommendations

Info

Structural reforms and macro-economic policy / 6 market policies as well as decent income support in unemployment remained too limited. At the same time, good economic growth did not translate into much job creation, thereby reducing job prospects for retrenched workers. Finally, Cazes and Nesporova call for a true social dialogue to rebalance the mix of flexibility and security in Central and Eastern Europe. Pavel Janicko (CMKOS) confirms the previous analysis from the point of view of the Czech Republic. There is too much focus on labour market reforms deregulating workers’ rights and weakening trade unions and insufficient focus on the social dimension of transition and structural change, on a well-functioning employment service, on investing in human capital and on ensuring decent wages. Claudio Treves (CGIL-Italy) describes how the previous government pushed through labour market reforms weakening workers’ rights and spreading insecurity throughout the work force while the real problem of Italy’s overspecialisation in medium-tech sectors was ignored. In a second part, the question is addressed which kind of structural reforms are necessary for the European economy. Ronald Janssen (ETUC) starts out from the basic principle that globalisation requires a well functioning labour market promoting upward (as opposed to downward) flexibility of workers. Put differently, Europe can and should not compete with China by cutting wages and working longer but by upgrading the economy and its workforce.Therefore, a trade union agenda for structural reform has two basic pillars: One pillar is to set decent working standards so that business has to resist to the temptation of addressing competition by going down the wrong route of simply exploiting its work force. The other pillar is to invest more and massively in the new social agenda of skills, upward mobility and gender. The paper also argues that the two pillars are closely interlinked with each other and that the way to reform is to build the new social agenda of skills and mobility on the basis of robust workers’ rights guaranteeing fair wages and working conditions. Niklas Noaksson (former ETUI-REHS) focuses on the method that is being used in Europe to deliver more structural reforms. After describing the open method of coordination, as it has been used in the European Employment Strategy since 1997, Noaksson draws attention to the reforms introduced by the 2005 relaunch of the Lisbon strategy. It appears the reform of the strategy to deliver structural reforms is copying the strategy used by the OECD. As a result, bilateral contacts between Commission and member states take a more prominent role. Also, the role of country specific policy recommendations has been reduced. To improve delivery of reforms, national social partners and parliaments should be associated more closely and the European Union structural funds should be used to encourage those member states that comply with the Lisbon guidelines. Ake Zettermark (SACO) describes how trade unions in Sweden handle structural reform. Trade unions and workers in Sweden are found to be quite open to change, as illustrated by the fact that 80% of Swedish and Danish workers actually are of the opinion that changing jobs every few years is a good thing to do. However, this is no coincidence. Economic policy and labour market policy are very much supporting workers when confronted with structural change: Unemployment benefits are high, jointly run social partner funds provide retrenched workers with immediate assistance in looking for a new and productive job from the moment they receive notification of dismissal, and the so-called industrial collective agreement focuses wage formation on the objective of creating new jobs and decreasing unemployment. Emmanuel Mermet (CFDT) stresses that France provides the counter-example of how structural reform and macro-economic policy should not be done. In France, the emphasis is on expanding the low wage sector by artificially subsidising low paid jobs. Jobs paying between the minimum wage and 1.6 times the minimum wage enjoy substantial cuts in social security contributions. However, this unbalanced focus on low wages works to create a ‘low wage trap’and comes at the expense of the incentive to invest in education, training and to raise productivity. Moreover, in trying to push for lower job protection, the French government has simply ignored the role social partners and social dialogue should play in implementing reforms such as these. Mistakes have also been made on the macroeconomic policy side.Tax cuts have benefited the rich who have mainly used the money to save more. France has raised government deficits by cutting taxes but this has done little to boost domestic demand. The papers of the third and final part make the link between labour market reforms and macro-
economic policy. Ad van Riet (European Central Bank) provides the point of view from the side of monetary policy makers. Here, the focus on price stability is considered to be essential. On the one hand, the focus on price stability allows the ECB to react to those structural reforms which have an impact on the medium-term outlook for inflation. On the other hand, a stable level of prices creates transparency, making the need as well as the potential benefits of structural reforms more visible for everyone to see. Gustav Horn (IMK) warns European policy makers in general and the European Central Bank in particular not to make the mistake of turning low potential growth into a self-fulfilling prophecy. Policy makers should not exclusively focus on structural reforms to increase the medium term rate of potential noninflationary growth. They should also pay due attention to the need of stabilising the economy around full potential by using active aggregate demand policies. If not, labour market hysteresis might turn cyclical unemployment into structural unemployment. Failure to stabilise aggregate demand and activity will also result in a lower investment ratio depressing total factor productivity growth, thereby resulting in a reduced growth potential for the economy. Pragmatism should prevail and given a benign inflation outlook, the ECB should strive to ‘test the waters’ by triggering a virtuous cycle of falling unemployment, higher growth, falling structural unemployment and higher productivity growth. Cathérine Mahieu and Henri Sterdyniak (Office Français des Conjonctures Economiques-OFCE) argue that the Stability and Growth Pact is not delivering what is urgently necessary, that is a real coordination of macro- economic policy in and inside the euro area. In a monetary union, with its single interest rate regime, flexible fiscal policies become even more important to address country-specific shocks and national divergence. However, the European fiscal policy framework is governed by rigid and overly simplistic rules. The Stability Pact is basically constructed to constrain discretionary fiscal policy makers instead of allowing fiscal policy to address the real economic needs of the member states. Mahieu and Sterdyniak propose a reform of the Stability Pact that is based on the central idea that European surveillance of member states’ fiscal policies should be limited to preventing any negative spill-over to the rest of the euro area. Binding rules should be limited to dealing with externalities. According to the authors, this could be done by Introduction offering member states the choice of an inflation target between 1.5 and 5%. The European Commission and Finance Council is then responsible for watching over the compatibility of these national inflation targets with euro area wide price stability (defined between 1.5 and 3.5%) as well as for watching over the fact that each country respects its engagement on delivering its contribution to price stability. In this way, euro area wide price stability as well as flexible fiscal policy making can be combined with each other. Logically, such a policy setting requires a permanent dialogue between the finance ministers of the euro group with the European Central Bank. Jörg Bibow (former Franklin College, Switzerland) fundamentally questions the argument that countries of a monetary union need substantially more wage and price flexibility in order to avoid the euro area from drifting apart. Indeed, with Spain rapidly recovering from the 2001, France and Italy recovering slowly and Germany not recovering at all, economic divergence is rapidly widening inside the euro area. Can wage flexibility, which basically works through the channel of competitiveness and real exchange rate depreciation, solve the problem? Bibow observes that the equilibrating mechanism of wage flexibility also has an important internal dimension. Wages are not only costs for competitiveness but also incomes for consumption. Wage moderation in Germany and more buoyant (nominal) wage growth in Spain have resulted in an additional depressing effect on German growth while sustaining private consumption in Spain. On top of this, other powers of divergence work to reinforce the wage moderation channel. In a monetary union with a single interest rate, divergence of inflation (resulting from diverging wage growth) delivers low real interest rates for the inflationary country and high real interest rates for the country with low growth and disinflation. All of this has now resulted in Spain running a giant current account deficit of almost 10% of GDP and Germany becoming the world champion in exports, with the first country enjoying continuing high growth and the latter country having seriously depressed growth. The basic policy message that European policy makers should urgently understand is that wage flexibility is not a substitute for flexible use of macroeconomic policies. Instead of calling for even more competitive wage dumping in the euro area, policy makers should focus more on getting the macroeconomic policy regime right by, amongst other things, adequately reacting to symmetrical demand shocks that have hit the euro area as a whole. / 7
Page 1: Structural reforms and macro-econom
Page 5: overview Introduction - Reiner Hoff
Page 10 and 11: Structural reforms and macro-econom
Page 13 and 14: PART 1 Structural reforms: What has
Page 15 and 16: described as an economy that is in
Page 17 and 18: The policy conclusions following fr
Page 19 and 20: 74 72 70 68 66 54 62 60 58 56 54 Bu
Page 21 and 22: Table 4 Main characteristics of lab
Page 23 and 24: employment. However, these programm
Page 25: LABOUR REFORMS IN ITALY 1993-2006 O
Page 29 and 30: PART 2 Structural reforms: The way
Page 31 and 32: % of labour force Almost 16% of you
Page 33 and 34: This observation may have major imp
Page 35 and 36: female. In the ‘better jobs’, t
Page 37 and 38: into new sectors and activities tha
Page 39 and 40: • Marinescu (2006) ‘Strenghteni
Page 41 and 42: pressure on members may result in e
Page 43 and 44: een replaced by Active Labour Marke
Page 45 and 46: Lisbon who would be in charge of ca
Page 47 and 48: 5.1 National parliaments to adopt N
Page 49 and 50: (2000) Lisbon European Council, Pre
Page 51 and 52: jobs, for both spouses. Notably, th
Page 53: ‘GETTING TRAPPED IN LOW WAGE JOBS
Page 57 and 58: PART 3 Structural reforms and the e
Page 59 and 60:
translate into a more dynamic and r
Page 61 and 62:
contributes to the implementation o
Page 63 and 64:
the progress made by these countrie
Page 65 and 66:
endowment (especially the capital s
Page 67 and 68:
The decrease in activity of firms a
Page 69 and 70:
6 4 2 0 -2 -4 -6 -8 -8 1970 1975 19
Page 71 and 72:
THE STABILITY AND GROWTH PACT: STAB
Page 73 and 74:
3. From 1997 to 2005: the SGP under
Page 75 and 76:
4. How to improve the fiscal framew
Page 77 and 78:
the convergence of real interest ra
Page 79 and 80:
etween. Notice also that the slowdo
Page 81 and 82:
That leaves financial integration a
Page 83 and 84:
16,0 14,0 12,0 10,0 8,0 6,0 4,0 2,0
Page 85 and 86:
opposite can arise in Germany - eve
Page 87 and 88:
precisely because they benefit from
Page 89 and 90:
LABOUR MARKET REFORMS AND MACRO-ECO
Page 91 and 92:
observe. After the 1997 election th
Page 93:
Acknowledgements The conference and
Page 96:
avec le soutien de la Commission Eu
show all

Structural reforms and macro-economic policy - ETUC

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?