The EU and social policy

The case for a European Social Union

Frank VandenbrouckeSummer School ‘The EU Inside Out’

22 May 2015

Main argument

A basic consensus on the European Social Model and the role the European Union has to play (and not to play) in the domain of social policy…

… is not a luxury.

It is an existential necessity.

Structure of the presentation

• The diversity of European welfare states

• Why is a basic consensus on social policy a necessity?

– Eurozone– EU28

• Which solidarity?

• The idea of a ‘European Social Union’

• Example: social investment as a common ambition

• Policy recommendations & tough nuts to crack

The diversity of EU welfare states Input: expenditure on social protection, gross, in % of GDP (2010)

RO LV BG EE SK PL LT MT CZ CY LU HU SI ES PT UK GR IE IT BE AT SE FI GE NL DK FR00

05

10

15

20

25

30

35

old age & survivors Sickness/Health Care Unemployment DisabilityFamily/children Housing & Social Inclusion n.e.c. Other & adm. costs

The diversity of EU welfare statesOutcome: a two-dimensional map of outcomes

The diversity of EU welfare states: povertyPoverty risk and poverty threshold: “national” conception (SILC 2010)

CZ NL SK AT HU SI SE FI DK FR LU BE MT CY GE EE IE UK PL PT IT GR LT BG ES RO LV.000

5.000

10.000

15.000

20.000

25.000

.000

2000.000

4000.000

6000.000

8000.000

10000.000

12000.000

14000.000

16000.000

18000.000

AROP total population, SILC 2010 Poverty threshold PPP

The performance of European welfare states

50.000 55.000 60.000 65.000 70.000 75.000 80.000

8.000

10.000

12.000

14.000

16.000

18.000

20.000

22.000

24.000

26.000

17.0000

14.8000

21.2000

9.6000

13.1000

16.1000

17.5000

15.2000

23.100022.2000

14.1000

20.5000

19.4000

14.7000

19.200018.6000

15.1000

14.000015.0000

10.1000

14.4000

17.100017.9000

22.6000

13.500013.2000 13.200014.2000

16.2000

At-

risk

-of-

pove

rty

rate

tota

l pop

ulati

on, S

ILC

2012

(IE=

SILC

201

1)

Low povertyHigh employment

High povertyHigh employment

Low povertyLow employment

High povertyLow employment

Employment rate 15-64, LFS 2012

The welfare state is not ‘the problem’

Switz

erla

nd

Finl

and

Germ

any

Unite

d St

ates

Swed

en

Neth

erla

nds

Japa

n

Unite

d Ki

ngdo

m

Norw

ay

Cana

da

Denm

ark

Aust

ria

Belg

ium

New

Zea

land

Aust

ralia

Luxe

mbo

urg

Fran

ce

Kore

a

Irela

nd

Icela

nd

Esto

nia

Chile

Spai

n

Pola

nd

Turk

ey

Czec

h Re

publ

ic

Italy

Port

ugal

Mex

ico

Slov

enia

Hung

ary

Slov

ak R

epub

lic

Gree

ce

1 3 4 5 6 8 9 10 11 14 15 16 17 18 21 22 23 25 28 31 32 34 35 42 44 46 49 51 55 62 63 78 91

.000

5.000

10.000

15.000

20.000

25.000

30.000

35.000

40.000

Public Spending 2009 Private Spending 2009

OECD countries ranked according to Global Competitiveness Index 2013-2014

Publ

ic an

d pr

ivat

e so

cial s

pend

ing

as a

% o

f GDP

Structure of the presentation

• The diversity of European welfare states

• Why is a basic consensus on social policy a necessity?

– Eurozone– EU28

• Which solidarity?

• The idea of a ‘European Social Union’

• Example: social investment as a common ambition

• Policy recommendations & tough nuts to crack

The consequences of monetary unification

Transfers might mitigate the symmetry/flexibility trade-off

The EU’s way: more symmetry, more flexibility

Flexibility determines social order

Institutional advantage of coordinated bargaining

Competitiveness:symmetrical approachnecessary

=> convergence

Defining the EMU’s social objective is a necessity rather than a luxury

• EMU forces upon the member states a shared conception of flexibility

• A basic consensus on the functioning of the social model is necessary for the long-term sustainability of EMU

– short term: stabilisation– mid term: a symmetric guideline on wage cost competitiveness& institutions that can deliver– long term: sustainability of pensions

• Symmetry => convergence w.r.t. fundamental parameters => shared objectives

• Legitimacy => convergence in prosperity

‘excessive social imbalances’ associated withinadequate and disparate investment in human capital

The human capital asymmetry: employment and formal educational attainment

.000 10.000 20.000 30.000 40.000 50.000 60.00045.000

50.000

55.000

60.000

65.000

70.000

75.000

80.000

85.000

% of population (15-64) with lower secondary education attainment, 2012

Empl

oym

ent r

ate

15-6

4, 2

012

Many low-skilledLow employment rate

Few low-skilledHigh employment rate

Few low-skilledLow employment rate

Why a ‘European Social Union’?

• an inevitability of European Monetary Union

• integration and social regulation in EU28

– Social dumping?– Social sovereignty?

• the very core of the European project.

Why a ‘European Social Union’?

• an inevitability of European Monetary Union;

• Freedom of movement and national social cohesion in EU28:

– Social dumping? – Economic freedoms right to strike (Viking, Laval)

• the very core of the European project.

Social dumping…

… or “convergence machine”?

Source: Lefebvre and Pestieau, Peut-on mesurer la performance de l’Etat Providence?

Why a ‘European Social Union’?

• an inevitability of European Monetary Union;

• Freedom of movement and national social cohesion in EU28:

– Social dumping? – Economic freedoms right to strike (Viking, Laval)

• the very core of the European project.

Why a ‘European Social Union’?

• an inevitability of European Monetary Union;

• Freedom of movement and national social cohesion in EU28: ‘a balancing act’

– Social dumping? – Economic freedoms right to strike (Viking, Laval)

• Two dimensions of solidarity: domestic (national) and pan-European

Why a ‘European Social Union’?

• an inevitability of European Monetary Union;

• Freedom of movement and national social cohesion in EU28: ‘a balancing act’

– Social dumping? – Economic freedoms right to strike (Viking, Laval)

• Two dimensions of solidarity: domestic (national) and pan-European

Structure of the presentation

• The diversity of European welfare states

• Why is a basic consensus on social policy a necessity?

– Eurozone– EU28

• Which solidarity?

• The idea of a ‘European Social Union’

• Example: social investment as a common ambition

• Policy recommendations & tough nuts to crack

A European Social Union

A Social Union would

• support national welfare states on a systemic level in some of their key functions

• guide the substantive development of national welfare states – via general social standards and objectives, leaving ways and means of social policy to Member States – on the basis of an operational definition of ‘the European social model’.

Þ European countries would cooperate in a union with an explicit social purpose, pursuing both national and pan-European social cohesion

Convergence in prosperity: the social investment imperative

• A social investment agenda (cf. Europe 2020, SIP)

– Child-centred social investment strategy– Human capital investment push– Reconciling work and family life– Later and flexible retirement– Migration and integration through education and participation– Minimum income support and capacitating service provision

• The political deal the EU needs is one wherein all governments pursue budgetary discipline and social investment, and are supported therein in a tangible way by the EU.

Spending on education 2004-2008-2012

Romania

Hungary

Portuga

l

Greece Ita

lyLat

via

Bulgaria

Spain UK

Slove

nia

Finlan

d

Irelan

d

Swed

en

Denmark

Lithuan

ia

Netherl

ands

France

Estonia

Austria

Belgium

Czech Rep

ublic

German

y

Poland

Slova

kia

Luxe

mbourg-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

Real public spending on education, 2012 vs. 2004-08Spending % GDP, 2008, vs. average

Spending on education 2004-2008-2012 and PISA results

Romania

Hungary

Portuga

l

Greece Ita

lyLat

via

Bulgaria

Spain UK

Slove

nia

Finlan

d

Irelan

d

Swed

en

Denmark

Lithuan

ia

Netherl

ands

France

Estonia

Austria

Belgium

Czech Rep

ublic

German

y

Poland

Slova

kia

Luxe

mbourg-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

Real public spending on education, 2012 vs. 2004-08 PISA 2012 (Math, Science, Reading) vs. averageSpending % GDP, 2008, vs. average

Convergence in prosperity: the social investment imperative

• A social investment agenda (cf. Europe 2020, SIP)

– Child-centred social investment strategy– Human capital investment push– Reconciling work and family life– Later and flexible retirement– Migration and integration through education and participation– Minimum income support and capacitating service provision

• The political deal the EU needs is one wherein all governments pursue budgetary discipline and social investment, and are supported therein in a tangible way by the EU.

Structure of the presentation

• The diversity of European welfare states

• Why is a basic consensus on social policy a necessity?

– Eurozone– EU28

• Which solidarity?

• The idea of a ‘European Social Union’

• Example: social investment as a common ambition

• Policy recommendations & tough nuts to crack

The case for a European Social Union

• support national welfare states on a systemic level in key functions (e.g. stabilization)

• guide the substantive development of national welfare states

– via general social standards and objectives

Þ symmetric w.r.t. to competiveness (wage policy & capacity to deliver)Þ social investmentÞ minimum wages and minimum income protectionÞ solidarity in reform – leaving ways and means of social policy to Member States

The case for a European Social Union

• support national welfare states on a systemic level in key functions (e.g. stabilization)

• guide the substantive development of national welfare states

– via general social standards and objectives

Þ symmetric w.r.t. to competiveness (wage policy & capacity to deliver)Þ social investment (investment in and protection of human capital)Þ minimum wages and minimum income protectionÞ solidarity in reform – leaving ways and means of social policy to Member States

The case for a European Social Union

• support national welfare states on a systemic level in key functions (e.g. stabilization)

• guide the substantive development of national welfare states

– via general social standards and objectives

Þ symmetric w.r.t. to competiveness (wage policy & capacity to deliver)Þ social investment (investment in and protection of human capital)Þ minimum wages and minimum income protectionÞ solidarity in reform – leaving ways and means of social policy to Member States

The case for a European Social Union

• support national welfare states on a systemic level in key functions (e.g. stabilization)

• guide the substantive development of national welfare states

– via general social standards and objectives

Þ symmetric w.r.t. to competiveness (wage policy & capacity to deliver)Þ social investmentÞ minimum wages and minimum income protectionÞ solidarity in reform – leaving ways and means of social policy to Member States

T

ough nuts to crack

Thank you!

1. F. Vandenbroucke, The Case for a European Social Union. From muddling through to a sense of common purpose, Euroforum Policy Paper, Sept. 2014 www.kuleuven.be/euroforum/papers

2. F. Vandenbroucke, with B. Vanhercke, A European Social Union. 10 Tough nuts to crack, Friends of Europe, Spring 2014 http://www.friendsofeurope.org

3. Unequal Europe. Recommendations for a more caring EU. Final Report of the High-Level Group on Social Union, Friends of Europe, Spring 2015 http://www.friendsofeurope.org