1

Europe’s Social Reality

Roger Liddle, Principle Policy Advisor to the President of European

Commission

Globalisation and the Future of the Welfare State

Santiago, Chile

15 March 2007

2

Is Globalisation the biggest factor driving social change in our societies?

YES:

• Some loss of jobs in low skilled sectors subject to new international competition

• Some “delocalization” – but not as much as people think and often, when it happens, within the EU itself to the new Member States

• Outsourcing of particular skills

• Increased migratory pressures (relative ease of travel, refugees, poor people seeking better life, human trafficking)

• Intense pressure on energy and natural resources, with need to tackle climate change

3

BUT

Social change mainly home grown in Europe

• Technical progress and rising living standards driving Europe’s economic transformation to a knowledge and service economy

• Rise of the Welfare State creating new opportunities and leading to some new dependencies

• Gender and demographic change

• The coming of mass affluence and the individualization of values

4

From the industrial to the knowledge and service economy

1947 Large parts of Europe still pre-industrial

1977 Mass manufacturing industrial economy

2007 40% work in “knowledge sectors” in EU15 2/3 of all jobs in services (EU25)

5

Shifts in occupational structure very fast

Between 2000 and 2004, 1.7m fewer industrial jobs; 1.1m fewer agricultural jobs; 8m more service jobs

Job growth in last decade (EU15): overall only 6%,

in knowledge sectors 24%

6

Big social implication of knowledge economy: the necessity of skills

• 50% of jobs already demand a high level of cognitive and/or personal skills.

• Number is growing fast: two thirds of new jobs in the new economy are skilled.

• Increasingly bleak prospects for unskilled: unemployment rate three times higher than for graduates

7

YET

• 1 in 3 of the EU workforce is unskilled

• 1 in 6 still leaving school without skills

• Educational performance (in terms of attainment of intermediate skills) in decline in some MS

• Bleak prospects for low skilled, especially men, who lose their jobs in mid-life

8

Unemployment still top political issue in most Member States despite recent recovery (employment rate up 5% since 2000)

• Youth unemployment twice the unemployment rate overall: over 20% in France, Italy and Spain; around 40% in Poland

• Very low employment rates for over 55s despite recent improvements

9

Confidence in keeping one’s job

10

New patterns of regional inequality:

• Cities prospering that attract “creative class” but old industrial towns in decline

• Within EU 15, gap between richest and poorest MS narrowed, but gap between richest and poorest regions across EU 15 widened

• In NMS, two thirds live in regions where GDP per head is less than half EU average: average income of bottom quarter of the population in Bulgaria and Romania as little as 100 Euro a month

• Generational distribution of income

11

The new world of work

Reasonable levels of job satisfaction (84% very satisfied or fairly satisfied)

But

• 28% feel their health at risk because of work

• Complaints of rising work intensity – stress and muscular pain

• Growth in non-standard jobs (1 in 7 overall) concentrated in MS with strong “insider/outsider divisions” in their labour markets (eg France, Germany, Poland and Spain)

• Falling trade union membership except in Nordics (in the last decade trade union membership fell by 10% in Italy and the Netherlands; a quarter in Britain and Germany; and by half in the NMS)

12

Level of stress at work

More stress in Eastern countries?

13

Impact of welfare state

Contribution of health services, pensions and the abolition of aboslute poverty on prospects for a long life

Men Women

1900 43.5 46.0

2000 75.4 81.4

2050 82.3 87.4

Rise in life expectancy is a dramatic European achievement

But rise in dependency: among 55-64 year olds over 40% of men and 60% of women have dropped out of the labour market

14

53%

51%

42%

Is too expensive for the(NATIONALITY) society

Provides wide enoughcoverage

Could serve as a modelfor other countries

Quality of welfare systems

Expensive but worth it

“For each of the following please tell me whether you think it applies to the (NATIONALITY) social welfare system? Our social welfare system… ”

Answers “It applies to…” – EU 25

15

But

Rise in dependency:

• among 55-64 year olds over 40% of men and 60% of women have dropped out of the labour market

And

Persistence of relative poverty

• 1 in 6 over 65s – 12 million of 72 million pensioners – clasified as at risk of poverty.

• 1 in 5 children (under 18 year olds) – 18 million of the EU’s 94 million children at risk of poverty

16

Populations at risk of falling into poverty

Anyone is at risk someday.

17

Child poverty big issue across Europe - concentrated among

• Single parent families: 4.4% of all EU households (but at high of 8.4% in UK) – a third at risk of poverty

• Jobless households where 10% of European children live – 60% at risk of poverty

• Large families on low incomes

and rising in several MS!

18

Gender and demographic change

More women in work

• Gap between proportion of men and women with jobs fallen to 15% (uniform fall across EU)

• Prevalence of part time work varies a great deal (Portugal 10%, Finland11%, Netherlands 53%)

19

Declining fertility

• 1960 2.69; 1980 1.82; 2000 1.53; 2003 1.48: well below sustainable levels

• Biggest recent falls in southern Europe and new Member States

• Some evidence that women with jobs now more likely to have children

• Some evidence that fertility rates higher in MS with better childcare, easier maternity and paternity leave and greater availability of part time work

Supporting the “dual earner” couple now the prime task of family policy

20

Implications of ageing

Sustainability of the Social Model as the public spending costs of age related expenditure rises by 2.5% of GDP by 2030 and 4.3% by 2050

28% of over 70s currently live alone; 40% of over 80 year olds

Between a third and two thirds of over 75 year olds dependent on some form of informal care

Pressure on weakening extended families (mainly women, without greater gender sharing of tasks) to care for elderly at same time as to stay at work longer in order to make pensions more sustainable

21

MIGRATION AND DIVERSITY

Migration

• no solution to demographic problem in long term (as birth rate of migrant communities falls to general European level)

• but can be source of new labour supply and economic growth in the medium term

• however social impact profound

22

Recent waves of migration transforming European cities

Cities as different as Birmingham, Malmo and Marseilles now made up of more than one third ethnic minorities

"Non-native Dutch population" forecast to be 14.1% of total population by 2020 – but over half population of Amsterdam and Rotterdam (up from 6% in 1973)

This diversity enriches Europe: migrant contribution to diet, sport, social welfare and public services

But big problems of social integration remain

23

Problems for migrants:

• Discrimination, especially in labour market (in the Netherlands, two thirds of the adult population have jobs, but only 40% of Moroccans)

• Half world of "paperless illegals“

• Poor educational attainment (60% of Dutch Moroccans leave school without qualifications as against only 10% of "native Dutch")

24

Problems of integration:

• 60% of Europeans believe there are limits to how many people of other races, religions or cultures a society can accept: 25% reject multiculturalism altogether

• Half the "native Dutch" don't want neighbours next door of different ethnic origin

• Polling shows that a huge majority of Britons blame asylum seekers and migrants for abusing the welfare system

• Good economic performance and a well developed Social Model, as in Denmark, is no guarantee of successful integration

• Debate and dialogue urgently needed to establish common obligations of citizenship, particularly the boundaries between private beliefs and public rights

25

54%

48%

46%

42%

32%

People from other ethnic groups are enriching thecultural life of (OUR COUNTRY)

We need immigrants to work in certain sectors ofour economy

The presence of people from other ethnic groupsincreases unemployment in (OUR COUNTRY)

The presence of people from other ethnic groups isa cause of insecurity

The arrival of immigrants in Europe can efficientlysolve the problem of Europe’s ageing population

The question of immigration

Balanced views on immigration

“For each of the following statements, please tell me whether you tend to agree or tend to disagree.”

Answers “Tend to agree” – EU 25

26

RISE OF THE CITIZEN CONSUMER

Emergence of new wants

• material needs increasingly satisfied (centrally heated modern homes equipped with digital entertainment and wide range of consumer appliances, including dishwashers)

• new consumer demands for leisure, fitness, tourism, style (see the growth of new occupations like interior designers, personal counselors and gym instructors) driving Europe's transformation to a knowledge and service economy

• information empowerment: demand for more personalized and consumer accountable public as well as private services; growth of self-health

• increasing consciousness of risk (concerns for food safety, child safety etc)

27

BUT

• Rise of consumer debt

• Pervasive commercialization of life, including childhood

• Casualties of those who can't keep up on the "hedonic treadmill" of consumption – increases in obesity, alcoholism and mental illness

28

VALUE SHIFTS

Trend across Europe to individualization• Different from increasing secularization/ decline of

religious belief and decline in "social capital/ civic engagement/ trust in politics – but associated.

• Individuals seeing their lives as a personal biography to be written – not determined by their class, religion, origin

The result – greater personal freedom and tolerance of diverse sexuality and lifestyles

29

BUT

• Rising divorce rates• More births outside marriage (over a quarter across

the EU)• More people living on their own in the prime of life• Decline of extended family and the role of

grandparents (only a quarter of grandparents care for grandchildren quite frequently – half never)

30

11%

21%

25%

51%

44%

57%

85%

85%

32%

31%

54%

33%

46%

38%

12%

14%

35%

27%

15%

7%

9%

5%

22%

20%

4%

7%

1%

2%1%

1%

1%

2%

2%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Politics

Religion

Helping others or voluntarywork

Work

Leisure time

Friends and acquaintances

Your family

Health

Very important Quite important Not very important Not at all important DK

Things that are important to people

31

GROWING CONCERN FOR « QUALITY OF LIFE »

Quality of life in immediate post 1945 era defined by access to decent housing, adequate public services, and consumer goods like washing machines and cars

Rise in environmental concerns from 1970s

Key role played by EU in tackling air pollution, improving the purity of drinking water, cleaning up rivers and beaches, reducing industrial and vehicle emissions, tackling effectively the 1980s issues of the "hole in the ozone layer" and "acid rain"

32

Critical challenges remain

• Work life balance

• Erosion of "positional goods": concretization of the European coastline grew 7.5% in last decade; air travel growing 5% a year

• Rapid spread of urbanization – much faster then population growth – 40% increase in urban traffic forecast from 1995 to 2030

• Climate change – catastrophe?

33

Anticipated life for future generations

Contrasted anticipated futures for generations to come

34

GROWING RISKS OF SOCIAL POLARISATION

• New patterns of regional and occupational inequality as a result of growing divisions between the perceived "winners" and "losers" from globalization

• Because education is much more important in the knowledge economy, deteriorating position of low skilled – rising pre-tax wage inequality

• Embedding of disadvantage from one generation to the next becoming more, not less of an issue – better educated parents find it easier to embed advantage for their children (for example, in securing access to university)

35

Lesson from the Eurobarometer

Overall, European Union citizens are happy with their personal life but more critical about collective life.

There is a clear tendency of EU citizens to distrust public institutions.

EU citizens are nonetheless relatively satisfied with their everyday life environment although there are some major differences across member states.

A quarter of European Union citizens feel at risk of falling into poverty and 62% believe that anyone is at risk of poverty sometime in their life.

64% of European Union citizens are of the view that the life of those who are children today will be more difficult than the life of their own generation.

The survey shows that in all the 27 countries, getting a good education is seen as one of the two most important things for getting ahead in life.

36

TO SUM UP

Europeans should be optimistic about the EU's ability to prosper in a Global Age

Key Challenges :

• Education and skills in the knowledge economy : in some Member States educational performance in decline.

• Generational inequity due to demographic change.

• Europe needs more migrants : but considerable problems of social integration in many Member States.

• Risks of social polarization : increasing poverty and inequality; declining social mobility.