Social Inclusion Policy, the financial crisis and the EU2020 strategy

1. Social Inclusion Policy, the financial crisis and the EU2020 strategy Erasmus Intensive Program – Sofia, 27 February 2012 Gert Verschraegen

2. Currentsocialsituation in the EU is dramatic • Unemployment in the EU has now reached a historically high level cancelling out all of the previous improvements, while long-term unemployment accounts for an ever higher share of total unemployment. • Most groups are affected but especially hard hit are the young, the low-skilled and migrants. • Poverty is on the rise in many Member States, especially the peripheral ones. Young adults, children and single parents are particularly at risk.

3. Youth unemployment rate for EU Member States, November 2010, August 2011 and November 2011

4. Peripheral and more vulnerablecountries have been hit harder by recent austeritymeasures • Greece: Minimum wages and pensions have been slashed by 20% à 25%, medicines bills have been severely cut, different types of taxes on the rise with 15% till 40% • Latvia: 15% wage cut across the public sector; pensions reduced considerably (e.g. by 10% for old-age pension benefits and 70% for working pensioners). Spending on education reduced by 25% (2009 compared to 2008). • Ireland: public sector employee’s salaries were cut 20%. Taxes were increased on housing and water. This year the government is enacting additional cuts to health care and programs for children

5. What’sleft of ‘SocialEurope’? • As social spending cuts amplify the effects of the crisis, the four social groups traditionally more exposed to poverty – children, the elderly, women, and immigrants – are joined by a host of citizens not so easily labelled (mostly people with precarious jobs and lower earning capacities) • a quarter of those Europeans who until now had a decent standard of living (middle classes) at risk of sliding into social exclusion. • “New Poor”: people who marginally earn too much, i.e.  €620/month, to qualify for social welfare programs but do not earn enough to meet mortgage payments, health, and education costs • HowcanEuropeansocialpolicy help to respond to this crisis?

6. Let’stake a step backwards • ‘SocialEurope’ : does itexist? • Europeansocialinclusionpolicy: instruments and patterns • From the LisbonStrategy to the EU2020 strategy • The current crisis and the socialadequacy of the EU 2020 strategy • Discussion: is there a futureforSocialEurope?

7. Is there a ‘SocialEurope’? (≠ EuropeanSocial Model)

8. The European Ship, a picture puzzle

9. CompetingVisionson ‘SocialEurope’ and How to GetThere • Euro-corporatism, modeled afterstructure of national welfare states : gradualharmonizationthroughlegislation • Social and employmentpoliciesremainexclusivity of national welfare states: possibility of decentralisedcooperation (new modes of governance) • Post-hierarchicalintegration / multi-levelgovernance: Europeanization of nationalsystems, through a variety of policyinstruments

10. Europeaninstrumentsforsocialpolicy New Governance (a.o. EES; OMC Sociale inclusion; OMC Pensions) EUlaw (a.o. gender equality, health and safety at work, anti-discrimination directives) European Social Dialogue Structural Funds (o.a. ESF, EFRD)

11. 1. EU hard law (‘Acquis Communautaire’) • SOCIAL ACQUIS • Direct sociallegislation is scarce; forinstancenolegislation in the field of minimum incomeprotection (unanimityrequirement) • Nothwithstanding absence of ‘pure’ socialsecuritylegislation the ‘socialacquis’ has expandedsignificantly (mainly in the field of labourlaw) and effectssocialsecurity and socialinclusionpolicies • Legislationonworking time (hospitals, transports) • information and consultationdirective • non-discriminationlaw (seenextslide)

12. Non-discriminationlaw • This implies, firstly, the development of a general European anti-discrimination policy to provide better protection against discrimination (e.g., on the labour market, in housing, etc) on the basis of a person’s nationality, gender, religion, ethnic origin, etc. The best known example principle of equal pay for men and women performing the same work. Although such an anti-discrimination policy is not directly re-distributive, it does nonetheless exert important ‘social effects’; the fact is that it protects certain categories of the population (consider the ethnic minorities) that would no doubt score (even) worse on poverty and well-being indicators were discrimination be tolerated under the law • It, secondly, implies the development of transnational access to national systems of social protection (education, health care, minimum protection). The European Court reasons that all EU burgers residing in another Member State are entitled, in principle, to claim the right to social benefits in this other EU Member State, even if in the past they have never made any financial contributions into that other State’s social security system (f.i. Right to social assistance)

13. 1. EU law (‘Acquis Communautaire’) B. INTERNAL MARKET LEGISLATION • Economicintegration (=eliminatingobstacles to free movement of goods, persons, capital and services) is at the heart of the European Project • No unanimityrequired, butqualifiedmajorityvoting • This has notalways been detrimental to the social. Socialrole and dimension of ‘negativeintegration’ maynot have been sufficientlyappreciated in the past (Socialregulationbystealth)

15. Socialeffects of internalmarketlegislation • Someexamples: • Freedom of goods: Health and Safetyregulations (f.i. machinerydirective): approximation to the highest level of protection • Freedom of persons: socialsecuritycoordination(cf. video) = notmerelytechnical, fillsf.i. certaingaps in SS-protection (f.i. discussionaboutunemploymentbenefitsforunemployed in MS which does not have unemploymentinsuranceforthiscategory • Finally, let’snotforgetthateconomicintegration has led to decliningunemploymentrates and rising living standards (onanaggregate level). For instance, after EU enlargement in 2004, the new CEE countriessawtheirunemploymentrates drop and theirGDP’srisebyan average of nearly 2% a year (withthosemigrating to work in Western Europeseeingincomegains over 100%)

16. 2. EU ‘New Governance’ or ‘soft law’ (EES / OMC Social Inclusion: cyclical process of monitoring / evaluation aiming to enhance policy learning Supported by PROGRESS Launching(1999) Common Objectives IndicatorsNAPIncl Targets Joint Report Peer Review

17. Is this ‘Soft’ Law ? • Meets a lot of scepticismbecause of its non-binding nature • Yet, OMC and EES do impact uponmemberstates’ policies in the field of employment, socialinclusion and gender (bothprocedural and substantive) • Examples: • improvingstatistical and monitoringcapacity • Governancebyobjectives (target-setting) • evaluation/comparison/mirror effects • Emerginginternallearningprocesses (f.i. Belgium) • Setting standardsfor ‘good’ policies and setting concrete targets (f.i. childpoverty in B & F, Incomeguaranteeforolderpeople in B) • Constructingnewdeliberativespaces in whichactorscanusebenchmarks, targets, etc. as a ‘leverage’ (f.i. earlyretirement in B & F)

18. 3. EuropeanSocialDialogue • Possibility to negotiate European collective agreements, to be implemented in all member states (= negotiated alternative of EU law) • Although little use has been made of it, there are important directives on • Parental leave (requires Member States to ensure that employers give a minimum of three months unpaid leave to both mothers and fathers after the birth of a child) • Part time work (ensures that workers concerned by new forms of flexible working receive comparable treatment to full-time staff on open-ended contracts

19. 4. StructuralFunds (ESF, EFRD, CohesionFund) • The onlyEuropean instrument for ‘redistribution’ (i.e. genuineEuropeansolidarity) • Budgets have increasedsubstantiallyduring the ’80’s and ‘90’s because of enlargement • AlthoughStructuralFunds have noexplicitsocial goals they have becomerather important forsocialinclusionpolicy • For instance, EuropeanSocialFund has been established as anemploymentfund (Rome Treaty 1957), yet over time it has ‘stretched’ the notion of employment: in order to promote ‘employability’ they moved into education (even early childhood or preschool education of marginalized population sections) or areas of social inclusion (pathways into integration) and even health (‘health as a precondition of labour inclusion)F.i. 23% of Belgian ESF money (2007-2013) to ‘improvingsocialinclusion of less-favouredpersons’ and 40 % to ‘enhancingaccess to employment’) • In the socialsphere, StructuralFund Money financesbothinfrastructure (f.i. hospitals) as well as a myriad of public and private actions • Structural Funds also play a key role in underpinning the development and revitalisation of Europe’s towns and cities (URBAN) • “We have all been cheating, in a way” (INT EU3) • URBAN

20. Importance ESF in the field of employment and socialinclusionhighlyunderrated • From 1999 onwards the ESF has been explicitly coupled to the EES and OMC social inclusion • The availability of ESF-financing for the implementation of EES goals is a key incentive to translate EES goals into action (principle of co-financing)* • Under the current EU-2020 strategy (seefurther) allocationsfor the ESF willincrease, yet at the same time conditionalities (ex ante and ex post) willbereinforced

21. In sum • Nothwithstandinglack of explicit legislativecompetences in the field of social inclusion and social security, the EU has developed a battery of instruments to promote social protection. • Increasingintegration of instruments (f.i. ESF and the EES) gives EU governance in social and employment field a regulatorystrength and potentialitdidnotpreviouslypossess • Yet, theyshouldbeused to the full…

22. Whatabout the socialdimension in the new EU 2020-Strategy (‘smart, sustainable and inclusivegrowth’)? Europe 2020 Integrated Guidelines Stabilityand Growth Pact 1. Macro-economicsurveillance (Integrated Guidelines 1-3) 2. Thematiccoordination (Integrated Guidelines 4-10) Monitoredthrough 5 EU Headline Targets 3. Fiscal Surveillance StabilityandConvergence Programmes (SCP) Member States – April National Reform Programmes (NRPs) (including national targets) Member States - April synchronized

24. At first sight - social dimension subsumed to financial and economic objectives • fulfillment of debt criteria is sacrosanct at the moment • Close link NRPs and Stability and Convergence Programmes • Synchronisation: NRPs and Stability programme read together (loss of autonomy of social inclusion policy)

25. Yet, some positive points • Adoption of an EU poverty target (lift 20 million people out of the risk of poverty) • Social cohesion/inclusion: now on equal par with other political priorities (on paper) • Adoption of national targets in the field of poverty reduction • Establishment of a European Platform against Poverty (but how will it look like?)

26. Risks • One-sided emphasis on fiscal consolidation might kill growth • Social initiatives seem to be dominated by fiscal and economic ones : actions promoting social inclusion are not very visible • New governance infrastructure remains unclear: for instance, to what extent will poverty targets be binding (what if (say) Germany or Bulgary do not set or miss poverty targets?)

27. CanEurope’ssocialdimensionbesafeguarded? "The fundamental goal of everything we do is to ensure that the European social market model can be sustained” Danish Prime Minister HelleThorning-Schmidt (24 feb) “The European social model has already gone when we see the youth unemployment rates prevailing in some countries.” (European Central Bank President Mario Draghi, 23 feb)”

28. Where to go fromhere? 3 scenarios 1) Worst-case scenario: further fiscal consolidation and austerity measures may further erode welfare and social inclusion policies, aggravate the situation of the most vulnerable (if they are not carefully designed to avoid regressive distributive effects) and lead to further social inequality 2) minimum scenario: upgrade existinginstruments 3) paradigm shift: minimum income as part of ‘Social Investment Pact’ (Hemerijck, Palier, Vandenbroucke) • Combine short-term fiscal consolidation (f.i. later and more flexible retirement) and long-term social investment (in human capital) in the context of Europe 2020. • Objectives: modernise welfare system, invest in people to prepare (capacitate) them for social change and global competition (by emphasizing human capital investments,