EUROPEAN EMPLOYMENT STRATEGY AND THE INTEGRATED … · the 15, exceeding the 10% mark. Nevertheless, the situation started to improve as of 1994, and the unemployment rate was gradually

EUROPEAN EMPLOYMENT STRATEGY AND THE INTEGRATED GUIDELINES

FOR GROWTH AND JOBS

European Trade Union Confederation

EUROPEAN EMPLOYMENT STRATEGY AND THE INTEGRATED GUIDELINES

FOR GROWTH AND JOBS Final Report

Oriol Homs | Wilfried Kruse | Céline Lafoucrière | Pierre Tilly

avec le soutien de la Commission Européenne

with the support of the European Commission

European Trade Union Confederation

1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 05

2. Employment trends 2005-2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 072.1.Employment in Europe 1997-2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 082.2.EES monitoring indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 09

3. Year 2005 of the ees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113.1.Integrated guidelines for jobs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123.2.The NRPs and the Joint Employment Report 2005-2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

4. Case studies and discussions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174.1.Results of the case studies: shortcomings across the board . . . . . . . . . . . . . . . . . . . . . . . 184.2.Results of the surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

5. Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 515.1.After the reform, what about the strategy ? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 525.2.After the reform, what about the social partners’ownership ? . . . . . . . . . . . . . . . . . . . . . . 535.3.Final remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

6. Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

EUROPEAN EMPLOYMENT STRATEGY AND THE INTEGRATED GUIDELINES FOR GROWTH AND JOBS | 3

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1. Introduction 2. Employment trends 2005-2006

3. Year 2005 of the ees4. Case studies and discussions

5. Conclusions6. Proposals

INTRODUCTION

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In May 2005, ETUC submitted a report entitledContribution of the Trade Union Organisations tothe Evaluation of the Actions conducted and theirImpact in Terms of the European EmploymentStrategy – the result of an extensive discussion onthe trade union view of the development of the EESand its impact at European level.

In the course of 2006, ETUC asked the same team ofresearchers to conduct a follow-up of the applica-tion of the integrated guidelines for jobs, and to gofurther in the trade union view as to the success ofthe EES, while taking account of the events thathad taken place since the last report.

This second report introduced a number of metho-dological changes compared with the first. Not onlywas a new survey conducted and sent to all thenational trade unions; two seminars were organi-

sed, the themes of which were focused more on theprincipal working hypotheses of the first report;and four case studies were conducted in Hungary,Sweden, Germany and Spain, so as to compare andcontrast the discussions in the fields and to moveforward on the national conditions in which the EESis applied.

The seminars were organised in Bratislava on 16and 17 February 2006 and in Ljubljana on 20 and 21April of the same year, and the different nationaltrade unions were invited to attend.

In the end, the conclusions drawn from the discus-sions and the proposals of the reports were presen-ted at a final seminar held in Brussels, and atten-ded by experts, professionals, European tradeunionists, representatives from the EuropeanCommission and from employers’ organisations.





EMPLOYMENT TRENDS 2005-2006

The EES was revised again in 2005 integrating themacroeconomic, microeconomic and employmentdimensions to a greater extent, and redefining thestrategic guidelines. This new employment step isstill in force today.

From a strictly quantitative view as to the number ofjobs, these three major steps in the development ofemployment since the adoption of the EES, haveshown that the strategy charted in 1997 served farmore as a guideline for generic objectives based on

diagnostics, updated and adapted to the changes ofthe economic situation, than as an efficacious ins-trument to engineer a significant impact on thedevelopment of employment in Europe.

The integrated guidelines of 2005 are still aimed atthe Lisbon objectives, even though it is now assu-med that these objectives will not be achieved bythe date originally set; a sizeable part of the NRPs ofthe member countries have started to introduceextended deadlines.

Two years after the first report on the contributionof the trade union organisations to the evaluation ofthe actions conducted and their impact on theEuropean Employment Strategy, developments inemployment in Europe since the beginning of theEuropean Employment Strategy in 1997 can be ana-lysed with greater detachment at this time.

2.1. Employment in Europe 1997-2006

The recession at the beginning of the 1990s broughtabout high rates of unemployment in the Europe ofthe 15, exceeding the 10% mark. Nevertheless, thesituation started to improve as of 1994, and theunemployment rate was gradually reduced. TheEuropean Employment Strategy charted in 1997 wasintended to sustain and expand this improvement inthe unemployment situation and to broach the sta-kes for the future. For this stage, running from 1994to 2001, in a context of a generalised economicimprovement, the EES had a positive impact: therate of employment grew by two points, while theunemployment rate was reduced by one point.

It was against this background of a certain amountof euphoria, that the Lisbon summit adopted an

ambitious plan for tackling the stakes for the futureof Europe that would enable it to become the mostcompetitive economy on the planet, while maintai-ning the European model of social cohesion by2010.

As of 2001, however, the change in the economiccycle had a serious impact on the Lisbon objectives:the rate of employment has practically stagnated,whereas the unemployment rate has started toclimb, affecting many workers in most MemberStates. The strategy’s guidelines for jobs had to beadjusted in 2003 so as to be brought in line with asituation that was growing more distant from theLisbon objectives. The desire to continue workingso as to reach those objectives in 2010 was reitera-ted, in terms of full employment and a better qualityof jobs and greater productivity, whilst endeavou-ring to stimulate cohesion on an inclusive labourmarket.

As of 2004, the year in which the EU was enlarged to25 members, we have noted a new improvement ofthe situation, with renewed growth in employmentrates, as well as a reduction of the rates of unem-ployment affecting the different countries to une-qual degrees.

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Employment trends in the EU-25

Year Employment rate Unemployment rate Key dates of the EES 1997 60.6 European Employment Strategy 1998 61.2 9.4

1999 61.9 9.1

2000 62.4 8.6 Lisbon Summit 2001 62.8 8.4

2002 62.8 8.8

2003 62.9 9.0 New European guidelines for jobs 2004 63.3 9.1 Enlargement to EU-252005 63.3 8.8 Integrated guidelines for jobs 2006* 64.6 7.9

The employment rate refers to the second quarter and the unemployment rate to the month of October.


1 Cf.: Indicators for monitoring the employment guidelines including indicators for additional employment analysis. 2006 Compendium.29-9-06.

2. Employment trends 2005-2006

2.2. EES monitoring indicators

Even if the employment situation has improved interms of jobs, if we calculate the number of jobscreated as full-time equivalents, there has beenpractically no growth at all in the last five years. Theconclusions are even more discouraging if we alsoconsider the inequalities on the labour market.

The gender variable has registered the most posi-tive performance, in spite of the major differencesthat persist as to the employment situation bet-ween men and women. The growth that has occur-red has been far more favourable for women,although the activity and employment rates bet-ween men and women are still marked by a 15 pointdifference, a reduction of about 2 points since 2000notwithstanding. If we now calculate the employ-ment rates in terms of full-time equivalents, the dif-ferences are even greater, 21 points, even if, thereonce again, there has been a reduction of about 2points. And the differences between the percentageof those employed under non-standard contractsbetween men and women are more than 14 points,even though, once again, pay differences have beenreduced by two points.

The situation of young people is still worse thanthat of adults, as the unemployment rates haveseparated these two groups even more in recentyears. Only the employment rates of young women

have improved, but not those of their male counter-parts.

Regional disparities in employment are still verywide, even if they have improved in recent years, ashas the situation with occupational accidents.

The long-term unemployment rate of those expe-riencing the greatest difficulties to find a job hasremained constant in the last five years. The diffe-rences between the unemployment rate amongmigrants and EU nationals remain high, at morethan 8 points.

Finally, the percentage of non-standard employ-ment is about 40%, with wide differences betweencountries1 .

As regards life-long continuing training, access totraining has improved considerably, from 7.8% in2001 to 11% in 2005; the same applies for the otherindicators for monitoring improvement in educationand training.

Consequently, the recovery in employment in thelast two years has meant neither a clear improve-ment in the status of employment, nor a consolida-ted reduction in the inequalities on the labour mar-ket, except with regard to gender differences, in theright direction, although their objectives are still farfrom reached.


YEAR 2005 OF THE EES




This new report on the contribution of the tradeunions to the monitoring of the EES intends to ana-lyse, in concrete terms, the integrated guidelinesfor jobs and their impact on employment and onthe social dialogue between the social partners.

We can state that 2005 was a key year for revivingthe EES. In addition to the new guidelines, the mainreference points for 2005 are the launch of the EUprogramme on the Lisbon strategy by theCommission, the implementation of the new pro-gramming step 2005-2008, with the presentationof the NRPs by the Member States, and the drawingup of the Joint Employment Report of the EuropeanCommission and the Council 2005-2005 by way offollow-up evaluation of the EES.

3.1. Integrated guidelines for jobs

In view of the difficulties to attain the Lisbon objec-tives and the need to revive the EES, capitalising onthe context of a lukewarm improvement in theemployment situation, the Commission has propo-sed new guidelines that would integrate the openmethod of coordination (Luxembourg process),microeconomic and structural reforms (Cardiff pro-cess), and macroeconomic and budgetary instru-ments (Cologne process). This integration of pro-cesses aimed at creating greater coherence bet-ween the different economic, environmental andsocial policies so as to attain the Lisbon objectives,even if greater emphasis is placed on the processand on concrete measures, and far less on theobjectives to be achieved.

The main objective of the guidelines consists ofimplementing policies to: > Attract more people in employment, in particu-lar, by making work pay, by doing away with unem-ployment traps, and by encouraging women and theelderly to join – or to stay in – the labour market; > Improve the capacity of workers and of compa-nies to adjust, while making labour markets moreflexible through diversified contracts of employ-ment > Invest in human capital by improving educationand skills.

These three objectives are broken down in eightguidelines which, together with macroeconomicand microeconomic guidelines, constitute all 23new integrated guidelines. > Guideline no. 17: Implement employment poli-cies aiming at achieving full employment, improvingquality and productivity at work, and strengtheningsocial and territorial cohesion.

> Guideline no. 18: Promote a lifecycle approachto work. > Guideline no. 19: Ensure inclusive labour mar-kets, enhance attractiveness, and make work payfor job-seekers, including disadvantaged peopleand the inactive. > Guideline no. 20: Improve matching of labourmarket needs. > Guideline no. 21: Promote flexibility combinedwith employment security and reduce labour mar-ket segmentation, having due regard to the role ofthe social partners. > Guideline no. 22: Ensure employment-friendlylabour cost developments and wage-setting mecha-nisms. > Guideline no. 23: Expand and improve invest-ment in human capital.> Guideline no. 24: Adapt education and trainingsystems in response to new competence require-ments.

The Member States, in cooperation with the socialpartners, will have to implement these lines ofaction to cover the following objectives: full employ-ment, improving quality and productivity at work,and strengthening social and territorial cohesion. As we can appreciate, these guidelines are a pains-taking balance between the different conceptions ofemployment policy, the role that the EuropeanCommission must play in promoting employment,and the varying situation of employment in eachmember country.

Four aspects are worth commenting on when analy-sing the guidelines: > The difficulty of integrating the three compo-nents of the integrated guidelines. The integrationof the economic perspective with that of employ-ment undeniably constitutes a step forwardtowards a global conception that will take dueaccount of the social impact of economic policiesand the potential for involving the social partnersfor economic growth. Against the background of theopen and inter-institutional coordination of theEurope of the 25, this integration is very complexand requires high doses of leadership. As a result ofthis situation, instruments tend to be juxtaposedrather than integrated, leaving coherence gaps bet-ween the desire to improve the competitiveness ofthe European economy and the macroeconomicpolicy instruments to use, or declarations advoca-ting the European social model and its reform. > A macroeconomic approach far too rigid and fartoo unbalanced to keep inflation under control andmoney supplies that do not pay sufficient attentionto intervention in the economic cycle so as to revivethe national economies. The limited experience with

12 |

monetary union, the success obtained notwithstan-ding, exerts excessive pressure for a conservativemanagement of money supply in the face of uncer-tainty on how to coordinate economic growth andthe cycles of the national economies. The difficul-ties of managing the coordination of national eco-nomies at European level give rise to fears, slow thecapacity to react to the economic situation and tothe wait-and-see and unconvincing attitudes ofEuropean leaders. Insecurity and suspicion set inamong the economic and social partners, withnegative effects on investment and consumptionthat extend, to no use, the reaction and recoveryperiods of the national economies 2. > The balances aimed at defining the guidelinesshow gaps that leave certain basic social objectivescompletely diluted, such as those for promotingpolicies to reduce the number of poor workers, or toprohibit salaries below the minimum levels ofdecent income. > Be that as it may, the main problem, as we shallsee below, is that these approaches constitute acoherent whole which, some qualifications notwith-standing, seems balanced and has received thesupport, at the outset, of the social partners and themain institutions active in the employment dimen-sion; as defined, however, they risk not being inter-preted and applied with the same global and unitaryconception, and each partner, in particular each ofthe governments in charge of implementing themmay, on the contrary, interpret them differently andplace emphasis on one or another guideline or thisor that aspect within each guideline, so that whentransposed at national level, the results obtainedmay produce very different – and in some caseseven contradictory – results from those expectedwhen initially charted. The coherence of the guideli-nes, as defined, therefore risks disintegrating whenthey are applied at national level.

The attention must therefore be focused on the pro-cess for monitoring and implementing the new inte-grated guidelines for jobs. This comes down toasking up to when does their application manage tomaintain the balances they contain, or whethertheir particular application by each governmentwinds up disrupting the initial balances and entailsthat the results do not bring about the desiredimpact. Other measures that flank the guidelines onsimplifying the monitoring (a single joint annualreport, tri-annual integrated national programmes,a simplified committee for employment, etc.) thatare more connected with the process of managing

and applying the guidelines are therefore gainingground.

This ambiguity of the new guidelines is reflected inthe scepticism of trade union leaders, which will bediscussed in the next chapter. In fact, whileagreeing with the proposal to integrate economicand employment approaches, these leaders fearthat their application will have little impact onemployment; they dread above all that workers willin the end pay for the consequences of efforts toimprove the competitiveness of the European eco-nomies, with increasingly longer periods of employ-ment crisis and a loss in the quality of jobs.

As well as the processes already mentioned, otherinstruments have been introduced to strengthenthe EES:

> The approval of the European Pact for Youth andpromoting active citizenship; this pact aims toimprove education, training, mobility, integration inthe world of work and social inclusion for youngpeople, while facilitating the reconciliation betweenworking and family life. Numerous NRPs include it intheir aims, although without improving it or makingit very visible; furthermore, in nearly all cases, par-ticipation by youth organisations was not enhan-ced. > The approval of new rules for structural funds, inparticular the ESF, strengthening the role of instru-ments in favour of European economic and employ-ment policies. > A globalisation adjustment fund as a new instru-ment to complement the reorganisation of theobjectives of the structural funds, so as to facilitatethe capacity to react to difficulties faced by compa-nies and territories in adapting to the dangers ofcompetitiveness as economies are globalised. > The “Education and Training 2010” work pro-gramme that defines a global agenda for coopera-tion by and between the Member States to improvethe education and training systems in Europe so asto encourage the development of human capital. > The EU programme on the integrated Lisbonstrategy integrates a set of measures for the imple-mentation of the Lisbon objectives as an effort bythe Commission to improve the visibility and coordi-nation thereof. > The measures intended to stimulate employ-ment constitute a set of additional actions; withregard to employment, they are intended to encou-rage analysis, research and cooperation among the


2 Cf. More and Better Jobs for Europe: Europe needs more flexible macroeconomic policies, as ETUC’s position on macroeconomic policy.

3. Year 2005 of the ees

Member States, through the monitoring of the EESby the European Employment Observatory, andalso thanks to the mutual learning programmeunder the auspices of which are organised themeseminars and peer reviews to exchange good prac-tices and to encourage cooperation between theMember States.

All these instruments provide a complex view of theEuropean Employment Strategy; the hardcore ofthis strategy consists of the guidelines and theNRP, but it nonetheless comprises a very vast rangeof measures, instruments and mechanisms thatshould be considered globally. It is moreover worthbearing in mind the potential and limits of theconstitutional mandate of the Amsterdam Treaty.The new section on employment therein considersthis matter as part of “matters of common interest”of the Member states, as well as one of the objecti-ves of the EU. It vests additional competencies inthe Commission while nonetheless reserving thecompetency for employment policies for theMember States.

We must also point out that the EES must be consi-dered against the background of other Europeanpolicies; not only those connected directly with theemployment and the development of human capi-tal, but also those geared to the completion of thesingle market. We have been able to perceive thatin recent years, EU decisions with a greater poten-tial impact on employment have stemmed from theapproval of directives, such as the one on services.

3.2. The NRPs and the JointEmployment Report 2005-2006

The main instrument of the EES as applied at natio-nal level consists of the NRPs and the joint employ-ment report which reflects the opinion of theCommission and of the Council. The last report for2005-2006 is quite explicit on the progress and limi-tations of EES.

The main conclusion of the joint report is that theEES is being correctly implemented by the MemberStates, but that it is not sufficiently ambitious interms of the proposed actions to be taken in orderto face the major challenges and commitments ofthe Member States regarding employment.

...“It is essential to move up a gear in implementingthe Lisbon Strategy. Member States should be moreambitious in reaching the objectives of theEuropean Employment Strategy: full employment,productivity and quality at work, and social and ter-

ritorial cohesion. Governance and social partner-ship are crucial to implement effectively the employ-ment and social policies.”

The report recommends that the Member Statesmust step up their efforts and get more involved,and calls for more responsibility for the social part-ners and better governance of national policies.

The main criticisms levelled by the joint report areas follows; the measures adopted by the MemberStates focus on the deficiency of structural changesto achieve higher economic growth and to createmore jobs; furthermore, the actions taken are frag-mented, geared to a limited number of specificgroups, while paying little attention to the efficacyof the measures for human capital; the fragmentarynature and the insufficient importance attached tonew measures for improving the capacity of workersand companies to adapt, the imbalance betweenflexibility and job security that risks aggravating theprecarious nature of employment and compromi-sing the sustainable integration into the world ofwork, while limiting the creation of human capital ina number of Member States, as well as the scarceefforts to involve the social partners and all thesocial actors so as to implement the NRPs, alsocome under criticism.

In a world, according to European officials, the NRPsdo not show major formal differences in the approa-ches to the guidelines. Analyses and proposals foraction at national level are in line with Europeancommitments. Nevertheless, things would be quitedifferent if the NRPs were to draw up real strategicplans, setting out national commitments to rea-ching the Lisbon objectives by following the guideli-nes overall and with the same balances as establi-shed at European level. The response is clearlynegative, and far from what was expected – andneeded – to attain the objectives set.

In general, the NRPs are formal documents drawn upnearly exclusively by the governments, without theactive participation either of the social partners, orother national political, economic and social actors,which would set in order the actions currently pur-sued by each government, so as to put them on thesame course with the guidelines; yet the objectiveswould not have to be defined down to the tiniest andmost complex detail, nor the programmatic andfinancial means and resources allocated to reachthem; the scope of the guidelines would also be sub-ject to interpretation, according to the economic andsocial options of each government. The NRPs are far from being the national instru-ments of preference for structuring the decision-

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making process and the involvement of society as awhole, so as to promote the structural changesneeded for the recovery of the national economies,while bolstering the European social model which,for its part, would combine the flexibility and secu-rity needed to secure growth and the quality ofemployment.

If the rare progress registered on employment, interms of both quantity and quality, is added to

these deficiencies of NRPs, can we still state thatthe poor results obtained are primarily a problemof the speed and depth of the efforts made toencourage reforms and economic and socialgrowth?

The deficiencies detected undoubtedly have dee-per roots, entailing, in a certain way, the approa-ches, implementing instruments and leadershipcapacity.


3. Year 2005 of the ees


CASE STUDIES AND DISCUSSIONS




The field work that served as the basis for thisreport consists of four case studies for the ques-tionnaire sent to the national trade union organisa-tions and for the discussions held during the twointerim seminars and the final seminar. We shallnow present the main conclusions of the talks anddiscussions held with the social partners, and thenprovide the conclusions of each case study.

4.1. Results of the case studies:shortcomings across the board

The four countries examined in a case study were:Sweden, Hungary, Germany and Spain. These fourcountries have different situations, yet similarconcerns: in spite of the importance of employmentin each country, the EES is not the focus of the dis-cussions.

Brief national case studies, carried out as supple-ments to the general survey, reveal a highly diffe-rentiated panorama of diverse degrees of signifi-cance accorded, within individual countries, to thereform plan process initiated on European level – adisparity of views to which not only the variousgovernments but also the other social partnersand, in the present context, particularly the tradeunions contribute.

The position from which Sweden begins is – consi-dered from the employment viewpoint – a comfor-table one; the country has already exceeded allgoals set by Lisbon.

Sweden is also one of the EU Member States inwhich the interaction between European and natio-nal strategies is – at least under the formal aspect– especially well developed. “Lisbon co-ordinators”have been put in place at the work level itself; thereexists a “Lisbon Platform” between governmentand social partners which meets several times ayear and closely follows the progress of the reformplan process; a joint statement by the social part-ners is officially added as an appendix to everyreport on the National Reform Plan which is passedon to Brussels etc.

We thus read in the “Conclusions” section of thecase study: “The participation of trade unions inSweden could be described as exhaustive andhighly positive. The three Swedish federations areregrouped, together with the employers’ associa-tions, on the Lisbon platform several times a yearto follow the European process closely and agreeon their common text. All trade unions confedera-tions have indeed declared themselves highly

satisfied with the newly reformed Growth and JobStrategy. They see this reform as a positive way fordifferent departments to work together and for thewhole process to gain further transparency.”

Admittedly, there have recently occurred certainirritating little incidents which could well place aquestion mark over Sweden’s "brave new (employ-ment policy) world“. In 2006, for example, no state-ment by the social partners was appended to thereport on the National Reform Plan because theemployers could not agree on a joint position state-ment. The Swedish unions have also been shockedand surprised by the plan of the new Swedishgovernment to close down the famousArbeitslivsinstitutet. This closure would mean theunions being deprived of an important instrumentfor the scientific legitimisation of a labour andemployment policy that might raise a claim toequal respect with every other form of political andeconomic discourse. Quite aside, however, fromthese present small irritations within the "Swedishmodel“, the question remains as to why theSwedish manner of proceeding has not producedthe spur effect in the context of the whole trans-European reform plan and employment strategy.That this is devoutly to be wished for can be seen ifwe look at Germany, and even more clearly whenwe look at Hungary.

As regards employment, Germany remains - des-pite the present upturn, which is also having posi-tive effects on the labour market – in a criticalsituation, and not only in comparison with Sweden.Against the background of a thoroughly macroeco-nomic orientation towards stability, the foregroundof the 2006 report on the progress of the reformplan was taken up by an account of those so-called"structural reforms“, the health-reform and alsothe labour-market-reform aspect of which havebeen the object of severe criticism by the unions asregards their effects on the quality of the welfarestate and on employment – to the point that theunions have even organised public demonstrationsaround this theme. In Germany, the quantity andquality of available employment and the issues sur-rounding “employment and poverty” are currentlyamong the leading topics of public rhetoric. Thesame, however, cannot be said about the topic ofEuropean policy on employment and the specifi-cally relevant reform plan process which is pre-sently ticking over in the background as a part of“miscellaneous daily business”.

The German Trade Union Federation (DGB) – res-ponsible, as an umbrella organisation, for labourmarket policy - is developing an increasingly critical

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stance vis-à-vis the context for employment policywhich has been established by the European stra-tegy for macroeconomic stability. Such criticism isall the sharper inasmuch as the DGB perceivesmany points of concordance with the policy cur-rently pursued by the German federal government.The DGB, moreover, feels it has been snubbedbecause the German federal government is tendingto neglect, already in its second year, the establi-shed requirement that all partners in the socialcontract be drawn, in good time, into the politicaldecision-making process. Since the deadlineshardly leave time to develop serious positions onthe issues, and since integrated discussion is rejec-ted as regards macroeconomic questions -- therecent so-called “structural reforms” and theeffects of these on employment policy are percei-ved as a dependent variable.

Against the background of the noted German tradi-tion of “co-determination“ in industrial relationsthis is indeed a remarkable way of proceeding. Forthe time being, however, it does not look as thoughit is prompting the German trade unions to makethe interaction between European and nationalpolicies a point of political contention and to insist,on this issue, on a right to participation and co-determination. Rather, the unions are once againtending to concentrate on the core themes of anational employment and social policy. It remainsto a great extent still unclear what role would needto be taken on, within the context of a multi-levelstrategy, by the country’s trade unions if they are 1)to help to render genuinely effective the ETUC'sdemand for a revision of the macroeconomic guide-lines and 2) to strengthen their own position withinthe domestic struggle concerning an appropriateemployment policy.

Hungary is, in a sense, opposite Sweden. From thepoint of view of stability, the European Commissionconsiders the country to be very much on the rightpath. According to official figures, there are signifi-cant growth rates, falling inflation, and the officialunemployment rate stood at just 7.1% in 2005. Onthe other hand, from the point of view of living andsocial standards, Hungary is one of the Europeancountries with the biggest problems, with starkregional disparities, a stubborn core of long-termunemployment and a powerful growth in the “blackeconomy”. Trade unions in Hungary are numerousand fragmented, but confronted nonetheless withincreasingly difficult tasks.

There are three key reasons why the new EUMember States are having difficulties in establi-shing an effective interaction between European

strategy and national policy: (i) many of the pro-blems faced by the new Member States were consi-dered and addressed only belatedly – or often notall – by the Guidelines (ii) mutual trust and confi-dence is lacking (iii) social dialogue is weak. Thislast point is one stressed above all by theHungarian unions themselves, who, on the onehand, confess, self-critically, their hitherto lackingcapacity to form and direct such a social dialoguebut, on the other, find themselves objectively faceto face with employers little concerned with such adialogue, and governments unwilling to demand orenforce such a thing. In Hungary, then, we see acountry which is (as yet) lacking in almost everyrespect in those preconditions and instrumentswhich lie – in the form, at least, of “potentials“ – atthe disposal of both the German unions and, evenmore markedly, the Swedish unions.

The Spanish case reflects yet another position inthe spectrum of employment situations in Europe.With a sustained strong growth in employment formore than a decade, Spain, formerly one of thecountries hardest hit by unemployment, managedto reach the European average, more or less, andeven to register a high number of immigrants, whileincreasing the participation of women in the wor-king population. Spain produced nearly half of thejobs created throughout Europe in recent years.This job creation success story should be qualifiedhowever, given the high contractual flexibility – oneof the highest in Europe – where a considerablenumber of workers are under temporary contractsof employment. Seen from this perspective, theSpanish situation reflects the discussion onemployment and the EES in Europe: at a time whenemployment is recovering, the question of qualityof employment is becoming a major theme forassessing the results of the EES.

The Spanish case moreover illustrates a contradic-tory situation, inasmuch as the social dialogue hasbeen intense in recent years and has led to veryimportant agreements between the social partnersand the government, whereas the EES was not partof the priorities nor the hardcore of the negotia-tions, which included important measures toreform the labour market, among other aspectsaimed at reducing the rate of temporary employ-ment. In short, although employment was a keyissue in the social dialogue in Spain, the EES moni-toring process did not play a sufficient role for thedevelopment of the discussions and the decisionstaken.


4. ca se studies and discussions

4.1.1. Evaluating the involvement ofnational trade unions in the NationalReform Programmes of the newly refor-med Growth and Jobs Strategy. National Case Study: Sweden3

4.1.1.1. Employment and economic situation inSweden Sweden is a rather atypical country in the EuropeanUnion (EU), within the realm of the newly reformedGrowth and Jobs Strategy (GJS), as it alreadyexceeds all the Lisbon employment targets includingthose for women and for older workers. The Lisbontargets set the objective of attaining a 70% employ-ment rate by 2010 when the Swedish employmentrate already stands at 78% and is forecast to carryon growing slowly in the next five years. The totalSwedish unemployment rate stands at a record rateof about 5%. The trend seen in recent years of fallinginvestments also appears to have been reversed asGDP grew by 3.5% in 2005.

The last few years have been rather unusual incyclical terms, for Sweden, in three different res-pects. First of all the favourable trend of exports, inrelation to imports, has made a major contributionto growth from foreign trade. Swedish exportersbenefit from the fact that demand in other coun-tries is generally very high. This is particularlyimportant when considering that half of SwedishGDP is generated by exports. Moreover, Swedishcompanies making telecommunications productsand motor vehicles are enjoying major export suc-cesses, which have helped boost the upturn4.

The second unusual feature of Sweden’s currentphase in the economic cycle is that the number ofworking days is considerably higher than normal.One implication of this ‘calendar effect’ is thathours worked are expected to increase by one per-centage point more than they would otherwise,giving a temporary boost of 0.6 percentage point toGDP growth (see Table 1).A third feature is that employment in 2004 fell by0.6%, while GDP growth was strong.

Sweden’s long tradition of a favourable employ-ment situation started in the early 20th Century. Inthe 1970s and 1980s the Swedish economy expe-rienced a further “all time high” which led to asituation, in the 1990s, where Sweden alreadyaccounted for a situation of full employment. The

economically active population participating in thelabour market was 82%. The Social Democratgovernment in place until 17 September 2006, andconsecutively for the last twelve years, adoptedstrong macroeconomic policies aimed at devalua-ting the Swedish krona. These macroeconomic poli-cies consequently boosted the Swedish market,which has always been highly dependent onexports, and led to high demand for Swedish mar-ket export products. Although the nature of pro-ducts exported has shifted drastically in recentdecades, Sweden has managed to maintain a sta-ble level of total exports for its national economy.In the first half of the century Swedish exports weredominated by mining products, whereas today thetendency is to develop engineering products, suchas information and technology, and telecommuni-cation products. The market has been highly effi-cient in following international demands andtrends.

Although the country experienced an economic cri-sis at the beginning of the 1990s, which could becompared to a depression and during which unem-ployment peaked at nearly 13%, this only lasted forsix years until the economy started to look up againand unemployment rate slowly dropped back downto today’s levels. Of today’s unemployment rateonly 3% is considered to be long-term unemployed.However both government and social partnersshow a certain concern today. Even though Swedenhas been experiencing significant economic growthin the last few years, this growth does not seem togenerate further jobs. Although the social demo-crats have optimistically forecast that GDP growthin 2006 will be more employment-intensive sincethe rate of production growth in service sectors isexpected to rise, this does not appear to be strictlytrue. Over the past few years, employment hasbeen held back by the fact that many companieshave improved their performance through far-rea-ching cost savings and highly restrictive recruit-ment policies. The high pace of rationalisationwhich has characterised recent development is not,however, considered sustainable in the long term.Accordingly, productivity growth will fall slightlyand, to a higher degree, demand will be met withincreased labour inputs (Swedish NRP 2005).

The issues of tax cuts and job creation have been atthe heart of the recent election campaign, whichsaw the end of a 12-year Social Democrat govern-

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3 The case study was conducted by Céline Lafoucrière. 4 Interview with Lena Hagman, Chief economist, TCO (The Swedish Confederation of Professional Employees), in August 2006.

ment. On 17th September 2006 the Social Democratparty was replaced by the Moderate party, whichtakes a harder line on these issues, and mainly onthe reduction of labour taxes. In early 2006, the for-mer Swedish government set an employment tar-get of 80% to be reached in the next five years. Toattain this target, around 300,000 more jobs wouldhave to be created . In 2006, however, only 64,000jobs were created and it appeared difficult to fore-cast anymore job creation under the present taxa-tion conditions. Sweden applies one of the highestrate of administrative taxes on small and medium-sized enterprises (SMEs) as well as the highest rateof taxes on low-paid jobs in the EU. This has gene-rated strong and recurrent criticisms from theEuropean Commission, and is a major worryamongst the Swedish population. The 2004 CouncilRecommendations, as well as all CouncilRecommendations issued since the creation of theLisbon Strategy and the European EmploymentStrategy (EES), recommend a reduction of thesetaxes in order to stimulate the creation of SMEsand thereby further stimulate employment. Thisrecommendation, although talked about within theSocial Democrat government and amongst socialpartners, had so far been left aside, for it did notcorrespond to the national political ideology. Thenew Moderate government promises to tacklethese issues fast. We believe that these promiseshave been a key to the Moderate’s party gettingelected.

4.1.1.2. Government actions for employmentThe former Social Democrat government had longpractised employment policies which are in linewith the EES. This particular focus was given as

early as the beginning of the 1950s and will proba-bly be followed by the Moderate party, very close inmany ways, as did the Social Democrat party. Itcreates a situation in which the Swedish govern-ment is highly supportive of the EES. The only andmain controversy can be found in the reduction oflabour taxes, as mentioned above. These contro-versies as well as the paradoxical jobless growth,experienced at the moment, were at the heart ofthe Swedish elections held this year. The result ofthese elections on 17th September 2006 show that,according to the Swedish population, the SocialDemocratic party had failed to create more jobs. Inthe near future, therefore, we can expect a changein tax policy. Although the Social Democrats hadbeen quite successful in maintaining good livingstandards, high employment and economic rates,the taxation barriers - which they refused to tackle- did not allow them to foster the creation of morejobs and finally pushed them out of government.

In terms of economic policy the social democratgovernment’s main goal was to achieve high, sus-tained growth and full employment. It consideredthese aspects essential in order to pave the way toimproved quality of life and equitable welfare. Toattain this objective the government envisagedmacroeconomic stability as a precondition (NAP forSweden 2004). The Swedish government set twogeneral aims of budgetary policy: that public finan-ces should show an average surplus of 2% of GDPin the course of one economic cycle and that expen-diture should not exceed the budgetary ceilings.The foremost reason for the 2% surplus aim is thefuture demographic strains on public welfare sys-tems. Sweden has is one of the EU countries with


Table 1: Trends in Sweden 2003–2005

2003 2004 2005

Number of people employed -0.3 -0.6 -0.8Rate of regular employment (1) 77.6 77.0 77.0Unemployment rate (2) 4.9 5.6 5.1Labour market policy programmes (2) 2.1 2.3 2.5Number of hours worked (3) 3.5 3.4 3.5Hourly pay 3.5 3.4 3.5Consumer price index, annual average 2.0 0.6 1.4Public sector financial saving 0.5 0.7 0.6GDP growth 1.6 3.5 (3) 3.0

Source: Swedish National Action Plan for Employment 2005

(1) Regularly employed people aged 20–64 as a proportion of the population.

(2) Unemployed people as a percentage of the labour force.

(3) A calendar effect consisting of the higher number of weekdays in 2004 explains 0.6 percentage point of the GDP growth rate.During 2006, this effect is expected to be zero.


the strongest public finances. Surpluses in publicfinances averaged 2% in 2000-2003. As for ceilingson expenditure, Sweden has met them every yearsince their introduction in 1997. Stable prices arealso a prerequisite for a successful economicpolicy. The new Moderate government showsstrong similarities with the former government.This situation leads us to think that the same policyline will be held by the Moderate government,although some changes will probably occur in thetaxation system.

The Riksdag (Swedish Parliament) started to focuson achieving price stability in order to attain a well-balanced monetary policy, in 2004 (Sweden beingoutside of the euro zone). The independentSwedish Central Bank, the Riksbank, has definedprice stability as a rise of not more than 2% inconsumer prices, with a tolerance of ±1 percentagepoint. The social democrat government supportedthe emphasis of monetary policy and the inflationtarget (Swedish NAP 2004).

In terms of labour market policies the governmentworked to give labour market policy a clearergrowth orientation. The emphasis on work andskills seemed to be the prime focus of the formergovernment’s policy, i.e. that in every area andevery part of the country, policy must concentrateon getting more people into work. Active measuresfor the unemployed in the form of education, trai-neeship and employment were given priority. All inall, this serves as a foundation for efforts to attainthe goals of full employment, low unemployment,enhanced quality and productivity at work, andsocial cohesion pursued by the Social Democratgovernment, which will hopefully be continued bythe Moderates.

In 2003, spending on labour market policy amoun-ted to 2.3% of GDP, 1.1% of which was dedicated toactive measures and 1.2% to cash support. InSweden, active labour market policy is combinedwith unemployment benefit that combines incomesecurity with the requirement to adjust. The OECD5has recently emphasised that countries with anactive labour market policy and relatively generousunemployment benefits succeed in reconciling adynamic labour market with a sense of security foremployees. Swedish labour market policies are inline with this.

In terms of youth unemployment, in Sweden youngpeople tend to be unemployed for shorter periodsthan other age groups. However, long-term unem-ployment among young people rose between 2001and 2003, followed by a recovery and a further

decrease in 2004. Unemployment among youngwomen is lower than that of young men, in general.This is mainly due to the existence of a generous,high-quality childcare system. In 2003 the NationalLabour Market Board (NLMB) adopted a target ofhalving the number of young people in long-termunemployment by 31 August 2004. This target wasattained in June 2004. This decrease was largelydue to the employment offices’ intensified effortsand the fact that the Public Employment Service(PES) gave particular priority to employment andtraining for young people. In the autumn of 2004the Social Democrat government proposed that themunicipalities should be obliged to keep informedabout the occupations of young people under theage of 20; ensuring that every unemployed youngperson should, within 14 days, draw up an indivi-dual action plan in cooperation with the employ-ment office and offering those young people whodo not find employment within 90 days organisedjob-seeking activities and temporarily making thegeneral recruitment incentive available to youngpeople aged 20-24 after only six months’ registra-tion, instead of the current 12.

These current measures for young people (knownas the Municipal Youth Programme and theDevelopment Guarantee) are constantly being eva-luated and further improved. One of the recentactions is a programme of compulsory jobseekeractivities.

The flexibility of the Swedish system also allows forample scope to supplement qualifications accor-ding to the needs of the labour market and indivi-duals (Swedish NAP 2004). However, and accordingto the yearly European Union’s Recommendations,efforts should still be maintained to avoid laboursupply constraints. In view of the ageing popula-tion, there will be a need to sustain labour supplyby exploiting potential sources of labour amongimmigrants, the young and the long-term sick, andby improving incentives to work. The assessment ofthe Employment Taskforce and the analysis in theJoint Employment Report of the implementation ofthe EES guidelines and 2003 CouncilRecommendations show that Sweden should giveimmediate priority to:• increasing the adaptability of workers and enter-prises;• facilitating the development of SMEs in particularby reducing administrative burdens;• attracting more people to the labour market andmaking work a real option for all; • addressing the rising number of people on long-term sick leave by promoting work-oriented solu-tions and improving conditions of work;

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• eliminating remaining unemployment and inacti-vity traps;• closely monitoring the results of actions to inte-grate immigrants into the labour force;• investing more and more effectively in humancapital and lifelong learning;• reducing early school-leaving and increasingaccess to training for the low-skilled and the econo-mically inactive; • addressing the issue of emerging bottlenecksand skills mismatches in low- and medium-skilledsectors (Recommendations 2004).

4.1.1.3. Swedish trade unions and employmentSweden has a long tradition of smooth bipartitesocial dialogue. The unionisation rate stands atmore than 80% and collective agreements are esti-mated to cover over 90% of all employees. Undernational legislation, collective agreements areapplicable to all employees within the sector, whe-ther or not trade union members., Characteristi-cally Sweden does not provide for any governmentmechanism or legislation which would extend theeffects and/or the scope of application of a collec-tive agreement to other sectors. This is the case forminimum wages. Minimum wages are solely defi-ned by collective agreements and, therefore, thesocial partners at sectoral level.

Although bipartite social dialogue is considered towork better than tripartite social dialogue, govern-ment does generally show a strong interest in dis-cussing and negotiating with the social partners. Itcan be argued that some of the tensions which canbe found at tripartite level sprang from the closecollaboration which existed between LO Swedenand the Social Democrats in power until September2006. This has been the case for many years andthe recent Labour Minister was a former LO official.LO therefore openly described itself as one of themain government supporters and further contribu-tes to funding the Social Democrat Party’s electioncampaign. Contrary to what common sense mightdictate this situation did not however provide for alarge imbalance between trade unions confedera-tions. It did, however, seem to provide theemployers' associations with an argument torefuse to negotiate in details at central level. This isone of the reasons why bipartite social dialogue ismore successful in Sweden. Although it will be inte-resting to see whether this situation evolves withthe recent change of government.

The Swedish system is composed of three tradeunion confederations, regrouping a large number

of sectoral trade unions. These are: the SwedishTrade Union Confederation (Landsorganisationen ISverige, LO Sweden) representing the blue collarworkers, The Swedish Confederation forProfessional Employees (TCO) representing thewhite collar workers and Sveriges AkademikersCentralorganisation (SACO) representing academicworkers.

LO Sweden’s connection with the Social DemocraticParty sprang in the post-war period. In the 1970sand 1980s the influence exercised by LO Sweden onthe social democrat government was so significantthat the organisation was able to secure legislationto give trade unions further negotiation rights.Although this helped trade unions to establishthemselves firmly in today’s social dialogue sys-tem, it created tension between them and theemployers’ organisations. The latter tended to dis-tance themselves from negotiation at the centrallevel for fear of further legislation on labour. Thissituation, albeit lighter, still persisted until recentlyand created a situation, whereby bipartite socialdialogue, at all levels, worked better than tripartitesocial dialogue. It is worth noting a specific featureonly found in the Scandinavian model (as it alsohappens in Denmark), whereby most decisions andchanges affecting labour happen through collectivebargaining6. This is also the case for Europeandirectives regarding labour which, in Sweden, aremostly implemented through collective agree-ments rather than through national legislation.Furthermore there also existed, until recently, adeliberate Social Democrat government policy toencourage social partners to work together andcollectively bargain. This has been the case sincethe late 1930s. Trade unions are highly proactive inSweden having created, in the last few years, ahighly successful and international research centreon European employment issues: theArbetslivsinstitutet (Research Institute for WorkingLife), within which all three trade union confedera-tions are represented together with the Swedishgovernment. The four institutions finance theSALTSA programme (Joint programme for WorkingLife Research in Europe) which enables researchersto study labour market trends and social dialoguedevelopments in the European Union. This is pro-bably the only such example to be found in the EU.It will, therefore, be crucial to follow future deve-lopment of the Swedish social dialogue conside-ring the recent changes of government and theshifts that this might bring.



6 Interview with Prof. Lars Magnusson, national expert on the social dialogue and Professor at the University of Upssala.

4.1.1.4. The Growth and Jobs Strategy and nationalsocial dialogueRegarding the newly integrated European employ-ment guidelines, all three confederations welcomethe reform7. They all approve the fact that bothemployment and economic policies should be inte-grated in the new GJS, as they recognise that itallows the different departments and ministries towork together and thereby gain greater transpa-rency of the whole process. From SACO’s point ofview the newly integrated guidelines provide a solidbase for assessing and restructuring employmentpolicy in the Member States. However, all threeconfederations agree on the need to emphasise therole of the labour market organisations in the deve-lopment of related policy. They consider that agree-ments between the social partners are often prefe-rable to labour law and explain that, since politicalmajorities vary, government legislation relating tolabour market policy can be less efficient than thatof the labour market parties which have a deeperand more thorough understanding of the rules and

circumstances on the labour market. The Swedishtrade unions therefore recommend that the guideli-nes should further acknowledge the potential ofagreements between the social partners. Thisdemand remains, however, independent from thelatest reform of the European employment process.They do note highlight any dilution of the employ-ment guidelines or of the role of social partnerswithin the newly reformed integrated GJS, on thecontrary. They all agree on the fact that the EES hasallowed the role of social partners and their respon-sibility to collectively bargain to be clearly definedin European texts 8.

It is also important to highlight the fact that LOrepresentatives explain that the Lisbon Strategy hasalso enabled the social partners to be informed, ona regular and consistent basis, of different employ-ment developments. The yearly exercise, whichbrings all partners around the table, to draw up theNRP is seen as highly positive. It enables the socialpartners to be updated on a regular basis 9.

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7 Interviews with SACO, LO and TCO in August 2006.8Ibid.9 Interview with Lena Westerlund and Monika Arvidsson, economists, LO Sweden (The Swedish Trade Union Confederation), inSeptember 2006.10 Interview with Lena Westerlund and Monika Arvidsson, LO Sweden, in August 2006

Appending the social part-ners’ text to the NRP

As has been the case inDenmark, since 2004, the formerSwedish government planned toappend the social partners’contribution to the NRP 2006.The only condition for this to besuccessful is that this textshould be produced by all socialpartners, by a common agree-ment. If this condition is met, thetext will be published in fulltogether with the NRP. Althoughthis is an important step forwardand represents a highly positivepractice within the realm of theGJS, it is crucial to note that ithas not been an easy target toattain. In 2005, for example, thesame promise was made to the

social partners but the operationfailed due to the privateemployers’ refusal to cooperateon the central level and agree onthe final text. Although all othersocial partners had agreed onthe final text, the social partners’contribution could not be appen-ded to the NRP as the govern-ment’s condition that it representall social partners, had not beenmet. It will be crucial whether thenew government follows thatsame path. In relation with the above=men-tioned need for increased impor-tance to be given to the socialpartners, LO’s representativesexplain that both nationalgovernments and the EuropeanCommission should take moremeasures to ensure no single

organisation can block the wholeprocess. They explain that, inview of what happened last yearin Sweden it is too easy for a sin-gle organisation to sabotage theentire process. They thereforedemand that a specific elementshould be added to the guideli-nes so as to guarantee that thesocial partners’ final text is notbe jeopardised if one partnerrefuses to cooperate. The effortsof those who worked togethershould be represented and notsimply diluted by the decision ofone partner. LO further explainsthat if such measures were to beapplied, such intransigent part-ners might be more stimulated tonegotiate 10 .

In terms of content several actions have been takento coordinate the Lisbon process at national leveland to stimulate employment. In response to guide-line 18, for example, the social partners and thepublic employment services have cooperated toappoint a national coordinator to investigate whe-ther labour market entry of young people could befacilitated by agreements between the social part-ners. This national coordinator published a text, in2005, identifying different barriers to youth employ-ment . These barriers included high wage costs andinsufficient use of apprenticeships. Although thistext has been highly criticised by all social partners,discussions are still underway to find solutions andboost youth employment.

This text, which also tackles the area of competen-ces, raised an old national debate on the "compe-tence account". Several trade unions had lookedinto the possibility of creating a competence accountin order to stimulate and facilitate lifelong learning,mainly as a way to counteract demographic changesand to allow older workers to remain on the labourmarket for a longer period of time. Although thegovernment supported the idea, no agreement wasreached between social partners on the matter. LOSweden argues that the competence account shouldbe highly subsidised by government in order toavoid an unbalanced distribution amongst workers.As it stands today the agreement is considered, by acertain number of social partners and government,to give greater support to the higher educated andpaid workers. As further subsidies from employersand government have not been agreed the draft text,although in existence, has been left aside for thetime being. SACO is however a strong defender ofthis measure and will carry on working on develo-ping it further 11. The new government might, indeed,choose to investigate this action further.

In terms of organisation, a Lisbon group was set upas early as 1998 with the creation of the LisbonStrategy. Within this Lisbon group all social partnersare invited to discuss and participate in theEuropean debates concerning employment. Thishas been a highly successful group from the start.This platform enables social partners to draw uptheir common text, which is then submitted to thegovernment who tends to accept it as it stands andrarely asks for any amendments to be made. Thetext has so far been woven into the NRP, althoughgovernment plans to append the common text tothe NRP this year. This was also planned for the2005 NRP. As mentioned above this was thwartedby the private employers’ association, a highlypowerful organisation in Sweden, which refused togo along with the final text. However, it is crucial tomention that this is the only incident of the kind tobe recorded on this platform since 1998. It mainlysprang from the fact that the 2005 NRP had to takeinto account the newly reformed GJS and thereforehad to re-evaluate all details included in the text.Historically employers have found it difficult tocooperate on the central level for the different rea-sons exposed above. This year should not presentsuch difficulties as the process will be much lighter.

It is important to note that this platform is quite aninnovation in the Swedish social dialogue, as thethree confederations are not accustomed to workingtogether on collective agreements. Interestinglyenough, this is the case for structural changesactions.

Therefore, although trade union confederations donot tend to issue common texts or negotiate at cen-tral level, the bipartite social dialogue remains suc-cessful and tends to generate novel actions, oftennon-existent at national level.



11 Interview with SACO’s general secretary, Ake Zettermark (Sveriges Akademikers Centralorganisation), in August 2006.

Structural changes –social partners’ actions

In order to tackle the restructu-ring process, the social partnershave worked together to devisesome solid measures and tacklestructural unemployment. Onone hand the TransitionAgreements, often known as theRelocation Agreements, formpart of these measures and cover

most sectors of the labour mar-ket. The aim of these agreementsis to provide redundant workerswith various educational andretraining schemes, which sup-plement schemes provided bythe public employment services,and ease their return to work in ashorter period of time. Theseagreements are signed by thesocial partners and administeredby the Job Security Councils.

These councils’ activities arefinanced by employers, whocontribute a share of theiremployees’ wages into theCouncils’ funds. The first Councilwas established in 1974 andcovered salaried workers inindustry and service sectors.Government sector, banking andemployees employed by munici-pal companies where only inclu-ded in the agreements in the

Pursuant to the Industrial Agreement, each tradeunion confederation, also has its industrial insu-rance (Omstallnings). Although each of these hasbeen created at different times and remains inde-pendent of the others, they all have the same aim:helping redundant workers to get back to work fast. This insurance could be described as a smallaccount held by each of the trade union confedera-tions and financed in cooperation with theemployers. It is mainly used to provide informationand job coaching to workers who are under threat ofredundancy. This consists of a preventive early inter-vention. There are three agreements, one for each ofthe federations. In the case of LO Sweden, however,part of the blue collar industrial insurance is tax-fun-ded, although it still remains smaller than the onefor white collar employees. This insurance repre-sents a percentage of the wages. Wage level, there-fore, has a strong influence on the amount put aside.This is one of the reasons put forward by the tradeunion confederations for explaining why agreementscould not be bargained and agreed collectively.

4.1.1.5. ConclusionsTrade union participation in Sweden could be des-cribed as exhaustive and highly positive. The three

Swedish confederations are regrouped, togetherwith the employers associations, on the Lisbonplatform several times a year to follow theEuropean process closely and agree on their com-mon text. All trade union confederations havedeclared that they are highly satisfied with thenewly reformed Growth and Jobs Strategy. They seethis reform as a positive manner for differentdepartments to work together and for the wholeprocess to gain further transparency.

Trade union confederations in Sweden have welco-med the Lisbon Strategy right from the start. Theyclaim that it has enabled them to gain informationas well as a deeper knowledge of government poli-cies. They also value the fact that it has helpedestablish formal recognition for social dialogue inEuropean texts, as well as at national level.

When studying the case of Sweden it is striking tonote that it is one of the rare EU countries to haveexceeded the Lisbon targets, in all senses. As men-tioned above the quantitative targets are already inline with the Lisbon targets. But most importantly,Sweden is already doing quite well with regard tothe more implicit targets: such as a well functioning

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1990s. Private sector blue collarworkers were finally included inthe agreement in the most recenttext, signed last year. This lagbetween the inclusions of diffe-rent sector workers is due to thefact that the three Swedishconfederations do not tend tonegotiate their agreements toge-ther. They each have their ownnegotiations, although a com-mon text may ensue. The finalagreement, however, implemen-ted jointly by the social partners,allows for stronger cooperationbetween the employers’ associa-tions and the trade unions. Theytake responsibility for the neces-sary changes together(Zettermark, 2006).On the other hand there is alsothe Industrial Agreement referredto in the Swedish NRP. Thisagreement was made in 1997between twelve employers’ asso-ciations and eight trade unionsand effectively represents all sec-

tors of the industry, in Sweden. The agreement is unique in itsscope for it:- covers the entire sector of theSwedish economy which is expo-sed to competition;- bridges old boundaries bet-ween blue and white collaremployees on the union side- introduces a completely newmodel for collective bargainingand conflict resolution.

On the basis of this agreement,the different parties take jointresponsibility for wage determi-nation, in their respective areasof the labour market, and contri-bute to more effective wagedetermination. This has made iteasier to combine successfullylow unemployment and pricesstability. In agreement, the parties alsoset out their joint assessments ofthe prospects for industrial acti-vities, including international

competition, economic condi-tions, competitiveness andenergy availability. Furthermore,the importance of research anddevelopment, as well as educa-tion and training, is studied indetail and submitted to theIndustry Committee for evalua-tion.Finally a framework for wagenegotiation procedures is outli-ned in the agreement with thespecific intent of not having toresort to industrial action. Theparties are required to startnegotiations three monthsbefore the previous agreement isdue to expire.These social partners’ initiativesto face industrial changes haveso far been highly successful andare highly regarded by the natio-nal government. The latter oftenuses this example in its own NRPto report on good bipartite socialdialogue practices.

social dialogue. Social dialogue works well atbipartite level in Sweden and collective agree-ments tend to replace legislation in most cases,such as minimum wage setting and implementa-tion of European directives. The trust given to social partners enables them tobe highly proactive. This is the case in the examplesmentioned above where each trade union confede-ration has created, in agreement with theemployers’ associations, their own industrial insu-rance. This measure aimed at helping redundantworkers to find work before they are even out ofwork is a highly positive example of early interven-tion. Although these insurance schemes do not pro-vide for large amount of money, they do help toinform workers about training and provide themwith a certain degree of job coaching. This is a uni-que example in the European Union. Swedish tradeunions tend to be highly proactive in developing,together with all social partners, training and life-long learning measures.

In general we can conclude that trade unions are wellinformed and make an important contribution to thedrawing up of the NRP, together with government andemployers. If the social partners’ text is finally appen-ded to the NRP this year, considering the recentchange of government, this will represent a furtherimportant step forward. However, it is interesting tonote that trade unions in Sweden do demand greateracknowledgement of their work at European andnational level. In this sense, measures should betaken to ensure that the social partners’ common textis not disregarded if one of the partners refuses to goalong. As mentioned above, this was the case inSweden when the common text was not annexed tothe NRP due to the refusal by the private employers’association to sign the common text. One couldargue that this situation could empower one singlepartner more than the others. Measures should the-refore be taken in the GJS guidelines to mention thatthe common text should be apparent, although onepartner might not have agreed with it. This situationmight indeed stimulate all partners to agree andwork together. The work of the working partnersshould not be discarded.

References

• Interview with The Swedish Confederation of pro-fessional Employees (TCO), Mrs Lena Hagman, Chiefeconomist, in August 2006

• Interview with The Swedish Trade UnionConfederation (LO Sweden), Mrs Monika Arvidssonand Mrs Lena Westerlund, Economists, in August2006• Interview with Sveriges AkademikersCentralorganisation, Mr Ake Zettermark, GeneralSecretary, and Hanna Eriksson, in August 2006• Zettermark, A. (2006) “Labour market reforms andmacroeconomic policies in the Lisbon agenda”, pre-sented at the ETUC conference, 20-21 March 2006,Brussels• Swedish NAP 2004• Swedish NRP 2005• European Council recommendations 2004• European Council recommendations 2005

4.1.2. National case study: Hungary12

Before addressing the questions that are at the heartof this report, i.e. the employment policies at nationallevel and the connections with the EuropeanEmployment Strategy, a number of parameters thatplace these questions in a more global contextshould be borne in mind. For instance, the map belowshows how Hungary, a central European country witha very proud past, is a region at the crossroads ofnumerous geographic routes. Hungary has borderswith no fewer than six countries (Austria, Slovakia,Rumania, Ukraine, Slovenia and Croatia). Its rela-tions, both close and conflicting in certain respects,with its neighbours, are central to and for develop-ment, and in particular for the labour market. Againstthis background, Budapest, the capital, with its twomillion inhabitants, plays a central role in the country,all the more so as the other cities are far smaller (thelargest have 200,000 inhabitants). On the political front, the end of Communism inHungary was followed by the emergence of new poli-tical elites clustered in three categories: wealth (pro-fessionals, artists, entrepreneurs), prestige (intellec-tuals, media) and power (senior civil servants, localnotables)13. These new elites include the Hungarianmembers of parliament elected since 1990.

Finally, it is worth stressing the weight of history andthe need for time in the long and complex changefrom a planned economy to its antithesis, i.e. themarket economy. A radical change of the rules sawthe introduction of autonomy and freedom of choice,decision-making and entrepreneurship by economicactors other than the State, thereby altering the



12 Case study conducted by Pierre Tilly13 Catherine Horel, Les nouvelles élites intellectuelles et politiques en Hongrie, in : Le Contrat social en Europe. De Jean-Jacques Rousseauà la dimension sociale de Maastricht, Actes de la Chaire Glaverbel, Louvain-la-Neuve, 1996, p.205.

entire economic behaviour of these same actors, upto the highest private level. Far from having disap-peared, the role of the state has, and continues, todevelop after a complete turnaround, during which itwent from the foreground to the background. For asignificant part of the Hungarian population, theState continues to be the leading actor when it comesto addressing the daily concerns of the population.For its part, the private sector had already developedin Hungary under Kadarism, which enabled it to ridethe privatisation wave faster than its neighbours.

4.1.2.1. The employment situation in the country Hungary can be considered to be close to theRhenish model which comprises Belgium, Germany,Austria, Switzerland and the Benelux countries. Inthis system, the market economy is seen as a socialeconomy, i.e. the market is not an end, but a means.The end is of a social nature, i.e. social cohesion.

Against this background, the main line of conduct ofthe Hungarian transition model relied on an increa-sed opening to foreign capital. An early liberalisationof trade, active and open privatisation, and the intro-duction of regulations for foreign investments,enabled Hungary to emerge, along with Poland, asthe main recipient of direct foreign investmentsamong Central and Eastern European Countries.Accession to the EEC on 1 May 2004 thus brought toa close the first transition phase of the Hungary eco-nomy. Since 1990, Hungary has implemented a policyto privatise its economy, one that extends also toindustry, agriculture and services.

This privatisation movement has accelerated theopening of the Hungarian economy: In fact, 80% ofHungarian exports go to the Europe of the 25, and71% of Hungary’s imports come from these samecountries.

Hungary has for some 15 years now been pursuinga continued policy of structural reforms that seems

to have produced results: the creation of a legalframework favourable to the market economy, abold privatisation policy, and the establishment ofa credible banking sector from scratch. These diffe-rent elements have unleashed private initiative andhave become engines for modernisation andgrowth, according to analysts. This developmenthas nonetheless been accompanied by a socialambition restricted by the shrinkage in public spen-ding. Thus, less than 1% of GDP of the new MemberStates, compared with 2.5% on average for theEurope of the 15, is devoted to public marketemployment policies, in spite of new needs and therise in the number of individuals concerned.

According to the European Commission, Hungaryboasts sound fundamentals: a 4.1% growth rate;inflation standing at 3.6% in 2005 compared with35% in 1991; an unemployment rate of 7.1%.Nevertheless, this country suffers from a structuralbudget deficit estimated at 10.1% of GDP in 2006,and a current account deficit that has been growingbigger since 2002. Instead of going down, as hadbeen expected, the budget deficit (5.4% in 2004)exceeded the 6% mark in 2005.

Per capita GDP now amounts to 60% of the EU ave-rage. In terms of human development, in the begin-ning of the year 2000, Hungary ranked 43rd among174 countries in the human development index,which puts Hungary far ahead of the other Centraland Eastern European Countries on this front. Sincethe mid 1990s, the Hungarian economy has grownby 4% annually, one of the highest rates in the EU.The labour productivity rate is also well above theEU average. After a temporary acceleration in 2003,the employment trend turned negative in 2004, andthe overall employment rate dropped to hit 56.8%,which is far below the Lisbon objective, while theunemployment rate went up (6% in 2004), butremained below the EU average. This low unem-ployment rate is nonetheless accompanied by avery low activity rate (60.5% in 2004).

Overall, the case of Hungary reflects the majortrends in all the new Member States: low employ-ment rates, wide regional disparities, extensivelong-term unemployment and the development ofthe informal economy.

4.1.2.2. Governmental action for employmentTo gauge the current government’s employmentpolicy properly, it is necessary to examine it againsta more general analytical framework. For some tenyears, now, the Hungarian parliamentary systemhas veered towards a system characterised by thepredominance of the Prime Minister (who can be

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removed from office by Parliament only of his suc-cessor is designated concurrently), before aPresident who plays the role of arbitrator and a uni-cameral Parliament which has to share some of itsprerogatives (in particular the legislative initiative)with the executive branch. The mixed electoral sys-tem, which combines voting for a single candidatewith two elections of proportional representation(national and provincial), and which comprises arepresentation threshold fixed at 5%, has yieldednet majorities and avoided too extensive a frag-mentation of the political stage, without howeverleading to a strict two-party system.

This institutional stability has been coupled withfrequent change-overs of political power: after thereturn to democracy in 1990, the elections in 1994and 1998 saw changes of majority. After Mr Göncz(1990-2000) and Mr Madl (2000-2005), Mr LaszloSolyom – elected by Parliament with the support ofthe right-wing opposition – has been the Presidentof the Republic since August 2005. Whereas local(municipal and provincial) elections were held as of1 October 2006, the legislative elections of 9 and23 April 2006 re-elected the out-going socialist-liberal alliance (MSzP and SzDSz) to power, with amajority of 210 seats (out of 386) against 175 forthe conservative opposition (42.03% of the votesin the second round for FIDESz-MPP (Christiandemocrats) and 5.04% for the MDF / DemocraticForum). Led by Prime Minister Ferenc Gyurcsany,the Socialist Party / MSzP obtained a majority with190 seats (43.21% of the votes), the liberal party ofthe SzDSz retaining 20 seats (6.50%). Participationin the second round of voting was 64.36% (compa-red with 67.83% in the first round). The harmonybetween the two parties (in particular between MrGyurcsany and Minister for Economic Affairs Koka)really mobilised voters on the left.

Ferenc Gyurcsany, a billionaire from a poor back-ground who made a fortune in real estate duringthe 1990s, and went into politics out of sheer inte-rest, has performed a rare feat in Central andEastern Europe since the fall of Communism: anoutgoing head of government getting re-elected fora second term. His Socialist Party was allied withthe liberals during the electoral campaign, but thesuccess has seemed like a personal victory for this42-year old man.

He immediately embarked on a wide-ranging pro-gramme of reforms that includes a complete over-

haul of the public services. “The first one hundreddays of my second term will see more than 100 mea-sures,” he promised. Hungary must reduce its publicdeficit as a matter or urgency, as at 6.1% of GDP it isthe highest in the EU and tends to weaken the forint.Otherwise, as just reminded by Brussels, accessionto the Euro expected in 2010 will be compromised.

This firm believer in social democracy, who recentlyrefused to visit a Suzuki plant where trade unionsare prohibited, wants to turn Hungary into “a compe-titive country specialised in activities with highadded value.” But will he have the courage to reformthe health and pension systems, both of which are indeficit, and would require reforms that will mostlikely be unpopular? This is the test that awaits thesecond Gyurcsany government that has promised totake Hungary “to the change it has so long waitedfor.” By way of illustration, his programme providesfor a substantial reduction in the number of hospi-tals – an under-financed and under-equipped sector– in a reform that is needed given the financial crisisof the Hungarian healthcare system. But “no one willbelieve that this project is feasible.”14.

4.1.2.3. The government’s action plan for employment

The new government seems to be more proactivethan the previous one, but had to face a serious cri-sis in September, the effects of which are still diffi-cult to assess. In its programme for the period 2004-2006 for a free and fair Hungary entitled NewDynamism for Hungary, the Hungarian governmenthas embarked clearly on reaching the Europeanobjective, especially as regards competitiveness.“The government will work out the second EuropePlan that defines the guidelines for Hungary’s deve-lopment within the European Union for the period2007 to 2013.” This programme was apparentlydrawn up without any prior consultation of theHungarian social partners to speak of. “It was finali-sed close to Lake Balaton by the main political lea-ders cut off from the world before being communica-ted to the social partners, who were expected to res-pond within a very short period (48 hours).”15 Theemployment programme is entitled Jobs, Jobs, Jobs,which inevitably brings to mind the European recom-mendations on the matter.

The different action plans adopted in recent yearsshow that the countries endeavoured in particularto comply with the guidelines under the EES


14Interview with Lazlo Kovac and Erika Koller (Liga), 15 September 200615Idem


without necessarily always taking into accountnational specific features. It is worth underscoring,nonetheless, that as of the beginning of the 1990s,the EU allowed international institutions to shapenumerous national public policies, including aboutemployment. The recipes tried in Hungary are the-refore largely based on the precepts of the WorldBank and the IMF.

Hungary’s national reform programme (NRF) identi-fies nine major challenges: reducing the budgetdeficit; R&D and innovation; the business environ-ment; competition; infrastructure and facilities; therise in the employment and activity rate; improvingthe situation on the employment market for lessfavoured individuals; reducing regional disparitieson the labour market and capitalising on humanpotential by improving education and training. Thegovernment’s programme provides in particular forsizeable reductions in the number of peopleemployed in the public sector, the country’s princi-pal employer, which seems paradoxical at a timewhen the Hungarian government wants to raise theemployment rate from 57% to 63% by 2010. “Thepublic sector is in the midst of a restructuring ope-ration, but there is hardly any mobilisation by thetrade unions to be seen.” 16 Other strategic sectorsfor the trade unions such as energy (gas, electricity,etc.) are likewise being restructured.

Even if the Government seems to show openness inaccepting to negotiate a part of the budget resour-ces available for an employment policy, drawing upthe RNP posed two major problems, according toLazslo Kovac of the trade union Liga, founded in1989, which now has some 135,000 members17.

1° “The Reform Programme was negotiated at the(National) Economic and Social Committee mee-ting. Unlike the National Reconciliation Council,this board has only consultation rights, andconsists of individuals (the presidents of the SocialPartners) instead of Trade Unions or Employerorganisations. This division of competence bet-ween the two institutions has caused some distur-bances in terms of the flow of information, decidingthe role and reactions of Trade Unions and in thepreparation of the Trade Union statements (No offi-cial statement has been published to date)” 18.

2°The multiplication of Trade Union tasks, and theoverload ofresponsibilities of our staff with the Government’spropositions. In August2005, the Government produced a Concept ofNational Development; in October 2005, it drew upa Report on Employment and Economic and SocialDevelopment; in December we received theNational Reform Programme for Growth andEmployment; in March 2006, officials presentedthe Programme of the New Hungary (NationalDevelopment Plan). These, rather similar docu-ments were prepared at the initiatives of theCommission of the EU, and the HungarianGovernment made strenuous efforts to meet the EUrequirements. However, the exact purpose of eachdocument is not all clear for the parties involved ».

The overall deterioration in working and employ-ment conditions is considerable. The trend towardsa fragmentation of the labour markets in the EUMember States is particularly worrisome, all themore so as it risks intensifying in the future. Themobility of workers remains low. “Hungarians donot like to travel, unless it is really necessary. Theproblem of housing is crucial in this lack of mobi-lity. We must encourage the industrialisation of theeastern part of the country with Ukraine, which isan important trading partner.” The serious discre-pancy between the needs of employers and theskills and qualifications of workers is also a majorcharacteristic of employment in the new MemberStates, including Hungary. “There is a lack of labourforce in certain sectors that require high qualifica-tions. There are shortages in the technical occupa-tions. We have to turn to immigration to fill thesegaps.”20. This is a serious structural imbalance,which explains in part both the long-term unem-ployment and the development of the informal eco-nomy.

The Commission shares this analysis of priorities,and considers the following to be the strong pointsof the employment policy progra

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EUROPEAN EMPLOYMENT STRATEGY AND THE INTEGRATED … · the 15, exceeding the 10% mark. Nevertheless, the situation started to improve as of 1994, and the unemployment rate was gradually