EU social policy – priorities for business

Maxime Cerutti
Director Social Affairs Department, Business Europe

We are experiencing profound changes on our labour markets, due to the digitalisation of the economy, a more diverse workforce, and increased global competition. Europe needs to have the right policy frameworks in place to adapt to these changes in a way which preserves our competitiveness and allows companies to create more jobs and wealth. This is the basis for sustaining our social systems and improving social cohesion.

The EU needs to design social policy in a way which encourages dynamic and flexible labour markets, protecting employment rather than jobs. The Commission should not propose social legislative initiatives that are counterproductive for growth and jobs or divide Europe. The right policy approach at European level is to support Member States and national social partners in all EU member States in their efforts to put in place:

• employment regulations that are sufficiently flexible to help companies adapt to constantly changing economic circumstances, while providing appropriate levels of protection to workers and encouraging their mobility on the labour markets.
• social policies and investments that encourage enterprises to hire people for sound economic reasons, and people to work.

This should be done in a way that supports European businesses, workers and citizens to reap the benefits of digitalisation. We also need to increase productivity in Europe, as the best route to sustained economic growth.

The EU’s approach to social policy must respect the role of social partners at all levels, in line with national industrial relations systems and leave space for flexible social dialogue solutions that meet employers’ and workers’ changing needs, for example through collective bargaining.

In the future, a key factor to encourage enterprises and their organisations to invest in social dialogue is to ensure that it positively contributes in terms of competitiveness. Essential in this respect is that the legal framework, and collective bargaining practices provide to companies enough flexibility to adapt their workforce to variations in demand for their products and services, and to evolving production processes.

Positively, the economic recovery is underway in Europe. The way this has translated into improvements on labour markets and poverty reduction is positive news, which confirms in fact our conviction that economic growth is the main vector of social prosperity. But it is a mixed picture across member states, and more progress is needed in those countries where unemployment remains too high.

Whereas improving economic conditions understandably generate discussions on how to distribute economic growth, one of our key demands is to reduce the tax wedge on labour. High levels of labour taxation or social contributions negatively affect employment by reducing incentives for employers to hire more staff. Over the last 10 years, the EU has made no progress in closing the gap with other advanced nations. The average tax wedge in Europe is 42% – almost one-third higher than in Japan and the USA for example. Social investments and benefits also need to be designed in a way that underpins economic growth and employment participation of benefit recipients.

Another key concern for business across Europe is that companies increasingly report difficulties in hiring qualified workers even where unemployment remains high. The European Centre for the Development of Vocational Training (Cedefop) has measured that 4 in 10 EU employers has difficulty finding people with the right skills. We are experiencing a structural mismatch between the skills needed on labour markets and those of the workforce. To correct this and make sure that people can fulfil their potential on the labour market, we need to ensure that education and training systems provide people with relevant skills that make them employable.

To conclude we are calling on the EU and member states to better implement labour market and social system reforms as part of a reform partnership. There is no EU blueprint for this, as it depends on the national circumstances and levels of economic and social conditions and progress. However, the EU plays an important role in recommending measures to member states. Progress is also needed to address economic and social challenges in an integrated way to achieve at the same time positive outcomes for business and society.