New Frontiers of Social Europe

It is somewhat ironic that a European Commission headed by a former Social Affairs minister (Ursula von der Leyen) was almost inaugurated without the word ‘social’ appearing in the title of either commissioner. This would have been a great shame, especially at a time when the progressive family is represented in the Commission with the highest share in about two decades. On top of that, various civil society organisations and other stakeholders are just now looking for ways to turn the so-called European Pillar of Social Rights (EPSR), a collection of 20 non-binding principles, into a sustainable reality.

Indeed, a critical question today is whether the EU can also provide material support to its Member States and regions in a systematic way to meet common social standards and achieve commonly agreed goals. The efforts to answer this question brought the concept of a Social Union, which has been coined and promoted by social scientists like Frank Vandenbroucke, Maurizio Ferrera and Anton Hemerijck. In their view, the European Social Union is not a European Welfare State, but a union of national welfare states, with different historical legacies and institutional patterns. But what concrete steps would help us moving to this direction at this stage?

“A basic European unemployment insurance scheme, would make a direct link between reducing imbalances in GDP growth and helping the innocent victims of recessions and financial crises.”

Perhaps the most frequently mentioned reform idea with relevance to both economic and social affairs is unemployment insurance. A basic European unemployment insurance scheme, and its re-insurance version, serving to partially pool between Member States the fiscal costs of cyclical unemployment, have been promoted for years as a possible automatic stabiliser for the European Monetary Union (EMU). Such a tool would make a direct link between reducing imbalances in GDP growth and helping the innocent victims of recessions and financial crises. It would help upholding aggregate demand during asymmetric cyclical downturns and provide a safety net to national welfare systems. 

Establishing at least some fiscal capacity for the euro area has been much talked about in recent years and the new long-term EU budget (MFF) is likely to introduce such types of tools. Existing monetary unions all function with examples of automatic stabilisers. If well-designed, a re-insurance scheme could also function well, and it could also be more politically feasible. A fair, rules-based and predictable transfer mechanism at the EMU level will have to be acceptable also for the ‘surplus countries’, in order to stabilise the single currency economically, socially and politically.

Another area where the interest in closer EU coordination has increased is wages and wage setting. Although the EU has no direct competences in this field, the issue has gradually come under EU-influence. In order to counter negative trends, a campaign was launched by Trade Unions for a European Wage Alliance a few years ago. How to facilitate upward wage convergence is the central question, and some concrete proposals have already been outlined.

” A guaranteed minimum income could be an effective way of ensuring adequate income support and fighting poverty”

For example, an agreement could be sought on a guaranteed wage floor in each country, based upon a coordinated approach towards minimum wages at EU level and ensuring that the levels are set above the poverty threshold and represent decent pay for the work undertaken. Guaranteed national minimum wages would help sustain internal demand while also improving the situation of posted workers and helping to fight social dumping.

Second, a guaranteed minimum income (at different levels per country) could be an effective way of ensuring adequate income support and fighting poverty while providing for activation incentives where relevant. Such a ‘national social floor’ would also indirectly define the minimum performance expected from national automatic fiscal stabilisers in times of economic crisis.

A third direction that needs to be highlighted is what we call a social economy. As the post-2008 financial and economic crisis was primarily a product of a certain business model, a reform process aiming at more resilient growth potential has begun. The efforts to reform the business model, however, also have to take into account social responsibility, employee well-being and participation. Building on the new focus around social rights (thanks to the EPSR), more can be done to help European companies to adapt their business models towards a better social and environmental impact.

1. Employee stock ownership and other forms of employees’ financial participation in their companies could be promoted in order to broaden capital ownership. European legislation and related practical tools could be particularly useful in promoting employee co-ownership of companies operating in more than one national jurisdiction
2. The EU could further promote the application of metrics that evaluate companies’ social and environmental impact.
3. Cooperation and knowledge learning between social enterprises across countries could be strengthened, also with support from EU funds.
4. A “socialisation” of the EU’s investment strategy (“InvestEU”) is a further opportunity that should not be overlooked.

Research carried out by Maurizio Ferrera found strong support for a larger EU budget aimed at promoting economic and social investments practically everywhere in Europe. This would help not only people in severe poverty but, practically all Member States when experiencing a rise in unemployment. Such support was not possible in the past. A fiscal capacity for the Social Union can thus count on the support of European citizens, as long as the established tools and mechanisms are deemed transparent as well as effective.

Since the functioning of the EU, and of its economic governance in particular, has massive consequences on national industrial relations and welfare systems (mainly through their fiscal base), there is a need for an EU safety net for the safety nets of the Member States. This approach goes beyond the exercise to establish the EPSR, firmly incorporating the tasks of the welfare state into the concept of the European Social Model and the fiscal mechanism of the EU itself.

Social Union

Right now, the need for such a move may not be obvious for all. However, in recent years, without any federalist momentum, the EU moved towards a Banking Union, a Capital Market Union, an Energy Union as well as a Security Union. A discussion on a Social Union may be very helpful if we want to avoid a further widening of the gap between the economic and social sides of the integration.

A 21^stcentury EU social agenda must address various new issues like the impact of digitalisation and robotisation on labour, especially concerning the effects of technological change on working conditions and income inequality. On jobs, skills and social security, the new OECD Jobs Strategy offers fresh analysis as well as guidance. While constantly updating social policy, the EU also has to monitor the social dimension of all EU policy areas, from foreign trade to competition.

Popular support may be lacking for a United States of Europe but, with the right arguments, it can be built up in favour of a Social Union. Such an initiative would restore the confidence in the capacity of European states to reconcile strong economic performance with a high level of social cohesion, and that this model can serve as an inspiration for others in the world.