# EUR-Lex - 52012SC0059 - EN

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# 52012SC0059

**COMMISSION STAFF WORKING DOCUMENT RESTRUCTURING IN EUROPE 2011 /* SEC/2012/0059 final */**

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COMMISSION STAFF WORKING DOCUMENT

RESTRUCTURING IN EUROPE 2011

Accompanying the document

GREEN PAPER

Restructuring and anticipation of
change, what lessons from recent experience?

RESTRUCTURING IN EUROPE 2011

FOREWORD

The European economy is slowly emerging from the deepest recession
in decades. The economic crisis resulted in a large drop in economic activity
in the EU, along with millions of jobs lost and a high human cost. The economic
and financial crisis is also speeding up new developments on the international
competition front with the rise of successful companies in emerging countries
that are increasingly competing with European businesses in upper segments of
the market.

The
competitiveness of the European economy and the preservation of activities and
jobs in Europe will depend more and more on the capacity of European companies
to boost their competitiveness through innovating and quickly and smoothly
adapting to change.

As underlined in
the Annual Growth Survey, the EU needs to use this crisis to address decisively
the issue of its global competitiveness so that it comes out stronger and turns
itself into a smart, sustainable and inclusive economy delivering high levels
of employment, productivity, competitiveness and social cohesion.

The positive
export performance of some Member States shows that success in global markets
rests not only on price competitiveness but also on wider factors such as
sector specialisation, innovation, and skills levels that enhance real
competitiveness. In that regard, the structural weaknesses pre-dating the
crisis which had not been tackled adequately are becoming glaringly obvious.

The EU has built
up a strong system of employment and social protection that, combined with a
relatively high level of education, has been the basis for its economic and
social prosperity over the last few decades. However, at a time when the business
environment is changing fast, some aspects of that system are making it more
difficult to quickly and smoothly reallocate resources, and especially human resources,
from declining activities to emerging ones.

On the other hand, that system, built around the principle of job
stability, is less and less capable of giving individual workers a real chance
of a secure professional future when their jobs are at risk, because it does
not sufficiently encourage them to adapt to change.

The economic and
financial crisis and the faster pace of change that it is causing make it more
important than ever for Europe to address those two weaknesses. Recognising the
need for economic adjustment as a vital feature of future growth and job
creation, the Commission wants to encourage permanent business adaptation to
fast-changing economic circumstances while maintaining a high level of
employment and social protection.

The Green Paper ‘Restructuring and anticipation of change: what
lessons from the economic crisis?’ is a sign of the Commission’s
determination to put in place all possible mechanisms and frameworks that
support and encourage business adaptation while at the same time creating the
conditions that will allow workers and regions to accompany that process and
avoid unemployment and social distress.

The present
report describes the numerous actions developed by the Commission that
contribute to the objectives outlined above and details the reasons why further
action in this field is needed. It covers multiple policy areas and a wide
range of instruments and demonstrates an effort of internal coordination that
is all the more needed as restructuring is a complex and multifaceted
phenomenon that cannot be efficiently dealt with otherwise.

EXECUTIVE SUMMARY

Anticipating, managing and mitigating the negative consequences of restructuring Coping with the crisis || This report presents an overview of the European Union’s main strategies, policies and actions that aim to help anticipate, prepare and manage restructuring and change. Particular emphasis is placed on efforts to mitigate the negative consequences of restructuring on individual workers and the wider community. The report has been written against the background of the most serious economic and financial crisis for many decades, which has had a severe impact on the levels of restructuring and change throughout the European Union. Over the period from 2002 to 2010, more than 11 000 cases of restructuring were recorded by the European Restructuring Monitor, with the ratio of announced job losses/job creations standing at 1.8:1. In the period 2008-2010, that ratio increased to 2.5:1. The crisis, from which the EU has not yet fully emerged, has tested the ability of both the EU and the individual Member States to cope with high levels of change and as such provides the backdrop to the report. The crisis of the past two years has had a severe impact on the labour market. The level of restructuring has increased considerably as companies struggle to cope with extremely challenging circumstances. Chapter 1 of the report examines the main restructuring developments across Europe, looking at recent levels of restructuring and the numbers of jobs lost and created. It looks in detail at restructuring in the automotive industry, a major sector for the EU economy (the European Restructuring Monitor announced that job losses in the sector from the first quarter of 2008 to the end of the second quarter of 2010 amounted to more than 160 000). It also gives examples of some initiatives undertaken at company level to preserve employment in the context of the economic crisis. It also looks at Member States’ responses to the crisis, including labour market reforms and the widespread use of short-time working in some countries, which has served to cushion the labour market effects of the crisis. Further, it examines the role of industrial policy during the crisis, focusing in particular on the steel and automotive industries.

Restructuring as a necessary part of business life || However, it should not be forgotten that, even in normal times, restructuring is a part of daily business life, and a process that is necessary in order to ensure that organisations keep pace with change and remain competitive in a global market. Restructuring is therefore a vital and constant part of organisational life and can create as well as destroy jobs. It is also a reaction to larger-scale changes, such as global warming and climate change. In order to reflect the changed and changing environment in which the EU finds itself, the report looks at the likely challenges for the EU, which include finding the necessary skills to allow the EU to remain competitive in the global market in the years to come, dealing with the health consequences of restructuring, coping with global warming and climate change, including finding new and alternative sources of energy (which could produce up to 2020 a net effect of about 410 000 additional jobs and a 0.24 % increase in gross domestic product (GDP) in the EU) and adapting industrial policy to ensure that the EU can compete with its global neighbours.

The EU’s wealth of experience in dealing with restructuring || Over the past few decades, the EU has built up a wealth of experience in examining and dealing with how best to anticipate and manage restructuring in order to mitigate its negative impacts as far as possible. There are many examples of best practice at the level of individual Member States, which have been drawn together and showcased in a range of recent EU-funded projects on restructuring. The challenge now is to try to build on and use this experience to formulate a framework at European level on anticipating and managing restructuring. The European Commission has, in its October 2010 Communication on industrial policy, as well as in other recent policy papers, touched on some of the relevant issues, and has indicated that it will consult the EU-level cross-sector social partners on such a framework. Dealing with restructuring in a positive way involves both anticipating and managing it. In order to limit the negative impact of restructuring as much as possible, it is vital that anticipatory measures are put into place as far as possible. There are examples of initiatives such as economic and financial observatories and early warning systems in some EU Member States, although these are not replicated in all of them and could be developed further in those where they are present. The anticipation of restructuring is key to mitigating the adverse effects as far as possible, as it enables the actors to plan and take action to lessen the impact in advance of the restructuring event.

The crucial role of competence and skills development ... || Competence and skills development sits at the core of forward-looking employment policy and is a subject that is integral to best practice in the management of restructuring. The demand for a highly qualified labour force remains a key source of future growth. From a market standpoint, it is essential that qualifications, competences and skills of mobile EU professionals are recognised in a fast, simple and reliable way if we are to meet this surge in demand. On 19 December 2011 the European Commission adopted a proposal to modernise the Professional Qualifications Directive[1] in order to adapt it to an evolving labour market. Chapter 2 of the report therefore examines competences and skills in the context of the future direction of the EU economy and the restructuring that the EU has undergone in the past few years. This includes issues such as lifelong learning and the importance of ensuring that all workers have the opportunity to develop their skills and competences throughout their working life. It is also important to ensure that skills are transferable, as this will improve employability and aid movement between companies and between sectors if necessary. A particular focus is placed on the skills needs and skills policy of the automotive sector, and on the skills needs of SMEs (in 2008, according to Eurostat figures, out of nearly 20.8 million companies in the EU, 99.8 % were SMEs and they accounted for around 67.4 % of all employment by enterprises). These businesses cannot offer as targeted an approach to training and skills development as their larger counterparts.

... and of the EU support funds || The EU makes a range of funds available to Member States in order to support restructuring, and this plays an important role in helping to anticipate and manage restructuring. Chapter 3 of the report examines the role of state aid provided by Member States, including the Commission’s policy response to the economic crisis, involving aid both to the financial sector and to the real economy. It also examines the role of the European Social Fund (over 400 000 enterprises have received assistance from the ESF and more than 7 million have been supported by activities funded by it) and the European Globalisation Adjustment Fund (a total of 29 applications were submitted to the Commission in 2009, with an amount requested per worker varying between slightly above € 500 and over € 15 700, with an average of € 5 698); it gives examples of where the funds have succeeded in helping to manage restructuring. Finally, it looks at the impact of restructuring in the EU regions and how EU funds have helped specific regions to manage restructuring.

Legislation and social dialogue shape the employee involvement framework for the response to restructuring || Restructuring in the EU is covered by a body of legislation, in the form of a number of Directives, largely in the field of informing and consulting the workforce about changes that are likely to affect them. Chapter 4 of the report examines this framework and also looks at the implementation of EU law and the preparation of possible new initiatives in this area. Social dialogue also plays an important part in shaping responses to restructuring, at both EU and national level. There are a number of joint actions at EU level on the management of change, and a range of sectoral initiatives that have successfully managed change. A number of transnational agreements on restructuring also cover issues such as social responsibility, anticipating change, and mitigating the negative consequences of change.

Initiatives and tools available at national level to anticipate and manage restructuring || A wide range of measures have been taken by Member States to support restructuring, focusing on anticipation and management of the process, and Chapter 5 of the report reviews them. In particular, it examines the findings of a large-scale Commission-funded project undertaken in 2009-2010, designed to showcase examples of best practice in the anticipation and management of restructuring in each of the 27 EU Member States and to stimulate debate at both national and EU level on these issues. It also reviews the existing schemes, instruments and mechanisms providing support to workers affected by restructuring that have been set up in parallel and in addition to the typical support mechanisms of the public employment services (PES), based on a study carried out for the Commission in 2009. The chapter also provides a comparative analysis of these tools and a review of how flexicurity policies can help to anticipate and manage restructuring.

Facing up to future challenges || The future challenges that the EU is facing are many and varied, and Chapter 6 of the report examines the main issues and how they might be addressed. One of these is the psychosocial effects of restructuring, including the effects not only on the workers who are losing their jobs, but also on the ‘survivors’ and the line managers in an organisation. Managing the psychosocial effects of restructuring is of prime importance as this will help to ensure that the negative consequences of the restructuring process have as little effect as possible on those involved in the process. Climate change is another huge challenge for the EU and an issue that has been a focus for EU policy makers for some time. There are many potential impacts of climate change on employment, such as effects on specific sectors, the changes to skills policies that will be needed in a green economy and the challenges of moving to a low-carbon economy. It is likely that climate change will require a significant and coordinated response from the European Union in order to ensure that the full benefits of the green economy are harnessed by the EU economy. In terms of sectoral impacts, the transport sector is an industry that will be significantly affected by the move to a low-carbon economy and challenges include the development of green jobs, the types of skills that will be needed in the sector, and best practices in restructuring. Future challenges also include the best way forward for EU industrial policy, and most specifically the links between industrial policy and employment and skills policies. Many of the relevant issues are highlighted in the Commission’s October 2010 Communication on industrial policy, which sets out the main challenges for industrial policy in a globalised economy.

The challenges of economic and social change and the need for a common approach || As mentioned above, the EU has developed many responses to restructuring and change, and Chapter 7 of the report looks into them. It focuses in particular on how the EU is dealing with the challenges posed by economic and social change, including a review of the range of policies and practices that have been developed in order to anticipate and manage change. In particular, it looks at what the Commission has been undertaking to try to improve the process of managing change, including its consultations with the EU-level cross-sector social partners on the issue of anticipating and managing change, and the social partners’ response, which took the form of joint orientations for managing change. Drawing on all this experience, the Commission has stated that ‘updated orientations on restructuring can be very useful in reinforcing the capacity of businesses and workforce to adapt to a fast-changing economic environment’.

Tentative lessons on anticipation and management of restructuring || The Commission has initiated a range of activities over the past 15 years with the aim of trying to help organisations and stakeholders manage restructuring in a way that has the least possible negative impact on workers, their families and the surrounding community. These include two consultations with the EU-level social partners on the issue of managing change. The Commission has also, over the past two decades, funded a wide range of research, in the form of studies or analyses aimed at identifying good practices, measures or actions to better anticipate restructuring and manage it in a responsible way. There is a significant degree of convergence between the good practices and measures highlighted in these studies, enabling the following tentative messages to be identified: ● Measures to anticipate and manage restructuring differ in individual Member States, depending on factors such as national culture, national industrial relations and employment systems, national welfare and social security systems and national skills and training strategies. Nevertheless, there is clearly scope for transposing initiatives or parts of initiatives across borders, adapting them to different national contexts. ● Active social partner involvement is crucial in many of the schemes available to anticipate and manage restructuring. ● Where a wide range of actors participate in measures, this is a strengthening factor. Partnerships can provide a broad spectrum of expertise and human resources to support organisations that are trying to manage restructuring. This can also limit the effects of restructuring on the wider region, community and employees’ families. ● SMEs have specific challenges when engaging with the anticipation and management of restructuring in a socially responsible way. They often lack the resources, both financial and in terms of personnel, to go much beyond statutory compliance. ● Anticipation of restructuring is a powerful tool that can limit its adverse effects. However, there needs to be greater emphasis on anticipation and preparation of restructuring. ● European funds play an important role in some of the newer EU Member States and in southern Europe. ● While redundancy should always be a last resort, active measures should take precedence over passive measures. ● Training is a crucial and core issue when considering the anticipation and management of restructuring. ● The impact of restructuring on the health of the individuals concerned should be monitored closely, and adverse effects, such as psychosocial but also physical impacts, should be mitigated as much as possible. This concerns those who are made redundant, those overseeing the redundancies (line managers) and the ‘survivors’ of restructuring. Although a range of innovative policies and practices have been highlighted by all these studies, at national, regional, sectoral and organisational level, there is a general lack of coordination and consistency in the implementation of socially responsible restructuring. More emphasis therefore needs to be placed on coordinating measures.

FOREWORD   2

EXECUTIVE SUMMARY   4

CHAPTER 1: RESPONDING TO THE CRISIS   17

1: RECENT LEVELS OF RESTRUCTURING IN THE EUROPEAN UNION   18

1.1: THE EMPLOYMENT IMPACT OF RESTRUCTURING IN EUROPE   22

1.2: RESTRUCTURING ACTIVITY DURING THE ECONOMIC CRISIS  24

1.3: JOB LOSSES  25

1.4: RESTRUCTURING INVOLVING JOB CREATION   34

1.5: EMPLOYMENT-MAINTAINING INITIATIVES DURING THE CRISIS  37

1.6: TENTATIVELY EMERGING FROM RECESSION?  40

2: LABOUR MARKET REFORMS  46

3: SUPPORTING LABOUR MARKETS DURING THE CRISIS:
SHORT-TIME WORKING   54

3.1: SHORT-TIME WORKING ARRANGEMENTS  54

3.2: PHASING OUT CRISIS-RELATED LABOUR MARKET MEASURES  59

3.3: THE WAY FORWARD   60

4: THE ROLE OF INDUSTRIAL POLICY IN RESTRUCTURING DURING
A PERIOD OF CRISIS  62

4.1: CHALLENGES AND OPPORTUNITIES DRIVING FUTURE
RESTRUCTURING   63

4.2: IMPLICATIONS FOR INDUSTRIAL POLICY MEASURES  68

4.3: SECTOR-SPECIFIC INDUSTRIAL POLICIES FOR
RESTRUCTURING   69

4.4: THE WAY FORWARD   74

5: ACCESS TO FINANCE IN THE CRISIS  74

CHAPTER 2: DEVELOPING COMPETENCES   79

1: THE IMPORTANCE OF LIFELONG LEARNING   81

1.1: PLANNED NEW PROPOSAL ON THE VALIDATION OF INFORMAL
LEARNING   83

1.2: THE EUROPASS FRAMEWORK   83

1.3: EU POLICY ON LIFELONG LEARNING AND SKILLS
DEVELOPMENT  84

2: THE ROLE OF SKILLS IN IMPROVING LABOUR MARKET MOBILITY   86

2.1: GENERAL VS SPECIFIC COMPETENCES  86

2.2: TRANSFERABLE SKILL SETS  88

2.3: FUTURE SKILLS NEEDS  90

2.4: THE ROLE OF DIFFERENT ACTORS IN SKILLS DEVELOPMENT  90

3: SECTOR STUDIES AND THE NEW SKILLS FOR NEW JOBS
INITIATIVE   94

3.1: NEW SKILLS FOR NEW JOBS INITIATIVES  94

3.2: SECTORAL STUDIES OF INNOVATION, SKILLS AND JOBS  95

3.3: EVOLUTION OF OCCUPATIONS IN THE EU   97

3.4: EMERGING COMPETENCES  102

3.5. WORK AND LIFE QUALITY IN NEW AND GROWING JOBS  103

4: EUROPEAN SECTOR COUNCILS ON JOBS AND SKILLS  106

4.1: FEASIBILITY STUDY’S RECOMMENDATIONS AND POLICY OPTIONS  108

4.2: MODEL CHOSEN BY THE COMMISSION   110

4.3: FIRST PILOT SECTOR COUNCILS ON JOBS AND SKILLS  111

5: SKILLS INITIATIVES IN THE AUTOMOTIVE SECTOR   113

5.1: EUROPEAN PARTNERSHIP FOR THE ANTICIPATION OF CHANGE
IN THE AUTOMOTIVE INDUSTRY   114

5.2: ANTICIPATION OF SKILLS NEEDS — TOWARDS A EUROPEAN
SECTOR COUNCIL   117

6: TRAINING IN SMALL AND MEDIUM-SIZED ENTERPRISES  119

6.1: SMEs IN EUROPE   119

6.2: GUIDE FOR TRAINING IN SMEs  121

6.3: TRAINING — A KEY TO SUCCESS AND ADAPTATION   123

6.4: FINANCIAL AND ORGANISATIONAL MEANS  124

6.5: HR AND SKILLS DEVELOPMENT POLICY   125

6.6: LESSONS LEARNED   127

CHAPTER 3: EU ROLE  WITH REGARD TO RESTRUCTURING SUPPORT   129

1: THE ROLE OF STATE AID   130

1.1: THE COMMISSION’S POLICY RESPONSE TO THE FINANCIAL
CRISIS  131

1.2: WAY FORWARD   135

2: THE ROLE OF THE EUROPEAN SOCIAL FUND   137

2.1: ADAPTABILITY IN THE ESF OPERATIONAL PROGRAMMES FOR
DURING 2007-2013  138

2.2: ESF INTERVENTIONS AT THE DIFFERENT STAGES OF THE
RESTRUCTURING AND CHANGE PROCESS  140

3: THE ROLE OF THE EUROPEAN GLOBALISATION ADJUSTMENT FUND   146

3.1: THE FUNCTIONING OF THE EGF  146

3.2: OVERVIEW OF APPLICATIONS RECEIVED IN 2009  148

3.3: NEXT STEPS  152

4: THE IMPACT OF RESTRUCTURING IN THE EU REGIONS  154

4.1: THE INFLUENCE OF GLOBALISATION   154

4.1.3: ‘SMART SPECIALISATION STRATEGIES’ AND THE SMART
SPECIALISATION FORUM    160

4.2: MANAGEMENT OF RESTRUCTURING UNDER THE EUROPEAN
REGIONAL DEVELOPMENT FUND   162

CHAPTER 4: DIALOGUE AND LAW    167

1: EU LABOUR LAW AND RESTRUCTURING   168

1.1: MAIN EU LABOUR LEGISLATION RELATING TO RESTRUCTURING   168

1.2: IMPLEMENTING AND ADAPTING LEGISLATION   170

1.3: PREPARATION OF NEW INITIATIVES  174

2: EUROPEAN-LEVEL SOCIAL DIALOGUE ON MANAGEMENT AND
ANTICIPATION OF CHANGE   175

2.1: UNDERSTANDING WHAT HAPPENS  175

2.2: SECTOR-LEVEL SOCIAL DIALOGUE   178

3: TRANSNATIONAL COMPANY AGREEMENTS AND RESTRUCTURING   184

3.1: AN EMERGING PHENOMENON   184

3.2: ADDRESSING SPECIFIC RESTRUCTURING EVENTS  184

3.3: SOCIALLY RESPONSIBLE MANAGEMENT OF FUTURE
RESTRUCTURING   186

3.4: ANTICIPATING CHANGE   188

3.5: ADDRESSING RESTRUCTURING IN GLOBAL AGREEMENTS  189

3.6: COMMISSION’S ROLE IN PROMOTING TRANSNATIONAL COMPANY
AGREEMENTS  190

4: CROSS-BORDER MERGERS  192

4.1: EMPLOYEE PARTICIPATION IN CROSS-BORDER MERGERS  192

4.2: EUROPEAN COMPANIES (SEs) 193

CHAPTER 5: MEMBER STATE ACTIONS TO SUPPORT RESTRUCTURING   198

1: RESTRUCTURING IN THE MEMBER STATES  198

2: ORGANISING TRANSITIONS  206

2.1: CLASSIFYING EXISTING SCHEMES AND MECHANISMS  207

2.2: RESULTS OF A COMPARATIVE EVALUATION   212

2.3: THE ROLE OF FLEXICURITY IN SECURING TRANSITIONS  213

CHAPTER 6: ISSUES AND CHALLENGES   219

1: PSYCHOSOCIAL EFFECTS OF RESTRUCTURING AND MENTAL
HEALTH IN THE WORKPLACE   220

1.1: THE EU FRAMEWORK, STRATEGIES AND ACTIONS  220

1.2. THE PSYCHOSOCIAL RISKS OF RESTRUCTURING AND CHANGE   225

1.3: MENTAL HEALTH AND
WELL-BEING AT WORK   231

2: THE IMPACT OF CLIMATE CHANGE ON EMPLOYMENT  235

2.1: OVERALL IMPACT OF CLIMATE CHANGE ON EMPLOYMENT  235

2.2: SECTORAL IMPACT OF CLIMATE-CHANGE POLICIES  236

2.3: CLIMATE-CHANGE POLICIES AND SKILLS  238

2.4: THE TRANSITION TO A LOW-CARBON ECONOMY   239

3: THE IMPACT OF RENEWABLE ENERGY POLICY ON EMPLOYMENT  241

3.1: THE BENEFITS OF THE RES SECTOR   243

3.1.1: THE EMPLOYMENT BENEFITS OF RES  244

3.1.2: THE FUTURE IMPACT OF RES ON EMPLOYMENT  245

3.1.3: LOOKING TO THE FUTURE   247

4: CHALLENGES FOR THE TRANSPORT SECTOR   248

4.1: OVERVIEW OF THE EU TRANSPORT SECTOR   252

4.2: DECARBONISATION AND GREEN JOBS  253

4.3: DEMOGRAPHY: HEADING FOR SKILL AND LABOUR SHORTAGES  257

4.4: INTEGRATION IN THE TRANSPORT SECTOR   259

4.5: FROM NATIONAL PUBLIC MONOPOLIES TO EUROPEAN PRIVATE
MONOPOLIES?  260

4.6: THE EFFECTS OF THE ECONOMIC CRISIS  261

4.7: EXISTING PRACTICES IN RESTRUCTURING   263

4.8: EU ACTIONS TO SOFTEN THE SOCIAL EFFECTS OF
RESTRUCTURING   264

4.9: OBJECTIVES FOR THE FUTURE   266

5: THE FUTURE OF INDUSTRIAL POLICY   267

5.1: AN INTEGRATED INDUSTRIAL POLICY FOR THE
GLOBALISATION ERA   267

5.2: IMPROVING THE FRAMEWORK CONDITIONS FOR INDUSTRY   268

5.3: INDUSTRIAL INNOVATION   268

5.4: IMPROVING THE EU’S SKILLS BASE   269

5.5: TACKLING STRUCTURAL EXCESS CAPACITIES  269

5.6: THE ROLE OF MANAGEMENT AND WORKER REPRESENTATIVES  270

5.7: TOWARDS A NEW EU GOVERNANCE FOR INDUSTRIAL POLICY   271

5.8: SUSTAINABLE INDUSTRIAL POLICY   271

5.9: ENERGY-INTENSIVE INDUSTRIES AND INTERNATIONAL
ASPECTS  275

5.10: DEVELOPING A SUSTAINABLE INDUSTRIAL POLICY   277

5.11: THE FUTURE   278

CHAPTER 7: MAIN ECONOMIC AND SOCIAL CHALLENGES: THE
RESPONSE OF THE EU   280

1: PRINCIPLES EXPRESSED IN AND RESULTING FROM THE
COMMISSION’S CONSULTATIONS OF EUROPEAN SOCIAL PARTNERS  281

1.1: THE 2002 CONSULTATION OF THE EUROPEAN SOCIAL
PARTNERS ON ANTICIPATING AND MANAGING CHANGE   281

1.2: THE 2003 EUROPEAN SOCIAL PARTNERS’ WORK ON MANAGING
CHANGE   284

1.3: THE 2005 CONSULTATION OF THE EUROPEAN SOCIAL
PARTNERS ON RESTRUCTURING AND EMPLOYMENT  286

2: PRINCIPLES RESULTING FROM ANALYTICAL WORK AND
STAKEHOLDERS’ VIEWS  288

2.1: SOURCES: STUDIES, REPORTS, RESTRUCTURING FORA   288

3: MAIN ISSUES RELATING TO THE ANTICIPATION AND
MANAGEMENT OF CHANGE   294

3.1: THE IMPORTANCE OF TIMELY ACTION   294

3.2: A MULTI-LEVEL, MULTI-ACTOR ISSUE   296

CHAPTER 8: CONCLUSIONS   302

1: TEN TENTATIVE LESSONS ON THE ANTICIPATION AND
MANAGEMENT OF RESTRUCTURING   303

SOURCES AND FURTHER READING   310

BIBLIOGRAPHY   313

CHAPTER 1:
RESPONDING TO THE CRISIS

The economic crisis of the past two years
has had a severe impact on the labour market, as organisations are obliged to
make redundancies in significant numbers in order to try to respond to the
external environment. Over the period from 2002 to 2010, over 11 000 cases
of restructuring were recorded by the European Restructuring Monitor, based at the
European Foundation for the Improvement of Living and Working Conditions (Eurofound)
in Dublin, with a ration of 2:1 regarding announced job loss to announced job
creation. The level of recorded restructuring announcements has, of course,
increased over the past two years, accompanied by higher levels of job loss,
although it would seem that both announced job loss and cases of restructuring
peaked during the first quarter of 2009.

The crisis has, however, had an uneven
impact in terms of sector, with some sectors hit much harder than others. The
automotive sector, which is a manufacturing sector for the EU, has been hit
hard by the crisis, due to reduced demand. By contrast, other sectors, such as
the retail sector, appear to have weathered the crisis comparatively well, with
job creation, certainly more recently, outweighing job loss in this sector.

In terms of employment, the automotive
sector is vital in the EU, both in terms of direct and indirect employment. In
order to weather the recent crisis, employers in this sector have resorted to a
range of initiatives, the most common of which has been short-time working,
which aims to bridge difficult but temporary economic circumstances.

In response to these challenges, the EU
institutions have been trying to put into place a sustainable labour market
policy response, in the form of an integrated strategy based on factors such as
interventions in employment protection, lifelong learning and activation
policies. These may help to improve the adjustment capacity of labour markets
and smooth the employment and social impact of restructuring. Increasing
participation, and enhancing workers’ employability through better skills. The
ultimate goal is to return to strong growth. The Europe 2020 strategy, which is
based on seven flagship policies, contains two policies that are relevant for
the labour market: an agenda for new skills and new jobs, aimed at modernising
the labour market, notably by developing skills which better match with labour
market needs and enhancing labour mobility prospects; and the ‘Youth on the
Move’ initiative, which aims to remove obstacles to reaching greater
educational attainment and higher employment rates for young people.

More widely around the EU, short-time
working has been one of the major policy responses of organisations, and one
that appears to have had the desired effect in terms of maintaining employment
levels. However, there are limitations to this measure, and it is particularly
important to ensure that short-time working is phased out correctly and not viewed
as a long-term option, as this will undermine recovery and growth.

It is not easy to see a clear way forward,
following on from the recent crisis, but it is clear that recovery will come
and that EU employment and industrial policy must be in a position to face up
to the challenges of the future, in order to ensure that recovery and growth in
the EU is strong and smooth. To this end, industrial
policy has begun to be more active in supporting the transition of industries
by setting up public private partnerships, fostering innovation and coordinating
Member States’ policies. In addition, in its strategies on restructuring,
industrial policy is also trying to better incorporate initiatives from other
policies, as it is clear that only a holistic approach will lead to sustainable
growth in the future. The Commission’s October 2010 Communication on industrial
policy makes this clear.

1: RECENT
LEVELS OF RESTRUCTURING IN THE EUROPEAN UNION

The European Restructuring Monitor (ERM),
operated by Eurofound, Dublin, records restructuring announcements in establishments,
based on media reporting. The ERM has been in operation since 2002 and now
constitutes a dataset of over 11 000 individual cases of restructuring
which, notwithstanding certain biases (see below), is the best single, publicly
available source of EU data on the employment impacts of large-scale
organisational restructuring.

Using a network of national correspondents
based in each of the EU27 Member States plus Norway, the ERM captures basic
descriptive and quantitative data concerning each reported case of
restructuring involving over 100 announced job losses or job creations or, in
the case of companies employing more than 250 persons, announced restructurings
affecting at least 10 % of the workforce.

It should be noted that this definition only
captures reported mass or large-scale restructuring processes. It therefore
only corresponds to the tip of the iceberg in terms of job creation and loss
most likely to be captured by national media. First, the information does not
include the impact on subcontractors unless these also satisfy the thresholds,
and ignores local spill-over effects indirectly generated on employment in a
given area. Second, it is well known that the main flows of job loss and
creation in a given country overwhelmingly come from small-scale loss and
creation. However, these large-scale processes are highly meaningful, for
several reasons. They are dramatic in scope and affect a large number of
people, both the workers given notice, their dependants and their families.
Further, as they often relate to major employers in a location, they can have a
disproportionate impact on the local and sometimes the regional economy, often
including important spill-over effects.

The value of the ERM database also stems
from the distinctions it allows regarding various organisational dimensions of
restructuring. Box 1.1 summarises the types of restructuring identified in the
ERM.

Box 1.1: Type of restructuring

Relocation: When the activity
stays within the same company, but is relocated to another location within the
same country.

Outsourcing: When the activity is subcontracted
to another company within the same country.

Offshoring/delocalisation: When the activity is
relocated or outsourced outside of the country’s borders.

Bankruptcy/closure: When an industrial site is
closed or a company goes bankrupt for economic reasons not directly connected
to relocation or outsourcing.

Merger/acquisition: When two companies merge or
during an acquisition, which then involves an internal restructuring programme
aimed at rationalising an organisation by cutting personnel.

Internal restructuring: When the company
undertakes a job-cutting plan, which is not linked to another type of
restructuring defined above.

Business expansion: Where a company extends its business
activities, hiring new employees. This form of restructuring has been
introduced to the ERM database in order to reflect the positive effects of
certain restructuring processes on employment.

Box 1.2 below gives information about the methodology used by the ERM

Box 1.2: Measuring the employment effects of
restructuring, the ERM methodology

The information contained in the ERM comes from
correspondents in each of the EU Member States, together with Norway, who
submit fact sheets on the basis of articles published in national newspapers
and the business press in the country in question of enterprise restructuring,
where this is defined as cases which:

● affect at least one EU Member State;

● entail an announced or actual reduction of at least 100 jobs; or

● involve sites employing more than 250 people and affecting at least
10 % of the workforce; or

● create at least 100 jobs.

In principle, all instances of restructuring that
meet these criteria should be included in the ERM, although how far this is the
case in practice depends on both the diligence of the national correspondents
concerned in reviewing the sources in question and the extent to which the news
sources (a selection of three to five business or economy-oriented newspapers
is screened in each country) actually report relevant cases. Both may vary
between Member States, partly with the size of the country, since a case of
restructuring involving the loss of, say, 30 jobs at a worksite employing 250
people is likely to be more newsworthy in a small country than a large one.

The cases excluded because they do not meet the
criteria defined because of either the worksite concerned or the job losses
involved being too small, are also likely to vary between countries. In this
case, the cases excluded might be expected to vary inversely with the size of
the country, though this is not necessarily so, since the typical size of
enterprise itself tends to vary across countries, there being a much larger
number of small and medium-sized enterprises in the southern Member States in
particular than in other parts of the EU.

There
is an acute lack of solid evidence on the employment effects of restructuring
at European level. While the ERM is not fully representative of the employment
effects of restructuring, it is the only EU-wide attempt to measure
restructuring directly. Moreover, the ERM is very timely[2] and is based on publicly available
information. This characteristic, together with the fact that it identifies the
companies and establishments undergoing restructuring, makes the ERM a
particularly useful measure from a policy perspective.

Potential
biases in ERM

The ERM defines job loss as intended
redundancies, which are not notified to any public authority but rather ‘announced’
either in the media or some other public domain. The thresholds for inclusion
in the ERM database are: at least 100 jobs or involving sites employing more
than 250 people and affecting at least 10 % of the workforce. There is no
stipulation of the time within which the intended job loss is to occur.

The major advantage of the ERM is that it occurs
very early in the dismissal process and that it will capture those who come to
leave very early in the dismissal process. It will, however, almost certainly
overestimate the actual number affected by the restructuring. The early warning
feature of the ERM is one of its major strengths as information is usually
available long before the reduction of the workforce is enacted. Another major
strength of the ERM is that it is based on information in the public domain.
There are no issues of privacy and the identification of specific cases allows
the process of structural change to be observed at the company level.

However, the major problem with the ERM is
whether the macro picture that it tells is representative of job loss in
general. How then can we expect the ERM to be biased with respect to job loss
in general? A priori, there is reason to suppose the following.

Firm size bias
occurs by definition due to the ERM thresholds. Moreover, even within the firm
size definitions there will almost certainly be an over-representation of large
firms and large workforce reduction as these are more likely to be reported in
the media. As firm size is correlated with a number of important factors such
as economic sector, size bias will lead to many types of bias. For example, the
large firm bias probably leads to a higher reporting rate in the ERM for
manufacturing relative to services. The manufacturing bias may in turn lead to
bias as regards region and gender. The fact that the sampling error will be
greater when firms are small may lead to inconsistencies over time (if firm
size varies over time) and between countries with differing firm size
distributions. The most obvious impact of large firm bias impacts on small
Member States such as Malta and Cyprus as they have very few firms of the size
that fall under the ERM thresholds. Indeed, the ERM database provides very poor
information on restructuring in these countries.

Regional bias,
apart from that which follows from the large firm bias mentioned earlier, is
likely to occur when media coverage is not evenly spread throughout the
country. While most of the designated newspapers are formally national, there
may well be some national or regional capital city bias.

Country size bias
is also likely. In absolute numbers, there is obviously much more job
loss in large countries. In terms of national impact, restructuring involving
for example 100 employees will be a less frequently occurring and more
media-prominent event in Portugal or Greece than in Germany or the UK. This suggests that the reporting frequency will be higher in small countries than in
big ones. This could seriously flaw comparisons between countries (but not over
time). Note that because there are more large firms in large countries, this
leads to better coverage in the ERM. Thus there are likely to be conflicting
tendencies to bias as regards country size, leaving little indication on the
size and direction of the bias.

Type of restructuring bias (in terms of internal restructuring, relocation, closure etc.) may
also occur if public and media focus is more concentrated on certain types of
restructuring. Otherwise there is little to suggest that bias occurs in this
aspect of the ERM.

The ERM also reports cases of job creation. As
the major part of ERM cases are identified in newspapers, one could presume, in
accordance with the journalist adage that ‘the best news is bad news’, a higher
rate of reporting of job loss relative to job creation.

Regarding the information collected, the sample
ERM fact sheet below illustrates the basic data that the system is designed to
capture.

This section of this chapter gives a basic
descriptive overview of the employment effects of large-scale restructuring in
EU27 and Norway from the ERM dataset from 2002 to the end of the second quarter
of 2010. Then it turns to look in more detail at recent data covering the
period 2008 to the second quarter of 2010, which covers the mini-cycle both
before, during and after the acute economic and financial crisis from the
fourth quarter of 2008 to the first quarter of 2009, when restructuring
activity also peaked. The section includes brief features looking at instances
of early retirement captured in ERM cases in the recent period and at
restructuring developments in the car manufacturing sector. It concludes with
some short examples of company and social partner initiatives which have helped
to mitigate the negative employment impacts of the most severe European
recession in recent memory.[3]

1.1: THE EMPLOYMENT IMPACT OF
RESTRUCTURING IN EUROPE

Between the beginning of 2002 and the end
of the second quarter of 2010, over 11 000 cases of large-scale
restructuring in EU Member States (including the new central and eastern
European Member States from 2005 onwards) were recorded by the ERM. The ratio
of cases of announced job loss to announced job creation was around 2:1 over
the period.[4] The cases recorded[5] were associated with announced job losses totalling just above 3.8
million and announced job creation of just over 2.0 million. The annual median
size of restructuring cases varied between 200 and 250 over the period covered
for both job gain and job loss. For details, see table 1.1 below.

Table 1.1: Large-scale restructuring in Europe: an overview of ERM cases from 2002 to 2010*

|| Cases || Employment || Median case size

|| Job loss || Job gain || Job loss || Job gain || Job loss || Job gain

2002-7 || 4 341 || 2 622 || 2 509 713 || 1 532 048 || 210 || 250

2008 || 1 032 || 535 || 527 124 || 278 781 || 227.5 || 200

2009 || 1 650 || 359 || 651 557 || 203 295 || 200 || 220

2010* || 345 || 183 || 144 162 || 61 566 || 230 || 200

Total || 7 368 || 3 699 || 3 832 556 || 2 075 690 || 205 || 231

Source: ERM (*2010, q1 and q2 only).

As the chart below indicates, the
distribution of announced employment gains and losses is heavily concentrated
in larger-scale restructurings. In part this is for reasons of large-firm bias
and media coverage bias which are inherent to ERM (see box 1.2). It is possible
to discern patterns comparing year-on-year shifts in the composition of announced
job loss by case size. The share of announced job loss in large-scale cases
involving at least 1 000 job losses has varied between 40 % and 60 %
over the period (share of cases on the other hand varies between 7 % and
11 % by year). The share of medium-sized cases and smaller cases increased
markedly during the crisis (2008-9) before beginning to fall back in early
2010. For details, see figure 1.1 below.

Figure 1.1: Share of ERM-recorded
announced job loss/gain by case size, 2002-10*

Source: ERM (*2010, q1 and q2 only).

In terms of announced job gain, large-scale
cases involving at least 1 000 new jobs account for the majority (c.60 %)
of overall job gains recorded on ERM in the period 2002-2009. The pattern in
the first semester of 2010 as growth has resumed has, however, been quite
distinctive: the share of jobs in medium-sized cases involving 150-499 jobs has
doubled (from 21 % to 42 %).

Over the period from 2002-2007 to 2010, the
median number employed in companies announcing major job loss has risen from
800 to 900 and the share of larger employing units[6] (500 or more employed in the affected units) announcing job loss
has not decreased; in fact it has increased, from 58 % to 60 %.

In summary, the trends appear to be for a
declining share of large-scale restructuring-related job loss or gain to be in
very large cases (those leading to the announced dismissal of over 1 000
individuals). At the same time, a consistently high share (around 60 %) of
job loss cases involves larger employing units (those with more than 500
employees).

Box 1.3: What is the employment impact of restructuring?

The word ‘restructuring’ has several meanings and
some definitions of restructuring might include events that do not have any
impact on employment levels or that, through a reorganisation of work, may have
an impact on the workforce in some other way. Similarly, the relationships
between restructuring and employment are neither simple nor straightforward.

The term ‘restructuring’ has come to be
associated with the enactment of structural change below the macro or national
level: there are reports of the restructuring of sectors, companies and
establishments. Restructuring is also seen as more of an active process
initiated by employers, in contrast to the more passive and deterministic
long-term forces of structural change and economic development. Even if it is
driven by the need to maintain or enhance profitability, and to ensure by so
doing the survival of the company (and thus jobs) in the long term,
restructuring is primarily perceived as having a negative impact on employment
levels at particular workplaces.

Nonetheless, the more abstract concept of
structural change, ie the reallocation of resources to more productive uses, is
generally viewed in positive terms. Job creation in new companies and sectors
of the economy is, together with cheaper goods and services, the main benefit
of structural change. However, to define this job creation as restructuring is
both contrary to public perceptions of the term, as well as being somewhat
illogical. It is also a complex theoretical problem insofar as restructuring is
also often defined by its negative effect on jobs and no clear-cut definition
has yet emerged.

Nonetheless, job creation is related to
restructuring in the short term in one particular context — when jobs are lost
in one company or location in order to be moved to another company or location.
This occurs either through the process of outsourcing or offshoring. Jobs may
be lost due to offshoring, for example, in Germany, but not from the EU. Some
evidence, for instance in the ERM, indicates that much job creation in the
newer Member States emanates from companies located in the old EU15. Similarly,
significant technological changes have already triggered restructuring
processes in which the loss of (unskilled) jobs has gone hand in hand with the
creation of (skilled) jobs. In the meantime, it is obvious that not all job
creations are linked to change, let alone to restructuring.

1.2:
RESTRUCTURING ACTIVITY DURING THE ECONOMIC CRISIS

As noted at the beginning of this chapter,
the past two years have been extremely difficult for the EU economy, due to the
financial and economic crisis that it has been experiencing during this time,
and from which it has not yet fully emerged. The crisis has, naturally, caused
the level of restructuring in the EU to increase, due to the higher incidence
of bankruptcies and closures. The trends of the past two years have been
captured by ERM data.

As stated above, the ERM has been in
existence since 2002 and tends on average to record approximately 90-100
large-scale restructurings per month. Restructuring activity recorded on ERM
peaked in the last quarter of 2008 and the first quarter of 2009 almost
immediately following the global financial crisis triggered by the collapse of
Lehman Bank in September 2008. In this period, monthly case totals climbed to
over 300 and featured a much higher share of job loss cases. For details, see
figure 1.2 below.

Figure 1.2: Restructuring activity during
the crisis (by quarter)

Source: ERM.

Declining ERM restructuring activity since
the second quarter of 2009 coincides with the onset of recovery in output,
although unemployment levels only began to stabilise at the end of the first
quarter of 2010.

1.3: JOB
LOSSES

The sectors most affected by large-scale
restructuring job loss during the peak quarters of the economic crisis were
manufacturing, retail and financial intermediation. Public administration,
which had accounted for 17 % of restructuring-related job loss announcements
in 2006-2007, represented a much smaller share of announced job loss in the
most recent period. This may be due to the fact that public sector employment
levels often have a counter-cyclical nature, ie they can rise during private
sector downturn. Nevertheless, there have been some high-profile announcements
of job losses in public administration most recently, in countries such as the UK, although these announcements will affect actual employment levels over a longer period
than announcements in the private sector.

For details, see figure 1.3 below.

Figure 1.3: Announced job loss in ERM
restructuring cases by major sector, 2008-2010q2

Source: ERM.

The next part of this chapter looks in more
detail at recent restructuring activity in the automotive sector, which is a
major manufacturing sector for the EU, and one that has experienced a
significant level of restructuring in recent years.

1.3.1: SECTOR IN FOCUS: AUTOMOTIVE
MANUFACTURING

Within the broad manufacturing sector,
announced job losses were most acute in automotive manufacturing, which
accounted for over a quarter of all manufacturing job losses. Demand for cars
and trucks has been severely affected by the economic downturn. Europe’s automotive industry, with the assistance of the public authorities, has
experimented with various remedies to endure and survive the slump while
preparing for the next generation of vehicles and consumers.

The automotive sector remains vital as an
employer in Europe — more than 2 million workers are directly employed and
nearly 10 million work in supply-chain activities. It is also a major hub of
research and development activity, a source of tax revenues and a positive
contributor to the EU’s trade balance with the rest of the world. This last
fact is important as it signals that the industry in Europe is internationally
competitive.

Nonetheless, the scale of the slump in
demand for cars has raised questions over the viability of parts of the
automotive industry, especially in a context of local and global overcapacity, estimated
to be in the range of 20 % to 30 %. Two main stimulus paths have been
identified for the sector, one short-term and the other more medium-term, both
involving relatively large public investment. In the short term, car scrappage
premia introduced by a number of Member State governments have provided a boost
to production and sales, especially of smaller, economy cars. In the
medium-term, climate-change imperatives are motivating large-scale public
investment such as the European Investment Bank’s European Clean Transport
Facility, which will underwrite research, development and production of less
polluting, more energy-efficient vehicles.[7]

Various flexibility measures — including
short-term working, shift reductions and temporary plant closures — have been
deployed to confront the consequences of a fall-off in demand for passenger
vehicles, which was over 25 % year-on-year at the height of the crisis.[8] While these measures may have absorbed some, perhaps many, potential
job losses, according to Eurostat short-term business statistics data there was
nonetheless a net decline of nearly 8 % in automotive sector employment
between the first quarter of 2008 and the first quarter of 2009. The sector
also accounted for the largest single share of announced job losses by sector
in ERM restructuring cases during 2008-2010. For an overview, see figure 1.4
below.

Figure 1.4: Breakdown of ERM job losses by
sub-sector (within NACE 34, automotive manufacture)

Source: ERM (*2010, q1 and q2 only).

As figure 1.4 above illustrates, announced
ERM job losses in the sector in the 30-month period from the first quarter of
2008 to the end of the second quarter of 2010 amounted to more than 160 000.
Of these, the majority were in supply-chain firms (NACE 34.3) rather than in
original equipment manufacturers (OEMs, NACE 34.1), in contrast to the earlier
period, when OEM job loss announcements predominated. The increasing share of
job loss announcements in the manufacture of auto parts/accessories is
suggestive evidence that the combination of negotiated flexibility and public
measures to stem unemployment in the sector have been more effective at
avoiding restructuring job loss in the main auto manufacturers rather than in
their supply chains. This may reflect the political importance of the principal
manufacturers (and their employees) and also the pragmatic fact that OEMs lie
at the centre of an extensive network of high-end manufacturing activity and
are its least dispensable components. Another possible contributing factor is
the fact that during the recession the main car producers have moved certain
ancillary functions in house that had been previously outsourced to supplier
firms.

The sector’s problems were thrown into
stark perspective by the plight of two of the big three US car manufacturing
groups. The US administration guided Chrysler and General Motors through
fast-track bankruptcies in the second quarter of 2009 and financed their
restructuring with over $ 60 billion in public funding. General Motors
announced the cut of 8 369 out of 48 000 jobs at its European Opel
plants in February 2010. An additional 850 partial retirement jobs are due to
be cut when current workers retire. The plan included the closure of the
Belgian plant in Antwerp, where 2 606 people are employed, 3 900 job
cuts in Germany and 900 jobs in Spain. PSA Peugeot Citroen announced in late
2009 the loss of 6 000 jobs in its factories in France between January
2010 and December 2013 in a performance plan aimed at restoring the
profitability of the group.

In the early part of the crisis, car sector
restructurings revealed in particular the vulnerability of temporary and
fixed-term workers, who constituted a front-line buffer of numerical
flexibility for manufacturers. BMW announced in February 2008 that it would cut
a total of 8 100 jobs, mainly in its German operations. Temporary agency
workers accounted for 5 000 of these jobs. The decision of the company to
let go at short notice of 850 of its temporary agency staff at its Cowley (UK)
plant, which produces the new Mini, caused an outcry in the UK. Union leaders accused the company of taking advantage of the basic level of protections afforded
agency workers in the UK. In the case of Skoda Auto’s announcement of 4 000
job losses in December 2008 in its Czech operations, all were temporary agency
worker positions. Similarly, Volkswagen in March 2009 announced
that it would be cutting all 16 500 temporary jobs in its worldwide
operations.

When consumer demand returned in 2009 as a
result of scrappage incentives, much of the slack was taken up by hiring/firing
temporary workers. The ERM records one case of 1 000 jobs created at Skoda
Auto, Mladi Boleslav (Czech Republic) in March 2009, attributed to increased
demand arising from scrappage schemes in neighbouring Member States, notably
Germany. Less than a year later, VW Skoda announced 2 440 job losses at
its Czech units (including Mladi Boleslav), principally temporary workers taken
on to deal with scrappage scheme demand.

As already noted, the automotive sector has
seen announced job creation as well as (more significant) job loss during 2008
to 2010 and is the second sector, after retail, in terms of announced new jobs
on ERM. As the geographical distribution of job gains/losses below shows, the
major West European producing countries are in general those with the largest
announced job losses. In France, Sweden, Germany and the UK, extensive job losses were reported with only nominal countervailing job gain. Germany had the
highest level of announced job losses (over 26 000) but this represents a
much smaller percentage of overall sector employment in that Member State than
in the case of Sweden for example. There was also some countervailing job gain
as was also the case in the Czech Republic — the one exception to a qualified
East-West dichotomy of job creation and loss.

Figure 1.5: Automotive sector job losses/gains
recorded on ERM 2008-2010q2 — countries most actively restructuring

Source: ERM (*2010, q1 and q2 only).

Since 2008, there have been 13 very large-scale
cases of business expansion in auto manufacturing involving the announced creation
of at least 1 000 jobs. All but one were in the central and eastern
European Member States (including four in the Czech Republic, three in Poland
and two each in Romania and Hungary). This was a continuation of previous
trends and shows clearly a shift — though not explicitly, or necessarily, an
offshoring — of productive capacity in the sector from older to newer Member
States.

At company level, the ERM picked up a
number of concrete examples of the above shifts. Autoliv, manufacturer of
safety equipment including seatbelts and airbags, announced a major worldwide
restructuring involving 3 000 announced job losses in July 2008.
Subsequently, specific job loss announcements were made at facilities in Hasselholm, Sweden (August 2008) and Gournay-en-Bray, France (March 2009) while 800 new
jobs were announced (also in March 2009) as the company expanded production at
Jelcz-Laskowice in Poland. In 2008, auto components manufacturer, Faurecia,
announced 1 250 job losses at its French units between 2009 and 2011, and
1 000 new jobs at its facilities in Pisek and Karvina in the Czech Republic. Similar patterns can be observed in cases involving a number of other
automotive component manufacturing firms including Keiper, Johnson Control and
Mahle.

While much attention has been paid to the
successful employment-maintaining effects of short-time working schemes,
especially in the car sector during the most acute phase of the crisis in late
2008 to early 2009, the scale of the demand slump for consumer and commercial
vehicles was such that job losses were extensive in the sector. Short-time work
and other forms of working time flexibility ensured that losses were not even greater,
but the ERM is consistent with short-term business statistics data in finding
that auto manufacture was nonetheless the sectoral division contributing most
to aggregate manufacturing net employment decline.

1.3.2: TYPE OF RESTRUCTURING:
RISING CONTRIBUTION OF BANKRUPTCY/CLOSURE TO OVERALL JOB LOSS

Internal restructuring represents a kind of
catch-all or default category of restructuring and has tended to account for
around 70 % of announced job loss in ERM cases for any given period since
2002. Of the other categories of restructuring that the ERM captures, the most
important is the combined bankruptcy/closure category, which accounted for a
sharply increased proportion of announced job losses during the crisis period
in 2008-2010 (up from 14 % in 2002-2007 to 22 % of total in
2008-2010).

The factors leading to this increased
incidence of restructuring borne of business failure are not difficult to
identify. Reduced demand, difficulties in accessing credit and receiving
payment are all customary features of a recession that make trading difficult
even for stronger companies. In the period immediately preceding the crisis, a
combination of low interest rates, easy credit and excessive debt/leverage may
also have weakened the financial foundations of many companies by encouraging
them to over-extend. Firms that are already over-borrowed or structurally weak
may not have the commercial resilience to withstand a more challenging
commercial environment during a recession. The largest single bankruptcy in the
period was that of UK high street retailers Woolworths in late 2008, where the
closure of over 800 stores resulted in over 27 000 announced job losses;
the firm’s former German subsidiary, Woolworths Deutschland, also declared
bankruptcy in May 2009 with the announced loss of over 5 000 jobs. Figure 1.6
below shows announced job losses by type of restructuring and year.

Figure 1.6: Share (%) of ERM announced job
losses by type of restructuring (except internal restructuring) and year

Source: ERM (*2010, q1 and q2 only).

At national level, the increased share of
bankruptcy/closure-related job losses was notable in the UK, Slovenia, Portugal, Greece, Italy and Finland (more than 15 percentage points in each country).
At aggregate EU level, the increase in the share of bankruptcy/closure-related announced
job losses was matched by a decline in the share of
offshoring/relocation/outsourcing announced job losses. This is consistent with
expected patterns of business behaviour during an economic downturn — higher
levels of business failure and retrenchment and less emphasis on expansion or
diversification via offshoring and relocation. From this perspective, the most
recent data showing an increase in the share of offshoring may be considered a
hopeful signal of recovery.

1.3.3: EARLY RETIREMENT AS A MEANS
OF DEALING WITH JOB LOSS

There are many ways in which the effects of
restructuring involving job loss can be mitigated. Traditionally, and
particularly when a larger part of the workforce was engaged in more
traditional heavy industry sectors, early retirement was a favoured means of
allowing older workers to leave the workforce in a relatively non-traumatic
way.

However, the past 10 years have seen a
withdrawal or reduction of incentives to early retirement — in both the public
and private sectors — in line with a policy consensus [9]
that emphasises the importance of broadening labour market participation and of
increasing the effective retirement age.[10]
The move to reduce early retirement incentives has been made all the more
pressing by empirical evidence that countries with generous and easy-to-access
early retirement schemes have also been those which have suffered the sharpest
declines in the employment levels of 55-64 year olds. Old age employment rates
are particularly sensitive to retirement incentive structures, which vary
considerably from country to country. Research also largely confirms that early
retirement has not been successful at aggregate level in one of its ancillary
objectives[11] — contributing to increased youth employment by ‘freeing up’ jobs
for younger workers.

However, there
are strong interests in maintaining early retirement arrangements, which can be
attractive for different reasons for a variety of stakeholders, including
unions, employees and employers. While some governments have recently attached
more stringent limitations to access to early retirement benefits (for example
Poland, Sweden and France[12]), others have rediscovered the short-term attractions of early
retirement as a cost-saving measure and/or as a politically acceptable means of
gaining numerical flexibility in the public service. An illustrative example is
the early retirement scheme for civil servants introduced by the Irish
government in April 2009. The scheme was included in an emergency budget as one
of a number of measures explicitly targeting public sector cost savings.[13] ERM national correspondents also report increased recourse to early
retirement in Romania, Latvia, Luxembourg and Hungary.[14]

The ERM shows some evidence of the
persistence of early retirement as one form of labour-shedding during
restructuring, especially amongst large companies. In the ERM in 2008-2010, 80
cases make explicit mention of early retirement. Early retirement features in
particular in cases from the following countries — Belgium, France and Spain (10 cases), UK (7), Italy and Norway (6). As a rule, early retirement tends to be
one of a range of measures deployed when restructuring as by definition it
relates only to that part of a company’s workforce between 50 and 60[15] years of age and
the statutory retirement age (generally 65). Other measures may include partial
retirement, part-time working, relocation, retraining and voluntary
redundancies, and the mix of measures in specific restructurings is generally
agreed on the basis of social partner negotiations.

Early retirement has in the past been
associated with restructuring arising from privatisation where states have
bought industrial peace by offering generous early retirement packages to
workforces affected by post privatisation restructuring job loss. Three
examples of company restructuring involving the use of early retirement are set
out below, focusing on the Italian airline Alitalia, the Italian
telecommunications group Telecom Italia, and the Austrian retail bank BAWAG.

Alitalia’s new phase as a private company
began in January 2009 after Italian investor group Compagnia Aerea Italiana
(CAI), acquired the ‘new’ Alitalia, leaving the Italian government with the old
company’s debts and its least profitable units. Employment in the privatised
Alitalia totalled 12 600 compared with 21 500 in the combined ‘old’
Alitalia and Air One, the smaller Italian airline, with which it merged. Prior
to the acquisition and in a context of sustained industrial action, the Italian
government and main trade unions reached a deal which made use of the full
range of Italian social shock absorbers (ammortizzatori sociali) to
cushion the effects of redundancies for over 3 000 of the Alitalia
employees. The agreement included recourse to the ‘extraordinary’ Wages
Guarantee Fund (Cassa
Integrazione Guadagni Straordinaria, CIGS) for four
years. After this period, redundant workers benefit for three years from the ‘mobility’
programme, which supports their incomes until they reach retirement age (or
find a new job). The Italian state — through the National Social Security
Institute (Istituto Nazionale Previdenza Sociale, Inps)  — pays an allowance
equal to 80 % of the average wage lost by the workers.

At Telecom Italia, the announcement of 5 000
job losses in June 2008 led to strike action which was resolved when the
restructuring plan was largely deferred to 2009-2010. The job cuts were planned
to be effected with recourse to a mobility procedure (procedura di mobilita),
which is an administrative prelude to dismissal, with a view to early
retirement, which would guarantee up to 90 % of salary for the redundant
workers.

BAWAG, the Austrian retail bank, formerly
owned by the Austrian Federation of Trade Unions (ÖGB), announced its intention
to reduce its workforce by 400 during 2008 without recourse to compulsory
redundancies. The bank was taken over in 2007 by a consortium led by the US private equity firm Cerberus Capital Management following losses incurred on currency
derivative investments. The takeover was facilitated by a large injection of
public funds by the Austrian state. Employees within seven years of the
official retirement age were allowed to opt for early retirement, in which case
they continued to receive at least 60 % of their last take-home pay until
reaching the legal retirement age — 60 for women and 65 for men.

Other large-scale restructurings with a
significant element of early retirement include those at:

● Eon-Energy, in August 2008

● Air France-KLM, in May 2009

● Michelin, in June 2009

● Volvo Europa, in October 2008

● Malta Shipyards, in June 2008

● Birmingham City Council, in February 2010, and

● Vattenfall Europe, in March 2010.

The above examples show how early
retirement is still being used by organisations throughout the EU, albeit in a
more limited way than in previous decades. Early retirement is clearly still an
option for organisations that are faced with the need to make large-scale
redundancies, although this does have implications for the balance of age and
experience in an organisation’s workforce, and for the wider workforce as a
whole, within the context of EU policy targets concerning the level of
employment for older workers.

1.4:
RESTRUCTURING INVOLVING JOB CREATION

Although cases of announced job loss have generally
outweighed those announcing job creation during restructuring events, there was
a marked shift to job-creating as opposed to job-destroying cases of
restructuring on ERM in the years up to 2008. This is reflected in the fact
that while cases of business expansion only began to be included in the dataset
late in 2003 — the original focus of ERM was on the negative employment
consequences of industrial change — in 2007, they accounted for the majority of
individual restructuring cases. 2007 was also the first year in which the
aggregate positive employment impact of all cases exceeded the aggregate
negative employment impact.

Since the second quarter of 2008, however,
announced job losses have exceeded job gains in every quarter and in aggregate
by a ratio of around 3:1. Nevertheless, there has also been a sharp decline in
the level of reported job creation by quarter in the most recent period — with
the somewhat surprising exception of the first quarter of 2009, near the height
of the crisis, when low-price retailers (Asda, Tesco) and restaurant chains
(KFC) in the UK announced major countrywide expansions.

Data contained in the latest ERM Quarterly
publication, which tracks developments in the third quarter of 2010, shows that
some sectors are now beginning to recover and to create jobs. For example, it would seem that the automotive
manufacturing sector is slowly recovering from the deep decline of 2008 and
2009. In the third quarter of 2010, several auto manufacturing companies that
between September 2008 and the end of 2009 announced dismissals of large
numbers of employees are now creating new jobs. In Sweden, the Volvo group has
been responsible for three cases of job creation
announcements. Volvo Trucks announced
it will hire 200 employees at its plant in Tuve, Gothenburg. Volvo Powertrain announced it has
permanently employed 150 people, who are part of 350 fixed-term recruitments
the company made during last year. Further, Volvo PV announced that 140 fixed-term employees will be permanently employed
at the factory facility in Torslanda. Volkswagen
Slovakia announced it is to create 1 000 new jobs
at its Bratislava plant by September, while PSA Peugeot
Citroën announced the recruitment of 900 new employees
to be employed in various plants across France before the end of 2010. The
company also announced that it will reintroduce a third shift at its plant in Portugal, which was abolished in 2009.
This decision will result in 300 new jobs; the third shift was planned to be operative
in November 2010 and to last six months. Whether it continues thereafter will
depend on market conditions.

In the computer
and related activities sector, the largest case of job announcement refers to Hewlett
Packard (HP), which announced
it is to create 700 new jobs at its plant near Glasgow, as the company is setting up an IT service hub. In 2009, HP announced the loss of
700 manufacturing jobs at the same plant following the decision to transfer
production to the Czech Republic. These jobs were expected to be gone by
October 2010 but with the newly created jobs in IT services, the plant will go
back to employing around 1 300 people. In Ireland, internet company Google has announced the creation of 200 jobs for graduates with strong IT skills as a
result of a new operations centre in Dublin. The new centre was expected to be
operational by the end of 2010 and it will focus mainly on Google geographical
products such as Google Maps and Google Local.

As can be seen from figure 1.7 below, which
shows ERM data for aggregate announced job creations, manufacturing has been
one of the more dynamic sectors in terms of announced job creations, although
this relates largely to the first half of 2008, before the onset of the
economic crisis. Thereafter, manufacturing accounts for a declining share of
job gains and the principal source of announced job creation has been the
retail sector. From the first quarter of 2008 to the second quarter of 2010,
around 30 % of announced job gains were in the retail sector and around 25 %
in manufacturing.

Figure 1.7: Announced job gain in ERM
restructuring cases by major sector, 2008-2010q2

Source: ERM (*2010, q1 and q2 only).

Box 1.4 below looks at the retail sector, which has been one of the sole
motors of job creation in the EU over the past few months.

Box 1.4: Examples of restructuring involving
job creation: the retail sector

The retail sector is of great importance to the
EU economy, employing over 14 % of the workforce. The European Commission
characterises this sector as being one of the EU’s main employers, and often
the entry point into the labour market for many young, low-skilled or unskilled
people. However, the Commission also notes that a number of issues have an
impact on employment and competitiveness in the sector, such as: differences in
labour law and collective agreements applicable to retail services; the
negative impact of the informal economy on working conditions; and a mismatch
between the skills needs of companies and those of staff in the retail sector.

The sector has experienced major job losses over
the past two years, due to high levels of restructuring. However, over the past
few months, this sector has also seen significant job creation, and it is
indeed one of the few sectors currently recruiting workers. In the second
quarter of 2010, around 30 % of announced job gains in the ERM were in the
retail sector. The retail sector is extremely competitive and in the current
difficult economic climate, the lower-cost chains are doing well and embarking
on business expansion, at the expense of other retail groups.

Recent job creation plans have been announced in
a range of retail groups, often the result of multinationals investing in
central and eastern European countries. For example, in mid-August, hypermarket
chain Kaufland, part of the
German group Lidl & Schwarz, announced the creation of 180 new jobs near
Turda (Cluj, Romania) as result of an investment of € 80 million in a new
regional distribution centre. Kaufland operates 53 stores in Romania; the group intends to open five to six new units in the second half of 2010. Also in Romania, the Romanian DIY chain Dedeman announced
in late September that it planned to open a new store at Cluj Napoca in
February 2011, creating 230 jobs.

In the Czech Republic, towards the end of August,
AAA Auto, one of the largest
used car retailers in Europe, announced that it has created 200 jobs in the
first six months of 2010. The company, operating in the Czech Republic and Slovakia, reported substantial profits despite a decline in sales. In Estonia, in mid-August, Maxima Eesti, a
member of the international retail chain Maxima Grupe, announced the creation
of 120 new jobs by the end of 2010 in three new stores. Maxima Grupe is based
in the Lithuanian capital and is one of the largest employers in the Baltic States with approximately 25 500 employees. Also in Estonia, in mid-August, the
Estonian retail sale company OG Elektra announced that 200 new jobs will be created by the end of 2010 in
six new stores. Between January and August 2010, the company created 130 new
jobs by opening five new stores, mostly in the capital Tallinn.

The UK supermarket chain Tesco has been expanding
into central and Eastern Europe. In Hungary, in mid-August, Tesco Hungary announced the opening of two
new supermarkets, in Bicske and Tolna, creating 200 new jobs in total. Over the past 16 years, Tesco Hungary has opened 108 supermarkets and has around 22 000 employees in the country. Tesco is also expanding in Ireland: in mid-July, it announced an expansion that will result in seven new stores and the
creation of approximately 750
jobs during the course of 2010, the majority of which will be outside Dublin.

Other job creation announcements in the older EU
Member States include the announcement in mid-September by the furnishing
retailer Ikea that it is to
create 240 new jobs, with the opening of a new store in Catania (Sicily, Italy). The new store will be opened in March 2011. Ikea already has 18 stores and
6 300 employees in Italy. Also in mid-September, the French retail group Mestdagh announced its intention to hire
between 250 and 300 workers before 1 October in Belgium, in order to run the 16
stores that the group bought from the French retailer Carrefour. In Ireland, the American fashion retailer, Forever 21,
announced in early October that it is to open a new fashion outlet in Dublin in November 2010, which will create 250 new jobs. This chain has over 500 shops in
15 countries. Finally, in the UK, in early August, the US cash and carry company Costco announced the
creation of 130 jobs in Coventry, with the opening of a new warehouse.

The future is likely to hold more restructuring
activity in the retail sector, as private equity firms are reported to be
engaged in renewed takeover activity in this sector. Although takeover activity
has dropped sharply over the past year — there were only € 8.7 billion
worth of retail takeover deals in Europe last year, which is down from € 15.2
billion in 2008 and € 44.5 billion in 2007, according to data from Thomson
Reuters — there are reports that many retail chains, including some well-known
high street names, could become targets for takeovers in the months ahead.

Source: ERM Quarterly 3, autumn 2010.

1.5:
EMPLOYMENT-MAINTAINING INITIATIVES DURING THE CRISIS

In addition to the large-scale cases of
restructuring involving job loss or creation, a key labour market development
during the 2008-2009 economic crisis was the often innovative approaches to
forestalling or avoiding job loss that may otherwise have occurred. In most
cases, these involved combinations of company initiatives and social partner
negotiation often within a framework of public policy initiatives — notably
public short-time working schemes — that were rapidly adapted to the worsening
economic situation.

In the face of unprecedented large output
losses, especially in major goods-producing sectors, employment losses have
been in many cases surprisingly modest. Even the significant decline in
employment in automotive manufacturing noted above is in the context of
declines in sales and production which were many factors greater than the
associated job loss.

At company level, the main instruments, in
addition to early retirement, used by companies to adapt cost structures to an
abrupt decline in demand while avoiding permanent job loss included:

● pay freezes (in some cases, pay cuts) or deferred bonuses/wage
claims; and

● various forms of working time flexibility, such as:

● short-time working — with or without public incentives;

● running down of working time account surpluses;

● overtime reductions;

● compulsory unpaid or partially paid leave;

● temporary lay-offs;

● temporary plant closures; and

● career breaks.

Box 1.5 below serves as a brief illustration of some of the measures
identified or implemented to share the pain of adjustment while retaining jobs.
They involve a range of initiatives, many of which re-frame the conventional labour
contract from working for free (albeit very temporarily) to being paid for not
working (albeit at a marginal rate).

Box 1.5: Measures aimed at retaining jobs
during restructuring

Career break/sabbatical

At the beginning of May 2009, Spanish-headquartered
BBVA bank introduced a set of cost-cutting measures which also aimed to help
employees to reconcile family and working life and allow them more flexibility.
The measures were offered to its 30 000 Spain-based employees on a
voluntary basis and included:

● three to five years of leave to pursue personal or professional
projects, with a guaranteed job at the end of the leave. During the leave,
employees receive the equivalent of 30 % of their annual pre-tax compensation,
subject to an annual minimum of € 12 000, plus € 3 600 in
healthcare coverage. To qualify for the scheme, the employee must have worked
at BBVA for at least eight years (BBVA, 2009);

● up to two years of special leave to take care of children or relatives
or to take up post-graduate studies. Employees on study leave are paid € 6 000
a year. To be eligible, employees must have worked at the bank for at least
three years. Family leave is unpaid and requires having worked at BBVA for at
least one year; and

● shorter working days: a five-hour day, five days a week or a
four-day working week. During the short-time working period, an employee’s pay
is reduced in proportion to the reduction in working hours.[16]

Pay freezes and pay cuts

In December 2009, Independent News and Media (INM),
which owns several newspapers in Ireland, announced pay cuts and freezes
affecting employees working on its two main Irish newspaper titles — the Irish
Independent and the Sunday Independent. All directors and top
executives would have their pay cut by 10 % and bonuses would not be paid
for the 2008/2009 period. Employees at other levels were also affected by pay
cuts in proportion to their salaries. The cuts varied from a pay freeze for
those on € 40 000 or less per annum and a reduction of 2.5 % for
those on between € 40 000 and € 50 000. Those earning
between € 50 000 and € 100 000 took a 5 % pay cut (The
Irish Independent, 2008). At the same time, INM introduced a new share-buying
scheme whereby employees were given the option to buy shares — at the share
price on the day of introduction of the scheme — worth 2.5 times the pay cut.

Working for free

In June 2009, British Airways chief executive
Willie Walsh announced that he would work for free the following month,
forgoing his monthly salary of £ 61 000. He was immediately followed
by the airline’s financial officer. All
employees were given the option to volunteer (as the company was aware that not
all staff members were in the financial position to participate) for between one
and four weeks’ unpaid leave or unpaid work, with the pay loss spread over
three or six months. The measure was announced to the employees in the form of
an email as well as by a letter of the chief executive published in the company
internal magazine. Employees had one month to apply for their participation,
and the measures were to be carried out by March 2010.

By June 2009, around 800 out of the 40 000
employees had volunteered to work for free (mostly for one week) and a further
7 000 had agreed to unpaid leave, which will save the company up to £ 10
million.[17] The participants came from all employee groups, with no group being
particularly represented.

Financial
employee participation

Works councils at German car producers such as
Opel, Volkswagen and Daimler have started a discussion about the role of
financial participation in times of economic crisis.

In the past, employees of Opel have
accepted wage cuts in exchange for investment commitments and employment
guarantees. In the context of the crisis, the Opel employees were ready to
waive wage claims worth about € 1.2 billion. In return, they asked for 10 %
of future Opel shares. According to the works councils’ proposal, the stock
corporation would hold the employees’ shares in trust, while the chairs of the
works councils of Opel’s German plants would serve as shareholders.[18]

At Daimler, the works council was also
considering the conversion of employee bonus payments, worth a total of € 280
million, into Daimler shares. Similarly, in the case of the combined
Volkswagen-Porsche group, the unions’ and the works councils’ goal consists in
enabling the more than 380 000-strong workforce to hold a significant
share of the company. The works council’s model of financial participation is
based on the bundling of employee shares in a foundation, cooperative or
registered association. According to this model, employees would receive
dividends in the form of social projects. Also the voting stock should be
exercised collectively in order to guarantee an effective
influence on strategic decisions.

1.6: TENTATIVELY EMERGING FROM RECESSION?

At the time of writing, it would seem that Europe is beginning to emerge from recession, albeit tentatively. The latest available
figures from Eurostat, which relate to the third quarter of 2010, show that GDP
in the EU27 increased by 2.1 % compared with figures for the third quarter
of 2009. Compared with the previous quarter, EU27 GDP increased by 0.4 %.
However, GDP growth in many individual Member States is below the EU average,
with some still experiencing negative growth in the third quarter of 2010,
compared with the second quarter of the year. Further, there are disparities in
growth rates in individual Member States, ranging from 5.3 % in Luxembourg
and 4.5 % in Sweden on a year-on-year basis, to negative growth in some
countries, such as -4.5 % in Greece and -2.3 % in Romania on a
year-on-year basis. For details, see figures 1.8 and 1.9 below. Further, there
remain concerns over the level of public debt in some countries and some
concern over the stability of the euro.

Figure 1.8: GDP growth in EU Member
States, third quarter 2010. % change compared with third quarter 2009

Source: Eurostat.

- Second quarter figures

**Percentage change calculated from
non-seasonally adjusted data

Figure 1.9: GDP growth in EU Member
States, third quarter 2010. % change compared with second quarter 2010

Source: Eurostat.

Unemployment levels in the EU27 countries
have stabilised over 2010. Recent
internal flexibility arrangements — short-term contracts, part-time work, temporary lay-offs
and job share schemes — as well as improvements in the general macroeconomic
climate have helped to stabilise labour markets, according to the ERM
Quarterly for the third quarter of 2010.

According to the European Restructuring
Monitor’s most recent figures at the time of writing, which relate to the third
quarter of 2010, the number of restructuring events recorded is falling
steadily, indicating that the worst may be over, in terms of weathering the current
crisis. The number of restructuring cases recorded in the second quarter of
2010 was 224, of which 120 were cases of restructuring involving the
announcement of job loss. The total number of announced job losses was around
128 000. This compares with a high point recorded by the ERM in the first
quarter of 2009, in which over 700 cases of restructuring concerning the
announcement of job losses were recorded, involving around 280 000 announced
job losses.

In terms of sectors, it would seem that the
automotive manufacturing sector is beginning to recover, and job creation in
the retail sector is outweighing job loss, due to the expansion plans of a
number of retail chains. However, some sectors are still suffering from the
downturn, notably the construction sector, which recorded a 1.7 %
seasonally adjusted drop in output in September 2010 in the EU27, compared with
figures for August 2010, and a 3.6 % drop compared with September 2010.
Figures for the eurozone were even more pronounced, with a 2.1 % fall
compared with August 2010 and an 8.6 % fall compared with September 2009.

In the medium-term, therefore, it would
seem that the European economy is beginning to stabilise and that growth is
reasserting itself, certainly in terms of export-led growth in countries such
as Germany. The incidence of restructuring is therefore likely to fall further,
although some countries, including Greece, Portugal, Italy and Spain, may continue to experience some turbulence due to high levels of public debt and
unbalanced budgets. The ERM Quarterly for the third quarter of 2010 notes that opinions differ on the timing of the budget consolidation in EU
Member States and withdrawal of fiscal stimulus at this stage of recovery while
the EU economy is still fragile. Critics point out that fiscal consolidation
with prolonged unemployment will weigh on nominal wages. In this context,
private consumption may lose momentum with negative knock-on consequences for
domestic demand. Further, softening global demand for the European goods in the
second half of 2010 could pose a risk for EU exports.

Adopting a longer-term perspective and looking
forward to the coming 10 years, the EU’s 2020 Strategy sets out a framework for
economic growth and job creation in the EU. Its specific targets are as
follows:

● 
75 % of the population aged 20-64 should be
employed, including through the greater involvement of women, older workers and
the better integration of migrants in the work force;

● 
3 % of the EU’s GDP should be invested in
R&D;

● 
The ‘20/20/20’ climate/energy targets should be
met (including an increase to 30 % of emissions reduction if the
conditions are right);

● 
The share of early school leavers should be
under 10 % and at least 40 % of the younger generation should have a
tertiary degree; and

● 20 million less people should be at risk of poverty.

The 2020 Strategy aims to turn the EU
into a smart, sustainable and inclusive economy delivering high levels of
employment, productivity and social cohesion. Under its flagship initiative ‘An
agenda for new skills and jobs’, the Commission intends to create conditions
for modernising labour markets with a view to raising employment levels. It
states that in order to achieve this, it will work:

● 
to define and implement the second phase of the
flexicurity agenda, together with European social partners, to identify ways to
better manage economic transitions and to fight unemployment and raise activity
rates;

● 
to adapt the legislative framework, in line with
‘smart’ regulation principles, to evolving work patterns (eg working time,
posting of workers) and new risks for health and safety at work;

● 
to facilitate and promote intra-EU labour
mobility and better match labour supply with demand with appropriate financial
support from the structural funds, notably the European Social Fund (ESF), and
to promote a forward-looking and comprehensive labour migration policy which
would respond in a flexible way to the priorities and needs of labour markets;

● 
to strengthen the capacity of social partners
and make full use of the problem-solving potential of social dialogue at all
levels (EU, national/regional, sectoral, company), and to promote strengthened
cooperation between labour market institutions including the public employment
services of the Member States;

● 
to give a strong impetus to the strategic
framework for cooperation in education and training (ET 2020) involving all
stakeholders. This should notably result in the completion of of lifelong
learning strategies (in cooperation with Member States, social partners, experts)
including through flexible learning pathways between different education and
training sectors and levels and by reinforcing the attractiveness of vocational
education and training. Social partners at European level should be consulted
in view of developing an initiative of their own in this area; and

● 
to ensure that the competences required to
engage in further learning and the labour market are acquired and recognised
throughout general, vocational, higher and adult education, and to develop a
common language and operational tool for education/training and work: a
European Skills, Competences and Occupations framework (ESCO).

The next section of this
chapter examines the reactions of the EU labour market to the crisis and the
types of reforms that are being put into place to ensure that it emerges from
the crisis in a way that ensures its future competitiveness in the global
economy.

2: LABOUR
MARKET REFORMS

As already set out in the previous section
of this chapter, in the second half of 2008, the EU economy entered a recession
that continued for most of 2009, although in 2010 there were renewed signs of
growth. The impacts of this recession have taken a severe toll on the economic
well-being of many European citizens over the past two years. In the euro area
alone, GDP contracted by 4 % in 2009, unemployment surged, and public debt
rose to unprecedented levels. However, the latest figures, relating to the
third quarter of 2010, show that GDP has begun to rise again, by 1.9 % in
the eurozone and by 2.2 % in the EU27, compared with the third quarter of
2009.

European labour markets have reacted to the
economic slowdown of 2008 and 2009 with a gradual but steady decline in
employment that has yet to come to an end. Around 4 million jobs were lost in Europe in 2009 and the rate of unemployment reached 9.4 % in the last quarter of the
year, despite some moderate signals of economic recovery appearing in some
countries. The latest figures, relating to November 2010, show that
unemployment is still climbing, with a eurozone rate of 10.1 %, compared
with 9.9 % in November 2009, and an EU27 rate of 9.6 %, compared with
9.4 % in November 2009.

Figure 1.10 below gives details of GDP and
employment growth in the EU27 from 1996 to 2009.

Figure 1.10: GDP and employment growth

Source: Commission services. GDP growth is
year-on-year growth.

During 2008 and 2009, the deterioration of
the labour market in the US was accompanied by a drop in the participation rate
(the fourth quarter of 2009 was some 2 % lower than the level in the first
quarter of 2008). Conversely, a moderate drop in employment was accompanied by
an increase in participation in the EU and the euro area. This should be seen
as a positive development for the prospects of the recovery, as a fall in
participation during the recession can also turn into a persistently low labour
supply during the recovery. Unemployment at record high levels for a long
period may in fact mean that those without jobs, especially those with a low attachment
to the labour market, may give up searching because of their relatively low
employment chances. Skills mismatch and unconditional welfare policies can further
worsen this discouragement to participating in the labour market, while
activation policies and support to workers affected by economic change can
encourage people to remain in the labour market and facilitate their transition
to new jobs.

The first signal of discouragement is a
decrease in labour force participation, which usually means a falling unemployment
rate in the short run. In the long run, a low participation rate hampers the
functioning of the labour market, through shortages of labour supply and higher
wage pressures, and can be a bottleneck for economic growth. Avoiding such
effects in labour markets is of crucial importance in averting a lasting
negative impact on potential output after a crisis. This is why the European
Economic Recovery Plan[19] (EERP) placed considerable importance on measures to prevent
unnecessary labour shedding which would have entailed great losses in human
capital and had a lasting negative impact on potential output.

The EERP also called for priority to be
given to those reforms which can support aggregate demand, employment and/or
household income during the crisis, while at the same time improving adjustment
capacity to enable a faster recovery when conditions improve. In line with
this, in spring 2009 the European Commission issued a number of guiding
principles for labour market and social policy action contingent to the crisis,[20] including:

● 
keeping people in viable employment, while
supporting employability and easing transitions to new jobs;

● 
providing adequate income support and
reinforcing activation;

● 
considering measures to boost both labour demand
and labour supply; and

● 
investing in training and skills upgrading, and
enhancing the employment services to cope with increasing unemployment.

By contrast, it stated that measures such
as indiscriminate tax-funded support for jobs in declining sectors or regions,
which could delay necessary restructuring, large direct job-creation schemes in
the public sector not sufficiently targeted at specific vulnerable groups and
early retirement or other policies that push workers out of the labour market
needed to be avoided.

European labour markets have reacted very
differently to the crisis in terms of labour turnover. Many countries have
recorded on average a low labour turnover. However, while in the Nordic
countries, high turnover is associated with efficient labour market activation
policies and low hiring and firing restrictions, in France and Spain this
appears to be a consequence of a segmented labour market. As a result, one can
draw the conclusion that there is a faster labour market response to the first
signs of recovery in those countries with more flexible labour market
institutions, as they enable better transitions in the labour market.[21]

Together with changes in the number of
jobs, firms have also used changes in working hours as a tool to adjust labour
input during the crisis. Labour hoarding is the normal response of firms that
prefer to keep their experienced workers during the early stages of a
recession, especially if high-skilled workers are difficult to find when the
recovery takes hold. By cutting hours, firms can keep their wage costs down and
save jobs during difficult periods. In addition, government-sponsored
short-time schemes have also been widely used in many EU Member States. These
schemes have been reinforced in some countries and introduced for the first
time in others (see also section 3 of this chapter, which focuses on short-time
working).[22]

Many countries responded to the impact of
the severe economic crisis that hit the EU economy by extending the coverage or
generosity of unemployment benefits, by reinforcing other social benefits,
and/or by introducing generous short-time work schemes. Measures have also been
reinforced to support activation and facilitate transitions to new jobs. Temporary
labour market and income support measures amount to 0.4 % and 0.2 %
of GDP in 2009 and 2010 respectively — and represent a large share of all
temporary measures in 2009 and 2010 respectively. Three main types of measures
can be identified:

● 
measures addressing labour demand, consisting of
public subsidies for temporary working time reductions, wage subsidies and
changes in labour taxation;

● 
measures dealing with activation, comprising a
range of active labour market policies; and

● 
measures supporting incomes and thereby
aggregate demand, such as changes in the generosity of unemployment benefits
and social measures to support households’ purchasing power.

These measures have played a role in
shaping the impact of the crisis on labour market developments in the EU, where,
compared to the US, participation rates have in general held up well and
unemployment increases have been more muted than could have been expected. Even
so, the crisis has clearly shown the underlying structural weaknesses of the
European labour markets, which ultimately need to be tackled, irrespective of
the prevailing cyclical conditions. Pre-existing long-term challenges (such as ageing,
globalisation and technological change) have also remained unchanged, if not
intensified by the crisis. Further, the crisis has added two new dimensions to
existing challenges. First, with the unemployment rate increasing almost
everywhere, the burden of adjustment has been unequally spread across various
socio-economic groups. Second, public finances will be extremely constrained in
the coming years. Within this new environment, the
focus has to be first and foremost on well-targeted policies (for example to
activate those with low levels of skills or who are unemployed on a long-term basis)
with low or no direct budgetary impact and designed in such a way as to avoid
deadweight losses. At the same time, measures that have adverse effects on
inter-sectoral mobility, such as short-time working schemes, should be
discontinued as the recovery gains strength and replaced by policies that
promote job reallocation, thus helping to smooth the impact of restructuring on
workers. As the deterioration in economic growth
bottoms out and fiscal space diminishes, the emphasis needs to switch from
measures aimed at containing labour shedding to measures aimed at returning to
a sustained growth path. Careful design and sequencing
of exit strategies are also important in order to avoid the risk of policy
mistakes that could induce another recession and to ensure that the withdrawal
of short-term support is performed efficiently.

The ECOFIN Council of 16 March 2010
identified a number of principles to underpin the
coordinated withdrawal of short-term measures in labour and product markets,[23] which complement
existing principles on fiscal exit strategies. As far as the labour market is
concerned:

● 
short-term measures need
to be gradually withdrawn when
the recovery is secured, by 2011 at the latest, while a
number of countries need to consolidate before then. If left in place too long,
these measures could hinder the adjustment process within and across sectors by
distorting price and cost signals and by introducing wrong incentives;

● 
a slight differentiation could be made between
different labour market measures. There is a case for concentrating first on
short-term schemes to reduce working time. Keeping the ad hoc
subsidising of working time reductions in place for a long period after a
recovery in economic activity takes hold could lead to a ‘freezing’ of job
patterns at a time when reallocation is needed. On the other hand, short-term
unemployment support could be maintained until a sustainable recovery is
secured, but once this is attained they should be gradually removed as they
could carry a significant economic cost in the medium term, still bearing in
mind that in some countries the need for budgetary consolidation may lead to
other conclusions, depending on the fiscal space available; and

● 
the withdrawal of short-term measures needs to
be complemented with a credible long-term structural
reform agenda which bolsters potential growth and employment, improves
competitiveness and supports fiscal consolidation efforts. To minimise the risk
of skills deterioration and the length of resulting unemployment spells, the
gradual phasing-out of temporary labour market support measures should be
accompanied, where necessary, by a strengthening of activation, training and
other flexicurity policies to facilitate job reallocation and workers’
re-skilling. Increasing the flexibility of the labour
market and its transitional security is of relevance in the face of the
challenges of tackling unemployment created by the recession, especially of young people, in the context of segmented labour
markets, and to ease the necessary sectoral
reallocation and smooth its impact on the workers
concerned.

Although effective, the measures enacted in
response to the crisis have been in many cases ad hoc. As such, they are
more mistake-prone than policies adopted during relatively normal, ie
non-crisis, times. Nevertheless, some crisis-related measures that have desirable characteristics could
become part of a consistent labour market policy framework to deal with future
aggregate demand shocks. For example, a number of Member States (such as
Finland, France, Latvia, Italy, Portugal, and Slovenia) have taken steps to
improve the coverage of unemployment benefits, some
have increased the activation of displaced workers
(such as the Czech Republic, Denmark, and the UK) and some have enhanced the
effectiveness of public employment services in order to cope with the increased
numbers of unemployed people (Germany, Belgium, Finland, Hungary, and the UK).
Countries such as the Netherlands, Hungary and Slovenia have introduced
short-time working schemes imposing strict conditionality on firms to deal with
risks of deadweight losses or to avoid prolonging the moment of inevitable
closure of a company. While expenditure on these measures should be reversed as
the recovery gains momentum, the institutional infrastructure set up for their
implementation should remain, to cope with future cyclical fluctuations.

Over a longer time horizon, the flexicurity
agenda is an appropriate framework to highlight the importance of labour market
reforms in moving towards a better adjustment to shocks. Reforms enhancing the
flexibility and security of the labour market and the response of wages to
local labour market conditions and productivity developments will increase the
resilience of the EU economy to these shocks. Reforms that shift the focus from
protection on the job to insurance in the market should reconcile workers’
demands for protection from unemployment and income risks with the need of
firms to respond quickly to swings in consumer preferences and to the
challenges and instability created by technological progress and
globalisation. An integrated strategy based on interventions in employment
protection, lifelong learning and activation policies may contribute to
improving the adjustment capacity of labour markets and smoothing the
employment and social impact of restructuring. Increasing participation,
improving labour market matching and enhancing workers’ employability through
better skills are needed to minimise the social consequences of the crisis, to
preserve European human capital and labour productivity in the long run, and,
ultimately, to return to strong growth.

As mentioned above, the Europe 2020
strategy[24] has identified three broad priorities in this context: smart
growth; sustainable growth; and inclusive growth, with two initiatives being
particularly relevant for the labour market: an agenda for new skills and new
jobs; and ‘Youth on the Move’.

The different policies needed to achieve
these priorities will need to be sequenced intelligently to ensure the
effectiveness and time-consistency of the European reform agenda. As stated by the European Council of 16-17 June 2010, the
Europe 2020 strategy responds to:

‘the challenge of reorienting policies away from crisis management
towards the introduction of medium-to longer-term reforms that promote growth
and employment and ensure the sustainability of public finances. It constitutes
a coherent framework for the Union to mobilise all of its resources and
policies and for the Member States to take coordinated action.’

With the Europe 2020 strategy, the EU is indeed acting to strengthen its
instruments to deliver a successful structural reform agenda in the coming
years. The strategy will involve a stronger policy framework at EU level,
organised around two strands, addressing on the one side key macro-structural
challenges at country level, including macroeconomic and fiscal stability
issues, and on the other side a number of thematic policy areas, including
labour market policies. The first strand will be implemented in the framework
of a reinforced Stability and Growth Pact and through the Broad Economic Policy
Guidelines. The second will allow a much more in-depth horizontal assessment of
key structural reforms through the National Reform Programmes and Integrated
Guidelines.

More specifically, macro-structural country surveillance will have a
wide scope and be carried out through the use of existing Treaty-based
coordination instruments — the Integrated Employment and Broad Economic Policy
Guidelines, set up in the framework of the Lisbon Strategy (and through its
successor strategy, Europe 2020), and the fiscal surveillance in the framework
of the Economic and Monetary Union — that will be aligned in time but kept
distinct. Policy coordination on fiscal policy would be conducted through the
Stability and Growth Pact, whereas coordination on all other (non-fiscal)
macro-structural policies would be carried out in accordance with the
Integrated Guidelines and thus cover internal/external imbalances,
macro-financial stability, competitiveness, employment and growth weaknesses.
The thematic surveillance would focus on structural reforms of a
microeconomic nature needed to achieve the goals of the Europe 2020 strategy.
The policies pursued under thematic surveillance in the context of the seven flagship
initiatives and three EU-level instruments outlined in the Commission’s 3 March
2010 Communication on its Europe 2020 strategy (see above) aim to galvanise
actions at national and EU level to achieve measurable progress towards the
five headline targets (on employment, research and development and innovation,
energy and climate change, education, and social inclusion), which are a
representation of the main dimensions and objectives of the strategy.

For an overview of the Europe 2020
strategy, see table 1.2 below.

Table 1.2: Europe 2020 architecture

Overall institutional structure || Integrated Guidelines establishing scope and policy priorities, including headline targets for the EU27 to reach by 2020 and to be translated into national targets

Delivery || Country reporting (Treaty-based surveillance) Aim: help Member States define and implement exit strategies to restore macroeconomic stability, identify national bottlenecks and return their economies to sustainable growth and public finances. Approach: enhanced assessment by the ECOFIN of main macroeconomic challenges facing Member States taking account of spillovers across Member States and policy areas. Instruments: reporting by the Member States through their stability and convergence programmes, followed by separate but synchronised recommendations on fiscal policy in SCP Opinions and on macro imbalances and growth bottlenecks in the BEPGs (art. 121.2) || Thematic approach (flagship initiatives) Aim: deliver headline targets agreed at EU level combining concrete actions at EU and national levels. Approach: strategic role of the sectoral Council formations for implementing flagship initiatives and monitoring and reviewing progress towards the agreed targets. Instruments: reporting by the Member States through streamlined national reform programmes including information on growth bottlenecks and progress towards the targets, followed by policy advice at EU level based on transparent evaluation frameworks issued in the form of recommendations under BEPGs (art. 121.2) and the Employment Guidelines (art. 148).

Source: Commission Communication Europe 2020 —
A strategy for smart, sustainable and inclusive growth, 3 March 2010.

The next section of this chapter looks in
more detail at a key labour market response to the recent crisis: short-time
working.

3: SUPPORTING LABOUR MARKETS DURING THE CRISIS: SHORT-TIME WORKING

Since the onset of the global downturn,
policy makers across the EU have been concerned to mitigate its adverse effects
on the labour markets. This is because previous crises have shown that sharp output
declines usually take two to three quarters to be transmitted into noticeable
rises in unemployment, reductions in demand for new workers, and overall
contractions in employment.

However, Member States face significantly
different situations and constraints. Some, including Ireland, Spain, Latvia and Lithuania, have been particularly hard hit by the crisis and have experienced
substantial reductions in employment and increases in unemployment, while in
others, including Belgium and Germany, the loss of jobs has been relatively
limited. Nevertheless, an assessment of the crisis-related labour market
policies of all Member States is of common interest, given their commitment to
the common EU goal of creating more and better jobs for all.

This section focuses on short-time working,
which has been a tool used by many Member States as a means of maintaining
employment during the downturn caused by the crisis, based on a recent joint
paper published by the Directorate-General for Economic
and Financial Affairs and the Directorate-General for Employment, Social
Affairs and Inclusion.[25]

3.1: SHORT-TIME WORKING ARRANGEMENTS

There has been a significant increase in
the use of short-time working around Europe. Most strikingly, the number of
recipients in Germany increased from 39 000 in May 2008 to more than 1 500 000
in May 2009, while in Belgium the number of recipients increased from around 87 000
in July 2008 to a peak of 313 000 in March 2009, after which it started to
decline gradually. In Austria, the total number of recipients rose from zero in
August 2008 to more than 36 000 in June 2009, falling thereafter. A more
modest increase can be observed in the other Member States.

Scope and limitations of
short-time working

A short-time work arrangement (STWA) can be
seen as a temporary reduction in working time intended to maintain an existing
employer/employee relationship. It can involve either a partial reduction in
the normal working week for a limited period of time (a partial suspension of
the employment contract) or a temporary lay-off (zero hours a week), in other
words, a full suspension of the employment contract. In both cases, however,
the employment contract remains in force, and is not broken. See box 1.6 for a summary of the main institutional characteristics of STWAs.

The objective of STWAs in times of economic
crisis is twofold. First, it enables companies to reduce labour costs in the
short term and to quickly adjust labour inputs to cyclical fluctuations in
labour demand by reducing working time for the existing workforce, rather than
resorting to lay-offs and related costly and lengthy dismissal procedures,
especially in highly regulated labour markets. Moreover, it enables companies
to retain skilled workers, thus avoiding the costs of recruiting and training
new workers when demand recovers, and enhances employee morale.

Second, to the extent that they prevent
lay-offs, such measures spread the adjustment burden over all of the workers
rather than concentrating the impact on a few, possibly more vulnerable
workers, who might otherwise risk becoming inactive in the long term.

However, two main kinds of risks are
associated with STWA schemes. First, they could lead to deadweight costs as
they may encourage employers to enrol in such schemes, even if no lay-offs are
planned. This may lead to excessive take-up and become an undue financial
burden on national unemployment insurance schemes, which are the usual
financing instrument in the EU. In the long run, taxes or contribution rates
would have to be increased — inducing higher wage costs and loss of
competitiveness. This is in contrast to the USA, where the financing of STWAs
is generally privately arranged and insurance-based.

Second, STWAs could prove ineffective in
saving jobs permanently. The jobs kept alive for some time could eventually
prove to be unviable and ultimately end in lay-offs. In the meantime, more
viable jobs held by non-beneficiaries of such schemes — who would typically be
new entrants to the labour market or SMEs — might be exposed to effective ‘displacement’.

Box 1.6: Institutional characteristics of short-time working

There is considerable variety in the institutional arrangements
concerning short-time working programmes across Europe.

In France, Belgium and Luxembourg, public short-time working and
temporary lay-off schemes are usually known as ‘partial’ or ‘temporary
unemployment’, sometimes with reference to the specific application or
circumstances (eg economic, seasonal, and technical). These schemes should be
distinguished from voluntary working time reduction on an individual or
collective basis (through time accounts, time credit, sabbatical leave, etc.[26]) or from ‘part-time unemployment’, which indicates a situation
where (partially) unemployed jobseekers would prefer to work longer hours or
full time, but can only find part-time work and receive various forms of direct
financial support for the incurred loss of earnings.

In Denmark, short-time working is designated as ‘work sharing’. This
indicates a reduction in working time intended to spread a reduced volume of
work over the same number of workers to avoid lay-offs. As such, it is to be
distinguished from ‘job sharing’, which refers to a voluntary arrangement
whereby two persons take joint responsibility for one full-time job.

In the Netherlands, short-time working support was temporarily
offered up until the end of March 2009 in order to respond to the economic
crisis. Since then, companies experiencing temporary financial difficulties may
apply for partial unemployment for their workforce.

Austria and Germany simply refer to such
schemes as ‘short-time working’, while Italy stresses the aspect of income
support in its short-time working scheme, which is called the Wage
Supplementation Fund (CIG[27]). The Italian scheme is among the larger
examples of STWAs in the EU and was created with the specific purpose of
absorbing sectoral crisis and favouring technological/commercial restructuring.

In countries such as Estonia, companies and employees may agree on
STWA, however, without public financial support.

In most of the other Member States (Estonia, Greece, Cyprus, Malta
and Sweden) which do not have government-subsidised STWAs to respond to drops
in labour demand caused by an economic downturn, insured workers can get support
through the regular unemployment scheme, or receive training grants for people
working reduced hours.

Main changes in response to the crisis

Table 1.3 summarises the main changes in
the STWAs across the Member States since the onset of the economic crisis.

In the Member States where STWAs already
existed before the crisis, the practical arrangements concerning these schemes
were temporarily modified with the onset of the crisis (ie in Belgium, Denmark,
Germany, Ireland, Spain, France, Italy, Luxembourg, Austria, Portugal and
Finland). These modifications are primarily aimed at lowering the participation
costs for employers and/or increasing the level of financial support by:
extending the eligibility duration; opening the arrangement to more participants;
and simplifying the enrolment procedure.

In nine Member States (Bulgaria, Czech Republic, Latvia, Lithuania, Hungary, Netherlands, Poland, Slovenia and Slovakia) new public support schemes for STWAs have been temporarily introduced since
the onset of the downturn. A feature of most of these arrangements is that
public support for short-time working is combined with training. It remains
optional in a majority of Member States but in the Czech Republic, Hungary, Netherlands, Portugal and Slovenia, people in short-time working are required to undertake
training. In Belgium, Germany, Lithuania, Hungary, Malta, Austria, Poland, Portugal, Slovenia and Finland, training for those in short-time work is
government-subsidised.

Table 1.3: Recent changes and new STWAs in
the EU Member States

Country || Already existing scheme || New STC scheme || (Changes) Eligibility/ Coverage || (Changes) Duration || (Changes) Benefits to Employees || (New) Link to Training || Cuts in employer’s SSC || More flexible procedures/ WTO || Temporariness of Changes

Wage supplement through employer || Support by UI plus activation

Austria || X || || || X || X || || incentives || X || || End 2010

Belgium || X || || || X || X || X || incentives || X || || End 2010

Bulgaria || || || X || || || X || || || || End 2009

Czech Republic || || || X || || || X || compulsory || || || 2010

Denmark || || X || || || || || || || X || 30/04/2011

Germany || X || || || X || X || || incentives || X || X || End 2010

Spain || || X || || || || || || X || X || End 2009

Finland || || X || || || X || X || || || || 2011

France || X || || || X || X || X || || X || || Permanent/ temporary (end 2010)

Hungary || || || X || || || X || incentives/ compulsory || X || || Mid 2010

Ireland || || X || || || || || incentives || || || 2010

Italy || X || || || X || || || incentives || || || End 2010

Lithuania || || || X || || || X || incentives || X || || No end date

Latvia || || || X || || || || incentives || || || End 2010 (to be confirmed)

Luxembourg || X || || || X || X || || incentives || X || X || End 2010

Malta || || || X || || || || incentives || || ||

Netherlands || || || X || || || X || compulsory || || || 01/04/2010

Poland || || || X || || || X || incentives || || || End 2011

Portugal || X || || || || || || incentives || || || End 2010

Romania || X || || || || || || || X || || End 2010

Slovenia || || || X || || || X || compulsory || X || || 31/03/2010

Slovakia || || || X || || || || || X || || End 2010

United Kingdom || || X || No changes

Note: STC: short-time compensation. For new
STW schemes we look at: introduction of benefits for employees, training
incentives and other extra incentives for employers. SSC: social security
contribution. UI: unemployment insurance. WTO: working time organisation

3.2: PHASING
OUT CRISIS-RELATED LABOUR MARKET MEASURES

Although the Member States differ in terms
of the constraints and initial conditions they face, and although labour market
policies are only part of a more comprehensive policy package that bolsters
potential growth and employment, improves competitiveness and supports fiscal
consolidation, some general principles can be formulated regarding the phasing
out of crisis-related labour market measures and the phasing in of structural
labour market measures.

First, a distinction can be made between labour
market measures that have to be phased out gradually once the recovery is
secured, such as STWAs, and measures that, due to their positive impact on the
structural working of the labour market, should be maintained and reinforced.
This latter category includes cuts in social security contributions, increases
in training, activation and other flexicurity policies that facilitate job
reallocation and workers’ re-skilling. There are also measures such as the
Italian CIGS scheme, which is a permanent measure based on insurance
contributions and which, prior to the crisis, had a credit balance, which is
now about to be exhausted, if not already in the negative. The entitlements of
this kind of scheme, as it is insurance-based, have a
legal force and therefore a phasing out of the scheme would be problematic. On
the other hand, when (if) growth returns, the CIGS will return to credit and
therefore to abolish it would not make sense. The same is true for other
insurance-based schemes in the EU.

Second, the risks associated with the
timing of the phasing out of the labour market measures should not be
under-estimated. Too early a withdrawal may undermine confidence and thus
depress aggregate demand, with consequent knock-on effects on companies in
terms of orders or demands for services. Too late a withdrawal on the other
hand may delay the necessary structural adjustments, lead to entrenched high
levels of unemployment (labour market hysteresis), and contribute a significant
additional burden to the public finances.

Third, the phasing out of measures should
reflect the situation and constraints of the Member States, with those that
have advanced furthest in their recovery able to move faster than those where
the recovery is still to come and where unemployment is expected to continue to
increase — provided, of course, the fiscal position allows it.

Fourth, as the fiscal constraints
intensified during the course of the crisis, it became ever more important to
improve the cost-effectiveness of labour market measures by strengthening their
targeting and timing.

Fifth, due consideration also needs to be
given to the social dimension of the exit strategy, including the central issue
of gender equality as part of the foundation to strengthen growth, employment
and social cohesion in the long term. In any case, particular attention needs
to be paid to differences in employment patterns between women and men: sector
and occupational segregation, the greater presence of women in part-time jobs
and in the public sector, and the lower numbers of women in self-employment. In
this respect, it should be noted that, due to their high concentration in the
public sector, women could be disproportionately affected by job losses when
budgetary spending is cut as part of fiscal consolidation.

For further consideration of this topic,
see Chapter 2 of the European Commission’s Employment in Europe 2010 Report.[28]

3.3: THE WAY FORWARD

Following the onset of the downturn, policy
makers in the Member States of the European Union took a variety of decisions
to introduce new labour market policies, or to modify or strengthen existing
ones in order to maintain employment, create jobs, upgrade skills, increase
access to employment, and support households.

A major concern of the EU and its Member States has been to develop policy responses in ways that do not compromise long-term
employment and growth potential. As such, labour market policies have been
designed to be implemented in a temporary, timely, targeted, fair and
coordinated way, and in line with flexicurity principles as well as with the
country-specific recommendations for growth and jobs identified under the
Lisbon Strategy.

Most measures are expected to expire by the
end of 2010 or later if the recovery is slower than projected by labour market
experts. However, some measures, such as hiring subsidies, job-search
assistance and training, are expected to continue during the early phase of the
recovery, which may well carry on until the end of 2011, as their effectiveness
reaches its full potential in this phase. Nevertheless, it should also be noted
that maintaining the arrangements for too long poses the risk that necessary
restructuring is delayed, enterprises become overstaffed, workers lose the
incentive to upgrade their skills, deadweight losses accumulate, and funds are
diverted from other useful purposes such as training.

When assessing the timeliness of the
crisis-related measures, a distinction should be made between, on the one hand,
measures that are more effective at the beginning of the crisis than at the
end-phase, such as STWAs, and, on the other hand, measures that have greatest
impact if they are implemented when the economy starts to recover, such as wage
subsidies. Nevertheless, some measures maintain their effectiveness
irrespective of the stage of the recovery, such as job-search assistance and
training.

By targeting people at the margins of the
labour market, the effectiveness and fairness of the crisis-related labour
market measures are often strengthened. For instance, in order to minimise the
fiscal cost and maximise their fairness, hiring subsidies have been targeted at
specific groups at the margin of the labour market.

Nevertheless, although there are strong
indications that all these crisis-related labour market measures had a positive
impact on the variability of employment during the economic crisis, it is too
early to determine whether employment saved by these measures will endure once
the crisis recedes.

Given the socio-economic complexity of the
issue, it should be clear that EU-wide mutual learning, the exchange of good
practice and a constructive dialogue with social partners should form the main
driving forces for strengthening the effectiveness and equitability of the
recovery measures.

Finally, the phasing out of crisis-related
measures should take into consideration the concrete situation and constraints
of the Member States and be complemented by the phasing in of structural
measures that are aimed at reducing structural unemployment, increasing labour
market participation, developing a skilled workforce, promoting social
inclusion and combating poverty.

The main EU influence on the labour market
is employment policy. However, there are links to many other strands of EU
policy, not least industrial policy, which influence the actions of companies
and the framework within which they operate. The next section of this chapter therefore
examines the role of industrial policy in restructuring, with a particular
emphasis on the crisis.

4: THE ROLE
OF INDUSTRIAL POLICY IN RESTRUCTURING DURING A PERIOD OF CRISIS

Restructuring tends to be usually
associated with job shedding and is consequently more at the centre of
employment, rather than industrial, policy. From an industrial policy
perspective, restructuring is largely perceived as a structural adjustment to
change and a transformation of industries in response to adjustment pressures,
which in turn are linked to efforts to keep pace with a global, dynamic
economy. Consequently, restructuring is seen as an inevitable process in a
constantly changing world. The role for industrial policy in this regard
centres on increasing the capacity of enterprises and industry to adapt to
structural changes, rather than attempting to mitigate the negative effects of restructuring
on employment.

However, the recent economic
crisis has, at least temporarily, changed the outlook for many industrial
sectors. As a consequence, in the current macroeconomic context, the
restructuring of companies in reaction to the crisis could also, to some
extent, be addressed by industrial policy actions. Of particular importance is
the need to ensure that short-term adjustment will lead to long-term
improvements in competitiveness and that the European-wide nature of recession
is properly assessed in order to implement action relating to this and future
downturns. That is why the European Commission’s Directorate for Enterprise and Industry (DG ENTR) has tried to identify the links existing between the
present economic crisis and the need for longer-term adjustment. For
information concerning the most recent development in this area, in the form of
the October 2010 Communication from the Commission on industrial and employment
policy, see chapter 6.

Having assessed restructuring
needs, industrial policy actions should then go beyond stimulus plans and focus
on a forward-looking targeted policy framework. Although forecasting is not the
role of policy makers, there is a real need to understand underlying trends if
policy makers are to aid the recovery process. On balance, the emphasis should
be on facilitating and encouraging recovery rather than driving industrial
competitiveness in key areas or sectors.

As well as having contributed to
the creation of the European Economic Recovery Plan (EERP), DG ENTR undertakes
various actions in the framework of industrial policy to better manage
restructuring. It attempts to closely follow developments in sectors in order
to be in a position to propose a strategy that goes beyond temporary measures.
A monthly analysis of changes in output, new orders, trade flows, employment
and confidence levels in manufacturing sectors provides a good basis for
formulation of specific actions.[29] In addition, more
thorough analysis has been carried out in the form of a stocktaking exercise
that investigated the strengths and weaknesses of different individual sectors.
This analysis has served the Commission as a reference for its new strategy on
industrial policy that intends to focus on facilitation of industrial change as
one of its main objectives.

4.1: CHALLENGES AND OPPORTUNITIES DRIVING
FUTURE RESTRUCTURING

Over the past 10-15 years,
European industry has changed radically, both in the new Member States and the EU15 Member States. European industry has seen high productivity
and strong innovation, a considerable re-orientation of its workforce and
capital investment, the development of new products for new and emerging
markets, and a major improvement in its environmental performance. The process
of globalisation has increasingly resulted in tightly interlinked international
value chains. As a result of the massive fall in costs for transport (eg the
use of containers) and communication (ICT) and of transaction costs and risks
traditionally associated with doing business across borders, previously
integrated industrial operations have been split into highly complex smaller
manufacturing and service packages and have to some extent been geographically
redistributed across continents.

This trend towards a more
intensive intra-sectoral (as opposed to an inter-sectoral) division of labour,
both at the national and at the international level, has led to a
reorganisation and fragmentation of product and services value chains. The role
of the final producer has been shifted, and their performance increasingly
depends on the performance of upstream businesses, including those located
outside the EU. This applies not only to manufacturing and assembly operations,
but also to service functions that were previously carried out in-house. The
traditional view that treats industrial sectors as homogeneous, independent and
national thus no longer seems to be an adequate basis for policy development.
Excellence at all levels has become much more important and increasingly
suppliers and innovation partners from different sectors and regions and those
with complementary competences are needed. Clusters of mutually reinforcing
industries and international cooperation have thus been increasingly attracting
the attention of policy makers. Moreover, the process of globalisation has
increased the exposure of numerous subsectors to exchange-rate volatility,
especially in those industries that mainly compete on costs as opposed to
quality or service.

This process is also reflected in
foreign direct investment and the high level of merger and acquisition
activities, transforming the scope and geographical distribution of many of the
major industries, such as chemicals, pharmaceuticals, and steel. These restructuring efforts have triggered economies of scale and
the exit of smaller players, while at the same time global markets have become
wider and more competitive. For an overview of sectors in terms of exposure to
adjustment pressure, globalisation and technology intensity, see figure 1.11.

Figure 1.11: Typology of sectors (Nace 2
classification) in terms of exposure to adjustment pressure, globalisation
(export share of production) and technology intensity

Nace codes — Sectors

Group 1 (Globalisation: low — Technology intensity: low)

15 || Food products and beverages

16 || Tobacco products

20 || Wood and products of wood

21 || Pulp, paper and paper products

22 || Publishing, printing and reproduction of recorded media

23 || Coke, refined petroleum products and nuclear fuel

26 || Other non-metallic mineral products

28 || Metal products, except machinery and equipment

Group 2 (Globalisation: medium — Technology intensity: low)

25 || Rubber and plastic products

36 || Furniture; manufacturing n.e.c.

37 || Recycling

Group 3 (Globalisation: high — Technology intensity: low)

17 || Textiles

18 || Wearing apparel; dressing and dyeing of fur

19 || Tanning and dressing of leather

27 || Basic metals

Group 4 (Globalisation: high — Technology intensity: high)

24 || Chemicals and chemical products

29 || Machinery and equipment n.e.c.

30 || Office machinery and computers

31 || Electrical machinery and apparatus n.e.c.

32 || Radio, television and communication equipment and apparatus

33 || Medical, precision and optical instruments, watches and clocks

34 || Motor vehicles, trailers and semi-trailers

35 || Other transport equipment

Source: ECORYS, Measuring and Benchmarking
Structural Adjustment Performance of EU Industry, May 2009.

The transformation of companies
has proceeded at a differential pace in different sectors, and it is true to
say that not all sectors operate in conditions that oblige them to embark on
substantial restructuring. A study ordered by DG ENTR[30] grouped
sectors according to their exposure to key adjustment pressures such as
technology intensity and globalisation. According to this study, companies in
sectors mostly exposed to these adjustment pressures are most likely to
experience restructuring, and were also among those most negatively affected by
the crisis. However, many companies in these sectors have already adjusted
their business models to their changing business environment and are therefore
more capable of adapting to their environment.

Nonetheless, the adjustment
pressures faced by European industry in recent years have been strengthened
significantly by the recent financial and economic crisis. The impact of the
crisis on industry has been severe, with manufacturing output falling by around
20 % and recovering as yet only slowly, by about 9 % in July 2010
since the trough in April 2009. Further, employment in manufacturing has fallen
sharply, by some 12 % since the onset of the crisis. However, in some
industries, labour market adjustment has worked somewhat differently compared
with earlier recessions, namely through increased use of short-term working and
labour hoarding. This emphasises the increased importance of a highly skilled
labour force to production and the conviction that the severity of the
recession might be relatively short-lived.

Successfully
overcoming the economic crisis will require substantial adjustments in a number
of sectors. First, if the recovery is slow to materialise, the implications of
short-term working and labour hoarding in industry will have to be dealt with.
In particular, actions will be needed to facilitate re-skilling and
re-employment.

Second, sectors that were already
undertaking restructuring or had been in decline for some time have been faced
with an acceleration of the negative changes and stronger adjustment pressures
as a result of the crisis. Further restructuring of these sectors will be
necessary to re-establish competitiveness and profitability and re-orientate them
towards new and growing market opportunities.

Third, the recession exposed a serious
overcapacity problem and a mismatch of product mix — particularly in the
automobile industry — that will have to be dealt with in the near future. Other
investment and consumer durable goods sectors have also been badly affected by
the recession, although the degree of over-capacity in these industries appears
to be less severe.

More widely, there are some
overarching challenges that most of the EU’s manufacturing sectors will have to
face in the near future. These include:

● 
exiting the crisis/tackling access to finance;

● 
facing globalisation: increasing competition
from Brazil, Russia, India and China (commonly known as the BRICs), market
access for trade and investment outside of the EU, access to raw materials;

● 
basing growth on research and innovation, which
includes in particular deployment of key enabling technologies and acquiring a
workforce with relevant skills;

● 
increasing energy and resource efficiency and
transition to low-carbon economy; and

● 
responding to emerging societal challenges, such
as demographic change, security and health.

The impact of these challenges on
companies will depend on the sector and even more on the situation of individual
companies and their business environment. What is important, however, is that
all the actions taken by companies to restructure will place them in a better
position to face those challenges.

This is also an area where
industrial policy can play a crucial role. Although it is clear that it cannot
and should not focus on individual companies, it still can enhance and
alleviate restructuring costs by providing the right framework and support
mechanisms for companies and sectors.

The European Economic and Social Committee’s
Consultative Commission on Industrial Change (CCMI) has carried out a
significant amount of work in analysing industrial change. Box 1.7 below
contains two CCMI opinions, on civil aviation and shipbuilding.

Box 1.7: CCMI opinions on civil aviation and
shipbuilding

Opinion on the
European aviation relief programme[31]

This CCMI opinion was adopted on 17 December 2009
and outlines the position of the European aviation industry in the context of
the economic crisis.

It states that the crisis has had a severe impact
on the European aviation industry, resulting in a significant fall in operating
results of the network carries, despite cuts on the supply side. Aviation
companies have been trying to react by means such as relocation of operations
outside Europe, although it notes that this may have long-term negative
consequences for high-qualified jobs in the EU, which in turn may ‘seriously
worsen’ the competitiveness of the industry in the EU.

In terms of the structure of the sector, it notes
that the fleets in service still have a relatively high average age, which has
an impact on airlines’ results, and therefore a structured dismantling sector
therefore needs to be set up, which should be a genuine European sector,
established under the auspices of public authorities.

The opinion also states that the European
Investment Bank should revert to its pre-2007 policy, under which European
carriers were able to benefit from credits; it believes that this should be
rapid and specifically targeted at the financing of new aircraft, rather than
financing a fleet expansion.

The opinion states that it would also be
appropriate to provide for mechanisms to cover financial risks, such as those
arising from fluctuating exchange rates. This could also take the form of loan
guarantees based on refundable advances or European Investment Bank (EIB)
loans.

Given the innovative and strategic importance of
the aeronautics industry for Europe’s industrial and technological base, strong
support for research and development (which has been jeopardised by the crisis)
could be obtained through sustained efforts by the EU, from the implementation
phase of the Commission’s 7th Framework Programme for Research and Development
and throughout the new framework programme for
Research and Innovation. the Horizon 2020.

The European shipbuilding industry: dealing
with the current crisis[32]

This opinion was adopted on 29 April 2010 and
focuses on the situation of the European shipbuilding industry in the context
of the current economic crisis.

It states that the EU shipbuilding industry is in
severe crisis, resulting from a lack of new orders, significant financing
problems, overcapacity and irreversible job losses. It is therefore necessary
to develop a common European strategy and to coordinate any initiatives taken
by EU Member States. The main points of focus are as follows:

● stimulating demand;

● financing (including a prolongation
beyond 2011 of measures under the Framework on State Aid to Shipbuilding);

● ensuring employment measures (including support at the time of
shipyard closures); and

● countering the absence of a level playing field.

In the absence of an international agreement at
the OECD, however, the EU must take direct and decisive action to protect the
European shipbuilding sector from unfair competition.

Member States and the EU must address the problem of the long-term financing
of the shipbuilding sector. A European financing instrument for shipbuilding
should therefore be set up with the EIB.

The Committee recommends that during the crisis
the social partners make special use of the opportunities for social dialogue
with a view to drawing up joint strategies for the future. Social dialogue is a
platform for joint ideas and solutions to tackle current and future challenges
for the shipbuilding sector.

4.2: IMPLICATIONS FOR INDUSTRIAL POLICY
MEASURES

European industrial policy does
not favour sectoral interventions that may directly influence the restructuring
actions of companies. Rather, it tries to set the appropriate framework and
incentives for companies to manage the transition on their own.

Furthermore, the crisis has
highlighted an additional aspect of the restructuring process that will require
more attention on the part of the Commission and coordination with the Member
States. Usually, discussions on restructuring and support for companies from
the public sector are set in the regional or sectoral contexts where the
company in question operates. Notwithstanding the relevance of this, it seems
that an additional angle of analysis is necessary. With growing cross-border
interdependencies and increasing complexity of value chains, restructuring of
companies might have serious repercussions on suppliers or clients in various
parts of Europe. This calls for a more transnational perspective, looking at
various actors in the value chain, both in terms of national recovery plans and
specific restructuring plans for companies. The case of the motor manufacturer
Opel, for example, where various countries were bargaining over which
production facilities should be closed, shows clearly that restructuring plans of
multinational companies need to be analysed in an international context.[33]

4.3: SECTOR-SPECIFIC INDUSTRIAL POLICIES
FOR RESTRUCTURING

In addition to integrated
horizontal policy, DG ENTR is also active at sectoral level. Various sectoral
initiatives have been launched as a response to adjustment pressures, again
more in order to foster future growth rather than to deal with short-term
restructuring. The section below highlights two examples of policy responses to
adjustment pressures. Both sectors concerned have been amongst those most
negatively affected by the crisis.

4.3.1: STEEL INDUSTRY

During the 1980s and early 1990s,
the steel sector in the EU underwent a period of extensive restructuring which
was characterised by a reduction of capacity, accompanied by the elimination of
state aid, and followed by privatisation and consolidation. Due to these
restructuring efforts, the EU steel sector is today seen as a dynamic,
innovative and customer-oriented industry.

Continuous research and development,
coupled with capacity to innovate, are crucial to maintaining competitiveness
in relation to companies from non-EU countries. EU companies in the steel
sector exploit the technological advantage at the top of the product line, such
as, for example, special steel for the automotive industry, and have
established a strong relationship with clients, including in the area of
product development.

However, demand for steel depends
on the development of demand for durable goods and construction and the sector
is therefore very vulnerable to economic downturns. The EU steel sector is also
open to international competition and strongly affected by the cyclical
development of global demand for steel. The sector is dependent on imported raw
materials and exposed to high volatility of raw material prices.

The ability of steel producers to
sustain periods of low demand and prices is limited. The cost structure of the
steel sector is characterised by high fixed and capital costs and covering
these costs requires high capacity utilisation. Reducing output is a short-term
option only, therefore, and requires availability of capital reserves. In a
global perspective, world steel overcapacity poses a permanent risk of
disruptions on the market and depressed prices in periods of declining demand.

Impacts of the crisis and
current situation

In 2009, the steel sector was hit
by the crisis in industries that use steel, and in particular by the strong
decline in demand from the construction and automotive sectors. The production
of crude steel in the EU27 fell by 29.9 % in 2009 compared with 2008
figures. The crisis therefore affected all the largest steel-producing
countries in the EU. Many European companies reduced the number of days of
production, or mothballed capacity, in particular during the first half of
2009.

The steel producers dealt with
the crisis by cutting production on a massive scale and making temporary
lay-offs. This meant that they avoided significant permanent job losses, as had
been the case during past downturns. The European federation of iron and steel
industries, EUROFER, estimates that the ad hoc temporary crisis measures
(such as temporary lay-offs and short-time working) and redundancies affected
approximately 40 % of the total steel workforce, as at the end of June
2009. However, by December 2009, EUROFER estimated that the percentage affected
had dropped to 17 % of the total steel workforce.

The sector started to recover in
mid-2009 as the overall economic conditions improved. The recovery in steel
production continued during the first half of 2010 — key drivers have been the
recovery in international trade and the rebuilding of inventories that were
depleted during 2009. Most producers have now restarted mothballed capacities,
and in Europe capacity utilisation of blast furnaces has risen from 60 %
(at the end of 2009) to 80 %. However, while EU production has been
improving, mainly through restocking and increasing exports, there is no
evidence of improvement in terms of real demand.

Effects of measures
implemented in response to the crisis

Over the past two years, the
demand for metal products has been influenced by temporary measures adopted by
Member States, such as the introduction of car scrappage schemes or measures
facilitating access to credit that were adopted under the temporary framework
for state aid, issued by the European Commission in January 2009.[34]
In one case only, the Commission authorised a state aid measure under the
temporary framework: this was for a Latvian steel manufacturer, JSC
Liepājas Metalurgs, in order to finance modernisation.

The steel industry has welcomed
the new public-private partnerships for research which have been launched in
the framework of the European Economic Recovery Plan in the manufacturing,
construction and automotive sectors. Through the development of new materials,
steel plays an important role in reducing the carbon footprint of buildings and
cars over their life cycle. The steel industry aspires to participate in
projects funded by this scheme and to this end, the European steel technology
platform (ESTEP) has established links with other technology platforms in sectors
such as construction and the automotive industry. The PPP Factories of the
future[35] is also seen by the steel industry as an expedient instrument to
incentivise process innovations.

As for the immediate future and
amid current fears that existing surplus supply will reduce prices, another
period of idling blast furnaces in order to reduce capacity may occur in the
short term. From a longer perspective, adaptation in the EU steel sector will
be a continuous process in order to face tough competition from non-EU
countries, volatility in energy and raw material prices and increasing
environmental requirements set by EU regulations. Opportunities can be seen in
terms of the development of products for growing markets, such as the renewable
energy sector, and meeting the increasing demand for special (high strength)
steel, particularly in the automotive sector.

4.3.2: AUTOMOTIVE SECTOR

The European automotive industry has
visible and persistent structural difficulties, further aggravated by the
economic downturn and current slow recovery. In recent years, the industry has
shown all the characteristics of very intense competition with tight profit
margins, shortening product cycles, an increasing need for innovation and for
aggressive sales strategies in a constant battle for market share. Competition
has further intensified because of industry globalisation and new entrants to
European automotive markets. On the other hand, new global markets have opened
and with them new business opportunities.

The industry’s reaction to increased
competition and new market opportunities has been, among others, to add
significant new production capacity — particularly by expansion into the new EU
Member States (as well as investments around the EU’s periphery). However, the building
of new capacity has often delayed structural change and left the automotive
industry with a serious overcapacity problem. It is estimated that average
capacity utilisation in Europe before the crisis was 80-85 % and this has
now dropped even further due to the economic crisis.

On a more positive note, the automotive
industry in the EU has also sought to boost its competitiveness by fine-tuning
its production to changing consumer preferences and societal needs. In respect
of the latter, the EU has proved a powerful driver of anticipation and change
by establishing ambitious emission and safety standards. Despite very tight
reserves, the high cost of innovation and against the backdrop of intense
competition, the industry has proved a responsible partner in answering the
societal needs for less emission and more safety. At the same time, it has
established its role as a global leader in environmental and safety technology.
The illustration of this trend is that in 2009, the demand for passenger cars emitting
less than 120g of CO2 is up by almost 60 % compared with 2008,
and sales of those vehicles account for 25 % of the market. It can be
expected that this trend will orientate the industry in the future.

Impact of the crisis and current
situation

The economic and financial crisis affected
the automotive industry severely — its effects began to be felt from August
2008 in the form of plummeting sales and interruptions in production. Falling
demand and production levels have led to reduced employment across the
automotive value chain as companies seek to cut costs. Hundreds of thousands of
employees have been affected, and in particular workers on temporary contracts
(see the section above on the automotive industry). The crisis has also
highlighted the economic importance of the sector, on which 12 million people
depend for their employment and many regions for their economic well-being. The
Commission was prompt in reacting to the crisis by putting into place a package
of measures grouped under the so-called Green Cars Initiative.[36]

In 2010, the situation of the automotive
industry has improved in terms of sales and production. There is, however,
still the case for very cautious optimism in terms of forecasts for the next
years. While the industry appears to have weathered the worst of the crisis, it
has not yet completely dealt with overcapacity and structural change.

Effects of the measures implemented in
response to the crisis

Changes in the automotive sector will need
to be partly driven by public policy and this is why the European Commission
has devised a new, comprehensive strategy[37] supporting the development and market uptake of clean and energy-efficient
vehicles. This strategy, by providing a favourable legislative framework,
stimulating research, market uptake and infrastructure development, aims to
further boost the competitiveness of the European automotive industry in green
technologies and thus stimulate creation of new jobs, including in associated
industries and the supply chain. Importantly, this new strategy will support
restructuring by providing clear strategic vision that will be supported by the
European policies.

The strategy comprises over 40 concrete
actions and among them an important place is taken by anticipation and management
of restructuring as well as anticipation of the skills and qualifications
needed to design and produce innovative vehicles. This objective translates
into two concrete actions:

● establishment of a European Sectoral Skills Council, aiming at
creating a network of Member States’ national observatories; and

● targeting the use of the European Social Fund, starting in 2011, to
encourage retraining and upskilling of automotive workers.

In October 2010, the CARS 21 (Competitive Automotive Regulatory System
for the 21st century) High
Level Group was relaunched by the Commission. One of its tasks is to ‘contribute to ensuring a smooth and
balanced economic and social transition, through a pro-active anticipation and
management of restructuring processes, skills needs and the related
qualification needs’. In its interim report, the HLG identifies some policy
highlights on workers’ employability in times of restructuring (see box).

● 
Reinforcing the
competitiveness of the European industry constitutes the only way to preserve
and develop employment in the EU in the long term. The joint efforts to be deployed should always aim
at preserving future competitiveness rather than trying to defend existing
jobs.

● 
Anticipation of
change and restructuring
is vital, it should be holistic and respect all factors influencing
competitiveness and long-term perspective of companies. It should be integrated
effectively in companies’ long-term strategies, with due attention paid to
human resources’ skills and availability.

● 
Increased skills and
competence levels
contribute to the creation of an adaptable and mobile workforce, enhancing the
employability of workers in the sector and facilitating employment transitions.
Members States, regions, companies and employees share the competence and
responsibility for increasing skills and competence levels.

● 
Some companies, when
appropriate in cooperation with relevant stakeholders, develop mechanisms
for forward planning of employment and skill needs. That requires a proper
identification of skills needs and effective cooperation between the public
sector, industry and educational establishments in ensuring that the training
being offered is in line with the needs of companies and the innovation
process.

● 
As during the crisis, social
dialogue should continue to constitute a crucial tool for dealing with
employment, skills and, in general, adaptation issues. Social dialogue
demonstrated, throughout the crisis, that it encouraged the adaptation of
companies to difficult situations. These included development of innovative
instruments (such as short-time work, and variation of employment conditions in
accordance with production needs and market demand, etc.), as well as by more
fundamental restructuring.

● 
At company level, this
means that necessary restructuring
cannot be resisted but in order to minimise its social impact, good practices
in this field should be disseminated and promoted while paying attention to the
specifics of individual national industrial relations system and of economic
and social contexts.

4.4: THE WAY FORWARD

The current crisis has not changed the
approach of industrial policy to restructuring. This policy does not aim to
intervene in specific restructuring cases, but rather reshape the framework
conditions in order to allow companies to regain their competitiveness after
necessary structural adjustments. Nonetheless, industrial policy has also begun
to be more active in supporting the transition of industries by setting up
public-private partnerships, fostering innovation and coordinating Member
States’ policies. In addition, in its strategies on restructuring, industrial
policy is also trying to better incorporate initiatives from other policies, as
it is clear that only a holistic approach will lead to sustainable growth in
the future. The latest Communication from the Commission on industrial and
employment policy is set out in chapter 6.

5: ACCESS TO FINANCE IN THE CRISIS

Cohesion policy[38] and
the EU rural development policy recognise the difficulties of SMEs in gaining
access to finance, especially in the case of innovative companies in the early
stages of growth or expansion. In the 2007-2013 programming period, under the
Cohesion policy, at least € 27 billion is targeted directly at SMEs and an
additional amount of around € 28 billion is planned for support to
productive investment not related to business size, of which a large proportion
should also benefit micro, small and medium-sized enterprises. The Rural
development policy further invests more than € 9 billion in rural
non-agricultural SMEs (including via the Leader approach), and more than € 20
billion are targeted as productive support towards agricultural, forestry and
agri-food enterprises, which are predominantly family-based, micro- or small
businesses. In additional to the traditional support through grants, Structural
Funds and the Rural Development Fund can also provide other forms of financing
to SMEs, such as equity investments, loans, guarantees or a combination of
these.

Financial engineering instruments have
acquired a new emphasis in the current programming period, namely through
specific provisions made in the regulations to promote the use of these
instruments and a stronger association of the international financial
institutions (IFIs), in particular the European Investment Bank (EIB) and the
European Investment Fund (EIF), in the development and implementation of some
products (for example, the Joint European Resources for
Micro to Medium Enterprises fund (JEREMIE), which is a joint initiative
developed by the Commission together with the EIF/EIB for the 2007‑2013
Structural Funds programming period, with the objective of improving access to
finance for SMEs and new business creation through financial engineering
instruments).

The JEREMIE initiative has been showing
good progress and has currently been developed in 15 Member States either at national or regional level, or both. Total funds legally committed under 29
JEREMIE holding fund agreements exceed € 3.1 billion. The EIF directly manages
11 mandates for some € 1.1 billion and many Member States and regions are
implementing JEREMIE with other financial institutions, national or regional,
acting as holding funds (two-thirds of legally committed funds). There are also
financial engineering instruments for SMEs implemented without holding funds in
other regions.

Additional financial engineering support to
businesses in rural areas as well as to agricultural and agri-food enterprises
are given under the European Agricultural Fund for Rural Development (EAFRD).
In total 23 rural development programmes by 8 Member States have foreseen such
possibilities (Latvia, Lithuania, Italy, Romania, Germany, Belgium, Corse (France), Greece). The EAFRD funding for financial engineering actions has seen a
steady growth in the last two years with total EAFRD funds committed for the
period 2007-2013 reaching already € 573 million. Additional public
co-funding will bring the overall expenditure for financial engineering under
rural development to more than € 650 million. There are also several
regional financial engineering initiatives (mostly in Italy) without EAFRD support to have been provided.

Microfinance
is an important means of stimulating self-employment and the creation of micro enterprises
and is increasingly an option for the unemployed to earn a living. In the
current context of reduced credit supply, the new European Progress
Microfinance Facility, established by the European Commission, aims to ease
access to finance for people who want to start up or further develop their own
business but have difficulties in accessing banking loans.

An initial budget of € 100 million is
expected to leverage to a total amount of € 500 million in micro-credit.
This will be realised in cooperation with the European Investment Bank
(EIB) Group and is expected to result in around 45 000 loans over a
period of up to eight years.

Financial engineering instruments are used
primarily to deliver non-grant financial support for SMEs. There are sectors
where investments can be expected to yield a revenue stream and are therefore
amenable to repayable support; involvement of financial sector also brings
additional co-financing to the system.

Typical areas of support include:

● creation of new businesses or strengthening of existing businesses;

● access to investment and working capital by enterprises,
(particularly SMEs) to modernise and diversify their activities, develop new
products, and secure and expand market access;

● business-oriented research and development, technology transfer,
innovation and entrepreneurship;

● technological modernisation of productive structures; and

● productive investments which create and safeguard sustainable jobs.

Discussions with Member States and other stakeholders show that there is widespread support for the continuation and
possible expansion of the use of financial engineering instruments in current
and future programming periods. Future discussion will address the
possibilities of redirecting a decisive amount of support to the private
sector, and particularly towards SME development, and to non-grant forms of
assistance.

Increasing advances to ERDF ESF and
EAFRD programmes

Additional advance payments provided an
immediate cash injection of € 6.25 billion in 2009, with a view to
increasing pre-financing and accelerating investments for the benefit of final
beneficiaries, all carried out within the financial envelope agreed for each Member State for the 2007-2013 period. This amendment to Regulation (EC) No 1083/2006 had
brought the total of advance payments to € 11.25 billion in 2009. All
advance payments were paid to the Member States by June 2009.

Similar increase of advance payments has
been carried out by the EAFRD, where advance rate payments for investments have
been raised from the initial 20 % to 50 % following an amendment to
Regulation (EC) No 1698/2005. Additional higher EAFRD co-financing rates for
the period of the economic crisis have further eased the burden on national and
regional budgets.

By doing this, the EU has allowed more
money to be spent rapidly on priority projects and Member States have acknowledged
the facilitating role of additional advances in the context of their liquidity
difficulties.

Almost all Member States, with the
exception of Austria, Denmark and Sweden, indicate how the advances were
applied, often involving changes in national policy and procedures. However,
the use of advances varied between countries. Accelerated spending through the
EU budget provided support to Member States and regions that were feeling the
strain of severely constrained public finances (in Latvia, for example) and
enabled more rapid implementation of structural funds programmes.

Most countries used these additional
resources for projects to support the public sector (ie local authorities) and non-governmental
organisations (NGOs). Advances were also used to support SMEs, both through
guarantees and under state aid schemes. Further, some Member States (such as Poland and Estonia) adapted their schemes to increase the pace and volume of advances to both public
and private beneficiaries or to reach out to specific groups at risk. In other
cases, advances were used to address specific objectives such as promoting
competitive funding schemes for urban regeneration projects in qualifying towns
(eg Gateways and Hubs in the UK).

It is clear that this measure has been
received favourably by Member States, particularly in terms of its contribution
towards the achievement of financial targets for 2009. Some Member States have emphasised
the positive impacts associated with the easing of liquidity and supporting
investment.

Simplifying the system for advances

In order to support enterprises, and
particularly SMEs, the conditions governing the payment of advances within the
framework of EU state aid rules were made more flexible by allowing state aid
advances to reach 100 % of total aid (until the end of 2010), instead of
35 %, provided the other conditions laid down in Article 78(2) of the General
Regulation are met.

A total of 10 Member States (Cyprus, Germany, Estonia, Greece, Italy, Latvia, Poland, Portugal, Romania and Slovenia) indicated that they had used this simplification. Some Member States (eg Greece) had decided to increase the threshold from the 35 % to 50 %, rather than the full
100 %.

In addition, the Commission put into place
a temporary framework under the state aid rules for Member States to tackle the
effects of the credit squeeze on the real economy until 2010 (see below).

Temporary framework for state aid rules

In addition to the above-mentioned
legislative changes, on 17 December 2008 under EC Treaty State aid rules, the
Commission adopted a temporary framework providing Member States with
additional means to tackle the effects of the credit crunch on the real
economy. The detailed provisions of the temporary
framework are discussed in more detail in Chapter 3, section 1.1.2.

CHAPTER 2: DEVELOPING COMPETENCES

Skills and
competence development is central to the successful anticipation and management
of restructuring and to the future development of the EU’s economy and its
workforce. If the EU is to remain competitive on the world stage, it is vital
that the workforce keeps pace with the skills and competences that will be
needed in a globalised and changing world.

During the economic downturn, promoting
mobility within the EU single market can contribute to tackling mismatches
between skills and labour market needs. Each Member State is free to make
access to a particular profession legally conditional upon the possession of a
specific professional qualification. Across the 27 Member States, the
Professional Qualifications Directive  applies to about 800 categories of
regulated professions. The regulation of access to a profession can be a major
obstacle for the free movement of workers. The active working population in
many Member States is shrinking, but the demand for a highly qualified labour
force remains a key source of future growth. From a market standpoint it is
essential that qualifications of mobile EU professionals are recognised in a
fast, simple and reliable way if we are to meet this surge in demand. Dealing
with labour supply shortages will require a well-functioning system for
recognising professional qualifications. On 19 December 2011 the European
Commission adopted a proposal to modernise the Professional Qualifications
Directive in order to adapt it to an evolving labour market. For example, the
legislative proposal introduces an obligation for Member States to list and
describe the professions they regulate and explain why the regulation is
necessary. In addition, the Commission will launch a mutual evaluation of the
national legislations regulating the professions.

Central to
competence development is the concept of lifelong learning, which focuses on
encouraging workers to develop their skills and competences throughout their
working life. This will also ensure that they retain high levels of
employability, making them more resilient to future waves of restructuring,
both within their specific sector and more broadly across the whole economy and
maybe even across national borders. Employees therefore need to possess a set
of skills that are easily transferable, which will equip companies with a more
flexible, adaptable and mobile workforce, while at the same time facilitating
worker mobility occupationally and geographically. The EU's Lifelong Learning
Programme supports these goals by funding innovative cooperation between
education and training institutions to support the learning mobility of both
students and staff. The Commission's proposal for the future "Erasmus For
All" Programme builds on this experience, helping education and training
systems to work together across borders to deliver the knowledge and skills
needed in an increasingly globalised labour market.

In a quickly
changing environment, people need not only basic skills such as literacy and
numeracy, but also competences in learning to learn, in analyzing complex
information in the media (digital and media literacy), in being able to adapt
and to seize new opportunities in a global world (entrepreneurship, foreign
language).

Job and sector-specific skills are equally
important for employability. Skills connected with new technology and green
technology, and a range of management competences and innovative skills will
also be crucial. There is a need for a range of actors to cooperate in helping
workers to gain the skills they need in the future. These actors include the
workers themselves, their employers, public placement bodies, regional and
local bodies, and the education sector. It is important that all actors also
work closely with local industry to make sure that skills provision is adapted
to ever-evolving business needs.

The validation of non formal and informal
learning is also a crucial piece of the jigsaw, as is ensuring that skills are
transferable, as this will aid movement between companies and between sectors
if necessary. Initiatives such as the EU’s Europass system and a Recommendation
on the validation of informal and non formal learning can help in this respect.

The EU naturally has an important role to
play in providing a framework within which skills and competence development at
national level can take place. In 2009, the Council set up a Strategic
Framework for European Cooperation in education and training ("ET
2020") that will support such development. EU institutions have been
active in initiating a range of activities and programmes designed to enhance
skills development, including targeting policy at young people and focusing on
specific sectors. Central to policy in this area is the creation of European
sector councils on jobs and skills, briefed to gain
insight into likely developments in employment and skills needs, with the aim
of assisting policy making in a specific sector. They are also intended to
function as a platform in which at least two types of stakeholder are involved.
A number of pilot councils have so far been initiated in sectors such as
automotive and textiles.

The automotive sector in particular needs
to ensure that the skills of its workers are updated, in order to keep pace
with the particular demands placed on this sector, as a key driver of
innovation. A European sector council on jobs and skills in this sector would,
it is hoped, help existing national observatories on skills and qualifications
in the sector, facilitate the exchange of information between them, and allow
its dissemination to a wider audience.

SMEs face particular challenges when trying
to ensure that the skills of their workforce are up to date, and the Commission
is developing a policy aimed at encouraging skills development in SMEs.
Overall, a lack of financial means and organisational reasons are the first
obstacles to training faced by many SMEs, and the EU is working to disseminate
good practice examples of how these obstacles can be overcome.

1: THE
IMPORTANCE OF LIFELONG LEARNING

Some recent initiatives in the lifelong
learning policy area are likely to have a strong, albeit indirect, impact on
the consequences of restructuring, as they support people and organisations in
managing transitions. These initiatives all share a feature that is proving to
be a significant factor of innovation, actually triggering wide-ranging
developments at national level: a strong focus on competences.

While developing, assessing and certifying
competences has always been considered part of education and training, the
systematic organisation of the provision, assessment and accreditation of
learning around learners’ outcomes in a lifelong learning perspective is a
relatively innovative approach.

The action that brings forward this
approach in the most high-profile and comprehensive way is the European Qualifications
Framework for lifelong learning (EQF), established through a Recommendation of
the European Parliament and the Council in April 2008.[39]
The EQF is a reference framework in which eight qualification levels are
defined in terms of learning outcomes: ie what a learner knows, understands and
is able to do after a learning experience, as opposed to learning inputs such
as the length of a learning experience or the type of institution. This enables
the EQF to connect to different national systems and to cut across sub-systems
such as higher education and vocational training.

EU Member States are in the process of
referencing their qualification levels to the eight EQF levels. The EQF will
then act as a translation device to make qualifications more readable and
understandable to employers, individuals and institutions, so that workers and
learners can better use their qualifications across countries, systems and
sectors.

Implementing the EQF means that national
qualification levels should also be defined in terms of learning outcomes,
which in some Member States and systems amounts to a radical change of
approach. However, all Member States have started developing a national
qualifications framework (NQF) based on learning outcomes and covering the
whole span of qualifications. It can be considered that Ireland, France, Malta and the UK have implemented frameworks, and 10 more countries are now
entering an early implementation stage. This clearly indicates the widespread
consensus on the need to define qualifications — and consequently the provision
and the assessment of learning — through what people can do at the end of their
learning process. For an overview of the implementation of a NQF, see figure
2.1 below.

Figure 2.1: Number of EU Member States with
a national qualifications framework, 2002-2014

Source: European Commission.

The consistent application of this approach
should prove specifically helpful in situations of crisis, when companies may
need to undergo radical reorganisation and many workers change tasks, jobs,
companies and trade and often need specific further training. This approach
helps companies, institutions and individual workers to gain a clearer and more
comprehensive overview of the skills and competences available to them, so that
they can make better informed choices when confronted with the need to
reorganise. The focus on competences makes it easier to match tasks and
workers, to train workers and to take into account both the skills developed
through formal learning and those developed through work experience.

The development of qualification frameworks
based on learning outcomes is expected to promote schemes for the validation of
non-formal and informal learning outcomes, including the accreditation of prior
experience: countries that already have established national frameworks based
on learning outcomes also feature effective validation arrangements. For
instance, all qualifications included in the French national register can also
be obtained through the validation pathway.

Consistent with the EQF approach, the
European credit system for vocational education and training (ECVET), adopted
in 2009, organises the transfer of credits from one
qualification system to another (or from one learning ‘pathway’ to another) around
the assessment and validation of the learning
outcomes of individuals. This allows learners to accumulate the required
learning outcomes for a given qualification over time, in a variety of
situations and in more than one country. This offers a valuable opportunity in
a society characterised by flexible occupational and learning pathways — an
element that may grow dramatically in times of economic crisis.

1.1: PLANNED NEW PROPOSAL ON THE
VALIDATION OF INFORMAL LEARNING

The regular inventory of national
experiences of validation of non-formal and informal learning prepared by the
European Commission and the European Centre for the Development of Vocational
Training, Cedefop, shows that such experiences and their impact are growing.
However, the fact that all European countries are now engaged in establishing
national qualification frameworks creates the conditions for a more systematic
and comprehensive approach to validation. Measures aimed at developing this
will be included in a proposal for a Council Recommendation on the promotion
and recognition of the validation of non-formal and informal learning, planned
for adoption in 2012. As a practical tool to support authorities in setting up
and managing validation arrangements, a set of European guidelines was recently
published and will regularly be updated.[40]

1.2: THE EUROPASS FRAMEWORK

The competence approach applied at system
level by qualification frameworks and credit transfer systems has an indirect
but significant impact on individual workers and learners. A more direct
service — also organised around the concept of competence — is provided by
instruments that specifically target citizens as users, such as the documents
made available within the Europass framework. Europass allows EU citizens to present their qualifications and skills in a way that
employers can understand and appreciate. Further, the Europass
Certificate Supplement describes certificates in terms of learning outcomes and
in some Member States is part and parcel of the national qualification
framework.

The Europass CV is a tool that is
increasingly used by EU citizens — about 10 000 each day — and aims to
help people to highlight their skills and competences by providing both
information on formal education and, when available, work experience. Figure
2.2 below charts the growth in the number of completed Europass CVs from 2005
to 2010.

Figure 2.2: Europass CV completed (daily
average)

Source: European Commission.

Through the language of competences, the
Europass CV helps communication between jobseekers and employers, and as such
can be a valuable tool in the context of restructuring, although it rests on
self-declaration on the part of the applicant. Information on skills developed
during specific experiences, such as traineeships or periods of work, can
however be given by the company or other organisation that has hosted the
experience.

The Europass Mobility is a specific
Europass document, which currently enables citizens to document experiences
involving transnational mobility, such as traineeships in a company abroad. Its
use is currently also being tested for home country experiences, with a view to
laying the ground for the development of a more general Europass Skills
Passport, which would record the skills and competences acquired by citizens in
any setting, including in particular work experience and volunteering.

In addition to these tools, the Europass
Skills Passport, in combination with the Europass CV and with formal
qualification supplements, describing learning outcomes as promoted by the EQF
and applied within national qualification frameworks, will provide a
comprehensive portrait of its holders in terms of competences, supporting
companies and individuals in their choices in the labour market.

1.3: EU POLICY ON LIFELONG LEARNING AND
SKILLS DEVELOPMENT

Information, advice and guidance are
crucial factors in enabling citizens to manage transitions, helping them to
identify the strengths and weaknesses in their competence profile, make better
informed decisions about further learning and employment opportunities and make
effective use of validation schemes. Two EU Resolutions of the Education
Council adopted in 2004[41] and 2008[42] have highlighted the need for strong guidance services throughout a
worker’s life to equip them with the skills to manage their learning and
careers and the transitions between and within education/training and work.
Member States were invited by those Resolutions to take action to modernise and
strengthen their guidance systems, paying particular attention to the
development of career management skills; accessibility of services; quality
assurance and coordination of services.

The Commission supports policy and practice
in this area in a number of ways. Firstly, EU resources from the Lifelong
Learning Programme are used to fund two European networks:

● Euroguidance provides guidance to practitioners in the form of
information, documentation and training; and

● the European Lifelong
Guidance Policy Network — set up by the Member States at the end of 2007 — aims
to raise the awareness of policy makers in education and employment sectors of
the importance of lifelong guidance and support Member States in modernising
their systems. Among other activities, the network will work towards a new
version of the appreciated handbook, developed jointly with the OECD in 2005,
for policy makers in career guidance.[43]

The increased frequency of transitions that
citizens face over the course of their working life, coupled with greater
diversity and mobility in education/training and the labour market, make
effective lifelong guidance systems more important than ever. The successor to
the Lisbon strategy — Europe 2020[44] — highlights
in particular the need for guidance to improve young people’s entry into the
labour market. Measures to strengthen guidance will form part of new
initiatives being put forward in 2010 concerning the mobility of young people,
combating early school leaving and new skills for jobs.

2: THE ROLE
OF SKILLS IN IMPROVING LABOUR MARKET MOBILITY

All economic sectors are currently in the
throes of a phase of restructuring, which itself needs to be seen against a
background of efforts to improve the EU’s competitiveness and re-direct the
European economy towards fresh activities with a higher added value that are
capable of generating new and better jobs. The success of these endeavours
hinges on a more strategic management of human resources, with more dynamic and
forward-looking interaction between labour supply and demand. This is essential
to a cohesive society, to competitiveness, as well as to the capacity for
innovation in the business sector and the economy as a whole.

The level of skills achieved can be a key
factor in determining how successful workers will be on the labour market.
Knowledge, know-how and skills are decisive and condition everyone’s chances of
a successful professional career and playing an active role in society. Keeping
skills levels up to date is a key factor in ensuring the continuing
employability of workers, particularly in times of restructuring, when workers
may need to move companies or even sectors in the search for alternative
employment. Employees therefore need to possess a set of skills that are easily
transferable, which will equip companies with a more flexible, adaptable and
mobile workforce, while at the same time facilitating worker mobility
occupationally and geographically, making it easier for them to develop their
occupational pathways.

For workers, skills mean employability and
occupational mobility. They are the best insurance against unemployment and are
an important factor in facilitating personal development and active
citizenship. However, labour markets — and the skills people need — are
evolving ever faster and future jobs are likely to require higher levels and a
different mix of skills, knowledge and qualifications. It will therefore be
increasingly necessary for workers to participate in lifelong learning and to
develop new skills in order to be able to adapt to a variety of tasks over
their working lives.

2.1: GENERAL VS SPECIFIC COMPETENCES

Results from a European Commission study on
transferable skills[45] show that general human capital/competences are those that increase
the value of a person across the whole of the labour market, ie in companies,
sectors and occupations. On the other hand, specific human capital/competences
increase the value of a person only within the company in which they have
acquired them; leaving the company therefore leads to devaluation of some specific
human capital/competences since they do not apply in other companies, sectors
and occupations. It should be noted, however, that the existence of purely
general or purely specific forms of human capital/competences is very rare. It
is usually possible to characterise human capital/competences as rather general
or rather specific, which indicates some extent that there is a mixture of
these two kinds of human capital/competences in the real-life economy.

The characterisation of human
capital/competences as general and specific, based on their application in the
labour market, affects the willingness of various economic subjects, be they
individuals or companies, to invest in their acquisition. The more general
human capital/competences are, the more likely employees are to invest in
acquiring them in order to increase their employability in other companies,
occupations and sectors. Conversely, the more specific human
capital/competences are, the less likely employees are to invest in acquiring
them due to their narrow application; should workers leave a specific employer,
these skills become less useful. For employers, the opposite applies: general
human capital/competences increase the risk of losing the employee, while
investing in the acquisition of specific human capital/competences ties the
employee ever more closely to the company.

At present, in addition to the interest
shown in specific skills, attention is also focused on general skills — and
mainly soft skills — due to their usability and transferability across occupations, sectors, and in some cases even across the whole
economy. General skills that are applicable in most companies, occupations and
sectors can be effectively applied in almost all jobs and in an employee’s
personal life; thus they are perceived as highly transferable. Soft skills —
job non-specific skills that are related to individual ability to operate
effectively in the workplace — are usually described as extremely transferable.
Specific skills — technical and job-specific abilities that are applicable in
very small number of companies, occupations and sectors — can be specified
negatively as skills not belonging among generic skills. They describe special
attributes for performing an occupation in practice and are constituted as a
mix of knowledge and abilities used during the practical process. Box 2.1 below sets out the main soft and general skills.

Box 2.1: General and soft skills ||

General skills || Soft skills ||

Legislative/regulatory awareness || Self-control and stress resistance || Achievement orientation ||

Economic awareness || Self-confidence || Concern for order, quality and accuracy ||

Basic competencies in science and technology || Flexibility || Initiative-Active approach ||

Environmental awareness || Creativity || Problem solving ||

ICT skills || Lifelong learning || Planning and organising ||

Knowledge of foreign languages || Interpersonal understanding || Information exploring ||

Knowledge of foreign languages || Customer orientation || Autonomy ||

Entrepreneurial competences || Cooperation with others || Analytical thinking ||

|| Communication || Conceptual thinking ||

|| Impact/Influence || ||

|| Organisation awareness || ||

|| Leadership || ||

|| Developing others || ||

2.2: TRANSFERABLE SKILL SETS

Knowledge of a set of skills that can be
used between sectors or groups of sectors enables effective job change during
an individual’s working life. Finding the most suitable occupation, where the
worker can make the most of their present skills, not only minimises any loss
of qualifications due to a change in job, but also reduces the costs for training
of new employees and the time necessary for handling tasks connected with the
new occupation. This also offers the best alternative opportunities for the
worker. The more skills are identified for each pair of occupations as common,
the higher the transferability, and vice versa. This knowledge is very useful
for the facilitation of occupational mobility in general and in particular
during restructuring processes, which has a substantial impact on both the
speed of restructuring processes and level of unemployment.

The comparison of key occupations in terms
of their skills transferability allows possible shifts in sectoral employment
to be highlighted. Combining information on transferable skills with the skills
profile of the new occupation helps identify what kind of re-skilling or
upskilling is necessary to achieve a smooth transition for those made
redundant. Box 2.2 below examines skills that can be transferred between
different groups of sectors.

Box 2.2: Skills that can be transferred between different groups of sectors Workers who have been made redundant in a sector usually look for alternative work in the same sector only, because they cannot imagine that they might use their skills in other sectors. However, it is obvious that their skills can be used in different sectors, but it is also obvious that there are sectors, or groups of sectors, where they can use more of these skills, and sectors, or groups of sectors, where they can use only few of them. For example, a redundant worker from the manufacture of textiles and leather (NACE 13, 14, 15) can be fairly easily employed in the manufacture of wood and furniture sector (NACE 16, 31), but not so easily in the agriculture, forestry and fishing sector (NACE 1, 2, 3) or the ICT sector (NACE 62). This is due to the range of applicable skills already at their disposal. The worker can use the same number of general skills from the textiles and leather sector (NACE 13, 14, 15) in the wood and furniture, agriculture, forestry and fishing and ICT sectors, as set out below. Agriculture, forestry and fishing (NACE 1, 2, 3): Legislative/regulatory awareness; economic awareness; basic competences in science and technology; environmental awareness; knowledge of foreign languages. Manufacture of wood and furniture (NACE 16, 31): Legislative/regulatory awareness; economic awareness; basic competences in science and technology; environmental awareness; knowledge of foreign languages. ICT (NACE 62): Legislative/regulatory awareness; economic awareness; basic competences in science and technology; environmental awareness; knowledge of foreign languages. Workers can also use approximately the same number of soft skills, as set out below. Agriculture, forestry and fishing (NACE 1, 2, 3): Flexibility; cooperation with others; communication; achievement orientation, efficiency; planning and organisation; autonomy. Manufacture of wood and furniture (NACE 16, 31): Creativity; customer orientation; cooperation with others; communication; achievement orientation, efficiency; concern for order, quality, accuracy; planning and organisation; autonomy. ICT (NACE 62): Flexibility; creativity; customer orientation; cooperation with others; communication; achievement orientation, efficiency; autonomy. Regarding specific skills, the worker can use 17 such skills from the textile and leather sector in the wood and furniture sector, but only three in agriculture, forestry and fishing and none in ICT, as set out below. Agriculture, forestry and fishing (NACE 1, 2, 3): Handling of production lines and machineries; technical drawing; maintenance and adjusting of machines and appliances. Manufacture of wood and furniture (NACE 16, 31): Orientation in technical documentation; appraisal and control of quality of raw materials, semiproducts and products; handling of production lines and machineries; technical drawing; waste disposal; machine and industrial sewing; hand sewing and needlework; handling of programmable and semiautomatic machines; upholstery; restoring and conservation of artefacts; preparation of materials and raw materials; maintenance and adjusting of machines and appliances; mounting, compounding and completion of products; calculations of material consumption; design; leading of staff collectives or teams; applying knowledge of history of art. ICT (NACE 62): None

2.3: FUTURE SKILLS NEEDS

Future
skills that are adapted to the evolution of the labour market needs also play
an important role in the employability of workers. ICT skills rank in first
place because technological development will allow workers to use them
efficiently in a growing number of occupations, tasks and areas. Further, the
number of occupations that will require advanced ICT user knowledge is set to
grow. Skills linked to specific technology (such as specialised skills in
chemistry, biology, electronics, or skills in the field of nanotechnology) will
be increasingly important, but for a relatively smaller group of expert
occupations.

Environmental technologies will trigger
growth in demand for skills in that area. Other identified future trends
include business and management skills, including in middle- and low-level
occupations. This will be linked to a growing need for inter-sectoral knowledge.
For example, to know how the product the worker develops or produces will be
used by the user helps them to identify possible innovations. This is also the
case concerning knowledge of the previous and succeeding parts of the production/development
process, which will boost efficiency and innovation potential. Language and
cross-cultural requirements, process management, skills related to the trend of
teleworking (autonomy, ability to work and solve problems independently), and
moral values such as ethics and loyalty will increase in importance.

2.4: THE ROLE OF DIFFERENT ACTORS IN
SKILLS DEVELOPMENT

The importance of workers’ general,
specific and soft skills among different occupations, groups of sectors and
their contribution both to the quality of work at microeconomic level and the
effective functioning of the labour market at microeconomic level have been
stressed often and in different contexts by the business sector, employers’ and
workers’ representatives, academic institutions, policy makers and other key
players on several occasions.

Skills development at enterprise level

Companies differ in
the complexity of their approach to the acquisition, development and assessment
of specific skills. In general, it is possible to identify two types of
enterprises: those that have sophisticated and well-designed models (this is
developed in a systematic manner, especially in large and medium-sized
companies with human resources departments or at least a human resources
specialist); and those that carry out these activities intuitively on the basis
of ad hoc solutions or through experience on the job (especially in
small companies). The most frequently used tools for recognition and assessment
of skills are periodical employee appraisal, feedback and 360-degree
assessment, balanced scorecard, competency-based performance review or
behavioural event interview and quality control circles. Specific skills are
often developed by learning-by-doing, which is usually supported by other
tools, such as review, coaching, and simulations of job tasks. Mentoring is
very common in this process. This elementary form of skills development is
often accompanied by targeted education/training, which can be internal (in the
enterprise) or external (undertaken by an external body) and take different
forms, for example education, training, workshops, seminars, conferences,
meetings and solving concrete tasks by brainstorming or case studies.

Enterprise
initiatives for the recognition, development and assessment of general and soft
skills are mostly rare, even though they can play a role in the employee
selection process. The cost of this investment can be carried by large and
medium-sized companies, whose strategy also relies on lucrative internal labour
markets. Even in this case, large companies are often ambivalent towards a
systematic acquisition of general and soft skills. On the one hand, they
understand that these skills can improve work efficiency, which benefits the
company as a whole. On the other hand, such systematic training promotes
willingness to leave on the part of the employee, which the company does not
want. Against this background, acquisition of these skills is often performed
in a muted way, with targeted employees but not throughout the whole
organisation.

Regarding employability, it is important to mention that employers’ requirements grow over
time. Today, an applicant for a job must be much better prepared and comply
with the job description more fully than a few years ago; many employers are
less willing to invest in up-skilling new staff. Therefore, individuals as well
as the education and public sector must pay more attention to the skills they
have, and train or support as necessary.

Public labour administration and placement offices

Public labour administrations and placement
offices possess tools to assess and conduct targeted training, which also aim
to meet the needs of companies. Many labour administrations develop profile
documents with their clients in order to represent their skills profile. This
is sensible and necessary as this clientele is a target group with little or no
formal qualifications that they can present to a prospective employer. Particular
groups that are in focus for the development of general and soft skills are
young people, older unemployed people and migrants, which are three groups with
specific problems in entering the labour market. Acquiring skills sets
increases and updates their employability.

The task of the public sector is to
increase or at least maintain employment, which can be guaranteed by the
development of skills. Many public sector representatives are aware that the
importance of employers in the further training of the labour force is
essential as well as the fact that they have to motivate employers (for example
financially) to provide training in areas that can help people to increase
their long-term employability.

Regional and local bodies

It is the responsibility of regional
administrative bodies to raise awareness of the need to acquire, develop and
certify transferable skills. They approach firms, trade unions, labour
administration bodies, placement offices and professional associations in order
to raise general awareness. Their activities can also include labour market
monitoring activities, which in the best cases give a detailed picture of
regionally available human resources and also of the associated strengths and
shortages concerning skills. However, very often their strategies lack a
systematic approach and are in some cases limited to model projects.

Besides enterprises, regional and local
players are probably the second most important actors when it comes to labour
market initiatives relevant to the transferability of skills. The main reason
for this is the prevailing regional and local mobility of the workforce in EU
Member States and, next to this, regional and local competence to develop
partnerships of key players to deal with complex labour market issues. Regional
and local partnerships for the labour market are therefore very useful
strategic tools for efficient interventions on the labour market.

The education sector

Education sector representatives
acknowledge that they also carry significant responsibility in this field,
whether at the initial education stage or through further continuous education
and training. Universities and education providers should be aware of
developments in the labour market and periodically evaluate their training
provision so that they can better accommodate the evolving needs of specific
occupations. Workers are liable to change their field of work ever more often,
and restructuring processes are underway within companies as well as whole
economies. Upskilling and re-skilling is in ever-greater demand, and the
importance of specific but also general and soft skills is gaining an
ever-higher profile.

In this context, the role of the education
and training system is seen as pivotal. It gives a wide range of people a good
chance to acquire all kinds of necessary skills or adapt previously acquired
skills to a changing situation. Many models are used to support occupational
mobility through skills development, such as the identification of skills gaps
for new jobs, career counselling, the development of skills through training
for workers who have been made redundant, many of them based on local skills
needs. Education and training providers see learning-by-doing as a crucial
method of skills development, which can be supported by other relevant tools,
such as workshops, seminars, conferences, coaching, distance learning, blended
learning, e-learning, consulting, observation and review of work by expert or
peer, sharing of experiences, skills and knowledge, training courses with
certificate, team discussions etc. Further, the representatives of educational
institutions believe in particular that the adaptation of educational activities
to the needs of students and labour market demands is very important in terms
of developing skills in relation to occupational mobility. Besides practical
skills, particular skills and knowledge with a wider application in more jobs
and skills need to be simultaneously developed. Developing abilities and
competences should be a lifelong process for which people are sufficiently
motivated and the results are officially recognised.

At national level, there is a division of
competences between public institutions responsible for education and for
employability. Sometimes this can result in competing/counteracting systems and
methods for identifying, assessing and recognising non-formal learning. Their
goal is mostly the same: rendering the system of vocational education and
training more flexible and inclusive by recognising alternative paths of
knowledge and skill acquisition and relating them to the needs of the labour
markets and employers. These latter needs are met through the profiling tool
which most labour placement offices use in order to determine the existing
skills of a person and the possible career paths. Based on that, they offer
advice to individuals as to the best ways of reaching an employment in an area
where their strengths lie.

Joined-up and coordinated approach required

Global economic competitiveness depends on
high levels of knowledge and skills which in turn lead to quality jobs and
decent wages. This is why governments strive to attract talent and provide
skills upgrading opportunities for people on all levels. However, this
important task cannot be achieved by one single actor. Working on skills
development requires a joined-up approach between education, training,
employment and economic development policies. It also means working closely
with local industry to make sure that skills provision is adapted to
ever-evolving business needs. And it needs to involve community and civil
society organisations to ensure that all can participate in enhanced
prosperity.

The EU institutions can also play an
important role in skills development and therefore in the next section of this
chapter, a range of EU initiatives in the area of skills and competence
development are explored.

3: SECTOR
STUDIES AND THE NEW SKILLS FOR NEW JOBS INITIATIVE

This section explores a range of EU
initiatives designed to help boost skills and competence development, and to
try to prepare the EU for the likely kinds of skills that will be needed in the
future.

3.1: NEW SKILLS FOR NEW JOBS INITIATIVES

Companies in Europe are faced with a
continually changing environment. Challenges such as the ageing of the
population, the rapid evolution of ICT, increasing globalisation and the
greening of the economy have concrete implications for companies in their
day-to-day business. Factors such as a changing regulatory framework, evolving
consumer preferences, new and more efficient technologies and increased
competition from abroad, affect companies and their business, with implications
for their competitiveness.

To stay competitive, companies have to
invest permanently in human capital to acquire, or equip the workforce with,
the skills mix that they need today and tomorrow. The issues of identifying
future skills needs, upgrading skills and matching them with labour market demands
have gained increased attention in recent years throughout the Union. In December 2008, the Commission published a Communication entitled New Skills
for New Jobs: anticipating and matching labour market and skills needs.[46]

In February 2010, the expert group on new
skills for new jobs issued a report[47] to the European Commission, in which it detailed recommendations
for future action. The report called for action in four main areas:

● 
provide better incentives for employers and
individuals to upskill, and investment in skills must be significant, smart and
not just financial;

● 
open up the worlds of education and training by
making education and training institutions more innovative and responsive to
both learners’ and employers’ needs, and by developing relevant qualifications
that focus on concrete learning outcomes;

● 
offer a better mix of skills that is more suited
to labour market needs; and

● 
better anticipation of future skill needs.

In March 2010, the Commission presented its
strategy for the next 10 years, Europe 2020 — A European strategy for smart,
sustainable and inclusive growth,[48] in which, under
the theme of inclusive growth, a flagship initiative entitled An agenda for
new skills and jobs was announced. This initiative highlights, among other
issues, the role and importance of skills in enabling workers to adapt to
changing conditions and stay productive, and also in reducing unemployment.

On 15 September 2010, the Commission set
out its agenda of actions targeted at young people in the Communication Youth
on the Move.[49] In particular, actions are targeted at supporting lifelong learning
strategies, the reform of higher education, the reinforcement of learning
mobility programmes and actions to improve the employment situation of young
people.

3.2: SECTORAL STUDIES OF INNOVATION,
SKILLS AND JOBS

In 2008 and 2009, the Commission conducted
a series of 19 sectoral studies[50] (see table 2.1)
to map and analyse the evolution of innovation,
skills and jobs within each of the selected sectors, taking into account each
sector’s global, national and regional contexts, in order to anticipate
possible changes in jobs and skills needs up to 2020. These studies also served
the purpose of bringing attention to ways and methods of achieving
forward-looking and strategic human resource management and thereby improving
European competitiveness in the global economy. A common ‘foresight’
methodology (see box 2.3 below) was applied to 18 of the 19 studies (the
study on the construction sector followed a similar but different methodology), allowing for comparisons between sectors.

Box 2.3: Methodology

The sector studies followed a European Foresight
Methodology (EFM) developed by Professor Maria João Rodrigues with support from
the European Commission. The methodology has been developed in order to perform
comprehensive sectoral analyses and foresights on emerging skills and
competences in the EU. It involves the following steps:

● presentation and analysis of the sector’s main economic and
employment trends and structures: this includes detailed sectoral data analysis
on employment, added value, education and occupations, along with a SWOT
(strengths, weaknesses, opportunities and threats) analysis of the sector;

● identification of the sector’s main drivers of change;

● identification of emerging or changing sector job profiles, skills,
and competences;

● construction of possible sector scenarios and their implications for
employment trends;

● analysis of the scenarios’ implications for competences and
occupational profiles;

● identification of strategic choices to be taken by companies in
order to meet skills needs;

● identification of implications for education and training; and

● presentation of main recommendations.

The 19 sectors covered represent together
over 60 % of total private employment in the EU — see figure 2.3. Both
traditional manufacturing sectors and services sectors were analysed. The
largest sector by far, in terms of both added value and share of EU employment,
is distribution and trade, followed by health and social work. Some sectors,
such as hotels, restaurants and catering (Horeca), construction, and textiles,
apparel and leather products, are far more important in terms of employment
than added value, indicating their labour-intensive nature. Other, typically
more knowledge-intensive sectors, such as financial services and chemicals,
pharmaceuticals, rubber and plastics, are much more important in terms of added
value than employment.

Figure 2.3: Share of total EU employment
by sector (%), 2006

Source: Sector studies and Eurostat 2009.

A transversal analysis of these sector
studies was then carried out. While the sectoral studies focused on
sector-specific developments and characteristics, this analysis aimed to
identify common patterns of change across the different sectors and to group
the sectors according to common historical and anticipated developments in jobs
and skills. A brief extract of the transversal analysis is presented below. The
full report is available for download on the Anticipedia website.[51]

Table 2.1: The 19 sectors analysed in the
sectoral skills studies

Automotive || Furniture

Building of ships and boats || Health and social work

Chemicals, pharmaceuticals, rubber and plastics || Hotels, restaurants and catering (Horeca)

Computer, electronic and optical devices || Non-metallic materials

Construction || Other services, maintenance and cleaning

Defence industry || Post and telecommunications

Distribution and trade || Printing and publishing

Electricity, gas, water and waste || Textiles, apparel and leather products

Electromechanical engineering || Transport and logistics

Financial services ||

3.3: EVOLUTION OF OCCUPATIONS IN THE EU

Looking at the general development in
occupations within the European labour force from 2002 to 2008, there has been
a clear tendency towards polarisation. The number of high-skilled jobs is
clearly on the increase while the number of skilled manual jobs has fallen —
see figure 2.4. The number of very low-skilled jobs (known as elementary
occupations) has remained more or less the same, increasing just slightly.

The decrease in the number of skilled
manual jobs seems to be closely connected to developments within Europe’s traditional production sectors, which have normally relied on craft workers and
other skilled workers. Many of these sectors are under heavy pressure due to
fierce international competition and many production activities have been
outsourced and offshored during the past 10-15 years.

Overall, the higher the skills level of the
employee, the greater the advantage for both the employee and the employer.
Employees with high and transferable skills levels have a higher degree of
employability and will find it easier to move between employers, and maybe even
sectors, should that be required. For the employer, employees with higher skills
levels will increase productivity and the quality of the goods and services
offered.

The studies grouped occupations into three
categories according to the level of skills required to perform the job.
High-skilled workers include, among others, managers and professionals, who are
typically workers with relatively lengthy educational backgrounds and/or
specialist knowledge within a certain field. A high share of high-skilled
workers within a sector indicates a relatively high knowledge intensity. As shown
by figure 2.4, the sectors with the highest share of high-skilled workers are:
health and social work; computer, electronic and optical devices; financial
services; printing and publishing; electricity, gas, water and waste; and
chemicals, pharmaceuticals, rubber and plastics.

The sectors with the lowest share of
high-skilled workers are, not surprisingly, the labour-intensive but relatively
low knowledge-intensive sectors such as: furniture; textiles, apparel and
leather products; transport and logistics; and Horeca.

Figure 2.4: Share of high-skilled workers1
in sectors, 2007

- 2006 data.

1High
skilled = 1. legislators & managers, 2. professionals and 3. technicians
& associate professionals. For detailed description of the ISCO
classifications see: http://www.ilo.org/public/english/bureau/stat/isco/isco88/major.htm

Source: Eurostat LFS 2008 and sector studies.
Comparable data not available for construction and defence.

Figure 2.5: Changes in the share of
occupations in the EU labour force, 2000-2008

Source: Eurostat 2009.

It should be noted when viewing the above
figure that the breakdown of employed persons by occupation is based on the
classification ISCO 88-COM. High skilled = 1, legislators & managers = 2,
professionals, technicians & associate professionals = 3, low skilled non
manual = 4, clerks and service, shop & market sales workers = 5, skilled
manual = 6, craft & related trade workers = 7, skilled agricultural,
forestry and fishery workers and plant & machine operators = 8, and
elementary occupations = 9.[52]

Scenarios of evolution

Three or four ‘scenarios of evolution’ were
constructed for each sector. They take into account the main drivers of change
affecting each sector and their likely development. These drivers include both:

● 
macroeconomic trends affecting the whole economy
such as the ageing of the workforce, the globalisation of the economy and the
increased use of ICT, which can be characterised as ‘exogenous’ drivers; and

● 
more sector-specific ‘endogenous’ drivers such
as the regulatory environment influencing the activities of the sectors.

These scenarios are not forecasts of the
future but are based on foresight analyses, which are experts’ opinions on
possible futures for the sector. In the transversal analysis, these scenarios
have been regrouped and summed up in a single graph, also taking into account
the impact of the recent financial crisis. Sectors
have been grouped into service, production and combined production/service
sectors.

As can be seen from the
figure 2.6 below, it emerges from the analysis that employment within
production in the EU will, in general, continue to decline while employment
within services will, in general, continue to increase. Furthermore, the
financial crisis seems to have speeded up ongoing developments, with continued
job losses in the traditional production sectors. However, many of the
production sector studies contain quite positive scenarios, including
consolidation and/or job growth. Thus, post-crisis, the forecasts predict a
consolidation within production employment in total and renewed employment
growth within services.

Figure 2.6: Grouped employment index
(2001=100) for services, production and combined production/services sectors,
developments 2001-2008 and forecasts 2009-2012

Source: Eurostat 2009 for historical data;
analyses and scenarios for forecasts.

The graph above charts the actual
development of employment from 2001 in services, production and combined
production/services sectors. The years from 2008 to 2010 are characterised by
the economic crisis, during which employment in production drops most sharply.
In the post-economic crisis period, from 2010 to 2012, employment in production
and combined production/services sectors is forecast to be relatively stable,
whereas employment in services is predicted to increase.

3.4: EMERGING COMPETENCES

The sector
studies identify emerging competences at sectoral as well as occupational
level. The transversal analysis provides an overall summary of the most
important skills which emerge across all sectors — see table 2.2.

Table 2.2: Main emerging competences
across sectors

Social/cultural || Technical || Managerial

Intercultural skills || ICT and E‐skills (both at user and expert level) || Intercultural management

Team work || Skills/knowledge related to new materials and new processes || International value chain management

Self management || Health and green skills (related to health and climate and environmental solutions) || International financial management

Entrepreneurship and innovativeness || || Green management (implementing and managing climate and environmentally friendly policies and solutions)

- Multiskilling and new combinations for skills and competences (eg combining two sets of skills normally belonging to two different occupations in the same organisation)

Main findings

The analysis reveals the increasing
polarisation of the labour market and skills needs. Skilled jobs (such as craft
workers) are declining and high-skilled jobs (such as professionals and
managers) are increasing rapidly, while the demand for very low-skilled
elementary jobs continues to rise at a moderate pace. There is also a divide
between services and production sectors. Whereas significant job growth has
mainly occurred in services sectors and will continue to do so during the next
10-15 years, there have been quite significant job losses in production sectors
during the past decade, especially within skilled jobs. However, in production,
there seems to be a development towards ‘European excellence’, characterised by
products with a higher added value, requiring more high-skilled jobs but also
less medium-skilled jobs.

Modern economies are experiencing a
dissolution of traditional sector divisions, most often owing to new
technologies, new customer demands and enlarged supply and value chains. As a
result, new job profiles are appearing, which demand new combinations of skills
and competences, and companies are increasingly demanding new types and mixes
of employees and educational backgrounds in most sectors.

Regardless of job losses and other
structural developments, there is a clear tendency towards upskilling for all
occupations, which goes in parallel with an increase in the educational
attainment levels of workers in all sectors.

Looking at emerging skills and competences,
many sectors are experiencing new skills needs within areas that are closely
connected to major world policy and economic trends, such as sustainability
(environment, climate, health, etc.), ICT and the continued
internationalisation of markets and supply chains.

At the same time, many sectors will face
serious recruitment and skills problems in the coming years if no actions are
taken. The ageing workforce, poor working conditions and/or a negative sector
image will for many sectors result in problems in finding sufficient labour and
the right skills. This is particularly true for production sectors which are
penalised by their ‘heavy industry’ image (such as shipbuilding or
electromechanical engineering) but also for some service sectors, the records
of which, in terms of working conditions and career opportunities, are
perceived as low (such as Horeca). Many sectors will therefore need to improve
their image and working conditions if young graduates, women and groups such as
migrant workers are to be attracted to fill vacant positions.

The next section of this chapter examines
how the EU can help develop skills levels in individual sectors by setting up
European sector councils on jobs and skills.

3.5. WORK AND LIFE QUALITY IN NEW
AND GROWING JOBS

An ongoing FP7
research project on Work
and Life Quality in New and Growing Jobs (WALQING[53]) explores the linkages between ‘new jobs’, their
conditions of work and employment, and outcomes for employees’ quality of work and life.

In a first
instance, employment growth in various countries (EU Labour Force
Surveys 2000 and 2007) was analysed on the basis of an original new methodology
developed to construct a balanced list of growing sectors in the EU.[54] While conventional concepts of employment growth choose between
either a relative trend index (e.g. expressed in percentages) or an absolute
trend index (expressed in numbers such as hours, workers or production output),
the BART Index for structural growth (balanced absolute and relative trend index) integrates both into a single index, overcoming
misinterpretations (over- or underestimating structural changes) and improving
comparability across Europe. The BART index enables to zoom in on national
particularities in growing sectors without being obscured by trends in larger
countries.

Figure 2.7:
BRAT Index

The BART Index
data presented above measure employment growth between the GDP-growth peaks of
2000 and 2007 based on the European Labour Force Survey. Although Construction
(2.45 %) takes the lead, the whiskers (indicating standard deviation) show
that its average growth is dispersed over countries with a very high growth and
countries where the sector might even be declining; this applies also (but to a
lesser extent) to Health & Social Work. On the other hand, this is not the
case for Business Activities (2.38 %) and the IT sector, which are growing
steadily in most or all countries.

The weignted
Job Quality Index (using European Working Conditions 2005 Survey data) uses
weights for 38 measures according to the unique percentage of variance that it
explains in three aspects of employee well-being (physical well-being,
psychological well-being, job satisfaction) The growing sectors (NACE
Two-Digit) of the EU economy with higher than average levels of job quality
are: Real Estate (Mean Job Quality = 60.2), Education and Health (M=60.4);
Public Administration (M=62.3); and, Financial Intermediation (M=67.7).

The results
below show the top ten sub sectors with the highest growth and below average
job quality. Two of the three most critical are quite ‘feminised’ sectors: 1)
Retail (M=53.5); 2) Construction (M=52.1); 3) Hotels and Restaurants (M=48.8).

Figure 2.8:
Job Quality Index

The WALQING
researchers note that European employment growth has not exclusively been
shaped by knowledge-intensity and skill-upgrading, and that employment growth
does not automatically generate ‘better jobs’ with satisfactory wages,
autonomy, learning opportunities, secure careers and participation in the
workplace. A number of the growing sectors attend to fairly basic needs of
consumers and companies (shelter, food, waste disposal, and care), all of high
relevance for the quality of life, future productivity and sustainability of
European societies. However, many segments of these
important and expanding sectors are characterised by poor job quality.
Low-skilled work, low wages, insecurity, health and safety risks, and little
discretion and voice tend to accumulate and reinforce one another.

4: EUROPEAN
SECTOR COUNCILS ON JOBS AND SKILLS

The idea of creating EU-level sectoral
councils on jobs and skills has received support from a range of studies and
sources, since the European Commission announced in its December 2008
Communication on New Skills for New Jobs (NSNJ) its intention to discuss
setting up these councils with the sectoral social partners,[55] an idea reiterated in a June 2009 Communication entitled A Shared
Commitment for Employment .[56]

In February 2010, an expert group on NSNJ
set up by the Commission presented its report,[57]
which makes a series of concrete recommendations to decision-makers on how to
solve Europe’s skills deficiencies and mismatches with labour market needs. The
recommendations include the following:

Create EU sectoral councils, bringing together existing national
networks at EU level for the analysis of the skills needs and the development
of proposals for updated qualifications in each sector. Encourage the emergence
of a new and specific body representing all key stakeholders of the learning
sector at EU level.

Most recently, in November 2010, the
Commission issued a new Communication, entitled An agenda for new skills and
jobs: A European contribution towards full employment,[58] in which it sets out its views on ways in which the EU’s labour
market targets for the coming years can be met, in the post-crisis context.

Conclusions and recommendations based on
sectoral studies on future skills needs conducted by the Commission had
revealed a need for stronger cooperation between stakeholders — that is,
businesses and social partners, public authorities and representatives of
education and training systems. The apparent absence of exchanges of
information between existing national observatories on skills and jobs (or
their equivalent), and the support of many sectoral social partners for this
initiative, convinced the Commission to launch in 2009 a study to analyse the
state of play with regard to national skills councils in the OECD countries, as
well as to investigate the feasibility of setting up such bodies at a European
level. The study was published in February 2010 and some of its finding are
summarised in box 2.4.

Box 2.4: National sector councils on employment and skills

The European Commission’s feasibility study on
EU-level sector councils on employment and skills, published in February 2010,[59] looked at
national sector councils, defining them as bodies that:

● deal with one specific economic sector;

● seek to gain insight into likely developments in employment and
skills needs, with the aim of assisting policy making within or for the sector
concerned;

● do so by providing analysis of developments on the sectoral labour
market;

● function as a platform in which at least two types of stakeholder
are involved; and

● work in a structured and continuous way.

The study also looked at ‘transversal councils’,
which are similar to sector councils, but cover trends and developments in two
or more sectors of the labour market.

Main features

Sector councils and transversal councils for
employment and skills are defined by three main features:

● they carry out or commission forecasting studies on jobs and/or
skills in a sector;

● the outcomes of these studies are discussed in a sectoral dialogue
in which at least two types of stakeholder are involved; and

● these discussions lead to proposals and/or actions to bridge
quantitative and/or qualitative gaps.

The study found that 22 of the 27 EU Member
States have at least one type of council, under various names and in various
forms. The councils can deal with initial vocational education and training
(IVET) and/or continuing vocational training (CVT), and they can operate at
national and/or regional level.

Objectives and activities

All sector and transversal councils have a common
objective: to improve the match on the labour market between demand and supply
in quantitative (jobs) and/or qualitative (skills and competences) terms. To
achieve this main objective, councils can implement a variety of activities,
notably:

● analysing quantitative trends on the labour market;

● analysing qualitative trends in the labour market;

● developing policy proposals to bridge quantitative gaps between
supply and demand;

● developing policy proposals to bridge qualitative gaps between
supply and demand;

● fostering cooperation between firms and vocational education and
training providers; and

● implementing programmes of actions to bridge gaps.

Most sector councils focus on qualitative skills
gaps, analysing qualitative trends on the labour market and responding to
skills/competency needs. Almost as frequently, they analyse quantitative trends
on the labour market — that is the number of job opportunities that are
available currently and, more importantly, in the future.

Representation

If councils are linked to the IVET system, in
most cases employers’ organisations, trade unions, the ministry responsible for
the sector and the IVET providing system are represented on their boards.
CVT-oriented councils are typically financed and led by the social partners.

Efforts to make education and training more
demand-oriented require a focus on companies and production technologies, and
this is reflected in the objectives of national councils (and the desired
composition of EU-level councils). Some stakeholders, and in particular trade
unions, bring to the fore the implications for the quality of work. This is
more easily done in CVT-oriented councils where social partners have the
predominant role, and in countries where tripartite policy making and
management are more common.

4.1: FEASIBILITY STUDY’S RECOMMENDATIONS
AND POLICY OPTIONS

Based on the analysis of national
experiences, expert interviews and a survey amongst stakeholders in five
sectors (textiles, wearing apparel and leather products, construction,
distribution and trade, and health and social work), the feasibility study made
seven general recommendations:

● 
proceed with promoting EU-level Sector Councils
on Jobs and Skills;

● 
set realistic objectives and expectations;

● 
ensure commitment from stakeholders for any EU
initiative to promote such councils by making participation voluntary, and
making support temporary and dependent on achievements agreed upon in advance;

● 
make EU support dependent on a few stringent
conditions and agreement on targets at the stage of applying to set up a
council, and on participation in monitoring and evaluation measures;

● 
promote cooperation with existing EU
initiatives, notably in the fields of labour market trends, and education and
training;

● 
put the initial focus on information exchange
and on the social partners, while considering a multi-stage involvement of the
other relevant stakeholders; and

● 
establish a transversal council with a limited
number of objectives.

The study provided three policy options for
the future:

● 
no policy, with
no action is pursued and the current situation prevailing in the future.
Although not generating immediate negative effects, this option was considered
a loss of opportunities to reinforce existing initiatives in Member States,
extend good practices to other Member States and increase the available
knowledge at EU level;

● 
focus on information exchange. This option would recommend that national sector councils exchange
information on the identification and monitoring of future employment and
skills needs in the sector concerned, in terms of both tools and outcomes; and

● 
focus on policy initiatives. This option would consider information exchange as a basis for the
development of, or support for, concrete policy actions. The focus of this
option would be on objectives related to furthering the responsiveness of the
education sector, and the quantitative and qualitative alignment of future
skills needs and the education sector.

The Consultative Commission on Industrial
Change CCMI of the European Economic and Social Committee issued an opinion on
sector councils on employment and skills, which supported the concept and
recommended cooperation between sectoral councils. For more details, see box 2.5 below.

Box 2.5: CCMI opinion on matching skills:
sector councils on employment and skills [60]

This opinion, which was adopted on 17 February
2010, states that European sectoral councils (ESCs) involving various
stakeholders should provide crucial support in the process of anticipating and
managing sectoral changes, in particular in terms of employment and skills
needs, in order to adapt skills to supply and demand. The Committee supports
the concept of a sectoral council based on the model proposed in European
social dialogue.

It states further that the activities of the
European sectoral dialogue committees (ESDC) could serve as an operational
model for the sectoral councils. However, ESCs can have a broader scope, in
terms of the number of stakeholders they comprise, and a more independent role
than ESDCs, focusing more on skills and the labour market than social dialogue.
Those sectors without European Social Dialogue (ESD) structures should also
have the opportunity to set up ESCs. A new ESC could then serve as a basis for
the creation of a new ESDC.

With a view to strengthening the impact of ESCs
on sectoral changes, they should give consideration to continuing education at
all levels. Using the open method of coordination as a basis, it is important
to move towards integration of policy on continuing training.

Professional associations and organisations
providing vocational education and training should participate in ESCs.
Furthermore, ESCs should cooperate with European universities and higher
education establishments, which, in turn, should create a link between industry
and academic research relating to training.

Structural and information-based support for the
work of sectoral councils by the European Centre for the Development of
Vocational Training (Cedefop) and the European Foundation for the Improvement
of Living and Working Conditions (Eurofound) should be taken into account in
the designation of the tasks of these institutions.

Sectoral councils, both at European and national
level, should cooperate and even create links with employment and skills
observatories and their national and European networks.

4.2: MODEL CHOSEN BY THE COMMISSION

Based on the conclusions of the
above-mentioned feasibility study, the Commission has developed an initiative
to set up European Sector Councils on Jobs and Skills, which are networks of
existing national sector skills councils. The feasibility study showed that at
present, national sectoral skills councils exist in many EU Member States;
overall, taking into account the diversity of sectors and regions, there may be
more than 2 500 of these bodies in place. The majority of these are facing
the same types of challenges, but unfortunately there is little or no exchange
of information and discussion between them.

The objective is to develop, at European
level, platforms for national sector skills councils, social partners and
education and training representatives to share information on: quantitative
and qualitative trends relating to existing skills gaps and future skills
needs; best practices; and tools, processes and strategies implemented
nationally. This information should be monitored, discussed and disseminated to
a wider audience, together with recommendations for the attention of policy makers
and other stakeholders. The objectives are to:

● 
create a community of practice between these
actors in the field of skills anticipation and labour market needs, sharing
information on both initial vocational education and training and continuing
vocational training;

● 
facilitate the dissemination and use of European
instruments in the field of employment and education and training — the
European Credit System for Vocational Education and Training (ECVET), the
European Quality Assurance Reference Framework for Vocational Education and
Training (EQARF), the European Qualifications Framework (EQF) and the Europass
European CV; and

● 
optionally and conditional upon the success of
the first objective, have the councils develop joint policy initiatives for
their sector, such as proposals for qualification and competence standards for
the sector at European level.

4.3: FIRST PILOT SECTOR COUNCILS ON JOBS
AND SKILLS

The Commission decided to launch the
European Sector Councils on Jobs and Skills initiative in a limited number of
pilot sectors. The model chosen for the creation of these European councils is
to leave their governance to the sector’s stakeholders, more particularly to
the European-level social partners in those sectors for which a European social
dialogue committee exists. In April 2010 the Commission invited the relevant
sectoral social partners to take a voluntary initiative to create a European
council in their sector and to submit a joint request to the European
Commission for its establishment and financial support.

So far, the textile, clothing, footwear and
leather sector is closest to launching the first EU sector council. The
automotive commerce and steel sectors are also exploring the possibility of
setting up EU councils for their sectors. There is a great interest from many
sectors and stakeholders in this initiative, the issue of skills having gained
huge attention in recent years, as a result of concerns regarding the
competitiveness of European companies in need of a skilled workforce, and with
the ageing of the population and the need to meet the demand for replacements.
This is no surprise since the vast majority of economic sectors are affected by
these phenomena and all are fighting to attract the best talent.

Structure proposed

European Sector Councils on Jobs and Skills
will include a limited number of representatives of each national sector
council, or equivalent, in Member States where such structures exist. The
European-level sectoral social partners and other representatives of the
sector, in particular in sectors where there is no European social dialogue,
will be members of the councils’ boards and responsible for their day-to-day
management. European-level representatives of education and training systems
will also be full members of the councils

It is envisaged that the sector councils
will meet twice a year, with larger-scale conferences held to disseminate the
information collected as well as to share recommendations made with a wider
audience.

Timetable and Commission support

The establishment of European Sector
Councils on Jobs and Skills is being carried out in two phases. The first phase
consists of the identification by the sectoral social partners of existing
national observatories and councils on jobs and skills for the sector
concerned. This first phase also serves to test the opportunity to launch a
sector council at European level or not, by questioning the national councils
on their interest in the initiative, their likely involvement, the type of
information they would like to exchange and the type of actions they would want
to see developed by the European network.

The second phase involves the creation of
the sector council itself, bringing together these bodies in a network and
starting the information collection and sharing process.

The Commission will financially support the
sector councils and the social partners. However, this support will be
conditional on an evaluation of the sector councils in terms of output,
commitment, satisfaction and value added.

The next section of this chapter focuses on
skills initiatives in the automotive sector, a sector that has already been
identified in various parts of this report as being faced with significant
change over the coming years.

5: SKILLS
INITIATIVES IN THE AUTOMOTIVE SECTOR

The automotive industry is a key sector in
the EU economy. Europe is the world’s largest producer of motor vehicles,
making almost a third of its passenger cars. According to the European
Automobile Manufacturers Association (ACEA), within the EU there are around 240
vehicle production and assembly plants in 19 Member States, producing passenger
cars, light commercial vehicles or vans, buses and coaches, medium-sized and
heavy duty lorries and engines, plus over 8 000 equipment manufacturers.
The sector is Europe’s largest private investor in research and development,
investing nearly € 20 billion in this area annually, and is a key driver
of innovation.

The automotive sector is a major employer
of skilled workers. In 2007, according to ACEA, it employed directly 2.2
million people in the EU (6.5 % of total employment in EU manufacturing)
in automotive manufacturing, equipment and accessories, plus bodywork, trailers
and caravans. A further 9.8 million people were employed indirectly in related
manufacturing activities (eg tyres, gears and electrical equipment), automobile
use (eg sales, distribution, maintenance and repairs) and passenger and freight
road transport. The EU Member States with the largest direct automotive
workforces are Germany, France, the UK, Italy, Spain, Poland and the Czech Republic.

Over the past century, the automotive
industry has been characterised by one constant factor: change. It was thus
already undergoing a process of restructuring before the onset of the financial
and economic crisis in 2008-2009. It was facing: overcapacity and declining car
ownership through increased urbanisation and congestion; stagnation in western
markets, though coupled with significant growth elsewhere; consolidation; and
increasing fuel costs and environmental concerns. The crisis has only compounded
the sector’s inherent problems. For an overview of the drivers of change in the
automotive industry, see box 2.6.

Against this background, the various actors
in the automotive sector have increasingly become aware of the need to
anticipate change, and to take a proactive approach rather than to react in a
defensive and protectionist way. Areas where the automotive industry has been
active in moving forwards and formulating new policy include using new
technology, specifically green technology, in response to environmental
concerns.

Box 2.6: Drivers of change
in the automotive industry

Changes in society and evolution of demand. The need for mobility remains high in mature economies and is
increasing in emergent ones, but is accompanied by new pressures and
aspirations, such as environmental concerns, urbanisation, demand for
differentiation and increased energy prices. The car is becoming less a prized
possession and more a means of transport (which increases competition with
other modes of transport, especially in cities, and raises the importance of
user costs).

Emerging technology. The car industry
has always been one of the most innovating sectors and is likely to be even
more so in the future. Three areas of technology are particularly important:
electronics and ICT; new composite materials; and new, non-fossil fuel forms of
propulsion.

Company strategies. The European
industry is composed of internationally recognised specialist manufacturers and
large generalist ones less involved in exporting. The pace of
internationalisation of the latter will be important in competition with
low-cost producers outside Europe, as will be the range of models they can
offer and the innovations incorporated in them.

Policies of regulation. Such policies
include fiscal measures as well as the regulatory framework as such, and affect
both: the supply side, by imposing, for example, limitations on CO2
emissions; and the demand side, by raising prices, as well as stimulating new
technologies.

5.1: EUROPEAN PARTNERSHIP FOR THE
ANTICIPATION OF CHANGE IN THE AUTOMOTIVE INDUSTRY

A European partnership for the anticipation
of change in the automotive industry was launched in October 2007 on the
occasion of a Restructuring Forum on the sector organised by the European
Commission. The partnership is based on a joint declaration[61] by ACEA, representing automotive manufacturers, the European
Association of Automotive Suppliers (CLEPA) and
the European Metalworkers’ Federation (EMF), supported by the Commission. The
partnership’s aim is to better anticipate and manage changes in the European
automotive sector, thus contributing to the industry’s sustainability.

The partnership declaration presents a
common diagnosis of the issues facing the sector. It outlines the role and
responsibilities of each actor (the EU, governments, companies, trade unions
and regions) in the common mission of: maintaining and strengthening the
competitive position of EU automotive companies; creating high-quality jobs;
and reinforcing the employability of the sector’s workers, seen as a
precondition for sustainable growth and social cohesion. The declaration sets
out ‘key factors of success to overcome the challenges’ facing the industry, as
follows:

● 
mutual trust and partnership are essential
between all the actors;

● 
there must be better regulation and policy
coordination, particularly relating to competitiveness, environment and
employment;

● 
innovation is the key factor for
competitiveness;

● 
investment in employees’ skill enhancement is
vital;

● 
improvements in productivity must continue; and

● 
it is necessary to continue to facilitate
anticipation, preparation and good management of change and restructuring.

The parties agreed to work together in
order to support the creation of analysis and forecasting tools, cooperate in
the dissemination and discussing of the findings, and ensure the provision of
accurate anticipation and adaptation tools.

Two 12-month projects have been conducted
by CLEPA and EMF — with ACEA and the Council of European Employers of the
Metal, Engineering and Technology-Based Industries (CEEMET) acting as observers
— with the aim of implementing the partnership’s work plan.[62] The European Commission’s Directorate-General for Employment,
Social Affairs and Inclusion provided financial support. The first project
focused on good practices in the anticipation of change and skills needs and
the enhancement of employability, while the second tackled issues such as
sustainable mobility, evolving societal demands, energy supply and efficiency,
and electric cars. For more details, see box 2.7.

Box 2.7: European
partnership for the anticipation of change in the automotive industry — main
outcomes of projects, 2008-2011

First project, 2008-2009

The project produced three studies, dealing with:

● 
good practices in anticipating and managing
change within companies and regions;

● 
good practices in increasing skills levels and
employability within companies, regions and sectors; and

● 
an analysis of automotive regions.

Two dissemination events were held to mobilise the actors around the
main principles and objectives of the project:

● 
a forum on good practices in anticipating and
managing change within companies and regions in the automotive industry, held
on 15 June 2009 at the Committee of the Regions, Brussels; and

● 
a forum on anticipation of change in the
automotive sector, held on 14 October 2009 at the European Parliament, Brussels.

On the occasion of the forum in October 2009, CLEPA and EMF
presented a joint declaration[63] which addressed the key issues currently faced by the automotive
industry and identified the main actions to be taken in order to tackle them.
The joint declaration recommended action in the following areas:

● 
the creation of a Pan European Observatory that
draws upon the best practices of government bodies, consultancy companies, and
research institutes and acts to coordinate activity between the existing
observatories; builds on a network of international agencies; conducts primary
research, and makes policy options available to key stakeholders. The ‘European
Observatory’ would in this way provide analysis of drivers of the long term eg
consumer attitudes, changing life style, urbanisation, that can also be fed
into the national observatories and so inform European, regional and company
decision-making;

● 
the financing of primary research on the
objectives and challenges (eg environment, pricing, urban adaptation,
sustainable development, Corporate Social Responsibility, and the relationships
between them) of the industry so firms can better align themselves strategically;

● 
the setting up of specific partnerships, with
European Social Fund support, to minimise social impact ie specific action
plans and burden sharing agreements with regional and local authorities; and

● 
the financing through the European Social Fund
of business and education initiatives that focus on the tools and techniques of
anticipation in the automotive industry.

Second project, 2010-2011

The second project focuses on actions on three issues:

● 
mobility, quality of life and societal demands;

● 
the impact of regulatory changes; and

● 
integration of the supply chain.

Main events under the project include:

● 
a conference entitled What future for
transport? Beyond challenges, towards a shared vision for mobility, held on
27 April 2010 at the European Economic and Social Committee, Brussels. This
conference debated the question of future mobility and its impact on the
automotive sector with a view to deepening collaboration of the sector’s main
actors and developing a joint policy approach to enhance the future
competitiveness of this industry. The project participants believe that only by
anticipating future changes in mobility and transportation needs, can the
European Automotive Industry generate growth, efficiently reallocate labour to
relevant activities and, at the same time, upgrade workers’ skills to
contribute to their long-term employability;

● 
a forum on electro-mobility, held on 30 June
2010 at the European Economic and Social Committee, Brussels. This forum
provided high-level discussions among all relevant stakeholders with a view to
fostering an ‘integrated approach’ that will enable electro-mobility to achieve
the expected results in terms of competitiveness and employability of the workforce.
In terms of future action, the following areas are a priority: ensuring that alternative propulsion vehicles are at least
as safe as conventional ones; fostering education and training practices to
ensure the transition of the workforce through new green jobs; promoting common
standards that will allow all electric vehicles to be charged anywhere in the
EU; encouraging installation of publicly accessible charging points; ensuring
the development of smart electricity grids; and updating the rules and
promoting research on recycling of batteries; and

● 
two more public events on the impact of the
regulatory framework (27 October 2010) and integration of the supply chain
(January 2011).

These two projects can be seen as an important contribution to the
debate about the key issues facing the automotive industry in the future. They
have brought together the main actors concerned with this sector and have
brought relevant issues to prominence at EU level. The main stakeholders have
formulated a plan of action that will now take these issues forward.

5.2: ANTICIPATION OF SKILLS NEEDS —
TOWARDS A EUROPEAN SECTOR COUNCIL

As part of the European partnership for the
anticipation of change in the automotive sector, the EMF and CLEPA called in
October 2009 for the creation of a pan-European observatory on skills issues.
In an April 2010 Communication entitled European strategy on clean and
energy-efficient vehicles,[64] the European Commission stated that, based on this request, it
would establish a European sectoral skills council for the automotive industry,
involving a network of national observatories. The initiative forms part of the
Commission’s current initiative to launch European Sector Councils on Jobs and
Skills in a number of pilot sectors — see section 4.3 of this chapter for
details.

The context for the automotive initiative
is that the sector is increasingly being affected by technological changes,
which are themselves closely linked to new societal demands. These
technological changes imply renewed efforts in research and development and
create high pressure in terms of new skills requirements and qualification
needs. Adverse demographic trends also constitute a major challenge.

Automotive industry stakeholders therefore
see it as very important to anticipate these changes and prepare companies and
workers well in advance, in particular to ensure that the sector has a suitably
skilled workforce throughout Europe. Any successful business innovation policy
depends on accurate anticipation of the skills needs and on avoiding skills
shortages. New tasks, new skill profiles and new working arrangements will be
needed in the automotive sector, and it is thus necessary to reflect on how to
manage the transformation process. Anticipating needs and reinforcing
investment in education and training are essential to give the European
automotive industry a suitably skilled workforce, thus guaranteeing its future
competitiveness.

The European-level automotive social
partners and industry organisations are now working on concrete ways of
establishing a European sectoral skills council, by mapping existing national
and regional sector councils and labour market intelligence concerning the
automobile industry throughout the European Union.

The role of this council would be to help
existing national observatories on skills and qualifications in the automotive
sector, facilitate the exchange of information between them, and allow its
dissemination to a wider audience. The participants would be the European
social partners and representatives from national sectoral observatories. The
Commission would act as an observer and support the initiative financially.

A European sectoral skills council will not
bring about ground-breaking technological innovations but it will provide the
necessary information and exchanges of good practice. This will help to ensure
that the European automotive industry’s workforce can rapidly and effectively
adapt to technological innovations and challenges.

Aside from sector-specific concerns, SMEs
have particular needs and are in a different situation from larger companies
when it comes to maintaining and improving the skills levels of their
workforce. Therefore, in the final part of this chapter, we turn to the
specific challenges faced by SMEs.

6: TRAINING
IN SMALL AND MEDIUM-SIZED ENTERPRISES
6.1: SMEs IN EUROPE

Small and medium-sized enterprises (SMEs)
are the backbone of the EU economy. In 2008, according to Eurostat figures,[65] of nearly 20.8 million companies in the EU, 99.8 % were SMEs,
defined officially in employment terms as those with fewer than 250 employees —
see table 2.3. SMEs are further divided by the EU into medium-sized
enterprises, with 50-249 employees, small enterprises with 10-49 employees, and
micro enterprises, with fewer than 10 employees. Micro enterprises made up 91.8 %
of EU companies in 2008.

In 2008, SMEs accounted for around
two-thirds (67.4 %) of all employment by enterprises, while micro
enterprises employed around three out of 10 (29.7 %) of the total.

The relative importance of SMEs — and of
the various size categories of SME — varies considerably between countries and
between economic sectors. Average firm size is smallest, in employment terms,
in Greece and Malta, followed by the Czech Republic, Italy and Portugal. It is largest in Slovakia, followed by Germany, Ireland and the UK.

In sectoral terms, in 2008 SMEs accounted
for 88 % of all employment in construction, and 83 % in hotels and
restaurants. However, they employed only 22 % of the workforce in
electricity, gas and water supply, and 31 % in mining and quarrying.

Table 2.3: Enterprises and occupied
persons, by size class, in the non-financial business economy, EU 27, 2008
estimates

Size class || Enterprises || Employment || Average occupied persons per enterprise

|| No. || % || No. || % || No.

Micro || 19 058 000 || 91.8 || 39 630 000 || 29.7 || 2.1

Small || 1 424 000 || 6.9 || 27 652 000 || 20.7 || 19.4

Medium || 226 000 || 1.1 || 22 665 000 || 17.0 || 100.3

SMEs || 20 709 000 || 99.8 || 89 947 000 || 67.4 || 4.3

Large || 43 000 || 0.2 || 43 414 000 || 32.6 || 1 006.1

Total || 20 752 000 || 100.0 || 133 362 000 || 100.0 || 6.4

Source: Eurostat, as elaborated by EIM
Business & Policy Research for European Commission (2010), ‘European SMEs
under Pressure, Annual Report on Small and Medium-sized Enterprises 2009’,
Directorate-General for Enterprise and Industry.

SMEs are a key driver of economic growth,
innovation, employment and social integration, and the European Commission sees
it as vital to mobilise and adapt to small business all existing policies and
tools, at both European and national levels. The Commission has developed and
implements a range of policy measures specifically meant to assist SMEs in Europe.[66] These policies aim to create conditions in which small firms can be
created and thrive. If the EU is to achieve its goals of speeding up economic
growth and creating more and better jobs, it will be SMEs which will play the
most important role, in particular because these firms are the main source of
new jobs in Europe. In order to better integrate the SME dimension into EU
policies, a special SME envoy[67] was appointed within the Commission’s Directorate-General for Enterprise and Industry. In addition, in June 2008, the Small Business Act for Europe was
adopted as a comprehensive policy framework for the EU and its Member States.

Box 2.8: EU measures to help SMEs

The European Commission has
developed and implements a range of policy measures specifically meant to
assist SMEs in Europe. These policies are aimed at creating conditions in which
small firms can be created and can thrive. EU policy in relation to SMEs is
concentrated in five key areas:

● promotion of entrepreneurship and skills;

● improvement of SMEs’ access to markets;

● cutting red tape;

● improving the growth potential of SMEs; and

● consultation with SME stakeholders.

The Small Business Act (SBA) for Europe, adopted
in 2008, aims to put into place a comprehensive policy framework for the EU and
its Member States. The SBA is an ambitious package of policies designed to put
SMEs’ interests at the centre of decision-making. At the height of the economic
and financial crisis, SBA implementation in the first year focused delivery on
the following priorities:

● reducing administrative burden for SMEs;

● access to finance;

● access to markets; and

● promoting entrepreneurship.

6.2: GUIDE FOR TRAINING IN SMEs

A recent specific initiative by the
European Commission to assist small business is a Guide for training in
SMEs, published in June 2009.[68] The guide
illustrates how training and skills development can be successfully developed
and implemented in SMEs despite the internal and external barriers that these
firms face in this area. It is based on work carried out in the context of the
Restructuring Forum on the adaptation of SMEs to change, held in November 2007,
and was prepared by the Directorate-General for Employment, Social Affairs and
Inclusion, in cooperation with other Commission Directorates-General, key
institutions in European training policy and the European-level social
partners.

Based on an evaluation of practical
experience and innovative solutions to address major challenges and problems
(with references to 50 cases of good practice), the guide for training in SMEs
provides a comprehensive and systematic overview of concrete solutions and key
elements in various areas where SMEs typically face problems and obstacles in
preparing, implementing and managing training appropriately. It groups the
various challenges and solutions around three basic aspects:

● 
addressing internal barriers and obstacles to
training facing SMEs;

● 
finding suitable methods and techniques for
training; and

● 
coping with current and structural challenges of
competence development.

For each topic covered, the guide
highlights major lessons to be learned, crucial factors of success and aspects
of transferability. In the next sections, we summarise some of the main
challenges and solutions identified by the guide.

Box 2.9: Other studies on the skills needs
of SMEs

Report on the identification of future
skills needs in micro and craft (-type) enterprises up to 2020

The European Commission, Enterprise and Industry Directorate General
has commissioned a major research study focusing on the identification and
analysis of skills needs in micro and craft (-type) companies.[69] The research
study aims to contribute to a better understanding of current and future skills
needs of micro and craft enterprises in Europe and to mainstream better the
needs of these enterprises in existing policy initiatives at EU level aiming at
anticipating and matching labour market and skills needs, identification of
skills needs and mismatches, and strengthening the links between vocational
education and training (VET) and the labour market. This study is regarded as a
part of the New Skills for New Jobs initiative and it should support the
implementation of the Small Act for Europe.

This study identified future skills needs in micro and craft
enterprises up to 2020 in three important economic sectors: construction, food
and private personal/health services. Recommendations are summarised with a
focus on three main areas of practice: future skills forecasting, communicating
future skills needs and integrating future skills into training programmes.

The qualifications-supporting company — How
do small and medium sized enterprise support formal adult education?

The EC-funded ‘Lifelong Learning 2010’
research project[70] analysed participation by employees of small and
medium enterprises (SMEs) in formal adult education (education and training in
the regular system of schools, universities and colleges). Based on 89 case
studies of SMEs in 12 European countries (covering 113 employees) the researchers
developed a typology of adult participation in LLL, identifying five basic
types of participation patterns:

o Completing — these are adults usually aged between 15 and 25
years who combine working and studying for economic reasons. Their main focus
is on completing their education.

o Returning — these are adults who have stopped their education
in the past and, having worked for some years, decide to take up education
again.

o Transforming — these are adults who are making a
fundamental change in career. Their current employment is considered temporary
and will be left when a position comes up in the new field.

o Reinforcing — these are adults who enter education to progress
within their chosen career and generally this provides the greatest potential
for support from employers. [Four subtypes are distinguished: progressing,
adapting, specialising and peaking.]

o Compensation — these are adults who engage in education
because their career is unsatisfactory and education benefits them on a
personal level.

The research provides a deeper insight into
the individual and organisational interests of adult education, as well as on
the interaction (and barriers) between workplaces and educational institutions.

OECD project leveraging training: skills development in SMEs

The OECD LEED programme is conducting a project to identify ways to
overcome the barriers to workforce development faced by SMEs. The project aims
to analyse formal education and training programmes and alternative ways of
learning through knowledge-intensive service activities (KISA). The project
examines local skills and training ecosystems of selected countries; it also
analyses the relevance of green skills for SMEs, making an important
contribution to the OECD green growth strategy by exploring the transformation
and greening of SMEs towards a low-carbon economy.[71]

6.3: TRAINING — A KEY TO SUCCESS AND
ADAPTATION

The skills, motivation and activation of
employees are crucial preconditions for the sustainable success, productivity
and innovation of enterprises. However, SMEs in Europe — and in particular
micro and small enterprises — face many challenges and difficulties with regard
to continuing training and the development of their human resources. For
example:

● 
how to identify a training programme suited to
the company’s specific needs?

● 
how to find financing for training courses?

● 
how to organise training, for example further
training for workers in micro companies where each worker is needed every day?

● 
how to attract more qualified young people?

The situation of SMEs with regard to
training is characterised by a paradox. On the one hand, continuing training
and lifelong learning (for both workers and managerial staff) are regarded as
crucial elements of competitiveness for SMEs against the backdrop of globalisation.
On the other hand, however, statistics show that continuing training and
qualifications are less likely to be available to employees working in SMEs
than to those in large companies.

6.4: FINANCIAL AND ORGANISATIONAL MEANS

A lack of financial means and
organisational reasons are the first obstacles to training faced by many SMEs.
There are, however, many examples of good practices that can help SMEs, alone
or in cooperation, to develop training without disturbing their organisation
too greatly. E-learning or distance learning, for instance, are particularly
well adapted. Thanks to information and communications technology (ICT),
training can be provided at the time that suits managers and employees best. To
help employers to launch training, there are several tools offering
organisational advice that seem particularly adapted to SME culture.

Box 2.10: Supporting
training in French SMEs

In France, Agefos-PME is a collection body dedicated to SMEs. It has developed several
innovative tools for SMEs, with the aim of facilitating their access to
training. Among the initiatives proposed by the regional agencies of Agefos-PME
is the ‘Training Pack’ (Pass’ Formation). This is a series of
training modules sometimes wholly financed by Agefos-PME for its members (with
the participation of the ESF, the State and local authorities) — or offered at
a very low cost (€ 200 a day for example). More importantly, Agefos-PME covers 100 % of wages during training and 100 % of any
additional costs (travel and accommodation). In order
to overcome organisational barriers, the training modules are short, lasting a
maximum of five days. The contents of these training modules have been
specifically designed for SMEs and focus on areas such as management, HR,
commercial issues, languages, and law.

Regarding the lack of financial means, SMEs
can be helped in several ways, for example through the sectoral joint bodies
that collect special taxes for training measures in some Member States, or other public organisations. However, it is also important to support SME managers,
employees and entrepreneurs by other means, for instance in looking for public
subsidies or European funding, as access to information is often complex.
Public aid can also help SMEs with related organisational matters. For
instance, a company may be reimbursed for the absence of an employee. Many
other initiatives exist that can address the issue of cost for SME managers and
entrepreneurs, such as training vouchers or qualification cheques.

SMEs do not generally have the means to
send their experienced staff on longer training courses. The training
programmes and methods available on the market are too often unsuited to the
size and needs of this type of company. Short training programmes (a few days
that can be split over the whole year) that are ‘straight to the point’ can be
very helpful from this perspective. It is important to note that training does
not have to be expensive to work well. Informal or on-the-job forms of training
can also address the needs of skills and competence development, if they are
well organised and their needs and objectives are clearly identified.

All over the EU, initiatives are being
implemented in order to adapt the content of training to the needs of SMEs.
Examples include: the development of quality labels and the enhancement of
skills through informal learning or ‘communities of practice’ for SMEs in the
tourism industry; the upgrading of employees’ skills in the textiles and
leather industry to help companies facing internationalisation; or increasing
employees’ ICT-related skills in SMEs.

6.5: HR AND SKILLS DEVELOPMENT POLICY

Although human resources and the skills
base are the most important factors in competitiveness and success for many
SMEs, HR and skills development are often not organised in a systematic way or
with a medium- and long-term approach. This situation can be helped by the use
of external advisory services, diagnostic tools and other practical
instruments. External public or private actors can offer guidance and access to
financing and aid for HR and skills development, which may target people with
specific needs on the labour market, such as less qualified workers, older
workers or women returning to employment. In the frequent absence of personnel
resources in SMEs, external or internal facilitators, advisers, coaches,
enablers and counsellors can help to develop a culture of training and, beyond
that, a culture of anticipation and management of change. An example of an
innovative awareness-raising approach is to appoint ‘ambassadors’ with the task
of promoting training to help keep older workers in employment. Equally,
training for managers and entrepreneurs should be given close attention.

Perceptions of training needs

For many reasons — including a lack of
opportunities, information and resources — in many SMEs training is not perceived
as important by managers, entrepreneurs and workers alike, and it is often
thought that existing training programmes are not suitable for SMEs. This makes
it important to stress that there are many examples of good practice with
regard to making suitable training and skills development possible in SMEs. For
example, specific tools adapted to SMEs can identify a company’s training or
skills needs, while initiatives can inform SME managers, entrepreneurs and
workers about existing opportunities, thereby raising the awareness of training
opportunities.

Resource pooling and cooperation

Involvement in networks, cooperation or
cluster activities with other SMEs can enable companies to engage more
effectively in ongoing training and competence development. Such networks can
help them to find access to information, increase awareness of the importance
of anticipating change and develop training. Networks can be organised on a
local basis, generally with a sectoral dimension, while wider communities of
practice can also be set up through online forums. An example of a network
approach is the state-funded Skillnets in Ireland, which supports the
development of enterprise-led learning networks dedicated to the promotion and
facilitation of in-employment training and upskilling as key elements in
sustaining national competitiveness.

Attracting young workers

Increasingly, SMEs are facing significant
challenges due to demographic change. An important issue is that many qualified
young people prefer large companies, and consequently SMEs need to do more to
attract and retain young workers. There are a range of innovative experiences
in the EU that illustrate how they can do this. For example: joint
apprenticeships programmes can be developed on a territorial basis, corresponding
to the needs of SMEs; networks can be set up to exchange good practice in the
successful management of demographic change; or practical courses to attract
younger workers can be introduced in sectors facing recruitment difficulties.

6.6: LESSONS LEARNED

The guide for training in SMEs shows that
there is a wide and rich diversity of practices and experiences in this area in
 Europe. However, in the end, they all lead to the same conclusion: if SMEs see
training simply as an obstacle course, the obstacles can be easily overcome.
However, this can be achieved only if SMEs receive help, support and guidance
in approaching training measures.

Many SMEs are confused and not that well
informed about the large range of training opportunities in their countries.
The existence of a large body of different training programmes has often
hindered entrepreneurs and employees in SMEs in making decisions on training.
Further, organisational barriers, a lack of financial resources or a mismatch
between actual training needs and supply are widespread barriers. However, as
highlighted by the guide, innovative solutions exist, addressing the common
constraints of SMEs with regard to training. While each company’s situation
varies according to its sector, size and region and there is no universal
solution to all their problems, each case has its solution. The factors of
success identified in the guide (see box 2.11) highlight important lessons that
may facilitate better and more successful training methods in the future.

Box 2.11: The key messages of the guide for training in SMEs, drawn from
experience across the EU

Anticipation. In a
rapidly changing economy, anticipation of skills and competence should become
second nature to SMEs. They need to be equipped with the appropriate tools and
advice in human resource management.

Social dialogue.
Anticipating skills and competence implies a considerable degree of dialogue
between workers and employers. Assessment tools can offer an initial basis for
this dialogue to be implemented. The proximity between managers/entrepreneurs
and employees in SMEs provides many opportunities for a common construction of
company plans with regard to human capital.

Assessment. A
permanent, lifelong, culture of assessment should be promoted. In the context
of a knowledge society, skill needs are rapidly changing. Needs assessment is
therefore a first step to anticipating needs and relevant social dialogue.
Evaluation of the results regarding the chosen objectives is also an element of
a permanent culture of assessment. Modifying the perception of needs is an
important challenge, but European SMEs can do it.

Collective approach. SMEs should not be left alone: they are often at the centre of
networks, including other SMEs and larger companies, public institutions in the
field of training or employment, professional bodies and federations, and
social partners. These networks need to be active. In view of the current
economic crisis, a collective investment in SMEs will prepare them for the
future.

Guidance and tools. When they step forward beyond their initial reluctance to receive
external guidance offered by professional or public actors, SMEs can benefit
from tailor-made tools to overcome obstacles (financial or organisational) in
the field of training. Whether they are within or outside a company (or both),
facilitators and enablers correctly trained to do their job can be promoted in
their function.

Opportunities.
Plenty of opportunities exist for SMEs, but the right information is often
lacking. SMEs might not always be aware of these opportunities, considering
them inaccessible or not intended for them. This is not the case. When
correctly equipped and enabled, SMEs can more easily take advantage of these
training opportunities, eventually resulting in new economic and social
opportunities for the company and its workers.

CHAPTER 3: EU ROLE  WITH REGARD TO
RESTRUCTURING SUPPORT

The EU plays an important role in the restructuring
process, by means such as regulating and endorsing state aid packages and the
specific help given by the European Social Fund (ESF) and the European
Globalisation Adjustment Fund (EGF). During the crisis, the Commission’s policy
response has centred on a number of Communications setting out how it intended to
apply state aid rules to government measures aimed at supporting the banking
sector and the real economy.

Most specifically, temporary measures,
adopted under Article 107(3)(b) of the Treaty, have proved to be an important
tool in coping with the crisis. The Commission does not impose any specific
restructuring measure from the outset and there is no specific business model
that is rejected in principle. The starting point of the analysis is always the
restructuring plan submitted by a Member State. A temporary framework for state
aid has been prolonged until 2011, which will maintain
some measures that facilitate access to finance, especially for SMEs, ie
subsidised state guarantees and subsidised loans, for example for green
products.

The ESF has been the EU’s main financial
instrument for the anticipation and management of change since its creation in
1957. Its specific aim is to render the employment of workers easier and to
increase their geographical and occupational mobility within the Union, and to facilitate their adaptation to industrial changes and to changes in
production systems, in particular through vocational training and retraining.
Over 400 000 enterprises have benefited from ESF interventions in the
field of adaptability, and the ESF has been particularly supportive to actions
anticipating economic change.

More specifically, in the context of
restructuring and change, the EGF was established in 2007 to help workers made
redundant due to structural changes in world trade patterns, assisting them in
finding alternative employment. The EGF can co-finance active labour market
measures to benefit redundant workers, such as job-search assistance, training,
incentives to take up alternative employment and the promotion of
entrepreneurship. A total of 29 applications for an EGF contribution were
submitted to the Commission in 2009, representing a significant increase on
previous years.

Change and restructuring, in the context of
globalisation, has a significant impact in the EU regions. Globalisation brings
about rapid changes and an increasing speed of structural adjustment. In
particular, low-skilled labour as well as low value-added economic activities
have felt the force of global competition in recent years. Many regions
throughout the EU will therefore have to restructure their economy and promote
continuous innovation in products, management and processes, as well as human
and social capital, in order to remain competitive. The crisis has had a
varying impact and additional disparities for long-term growth perspectives.
Particularly negatively affected are regions in the UK, Spain, Italy and Greece, which have become more vulnerable compared with their situation before the
crisis. The European Regional Development Fund (ERDF) has played a vital role
in facilitating structural adjustments initially induced by internal factors
such as the establishment of the Single Market and industrial restructuring,
and will most likely continue to play a particular role in supporting
adjustments of particular EU regions. There are a number of examples of
specific success stories in terms of regional adjustment and regeneration, from
all parts of the European Union.

1: THE ROLE
OF STATE AID

The concept of state aid is defined in
Article 107(1) of the Treaty on the Functioning of the European Union (TFEU)[72] and covers all
aid granted by Member States or through state resources in any form whatsoever
which distorts or threatens to distort competition on the internal market.
Member States’ interventions designed to help ailing companies can take
different forms, but tend to include, in particular:

● capital injections;

● debt waivers;

● debt rescheduling;

● debt to equity swaps;

● soft loans; and

● loan guarantees.

If the public authorities claim that they
are prepared to grant the above measures to companies on the same conditions as
market operators, and thus these interventions do not grant any economic
advantage to the company, the Commission will verify the existence of an
advantage under the so called market economy operator principle.[73] Provided this
test is not satisfied and the measure constitutes state aid, its compatibility
with the internal market is assessed by the Commission under the Rescue and
Restructuring Guidelines.[74] The Rescue and Restructuring Guidelines are based on Article
107(3)(c) of the TFEU and apply to all sectors, except the coal and steel
sector.

Rescue aid to firms in difficulty can only
be awarded as a temporary assistance in the form of a loan or guarantee to keep
an ailing company afloat for a period of six months during which a
restructuring plan or liquidation plan is devised. Restructuring aid can be
granted in any form on the basis of a restructuring plan fully endorsed by the
Commission which would lead to long-term viability of the company on the basis
of realistic assumptions and in a reasonable timescale. The restructuring plan
should include compensatory measures, in particular divestment of assets,
reductions of capacity or market presence or entry barriers to the market
concerned, in order to compensate for the distortive effect of the aid on the
market. Write-offs and closure of loss-making
activities which would at any rate be necessary to restore viability cannot be
considered reduction of capacity or market presence for the purpose of the
assessment of compensatory measures.

The underlying principle of both rescue and
restructuring aid is ‘the one-time-last-time principle’ which means that a
company in difficulty which has benefited from a rescue or restructuring aid in
the past 10 years, is not eligible to receive further state support.

The Rescue and Restructuring Guidelines
take into consideration policy objectives such as social and regional policy
and recognise the beneficial role played by small and medium enterprises in the
economy. On the other hand, the Rescue and Restructuring Guidelines clearly
underline that rescue and restructuring aid cannot be justified to keep ailing
companies artificially alive in a sector with long-term structural overcapacity
or allow companies to survive only as a result of repeated state interventions.[75]

1.1: THE
COMMISSION’S POLICY RESPONSE TO THE FINANCIAL CRISIS

In order to assist Member States in taking
urgent measures to preserve financial stability and provide legal certainty,
the Commission adopted a number of Communications between October 2008 and July
2009, setting out how it would apply state aid rules to government measures
aimed at supporting the banking sector and the real economy (which is that part
of the economy which is concerned with producing goods and services, in
contrast to that which is concerned with buying and selling on the financial
markets) in the context of the economic crisis. The primary rationale of this
guidance was to ensure that emergency measures taken for reasons of financial
stability maintain a level playing field between firms which receive public
support and those which do not, as well as between companies located in
different Member States. These rules were adopted under Article 107(3)(b) of
the Treaty in the light of the seriousness of the crisis and its impact in the
overall economy of the Member States. An overview of these Communications is
provided below.

1.1.1: STATE AID TO THE FINANCIAL SECTOR

The Commission’s Communication entitled The
application of State aid rules to measures taken in relation to financial
institutions in the context of the current global financial crisis ,[76] issued in 2008, was the Commission’s first response to the
worsening financial crisis. Based on the principles of the existing guidelines
on rescue and restructuring aid, this Communication provided guidance on the
criteria for determining the compatibility of state support measures for the
financial sector within the special circumstances of the crisis. In particular,
the Communication provided detailed guidance on government guarantees for bank
liabilities, which were the most widespread initial response to the crisis,
when it was necessary to re-start the interbank lending markets.

The Communication of October 2008
recognised the importance of recapitalisation schemes in preserving the
stability and proper functioning of financial markets. In response to requests
for detailed guidance on the compatibility of recapitalisation schemes, the
Commission issued a further Communication on 5 December 2008, entitled The
recapitalisation of financial institutions in the current financial crisis:
limitation of aid to the minimum necessary and safeguards against undue
distortions of competition .[77] The Communication recognised that the recapitalisation of banks
could serve a number of purposes, including not only the restoration of
financial stability, but also the preservation of lending to the real economy.

Subsequently, several Member States
announced an intention to complement guarantee and recapitalisation measures by
providing some form of relief for impaired bank assets.    In its February 2009
Communication on impaired assets,[78] the Commission provided guidance on the treatment of asset relief
measures by the Member States. This guidance is based on the principles of
transparency and disclosure, adequate burden-sharing between the state and the
beneficiary and prudent valuation of assets based on their real economic value.

The Communication of October 2008 made
clear that a far reaching restructuring would be required for financial
institutions with problems resulting from their particular business model or
business practices, whose weaknesses had been exposed and exacerbated by the
crisis. Other, fundamentally sound institutions might require less substantial
restructuring in order to ensure long-term viability. The Commission’s July
2009 Restructuring Communication[79] clarifies some aspects of restructuring in the context of the
present financial crisis. In particular, it gives detailed guidance on how
restructuring plans need to address long-term viability, burden-sharing between
the bank, its shareholders and the state, and distortions of competition
created by the aid.

The Commission does not impose any specific
restructuring measure from the outset and there is no specific business model
that is rejected in principle. The starting point of the analysis is always the
restructuring plan submitted by a Member State. In that respect, the first
priority when dealing with the restructuring of banks is to ensure that they
can operate profitably without state support. The benchmark of long-term
viability may call for different solutions across banks, ranging from limited
restructuring with no divestments to an orderly winding-down of unviable entities.

Any restructuring plan has to adequately
address measures to limit distortions of competition. Taking account of the
market circumstances of each case and the scale of State intervention, measures
to limit competition distortion may include divestments, temporary restrictions
on acquisitions by beneficiaries and other behavioural safeguards.

If, in all restructuring cases that have
been dealt with by the Commission, the principles of the Restructuring
Communication have been carefully applied, account has also been taken of the specificities
of each individual case. Reaching the right balance between the multiple
aspects of a restructuring case requires thorough knowledge of the facts and
specificities of each bank. However, the principles guiding the Commission’s
approach are clear and consistently applied across cases.

1.1.2: STATE AID TO THE REAL ECONOMY

In parallel to the measures directly
addressing financial institutions, the Commission also adopted a temporary
framework[80] for state aid measures in order to counteract the increasing
difficulty of the real economy in obtaining credit and other types of financial
support, while maintaining a level playing field and avoiding undue
restrictions of competition.

The additional state aid measures provided
for by the temporary framework basically pursued two objectives:

● 
to immediately unblock bank lending and thereby
help provide continuity in company access to finance; and

● 
to encourage companies to continue investing
into a sustainable future, including the development of green products.

The temporary framework provides for a
number of new measures that could be applied by Member States for a limited
period of time, until the end of 2010, as well as a number of temporary
derogations from existing state aid rules:

● 
a lump sum of aid of up to € 500 000
per company for two years, which can cover investments and/or working capital.
In October 2009, the Commission introduced an amendment to the Temporary
Framework in order to allow for a compatible limited amount of aid of € 15 000
for the agricultural sector,[81] which was initially excluded from the scope of application of this
measure;

● 
subsidised guarantees for loans at a reduced
premium. The guarantee can cover up to 90 % of the loan and it may relate
to both investments and working capital loans;

● 
aid in the form of a subsidised interest rate;

● 
subsidised loans for the production of green
products (meeting
environmental protection standards early or going beyond such standards); and

● 
a risk capital injection for SMEs of up to € 2.5 million per year (an increase on the
previous € 1.5 million per year) in cases where at least 30 %
(instead of the previous 50 %) of the investment cost comes from private
investors.

Further, Member States can benefit from a
simplification of the ‘escape clause’ contained in the Communication on
short-term export-credit insurance.[82] This clause gives
the possibility of using public funds to cover marketable risks, which are
usually excluded from this benefit.

The temporary framework is, in principle, of
general application to all types of firms. However, a significant exception was
that it was not applicable to firms that were in difficulties on 1 July 2008. Aid
to companies where difficulties date from before the economic crisis had to be
assessed exclusively on the basis of general rules regarding rescue and
restructuring aid (see above). This rule acknowledged that a number of
companies might have found themselves cut off from financing due to the drying
up of the lending market, although they had a sound business plan. The
temporary framework could therefore be applied to relieve temporary financial
difficulties. If the difficulties arose before the crisis, however, the normal
rules of rescue and restructuring aid had to be applied. In this way, the Commission
ensured that over-protective aid measures devised by the Member States would
not revitalise structurally failing firms to the detriment of competition and
healthier firms.

By way of example, the Commission approved
guarantees to be issued by the Swedish state as collateral for a loan from the
European Investment Bank to finance green projects by Volvo cars, after
concluding that this company was not in difficulty on 1 July 2008.[83] The Commission,
following a notification by the United Kingdom, also approved rescue aid to the
LDV Group.[84] Since that company had been in difficulties for some time, the
measure was based on the Rescue and Restructuring Guidelines.

Between 17 December 2008 and 1 October 2010,
the Commission approved 73 schemes under the Temporary Framework, and 4 ad
hoc aid measures, including:

● 23 schemes for aid up to € 500 000 per company;

● 18 subsidised guarantee measures;

● eight schemes for subsidised loan interests;

● 
five schemes offering reduced interest loans to
businesses investing in the production of green products; and

● six risk-capital schemes and 13 export-credit schemes.[85]

Financial support from public
authorities in the context of restructuring, including labour market measures
that are undertaken by the public authorities particularly at regional and/or
local level, may involve state aid. Care must therefore be taken to ensure that
such support complies with the applicable rules on state aid.

1.2: WAY
FORWARD

On 1 December 2010, the Commission
prolonged into 2011 the crisis-related state aid measures that enable Member
States to support their financial sector as well as the temporary framework, in
both cases on stricter conditions.

The Commission believed there were still
grounds to deem the requirements for the application of crisis-related rules
fulfilled. But the continued punctual availability of specific crisis aid
measures must go hand in hand with a gradual disengagement from the temporary
extraordinary support[86].

For the financial sector, this approach had
already started with the tightening of conditions for new government guarantees
from July 2010 through a fee increase and a closer scrutiny of the viability of
heavy guarantee users. It is now required that, as of 1 January 2011, every
bank in the EU having recourse to state support in the form of capital or
impaired asset measures will have to submit a restructuring plan. Until now
this was limited to distressed banks, ie banks that, in particular, received
support above 2 % of their risk-weighed assets.

The prolonged temporary framework maintained
some measures facilitating the access to finance, especially for SMEs, ie
subsidised state guarantees and subsidised loans, inter alia for green
products. In these areas, the market is not yet able to entirely meet small
companies’ financing needs. The introduction of stricter conditions for those
measures aimed at facilitating a gradual return to normal state aid rules while
limiting the impact of their prolonged application on competition. This
includes that, in 2011, for large firms working capital loans were excluded
from the application of the Temporary Framework and that firms in difficulty could
no longer benefit from the framework.

As companies still have difficulties in
finding adequate trade insurance coverage from private insurers in many sectors
and Member States, the Commission also extended the procedural simplifications
on short-term export credit insurance that were introduced by the Temporary
Framework.

The next section of this chapter looks in
detail at the role of the European Social Fund in providing help to organisations
to enable them to better anticipate and manage change.

2: THE ROLE
OF THE EUROPEAN SOCIAL FUND

The European Social
Fund (ESF)[87] has been the EU’s main financial instrument for
the anticipation and management of change since its creation in 1957. Under
Article 162 of the Treaty on the Functioning of the European Union, the ESF aims ‘to render the employment of workers easier and to increase
their geographical and occupational mobility within the Union, and to
facilitate their adaptation to industrial changes and to changes in production
systems, in particular through vocational training and retraining’.

In the context of
globalisation, continuous innovation in technology, the occurrence of major
change in consumer demand and new business models, anticipating and managing
change has become a key issue in the employment strategies of both companies
and authorities in the past decade. One of the key
challenges for the ESF in 2007-2013 is to reconcile security for workers with
the flexibility which companies need (which forms part of the flexicurity
debate).

Acknowledging and
responding to these needs, the ESF for the period 2000-2006 placed the
development of employment through improving the adaptability and skills of
people among its chief priorities (see box 3.1 below).

Box 3.1: The 2000-2006 programming period

23 out of 25 Member States
used the ESF for actions supporting the adaptability of their companies and
their workers. Between 2000 and 2006, almost € 12
billion in total was invested to support the anticipation, management and
mitigation of economic change. The ESF contributed € 5.2 billion, 43 %
of the total expenditure in the area of adaptability.

More than 7 million people have been supported
through ESF-funded actions, mainly in the UK and Italy (1 million participants
in each of these countries). Most beneficiaries were people between the ages of
26 and 54 and one in seven beneficiaries was an older worker. This share is
almost twice as high as their average involvement in ESF actions. In some
Member States, they represent a very significant part, such as in Finland (40 %) and Belgium (35 %).

Over 400 000 enterprises have
benefited from ESF interventions in this field. ESF has been particularly
supportive to actions anticipating economic change. Special attention was given
to actions in support of SMEs. ESF support for
adaptability has been further enhanced for the 2007-2013 programming period.
The ESF is currently supporting adaptability interventions in all 27 EU Member
States. It is making major contributions in the anticipation and
management of change, providing support for individuals, systems and companies.
This contribution is presented in more detail in the following sections of this
chapter.

2.1: ADAPTABILITY IN THE ESF OPERATIONAL
PROGRAMMES FOR DURING 2007-2013

In the programming period 2007-2013, the
ESF is supporting interventions under the following six policy fields:

● 
adaptability of workers and companies;

● 
access to employment for jobseekers and inactive
people;

● 
social inclusion of disadvantaged people with a
view to their sustainable integration in employment;

● 
development of human capital through the
promotion of reform of education and training systems and learning;

● 
promotion of partnership and the involvement of
the social partners; and

● 
strengthening of the institutional capacity and
the efficiency of public administrations and public services at national,
regional and local level.

During this period, the ESF budget has been
significantly increased, to € 13.5 billion, to co-finance adaptability
interventions. This represents 18 % of the total ESF investment across the
EU (€ 76 billion), almost one fifth of ESF funds. For an overview of ESF
expenditure by category during this period, see figure 3.1 below.

Figure 3.1: ESF expenditure by category,
2007-2013

A detailed mapping of interventions to
support the anticipation and management of economic change and restructuring
was carried out in 2009.[88] This exercise identified 106 operational programmes addressing
adaptability out of a total of 117 operational programmes for the entire
programming period 2007-2013.

In the period 2000-2006 there were no
adaptability operational programmes in Cyprus and Latvia. Now interventions are
foreseen in all Member States. However, there are considerable differences
between Member States, when it comes to the ESF allocations dedicated to
adaptability in relation to all ESF subsidies for the period 2007-2013, ranging
from 7 % in Portugal to 76 % in Ireland.

Table 3.1 below gives an overview of the
three main categories of measures that the fund may support and the financial
allocation to each of these categories of measures, based on the ESF regulation
that was adopted in 2006.[89]

Table 3.1: ESF allocations aimed at
increasing the adaptability of workers and firms, enterprises and entrepreneurs
by categories

Category || Financial allocation in Million Euros || Percentage

Development of lifelong learning systems and strategies in firms; training and services for employees || 9.4 || 69.6 %

Design and dissemination of innovative and more productive ways of organising work || 1.6 || 11.8 %

Development of special services for employment, training and support in connection with restructuring of sectors || 2.5 || 18.6 %

Total || 13.5 || 100 %

The improvement of human resources planning
and development in companies accounts by far for the largest part of ESF
support in this area, with around € 9.4 billion (almost 70 % of the
total expenditure). € 2.5 billion (18.6 % of the total expenditure)
is more directly linked to sector and company restructuring through the
development of systems to effectively anticipate change. Finally, innovative
and more productive ways of organising work account for almost € 1.6
billion (12 % of total expenditure).

2.2: ESF INTERVENTIONS AT THE DIFFERENT
STAGES OF THE RESTRUCTURING AND CHANGE PROCESS

ESF interventions can be distinguished
according to the different stages of the restructuring and economic change
processes:

● 
anticipation of economic change and skills
needs;

● 
managing economic change and promoting
adaptability; and

● 
mitigating the effects of economic change and
restructuring processes. The individual stages of anticipation, management and
mitigation are addressed in 19, 23 and 17 Member States respectively.

Anticipation of economic change and
skills needs

The ESF supports various activities in the
context of the anticipation of economic change and skills needs, such as
forecasting, analysing skills gaps and future skills requirements and/or early
warning diagnosis.

These measures mainly focus on enterprises
as a main target group, for example by providing information, counselling, and
aid with work organisation and working time. However, there are also some
targeted actions for workers, for example by providing career development,
guidance, counselling, and individual skill development plans, and supporting
professional mobility.

Box 3.2: National
occupational skills needs forecasting (Finland)

The national occupational skills needs forecasting project
(Valtakunnallinen ammatillisten osaamistarpeiden ennakointi, VOSE) is one of
several projects developing anticipation methods in Finland currently underway,
many of which receive funding from the ESF. The Finnish National Board of
Education initiated the project, focusing on anticipating future competences
and skills needs. The VOSE project has a budget of 1 million euros for three
years, from 2008 to 2011.

The aim of the project is to develop procedures which enable the
anticipation of competences and skills needs for the future for post-compulsory
education and in all vocational and professional fields. These include methods
for anticipating competences and skills needs, anticipation processes and
networking of the institutions involved. The procedures will be tested in the
social and health care, real estate and construction sectors. The VOSE project
also aims to create a web-based tool that works in social media.

VOSE is a cooperation project engaging several stakeholders,
including the state administration, social partners, vocational education
providers, polytechnics, universities, local authorities, research institutes
and student organisations.

http://www.oph.fi/tietopalvelut/ennakointi/osaamistarpeiden_ennakointi/vose-projekti

Managing economic change and promoting
adaptability

The ESF finances different activities in
the context of managing economic change and promoting adaptability. These include
measures to help companies to keep pace with modern technologies by developing
their research and development capability (through actions such as research
grants and pre- and post-doctoral training), activities in the field of
innovative and modern types of work organisation to enhance company
competitiveness (for example in the area of working time and work-life
balance), further training, skills and competence development, targeting
addressing managers, entrepreneurs and individual workers.

Box 3.3: Devising the
Romanian labour market’s response to the economic crisis — enhancing company
flexibility and the security of the workforce (Romania)

The stated goal of this project is to contribute to the promotion of
the core concept of flexicurity in the Romanian economy.

The objectives of the project are:

● 
to analyse various scenarios of growth and job
creation for the Romanian economy and to explore ways and means of exiting the
crisis and resuming growth with job creation;

● 
to devise for this purpose an ‘anticipation tool
kit’ using both enterprise investigation as well as modelling techniques; and

● 
to explore and implement at enterprise level
innovative ways by which the incorporation of flexicurity could help in
boosting the chances of corporate entities in a global, highly competitive
environment.

Activities of the project include: studies and analyses of good
practices at European level and the likelihood of transferability into national
practice, an in-depth analysis of the national context, a preliminary
assessment of available anticipation tools, scenario analysis, development of
anticipation instruments, activities to devise tailored flexicurity
arrangements and set the stage for their subsequent application, training in
internal flexibility arrangements for 45 line managers and human resources
managers in the two selected enterprises, a number of dissemination activities
and the publication of the results of the first test run of the anticipation
instrument, based on the outputs of scenario analysis. This project was
launched at the end of 2009 and will run until the end of 2011, with a total
budget of € 3 million.

www.flexicovery.ro
(under construction)

In 43 operational programmes, the specific
needs of small and medium-sized enterprises (SMEs) are addressed explicitly,
with actions foreseen to support the development of adequate training and
competence development structures and systems such as tailor-made training
programmes, job rotation schemes and/or pooling of resources.

Box 3.4: The Working Skills
for Adults initiative (Wales, UK)

A £ 15 million scheme to increase the skills of over 16 000
workers across six counties in south-east Wales was launched in June 2010. Led
by Torfaen County Borough Council in collaboration with three other local
authorities and three further education colleges, the Working Skills for Adults
initiative will help employees gain new qualifications and skills as well as
help employers identify training to boost business productivity.

Operating across Torfaen, Blaenau Gwent, Bridgend, Caerphilly, Merthyr Tydfil and Rhondda Cynon Taf, it will address the general skills that employees
need and that can be transferred between jobs, such as basic skills training,
ICT and Welsh language.

In addition, specialised support for small- to medium-sized
enterprises (SMEs) will help identify specific skills gaps and supply national
vocational qualification (NVQ) programmes to address them.

Working Skills for Adults is backed by £ 8.8 million from the
European Social Fund, with further funding from the local authorities and
further education colleges who will deliver the scheme.

Training and support will be offered in a wide
range of community, college and workplace settings and through a range of
channels, including online and face-to-face, to meet individual needs and
reduce barriers to learning.

Mitigating the effects of economic
change and restructuring processes

The ESF funds many interventions which
accompany restructuring and structural change, both at the enterprise level as
well as helping individual employees to cope with the effects of restructuring
and change.

At the enterprise level, particular
activities such as advice and studies are being implemented throughout the
European Union to support social dialogue and improve crisis management. Other
actions have been focusing more on the consolidation of sectors’
competitiveness or the redeployment of companies in sectors in decline (through
actions such as consulting, guidance and re-qualification).

Box 3.5: Evolution of
organisational culture in times of restructuring: research and information
project (Poland)

This project was implemented from January 2009 to March
2010 by the social partners in Poland. Its principal objective was to raise
awareness of the importance of organisational culture in the process of
restructuring and to deliver model solutions of organisational culture in order
to improve the competitiveness of companies facing change. The project was
based on a diagnosis and has delivered a model of adaptable organisation and
standard measures which should be carried out during the process of
restructuring. Employers, employees and social partners participated in
designing and delivering standards, which were disseminated at conferences and
meetings with employers and employees throughout the entire country. It is
estimated that 70 % of participating employers and employees raised their
awareness of their role in the design of the culture of organisation. Further,
representatives of 40 trade unions and at least 10 regional organisations of
employers were targeted by the information and promotion campaign, which was
one of the elements of the project. The total budget of this project was 807 000
PLN.

http://www.fzz.org.pl/index.php?option=com_content&view=article&id=110&Itemid=76

At individual employee level, assistance
includes advice, tailored help and training (often through dedicated
structures) for individuals who have been made redundant, and promotion of
professional mobility, self-employment and start-ups.

Box 3.6: Restart —
Vysočina / Restart — Highlands (Czech Republic)

This project aims to assist 1 000 employees who are under
threat of redundancy or who are already under notice, working in companies in
sectors undergoing structural changes.

The project consists of a mix of activities — from introductory
consultancy through to training and re-qualification until individuals find
alternative employment — designed to help participants potentially before their
employment is terminated. Employers receive partial reimbursement of salary and
social and health insurance costs during the period in which the employees
participate in the activities (which are free of cost for the employees).

The project is implemented by Regional Labour Offices in the
Highlands region of the Czech Republic from October 2009 to February 2012. Its
total budget is € 2.6 million, with € 2.2 million from the European
Social Fund.

http://www.esfcr.cz/zakazky/restart-vysocina

As the length and significance of each
stage varies greatly according to Member States’ characteristics, ESF measures
address each stage of the change process in a different way in individual
Member States. In some cases, measures are concentrated on one stage only, and
in others they cover two or three stages of the process (see box 3.7 below).

Box 3.7: Rapid reaction to
change, including prevention and crisis intervention measures (Poland)

This project was launched in April 2009 and will be terminated in
December 2013 with the establishment of the centre of Monitoring of Economic
Change. Its budget is 56 million PLN. Based on a comprehensive system of
indicators for anticipation of change and through the analysis of sensitive
sectors (12 reports), the three sectors that are in most need will be
identified.

A total of 200 companies (10 micro enterprises, 130 SMEs and 60
large enterprises) will receive support in the framework of individual
development plans drawn up on the basis of indexes of early warning.

A total of 4 000 workers and employees will receive support: at
least 80 % will increase qualifications and/or change jobs; at least 50 %
will benefit from outplacement schemes, including 30 % who will find a job
after six months.

Support
for business creation and self-employment

The
European Social Fund has a long history of supporting people who want to start
their own companies and be self-employed. Supporting self-employment and new
businesses is one of the priorities of the European Social Fund 2007-2013
programming period. Seventeen Member States have included this priority in
their Operational Programmes which set out the employment and social priorities
they have selected for ESF funding. Overall, this priority is receiving some € 2.75
billion of ESF funding although the total spend will be higher as matching
national funding is added.

Much of this funding is devoted to
supporting would-be entrepreneurs according to their needs. They can obtain
training, advice and mentoring through ESF programmes which will help them set
up their companies. Once up and running, training, guidance and consulting can
contribute greatly to the new business’ survival through the first months —
providing the new entrepreneur with the skills and advice to avoid common
pitfalls. As well as providing new entrepreneurs with the skills and advice
they need, the ESF also helps them surmount the other main obstacle many face —
access to finance. Several Member States deploy ESF funding to support micro-credit
lending aimed at raising employment and promoting entrepreneurship.

The other main EU-level fund to which
actors can turn to help them in their efforts to anticipate and manage change
is the European Globalisation Adjustment Fund (EGF), which is discussed in
detail in the next part of this chapter.

3: THE ROLE
OF THE EUROPEAN GLOBALISATION ADJUSTMENT FUND

The European Globalisation Adjustment Fund
(EGF)[90] was established in 2007 to help workers made redundant due to
structural changes in world trade patterns, so that they can find alternative
employment. The EGF can draw down funds from a maximum annual reserve of € 500 million,
with which it can co-finance active labour market measures to benefit redundant
workers, such as job-search assistance, training, incentives to take up
alternative employment and the promotion of business creation.

The EGF was designed as a means of
reconciling the overall long-term benefits of open trade in terms of growth and
employment with the short-term adverse effects which globalisation may have, in
particular in relation to the employment of the most vulnerable and lowest-skilled
workers. In addition to the EU’s Structural Funds, the programmes of which are
carried out over multi-annual periods, the EGF was intended as an instrument to
be available in situations where mass redundancies were caused by globalisation
and were likely to have a severe impact on the local, regional or national
economy.

In its European Economic Recovery Plan of
26 November 2008, the Commission stated that it would revise the rules of the
EGF so that workers affected by the global financial and economic crisis would
also be in a position to benefit from EGF assistance; the rules of the EGF were
amended accordingly in 2009. This resulted in a steep increase in the number of
applications for EGF funding as well as a rise in the number of workers targeted
for help.

3.1: THE FUNCTIONING OF THE EGF

The rules governing the EGF are laid down
in Regulation (EC) No 1927/2006, which was adopted by the European Parliament
and the Council on 20 December 2006. This Regulation states that a Member State (not a company or an individual) can submit an application for a contribution
from the EGF when redundancies within one company and its suppliers and
customers, or in an economic sector within one or two contiguous regions, have
a significant adverse impact on the regional or local economy.

Originally, the EGF could intervene only in
cases where at least 1 000 workers had been made redundant because of
structural changes in world trade patterns (eg a substantial increase of
imports into the European Union, or a rapid decline of the EU market share in a
given sector or a delocalisation to third countries). A consultation of
stakeholders (the EGF national contact persons, social partners, and academics)
in September 2008 showed that the threshold of 1 000 redundancies was
considered too restrictive since mass redundancy events affecting fewer than 1 000
workers still have a European scale, which would justify the involvement of the
EU as they can cause severe effects at the level of the regional or local
labour market.

In the light of the scale and the speed of
development of the global economic and financial crisis, the Commission
announced in its European Economic Recovery Plan[91] its intention to extend the scope of the EGF as part of European
response to the crisis and to transform it into an early, more effective
intervention instrument in line with the fundamental principles of solidarity
and social justice.

The intention to improve the EGF resulted
in an amendment[92] to the 2006 EGF Regulation, which applied to new cases from 1 May
2009 and introduced both temporary and permanent modifications. The permanent
changes focus in particular on: a reduction in the number of redundancies
required to trigger EGF assistance (500 instead of 1 000); and the
extension of the period in which the measures may be implemented (24 months
instead of 12 months). The temporary provisions — until the end of 2011 —
broaden the scope of the EGF to cover redundancies caused by the financial and
economic crisis in addition to those due to world trade slowdown between 2008
and 2009, and they also increase the EGF co-financing rate from 50 % to 65 %.
For an overview of the provisions contained in the EGF Regulation as amended,
see table 3.2 below.

Table 3.2: Main provisions of the 2009 EGF Regulation

Intervention criterion || Art. 2(a) of EGF Regulation 2009 || Art. 2(b) of EGF Regulation 2009

Enterprises concerned || One enterprise and its suppliers/downstream producers || Enterprises operating in the same economic sector[93] (typically SMEs)

Geographical scope || National || Regional (one or two contiguous regions[94])

Number of redundancies || 500 or more

Period to count redundancies || 4 months || 9 months

An EGF contribution can be sought only for active
labour market policy measures such as:

● 
occupational guidance, tailor-made training and
retraining (eg ICT skills, certification of acquired experience), outplacement
assistance, entrepreneurship promotion or aid for self-employment;

● 
special time-limited measures, such as
job-search allowances, mobility allowances or allowances to individuals
participating in lifelong learning and training activities; and

● 
measures to stimulate in particular
disadvantaged or older workers, to remain in or return to the labour market.

All of the above measures are eligible for
EGF assistance, as long as they do not replace measures provided for under
national law or collective agreements. Only the targeted workers can benefit
from EGF assistance. The EGF does not co-finance the restructuring of companies
or sectors.

3.2: OVERVIEW
OF APPLICATIONS RECEIVED IN 2009

A total of 29 applications for an EGF
contribution were submitted to the Commission in 2009, of which 27 were
received after 1 May 2009 when the amended rules of the EGF entered into force.
By comparison, the EGF had received only 14 applications in its first two years
of operation.

The applications received in 2009 were
submitted by 13 Member States (seven applications were from the Netherlands,
four from Lithuania, three from Ireland, two from Portugal, Germany, Belgium,
Spain, and Denmark, and one each from Italy, Sweden, Austria, France and
Bulgaria) and aimed at helping almost 29 000 redundant workers for a total
requested amount of € 164.7 million. These applications related to 17
different sectors, of which the printing industry (5 applications), the
automotive sector (4) and the textiles industry (3) were the most prominent. It
must be noted that the EGF Regulation does not restrict the scope of the EGF to
specific economic activities, meaning that any worker from any type of
enterprise — be it operating in industry, the services or in primary sectors —
can benefit from its assistance, provided the intervention criteria are met.

EGF applications by amount requested

The Member State applying for EGF support
must design a coordinated package of measures that best fits the targeted
workers’ profile, and decide on the level of assistance to request. The EGF
Regulation does not limit the amount requested per measure or per application,
but the Commission’s assessment of an application may raise issues which cause
the applicant Member State to revise its package of measures, thereby affecting
the level requested.

In 2009 the contributions requested from
the EGF ranged from € 258 164 to € 56 385 144, with an
average of € 5.5 million.

In terms of categories of measures provided
to the targeted workers, most of the expenditure relates to training and
retraining, job-search assistance and allowances while workers are involved in
an active labour market measure. In 2009, for instance, the breakdown of
estimated costs per type of actions for the 10 applications approved by the
Budgetary Authority that year is set out in table 3.3 below.

Table 3.3: EGF co-financed measures
approved in 2009 according to EUROSTAT classification

|| Estimated cost EGF + Member State (€) || % of total

Sub-total Labour market policy services || 12 954 880 ||

1 || Individual job-search assistance & case management and general information services[95] || 9 406 680 || 10.91 %

|| Job-search allowances || 174 600 || 0.20 %

|| Mobility allowances || 2 528 400 || 2.93 %

|| Other allowances (eg apprenticeship schemes) || 845 200 || 0.98 %

Sub-total Labour market policy measures || 69 664 315 ||

2 || Training and retraining || 35 806 540 || 41.51 %

|| Training allowances || 12 579 650 || 14.58 %

|| Subsistence allowances while in training or in other active labour market measures || 13 077 200 || 15.16 %

3 || Job rotation and job sharing || N/A || N/A

4 || Employment and recruitment incentives || 2 577 500 || 2.99 %

5 || Supported employment and rehabilitation || 281 600 || 0.33 %

6 || Direct job creation || 594 000 || 0.69 %

7 || Start-up incentives to promote entrepreneurship || 4 747 825 || 5.50 %

Expenditure for implementing EGF (Art. 3 of EGF Regulation) || 3 635 200 || 4.21 %

Total || 86 254 395 || 100 %

In qualitative terms, the feedback provided
by the applicant Member States suggests that the EGF contributions they
received allowed them to intensify the assistance provided to redundant workers
and to extend the duration of support beyond what would have been available
without the EGF. In other cases, the EGF made it possible to use successful new
approaches (eg interaction in peer groups, increased guidance and counselling)
specifically designed for low-skilled or older workers.

EGF applications by workers targeted for
assistance

The number of workers affected by
redundancies in an EGF application can differ from the number of workers
actually being helped. Depending on the intervention criterion used, the
applicant Member State has the possibility of including among the target group
the workers made redundant because of the same global event, but before and/or
after the reference period (ie the period during which the redundancies
triggering the EGF application are being counted). Furthermore, the Member
State can also decide to focus the EGF assistance on a reduced number of
workers, for instance on those facing exceptional difficulty in remaining in
the labour market or those who are deemed to be most in need of support.

In 2009 the number of workers targeted for
EGF support in individual cases ranged from 139 to 3 582, with an average
of just under 1 000.

EGF applications by amount requested per
worker

The package of individualised services that
a Member State may propose to the redundant workers concerned is at its
discretion, within the terms of the EGF Regulation. The amount requested per
worker affected can therefore vary according to the scale of the redundancy
event, the labour market situation in the region affected, the individual
circumstances of the workers concerned, or even the general cost structures in
the Member State or region affected. Applications received in 2009 were
submitted under two consecutive sets of rules (ie an implementation period of
12 or 24 months, or a co-financing rate of 50 % or 65 %) depending on
whether they were submitted before or after the entry into force of the revised
EGF Regulation. This had an impact on the contents of the applications
submitted.

In 2009 the amount requested per worker
varied from slightly above € 500 to over € 15 700, with an
average of € 5 698.

Box 3.8 below contains a summary of cases for which the EGF received final
reports in 2009, following the original 12-month implementation period. These
describe how the EGF has helped Member States to re-integrate redundant workers
into employment, to intensify their assistance for
these workers and to extend the duration of support beyond what would have been
available without the EGF contribution.

Box 3.8: Case studies of EGF funding in Member States

EGF/2007/004 Perlos/Finland

Of the 921 workers who benefited from the
measures co-funded by the EGF, 56.9 % were in work again at the end of the
implementation period. Training for new jobs with a future was a significant
benefit not only for the workers but also for the region as a whole, which is
remote and threatened with depopulation. The development and maintenance of a
broad network of stakeholders supported the redundant workers and put them back
into work more quickly. Early collaboration with the Commission allowed a more
ambitious package of measures to be designed for the workers than would
otherwise have been possible. The final report contained a SWOT analysis
(strengths and weaknesses, opportunities and threats) of the case which may be
helpful in planning future cases. The measures co-funded by the EGF enabled the
 North Karelia authorities to draw up contingency plans for future large-scale
redundancies.

EGF/2007/006 Piemonte/Italy

Of the 1 298 workers who benefited from the
measures co-funded by the EGF, 48.9 % were in work again at the end of the
implementation period (including five who created their own businesses). The
employment status of the other 51.1 % was not reported. The intervention
paid special attention to incentives to women and workers older than 55 to
participate and not leave the labour market. A high percentage of workers over
40 were able to find new employment, and the rate of re-employment of older
workers achieved by these measures was especially high for the area. Thanks to
retraining, workers were moved from the textile sector to other, more
competitive, sectors of production.

EGF/2007/008 Textiles/Malta

Of the 672 workers who benefited from the
measures co-funded by the EGF, 65.5 % were in work again at the end of the
implementation period (including 24 who started their own businesses). The
intervention meant that the workers affected received more personalised
assistance to re-enter the labour market. Consequently, it also helped them to
face fewer social and economic difficulties. Malta found occupational guidance
very useful, as it enabled many workers who were unaware of job opportunities
in other sectors to consider employment outside the textiles sector. Most of
the workers had limited transferable skills, so the wage subsidy encouraged
employers to give them job opportunities. The use of the start-up grant scheme
was also considered an achievement.

EGF/2007/010 Lisboa-Alentejo/Portugal

Of the 558 workers who benefited from the
measures co-funded by the EGF, 19.5 % were in work again at the end of the
implementation period (including 11 who started their own businesses). This
fairly low percentage should be seen in the light of the structural problems of
the automotive sector, which pre-dated the global financial and economic crisis
and were exacerbated by it. In the last quarter of 2008, when the measures
ended, new car registrations in Europe fell by an average of 20 %. Despite
this unfavourable situation, individual skills recognition and validation
programmes for those workers with the lowest educational qualifications gave
them a better start in finding a new job. The EGF measures were usefully
complemented by other measures, including some co-funded by the European Social
Fund.

EGF/2008/002 Delphi/Spain

Of the 1 589 workers who benefited from the
measures co-funded by the EGF, 10.7 % were in work again at the end of the
implementation period (including eight who started their own businesses).
According to the final report, this low percentage should be seen against the
rapid deterioration of the labour market in Andalusia at that time. In February
2009, when the implementation period ended, employment was 6.6 % lower
than in February 2008. The Spanish authorities continued to provide training
measures for specific target groups, using their own means, until 31 July 2009.
Despite the unfavourable economic background, by the end of July 2009 there
were thus good prospects of re-entering the labour market for about 600 of the
dismissed Delphi workers.

This information is taken from the report on the
activities of the European Globalisation Adjustment fund in 2009, COM(2010) 464
final.

3.3: NEXT STEPS

The sharp increase in the number of
applications submitted to the EGF shows that the improvements brought to the
EGF Regulation in 2009 met the expectations of the stakeholders and provided
the European Union with an additional instrument to mitigate the employment
consequences of the economic crisis. The crisis derogation of the EGF will come
to an end on 31 December 2011, while full economic recovery may take longer to
achieve. The Commission is therefore considering proposing to the European
Parliament and to the Council an extension of the temporary crisis derogation
until the end of 2013 (which is when the EGF as set in the current Regulation
must be reviewed).

A review of the EGF Regulation will be
necessary to coincide with the next multi-annual financial framework
(2013-2020). Several options are currently being considered to streamline the
functioning of the EGF, aiming in particular to simplify the budgetary
procedure necessary to grant a contribution, with the possibility of converting
it into a permanent fund with its own budget line under the multi-annual
financial framework.

These technical improvements could also be
implemented together with a further extension of its scope to meet the
objectives set in the Europe 2020 strategy.[96] In this, the Commission explicitly referred to the EGF in its
Flagship Initiative An industrial policy for the globalisation era:

‘At EU level, the Commission will work (...) to promote the
restructuring of sectors in difficulty towards future oriented activities,
including through quick redeployment of skills to emerging high growth sectors
and markets and support from the EU’s state aids regime and/or the
Globalisation Adjustment Fund.’

This means that the EGF could act in
synergy with European industrial policy to mitigate its potential adverse
effects and encourage the integration of redundant workers in sectors with a
brighter future, just as it has been doing so far for those negatively affected
by change in world trade patterns.

The impact of restructuring on the EU
regions is diverse, a trend which has continued during the recent crisis. The
next part of this chapter looks in more detail at the impact, anticipation and
management of restructuring in the EU regions.

4: THE IMPACT
OF RESTRUCTURING IN THE EU REGIONS

Globalisation creates increased
opportunities for producers and entrepreneurs as well as for consumers.[97] It is also a motor for growth and creating jobs. However,
globalisation also brings about rapid changes and an increasing speed of
structural adjustment. In particular, low-skilled labour as well as low
value-added economic activities have felt the force of global competition. Many
regions throughout the EU will therefore have to restructure their economy and
promote continuous innovation — in products, management and processes, as well
as human and social capital — to turn globalisation challenges into
opportunities. Globalisation creates pressure for rapid structural change in
order to adjust regional development paths and preferably stay ahead of
competitive pressures. This will become ever more important in the years to
come, particularly as regions begin to exit the crisis.

4.1: THE INFLUENCE OF GLOBALISATION

The globalisation index, as set out below,
measures regional opportunities and vulnerabilities by looking at long-term
structural conditions. The Europe 2020 agenda identifies low employment rates
as being as one of the main structural weaknesses of Europe. Consequently, the
globalisation index contains employment as well as indicators measuring
educational attainment and general growth perspectives.

Figure 3.2:
Globalisation vulnerability index, 2020

A number of studies and economic forecasts
suggest that the economic crisis has diminished overall growth perspectives
over the medium term in all European regions. The crisis has had a
differentiated impact and additional disparities for long-term growth perspectives.
Particularly negatively impacted are regions in the UK, Spain, Italy and Greece, which have become more vulnerable compared with their situation before the
crisis. On the other hand, a number of central and western regions appear less
weak than before the crisis.[98]

Many regions located in the northern
periphery of the EU, as well as some central and western regions, appear in a
rather favourable position. Capital and metropolitan regions, including London, Paris, Hamburg, Madrid, Bucharest, Sofia, Prague and Warsaw, appear among those
regions which are likely to turn the globalisation challenge into
opportunities. All of these regions have a highly educated workforce and a high
share of employment. In addition, these regions display good framework conditions
for supporting innovation. In sum, these regions are on an economically
sustainable path of development with reasonable long-term growth perspectives.

By contrast, most regions located in the
southern and south-eastern parts of the EU, in addition to Latvia and Lithuania, appear to be highly vulnerable. A high share of low-skilled workers, combined
with low value-added economic activities characterise southern and south-eastern
regions. Some of these regions, particularly in the eastern parts of the EU
experienced high growth in the past, despite these structural disadvantages.
The basis of these gains has been structural adjustment from agriculture and
heavy industry towards basic industrial activities and basic services. However,
these activities are subject to largely cost-driven intense competition from
other emerging economies. The stability of the future growth path of these
regions will therefore depend on improving the value-added in regional economic
activities. Improving the conditions of innovation will be key.

4.1.1: RESTRUCTURING IN OBJECTIVE 2 REGIONS

An ex post
evaluation of cohesion policy programmes 2000-2006[99]
examined restructuring in Objective 2 regions in the context of globalisation.
This consisted, first, of an overall analysis of structural change over the
period 1990-2005 across regions in the EU15 in order to try to detect
differences in performance between regions with different sectoral
specialisations, distinguishing between those specialising in traditional
industries, those in capital-intensive — or heavy — industries and those in
equipment, or engineering, industries. The second, and main, part of the
analysis consisted of case studies of regions receiving Objective 2 funding.
These included Tuscany (Italy), Brittany (France), North West England, North East England, North Netherlands, Basque Country (Spain), Rhône-Alpes (France), Southern Finland,
North Rhine-Westphalia (Germany), Bavaria (Germany), and Styria (Austria). The aim in each case was to examine the efforts of the
regions concerned to restructure in the face of increased competitive pressure
from globalisation and the contribution of Objective 2 funding in this regard.

The main findings of the analysis can be
summarised as follows:

● 
a number of Objective 2 regions (defined at the
NUTS 2 level) across the EU changed their specialisation over the period
examined, shifting from traditional to capital-intensive industries or from
capital-intensive to equipment industries. In both cases, this was associated
with a positive economic performance and, in most cases, an improvement in
their estimated international trade balance;

● 
of the case study regions, only Styria (Austria)
had succeeded over recent years in changing its area of specialisation,
emphasising the difficulties of achieving this and breaking free from an
historical development path. The strategy adopted in the region succeeded in
building an automotive sector almost from scratch based on inward investment,
with the regional agency pursuing a selective policy of attracting suitable
foreign companies;

● 
the experience of Styria as compared with that
of the Ruhr area of North Rhine-Westphalia in Germany highlights two important aspects of restructuring. The
first is that it takes many years, and even decades, to bring about an
effective change in areas of specialisation, even with continuous support. The
second is that this is easier to accomplish if the area concerned is smaller
rather than larger;

● 
long-standing policy efforts to diversify the
economies in many of the industrial Objective 2 regions have not led to the
intended shifts in their sectoral pattern of economic activity. The pattern
inherited from the past, and often in place for a century or more, has proved
highly resistant to change. In North Rhine-Westphalia, the Ruhr remains adversely affected by the past dominance of heavy
industry, despite numerous policy initiatives and substantial investment aimed
at developing and expanding new activities. Even in Styria, the case study
found no evidence so far for the further diversification of the economy away
from relative reliance on the automotive industry into higher-tech and more
knowledge-intensive sectors;

● 
the case studies demonstrated that enterprise
support focused on increasing the innovation capacity of firms, especially
SMEs, and their performance on international markets can strengthen
competitiveness and assist restructuring, as in Styria, the Basque Country (Spain) and, to a lesser extent, Tuscany (Italy). Measures that proved to be the most effective were
those aimed at encouraging new clusters of activity in specific sectors and in
particular areas of technology;

● 
in some case study regions (Brittany and
Rhône-Alpes in France, for example), the regional development strategy was not
so much directed at structural change as at maintaining the internal
territorial balance and safeguarding employment. Since the evaluation was
concerned explicitly with restructuring and with the development of regional
economies, it did not investigate the effectiveness of this strategy;

● 
the evidence is that three regions which showed
the clearest signs of restructuring were also the ones where the regional
authorities were aware the earliest of the need for structural change. They
accordingly reacted to the threat of globalisation sooner than those in other
regions by promptly developing strategies for encouraging the diversification
of their economies. This demonstrates the importance of looking ahead and
trying to anticipate the need for change in areas of specialisation;

● 
analysis of the relationship between Objective 2
programmes and the broader set of regional policy measures suggest that the
most effective programmes were those which were in line with and, therefore,
reinforced, the main thrust of development strategies being pursued in the
regions. Support of the European Regional Development Fund (ERDF) for ‘mainstream’
measures contributed more than where additional ‘complementary’ objectives were
pursued;

● 
at the same time, the possibility of using ERDF
finance to support these strategies was hampered in some regions by ‘micro-zoning’,
which concentrated funding on small areas with very specific territorial needs;

● 
the effectiveness of intervention was closely
related to the competence and expertise of local institutions and their
strategic vision. The evidence is that these attributes can change the path of
development — and overcome historical ‘path dependency’ — by persistent,
focused and concentrated policy effort; and

● 
the evidence from the evaluation is that,
despite its small scale, the funding provided under Objective 2 was of major
importance for the regions examined. A large majority of those interviewed in
the course of the case studies confirmed that ERDF support was instrumental in
encouraging the adoption of a long-term strategic view of development, which
was vital for both designing and building effective support for restructuring.
It, accordingly, played a key role in setting the agenda for change as well as
providing valuable funding which could be used to lever larger-scale financial
support. In short, it acted as a catalyst for change, encouraging regional
authorities to prioritise and enabling them to innovate as well as to put in
place long-term action programmes.

4.1.2: ANALYSIS OF RESTRUCTURING IN THE EU REGIONS

DG Regio has produced an analysis of the
effect of restructuring on the increase in labour productivity in 2000-2007.
Restructuring in this context means the shift of labour from less to more
productive sectors, for example between agriculture and industry or services.[100]

Figure 3.3 presents the average annual
change in labour productivity due to employment shifts between sectors.
Restructuring occurs mostly in countries at an earlier stage of economic
development. As a result, its effects are strongest in the Convergence regions[101] where nearly half of the increase in
labour productivity came from the shifts of employment between sectors. The
more developed regions are usually much more productive and have a higher share
of employment in high value-added sectors. Employment shifts occur mainly
within sectors, eg from low to high-tech industry. Employment shifts in the
Regional Competitiveness and Employment (RCE) regions contributed only 11 %
to the increase in labour productivity. In the Transition regions, which occupy
a middle stage of economic development, the contribution of restructuring to
the increase in labour productivity was 28 %.

In the EU27, where labour productivity grew
1.4 % annually between 2000 and 2007, the growth of productivity due to
restructuring was 0.4 % a year, thus employment shifts contributed around
30 % to the total growth in labour productivity. The remainder came from
productivity increases within sectors which is a result of innovation in a
broad sense. Table 3.4 shows the contribution of restructuring to the growth in
labour productivity between 2000 and 2007.

Table 3.4: Contribution of restructuring to the growth in labour
productivity, 2000-2007

|| Total growth of labour productivity || Growth of productivity due to restructuring || Contribution of restructuring to productivity growth

EU-27 || 1.4 || 0.4 || 31 %

CONV || 2.5 || 1.2 || 46 %

TRANS || 1.0 || 0.3 || 28 %

RCE || 1.1 || 0.1 || 11 %

Source: DG REGIO calculations, Eurostat.

Figure 3.3: Productivity through
employment shifts between sectors, 2000-2007

4.1.3:
‘SMART SPECIALISATION STRATEGIES’ AND THE SMART SPECIALISATION FORUM

‘Smart
specialisation strategies’ and the smart specialisation forum, that
REGIO is promoting as a policy priority, can be an important tool for
regions to use in their restructuring process.

The
establishment of a ‘Smart Specialisation Platform’ (S3P) was announced in the
communication of the European Commission ‘Regional Policy contributing to smart
growth in Europe 2020’ (COM(2010) 553 final) with the purpose of assisting regions
and Member States to develop, implement and review regional smart
specialisation strategies. The Commission staff working document (SEC(2010)
1183) accompanying the communication added more details on the form, structure
and components of the S3P.

The process of
establishing and implementing smart specialisation strategies is expected to
lead to a and more strategic and efficient use of national, regional and EU
funding the current programming period 2007-2013 and to provide a quick-start
for the future Cohesion Policy ) along the lines of the Europe 2020 strategy
and priorities.

Smart specialisation is an important policy
rationale and concept for innovation policy. It promotes efficient, effective
and synergetic use of public investments and supports Member States and regions in diversifying and upgrading existing sectors that are the basis of their
economies and in strengthening their innovation capacity.

It aims to harness regional diversity
by avoiding uniformity and duplication. It combines goal-setting (EU 2020,
Innovation Union) with a dynamic and entrepreneurial discovery process
involving key stakeholders from government, business, academia and other
knowledge-creating institutions.

A smart
specialisation strategy is a multi-annual strategy
aimed at developing a well-performing national or regional research and
innovation system, which can be assessed through the self assessment tool
proposed by the Innovation Union flagship. It defines a policy mix and
budgetary framework focusing on a limited number of priorities targeted at
stimulating smart growth.

The strategy is
preceded by sound analyses of the assets of the region and technology foresight
studies focusing on the relevant sectors identified with a view to access
emerging markets and niche markets. It includes the analysis of potential
partners in other regions and avoids unnecessary duplication and fragmentation
of efforts.

It is based on
a strong partnership between business, public entities and knowledge
institutions, that need to work together to produce the above mentioned
analyses, and on the setting-up of adequate bodies responsible to implement
them. The ‘quality’ of this partnership is essential for its success.

The EU Regional
Policy and EU innovation policy have a long experience of working with a
large number of regions on developing regional innovation strategies,
through several Community initiatives as for example, the Innovative Actions.
This initiative led to an appreciable impact in all regions assisted. In a
number of cases this impact has led to sustained structural changes to the way
regional policy is designed and delivered, specifically by establishing the
bases of high quality partnerships that in the most developed regions became
sustainable and developed the strategic intelligence bodies that achieve to
reconvert the economy and lead regions to competitive growth, even during the
present crises. Nevertheless those with shorter involvement in these processes
struggled to sustain these partnerships and hence results waver or fade.

Aiming at
developing the strategic intelligence needed in each region/Member State and keeping it in a sustainable way the S3P will act as a facilitator in bringing
together the relevant EU funding programmes and policy support activities in
research, SMEs, innovation, clusters, digital agenda, health, climate change,
creative industries and cooperation universities business. It includes high
level experts in these fields, including the OECD and networks of regions, of
representatives of SMEs and other business bodies that focus on innovation and
on targeted support measures to innovate.

It intends to
develop the critical mass at EU level to provide direct feed-back and
information to regions, Member States and their bodies, provide a learning
platform that speed-up the learning process between regions and develop
processes of peer review that assess the strategies, establish criteria of
assessment and lead to the improvement of these strategic documents.

The S3P is run by a steering team that
gathers representatives of DG REGIO, RTD, ENTR, EAC, INFSO, EMPL, SANCO, CLIMA
and the JRC. A mirror group for advise and follow-up composed by
high-representatives of networks and bodies took their functions in June 2011
(for example, EURADA, ERRIN, EBN, OECD).

4.2:
MANAGEMENT OF RESTRUCTURING UNDER THE EUROPEAN REGIONAL DEVELOPMENT FUND

Since its inception, the European Regional
Development Fund (ERDF) has played a vital role in facilitating structural
adjustments initially induced by internal factors such as the establishment of
the Single Market and industrial restructuring. In recent years, external
challenges have shifted the focus of the ERDF to supporting adaptations
triggered by rapid globalisation and the integration of new Member States in
the Single Market. Subsequently, the ERDF has increasingly focused on
investments facilitating a move up the value chain, such as research and
development innovation and ICT.

In the future, the ERDF will most likely
continue to play a particular role in supporting adjustments to smart,
sustainable and inclusive growth in Europe.

The boxes below contain examples of
restructuring and reaction to change.

Box 3.9: UNIC — URBACT Fast track network on restructuring of European
ceramics cities

Economic change has left visible footprints in
cities with a strong industrial history. The process of transition from heavy
resource-intensive production to innovation-driven and high-technology systems
is ongoing, and will remain a challenge in years to come.

The development of cities, the home of most
industrial sites in Europe, is strongly bound to the economic success of their
industries. Modern industry, on the other hand, relies on competitive business
locations and innovating environments. Ceramics cities from all over Europe are showcases of this dependency. The consequences of industrial reorganisation
(concentration, relocation) are felt largely in cities with a strong ceramics
industry, and a lively history in ceramics manufacturing. This not only
requires cities to reshape and adapt, but also industries to collaborate with
cities. It is also vital to keep and develop specific urban identities,
building upon prestigious manufacturing tradition.

This example of ceramics cities illustrates the
fact that strong dependencies on one sector of the urban economy constitute a
significant risk to the economic well-being of cities as a whole. Negative
developments have a strong and widespread impact, not only on the employees in
the industry itself, but also on those in the supply companies, and this has
wide-ranging effects on social and economic cohesion within cities and regions.

The UNIC[102] (Urban Network for Innovation in Ceramics) network links nine
leading ceramics cities in Europe (Limoges, Aveiro, Delft, Pécs, Castellòn,
Stoke-on-Trent, Faenza, Cluj Napoca and Seville) — cities with long and vivid
histories in the ceramics industry and manufacturing. UNIC is designed to focus
on re-inventing the image of ceramics cities and on reinforcing their
attractiveness by offering good living conditions, interesting business
locations and professional development perspectives for more social and
economic cohesion at local level. In this context, close cooperation with local
stakeholders and interest groups is just as vital as strong links with relevant
regional, national and European authorities.

The network is financed under the URBACT II
programme (2007-2013) and has been selected by the European Commission as a
fast track network. Under active participation of Commission Services these
nine cities have designed their future strategies in the form of local action
plans, which identify possible paths from traditional industry towards a
sustainable innovation-driven economy, while preserving and using the cities’
asset of a common, strong industrial heritage. Implementation projects evolving
from this network will focus on effective links between research and education,
and between innovation and local traditions. The nine local action plans were
launched in Brussels on 20 May 2010, and will — with support of structural
funds — help to drive forward innovation and economic competitiveness.

In times of economic crisis in particular, a
dependence on traditional industries is usually seen as a major risk. However,
the UNIC network demonstrates that this does not need to be the case: cities
can build on their technological and cultural know-how in order to branch into
long-term, sustainable paths of innovation.

Box 3.10: REGIO STARS 2011[103] — anticipating economic change category

The Europe 2020 strategy proposed that the exit
from the current crisis should be the point of entry into a new sustainable
social market economy. Future prosperity will come from innovation, where the
key input will be knowledge, and the more efficient use of resources. Crises
have always shown that regional economies must permanently transform and renew
in order to tackle future challenges.

The objective of the
RegioStars Awards is to identify good practices in regional development and to
highlight original and innovative projects which could be attractive and
inspiring to other regions.

Projects proposed for an award under the Region
Stars scheme should describe the policy tools that have underpinned the
economic transformation agenda and regional adaptability to change in the
recent past.

Examples of projects that could be submitted
include:

● use of dedicated innovation strategies, economic intelligence or
foresight exercises to anticipate and adapt to economic change, thus promoting
improvements of productivity within a sector;

● use of innovative policy tools in order to promote productivity
growth within sectors and/or shifts between sectors (ie restructuring,
diversification) through innovation in a broad sense, including better use of
existing technology and resources, and new management and organisation
techniques; and

● successful development of entrepreneurship and innovation-based
incubation policies to promote economic transformation and renewal by
developing new, future-oriented economic activities in the region.

The winners of the ‘RegioStars’ 2010 were
announced on 20 May in Brussels during the annual ‘Regions for Economic Change’
conference. Awards were given to the most innovative regional projects which
had received funding from the EU’s cohesion policy. A jury made up of
professionals in regional development chose the six winners from the record 87
applications, as follows:

● the C-Mine Centre, Genk, Belgium (€ 3.2 million in EU funding from the ERDF), for innovative use
of brownfield sites in an urban context. Building upon the legacy of Genk’s mining foundations, the multi-purpose C-Mine centre has transformed a former
industrial site into a hub for entrepreneurs and visitors alike. It includes
two concert halls, exhibition space and a design centre;

● the Micro-Finance Institute, East-Mid-Sweden (€ 340 000 in EU funding from the ERDF),
for the integration of migrants or marginalised groups in urban areas.
Set up in 2008, this project focuses on improving access to finance for migrant
women who often face difficulties in trying to secure capital to start-up or
develop their own business. The main aim of the project was to establish a
permanent micro-finance institute to help overcome these barriers. At the time
of the award, the project had supported 80 new female entrepreneurs and
contributed to the start-up of 15 micro enterprises, creating 20 jobs;

● computer literacy basics for a Lithuanian e-citizen, Lithuania (€ 2
million in EU funding from the ESF). In 2002, a group of
companies, banks, and telecommunications and IT businesses formed the Langas j
Ateitj alliance. The aim was to provide training, establish public internet
access points and stimulate growth in e-services, to enhance computer literacy
skills. The main target groups were the elderly, disabled and people living in
remote areas with little access to digital services. In total, 50 400
adults completed courses over the two years;

● new business model for ambulatory monitoring of patients, Brandenburg, Germany (€ 86 000
in EU funding from the ERDF), for ICT applications by or for
SMEs. The first of its kind in Brandenburg, this
project combined the expertise of various regional partners in using
tele-medicine to monitor and treat people, outside a traditional medical
environment, who have suffered from a heart attack. Its overall aim was to
reduce the number of hospital admissions per patient. At the time of the award,
over 100 patients had benefited;

● high-speed broadband in Auvergne, France (€ 10 million in EU funding from the ERDF).
High-speed broadband is an essential ingredient in ensuring
competitiveness in today’s world. But in sparsely populated areas, private
telecommunication operators are frequently reluctant to take on all the risks
of investing in these so-called ‘white areas’. Faced with this challenge, Auvergne established a public/private partnership (PPP) in 2005 to extend high-speed
broadband coverage to 100 % of households, which was achieved by early
2009; and

● www.esparama.lt, Lithuania (€ 110 000 in EU funding). ‘Esparama’ in
Lithuanian means EU assistance — this official website provides information on
all EU structural funding in the country from data supplied by content
administrators in 15 government institutions. The site’s easily navigable
homepage clearly presents separate sections for funding applicants,
beneficiaries, media and general public, institutions and news.

Four other projects received special mentions from the 2010 jury:

● Pieper Site, Wallonia, Belgium. Part of a wider urban business
renovation process, this project took an innovative approach in re-developing a former
industrial brownfield site into a business park. The main aim of the site has
been to attract companies compatible with the surrounding urban residential area;

● successful integration of Roma children, Ljubljana, Slovenia. The Roma constitute the largest ethnic minority in central and eastern European countries,
and often struggle with discrimination and social exclusion. This project seeks
to address some of these problems with the help of Roma teaching assistants,
aiming to strengthen the links between Roma children, their schools and their
parents;

● eREGIO, North Karelia, Finland. This project aimed at extending high-speed broadband coverage in rural and very remote
areas of Finland. Despite the challenge, eRegio achieved excellent results, with
almost 99 % of the region having broadband access by 2008; and

● entdecke-efre website, Brandenburg, Germany. The website ‘entdecke-efre’
— ‘discover ERDF’ — sets out, in an easily navigable format, a range of
information on EU-funded projects and processes involved to benefit from the
funds.

CHAPTER 4: DIALOGUE AND LAW

The anticipation and management of
restructuring in the European Union takes place within a legislative framework
comprising a number of EU Directives, largely in the field of informing and
consulting with the workforce on changes that are likely to affect them. In
particular, through the implementation of the Directive establishing a general
framework for informing and consulting employees, which was due in March 2005,
there has been significant progress in certain Member States regarding the
national level of the anticipation of change in companies. Nevertheless, in the
context of the increased challenges of corporate restructuring, the European
Commission believes that the operation of the set of Directives dealing with
information and consultation at company level needs to be evaluated, and this
led to a review of the European Works Councils Directive in 2008-2009. Further,
the crisis, the increasing pace and cross-border dimension of change, the
emergence of innovative ways to protect transitions from job to job, promote
anticipation and develop constructive dialogue between stakeholders, and the
importance given to skills adaptation bring new challenges and new prospects
for EU labour law in the area of corporate restructuring.

The legislative framework is complemented
by a range of joint texts agreed by the EU-level social partners at both
cross-sector and sector level. Social dialogue between representatives of
management and labour can be a powerful means of successfully anticipating and
managing change and restructuring, given the participants’ specific insight
into the reality of workplaces and their responsibility for many of the issues
concerned. Most recently, between 2004 and 2009, the cross-industry social
partners carried out a project in 26 Member States, which looked at the role of
the social partners at national, sectoral, regional and enterprise levels in
economic restructuring.

Social dialogue also takes place at
sectoral level, and a wide variety of sectors have embarked upon joint actions
or concluded joint texts aimed at improving the management of change, notably
in railways, the sugar industry, civil aviation, postal services, chemicals,
and local and regional government. This is a valuable level for social dialogue
on this theme, as the actors understand the very specific factors that are
relevant to the organisations that operate in their sector.

Social dialogue in the form of
transnational agreements has gained in importance in recent years, due to the
growth of social dialogue in transnational companies, the rise in the number of
European Works Councils, and deliberate moves on the part of trade unions to
provide a counterweight to the increasing global dimension of the employer
side. Many such agreements with European scope tend to have as their core aim
the establishment of partnerships to deal with company restructuring and anticipate
change, and these agreements are thought to constitute some of the most
innovative and positive examples of actions in this area. The types of
transnational agreements in existence address specific restructuring events,
provide for the socially responsible management of potential future
restructuring, anticipate change in a longer-term perspective, and deal with
restructuring as part of a broader global accord on workers’ rights or
corporate social responsibility.

Social dialogue and worker participation
also plays a role in European Companies (SEs), although this varies according
to a range of factors, such as the type of company and origin of participating
companies.

1: EU LABOUR
LAW AND RESTRUCTURING

Corporate restructuring has been an area
dealt with by EU labour law since the first oil shock and difficult economic
conditions of the 1970s, when Directives were adopted ensuring the protection
of workers in the event of collective redundancies, transfers of undertakings
and employer insolvency. The growing cross-border dimension of such processes
was first addressed in the 1990s with the Directive on European Works Councils,
and in the past decade by generalised provisions on forward-looking employee
information and consultation at both national and transnational level.

The ongoing economic crisis, the increasing
pace and cross-border dimension of change, the emergence of innovative ways to
protect transitions from job to job, promote anticipation and develop
constructive dialogue between stakeholders, and the importance given to skills
adaptation in the EU’s new Europe 2020 strategy (see chapter 2), bring new
challenges and new prospects for EU labour law related to corporate
restructuring. This relates in particular to:

● 
the effectiveness and linkage of employee
information and consultation rights at transnational and national levels;

● 
the protection of workers making transitions
between companies;

● 
the adaptation of skills, and anticipation of
employment and skills needs in companies;

● 
the promotion of European social dialogue and
transnational company agreements; and

● 
fair conditions for the cross-border mobility of
workers.

Here, we review the existing framework and
fresh developments relating to EU labour law on corporate restructuring.

1.1: MAIN EU LABOUR LEGISLATION RELATING
TO RESTRUCTURING

The provisions of several labour law
Directives relate to corporate restructuring. Their aim is to ensure the
protection of workers’ rights and provide for the involvement of workers’
representatives in the restructuring process. They play a crucial role in
promoting an approach aimed at anticipating change and encouraging cooperation
in responding to it.

Like all Directives, these Directives are
binding on the Member States as regards the objective to be achieved, although
Member States are free to determine the form and methods with which to fulfil
Community obligations under their internal legal order. In addition, in the
areas to which the Directives apply, national legislation and practice may
provide for a higher level of protection for workers than stipulated by these
Directives.

The protection of workers’ rights is
ensured in the event the employer becomes insolvent or changes, under the
Directives set out below:

● 
the Directive on employer insolvency (2008/94/EC)
aims to provide minimum protection for employees in the event of the insolvency
of their employer. It obliges Member States to establish a body (a guarantee
institution) to guarantee the payment of employees’ outstanding claims.
Moreover, Member States must take the necessary measures to ensure that
non-payment of compulsory contributions due from the employer, before the onset
of its insolvency, does not adversely affect employees’ benefit entitlements in
as much as the employees’ contributions were deducted at the source from their
remuneration; and

● 
the Directive relating to the safeguarding of
employees’ rights in the event of transfers of undertakings, businesses
or parts of businesses (2001/23/EC) provides that rights and obligations that arise from a contract of
employment or employment relationship that exists on the date of a transfer,
shall be transferred from the transferor (the party that ceases to be the
employer), to the transferee (the ‘new’ employer, in short). The Directive
further provides that the transfer must not constitute grounds for dismissal by
either the transferor or the transferee.

Special information and consultation
procedures are established by EU Directives in the event of collective
redundancies or transfers of undertakings, as set out below:

● 
the Directive relating to collective
redundancies (98/59/EC) provides that an employer which envisages
collective redundancies must provide workers’ representatives with specified
information concerning the proposed redundancies and must consult with the
workers’ representatives in good time with a view to reaching an agreement.
These consultations should cover ways of avoiding or of reducing the
redundancies, and of mitigating their consequences by recourse to social
accompanying measures aimed, in particular, at aid for redeployment and
retraining of the redundant workers. The Directive also provides for the public
authorities to be notified of any projected collective redundancies, and
requires that these redundancies cannot take effect earlier than 30 days after
this notification; and

● in addition to the protection of workers’ rights, the Directive on transfers
of undertakings, businesses or parts of businesses provides that both the
transferor and transferee must provide specified information to the
representatives of employees affected by the proposed transfer and, if either
party envisages measures in relation to the employees, their representatives
must be consulted with a view to reaching agreement.

Moreover, a set of Directives provides for
the information and consultation of workers on a regular basis, at both national and transnational levels,
as set out below:

● 
the Directive establishing a general
framework for informing and consulting employees in the European Community
(2002/14/EC) seeks to strengthen dialogue within enterprises and ensure
employee involvement upstream of decision making with a view to better
anticipation of problems and the prevention of crises. It applies to
undertakings with at least 50 employees or establishments with at least 20
employees and provides for employee representatives to be informed and
consulted on developments in the undertaking’s economic situation, the
development of employment and decisions likely to lead to changes in work
organisation or contractual relations;

● 
the Directive providing for the establishment of
a European Works Council (EWC) or a procedure for informing and
consulting employees in Community-scale undertakings and groups (94/45/EC,
recast by Directive 2009/38/EC) applies to undertakings or groups with at least
1 000 employees and at least 150 employees in each of two Member States.
It allows for the establishment of a European Works Council, representative of
employees in the Member States where the group has operations, to be informed
and consulted on the progress of the business and any significant changes
envisaged; and

● 
three Directives provide for the involvement
of employees (ie information, consultation and in some cases participation
on the supervisory board or board of directors) in companies adopting the
European Company Statute (Directive 2001/86/EC) or the European Cooperative
Society Statute (2003/72/EC) or deriving from a cross-border merger
(2005/56/EC).

1.2: IMPLEMENTING AND ADAPTING
LEGISLATION

Through the implementation of the Directive
establishing a general framework for informing and consulting employees, which
was due in March 2005, there has been important progress in certain Member
States regarding the national level of the anticipation of change in companies.[104] However, in the context of the increased challenges of corporate
restructuring, the European Commission believes that the operation of the set
of Directives dealing with information and consultation at company level needs
to be evaluated.

The main area of concern over recent years
has related to the effectiveness of the transnational level of information and
consultation in case of restructuring operations in the context of EWCs
established by Directive 94/45/EC, and this led to its review in 2008-2009. In
addition, the crisis revealed growing concerns over the legislation applied in
the event of an employer’s insolvency. These initiatives add to the permanent
monitoring that the Commission undertakes in order to ensure that the
Directives are properly implemented by Member States.

Legislative action complements
non-legislative measures in this area, for which the EU continues to
provide substantial support, especially through budget line
04.03.03.03. This budget line provides support for measures to promote best
practice in the field of information, consultation and participation of
representatives of undertakings. A sum of € 7.3 million was allocated to
this for 2010.

Implementation of the recast Directive
on European Works Councils (EWCs)

Directive 2009/38/EC, adopted in May 2009
following a 2008 proposal from the Commission,[105]
recasts the 1994 Directive on EWCs. The main provisions concern: concepts of
information and consultation; the link between national and European levels of
information and consultation; a right to training for employee representatives;
the role of trade unions; the adaptation of EWCs to change; and a two-year
window to conclude or renew anticipatory agreements on EWCs.

The Commission is assisting the Member
States in the implementation process of this Directive, which must be completed
by June 2011.

Together with the promotion of best
practice, the new legal framework should meet the following objectives:

● 
ensuring the effectiveness of employees’
transnational information and consultation rights in existing EWCs;

● 
increasing the take-up rate (the proportion of
EWCs established compared with the number of companies falling within the scope
of the Directive);

● 
ensuring legal certainty in the setting up and
operation of EWCs; and

● 
achieving a better coherence and interplay
between EU legislative instruments on the information and consultation of
employees.

Evaluation and ‘fitness check’ of
Directives on information and consultation at national level

As outlined above, the provisions of
several labour law Directives provide for information and consultation of
employees in the context of corporate restructuring. Special procedures have
applied to collective redundancies and transfers of undertakings since the
1970s, while the 2002 framework Directive on information and consultation
secured a right to regular information and consultation in
undertakings/establishments. Going beyond the implementation in national legal
orders of the individual Directives, which has already been reviewed in
Commission’s reports,[106] an ‘ex-post’ evaluation will investigate how these Directives are
being applied at present, as well as any shortcomings and room for improvement.
These Directives are also among the first clusters of Directives to be examined
by the Commission under a new ‘fitness check’ of EU legislation. This process
aims to determine whether Directives are fit for purpose, in terms of meeting
their objectives in an efficient way (looking at issues such as implementation,
infringements, complaints, ex-post evaluations and administrative burdens), and
to design further actions that may be required, notably simplification.

Implementation
and application of legislation on employer’s insolvency

As described above, Directive 2008/94/EC
aims to protect employees’ rights in the event of the insolvency of their
employer, in particular by guaranteeing payment of their outstanding claims
(wages, pensions and other benefits). The Commission will report on the
implementation and application of several of the Directive’s provisions. It has
also commissioned a study on the protection of defined-benefit pension schemes
and book-reserve schemes, in relation to the Directive’s Article 8 on
protection of supplementary occupational entitlements to pensions. The Commission will
also launch a study on measures and practices relating to transfers of
undertakings (under Directive 2001/23/EC) in insolvency or similar situations.

Box 4.1: Interpretation of Directives by the European Court of Justice

The European Court of Justice (ECJ) had the
opportunity to interpret several provisions of EU labour law Directives
relating to restructuring in a number of judgments rendered between 2008 and
early 2010.

In relation to Directive 98/59/EC on collective
redundancies, the ECJ delivered three judgments. Most importantly, it ruled
in case C-44/08 on the question of who should consult employees on collective
dismissals in the case of a group of undertakings, and at what time.[107] In its judgment,
the Court ruled as follows:

The adoption within a group of undertakings of
strategic decisions or of changes in activities that compel the employer to
contemplate or to plan for collective redundancies, gives rise to an obligation
on that employer to consult with workers’ representatives.

The consultation procedure must be started by the
employer once a strategic or commercial decision compelling it to contemplate
or to plan for collective redundancies has been taken.

The obligation to start negotiations does not
depend on whether the employer is already able to supply to the workers’
representatives all the information required by the Directive — the information
can be provided during the consultations and not necessarily at the time when
they start.

In the case of a group of undertakings consisting
of a parent company and one or more subsidiaries, the obligation to hold
consultations with the workers’ representatives falls on the subsidiary which
has the status of employer only once that subsidiary, within which collective
redundancies may be made, has been identified.

In the context of a group of undertakings, a
decision by the parent company that has the direct effect of compelling one of
its subsidiaries to terminate the contracts of employees affected by the
collective redundancies can be taken only on the conclusion of the consultation
procedure within that subsidiary, failing which the subsidiary, as the
employer, is liable for the consequences of failure to comply with that
procedure.

In case C-12/08, the Court clarified that the
collective redundancies Directive allows national legislation that subjects the
exercise of the rights of individual workers to certain requirements.[108]

In case C-323/08, the Court clarified the scope
of the Directive in the event of the employer’s death.[109]

The ECJ delivered one judgment relating to
Directive 2002/14/EC on information and consultation, clarifying in case
C-405/08 the extent of the protection granted to employees’ representatives.[110]

The Court issued four judgments relating to
Directive 2001/23/EC on transfers of undertakings. In case C-313/07, it
clarified that the Directive does not have effects on contracts other than
employment contracts.[111] In case C-396/07, the ECJ clarified the effects of the termination
of an employment contract because a transfer involved a substantial change of
working conditions.[112] In case C-466/07, the Court ruled that where the transfer concerns
only part of an undertaking, for the Directive to be applicable it is not
required that this part retains organisational autonomy.[113] In case
C-561/07, the Court ruled that Italy had infringed the Directive through its
legislation on undertakings in critical difficulties, which relieved these
undertakings from certain obligations resulting from the Directive.[114]

As far as the Directive on employer insolvency
is concerned, two judgments were handed down. This Directive requires
Member States to establish institutions that guarantee the payment of unpaid
salaries. In case C-310/07, the Court clarified the conditions for the
competence of the guarantee institution in a Member State in cases where the
insolvent company had activities in more than one Member State.[115] In case C-69/08,
the ECJ clarified the conditions that national law can impose for limitation
periods on making claims to the guarantee institution.[116]

1.3: PREPARATION OF NEW INITIATIVES

The main new initiatives of the Commission
regarding dialogue and law relate to the European Code of conduct and to
transnational company agreements. Challenges and proposals relating to labour
law and restructuring will also be addressed as part of a series of initiatives
taken by the Commission, notably in the areas of employment, internal market
and transport.

2:
EUROPEAN-LEVEL SOCIAL DIALOGUE ON MANAGEMENT AND ANTICIPATION OF CHANGE

The legislative framework set out above is
complemented by a range of joint texts agreed by the EU-level social partners
at both cross-sector and sector level. Overall, social dialogue between
representatives of management and labour at all levels (company, sector, national
and European) can be a powerful means of successfully anticipating and managing
change and restructuring, given the participants’ specific insight into the
reality of workplaces and their responsibility for many of the issues
concerned. Here we look at relevant initiatives taken recently within the
social dialogue at European level. This dialogue, supported by the European
Commission, encompasses:

● 
the cross-industry dialogue, which involves the
European Trade Union Confederation (ETUC)  — plus the Eurocadres/CEC liaison
committee, which represents managerial and professional staff unions —
BusinessEurope, the European Centre of Employers and Enterprises providing
Public Services (Ceep) and the European Association of Craft, Small and
Medium-sized Enterprises (Ueapme); and

● 
the sectoral social dialogue, based on 40
sectoral social dialogue committees brings together European-level
representatives of management and labour in the industry concerned.

The focus here is mainly on developments
over 2008-2010. For more information on earlier initiatives — including
Commission consultations of the cross-industry social partners on tackling
restructuring in 2002 and 2005, and a set of ‘orientations for reference in
managing change and its social consequences’ on which the cross-industry
partners have worked in 2003 without having reached a formal agreement on the
issue– and on the European social dialogue more generally, see the Restructuring
in Europe 2008 report.[117]

2.1: UNDERSTANDING WHAT HAPPENS

Between 2004 and 2009, the cross-industry
social partners carried out a project in 26 Member States, which looked at the
role of the social partners at national, sectoral, regional and enterprise
levels in economic restructuring. The first phase of the project, undertaken in
2005 and 2006, covered 10 new Member States (Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia).[118]

The second phase of the project, conducted
in 2007 and 2008, involved 10 more Member States: Austria, Denmark, France, Greece, Ireland, Italy, the Netherlands, Spain, Sweden and the UK. It found that the restructuring that took place in many sectors in most of these countries
reflected a growth in the importance of services and a parallel reduction of
employment in manufacturing. Whilst job reductions took place, the overall
background to restructuring was one of economic and employment growth, with Europe as a whole adding 7 million new jobs over the period 2000 to 2005. The burden of job
loss did not fall evenly between sectors and regions and there were often clear
distinctions between those who gained and those who did not.

The third phase of the project, covering
six countries, took place against the background of the financial and economic
crisis that took hold towards the end of 2008. Discussions with the social
partners in Belgium, Finland, Germany, Luxembourg, Portugal and Romania were dominated by the impact of the crisis and the design and adoption of
anti-crisis measures to the exclusion of virtually all other issues.

The project concluded with a final
conference and an expert report in January 2010 — see Box 4.2. No further
follow-up has yet taken place.

Box 4.2: Excerpt from the
final expert report* of the European cross-industry social partners’ project on
social dialogue and restructuring (2005-2009)

The macro themes that together make up an agenda for successful
social partner engagement in the management of change and which are common to
any national system are: anticipation and shared diagnosis; managing job
transitions; preparing the workforce of the future; and restructuring, social
dialogue and the crisis. Second, there are very specific and practical
micro-level examples from a country, sector or organisation that are capable of
adaptation and adoption in differing environments and circumstances.

A ‘road map’ identifying a number of areas for successful social
partner engagement in the management of change, is meant to work in any
national context and includes the following:

Assuring timely and relevant information and consultation. This is one of the areas where the engagement of the social partners
is currently weakest. Anticipation of change is crucial if sudden and
unexpected workforce shocks are to be avoided and restructuring take place
against timescales that facilitate both organisational change objectives and
the delivery of acceptable solutions for affected workers. In organisations
where works councils are present and, in the case of large organisations, a
European Works Council (EWC), these bodies can play an important role in the
prior information and consultation process.

Anticipating change and developing a shared diagnosis and agenda. The specific concern expressed was that information was provided to
workers’ representatives too late, and that consultation was frequently, at
best, peremptory. Where this question was raised it was pointed not only toward
employers but also toward governments in their consultation related to
employment policy and restructuring related laws or projects.

Managing job transitions. It appeared
from the discussions that took place in the 26 countries that interest is being
shown by both workers’ and employers’ representatives in job transition
schemes. In countries where job transition arrangements have not traditionally
been commonplace, considerable interest is shown in the Trygghetsrådet in
Sweden (which have generally been inappropriately translated as ‘job security
councils’ whilst in reality they are about ‘career’ rather than ‘job’
security), the Danish model of flexicurity, Finnish job foundations, or German
transfer enterprises.

Preparing the workforce of the future. The
social partners in every participating country highlighted current skills
mismatches and/or the future skills needs to support the changing economy as
key issues for the social partners and for government.

Addressing the specificities of SMEs. In
the national seminars, the amount of discussion and focus on small and micro
enterprises was limited and indicates a need for more substantive work to be
undertaken.

Transformational change. An important
objective of this project has been to go beyond defining economic restructuring
in terms of mass job losses in single large enterprises. Better practice is to
anticipate and manage change incrementally over a more extended timescale.
Where change anticipation in social dialogue processes is inadequate, social
partner engagement typically occurs only at the time when dramatic job loss is
almost inevitable.

Restructuring, social dialogue and the crisis. The discussions centred on the broad areas of government job
protection schemes, improving job security through pay moderation and
flexibility, and the ‘post crisis’ world.

The points above lead to an important conclusion of the project as a
whole. Whatever the national framework for the management of change, we found
that the active engagement of the social partners in the anticipation and
management of change at all levels improved performance in the design of change
management architecture and in restructuring practice. Within every national
framework, the role and influence of the social partners on restructuring the
enterprise or sectoral level varied widely. It was clear that the potential for
adopting good practice was not chronically inhibited by national employee
relations systems.

- Aritake-Wild (2010) ‘Joint European Level Social Partners’ Study
on Restructuring in the EU — Improving the anticipation and management of
restructuring ... adding value through social partner engagement’, Brussels.

2.2: SECTOR-LEVEL SOCIAL DIALOGUE

Social dialogue at sector level has also
focused on understanding the reality of restructuring, using its potential to
develop tailored, sector-specific responses. The following section describes
some of the main sectoral initiatives relating to a range of restructuring
issues in the following sectors:

● railways;

● the sugar industry;

● civil aviation;

● postal services;

● chemicals; and

● local and regional government.

Railways — impact of freight
restructuring

The social partners in the railway sector
published a joint report in February 2009 on the impact of European rail
freight restructuring on employment. The fundamental objective of this report
was to provide input for social dialogue, which was achieved by the organisation
of discussion seminars and visits to freight sites in six Member States. This
was the first time that the social partners had addressed this subject on a
European scale.

The social partners concluded that staff
numbers in the rail freight sector have been cut substantially due to
insufficient productivity improvements and a decline in market share. Railway
companies have, with some exceptions, introduced social support measures.
Restructuring has taken place, new job configurations have emerged, and training
has fostered enhanced competences. Outright dismissals have been avoided
through redeployment and early retirement. In addition to these changes for
employees, the European Transport Workers’ Federation (ETF), representing trade
unions, emphasised the spread of job insecurity, and the increase in
geographical mobility and in working time in certain Member States, along with
the coexistence of different contractual status for workers within the same
company. Employers stressed the survival of their companies, performance
improvements and cost control, notably through greater flexibility in order to
respond to demand more effectively and withstand the impact of cyclical
economic changes, and on efforts to find solutions for employees.

The social partners’ joint objective is to
use social dialogue to strike a balance that can be acceptable for both
parties, notably between the economic and the social perspectives, occupational
and family life etc. However, they fear that the pressure of lower transport
prices on the whole and for rail transport in particular may make certain
developments more difficult.

Civil aviation — worker involvement
in development of functional airspace blocks

In the civil aviation social dialogue
committee, the development of functional airspace blocks (airspace blocks based
on operational requirements, regardless of national boundaries) has been a key
topic in the context of sectoral restructuring affecting air-traffic
management. The relevant working group of the committee issued a joint
statement in the framework of a European conference on functional airspace
blocks in October 2007, in which the social partners agreed to assess annually
the progress made by their members in terms of consultation of workers on the
new system. To this end, the social partners jointly drafted a first
questionnaire to assess the consultation process concerning functional airspace
blocks during the feasibility study stage.

In their assessment of progress, the social
partners found that more precise and joint definitions of levels of worker
involvement were needed, although in general an information process had been
activated. Social dialogue needed to be reinforced in the implementation phase.
The trade unions felt informed and involved but not always sufficiently
consulted nor treated as real partners, leading to dissatisfaction with the way
that the views of the employees were considered. On the other side, the
providers were of the view that the level of involvement of staff
representatives was adequate, since no decisions had yet been taken, and said
that further consultations were foreseen on the possible social consequences of
the development of functional airspace blocks. Based on these results, the
social partners suggested discussing possible joint recommendations in the
social dialogue committee.

Postal services — examining the
development of the sector

In postal services, the economic crisis
that took hold in late 2008 compounded the ongoing decline in mail volumes due
to electronic substitution and the opening of the market to create additional
pressure on postal operators. Accordingly, the social partners in the sector
treated the crisis as an integral part of their work on the evolution of the
sector (an issue on which they had agreed a joint statement in 2007),
discussing how postal services are regulated with respect to their employment
and social dimension in different Member States, and working towards an
up-to-date ‘dashboard’ on this area of regulation across the entire EU.

Chemicals industry — the nature of
restructuring

In 2007-2008, the sectoral social dialogue
committee for the chemicals industry carried out a project on restructuring,
managing change, competitiveness and employment. Many different types of
restructuring were identified, such as merger and acquisition, change of
ownership, delocalisation/offshoring, outsourcing, relocation, closure and
expansion. All these types of restructuring are becoming more complex, which
led to various different viewpoints being expressed by the social partners.
Contrary to initial plans, it was therefore not possible to prepare general
guidelines on restructuring in the sector. However, the social partners agreed
a set of ‘joint lessons learned’ in May 2008.[119]

Local and regional government —
social dialogue on reform

The European Federation of Public Service
Unions (EPSU) and the Council of European Municipalities and Regions (CEMR),
the European social partner organisations involved in the sectoral social
dialogue covering local and regional government, completed a reflection on
social dialogue in public services reforms with a study published in 2008.[120] It identifies the main drivers of reform and seeks to raise the
understanding of main trends by putting into perspective 10 case studies of
reform approaches in different countries. It concludes that only in a few
countries has information and consultation of trade unions had a real impact on
restructuring. Therefore, the document puts forward points for reflection on
how the potential of a constructive social dialogue could be better used.

2.2.1: KEEPING WORKERS EMPLOYABLE AND COMPANIES
COMPETITIVE

How to ensure
that workers keep their skills up to date and therefore remain employable is a
key issue in today’s globalised economy. Companies need to engage with this
issue in order to ensure that they remain competitive. The following are
sectoral examples of initiatives that aim to increase worker employability and
company competitiveness.

Sugar industry — improving
employability

In 2009, in a context of substantial
instability due to restructuring, the social partners in the sugar sector
focused on the need to improve employability in their industry. To this end
they organised a conference on employability in October 2009 in Brussels in the framework of a project co-financed by the European Commission. This
project:

● 
defined the concept of employability;

● 
highlighted good practices in the sugar and
agro-food industry, as well as from outside these sectors;

● 
made recommendations concerning success and
employability factors;

● 
listed skills that should be developed and that
are required in the sugar sector;

● 
gave an overview of European and national
financing possibilities in 20 sugar-producing countries; and

● 
provided a practical dictionary defining
concepts connected with employability.

This information is presented in the form
of an interactive computer-based tool, allowing the content to be progressively
enriched by new contributions. The tool is available in multiple languages on
the website of the sugar social dialogue committee (www.eurosugar.org).

Railways — employability as a common
challenge

In the railways sector, the social partners
organised a conference on employability in 2008, designed to implement the
joint recommendations on the concept that they had approved in late 2007.[121] This conference allowed employers, trade unions, experts and other
stakeholders to exchange views on the current status and progress in the
implementation of the strategy of employability. With the help of specific
examples of good practice, participants discussed the significance of this
approach for European railway companies and their employees. The unanimous
acknowledgement that employability is a common challenge for corporate
management, employees, trade unions and works councils was a clear signal for
the European social dialogue committee to continue working on this issue and to
closely support and promote the process of implementing the strategy of
employability in the various national contexts.

Civil aviation — best practices on
training and qualifications

In the ground-handling working group of the
civil aviation social dialogue committee, the European social partners jointly
organised a conference on best practices on training and qualifications in the ground-handling
sector in 2008. The conference highlighted the evolution of the sector and the
link between training, safety and the quality of service. Following the
conference, the European social partners acknowledged that the development of
staff skills is an essential factor to deliver safe and high-quality services.
A priority is to recognise the proficiency of the employees, thereby improving
their employability and facilitating the adaptation of companies, which are
confronted by new challenges in an international economy. The European social
partners generally agreed that it is vitally important to their industry that
workers have the necessary skills and qualifications to meet the challenges of
a sustainable aviation market. They therefore decided to examine several
examples of good practice in a study conducted in 2008. As a result, the social
partners signed a joint declaration in 2009, outlining their common
understanding and examining joint initiatives deriving from the study.[122]

2.2.2: ANTICIPATION OF FUTURE SKILLS NEEDS

Faced with increasing globalisation, the
social partners in the textile and clothing sector agree on the crucial
importance of early anticipation and training to optimise the management of
jobs and skills of European workers and companies. In 2009, in the context of
the European Commission’s proposal to establish European Sector Councils on
Jobs and Skills, they finalised a project studying good practices in this area
and the feasibility of establishing a network of existing skills observatories.
As a follow-up, the social dialogue committee has started to explore the
creation and working arrangements of a possible sector council. Similarly, the
commerce, postal services and tanning and leather sectoral social dialogue
committees have also expressed an interest in becoming pilot sectors for the
proposed European Sector Councils on Jobs and Skills.

In a January 2010 joint appeal on ‘Emerging
from the crisis: fostering growth and jobs for a sustainable construction
industry’, the European social partners in the construction industry called for
a substantial increase in efforts for sector-specific vocational and
professional training facilities. The aim would be: on the one hand, to help
ensure that workers have the required skills to carry out energy-efficiency
upgrades in the housing sector; and, on the other hand, to facilitate labour
market transition and the strengthening of construction workers’ skills. At the
time of writing this report, the social partners in this sector had not yet
published any evaluation of actions in this area.

Box 4.3: Guiding
restructuring — a toolkit in the electricity sector

To help employers and trade unions better manage restructuring
processes, the European social partners in the electricity sector published in
December 2008 a toolkit for socially responsible restructuring, including a
best practice guide.[123]

This toolkit builds on in-depth case studies and analyses the
context of restructuring in the industry (such as liberalisation and
technological change), and the importance of social dialogue and of
anticipation and transparency in the process. It addresses the questions of:

● 
outsourcing and offshoring;

● 
training, lifelong learning and redeployment;

● 
health and psychosocial issues;

● 
the role of public authorities; and

● 
cross-border learning.

A practical checklist on each of these topics for the design of
restructuring strategies complements the explanations. The toolkit is published
in English, Polish, Romanian and Bulgarian.

3:
TRANSNATIONAL COMPANY AGREEMENTS AND RESTRUCTURING
3.1: AN EMERGING PHENOMENON

Since the early 2000s, there has been an
increasing tendency for multinational companies, and especially those
headquartered in Europe (or with major European operations), to engage in
transnational negotiating activity with workers’ representatives, resulting in
the conclusion of agreements dealing with issues common to all or some of the
countries where the multinational operates. Some 200 transnational company
agreements (TCAs, a term used here also to include other transnational joint
texts not labelled as agreements) have so far been recorded by the European
Commission in around 100 companies employing a total of 9.8 million employees.[124]

TCAs may be of global scope or focus on
European countries. On the employee side, their signatories are usually global
or European trade union federations, European Works Councils (EWCs), or a
combination of these parties, sometimes alongside national unions and works
councils. While global TCAs typically focus on fundamental rights or aspects of
corporate social responsibility, many TCAs with European scope tend to have as
their core aim the establishment of partnerships to deal with company
restructuring and anticipate change. Indeed, these agreements constitute some
of the most innovative and positive examples of actions in this area.

Here we outline the main ways in which TCAs
deal with restructuring and change, often in a very innovative way. Broadly,
they may:

● 
address specific restructuring events;

● 
provide for the socially responsible management
of potential future restructuring;

● 
anticipate change in a longer-term perspective;
or

● 
deal with restructuring as part of a broader
global accord on workers’ rights or corporate social responsibility.

3.2: ADDRESSING SPECIFIC RESTRUCTURING
EVENTS

A number of TCAs have been negotiated after
the announcement of a specific restructuring plan, in order to lay down a set
of guarantees for the employees affected by this operation, and sometimes also
addressing economic issues. For example, specific circumstances have prompted
the negotiation and adoption of TCAs at companies such as Danone
(France, food) and DaimlerChrysler (at the stage when it was a single
German/US automotive group), while a series of important European-level agreements
on specific restructuring exercises have been concluded at General Motors
and Ford (both US, automotive) since 2000, providing for alternatives to
closures and dismissals as well as pan-European social guarantees.

The most common contents of this type of
specific restructuring agreement are set out below.

Avoiding redundancies

When plant closures and workforce
reductions are planned, agreements often include commitments to avoid
compulsory redundancies. For example, the series of agreements concluded at General
Motors Europe played a key role in avoiding plant closures and large-scale,
concentrated job losses between 2000 and 2010.

Guarantees linked with transfer and
redeployment

When closures and/or redundancies are
unavoidable, agreements sometimes provide for internal and/or external
redeployment. Employees who are transferred after a plant closure often benefit
from the maintenance of employment terms and conditions and/or job security.
The same applies when employees are transferred to another company as a
consequence of a spin-off, alliance or sale. Several TCAs of this type also
contain a commitment to ensure the return of transferred employees in their
former company in some circumstances. For an example of a recent agreement
containing guarantees on transfer and redeployment for the integration of a
branch of Areva in Alstom and Schneider Electric, see Box 4.4.

Other accompanying measures

Other accompanying measures are generally
offered by agreements to employees affected by the restructuring plan,
especially in the case of redundancies. These may include: part-time work
programmes; outplacement assistance; support in starting up a business;
compensation payments on termination of contract; compensation for shortfalls
in earnings in a new job; training to attain the necessary skills to find jobs
with a new employer; or a priority right of application in future new
recruitment. Social and employment guarantees can also result indirectly from
agreements’ provisions addressing economic issues, for example commitments to
provide sourcing or investments.

Procedural rules and social dialogue

Agreements may provide for information,
consultation and dialogue over the restructuring in question and, in cases of
transfers, deal with the consequences for collective agreements and
representation. For example, they may provide that the existing collective
agreements will stay in force (one states that a divested company will join the
industry’s employers’ association so that the relevant sectoral collective
agreements will continue to apply). Some agreements contain rules on employee
representation during the restructuring and/or after the transfer of employees,
maintaining the rights of the EWC and national trade unions. Others adapt
representation to the new situation or provide for the creation of a new EWC.
An example of a TCA of this type is an agreement signed in March 2010 by Air
France-KLM (Netherlands/France, civil aviation) and its EWC, which lays down
the information and consultation arrangements to apply at various levels over
the reorganisation of the airline’s sales agencies at European airports.

Box 4.4: European agreement
on social guarantees following the acquisition of Areva T&D

Two France-based multinationals, Alstom (power) and Schneider
Electric (electrical engineering), jointly acquired in 2010 the energy
transmission and distribution (T&D) business of Areva
(France, nuclear power). Alstom will integrate Areva’s transmission
activities into its own operations, and Schneider Electric will integrate the
distribution activities.

In July 2010, Alstom and Schneider Electric signed a European
agreement with the European Metalworkers’ Federation (EMF), which provides
social guarantees for former Areva T&D employees and the rest of the Alstom
and Schneider Electric workforces.

The agreement guarantees former Areva T&D staff throughout Europe continued employment at Alstom or Schneider Electric in an equivalent job in the
same geographical area, and on the same pay. There will be no compulsory
redundancies before March 2013 affecting either the former Areva T&D
staff or the existing Alstom and Schneider Electric employees in the same
divisions, unless economic conditions deteriorate significantly. The
agreement’s commitments to former Areva T&D employees will not be
detrimental to other Alstom or Schneider Electric employees.

The accord also sets out provisions on integration and training
for former Areva T&D staff, social dialogue (including the integration
of former Areva T&D activities into dialogue structures at all levels,
including the Alstom and Schneider Electric EWCs) and collective bargaining
(including the adaptation of agreements at Alstom and Schneider Electric to
reflect those formerly applicable at Areva T&D).

3.3: SOCIALLY RESPONSIBLE MANAGEMENT OF
FUTURE RESTRUCTURING

Some TCAs jointly plan for potential future
restructuring in advance, setting out general rules and/or more concrete
measures to apply to employees when restructuring occurs. Agreements of this
type have, for example, been signed at Axa (France, insurance), Danone,
Deutsche Bank (Germany, finance), Dexia (Belgium/France,
finance), Diageo (UK, food and drink), EADS (Netherlands, aerospace), General Motors, RWE (Germany, utilities) and Total (France, petrochemicals). These agreements seek to ensure that restructuring occurs in a
socially responsible manner, explaining the companies’ social and employment
policy in the event of restructuring and change, and setting Europe-wide
guidelines and minimum standards, often with a particular focus on business
disposals. The aim is generally to promote job security and employability and
to mitigate the impact of restructuring on employees. A recent agreement at ArcelorMittal
contains provisions of this type (as well as on other aspects of restructuring)
— see box 4.5.

Avoiding
redundancies

In this type
of agreement, companies often pledge to avoid, as far as possible, job losses
and to seek alternatives to compulsory redundancies. These alternatives
include: internal redeployment; geographical mobility; part-time work;
redistribution and reduction of working hours; cuts in overtime; voluntary
departures or early retirement (often with financial compensation).

Accompanying measures

In future cases where job reductions are
unavoidable, agreements often stipulate accompanying measures, such as
practical and financial assistance in internal and/or external redeployment,
notably through vocational training and outplacement assistance. Where business
disposals occur, agreements may provide for the maintenance of rights,
employment terms and conditions, and pay-bargaining arrangements, or even give
employees a right to return to the original employer within a certain period.
Where plants close, some agreements provide for site rehabilitation aimed at
creating new jobs or stimulate economic development (for example through
consulting services, market or feasibility studies and financial assistance).

Social dialogue procedures

These agreements usually establish
procedural rules on social dialogue over restructuring. The companies commit
themselves to informing and consulting employee representatives — the EWC
and/or local trade unions and representatives — on restructuring plans and
their social impact. At the planning stage, one agreement provides for the
company and workers’ representatives to examine potential business
opportunities jointly in order to lessen the impact on employees and to favour
joint ventures.

Box 4.5: Managing and anticipating change at ArcelorMittal

In November 2009, ArcelorMittal (Luxembourg, steel) and the European Metalworkers’ Federation (EMF) signed a European
agreement on ‘managing and anticipating change’, prompted by the economic
crisis and the global fall in demand for steel. The agreement both deals with
the immediate effects of the crisis and lays down minimum Europe-wide
principles with a view to anticipating and managing change in a socially
responsible manner.

The agreement commits ArcelorMittal to
maintaining European plants currently temporarily closed because of the
fall in demand and reopening them in future, while drawing up industrial plans
for the future, covering matters such as: the upgrade and renewal of machinery
and tools; the preservation of critical skills; and the role of key
contractors. Compulsory redundancies will be avoided and workers will be
trained during periods of short-time working.

In a longer-term perspective, the agreement
stipulates a range of policies aimed at anticipating changes in jobs and skills
needs, and training and developing employees to improve their employability. It
also promotes social dialogue on anticipation and management of change at
local, national and European level, and creates a formal European-level
union-management consultative committee.

3.4: ANTICIPATING CHANGE

The TCAs that seek to anticipate change and
manage jobs and skills in a forward-looking way are among the most innovative
company-level initiatives relating to restructuring. Rather than dealing with
specific instances of restructuring or laying down principles or rules to guide
future restructuring, they establish a long-term employment policy with a view
to ensuring the future of employees, whatever organisational changes occur.
Examples of such agreements have been signed at Danone, Dexia, Eni
(Italy, energy), Schneider Electric, PSA Peugeot Citroën (France,
automotive), Total, and Thales (France, technology). A recent
example is at GDF Suez — see box 4.6.

Planning

Agreements of this type usually put in
place a planning process to assess current and future jobs and training needs
in a context of change, for example putting in place a system to
monitor anticipated technological and labour market developments.

Management of employment and skills

Based on assessments of future developments
in occupations and work, agreements seek to manage employment and skills. The
Europe-wide agreement on this anticipation/training policy may take the form of
a framework that sets orientations for subsequent national agreements, or
contain more concrete and detailed provisions, dealing with matters such as:

● 
general forward planning tools, with assessments
for each country, group company, workplace and/or job;

● 
professional development for employees, for
example through individual competence reviews, vocational training, mobility or
validation of work experience;

● 
an active training policy open to all employees,
defined through local annual discussions;

● 
aspects of recruitment policy, such as giving
priority to internal candidates, integrating new recruits or transferring
skills between generations;

● 
mobility issues, such as anticipating compulsory
internal and external mobility, encouraging and accompanying voluntary internal
mobility, and disseminating job vacancies within the group; and

● 
specific measures to manage the future careers
or retrain employees who have reached mid-career or work in physically
strenuous occupations.

Social dialogue procedures

These agreements highlight the importance
of information and consultation at European and local level in enabling an
anticipatory social dialogue. They may enhance the scope of information given
to the EWC, link the European dialogue with the information and consultation of
representative bodies at local level, or establish specific committees at
different levels.

Box 4.6: European employment
and expertise plan agreed at GDF Suez

GDF Suez (France, energy and utilities) signed in February 2010 a
European agreement introducing an ‘employment and expertise plan’, with a
negotiating group made up of national trade union representatives and the
European Federation of Public Service Unions (EPSU). The accord introduces a
Europe-wide system of forward-looking management of jobs and skills.

The agreement establishes a ‘stock-taking exercise’ of human
resources, HR management systems and practices, and company activities in all
GDF Suez subsidiaries, followed by regular monitoring, as a basis for forecasts
of future employment and skill needs. It lays down Europe-wide principles and
policies in areas such as career development, skills assessment, vocational
training, internal advertising of vacancies, recruitment, equal opportunities,
mobility, mentoring, older workers, and tackling the issues associated with
physically demanding work.

The agreement provides for information and consultation on relevant
issues for the EWC and national employee representative bodies, and creates
specific joint committees at European and national levels to monitor the
employment and expertise plan.

3.5: ADDRESSING RESTRUCTURING IN GLOBAL
AGREEMENTS

Many TCAs, generally those with worldwide
scope, are ‘global agreements’ or ‘international framework agreements’, dealing
with fundamental workers’ rights and/or corporate social responsibility issues.
Some of these agreements, while not specifically focusing on restructuring or
accompanying and anticipating change, include references to these issues.
Examples of such global agreements include those at EADS, EDF
(France, electricity), Eni, Generali (Italy, insurance), Lukoil
(Russia, energy), Rhodia (France, chemicals), Pfleiderer (Germany, wood) and Renault (France, automotive).

A number of these agreements refer
explicitly to the social management of restructuring by committing the company
to: protecting jobs through training and mobility; minimising the impact of
restructuring on employment and working conditions; ensuring the employability
of employees in a long-term perspective; or providing for the information and
consultation of employee representatives on restructuring. Some global
agreements contain specific commitments by the company to anticipate, as far as
possible, economic and industrial changes and their consequences in terms of
human resources. The most common means of implementing this ‘anticipation
principle’ include the management of skills and training, and a forward-looking
and permanent social dialogue.

Box: 4.7: Two examples of global agreements

The international framework agreement at the German wood
and by-product wholesaler Pfleiderer AG, signed in November 2010 between the
company’s Works Council, the German metal union, IG Metall, and the Building
and Wood Workers International (BWI), commits the company to respect the
international labour standards of the International Labour Organisation (ILO)
for all its employees. It also commits to applying, on its German sites and
elsewhere, minimum standards in terms of working conditions, in keeping with
the ILO’s international labour standards. The agreement, in the form of a
social charter, also contains other commitments on the health and safety of
workers, the protection of the environment, learning and vocational training,
and a commitment to work only with contractors, sub-contractors and suppliers
who recognise and implement these social principles.

The international framework agreement at the European Aeronautic Defence and Space Company (EADS NV), which also dates from 2005, makes a commitment to promoting the employment of the
company’s workforce. Specifically, in the case of company ‘re-orientation’ or
restructuring, the agreement says that it will do ‘all it can to protect
employment by means of all possible measures, including training and mobility,
whenever appropriate’. The accord was concluded between the European Works
Council and management at the company.

3.6: COMMISSION’S ROLE IN PROMOTING
TRANSNATIONAL COMPANY AGREEMENTS

Since 2005, the European Commission has
been active in promoting TCAs.[125] The Commission
started organising ‘stock-taking’ activities on TCAs as a contribution to the
implementation of the Social Agenda 2005-2010, which included plans for the
drafting of a proposal for an optional legal framework for transnational
collective bargaining. In 2006, the Commission organised study seminars for
governmental experts, social partners, academics and company actors to analyse
the emerging TCA phenomenon, its background and the first experiences with this
kind of joint text. The seminars were complemented by background reports,
company case studies and interviews with company actors. In 2008, a company
workshop was held, which allowed for an in-depth exchange between Commission
experts and management and EWC representatives from multinationals with such
agreements. The findings of this workshop contributed to a wider conference,
organised with the French Presidency of the Council in November 2008, on the
transnational dimension of social dialogue and restructuring.

In the framework of the 2008 renewed social
Agenda, the Commission issued a report[126]
analysing the role of TCAs in the context of increasing international
integration, and the issues to be addressed (actors involved, effects of
agreements, transparency and dispute settlement). This report was accompanied
by a mapping of existing TCAs.

Since 2008, the Commission’s promotion of
TCAs has included support for initiatives aimed at:

● 
facilitating the identification of the actors,
approaches or mechanisms that could be promoted in this area;

● 
identifying ways of ensuring that the texts
agreed are more transparent; and

● 
determining conciliation or mediation mechanisms
that could be promoted with a view to facilitating dispute settlement.

Specific actions launched with the aim of
supporting TCAs have included:

● 
financial support for social partner projects on
TCAs under budget heading 04.03.03.03 on information, consultation and participation
of representatives of undertakings;[127]

● 
the commissioning of studies on international
private law rules and on the effects produced by company agreements;

● 
the creation of a database of transnational
texts (under way); and

● 
the establishment in 2009 of an expert group on
TCAs made up of social partners, governmental experts and experts from other
institutions, to monitor developments and discuss ways to best support TCAs —
the Commission will draw conclusions from its work and propose future steps in
2011.

An extensive range of further documentation
on transnational company agreements is available at:
http://ec.europa.eu/social/main.jsp?catId=707&langId=en&intPageId=214

4:
CROSS-BORDER MERGERS

Many transnational companies are created as
a result of cross-border mergers, and these can have complicated provisions
regulating the information, consultation and participation of workers. This
section looks at issues surrounding cross-border mergers.

Since 15 December 2007 (the date by which
Member States should have adopted the national implementing legislation),
cross-border mergers have been facilitated by European legislation. Directive
2005/56/EC of 26 October 2005 on cross-border mergers of limited liability
companies sets out the conditions and procedures for these restructuring
operations, building on the national requirements for domestic mergers. The
Directive responded to strong demand from businesses to facilitate cross-border
mergers in the European Union, which had previously been impossible or very
difficult and expensive. It aimed to reduce costs and guarantee legal certainty
for companies taking part in these procedures.

The rules apply to limited-liability
companies which were formed in accordance with the law of a Member State and have their registered office, central administration or principal place of
business within the Community. The merging companies need to be governed by the
laws of at least two Member States.

The procedure of carrying out a
cross-border merger is developed to protect the rights and interests of
shareholders, creditors and employees. The participating companies must draw up
and publish common draft terms of mergers that set out, inter alia, the
ratio applicable to the exchange of shares, the terms of the allotment of the
shares of the resulting company and information on the evaluation of the assets
and liabilities which are transferred to this company (the acquiring company or
a new company). The draft terms must also describe the likely repercussions of
the cross-border merger on employment and, where appropriate, information on
the procedures by which arrangements for the involvement of employees in
determining their participation rights in the resulting company.

The management of the merging companies
must draw up a report to explain and justify not only the legal and economic
aspects of the merger but also the implications for shareholders, creditors and
employees. The report must be made available to the shareholders, as well as to
the representatives of the employees or the employees themselves, one month
before the general meeting that decides on the merger. If the management
receives an opinion from the employees in good time, it has to be attached to
the report.

4.1: EMPLOYEE PARTICIPATION IN
CROSS-BORDER MERGERS

As a general rule, employees’ participation
rights in the board of the company resulting from the cross-border merger are
governed by national law. However, there are three exceptions:

● 
if at least one of the merging companies has, in
the six months before the publication of the draft terms of the merger, an
average number of employees exceeding 500 and it is operating under an employee
participation system;

● 
if the law applicable to the resulting company
does not provide for at least the same level of employee participation as
operated in the merging companies; and

● 
if the national law applicable to the resulting
company does not provide for the employees of the foreign establishments of the
resulting company the same entitlement to exercise participation rights as
enjoyed by the employees in the company’s country of registration.

In these cases, the merging companies must
start negotiations with the employees (or their representatives) in order to
find an agreement on the exercise of participation rights in the board of the
resulting company. The detailed rules of the negotiation follow the
requirements of Directive 2001/86/EC that govern the involvement of employees
in a European Company (SE).

The Directive also makes sure that Member
States protect employee participation rights, in the event of subsequent
domestic mergers, for a period of three years after the cross-border merger has
taken effect.

4.2: EUROPEAN COMPANIES (SEs)

Council Regulation (EC) No 2157/2001[128] establishes a Statute for a European Company with a view to
creating a uniform legal framework enabling companies from different Member
States to plan and carry out the reorganisation of their business on a
Community scale. Council Directive 2001/86/EC[129]
supplements the Regulation as far as the involvement of employees[130] is concerned, with the aim of ensuring that the establishment of an
SE does not entail the reduction of practices of employee involvement existing
within the companies participating in the creation of the SE.

The fundamental principle and stated aim of
the Directive is to secure employees’ rights as regards involvement in company
decisions. Employee rights in force before the establishment of SEs should
provide the basis for employee rights of involvement in the SE (the ‘before and
after’ principle). This aim is sought primarily by means of an agreement
negotiated between the management of the companies concerned and the employees’
representatives. In the absence of agreement within a six-month period (which
can be extended to up to 12 months by agreement), the Directive establishes a
set of standard rules. Furthermore, employees’ representatives may decide not
to open negotiations or to terminate negotiations already opened, and simply
rely on the rules on information and consultation of employees in force in the
Member States where the SE has employees. According to the SE Regulation
(Article 12(2)), an SE cannot be registered unless one of these conditions is
met (ie an agreement on employee involvement is reached, or standard rules, or
national information and consultation rules, apply).

In 2008, the European Commission
commissioned an external study on the operation and
impact of the SE Statute.[131] The study, which was published in March 2010, was based on
questionnaires and interviews with stakeholders. In May 2010, the Commission
launched a consultation on the results of the study in order to test the
study’s results with a wider audience and provide the Commission with
stakeholders’ views on issues relevant in assessing the SE Statute. In November
2010, the Commission issued a report on the application of the SE Statute,[132] accompanied by a Staff Working Document, which, among other things,
makes an inventory of the existing SEs, presents trends on SEs’ distribution
throughout the EU, and analyses the main problems
encountered when setting up and running an SE.[133]

As to the current state of play as regards
agreements on worker involvement in SEs, the European Trade Union Institute
(ETUI) reports that by November 2010, 67 agreements on
worker involvement could be identified from the 658 SEs established.[134] The agreements of the larger SEs, in particular, are generally in
line with good ‘EWC practice’ and, on certain points, go beyond the provisions
of the SE Directive.

In 32 SEs the rights
enshrined in the agreement include board-level participation, thereby adding an
important dimension for workers’ voice in company decision-making.

At present, more than 90
employee board members represent the interests of the workforce on SE supervisory
or administrative boards. A fundamental innovation introduced by the SE
legislation is the transnational component of participation at board level. In
a number of SEs (eg Allianz SE, BASF SE and MAN Diesel SE) employee
representatives from several countries sit on the board and represent the
interests of the European workforce as a whole. SE employee board-level
representatives today come from 10 different countries (AU, BE, DK, FR, DE, IT,
NL, NO, PL, UK). For more information, see box 4.8.

Box 4.8: Worker involvement
in ‘normal’ SEs (those operating and employing 5 or more employees)

At least 67 SEs have arrangements on information and
consultation at transnational level.

32 SEs have board-level representation (participation):

● 
24 companies registered in Germany: Allianz,
ASIC, BASF, BP Europa, Clariant, Dekra, DVB Bank, E.on-Energy Trading,
Fresenius, GfK, Knauf Interfer, Lenze, MAN Diesel & Turbo, MAN, Porsche
Automobil Holding, SGLCarbon, SCA Hygiene Products, Q-Cells, RKW, Surteco,
Tesa, Warema, WILO, Wacker Neuson

● 
3 companies registered in Austria: STRABAG, Plansee, Conwert Immobilien Invest

● 
3 companies registered in France: SCOR (3 SEs)

● 
1 company registered in Cyprus: Prosafe

● 
1 company registered in Hungary: Wamsler

Source: ETUI November 2010.

Box 4.9: Examples of worker
involvement in SEs

MAN Diesel SE, Germany

MAN affiliate MAN Diesel SE, founded in August 2006, made history as
the first SE. As a result of this, German co-determination was spread to other
EU member states: on the SE supervisory board the German workforce
representatives now share the 50 % of the seats formerly reserved for them
in accordance with German co-determination law with their colleagues from
Denmark. No less important, the SE works council is now much more European than
the previous European Works Council. This Europeanisation of interest
representation to the highest achievable extent is well in line with the
objectives of the European Metal Workers Federation (EMF).

MAN Diesel SE was set up by a national
conversion, and is registered in Augsburg, Germany. According to the SE
statute, the management decided to retain the existing two-tier corporate
structure and, consequently, the German form of co-determination, giving the
workers 50 % of the seats on the supervisory board. At the same time, the
management used the founding of the SE to reduce the size of the supervisory
board from 12 to 10 members. This was not considered a reduction of
participation at this level by IG Metall, however: only the employee seat
reserved for the management staff representative was lost (according to German
co-determination law this person is considered as being on the employees’
side). At the time of SE establishment MAN B&W Diesel — mainly the result
of a German–Danish merger of heavy diesel machinery production in 1980 — the
company employed 6 423 people, mainly in Germany (2 875) and in Denmark (2 362), but also in France, the UK and the Czech Republic, with some service
departments in Greece, Norway and Sweden. The transformation of MAN B&W
Diesel into an SE may be seen as only a first step against a broader background
of reorganising the company’s whole machinery and truck branch in Europe, making it a bigger, globally more competitive player. Meanwhile, negotiations have
commenced with the workers as the company has decided to convert into an SE
wholesale (Oct 2008). Although the outcome was received positively by the
workers’ national representatives, in the course of the negotiations a number
of difficulties arose, caused by the different standpoints and backgrounds of
the employee representatives. These difficulties concerned the character and
consequences of the particular form of foundation and the location of the
company’s registered seat in Germany, and the understanding of board-level
participation, particularly between representatives of the two strong legal
systems involved, the German and the Danish.

Elcoteq, Finland

Finnish-owned Elcoteq opened a new chapter of high company mobility
and flexibility in Europe by taking advantage of the SE legislation. But its
employees are dependent on cross-border information and consultation only
somewhat above the standard provisions. No board-level representation has been
introduced by negotiating workers’ involvement in Elcoteq SE.

Elcoteq SE was set up by a conversion of the parent company
effective from 1 October 2005 and registered in Helsinki/FI. At the time of
establishment c. 7 500 employees from five EU member states were
represented by the special negotiating body: c. 860 from Finland, c. 3 340 from Estonia, c. 2 700 from Hungary, c. 550 from Germany and 7 from Sweden. Elcoteq is an electrical manufacturing services company supplying
customers such as Nokia and Ericsson. Worldwide Elcoteq has c. 20 000
employees and operates in 15 countries.

According to management the foundation of an SE was motivated by the
desire to adopt a European identity. Since Elcoteq publicly announced it would
move its headquarters from Helsinki to Luxembourg, however, other
considerations have emerged as important motives for using this new opportunity
to increase company mobility throughout Europe, probably including tax savings.

The negotiations between management and employee representatives
were used to set up a cross-border interest representation body — the SE works
council — for the first time. Because of a peculiarity of Finnish law on worker
participation no board-level presentation had been established in the previous
parent company. Accordingly, no board-level representation could be introduced
(on the basis of the standard rules) in the administrative board of Elcoteq SE.
Given the fundamental resistance of management to the board-level
representation of employees and the heterogeneous composition of the special
negotiating body, however — particularly the weak interest representation of
the Estonian workforce (only 100 trade union members out of 3 340
employees) — the make-up of the transnational interest representation agreed
upon can be regarded a remarkable success. The SE works council obtained rights
somewhat above the standard provisions: in addition to its information and
consultation rights it has the right to be informed about and to discuss, both
in advance and afterwards, the agenda of meetings of the administrative board.
This could be perceived as a kind of ‘informal participation’.

The negotiation process was characterised by the important role of
the external expert working for the Finnish trade unions, serving as
facilitator, legal adviser and educator at the same time. Cultural differences
and lack of language competence turned out to be particular obstacles to
achieving a common understanding and a mutually agreeable outcome. Not
surprisingly, the agreement also contains provisions and days off for taking
language courses (English). Finally, all parties involved were by and large
content with the agreement.

Case study source: ETUI.

CHAPTER 5:
MEMBER STATE ACTIONS TO SUPPORT RESTRUCTURING

The response of individual Member States to
anticipating and managing restructuring, particularly over the past two years,
has been mapped by a number of recent EU-wide research projects. These projects
add a great deal of value to the debate in terms of enabling key actors and
policy makers to understand the main challenges involved, and how they have
been overcome.

There are a range of schemes, instruments
and mechanisms of support available to workers who have been affected by
restructuring and which have been set up in parallel to
and complementing the typical support mechanisms of public employment services
(PES). Overall, the emphasis, or certainly the desired emphasis, of measures is
moving away from the more traditional passive measures, towards active measures
that involve an element of training and active support in the search for
alternative employment. These can include schemes such as outplacement and
measures designed to support occupational and geographical mobility. Studies of
the measures available conclude that there is a common
objective which is shared by national key actors: in times of
globalisation and accelerated change in every part of the EU’s economy and
society, an efficient system to organise professional and job transfer seems to
be crucial.

The role of flexicurity in easing the transition of workers into alternative employment is a
growing issue. Overall, the flexicurity concept moves
away from a job security mentality to an employment or employability security
mentality. It is a policy approach geared less towards the protection of jobs,
and more towards the protection of people, and therefore can provide a useful
framework for actions designed to support workers facing the need to make the
transition into alternative employment.

Flexicurity has a specific role to play in
the current crisis, and recent studies have highlighted the ways in which many
of the EU Member States have been trying to implement flexicurity principles in
order to try to weather the crisis. This has been undertaken in varying ways
and to varying degrees, depending on a range of factors, including national
social security and industrial relations systems, culture, traditions of social
dialogue and economic governance systems. Short-time working schemes provide numerical flexibility for the
employer, together with job and income security for the
employee and so can as such be considered as a flexicurity measure. However, the uptake is limited and workers are not always motivated to take
part. Further, firms may have limited experience of providing training to
workers and the capacity for training, particularly in SMEs, is very
problematic, as is the fragmented nature of training systems in some countries.
Nevertheless, the consensual nature of short-time working schemes provides a
promising basis for further tripartite cooperation.

1:
RESTRUCTURING IN THE MEMBER STATES

To support
knowledge-sharing on restructuring, in 2009, the European Commission launched
an initiative for disseminating the lessons learnt on existing and innovative
measures being carried out in all EU Member States for anticipating and managing
restructuring at the national, regional and local levels and across specific
economic sectors. This was carried out through the project Anticipating
Restructuring in Enterprises: National Seminars (ARENAS), which was managed
by the International Training Centre of the International Labour Office
(ITC-ILO) and funded by the Directorate-General for Employment, Social Affairs
and Inclusion.

The overall objective of this project
was to further advance the debate and the dissemination of good practices and
innovative measures and tools for anticipating and managing restructuring. This
was to be achieved by holding national seminars in each of the 27 EU Member
States, organised by national experts, who were also responsible for drafting a
national background paper for their country in order to support debate during
the seminar.

The exchanges during the national seminars
aimed at focusing on the effectiveness and usefulness of specific measures and
tools, taking into consideration the current economic downturn. Each national
seminar aimed to add to the existing body of knowledge on how to anticipate and
manage restructuring and how to mitigate its negative social and employment
impacts.[135] The seminars also showcased case studies of good practice in
anticipating and managing restructuring. They were tripartite in nature,
attended by representatives of central, regional and local government
authorities, trade unions, employers’ organisations, companies, chambers of
commerce, universities, research networks, and other relevant bodies. The seminars were held in each EU Member
State between April 2009 and June 2010.

The main purpose of the seminars was to
allow participants to share their views on the effectiveness of the different
measures available in their countries to anticipate and manage restructuring.
Seminar participants were given the opportunity to discuss the case studies and
assimilate the lessons learnt, with a view to applying this to their own
organisations and disseminating the ideas more widely.

A final synthesis report of the entire project draws out the project’s
main themes. This report also provides an overview of the main measures that
are available to anticipate and manage restructuring in all of the 27 Member
States. The aim of the report was to contribute to better understanding the
various tools available to anticipate and manage restructuring, in addition to
identifying which lessons could be disseminated to other countries in Europe. The intention was also that this exercise might contribute to debates on how the
European Union could facilitate the development of sustainable measures to
anticipate and manage restructuring across Europe.

Measures to anticipate and manage restructuring in the 27 EU Member
States share many similar features, which may be capable of being transferred
between Member States. For example, in all Member States there are some
measures available to anticipate economic and labour market developments, all
countries have legal frameworks that regulate how restructuring should be
managed and all have public authorities that initiate labour market policies to
reduce unemployment in the best possible way given each country’s
circumstances. These policies operate in the context of a variety of
traditions, cultures, economic structures, industrial relations systems and the
differing roles of actors such as the state, the social partners and the nature
of the legal framework that supports restructuring.

This project did not set out to evaluate the legal frameworks and
labour market policies of the 27 EU Member States, but rather to describe and
discuss the measures related to anticipating and managing restructuring. Box 5.1 below sets out some examples of early warning and anticipation systems from EU Member
States.

Box 5.1: Examples of measures to anticipate economic and labour
market developments

Government Foresight Network in Finland

The Government Foresight Network is an
inter-ministerial forum for cooperation and exchange of information in issues
relating to the anticipation of the future. Anticipation of the future refers
to a systematic and inclusive process involving the collection, assessment and
analysis of information. It also includes outlining projections and visions for
the future in the medium and long term.

All ministries are involved in anticipation activities relevant to
their appropriate administrative sector. Anticipation activities undertaken by
the ministries serve the strategic planning and direction of the administrative
sector as well as the Government’s decision-making. The Government Foresight
Network is a forum for discussing the results of the anticipation work carried
out in the administrative sectors. Appointed by the Prime Minister’s Office,
the Network’s term lasts until the end of the Government’s term of office. The
Network includes members from all ministries, and its presidency rotates among
the ministries.

Regional economic forums in the UK

The South West Regional Economic Task Group, chaired by the
government minister for the region, has a remit to:

● 
assess the regional impact of current economic
uncertainties;

● 
provide a conduit for the Regional Minister to
discuss economic challenges with private and public sector bodies, and for the
views of South West regional stakeholders to be represented at national level;
and

● 
provide a structure through which problems
affecting particular sectors or sub-regions/localities can be addressed, ideas
can be harnessed, and public sector intervention can be coordinated to optimum
effect.

It has considered detailed reports of the economic situation in the
region. In May 2009, for example, a report to the Task Group identified four
sectors which were both vulnerable and of particular importance to the region:
engineering, construction, retail and business services. The report suggested
particular localities that might then be particularly impacted by the
recession, in order to plan appropriate responses.

In terms of
managing restructuring, there is a wide range of measures in existence in EU
Member States, ranging from those that aim to prevent redundancies, those that
aim to mitigate the effects of redundancy and those that support redundant
workers. Box 5.2 below gives an overview of these measures, their advantages
and disadvantages.

Box 5.2: Overview of the main measures designed to manage restructuring

Measure || Advantages || Disadvantages

Wage and labour cost reduction || ● Redundancies may be avoided || ● Difficult to come to agreement with workers’ representatives ● Wage subsidies provide distorted incentive structure for employers

Short-time work || ● Quick adjustment ● Termination of contracts avoided ● Recruitment and training not necessary when demand resumes || ● Reduced income for workers ● Long-term effects not clear ● Redundancies cannot be avoided ● Risk of postponing redundancies

Partial unemployment || ● Quick adjustment ● Termination of contracts avoided ● Recruitment and training not necessary when demand resumes || ● Reduced income for workers ● Long-term effects not clear ● Redundancies cannot be avoided ● Risk of postponing redundancies ● Risk of misuse

Temporary lay-offs || ● Quick adjustment ● Termination of contracts avoided ● Recruitment and training not necessary when demand resumes || ● Reduced income for workers ● Long-term effects not clear ● Redundancies cannot be avoided ● Risk of postponing redundancies

Early retirement || ● Quick adaptation ● Can be regarded as compensation for long tenure || ● Risk of losing skilled employees ● Passive measure ● High costs ● Negative effect on pension system

Dismissal and severance pay || ● Can be preferred by workers || ● Passive ● High costs for employers when least able to pay ● Reduces attraction to activating measures

Dismissal and transition to new job || ● Activates workers ● Unemployment can be avoided || ● Limited coverage and availability in member states ● Temporary workers excluded ● Costly for employers

Training for transition and re-integration || ● Increase employability ● Prepare for future jobs ● Funding often available || ● Not always well perceived by employers and employees ● Lack of adaptation (time, access, methods, contents) ● Costly for employers ● Redundant workers are not always motivated to take part in training

This project culminated in the production of a final synthesis report,
which highlighted the main themes to emerge from the project, and the lessons
learned. It covers the following areas:

● an overview of the context
and regulation of restructuring and on the actors involved in restructuring. It
sets out the EU regulatory context governing restructuring, largely in the area
of the information and consultation of workers regarding any changes that are likely
to affect the workforce. It also gives an overview of the main actors involved
in restructuring, which include the employer, company-level workforce
representatives, national governments, regional authorities, joint tripartite
bodies, public employment services, social partners, training providers,
external consultants and individual employees;

● the main measures and tools
that are in place to anticipate restructuring in the EU, drawing out the
communalities and highlighting innovative practices. These measures focus on
economic and labour market forecasting tools, and tools that anticipate and
support transition;

● the main measures and tools
that are in place to manage restructuring in the EU, identifying the main
common elements and showcasing differences and innovative elements. Management
measures focus on: ways to avoid redundancies, such as wage reduction,
short-time working and temporary lay-offs; ways to manage redundancies, such as
early retirement, severance pay, and transition to alternative employment; and
training measures for transition and re-integration;

● the dynamics, trends, issues
and dilemmas related to the measures outlined in the previous chapters
of the report. This covers issues such as the role of the social dialogue
process, issues surrounding state intervention and the changing role of the
public employment services, issues surrounding training and education, the
impact of restructuring on health, and the effects of the crisis; and

● conclusions, including thoughts on future
policy emphasis. This final section of the report contains a number of key
findings, such as the need for the collection of data in order to allow
measures to be evaluated, the fact that, although there is a diversity of
measures in place around the EU to anticipate and manage restructuring, they
share some common elements that may be capable of transfer across national
borders, and the need for measures to stimulate demand for transition services
in some countries.

The
report also contains an annex which gives a brief description of the main
existing measures for anticipating change and for managing restructuring
processes in all EU Member States.

Box 5.3: Highlights of the European Synthesis Report

The range of information gathered by this project
confirms and underlines the work that has been developed in previous years by
the European Commission and the social partners. Although there are differences
in the systems and tools of anticipation and management of restructuring that
are in place in the Member States, it is nevertheless possible to identify
similar features amongst the existing systems and tools that could form the
basis of convergence of practice in this area.

Anticipation of restructuring:

● almost all countries have been developing anticipatory measures.
Examples: (1) forecasting and early warning systems; (2) measures aimed at
enhancing skills and competences levels in order to (i) strengthen
employability and thus mobility, (ii) as well as avoiding skills shortages or
skills mismatches. Those measures are particularly important to workers as they
allow them to be in the strongest position to react to any future restructuring
event and not to be absent from the labour market as a consequence of a
restructuring event; and

● the importance of social dialogue in the context of an anticipatory
approach. Regular exchanges of information in the context of collective
bargaining and a permanent and effective information sharing and consultation
at company level are a key element and work as the main anticipatory measures.

Management of restructuring:

● all countries have been developing measures for managing
restructuring, and while there are some national differences, the majority of
countries give priority to measures aimed at avoiding redundancies, such as
short-time work, partial unemployment or temporary lay-offs; and

● there is state involvement in restructuring in all Member States,
although the extent of state involvement varies.

The
European Synthesis Report is available via the following link: http://arenas.itcilo.org/

European Conference

The
synthesis report was presented at a European-level conference co-organised by
the Belgian Presidency of the EU Council and the
European Commission and held in Brussels on 18-19 October 2010.

The event gathered all the actors that had
played a part in this project, in order to review best practices in
anticipating change and managing restructuring in a socially responsible way
and to consider the future, and most specifically the role of the European
Union in adding value in this domain. This final gathering of all the
participants was considered to be essential to develop a common view of the
evolution of national systems in anticipating and managing restructuring, as
well as to allow conclusions to be drawn up at European level.

The conference consisted of a series of
workshops at which the project’s national country expert for each of the 27 EU
Member States gave a presentation of the main issues that were relevant for
their country, in order to stimulate debate. An overview was also given of the
debates that were held in each of the national seminars, which drew out useful
issues and themes that were relevant for each of the countries. The national
seminars brought together representatives of government, trade unions and
employers for each country, and served to stimulate debate on the issue of
restructuring in each country.

The next part of this chapter looks more
closely at the tools that are available to support the transition of redundant
workers to new employment.

2: ORGANISING
TRANSITIONS

There are a range of schemes, instruments
and mechanisms of support available to workers who have been affected by
restructuring and which have been set up in parallel to
and complementing the typical support mechanisms of public employment services
(PES). A recent study carried out between August and November 2009 for the
European Commission, DG Employment, Social Affairs and Inclusion presents a
stock-taking analysis of these tools.[136]

Before the global financial and economic crisis took hold, the dynamics of
restructuring resulted in a growing variety of activities at different levels
supplementing as well as improving ‘traditional’ public employment services
(PES) by more suitable instruments focusing in particular on the employability
of workers and/or the effectiveness of re-conversion and re-deployment. In
addition, flexicurity as a guiding principle of European and national labour
market policy reforms has contributed to change in employment policies and
public employment services in many European countries.[137]

While in the past such measures were often
of a passive nature (such as early retirement, ‘golden handshakes’, ie
severance payment packages and voluntary redundancies) learning processes, both
in the context of previous local and sectoral crisis situations as well as learning
from good and innovative practice throughout Europe have resulted in the
development of more proactive measures. Accordingly, schemes of re-conversion
and job transition are now often connected to occupational re-orientation,
training and qualification as well as outplacement.

While this seems to be a common trend
throughout the EU, there is a significant variety of country-specific
backgrounds and experiences, depending very much on the respective traditions
and frameworks of welfare state rationales and industrial relations. In Nordic
Countries such as Sweden for example, restructuring processes at the company
level have, since the 1970s, been accompanied by measures to support
professional re-organisation and transition. In countries with a high share of
part-time work and fixed-term employment contracts such as the Netherlands or Belgium, there is a strong tradition of outplacement support measures. Outplacement,
job transition as well as occupational and professional re-conversion also have
become an important field of labour market policy in countries such as France, Austria or Germany in the context of structural change in manufacturing or restructuring in
public services since the 1990s.

Although active measures of occupational
and professional transition and re-conversion in Southern Europe and the new EU
member states in Central and Eastern Europe have been less important in the
past, this has changed in recent years within the context of structural changes
in the context of globalisation (for example in textile and other manufacturing
sectors).

2.1:
CLASSIFYING EXISTING SCHEMES AND MECHANISMS

The above-mentioned study covers a wide
variety of different economic and social national contexts and identifies 27
instruments and schemes as relevant, which show significant differences with
regard to legal sources, types of support measures, scope, co-financing by
enterprises or the status of workers. However, if the notion of ‘transition’
with regard to professional orientation and employment is taken into account,
there are three major groups or clusters of schemes that can be identified:

A first group of mechanisms and schemes
which proactively seek to organise ‘transitional labour markets’, job
transition, re-employment and outplacement, often in the context of dealing
with redundancies in the context of restructuring. This could be company based,
sector/region based or even covering — at least by nature — a whole country.
Table 5.1 below gives an overview of the measures available for improving
professional and job transition.

Table 5.1: Overview and Classification of
measures for improving professional and job transition

Type || Characteristics || Schemes, funds, mechanisms

Focus transition, outplacement and re-employment || ● Either temporarily (in the case of restructuring or continuously) focusing on supporting and actively shaping ‘transitional labour markets’ ● Social partners and collective agreements at national, sector or company level playing a key role in designing and implementing measures ● Often co-financing and clear obligations of employers in restructuring situations foreseen || ● DK: Flexicurity operational model ● SE: Job Security Councils ● FI: Change Security operational model ● FR: Occupational transition contracts (CTP) ● FR: Mobility Leave ● NL: Mobility Centres ● BE: Outplacement and Employment Cells ● LU: Job Retention Plan ● DE: Transfer Companies ● AT: Labour Foundations ● IT: Wage Guarantee Funds

Focus training and skills || ● Based on the idea of professional/occupational mobility and very much orientated towards the individual jobseeker and effective professional transition ● In the context of larger restructuring/globalisation also targeting those workers who are threatened by unemployment ● Often state- or social partners driven approaches || ● ES: Occupational Observatories ● NL: Sectoral Training Funds ● DK: Competence Development Fund ● IT: Sectoral Training Fund ● IE: Skillsnet Scheme ● PL: Enterprise Training Fund ● RO: Enterprise Training Fund ● BG: Training vouchers scheme ● LV: Training and retraining programme

Focus efficiency of systems || ● Improving the capacity of PES to organise response to restructuring situations more efficiently ● Often driven by PES itself ● Central and Eastern European Countries (CEEC): important role of European Funds || ● UK: Rapid Response Service Teams ● PT: Integrated Intervention Offices ● EL: Strengthening the efficiency of PES ● CY: Individualised Public Employment Service ● SK: Employing the disadvantaged jobseeker ● EE: Reacting to Mass Redundancies ● LT: Mini Labour Exchange

Secondly, there is
a type of mechanisms, schemes, programmes and funds which are not focused on
actively implementing and organising transitions but rather on improving the
capacity for job and professional transition by training, ie the capacity of
workers as well as unemployed persons to find a new job. Here too, there are
sectoral as well as company-based and national approaches, mechanisms and
initiatives. These include initiatives such as sectoral training funds in the Netherlands and Italy, the Enterprise Training Fund in Poland, and the Skillsnet Scheme in Ireland. For more examples, see table 5.1 above.

Thirdly, there is a
group of measures and schemes presented in this report which are mainly aiming
at improving the efficiency of systems and their institutions (in particular
the PES). The objective here is either to better support professional and job
transition or to improve the efficiency of dealing with restructuring and mass
redundancies in general. These include the Rapid Response teams in the UK, the Mini Labour Exchange in Latvia, and measures to employ disadvantaged jobseekers in Slovakia. For further examples, see table 5.1 above.

2.1.1: TRANSITION AND OUTPLACEMENT

There are a wide range of schemes in place
in EU Member States that are designed to help workers to make the transition
from one job to another, and to provide outplacement to help them to update and
improve their skills levels and employability. The example below in box 5.4 is taken from France, where there are a large number of schemes in place to support
occupational mobility and transition.

Box 5.4: Supporting occupational mobility and transition in France

In the context of French social law, a number of schemes have been
implemented to facilitate the return to employment and/or transition to new
occupations for redundant workers. Often, these schemes take place in the
context of a social plan (plan de sauvegarde de
l’emploi), which must be drawn up when at least 10
workers are made redundant in companies with more than 50 workers. The social
law regulation of social plans imposes the setting up of a redeployment plan
aiming at facilitating the return to work of the employees made redundant.
Until relatively recently, the main mandatory schemes have only concerned large
companies of over 1 000 employees (‘redeployment leave’ — congé de reclassement). However, in
order to offer a similar approach to every worker, a redeployment scheme was
recently created, in 2005, for employees from companies with fewer than 1 000
workers (‘personalised redeployment contract’ — convention de reclassement
personnalisée). A reinforced version of the latter
scheme was put into place in 2006, in 25 employment areas hampered by industrial restructuring, following an
original ‘transitional’ approach
(‘occupational transition contract’ — contrat de transition professionnelle).

Another scheme, which is not mandatory, shows another approach to
job anticipation, transition opportunities and redeployment. The ‘mobility leave’ (congé
de mobilité) is a measure
open to companies with more than 1 000 employees. In contrast to the
former schemes, which are defined by law and put into practice through the
public employment service, this scheme relies on company-based anticipatory
agreements (GPEC) between the social partners. The logic of this scheme is to
anticipate, for jobs and occupations threatened by economic change, the ending
of the contract and the transition towards new jobs, through a reinforced
personalised guidance, training measures, and possible work periods in other
companies while still keeping — for the duration foreseen by the agreement —
the individual’s own wage and labour contract. The employee is given a
significant level of security to face the coming change, and can prepare in advance
of their redeployment with the help of the company.

Figure 5.1:
Overview of major French schemes to support occupational mobility and
transition

2.1.2: IMPROVING
TRANSITION CAPACITY BY TRAINING AND SKILLS

A number of schemes aim specifically to train
workers, with the aim of improving their skills levels and thus allowing them
to move on to alternative employment. This is an important factor in ensuring
the overall employability of workers, enabling them to move jobs within sectors
and even across sectors where necessary. This will become increasingly
important in the future context of increasing globalisation and
competitiveness. The example below, detailing the provision of training
vouchers for employees, is taken from Bulgaria.

Box 5.5: Training voucher scheme in Bulgaria

Up until recently in Bulgaria, only unemployed persons were entitled
to receive active labour market support such as vocational training programmes.
Up until the economic crisis, Bulgaria enjoyed a relatively good economic situation:
in 2008 the employment rate reached 64 %, compared to 58.6 % in 2006,
while the unemployment rate declined to 5.6 % in 2008 compared to 9 %
in 2006. However, long-term unemployment is still a serious problem for the
Bulgarian labour market — the relative share of the long-term unemployed of the
total number of registered unemployed people is high and rising (53 % in
2004 and 57.8 % in 2007).

Together with accession to the EU in 2007, the situation started to
change, as more funds became available for training and employment purposes.
Significant changes were introduced in 2009 on the basis of the Employment
Promotion Act. The purpose of this was to ensure employment retention in
companies facing economic problems (in industry and services, excluding
agriculture). According to the measures, employers facing economic problems
could reduce the working time of employees by 50 % in the context of a
partial unemployment scheme. New regulations allow employers to extend the
period of reduced working time up to six months, while at the same time
companies are reimbursed partially regarding expenses linked to employees’
salaries (the reimbursement amounts to 50 % of the minimum wage for three
or six months). Further, companies are entitled to receive support for the
training of their workers during the reduced working time. This support is
financed by the European Social Fund.

Employers may receive partial reimbursement (up to 50 %) of
training costs of employees, provided they keep the jobs of trained employees
for at least six months. But it is the individual decision of each employer as
how to organise the training. Most recently, the Bulgarian government decided
to guarantee more incentives to employees to invest in their human capital with
a view to developing or changing their qualifications in order to adapt to the
labour market situation or to increase their competitiveness. Based on the use
of the ESF support, the new instrument is a training voucher, forming a kind of
individual training account for each employee who decides to take up training.
The employee is free to choose the training programme (with assistance of the
labour office) as well as training provider. There are two types of training to
which the voucher applies: training of key competences; and vocational
training. In order to use the voucher, the employee must go to the local labour
office which will assist them in choosing training as well as in choosing a
training provider. The voucher can be used under the condition that the
training should take place after working hours, in the employee’s own time. The
instrument is to be financed by the EFS up to 2013, but there are proposals to
finance it beyond 2013 from other sources, in order for it to become a
permanent measure.

2.2: RESULTS
OF A COMPARATIVE EVALUATION

The in-depth analysis of the schemes and
instruments contained in the above-mentioned study has revealed an impressive
plurality of mechanisms throughout the European Union. There are mature
mechanisms, funds and instruments that have existed for decades, rather recent
ones and a large group of mechanisms which have been subsequently adjusted and
reformed in accordance with new challenges and framework conditions (eg the
current economic crisis). In fact, the picture of practice and systems in a
constant state of flux seems to be a significant result of this study — only a few
mechanisms remained unchanged over a longer period of time.

The study also shows that no common path
exists with regard to inventing, organising and funding employment and
professional transition in response to restructuring. Instead, the 27 schemes
presented in the study display specific national framework conditions of both
labour policy and industrial relations, in particular the state of social
dialogue and partnership. If any underlying ‘driving factor’ for certain types
and models of transfer regimes should be identified, then it is the conditions
of social dialogue and labour relations. The main structural factors, such as
the organisation of collective bargaining at various levels, the role of social
partners in labour market policy, and the tradition of co-determination and
employee participation, seem to be an important factor of influence for certain
kinds and types of transfer practice. This is particularly illustrated by the
sectoral initiatives and funds on skills and training which exist in various
countries. It is clear that most of the schemes and programmes presented in the
study would simply not exist and would not be able to be run efficiently without
active social partner involvement at all levels.

A major result of the study is that there
is a common objective which is also shared by national key actors: throughout
the EU there is a common trend of acknowledging transition as a major challenge
of labour market policy in today’s context. In times of globalisation and
accelerated change in every part of the EU’s economy and society, an efficient
system in place of organising professional and job transfer seems to be
crucial. Here, the survey shows that this challenge is felt not only in the
well-known cases of labour market innovation in Northern and Continental Europe
but also in countries which normally are not quoted in this context.

A further important result of the study is
the fact that both sides of the industry are sharing responsibilities
both in terms of co-financing (eg employers pay fees, employees resign from
severance payments rights) as well as in terms of active involvement in the
organisation and management of mechanisms and instruments. In the majority of
examples analysed this also implies certain obligations of the restructuring
company, in terms of following certain procedures, financial contributions
and/or other duties. However, only a few schemes analysed in the study display
a clear ‘mutualisation of risks’, that is, co-financing job and professional
transition practice or company-based outplacement services on a permanent
basis.

Though the study presents a comprehensive
overview and in-depth analyses of schemes and mechanisms supporting job and
professional transition processes in the context of restructuring, the analysis
— carried out in a relatively short period of time — leaves open some major
questions and also raises issues for further activities. In particular, two follow-up
activities would be very valuable.

First, the issues
of ‘costs and efficiency’ in order to assess the success and effects of a
scheme/mechanism/fund should be studied more thoroughly. Though the study
presents on a case-by-case basis existing financial figures and major results
of evaluations (if they exist), knowledge here is limited.

A second — and even more important — issue for follow-up activities would be
to organise an exchange of experience and information of actors directly
involved in the schemes and mechanisms presented in this study in order to
identify current trends, increase knowledge and draw conclusions from the EU-level
point of view.

2.3: THE ROLE OF FLEXICURITY IN SECURING
TRANSITIONS

Flexicurity can play an important role in easing
the transition of workers into alternative employment. Flexicurity
is a policy strategy to enhance, at the same time and in a deliberate way, the
flexibility of labour markets, work organisations and labour relations on the
one hand, and security — employment security and income security — on the other.[138]
Companies are under increasing pressure to adapt and develop their products and
services more quickly. If they want to stay in the market, they have to
continuously adapt their production methods and their workforce. This is
placing greater demands on business to help their workers acquire new skills.
It is also placing greater demands on workers with regards to their ability and
readiness for change. At the same time, workers are aware that company restructurings
no longer occur incidentally, but are becoming a fact of everyday life.
Protection of the specific job they have may no longer be sufficient, and might
indeed be counterproductive. In order to plan their lives and careers, workers
need new kinds of security that help them remain in employment, and make it
through all these changes. New securities must go beyond the specific job and
ensure safe transitions into new employment.

In its Communication Towards Common
Principles of Flexicurity: More and better jobs through flexibility and
security,[139] the
Commission defined some components of successful flexicurity policies,
including:[140]

● 
flexible and secure contractual arrangements and
work organisations, both from the perspective of the employer and the employee,
through modern labour laws and modern work organisations;

● 
effective active Labour Market Policies (ALMPs)
which effectively help people to cope with rapid change, unemployment spells,
re-integration and, importantly, transitions to new jobs — ie the element of
transition security;

● 
reliable and responsive lifelong learning (LLL)
systems to ensure the continuous adaptability and employability of all workers,
and to enable firms to keep up productivity levels; and

● 
modern social security systems which provide
adequate income support and facilitate labour market mobility. They will
include provisions to help people combine work with private and family
responsibilities, such as childcare.

The flexicurity
concept moves away from a job security mentality to an employment or
employability security mentality. It is a policy approach geared less towards
the protection of jobs, and more towards the protection of people. Encouraging
flexible labour markets and ensuring high levels of security will only be effective
if workers are given the means to adapt to change, to stay on the job market
and make progress in their working life. For this reason, the flexicurity model
also includes a strong emphasis on active labour market policies, and
motivating lifelong learning and training, improving customised support to
jobseekers, supporting equal opportunities for all and equity between women and
men.

2.3.1: FLEXICURITY IN THE CRISIS

The past 18 months
have proved to be extremely challenging for the EU, and the financial crisis
and ensuing recession experienced by most EU Member States has had an
inevitable impact on labour markets and employment.

The European Council adopted a set of
Conclusions on the issue of flexicurity in times of crisis at a sitting of the
employment, social policy, health and consumer affairs council in June 2009.
These Conclusions contained a set of policy measures based on flexicurity
principles, aimed at helping Member States and social partners to manage the
impact of the crisis. These include:

● 
maintaining employment, where at all possible,
for example through helping companies operate alternatives to redundancy such
as flexible working patterns and the temporary adjustment of working time,
where applicable, and other forms of internal flexibility measures within the
companies;

● 
creation of a better entrepreneurial environment
through a labour market which ensures at the same time the necessary
flexibility and security, benefits systems which provide work incentives,
appropriate levels of non-wage labour costs, especially for the low-skilled and
other vulnerable groups, as well as through better regulation and the reduction
of the administrative burden for businesses;

● 
enhancing and improving activation measures and
providing adequate income support and access to quality services to people who
are hit by the impacts of the crisis, through full utilisation of modern social
protection systems in line with the principle of flexicurity, subsidiarity and
sustainability of public finances;

● 
increased investment in human capital,
especially retraining, skills upgrading and labour market needs-matching,
including for persons working part-time or other flexible forms of employment
and low-skilled workers. Here in particular, the Council notes that further support should be provided for reducing youth unemployment
and other groups which
encounter difficulties in (re)entering the labour market. In this context,
those young people who are
entering the labour market for the first time require particular attention and
targeted measures;

● 
improving the effectiveness of the Public
Employment Services in order to be able to tackle the increased levels of
unemployment;

● 
adhering to the principle of gender
mainstreaming in all responses to implementing flexicurity
principles in order to tackle the crisis. It is
important that the responses support both women and men in their labour market
participation;

● 
facilitating the free movement of workers, in
accordance with the Treaties and the Community acquis, and promoting
mobility within the EU single market can contribute to tackling the persisting
mismatch between existing skills and labour market needs, also during the
economic downturn;

● 
implementing adequate responses with a view to
adapting, if relevant, employment and labour market provisions in the framework
of the flexicurity approach in order to promote flexible but secure transitions
from unemployment to employment as well as from one job to another, while
supporting reliable contractual arrangements for those in work;

● 
integrating all flexicurity elements and pillars
should focus on reducing segmentation and improving the functioning of the
labour market; and

● 
further attention needs to be paid to enhancing
the quality of working life and to increasing productivity.

Within this European framework, many of the
EU Member States have been trying to implement flexicurity principles in order
to try to weather the crisis, in varying ways and to varying degrees, depending
on a range of factors, including national social security and industrial
relations systems, culture, traditions of social dialogue and economic
governance systems.

A recent study
on flexicurity and the crisis, focusing on short-time working, was published by
the European Foundation for the Improvement of Living and Working Conditions in
November 2010.[141] The study examined 15 short-time
working schemes across Europe, which cut working time from between 10 %
and 100 % and compensated workers for between 55 % and 80 % of
the pay lost as a consequence.

One key finding
was that short-time working schemes provide numerical
flexibility for the employer, together with job and income
security for the employee and so can as such be considered as a flexicurity
measure. During the period of short-time working, all parties involved agree
that training should be provided and in some schemes,
training is mandatory. Despite this, however, the study found that the uptake
is limited and there are quality concerns. Workers are not always motivated to
take part; firms may have limited experience of providing training to workers
and the capacity for training, particularly in small and medium-sized
enterprises (SMEs) is very problematic, as is the fragmented nature of training
systems in some countries.

The study’s
overarching policy conclusion is that ‘the consensual nature of these
short-time working schemes provides a promising basis for further tripartite
cooperation. Just as the last two decades saw a re-orientation from passive to
active labour market policy, so should a flexicurity-aligned system of
short-time working adopt a more active stance. This facilitates the internal
restructuring of the firm during the downturn and is a useful means of inducing
a more counter-cyclical emphasis to training. It also improves employability on
the external labour market, should dismissals eventually become necessary.’

Box 5.6: Feelings of employment insecurity of european individuals during the financial
crisis

In the
aftermath of the financial crisis, researchers in the EC funded network of excellence
on ‘Reconciling Work and Welfare in Europe’ (RecWoWe) have
analysed how European individuals subjectively perceived their employment
security within different countries in the crisis years 2008/2009.[142]

At the country level, people in Central, Eastern and Southern Europe appear to experience much higher feelings of insecurity than those living
in Nordic or Western European countries. 18 % of the total variance in individuals’
employment insecurity can be attributed to the country level, which is quite a
large variance.

Institutional factors (employment protection
legislation, active & passive labour market policies) are important for the
economic performance of a country, correspond positively with employment rates
and impact on individuals’ human capital. These institutional factors, however,
seem to have little (statistical) significance for individuals’ feelings for
employment (in)security, which are much more driven by the overall economic and
labour market situation.

At the individual level, various demographic,
human and social capital characteristics have been considered, as well as
attitude variables help to explain why an individual feels employment insecure:

o Education and training are important, since those with tertiary education seem to be more
employment secure, as well as those who have taken some sort of courses or
training in the past 12 months.

o Emloyees with permanent contracts and with
a high degree of job control are more likely to feel employment security.
Surprisingly, perceived employment insecurity by part-time workers is quite
limited.

o People from a minority or discriminated
group feel less secure, but these correlate with other individual
characteristics, and appear to be an individual rather than group
characteristic.

o Company size and type (private/public) do
not impact insecurity perception, but there appears to be a sectoral edge:
unsurprisingly, workers in public administration feel most secure, followed by
the electricity and mining sectors. Employment insecurity is most acutely felt
in manufacturing and construction sectors, followed by transport and real
estate sectors. Employees in the financial sector, which was so crucial to the
financial and economic crisis, do not feel more insecure than the ‘average
employee’ (but may feel more insecure than before the crisis erupted).

CHAPTER 6:
ISSUES AND CHALLENGES

The future holds a great many issues and
challenges for the European Union, which come from a wide range of areas. One
major aspect of restructuring, and particularly of the levels of restructuring
that the EU has experienced over the past two years, is its psychosocial
effects. These effects can be severe, with significant consequences not only
for the individual, but also for the organisations in which they work or have
worked, unless this issue is recognised, anticipated and managed effectively. There
is a legislative framework at EU level in the area of managing occupational
health and safety, and ensuring that workers are adequately informed and
consulted about restructuring plans. There is also an EU-level social partners’
agreement on the management of stress and on violence and harassment at work. In
recognition of the importance of this topic, there have also been a range of
initiatives and actions taken at EU level, such as seminars and conferences, culminating
in a high-level conference in November 2010 and a planned conference for March
2011. This issue remains a challenge and therefore is likely to remain in the
spotlight for some time.

One of the most pressing challenges for the
EU and for the rest of the world is climate change. This is likely to have a
major impact on employment in the EU in terms of its impact on specific sectors
and its implications for skills policies. Moving to a green and low-carbon economy
is therefore likely to be one of the most significant challenges that the EU
will face in the medium and long term. There are potentially positive benefits
of moving to a low-carbon economy, but these can only be harnessed if the
labour force is equipped with the right skills to take advantage of the
opportunities. Skills shortages in areas such as renewable energy, energy and
resource efficiency, building renovation, construction, environmental services
and manufacturing are likely to be a problem unless there is a coordinated
policy response.

In particular, renewable energy sources are
a potential source of job creation, as there is a target to achieve 20 %
of energy from renewable sources by 2020. The employment potential of this
could be significant and this should be fully exploited.

Another key sector in the future low-carbon
economy is the transport sector. This sector is one of the EU sectors that is
most exposed to changes relating to climate change and changes in energy
sourcing and use, and is likely to restructure along two dimensions:
globalisation and decarbonisation. The move towards greener vehicles, for
example, will have significant implications for the sector’s workforce and for
the skills that this workforce will need in the future. It is thought that
labour and skills shortages are a real possibility for this sector in the
future. Therefore, significant efforts need to be made in the field of
training, in collaboration with the social partners and the Member States, with
the objectives of increasing the labour supply and adapting skills to emerging
needs.

The overarching framework for many of the
issues faced by specific sectors is the EU’s industrial policy, which provides
a backdrop to virtually all the issues discussed in this report. There is a
real link between industrial policy and employment and skills policies, and
this is explored in the Commission’s 2010 Communication on industrial policy
and globalisation. This focuses on issues such as how to improve the conditions
in which industry operates, how to encourage innovation and how to improve the
skills base. The role of management and worker representatives is highlighted
as being of prime importance in the anticipation and management of
restructuring and there will be a continued focus on this theme through the
publication of a Green Paper on ‘ Restructuring and anticipation of change:
what lessons from the economic crisis? ‘ in 2011.

1: PSYCHOSOCIAL
EFFECTS OF RESTRUCTURING AND MENTAL HEALTH IN THE WORKPLACE

This part looks at the issue of
psychosocial risks of restructuring, with a focus on stress-related problems as
well as mental health related to the workforce. It examines the European legislative
framework, the psychosocial risks of restructuring and change, and a range of issues
relating to mental health and well-being at work. It also gives a number of
policy recommendations.

1.1: THE EU FRAMEWORK, STRATEGIES AND
ACTIONS

Improving working conditions and
occupational health and safety is a key concern for the EU. The Union complements through its action the activities of Member States and of the social
partners. It provides a legal framework and a number of support activities that
can help to address these issues.

1.1.1: THE EUROPEAN LEGISLATIVE FRAMEWORK

From a safety and health at work
perspective, it is important to note, firstly, that the issue of mental health
in the workplace and restructuring should be seen within the wider context of
the EU role concerning the protection of workers’ health from risks that may have
an impact on their mental health.

The legal framework dealing with
restructuring, organisational change, and health and well-being at EU level
consists of three areas of legislation:

● 
occupational health and safety. Framework Directive (89/391/EC)[143]
states that ‘employers have a duty to ensure the safety and health of workers
in every aspect related to the work’, as well as the Community Strategy
2007-2012 on health and safety at work.[144]
The framework directive on the introduction of measures
to encourage improvements in the safety and health of employees at the
workplace lays down prevention principles. It contains a wide definition of
occupational health, in particular in Article 5: ‘... a duty to ensure the safety
and health of workers in every aspect related to the work’. One of the most significant
new developments of European Union health and safety legislation was the
introduction of risk assessment and the systematic documentation of the results
as a foundation for the establishment of a prevention programme of technical
and/or organisational measures to combat these risks. These tasks also include
the information and consultation of workers in order to allow them to take part
in discussions on all questions relating to safety and health at work, the regular
supervision of the efficiency of the measures put into place and the continuous
improvement of the situation according to the provisions of the framework Directive.
Prevention programmes must be continuously updated as long as the risk situations
persist. Change may have multiple positive aspects, but it may also entail
numerous negative facets, which are all the more important if the person is not
adequately prepared for that change. Therefore, organisational change can be
seen as a relevant risk for the health of the individual;

● restructuring. There are a number of
Directives that are relevant in this area. For example, the collective
redundancies Directive (98/59/EC),[145] which aims to regulate redundancies, introduce special obligations
for employers (information, consultation and encouragement to set up social
measures covering issues ranging from prevention to compensation) and provide information
to national public authorities. Further, the Directive safeguarding employees’
rights in the case of transfers of undertakings (2001/23/EC)[146] introduces obligations upon employers to respect labour contracts
and their related rights, giving specific rights to workers affected by such
operations. The Directive governing cross-border mergers of limited liability
companies also contains a range of rights for workers affected by cross-border
mergers (2005/56/EC[147]); and

● 
information and
consultation. Two main
Directives are relevant here. The first relates to
European Works Councils (EWCs) (2009/38),[148] the
main aim of which is to make sure that management informs and consults with
members of EWCs in exceptional situations affecting the interests of workers,
especially in terms of relocation, closure or mass lay-offs. The second is the
Directive providing a general framework for informing and consulting employees
in the European Community (2002/14)[149] with the aim of encouraging social dialogue on issues that affect
employees.

1.1.2: SOCIAL PARTNER AGREEMENTS

Since the early 2000s, the EU social
partners have been involved in a range of negotiations related to occupational
health in response to Commission consultations based on Article 154 of the EU Treaty,
launched in the framework of the EU Health and Safety Strategy 2002-2006. Most
specifically, the EU social partners have signed and implemented two framework
agreements:

● 
the framework agreement on work-related
stress,[150] signed on 8 October 2004, which marks a significant step towards
action to tackle work-related stress. This is a topic
that was first discussed as an occupational health risk in some Member States 20
years ago, and the Commission placed psychosocial risks centre stage in the EU
Health and Safety Strategy 2002-2006, following this up with consultations of
the EU social partners. The social partners have made a decisive step in
concluding this framework agreement and making the commitment to implement it
at national level. To a greater extent than with other
occupational safety and health risks, tackling psychosocial risks requires not
only rules but also awareness and a shared understanding. This implies dialogue
and worker involvement; and

● 
the framework agreement on harassment and
violence at work,[151] signed on 26 April 2007, and which came
into effect in April 2010. This agreement provides a method to prevent,
identify and manage problems of harassment and violence at work.

These agreements were to be
implemented by the constituent member organisations of the signatory parties
within three years.

These two framework agreements do not deal
explicitly with restructuring and organisational changes but are nevertheless
useful in helping to tackle these issues. Among the potential risk factors for
work-related stress, the 2004 agreement refers to communication, including
uncertainty about employment prospects or forthcoming change. However, the
national implementation measures for these agreements rarely address these
issues specifically. Other forms of social dialogue activities may be helpful
in this regard, starting with the common social dialogue which should take
place at company level when collective dismissals or major changes are taking
place.

It is also important to highlight the
tripartite mechanism characterising the workings of the EU advisory Committee
on Safety and Health at Work, in which workers, employers and Member States are
represented. This advisory body may play a role in the future with regard to
psychosocial risks in the workplace aiming at a balanced occupational health
and safety perspective of psychosocial risks.

1.1.3: EU STRATEGIES AND ACTIONS

The principal relevant strategy in relation
to the mental health of workers is the EU Strategy on Safety and Health
at Work 2007-2012. This Strategy states that:

● 
the Commission will ensure that initiatives
concerning health and safety at work are developed in a manner consistent with
public health policies which aim to prevent ill health and prolong a healthy
working life. In particular, the implementation of the present strategy will
take account of the results of the consultation which was completed in May 2006
on Promoting the Mental Health of the Population. Towards a strategy for
mental health for the EU[152] under the responsibility of the Commission Directorate General for
Health and Consumers, DG SANCO;

● 
at the present time,
problems associated with poor mental health constitute
the fourth most frequent cause of incapacity for work. The World Health
Organisation (WHO) estimates that depression will be the main cause of
incapacity by 2020. The workplace can be an appropriate place in which to prevent
psychological problems and promote better mental health;

● 
the Commission encourages Member States to
incorporate into their national strategies specific initiatives aimed at
preventing mental health problems and promoting mental health more effectively,
in combination with Community initiatives on the subject, including the
employment of persons with a mental disability; and

● 
the Commission stresses the importance of
negotiations between the social partners on preventing violence and harassment
at the workplace and encourages them to draw conclusions from the assessment of
the implementation of the European framework agreement on work-related stress
(see below).

The Charter of Fundamental Rights of the
European Union[153] also makes reference to the
health of workers. In Article 31, paragraph 1, it states that: ‘every worker
has the right to working conditions which respect his or her health, safety and
dignity.’
This section of the Charter is based on the
Framework Directive 89/391/EC on health and safety at work (see above), which
places on the employer the explicit obligation to assess risks to the health
and safety of workers. The provisions of the 1989 Framework Directive
imply that this risk assessment should cover any risks to health and safety of
workers, including psychosocial risks. Following this assessment, the employer
must take adequate preventive and protection measures, including with regard to
the risks that could cause psychological harm to workers.

Most recently, the European
Commission’s 2020 Strategy states that:

● 
a major effort will be needed to combat poverty
and social exclusion and reduce health inequalities to ensure that everybody
can benefit from growth. Equally important will be [the ability of the EU] to
meet the challenge of promoting a healthy and active ageing population to allow
for social cohesion and higher productivity; and

● 
efforts will be made to adapt the legislative
framework, in line with ‘smart’ regulation principles, to evolving work
patterns, such as working time and the posting of workers, and new risks for
health and safety at work.

However, within the context of this EU-level framework, it
should be remembered that it is the responsibility of national authorities to
control and monitor the implementation of legislation transposing EU
Directives. It is therefore the national labour inspectorates which have the
responsibility for ensuring that these provisions are fully effective.

It follows from the above that the existing European
legislation on health and safety at work contains provisions designed to
protect workers effectively against occupational hazards of all kinds,
including psychosocial risks. If these provisions are effectively and
comprehensively implemented at national level, they will help to prevent
psychological problems among workers.

The Committee of Senior Labour Inspectors has decided to
organise an information and awareness campaign on psychosocial risks at work at
European level in 2012.

A European campaign on the protection of
workers against stress at work was also conducted by the European Agency
for Safety and Health at Work in 2002.[154] This campaign provided
practical and useful information about stress and other psychosocial risks at
work, including tips and strategies to address this issue.

Finally, the Commission has developed
guidelines on stress at work addressed to national governments, trade unions
and employers.[155] The guidelines contain a
range of recommendations designed to help reduce the incidence of stress at
work. For example, on an organisational level, they maintain that stress can be
reduced by changes such as:

● 
allowing adequate time for the worker to perform
their work satisfactorily;

● 
providing the worker with a clear job
description;

● 
rewarding the worker for good job performance;

● 
providing ways for the worker to voice
complaints and have them considered seriously and swiftly;

● 
harmonising the worker’s responsibility and
authority;

● 
clarifying the work organisation’s goals and
values and adapting them to the worker’s own goals and values, whenever
possible;

● 
promoting the worker’s control, and pride, over
the end product of their work;

● 
promoting tolerance, security and justice at the
workplace;

● 
eliminating harmful physical exposures;

● 
identifying failures, successes, and their
causes and consequences in previous and future health action at the workplace; and

● 
learning how to avoid the failures and how to
promote the successes, for a step-by-step improvement of occupational
environment and health.

1.2. THE PSYCHOSOCIAL RISKS OF
RESTRUCTURING AND CHANGE

Restructuring is becoming a part of normal
business life, but the sheer pace of organisational change is resulting in
increasing pressure, in both the private and public sectors. Beyond major
restructuring, whether or not it is related to the crisis, many so-called
silent restructurings affect SMEs, fixed-term contract workers, temporary
workers and small businesses, which can experience severe problems in coping
with restructuring and change.

In the context of change, psychosocial
problems may take place and in some cases lead to incapacity for work. This is
first and foremost a problem for public health authorities, but its economic
consequences should not be underestimated. Uncertainty and job insecurity also
represent an important link between restructuring programmes and effects on
employees’ health. Depression, absence, sleep difficulties, and even suicides
have been identified as major symptoms of psychosocial difficulties. However,
there is a risk that health issues related to restructuring may be treated in
the same way as the risks related to asbestos, where the health effects were
known but appropriate measures were only taken after a considerable delay. A
concerted effort to tackle health and restructuring is therefore needed, not
just because restructuring can have a negative impact on health, but also as a
useful investment in the future of the European workforce and a way of ensuring
that the European model is sustainable and competitive. It should be noted that
the World Health Organisation (WHO) defines health as ‘a
state of complete physical, mental and social well-being and not merely the
absence of disease or infirmity’.

1.2.1: EMPIRICAL RESULTS OF THE HEALTH DIMENSION OF
RESTRUCTURING

Direct
victims of downsizing: workers facing redundancy

A long
tradition of unemployment research has highlighted the detrimental effects that
job loss and persistent unemployment can have on the individuals affected. In
addition, it is generally acknowledged that being in work, as opposed to being
out of work, is beneficial to an individual’s physical and mental health and
well-being.[156] Redundant individuals often experience this as a trauma and shock,
depending on the availability of offers of help, and sometimes face great difficulties
in coping with their situation. The main effects of this are psychosocial
distress, depression and anxiety, and psychosomatic diseases, such as
cardiovascular illness. These types of outcomes can even trigger suicidal
behaviour. The impact on the morbidity and even mortality of those who have
faced job loss is well proven. A deterioration of health behaviours (increased
drug use, bad diet, physical inactivity and poorer standard of sleep) can have
an impact on workers ́ long-term health. Social withdrawal caused by lack of
self-esteem and feelings of stigmatisation can further aggravate the health
situation of individuals and lead to a downward spiral into long-term
unemployment. Even those who have managed to find alternative employment but
are under-employed (for example, if they are in a job that does not match their
expectations or qualifications) display a lower level of health even after
re-employment.

Workers who remain in the organisation:
the ‘survivors’ of restructuring

Those who were in the past considered to be
the lucky ones — ie those who have kept their jobs — are now the object of
empirical research that has led to the term ‘layoff survivor sickness’ (Noer,
1997). This is defined as feelings of guilt and continued uncertainty over individuals’
health situation, leading to strain or fatigue which can be related to an increase
in long-term sickness absence, the use of psychotropic drugs (sleeping pills and
drugs to manage anxiety), increased nicotine and alcohol consumption, impaired
self-rated health and emotional exhaustion. Lower levels of self-efficacy and
lack of social support, together with increases in perceived job insecurity,
can contribute further to these problems. Further, increased work pressure and
intensification can be responsible for the increase in occupational accidents
and diseases observed in several cases of reorganisation.

Issues facing line managers in charge of
the execution of restructuring

Those responsible for implementing
restructuring decisions — the middle or line managers as executors of change —
face a certain amount of distress and extra workload that can negatively affect
their well-being. They are caught between the decisions of senior management
and the concerns and often negative responses of the workforce. As a response
to this, increased levels of stress and burnout, physical and psychological
health complaints, emotional instability, sleep disturbances and increased
alcohol consumption as coping mechanisms are most common among line managers.

1.2.2: INTEGRATING HEALTH: THE BUSINESS CASE FOR HEALTHIER
RESTRUCTURING

To make the business case for a health-friendly
restructuring the HIRES project[157] collected and combined all
aspects of the health impact of restructuring into one template. This provides
a consistent message to many audiences and helps the leadership team of a
company to prioritise health in restructuring against the many other
initiatives in the business that may require capital investment. It is a
perspective on the entire restructuring process and enables all organisational
bodies affected to be knowledgeable about the changes that result from
restructuring. Figure 6.1 shows the main restructuring risks for
individual and organisational health.

Figure 6.1: Restructuring risks for
individual and organisational health

Source: HIRES

1.2.3: HIGH-LEVEL CONFERENCE ON WELL-BEING AT WORK

The Belgian EU Presidency
organised in November 2010, together with the European Commission, an EU
Restructuring Forum ‘Investing in well-being at work — Addressing psychosocial
risks in times of change’.[158]

The objective of the Forum was to hear and
discuss latest research findings on the health impact of restructuring, on
stress at work, and on the reality of risk assessments in Europe’s workplaces,
as well as the tools available to different stakeholders in the management of the
psychosocial health risks related to work and restructuring. New information on
the implementation of the European social partners’ framework agreement on
work-related stress, including the Commission’s report, was presented at the
Forum.

This Forum was part of the EU Presidency’s
week dedicated to health and safety at work and provided practitioners, policy
makers, social partners and experts with the opportunity to hear and discuss
latest research findings as well as the tools available for managing
psychosocial health risks related to work and restructuring. A total of 10
policy recommendations were outlined during this conference. For details, see box 6.1.

Box 6.1: Policy recommendations

1. 
Health and restructuring: a key issue for
structural change?

Tackling health in restructuring is needed not
just because restructuring can have a detrimental impact on health but also
because it is a useful investment in the future of the European workforce and
can help to defend the European model as sustainable and competitive. However,
the right combination of legislative instruments, social dialogue, training,
investments, commitments and operational tools needs to be determined.

2. 
Groups at risk: trust and justice as a
critical issue?

Scientific and empirical evidence show that the
main groups at risk of the health consequences of restructuring are: the
redundant workers, the survivors, contingent workers, middle managers and small
businesses threatened by bankruptcies. The issue of justice is a major concern
during significant organisational change. The extent to which transparent
communication, cooperation and trust between employers and employees occurs in
company restructuring needs to be examined.

3. 
Data and studies: how to improve data,
awareness and monitoring?

Data related to health and restructuring are
widely lacking and fragmented at both national and European levels. In order to
better assess the real situation and to plan future activities, thought needs
to be given to how consistent collection and evaluation of data connected with
employee health in restructuring processes can be achieved, and this is a
particular difficulty in the case of SMEs.

4. 
What are the responsibilities of
companies and managers?

The protection of health is an employer’s
obligation in all aspects related to work including organisational change. In
case the employment relationship comes to an end, what is the shared
responsibility in transitions? There do not seem to be distinct borders between
corporate responsibility for promoting health in the workplace and the
responsibility of public actors to ensure the health of the workforce. The
appropriate level of managerial, professional and financial responsibilities
for promoting health in the anticipation, preparation and management of change,
including its impact on the value chain and on outsourcing, needs to be
determined.

5. 
Social dialogue: next steps?

Social dialogue is central for tackling
restructuring and occupational health and safety, and used as such. Further
steps for the social partners in terms of joint actions, collective bargaining
on changes in all dimensions and increasing awareness among employers, unions
and employees’ representatives now need to be determined.

6. 
Legislation: to be reconsidered?

EU Legislation does not explicitly mention the
link between health and restructuring but such a cause and effect relationship
seems to be clear. Thought needs to be given to whether it is necessary to act
at EU level and review existing legislation and frameworks, or whether it is
necessary to issue additional instructions or recommendations at EU and/or
national level. It may be necessary to develop a new role for labour
inspections by including restructuring and organisational change in their
emerging approach to psychosocial risks, and it may also be necessary to
consider including restructuring-related forms of ill-health under the scope of
any future EU instruments on occupational diseases.

7. 
Restructuring in the public sector: can
approaches from the private sector be transferred?

Public authorities are not only responsible for
policies and legislation but also for managing public bodies and organisations.
As the public sector in Europe is now undergoing major changes, thought needs
to be given to the responsibilities and actions that need to be taken by public
authorities at central as well as at regional or local level regarding
organisational changes in maintaining the health of their workforce.

8. 
The role of occupational health services
and partnering with the health sector: can this be improved?

A ‘healthy’ restructuring might benefit from
targeted health measures, although it should rely more on better anticipation,
preparation, management and follow-up. Some consideration should be given to
how the role of occupational health services in times of change can be
developed in terms of training and expertise to face the specific health
dimensions that are related to change and restructuring. Further, the role of
social security and healthcare providers in supporting the prevention of the
negative health impacts of restructuring should be examined.

9. 
Employment, health approaches and
flexicurity: new bridges?

The health consequences of restructuring may be
mitigated by actions such as modern employment approaches, including those
based on better employability and flexicurity. One question is whether
flexicurity approaches should be extended towards better adaptation of
organisations and individuals to change, and whether employment services have a
role to play in managing the impact of change on employees’ health.

10. 
Operational tools, networks and
education: how can they be developed?

Operational tools will be efficient only if they
are congruent with other aspects of restructuring, such as legislation, social
dialogue, commitment, training, exchange of good practices, investment and a
clear Occupational Safety and Health (OSH) role. Thought should be given to the
approach to be taken in terms of developing operational guidelines for
companies and organisations, taking into account the specificities of SMEs, and
the way in which risk assessment tools can be reviewed, with a view to
including the impact of restructuring and changes in work organisation.

1.3: MENTAL
HEALTH AND WELL-BEING AT WORK

Earlier economic crises have shown the
profound and lasting impact that crises have on people’s health. Job insecurity
is associated with a higher risk of mental disorders, such as depression and
anxiety, and recent data from Germany shows that mental disorders are three to
four times more prevalent in unemployed people than in people who work.
Unemployed people spent 7.5 times more days in hospital care than others
because of depression and alcohol addiction. In such difficult circumstances, people
are also more likely to abuse alcohol or smoke or even take up drugs. Workers
who may have to cope with high levels of stress at work are at a greater risk
of developing cardiovascular diseases. The WHO estimates that depression will
be the main cause of incapacity by 2020.

All this materialises into poor health,
diseases and suffering for the EU’s citizens. It also materialises into higher
demand for healthcare and social care at a time when budgets are particularly
stretched.

To build a sustainable economy, Europe needs a healthy workforce. People in good health work better, longer and are more
likely to continue working as they grow older. Bad health, in the contrary,
translates into higher levels of absence from work; lower productivity; early retirement;
and high social and healthcare costs.

Problems associated with poor mental health
constitute a major and increasing share of absence from work and work incapacity.
The workplace can be an appropriate place in which to prevent psychological
problems and promote better mental health. This is why
it is important to invest in people’s health at work.

There have been a range of actions at EU
level on the issue of mental health and psychosocial risks over the past few
years. The European Pact for Mental Health and Well-Being,[159] launched in
June 2008 by a high-level conference hosted by the European Commission,
provides an EU-framework enabling exchange and cooperation between stakeholders
in different sectors including health, employment and education on the
challenges and opportunities in promoting better mental health.

The Parliament expressed its support for
the Pact through the Tzampazi report on mental health.[160] In February 2009, the European Parliament issued a Resolution on
mental health,[161] welcoming the Pact as ‘as a basic priority for action’. In the area of mental health in the
workplace, the Resolution states that the workplace plays a central role in the
social integration of people with mental health problems and calls for support
for their recruitment, retention, rehabilitation and return to work.

For details of the Pact, see box 6.2 below.

Box 6.2: Main points of the European Pact for Mental Health and Well-Being

The Pact calls for action in five priority areas:

● prevention of depression and suicide;

● mental health in youth and education;

● mental health in workplace settings;

● mental health of older people; and

● combating stigma and social exclusion.

In the area of mental health in the workplace,
the Pact states that employment is beneficial to physical and mental health and
that the mental health and well-being of the workforce is a key resource for
productivity and innovation in the EU. However, it notes that the pace and
nature of work is changing, leading to pressures on mental health and well-being.
Action is therefore needed to tackle the steady increase in absence from work
and incapacity, and to utilise the unused potential for improving productivity
that is linked to stress and mental disorders. It states that the workplace
plays a central role in the social inclusion of people with mental health
problems. It therefore invites policy makers, social partners and further
stakeholders to take action on mental health at the workplace, including the
following:

● improve
work organisation, organisational cultures and leadership practices to pro­mote
mental well-being at work, including the reconciliation of work and family
life;

● implement
mental health and well-being programmes with risk assessment and prevention
programmes for situations that can cause adverse effects on the mental health
of workers (stress, abusive behaviour such as violence or harassment at work,
alcohol, drugs) and early intervention schemes at workplaces; and

● 
provide measures to support the recruitment, retention or
rehabilitation and return to work of people with mental health problems or
disorders.

The Pact was launched at a high-level conference held on 12/13 June 2008, at which participants
called on the Member States, together with further relevant actors across
sectors and civil society in the EU and international organisations, to join
this Pact and to contribute to its implementation.

They also called on the European Commission and Member States, together with the relevant international organisations and stakeholders:

● to
establish a mechanism for the exchange of information;

● to
work together to identify good practices and success factors in policy and
stakeholder action for addressing the priority themes of the Pact, and to
develop appropriate recommendations and action plans; and

● 
to communicate the results of such work through a series of
conferences on the Pact’s priority themes over the coming years.

1.3.1: CONFERENCE ON MENTAL HEALTH IN 2011

As part of the above-mentioned European Pact
for Mental Health and Well-Being, a high-level conference on the promotion of
mental health and well-being at work took place in Berlin on 3-4 March 2011.[162] The conference was the last of a series of five events organised
around different themes in the Pact. It was being organised by the European
Commission, together with the German Federal Ministry of Health and the
Ministry of Labour and Social Affairs.

It will create an opportunity to raise
awareness about the prevalence of mental health and well-being for workplaces,
as well as exchange and improve cooperation on the challenges and opportunities
in workplace mental health and well-being.

2: THE IMPACT
OF CLIMATE CHANGE ON EMPLOYMENT

This section examines the impact of climate
change on employment, looking at its overall impact, impact on specific
sectors, and changes that will need to be made to skills levels. With the issue
of climate change becoming ever more prominent, companies will have to adapt to
evolving regulatory frameworks, such as constraints on CO2 emissions
for car manufacturers and the EU’s CO2 Emissions Trading Scheme
(ETS). These policies are likely to lead to restructuring, at least in some
sectors and for some businesses.

The adjustments needed to respond to
climate-change polices aimed at cutting CO2 emissions provide a
clear example of a restructuring process. There are many opportunities — for
example through the early adoption of innovative new technology — to place
European firms ahead of global competitors that are slower to anticipate
change. Conversely, a failure to anticipate by European firms may lead to
hasty, reactive and forced later adjustment, which could damage companies and
leave their employees inadequately prepared, or trained, for alternative
employment. Companies will need to adapt their current products, processes and
technology to develop new innovative solutions and workers will also need to
acquire new skills. These issues are also dealt with in chapter 3 of the
European Commission’s Employment in Europe 2009 Report, which focuses on green
jobs.[163]

To support workers, companies and their
representatives in their efforts to anticipate and cope with climate-change
implications, the European Commission organised a Restructuring Forum on the
impact of climate change on employment on 22-23 June 2009. It was attended by
around 300 stakeholders, including representatives of Member States, social
partners and academic experts. In preparation for the Forum, a study analysing
the Impact of climate change on employment was carried out by GHK Consulting on
behalf of the Commission’s Directorate-General for Employment, Social Affairs
and Inclusion.[164] Below, the main findings of the report and Forum are summarised.

2.1: OVERALL IMPACT OF CLIMATE CHANGE ON
EMPLOYMENT

Climate change can have two kinds of impact
on employment. First, there are the direct physical effects, caused by factors
such as changes in temperatures and precipitation levels, rising sea levels and
changes to the frequency of extreme climatic events. Due to the gradual warming
process over many decades, most of these impacts will be felt in the medium to
long term. In April 2009, the European Commission presented a policy White
Paper, Adapting to climate change: Towards a
European framework for action ,[165] which presents the framework for adaptation measures and policies
to reduce the EU’s vulnerability to the impacts of climate change.

Second, in the short to medium term, most
of the impact will come from the effects of climate-change-related policies.
Climate-change policies will lead to restructuring by affecting both the supply
side and the demand side of businesses.

Climate-change mitigation and adaptation
policies will lead to higher compliance costs (especially in the form of higher
energy prices ADD "in the mid-term"), which may lead to competitive
disadvantages, especially for businesses subject to strong international
competition with countries where climate-change policies differ significantly
from those in the EU

Companies will have to respond to changing
customer demands that reflect climate-change policies, taking measures to
reduce barriers and promote innovation in response to market threats and
opportunities. Climate-change policies are therefore likely to have an impact
on all businesses in some way. On the macroeconomic level, there have been a
few estimates of what the impact might be of meeting carbon reduction targets,
in terms of the net effect on GDP levels (global, European or national) and the
potential level of investment required to attain these levels of reduction.
These suggest that in aggregate the overall impact is modest and that costs
will largely be compensated by the opportunity to take competitive advantage
from the structural changes triggered by climate-change policies.

2.2: SECTORAL IMPACT OF CLIMATE-CHANGE
POLICIES

Although climate-change policies seem
likely to have only a small net effect on employment overall, there are likely
to be significant gross impacts, in terms of both job creation and job
destruction. Managing these processes will pose a major challenge to labour
markets and stakeholders, and this was the main focus of the Commission’s Restructuring
Forum in June 2009.[166]

The different employment impacts of climate-change
policy and the transition to a low-carbon economy are illustrated by a 2008
analysis from the United Nations Environment Programme (UNEP), which found that
the ‘greening’ of the economy will affect employment in four ways:

Employment effect of greening of the economy || Example

Additional employment created || Additional insulation fitters for retrofitting homes

Employment substituted || Manufacturing hybrid cars instead of inefficient cars

Eliminated jobs || Reduction in packaging of products

Transformation of existing jobs || Gas-fitters installing gas combined heat and power instead of traditional systems

Source: Adapted from UNEP/ILO (2009) ‘Green
Jobs: Towards decent work in a sustainable, low-carbon world’.[167]

At the same time, climate-change policies
will affect every sector differently. Some may simply absorb the impacts (such
as higher energy prices) in their normal business model. However, some sectors
are more susceptible to these polices. There are four main sector-specific
economic impacts of climate-change policy:

● 
comparative advantage for some industries — marginal reallocation of resources from those sectors financing a
policy (paying its costs) to sectors that benefit from the intervention. More
bluntly, the main impact is to just shift resources from polluting sectors to
more environmentally friendly sectors;

● 
increase in value added — a transfer of demand to higher-value ‘green’ industries, which
could finance an expansion in net employment;

● 
increase in investment — this could come from government or from the private sector (eg clean-technology
venture capital); and

● 
first mover or fast follower advantage — a firm or sector may gain a first mover advantage under certain
market conditions, for example where significant barriers to entry exist, such
as strong intellectual property rights or large economies of scale; in other
situations, it may be more efficient to be a fast follower, taking advantage of
the work done by the first mover. This may be the case where there are much
lower R&D costs for followers, and where there are high initial marketing
costs for the first mover in order to educate the public.

A 2008 analysis by the consultancy KPMG,
entitled Climate changes your business,[168]
used this approach to come up with four main groups of sectors where the
employment impact can be expected to be largest:

● 
the energy (carbon) generating sectors, which
are likely to be the direct subject of climate-change policies;

● 
the employment-intensive sectors, where changes
in policies might trigger significant employment change;

● 
the competition-intensive sectors, where small
changes in energy costs or products translate into significant market impacts;
and

● 
the vulnerable sectors, where the scope for
major revisions to the cost base or service offers in response to
climate-change polices is limited.

Case studies were carried out by the
consultancy GHK for the European Commission in sectors thus identified as
exposed to the impact of climate change — electricity generation, air
transport, cement, retail, consumer goods, construction and haulage.[169] The results of the case studies were presented and discussed at the
June 2009 Restructuring Forum. The most common actions already taken by
companies include:

● 
researching their carbon impacts in detail,
using carbon accounting, carbon footprinting and life-cycle methodologies to
establish where the main impacts are within the company and its supply chains;

● 
increasing their energy efficiency (that is, the
ratio of output to energy input); and

● 
engaging with the policy process (through
lobbying).

In terms of employment, companies have
tended to adapt the skills of their existing workforce, rather than increasing
or decreasing the number of jobs.

2.3: CLIMATE-CHANGE POLICIES AND SKILLS

The developments described above can bring
positive results only if the labour force is equipped with the right skills to
take advantage of the opportunities. Indeed, the greening of the European
economy will lead to a redefinition of many jobs across almost all sectors.
Identifying the skills required to adapt to climate change and to reduce
greenhouse gas emissions therefore has an important role to play in policy
development. Moreover, this is not only a medium- to long-term issue. Already,
climate-change policies have led to certain skill shortages in a number of
sectors, such as renewable energy, energy and resource efficiency, building
renovation, construction, environmental services and manufacturing. Clean
technologies require skills in the application, adaptation and maintenance of
technology.

The requirements for green skills will
change progressively as climate-change-related jobs change. This will happen in
three ways (which link to the quantitative impacts identified by UNEP — see
above):

● 
some skills will become obsolete due to structural changes in the labour market and employment
shifts both within and across sectors owing to demands for a greener economy
(for example, as utility meter reading services are rendered obsolete by the
introduction of ‘smart’ household meters that automatically relay data to
utility companies);

● 
demand for some new skills will be created as new ‘green-collar’ occupations emerge to support adaptation to
and mitigation of climate change (for example, support and servicing of solar,
wind and other renewable energy technologies); and

● 
the skills required for existing jobs will
have a stronger green element as existing
occupational profiles change (for example, bottle manufacturers learning new
technical skills to reduce carbon emissions from production).

New jobs in ‘green’ sectors can lead to
increased investment in the skills of the workers concerned. There are examples
where demand for employees with environmental skills has involved (re)training
schemes for workers. Moreover, some sources suggest that there will be a shift
towards integrated technology and away from ‘end-of-pipe’ through natural market
changes but also though policies. As a consequence, high-skill jobs would be
promoted at the expense of low-quality jobs.[170]

2.4: THE TRANSITION TO A LOW-CARBON
ECONOMY

The transition from high-carbon to
low-carbon employment is not without its difficulties. Even if all of the above
analysis is correct — that is, the most affected sectors are correctly
identified, the kind of job changes (destruction, creation and modification) is
correctly analysed and the needs for skills development are appropriately
addressed by adequate training offers — there will still be a significant
amount of friction on the labour market. For example: there is a potential cost
of the transition for employees in ‘losing’ sectors; some categories of workers
may have difficulties in seizing the opportunities for reskilling; new jobs may
not be located in the same areas where the old jobs were lost; training will
take time; and there may be potential obstacles to the development of new jobs
in the ‘winning’ activities (access to raw materials, high barriers to entry,
low salaries etc.). As a result, there is a danger that unemployment of
displaced workers could become structural.

It is therefore paramount that the social
partners engage in a permanent analysis of ongoing climate-change-related
industrial restructuring within the existing framework of social dialogue,
trying to anticipate potential problems and jointly developing solutions that
take account of both businesses’ needs for flexibility and workers’ needs for
security.

Renewable energy stands at the heart of a
low-carbon economy. The next section therefore discusses the implications of
the growing renewable energy sector for employment and the labour market as a
whole.

3: THE IMPACT
OF RENEWABLE ENERGY POLICY ON EMPLOYMENT

Policies that
support renewable energy sources (RES) give a significant boost to the economy
and the number of jobs in the EU. Improving current policies so that the target
of 20 % of RES in final energy consumption in 2020 can be achieved will,
it is estimated, provide a net effect of about 410 000 additional jobs and
a 0.24 % increase in gross domestic product (GDP) in the EU. This is
therefore an important policy issue and this section looks more closely at the
impact that RES policy is likely to have on the EU’s labour markets, in terms
of the volume of the workforce and the skills that are likely to be necessary
in the future.

The Commission Communication An energy
policy for Europe[171] identifies the points of
departure for a European energy policy as:

● combating climate change;

● limiting the EU’s external vulnerability to imported hydrocarbons;
and

● promoting growth and jobs.

The likely positive effect of the increased
use of renewable energy sources on efforts to combat climate change and to
limit the EU’s external vulnerability to imported hydrocarbons is largely
undisputed. It has been clearly shown that renewable energy makes an
indispensable contribution to greenhouse gas reductions and to the increased
security of energy supply in Europe.

There is, however, still uncertainty about
the exact contribution of renewables to the promotion of growth and jobs in
terms of the objectives of the EU’s Lisbon Strategy. As stated in the Commission’s
RES roadmap:[172] ‘Studies vary in their estimates
of the GDP impact of increasing the use of renewables, some suggesting a small
increase (of the order of 0.5 %), and others a small decrease’. While most
policy makers believe that increased use of RES and job creation can go hand in
hand, others assume that the distribution and the budget effects might result
in turning a large gross employment effect into a small or even a negative net
employment effect.

The Renewable Energy Directive for 2020 was
adopted by the European Parliament and the European Council in December 2008.[173]
This Directive sets ambitious targets for each EU Member State with the aim of
achieving a 20 % share of renewable energy in Europe’s final energy
consumption by 2020.

The European
Environment Council of March 2008 issued a number of conclusions regarding
energy efficiency, climate change and renewable energy, urging the Member States and the Commission to ensure a better
coordination between the Lisbon and the EU Sustainable Development Strategies
and to pay increased attention to environmental technologies, resource efficiency
and biodiversity. It stated further that the EU should
foster an ‘ambitious global and comprehensive post-2012 agreement’ containing
goals such as global emission reductions to at least 50 % by 2050 compared
to 1990 levels and in line with the European Council’s reaffirmation that
developed countries should continue to take the lead also with a view to
collectively reducing their emissions by 60 % to 80 % by 2050
compared to 1990. It also stated that the EU should step up to the more
ambitious 30 % reduction as part of a global and comprehensive agreement,
as set out in the European Council conclusions of March 2007.

The Council
also stressed the importance of environmental technologies as one of the
fastest growing markets and of eco-design and a life-cycle approach in
supporting eco-innovation. It also recognised the importance of small and
medium-sized enterprises for the EU economy as well as their significant impact
on the environment and particular challenges related to increasing energy and
resource efficiency. In terms of regulation, it called
on the Commission and the Member States to increase efforts to consider
implementation measures in their impact assessment of new legislation, and to
share best practice on implementation and enforcement.

The Commission’s main thinking in the area
of renewable energy was set out in its January 2009 Communication, Towards a comprehensive climate change agreement in Copenhagen,[174] which was issued ahead of the United
Nations Copenhagen climate conference. The Commission sets out ways in which to
limit global warning to less than two degrees above the pre-industrial
temperature, stating that developed countries must take the lead and cut their collective emissions by 30 %
of 1990 levels by 2020 and that developing countries, except the poorest ones,
should limit growth in their collective emissions to 15-30 % below
business as usual levels by 2020. In particular, the Commission states that the
EU should seek to build, by 2015, an OECD-wide carbon market in order to
mitigate and to raise funds to fight climate change. The market should be
expanded to include major emerging economies by 2020 with a view to building a
global carbon market.

The Copenhagen Summit on climate change,
which took place in December 2009 resulted in a non-binding accord that limits
temperature rises, but does not include any emissions targets, which was seen
as a poor outcome by those advocating the introduction of controls on
emissions.

3.1: THE BENEFITS OF THE RES SECTOR

In order to reach the target of achieving a
20 % share of renewable energy by 2020, it is important to gain further
understanding and awareness of the economic and employment benefits of
renewables. A recent study entitled The impact of
renewable energy policy on economic growth and employment in the European Union
2009[175] provides a first detailed analysis of the full macroeconomic effects of renewable energy deployment at EU level.
The study analyses the past, present and future impacts of renewable-energy
policies in the EU on employment and the economy, looking at the gross and net
effects (including both conventional replacement and budget effects). It was conducted on behalf
of the European Commission’s Directorate-General Energy and Transport.

This study finds that the renewable energy
sector is already very important in terms of employment and value added. New
industries with strong lead market potential have been created, which
contribute about 0.6 % to total GDP and employment in Europe. This
development is likely to accelerate if current policies are improved in order
to reach the agreed target of 20 % renewable energies in Europe by 2020
(see above).

However, despite large gross figures in
terms of employment and value added, net figures are significantly smaller, due
to replaced investments in conventional energy technologies as well as the
dampening effect of the higher cost of renewable energies compared with
conventional alternatives. Currently, strong investment impulses — based on installations in Europe and exports to the rest of the world — dominate the economic impact of renewable energy policies and
therefore lead to positive overall effects. In order to maintain this positive
balance in the future, it will be necessary to uphold and improve the
competitive position of European manufacturers of RES technology and to reduce
the costs of renewable energies by exploiting their full learning potentials.
Therefore, policies which promote technological innovation in RES technologies
and lead to a continuous and sufficiently fast reduction of the costs will be
of major importance. Besides the implementation of strong policies in the EU,
it will be of key relevance to improve the international framework conditions
for renewable energies in order to create large markets, exploit economies of
scale and accelerate research and development.

Three projections for the RES deployment in
the EU are:

● 
no-policy — the no-policy scenario serves as a hypothetical reference by modelling the
situation in which all existing policies are abandoned;

● 
business as usual (BAU) — the BAU scenario extrapolates on current policies in all Member States, which are inadequate to achieve the
agreed target of 20 % RES in the EU-27 by 2020; and

● 
accelerated deployment policy (ADP) — the ADP scenario includes strengthened national
policies and is consistent with reaching the 2020 target.

Three projections of European companies’
global market share in RES are made:

● 
pessimistic (PE);

● 
moderate (ME); and

● 
optimistic (OE).

3.1.1:
THE EMPLOYMENT BENEFITS OF RES

Since 1990, the RES industry has seen
substantial growth, mainly due to public promotion policies. The fivefold increase in investment expenditures for new
RES plants to almost € 30
billion in 2005 was the main driver for this expansion. However, operational and maintenance expenditures also
increased continuously, due to the growing number of plants in operation. Furthermore, European suppliers gained
considerable global market shares in booming RES technology fields such as wind and photovoltaics. Total value added
generated by RES deployment has roughly doubled since 1990.

Due to increasing labour productivity,
total employment has grown by approximately 40 %. This development has led to the establishment of a strong
cross-sectoral RES industry in Europe. It comprises all the activities needed for planning, manufacturing and installing
facilities that use RES, for operating and maintaining them and for supplying them with biomass (direct
economic impact). It is furthermore connected with several industries that form
its upstream supply chain (indirect economic impact). In 2005, building and
operating RES facilities contributed about 0.6 % to total GDP and
employment in Europe. About 55 % of this impact is directly related to the
RES industry, with 45 % related to the supply chain industries. In
absolute numbers, RES deployment leads to a gross value added of € 58 billion and 1.4 million people
employed. With 0.9 million people employed, small and medium-sized enterprises
have a significant share of two-thirds of this employment impact. As important
suppliers of biomass, agriculture and forestry roughly employ 200 000
people. Other important economic sectors involved are the investment goods
manufacturing industry, construction and trade.

The contribution of the respective RES
technologies to employment in the EU Member States is shown in figure 6.2 below.
In most countries, biomass use has a high relevance for employment. Wind
technology is an important contributor to employment in Germany, Denmark and Spain and photovoltaics is relevant in Germany.

Figure 6.2: Total
employment induced by RES deployment in 2005, by country and RES technology

Source: European Commission.

3.1.2:
THE FUTURE IMPACT OF RES ON EMPLOYMENT

The above-mentioned study indicates that
employment levels would be slightly stimulated by RES policies, but the effects
would be moderate compared to the effects on GDP. The main results can be
summarised as follows:

● 
‘business as usual’ (BAU) RES policies in EU
Member States combined with moderate export expectations result into a roughly
constant positive employment effect of 115 000-201 000 employees in
2020 and 188 000-300 000 employees in 2030;

● 
an accelerated deployment policy (ADP) scenario
combined with moderate export expectations leads to a slightly higher increase
of averaged employment by 396 000-417 000 employees by 2020 and by 59 000-545 000
employees in the last years before 2030. In general, the models generate
comparable results, apart from those for 2030;

● 
the shifts of demand between different economic
sectors as well as the moderate energy cost increase in the ADP scenario result
in additional employment caused by RES policies not growing compared to GDP
growth;

● 
the effect on employment strongly depends on the
energy cost increase. If there are significant cost increases, these may dampen
the employment increase; and

● 
at the sectoral level, the areas in which
employment increases most due to RES policy would be the agriculture and the
energy sector, the former due to increased demand for biomass, the latter due
to the higher labour intensity of RES and increased expenditures on electricity.
Sectors losing employment would suffer from the higher energy expenditures of
households, the higher sectoral elasticities in response to higher goods prices
driven by energy cost increases and the prevailing budget constraint of
households. Examples would be the trade and retail sector as well as the hotels
and restaurant sector.

Figure 6.3 below presents the results on
employment of different policy scenarios. It is apparent that employment
increases in all the scenarios, but to a smaller extent than GDP. In BAU
scenarios, employment increases by 0.08 % in the moderate (ME) scenario
and 0.12 % in the optimistic (OE) one; this represents 187 000 and
262 000 new jobs created, respectively. In the ADP scenarios, the
additional investments and demands bring about a 0.24 % increase in
employment (545 000 jobs) in the ME scenario and a 0.29 % (656 000
jobs) in the OE scenario.

Figure 6.3:         Employment change
for Europe in thousands

Source: European Commission.

In terms of the distribution of total employment
by technology, there is a significant role for biomass technologies in terms of
employment generation and especially decentralised non-grid use. Over 60 %
of the total impact is due to biomass technologies. The major share of
employment is triggered by the supply of biomass for fuel use. This share is
subject to considerable uncertainty, since significant amounts of biomass for
non-grid use appear not to be purchased at market prices, but may be obtained
from own resources or informal channels, especially by private households. This
study assumes that 50 % of biomass obtained by private households is
purchased at market prices.

Regarding the employment effects per
technology, it becomes clear that current ‘business as usual’ RES policies do
not provide sufficient impulses to push future development of and employment in
research and knowledge-intensive technology while a strong RES promoting
policy, such as in the accelerated deployment policy scenario, triggers
development and employment in knowledge-intensive and competitive technologies
in the future. A strong increase in RES technologies such as wind power,
photovoltaics and solar thermal electricity is responsible for roughly 50 %
of the gross employment increase in 2030 compared to a no-policy situation. The
technology pattern of RES deployment under this accelerated deployment policy
scenario reflects (and justifies) the high promotion and hence the additional
generation costs for these knowledge-intensive technologies which are being
established successfully in the market, contributing to export and
technological competitiveness and thus also to employment.

3.1.3:
LOOKING TO THE FUTURE

The RES sector is
already very important in terms of employment and value added in the EU. This
sector’s contribution to GDP and employment in Europe is likely to be
accelerated if current policies are improved in order to reach the agreed
target of 20 % RES in Europe by 2020.

Two objectives for increasing the share of
RES are the reduction of CO2 emissions and other environmental
impacts and the increased security of supply due to reduced dependency on
imported fossil fuels. It is often stressed that these two key energy policy
objectives — security of supply and environmental sustainability — should be
targeted without sacrificing the third — economic sustainability. It is
therefore of immense value that increasing the share of RES not only does not
harm the economy, but actually benefits it by creating jobs and increasing GDP.

After considering the renewable energy
sector, this report now turns to the transport sector, which is one of the key
sectors that will be affected by climate change and the pressure to change
energy production and consumption.

4: CHALLENGES FOR THE TRANSPORT SECTOR

This section examines the main challenges,
in terms of restructuring, faced by the transport sector in the coming years. This
sector is one of the EU sectors that is most exposed to changes relating to
climate change and changes in energy sourcing and use. Overall, the economic integration
of Europe is set to continue over the next years and this, coupled with
accelerated globalisation, will lead to increased momentum in transport
activity. The transport sector is likely to restructure along two dimensions: integration
at European and global level and decarbonisation. Failure to combine progress
along these two dimensions will result in the European transport sector losing
the technological leadership that it enjoys today, and failing to support the
competitiveness of European businesses, with European logistics companies,
which heavily rely on the excellent connections to world transport networks,
likely to being affected in first place.

Led by strong economic forces and policies,
the EU is beginning to look, in terms of transport, like a continental,
interconnected market, even if much remains to be done. While the integration
of air and road transport systems is well advanced, rail and waterborne modes
still suffer from numerous persisting regulatory, administrative and technical
barriers which jeopardise their efficiency for cross-border transport.

The transport sector is still very far from
becoming a low-carbon system as it relies up to 95 % on oil. The Commission’s objective of decarbonisation of the transport
system[176] requires a substantial transformation of the sector although this
is a long-term objective. A roadmap to achieve this objective has been proposed
by the Commission in the Transport White Paper ‘Roadmap to a Single European
Transport Area- Towards a competitive and resource efficient transport system’.
The three basic elements of this strategy are the creation of a Single
Transport Area, the promotion of new technologies and the completion and
upgrading of European network infrastructure. Given the surrounding technological
and economic uncertainty, it is likely that this path will have to be regularly
readjusted in the future, in accordance with technological and economic
realities.

The decarbonisation objective implies that a
gradual but significant restructuring of the sector is needed. Within this
context, it is important to ensure that social cohesion is respected or
enhanced during the process of restructuring. The White Paper expresses the
willingness of the Commission ‘to align the competitiveness and the social
agenda, building on social dialogue’. It is to be expected that the forecast
growth in activity in the transport sector will help to make restructuring and
social cohesion compatible. During the process of
restructuring, it is crucial to raise the right expectations among
entrepreneurs and investors about the future of European transport policies
which shape the transport system of tommorow, given that expectations can
attract or deter investments.

The WP will build over many steps taken by
the EU transport policy, thus the internal market is well advanced in the EU,
with decisive steps having been taken recently. Railway freight market was opened
to competition in 2007, international passenger rail market in 2010 and new rules
for public transport procurement under Public Service Obligations (PSO) apply from
December 2009.  However, technical and regulatory barriers still effectively
reduce competition on the Single Market and constitute obstacles to the
provision of cross-border services. In aviation, Open Skies agreements with the
  USA and other countries are being concluded, increasing competition on the
market for intercontinental travel. International road transport is also
liberalised within the EU, while cabotage rules have been recently clarified.
Maritime transport is open to competition according to international rules. Nevertheless,
administrative barriers remain for intra-EU maritime transport, affecting the
competitiveness of short sea shipping compared to land-based modes. Market
integration is backed by the growing trans-European network and by a
substantial regulatory ‘acquis’ both of which are far from being
completed. All these measures take time to percolate into market realities, but
the process is ongoing, not least because strong economic forces and actors are
pushing in the direction of a low carbon, integrated and high quality mobility
system by 2050.

The main economic actors in a market
economy are the firms. The current structure of the transport services sector
includes a large volume of SMEs and individual operators, notably in road
transport and inland waterways[177]. They share the
market with a number of global giants and large European firms, whose
activities cover different modes of transport and different countries. First
among them are AP Moller-Maersk and Deutsche Post (DHL) which appear in the 2011
list of the FT global 500 largest companies by market capitalisation (ranking 194
and 424).

A step that was to prove decisive
concerning the integration of the European transport sector and its global
projection has been taken over the past 20 years in the form of the process of
liberalisation of national postal services. This triggered the creation of
global transport and logistics giants such as DHL or TNT, which were acquired by
the public mail services of Germany and the Netherlands, respectively. In this
way, two pre-internet era communications firms positioned themselves as ‘just
in time’ global delivery experts.

This mention of the enterprise structure of
the sector is necessary as neither consolidation nor restructuring takes place
in a vacuum — both are first of all the responsibility of firms. The success of
the co-modality concept (meaning the most efficient use of all transport modes
on their own or in combination), the efficiency of multi-modal chains and the
development and adoption of new technologies also depend on the decisions of
companies reacting to market and policy incentives.

Consolidation is needed to reap the
economies of scale and scope that are made possible by a very large market. lf
the European transport market appears at first sight to be highly fragmented
along national lines, this is mostly due to the railways sector, the problems
of which, concerning lack of interoperability and difficult access to some
markets, are well-known.

Table 6.1: Employment and number of
companies operating in the transport sector, 2008, EU27 (1000 persons)

Year || TRANSPORT || I60 - Land transport; transport via pipelines || I61 - Water transport || I62 - Air transport || I63 - Supporting and auxiliary transport activities; activities of travel agencies

2008 || 10301.4 || 6393.8 || 226.4 || 381.0 || 3300.2

2009 || 10097.0 || 6313.6 || 222.7 || 370.7 || 3190.0

In addition the well-established regulated
market opening, other integration drivers are at play. The enlargement of the EU
has provided a relatively low-cost workforce, of which firms from the older
Member States take advantage by establishing subsidiaries in the newer Member
States, or by buying their transport services. In addition, globalisation has
created a high level of activity, notably in seaports, where container
terminals are largely internationalised. Further consolidation in all modes seems
inevitable as a single European transport market continues to emerge in line
with the Transport 2050 White Paper objective of full modal integration.

4.1:
OVERVIEW OF THE EU TRANSPORT SECTOR

In 2009, the transport sector directly employed
10.1 million people,[178] which accounted for 4.5 % of the total employment in the EU.
This employment level fell by 2% between 2008 and 2009, however once the crisis
is overcome, employment growth in the sector is expected to resume, together
with transport activity, especially if the recovery is export-led. It is
likely, therefore, that restructuring in all transport sub-sectors and modes
will be facilitated by the expected sustained growth in activity.

Projections for transport activity estimate
that, based on current transport policies, most modes of transport will
considerably increase their activity up to 2030 (in this case 34 % for
passengers and 38 % for freight — see table 6.2).[179]
However, growth in activity will require either increases in productivity of
the existing labour force, which is already highly productive,[180] or increases in
employment.

Further, an active policy of
decarbonisation may imply higher employment needs in low-carbon transport modes
such as railways, inland waterways, short sea shipping and public transport, as
well as in intermodal logistics. It should be highlighted, moreover, that a
modal shift from the car to public transport will produce net increases in jobs
as the transport services which private drivers produce are not accounted for
in general employment and GDP statistics.

The introduction of the White Paper
Transport 2050 policies will boost the rates of growth of the more energy
efficient modes. Road transport will still grow, but at a slightly lower rate
than in a ‘no policy change scenario’ The development of a dense and extensive
HST network favoured by the White Paper will help to bring the very high growth
of aviation (100 %) to more manageable proportions.

Table 6.2: Projections in passenger and
freight growth, 2005-2030, by transport sub-sector without policy changes

Transport activity projections (% growth) || 2005-2030

Passenger transport activity || 34 %

Public road transport || 22 %

Passenger cars || 28 %

Powered two-wheelers || 31 %

Rail || 39 %

Aviation || 100 %

Inland navigation || 17 %

Freight transport activity || 38 %

Trucks || 40 %

Rail || 40 %

Inland navigation || 22 %

4.2: DECARBONISATION AND GREEN JOBS

The decarbonisation of transport will be
led in the short to medium term (up to 2020) by the search for energy
efficiency in all vehicles and modes, and by setting a level-playing field
between the different modes. Energy efficiency increases will largely result
from improving current conventional technologies, making wider use of
information technologies and setting stringent vehicle energy efficiency
standards. The level playing field between different modes will notably require
the removal of unjustified subsidies and moving towards the wide application of
the user-pays and polluter-pays principles. The latter move is expected to
provoke a shift towards more energy-efficient forms of transport.

In the shorter term, two ways of job
creation or job loss can be distinguished:

● autonomous growth within the different transport modes; and

● employment changes from the modal shift between them.

The extent of the modal shift
will also depend on the ability of the providers of energy-efficient transport
(railways in particular) to improve their attractiveness.

Rather than being due to the early effects
of the decarbonisation process, in the shorter term, restructuring will most
likely be mainly caused by the establishment of a European Transport Area,
global competition and the enhanced use of information technologies.[181]

The market penetration of alternative fuels
will be gradual, giving rise to the need to synchronise investments in
infrastructure and vehicles. Its effects on the labour force are not expected
to be significant before 2020, although critical bottlenecks could appear and
should be identified and eliminated (see box 6.3 on green jobs).

In the meantime, the main focus of this
low-carbon technology strand should be on ensuring the availability of appropriate
human and economic resources for R&D, not least through coordination of the
actions of the private sector and of the Member States and the Union. At the same time, an effort should be made to ensure that the education system,
which will educate the generations that will carry out the greater part of
transition in the transport sector, allows students to improve their STEM
(Science, Technology, Engineering and Mathematics) skills, which will be much
in need in the future.

It is likely that the system will become
knowledge-intensive before becoming low-carbon, just because the IT revolution
is already taking place and many transport sub-sectors have embraced the
adoption of IT. While the European satellite navigation system Galileo is in
the process of becoming operational, GPS use is already pervasive and its use, combined
with that of mobile phones, has greatly improved the efficiency of road and
other modes of transport. While mode specific smart mobility systems have been
or are being developed (SESAR for air, ITS for road, ERTMS for rail, SafeSeaNet
and eMaritime for maritime, RIS for inland navigation), their deployment is
often delayed or fragmented.

Box 6.3: The green and smart transport jobs of
the future: purely green jobs and the greening of conventional jobs

Purely green jobs
could be those that are needed to deploy electric, fuel cell or other non
conventional vehicles and to adapt infrastructures to the needs of a vehicle
fleet that uses a wide variety of fuels. Petrol stations would offer a variety
of refuelling possibilities, including electricity, biofuels, hydrogen, methane
and conventional diesel and petrol fuels. Other types of green jobs include
those in the information and communications technology sector providing
services to transport and those jobs in the manufacturing sectors that will
build green transport means. Critical bottlenecks could appear in the supply of
these green jobs.

Previous experience of large-scale demonstration
of electric vehicles has highlighted a major problem of skills shortages,
throughout the value chain of design, production, distribution, sales,
maintenance, disposal, and emergency first response. In addition, there are a
number of concerns, including the following:

● the demonstration of innovative vehicles has proved very costly,
either due to the need to have representatives from original equipment manufacturers
(OEMs) available on site or available to travel to sites at short notice, the
need to send vehicles back to regional centres for repair, or to send staff to
OEMs for specialised training. At least one dealership in every large city
would need to have specially trained staff;

● there are serious shortages of staff skilled in the research,
design, and development of electric drive-trains, power electronics, batteries,
fuel cells and hydrogen storage and system integration;

● dealerships are not trained to sell and maintain vehicles with
non-conventional drive-trains using non-conventional fuels;

● insurance companies do not have staff who are qualified to assess
risks;

● emergency first response staff are not trained to handle the
different issues raised by high voltage systems, risks of fire and explosion;
and

● planning authorities and certification bodies are not all equipped
to provide permission and approvals for new fuelling/re-charging infrastructures.

Beyond — and even before — the initial pilot
scale demonstrations, mature networks of qualified and certified staff will
need to be in place for all the above functions. A serious effort of resource planning
is therefore required. Considerable work was carried out by the ‘International
Partnership of the Hydrogen Economy’ to identify training needs and draft
training curricula. Similarly, the ‘Californian Air Resource Board’ has studied
training requirements.

During the first phase of commercialisation of
electric vehicles and hydrogen fuel cell vehicles (EVs/HFCVs), skills for the
current internal combustion engine (ICE) technology and additional new skills
for the electric power train, batteries and control systems will be required.
This phase will also coincide with an internalisation of electric drive-train
technology development within the automotive manufacturers which will therefore
also need these new skills.

In terms of anticipating and managing
restructuring, the skills and qualification levels needed for electric vehicles
and hydrogen fuel cell vehicles will be essential. As announced in the European
Commission’s Communication ‘European strategy on clean and energy efficient
vehicles’,[182] the Commission
will support the creation of a European Sectoral Skills Council, aiming at
creating a network of Member States’ national observatories. The Commission
will also target the use of the European Social Fund, starting in 2011 to
encourage retraining and upskilling.

Other modes of transport present similar
problems. For instance, the use of alternative energy in maritime transport
where emerging new propulsion technology such as the use of gas-fuelled ships
or wind energy propulsion will require safety standards and new skills which
could be of benefit to the revalorisation of the European workforce. As regards
gas-fuelled ships, interim guidelines on safety have been developed in the
framework of the International Maritime Organisation (IMO), which will be
complemented by the development and finalisation of the International Code of
Safety for Gas-fuelled Ships by 2014. The use of wind energy in maritime
transport is still at the research stage and will require new skills also, but
in a longer timeframe.

Alongside ‘green jobs’ there are what could be
called ‘conventional transport greening jobs’. The greening of the transport
sector can be seen as making more commercially attractive and increasing the
use of the greener modes of transport while ‘greening’ their more competitive
rivals and making a more efficient and ‘greener’ use of all modes of transport.
To compete with road and aviation, the low-carbon modes of transport have to
provide better services, which often require specific skills:

● there is an increasing technological complexity in railways (e.g. in
the case of high-speed trains), shipping and civil engineering as well as in
aviation. Workers employed here, as well as those working in possibly less
technically demanding sectors such as road transport, inland waterways and
logistics, need also to be well acquainted with information technology, and in
particular with Intelligent Transport Systems;

● civil engineering is becoming more capital-intensive, but also more
human capital-intensive, as public works take on larger and more complex challenges.
Pieces of infrastructure such as bridges and tunnels (including those in urban
locations) aim to make distances shorter and less costly in CO2
terms;

● public passenger transport requires personal attention to the user
to ensure a high level of quality, in particular concerning its security, and
to ensure a highly reliable service. This may require more customer attention
qualifications from the staff, for example to ensure accessibility for disabled
passengers, or to uphold passenger rights or guarantee security;

● the development of a knowledge-intensive transport sector, highly
efficient and adapted to the needs of customers, involves demanding central
service requirements. Central tasks such as regulation, monitoring, modelling,
statistic collection, or, at a more microeconomic level, network management,
managing tolls and internalisation systems, as well as Intelligent Transport
Systems, require highly skilled jobs to ensure rationality, feedback and
resilience of the transport system;

● logistic activities will grow over the coming years. Logistics
professions are to some extent common to different transport modes. By
increasing the efficiency of trans-shipment and supply chain management, they
increase the energy efficiency of the supply chain. With automation,
containerisation and electronic tracking of goods, logistic professions are
becoming more demanding in terms of skills.

Finally, there is the more controversial ‘greening
of brown jobs’, which could include the development of longer road freight vehicles
involving the implementation of special training for the drivers, notably on
energy efficiency and safety aspects. In the air transport sector, training
linked to the use of the Airbus A-380 is a case in point, where the use of
larger aircraft produces environmental benefits.

4.3: DEMOGRAPHY: HEADING FOR SKILL AND
LABOUR SHORTAGES

In spite of current relatively high levels
of unemployment, there is a consensus that the main problem facing the
transport sector will be labour and skill shortages, even in the absence of
decarbonisation of the sector. This is due to the accelerated ageing of the
transport labour force which creates a scarcity problem which the low female
participation rate in the sector will not help to resolve. Strong demand growth
will exacerbate this problem.The sector has already suffered in normal
conditions from skill shortages and a tight labour supply. For the moment,
skill shortages focus on conventional rather than green jobs. It is therefore
imperative that redeployment and renewal of the labour force is facilitated.

Green jobs within the transport sector
appear to require a blend of existing skills rather than adoption of totally new
skills. Moreover, in the first stages of decarbonisation, efforts will be
focused on research and development, followed by demonstration projects, the
strategic impact of which will be large but which are likely to go mostly statistically
unnoticed in the larger labour transport labour markets.

In the short term, from a restructuring
point of view, of greater importance than the emergence of new green jobs will
be the upgrading of traditional green jobs in railways or public transport and
the greening of conventional jobs in carbon intensive modes such as road
freight transport and aviation. These transformations are due to take place
against a background dominated by the ageing of the population. In a society
where the labour force will soon start shrinking, the transport sector
workforce is ageing more rapidly than the economy as a whole (26 % of
employees aged over 50 compared with 22 % on average in the economy). In
most sectors, female participation is expected to fill the gap left by ageing
male workers, but in transport the labour market share of female workers is
much lower than the average (21 % compared with 35 %, while in land
transport the share is only 13 %). For details of the age and gender
profile of the sector, see box 6.4 below.

Before the crisis, it was said that there
were shortages of skilled workers in the following transport professions:
locomotive drivers; road drivers; merchant navy officers; and skilled sailors
or entrepreneurial staff in inland waterways. Moreover, in some sectors, such
as railways or logistics, there was an ageing workforce, possibly due in part to
the civil servant status of many employees, which meant that employee turnover
was very low. The crisis has aggravated this situation.

Shortages in some precise skills can sit
aside the relative overstaffing of some modes of transport, as it has been the
case in the rail sector in some countries. Other modes can become overstaffed
in the future as a result of restructuring (for example air traffic management
support staff as a consequence of the creation of functional blocks, although
traffic growth should counteract this tendency) or consolidation between firms
(for example between aviation companies). Finally, increases in productivity or
changes in technology could make some jobs redundant (for example, train ticket
collectors). Dealing with these shortages and easing the restructuring of the
transport sector will require that labour mobility is able to overcome the implicit
barriers to gender, age, mode and nationality, and migration outside Europe.

Box 6.4: The age and gender handicaps of the transport sector

The proportion of the EU27 transport services
workforce aged 15 to 29 was 17.7 % in 2007, some 6.7 percentage points
below the average for the non-financial business economy. This was reflected in
an above-average share of older workers (aged 50 or more), representing more
than one quarter (25.7 %) of the workforce, compared with just over one
fifth (21 %) for the non-financial business economy as a whole. All of the
transport services NACE divisions recorded a relatively low proportion of
younger workers, but this was most notable for land transport and transport via
pipelines, where the proportion was as low as 14.1 %, one of the lowest
among the non-financial business economy NACE divisions, higher only than in some
mining and quarrying (NACE Section C) divisions. Air transport was the only
transport services NACE division where the proportion of older workers (20.0 %)
was below the non-financial business economy average, while the highest
proportion of older workers was recorded for land transport and transport via
pipelines and for water transport services (both 27.8 %).

Only 20.9 % of those persons employed in
this sector in 2007 in the EU27 were women, around three fifths of the average
for the non-financial business economy, where women accounted for 35.1 %
of those employed. In land transport and transport via pipelines (NACE Division
60) the share of women in the workforce was just 13.5 %, among the lowest
shares across the non-financial business economy NACE divisions, higher only
than in construction and two mining and quarrying (NACE Section C) divisions.
The share of women in the workforce was also particularly low in water
transport, 19.9 %, and just below the non- financial business economy
average in warehousing, transport support activities and the activities of
travel agencies (32.4 %). The only one of the four transport services NACE
divisions where the share of women in the workforce was above the non-financial
business economy was air transport where 40.7 % of the workforce was
female.

Source: European business — Facts and figures,
2009 edition

http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-BW-09-001/EN/KS-BW-09-00
l-EN.PDF

4.4: INTEGRATION IN THE TRANSPORT SECTOR

Restructuring is the result of decisions
taken by enterprises, even if they are sometimes triggered by changes in the
regulatory environment, such as the opening of markets or by external facts
such as the emergence of the new Asian trading powers. The high and
accelerating degree of integration of the European transport services sector at
enterprise level and over different modes should be highlighted, as the success
of decarbonisation and of the overall integration in a Single Transport Area depends
on what is taking place at the level of the firm.

The freight transport sector is relatively
integrated at enterprise level, with companies such as Deutsche Post-DHL, DB
Schenker, TNT, Kuhne and Nagel and SNCF-Geodis taking many of the strategic
decisions that will shape the sector. In spite of repeated pronouncements in
favour of rail freight, some of these companies have developed road freight
transport branches which now constitute the main focus of their activity: this
is the case with SNCF and Geodis or the takeover of Schenker by DB.[183]

ln medium-distance passenger transport
sub-sector, DB and/or SNCF/Keolis are leading the market, while in public
transport there are firms that are highly diversified, such as Veolia or First
Group UK, which are both active in railways and buses.[184] The increased use of tendering in urban and regional transport
gives these companies significant opportunities for expansion.

The internal market has led so far to some
degree of consolidation in aviation, where after the takeover of Swiss,
Brussels Airlines, and more recently of Austrian Airlines and British Midlands
by Lufthansa[185], other groups have emerged such as Air France-KLM or British
Airways-Iberia. Integration is hindered by the existing agreements with the USA[186] which constitute a barrier to fully-fledged mergers within Europe
and to capital movements across the Atlantic.

The actors driving integration can,
however, come from other fields as is the case with the seven BAA airports in
the UK, which were taken over by the Spanish construction firm Ferrovial. Construction
firms have had access to new activities thanks to the adoption of
public-private partnership schemes. Airports themselves, such as Frankfurt airport (operated by Fraport) may have a wide-ranging portfolio of shares and
management contracts in different airports worldwide.

Global interests have also established
beachheads in Europe, most notably in seaports. The case of an international
tender to build and operate a container terminal at the port of Piraeus, near
Athens, which was won by Cosco-Pacific, made the headlines due to trade union
industrial action against it. However, other Chinese or Asian companies run
terminals in many other ports in the EU.[187]

4.5: FROM NATIONAL PUBLIC MONOPOLIES TO
EUROPEAN PRIVATE MONOPOLIES?

Globalisation and decarbonisation may
favour concentration, as only large firms may be able to carry out large
research and investment programmes. It is often feared that the opening of
markets and subsequent restructuring may result in old national monopolies
being replaced by the predominance of a short number of European firms.[188]
This perception could slow progress towards the creation of a European system
that is able to carry out decarbonisation. EU and national policies should
ensure that well regulated competition prevails in EU transport markets.

Over time, economies of scale and scope as
well as historical advantages could lead to an excessive market concentration
in a few large firms. In railways and aviation, the ex-incumbents derive their
strength from the size of their former exclusive markets, from which they can
make inroads into other markets. Moreover, public firms benefit from the
financial strength of the Member States to which they belong. However,
cross-border penetration is not easy as other ex-incumbents use, as a means of
resistance regulatory or de facto barriers (e.g. provision of rail safety
certifications to new entrants), which are only slowly being dismantled. Within
passenger transport, public service obligations provide a channel for the
subsidising of firms and advantageous attribution of rail contracts to
incumbents, but this is seldom the case for freight transport. However, it is
clear that regulatory barriers cannot protect inefficient firms for ever and
that the need for public budget consolidation will drastically reduce the
subsidies available for both the passenger and freight markets.

lt is one of the roles of the EU and the
national competition authorities to avoid abuses of dominant positions.[189] Market forces
have also their own resilience. ln this respect, it is to be hoped that
challenges to the dominant firms could come from outsiders from other transport
markets, and also from coalitions of consumers favouring small suppliers that
are responsive to their needs.[190] Newcomers to the sector may be able to start from niche positions
or by better responding to customers’ needs.

4.6: THE EFFECTS OF THE ECONOMIC CRISIS

Europe is
recovering from the crisis in an uneven way with some Member States still being
immersed in it. The economic crisis is, in the short term, a force for the
consolidation of the transport sector, as the weakest actors merge, disappear
or are taken over. Swift job transitions will help minimising the high social
costs of this process. In the longer term, decarbonisation threatens the less
energy-efficient firms, many of which may not be able to finance large
investments in low-carbon equipment.

The crisis and its budgetary consolidation
aftermath have resulted in high numbers of bankruptcies and restructurings.
Comprehensive information on this topic is limited, although according to the
International Road Transport Union (IRU), the number of bankruptcies in the
road transport sector doubled during the crisis.[191] Further, the International Air Transport Association (IATA) recorded
losses in 2009 and after escaping from them in 2010 and 2011 expected to fall
in the red again in 2012 .[192] The European Restructuring Monitor, published by the European
Monitoring Centre on Change (EMCC), illustrates well the severity of the crisis
by listing a large number of cases of restructuring which were announced between
2009 and 2011. It is impossible to mention them all, not least because as
attention concentrates on large firms SME sectors like road or IWW are seldom
mentioned. Restructuring cases include those of: Olympic Airways, Aer Lingus, Alitalia,
Meridiana Eurofly, Air France, Czech Airlines CSA, Lufthansa Technik Airmotive
Ireland, Finnair Tekniikka, PKP Intercity and cargo, Cargo Slovakia, the ZSSK
passenger rail services of Slovakia, and ZSR the rail infrastructure company of
the same country, SZDC the Czech railways, the Medcenter Container Terminal in
the Gioia Tauro port, LOT ground services, Tirrenia, Sea France Channel,
Schiphol airport, the Mory logistics and courier express group in France, the
London Underground, and the Campania region public transport sector.

Some of these restructuring events have
been solved through agreements, involving natural departures, voluntary
redundancies, restructuring fund subsidies or a gradual implementation, while
others gave rise to strikes.[193]

The severe
budgetary and financial crisis in some Member States has greatly increased the
need for restructuring within their transport sectors as the room for national
budgetary support to the sector has been drastically reduced. The Union is assisting these countries to implement their National Reform Programmes or the
EU/IMF/ECB programmes which generally include transport reforms. Examples of
the latter are the intended restructurings of the Hellenic railways
organisation, the Romanian railways reform (infrastructure, passenger and
freight services) and of the Portuguese rail passenger services (Comboios de
Portugal) or those of the Lisbon underground and the Lisbon public transport
company.

In recent times some good news concerning job-creating
expansion restructurings are becoming more common, notably for the aviation
sector: Lufthansa, TNT Airways, Virgin Atlantic, Southend airport Essex or the Frankfurt-airport operator Fraport. Geodis and Keolis, two subsidiaries of
SNCF are also planning important recruitment operations.

Due to the preceding economic euphoria, many
transport firms entered the crisis with plenty of cash resources, even taking
into account record oil prices in 2008, and many aviation low-cost carriers and
ports and airports even benefited during the crisis. On the other hand, many
SMEs in the road transport and inland waterways sectors have felt squeezed by
the 2008 credit crunch and its repercussions.

In the aftermath of the crisis, the credit
crunch and the weak market demand are in many cases followed by a public
subsidy scarcity affecting transport companies which relied on them for their
daily operations. Public infrastructure expenditure will also be cut down as a
result of deficit avoiding recovery plans while some pieces of infrastructure
such as some regional airports are partially or totally shut down as their
subsidised operation cannot be afforded.

ln general, the crisis has had a larger
impact on freight transport than on passenger transport, which always remains
more constant within the business cycle. Within the transport sector, the
cheaper alternatives, such as the low-cost airlines and coaches, have
experienced an increase in demand, to the detriment of more expensive
suppliers. Within freight transport, the transport of fuels has also resisted
the crisis well.

Conversely, however, the crisis has
aggravated the situation in long-distance ocean transport, where even before
the crisis there were indications of serious future overcapacity. This
structural overcapacity (estimated to be as much as 20 %) is likely to
materialise as the recovery starts and could ensure years of fierce competition
and low maritime transport prices, which would further push the process of
globalisation.

4.7: EXISTING PRACTICES IN RESTRUCTURING

lt is often difficult to identify good
practices in restructuring from a social point of view and even more within the
transport sector. This is in part due to the fact that the initial effects of a
restructuring event are often detrimental to those involved.

In both the rail and aviation sectors, new
entrants to the sectors are a source of jobs. In aviation, the strong growth in
activity, which is resuming after the 2008-2009 downturn has allowed firms to
redeploy workers into other jobs or companies, although working conditions may
have deteriorated for some. In road transport and in seaports, firms keep a
core of workers, which preserves corporate knowledge. However, a general trend
in the entire transport sector, except aviation, is that this knowledge is
ageing with the workforce.

Substantial restructuring has already taken
place in aviation, with the emergence of the low-cost carriers, which now
control 30 % of scheduled flights. As air transport has grown,
redundancies from the companies that have gone bankrupt have, to some extent,
been absorbed by other companies.

Within railways, restructuring has often
taken place through early retirement, by not replacing staff taking retirement
or by redeployment to different jobs in the group. There have also been
voluntary departures, sometimes to other railway companies. Compulsory
redundancy has been used only rarely normally with fairly large severance
payments.[194] In many instances, the civil-servant status of railway workers has
meant that forced redundancies have been avoided. This has increased the
average age of the staff and threatens the transfer of knowledge within the
firm.

Further, road and maritime transport firms
have recourse to contracting forms that are relatively flexible. Road transport
companies use subcontractors while maritime transport companies employ workers
from non-EU countries,[195] which can be dismissed relatively easily, compared with workers
from EU Member States. In seaports there is a wide variety of solutions, often
based around a public or private ‘pool’ of permanent dockers supported by
temporary or casual workers or by transport company employees. The adjustment
resulting from the crisis has been borne by temporary workers, particularly as
most ‘pool’ workers cannot be dismissed.

Within freight transport, road is also a ‘dual’
sector, consisting of some large and medium-sized enterprises on the one side
and a thinly atomised sector on the other, from which fluidity derives the
whole road sector its strength. Logistics operators subcontract large numbers
of individual drivers, with which they can dispense if the business climate
worsens, while they retain their core fleet. The enlargement of the EU has
allowed drivers from new Member States, often working for delocalised old Member State firms, to provide services to large shares of the international road transport
market.

4.8: EU ACTIONS TO SOFTEN THE SOCIAL
EFFECTS OF RESTRUCTURING

Restructuring results in labour mobility
and job transitions. Even though restructuring is dealt with by individual Member States and the social partners, the EU should nevertheless ensure that restructuring
does not involve a drop in the quality of the service and in working conditions.
The EU can facilitate restructuring and reduce its negative consequences in
different ways:

● 
by increasing the employability of workers;

● 
by making sure there is no race to the bottom in
working and safety conditions;

● 
by making sure that an acceptable level of competition
is upheld; and

● 
by providing a gradual phase-in of measures that
may have a social impact, so that firms can prepare themselves for these
changes.

One important element that ensures the
employability of workers is providing them with certificates that acknowledge
their qualifications and facilitate their labour mobility. The EU has
legislation covering the issuing of licences and/or certificates for the
different modes of transport. In the case of maritime transport, EU inspectors
assess whether training and certification by EU and non-EU countries is carried
out at the appropriate levels. An effort to provide training has to be made to
compensate for the ageing of the population and the need to keep up with rapid
technological change. However, in a number of cases, training is controlled by
ex-incumbents which creates difficulties relating to the entry of new firms
into the transport markets. Moreover, existing training centres have a national
orientation: greater weight should be given to the ability to operate in international
environments.[196]

Measures that contribute to creating a level
playing field in the social area within and between the different modes of
transport include the following:

● 
in road transport, which has a large turnover of
firms due to low entry barriers, the EU has raised the requirements for the
access to the profession. It has also harmonised training requirements, working
times, rest periods and driving hours. Market opening towards the new Member
States has been gradual and the freedom to provide cabotage services has been subject
to some restrictions;

● 
for rail transport, there is also legislation on
driving and rest periods for engine drivers;

● 
in maritime transport, the 2006 ILO Maritime
Labour Convention laying down rules on recruitment and the working conditions
of seafarers has been transposed into EU legislation following an EU social
partners’ agreement;[197] and

● 
in aviation, safety rules define working and
rest periods as well as the health and professional conditions of pilots and
crew members.

EU social policy measures are generally
introduced gradually with phasing-in periods and derogations for special cases.
Moreover, studies and reports are requested after the introduction of the
measures, to ensure that they are functioning in a socially acceptable way.
Ex-post evaluation of past measures is now being added to existing ex-ante
impact assessments, which in their turn will pay much more attention to the
social dimension.

The need of restructuring
a firm or of closing it is not always derived from the effects of competition
in the market and is not always unexpected. In the context of public
procurement of services, or similarly regulated situations between private
firms, the restructuring or even the closure of contractor firms takes place on
a regular basis when the contract expires and a new service supplier is sought
through competition ‘for the market’. The situation for the workers involved
does not differ much from that of workers subject to other kinds of restructuring.
In some cases EU legislation opens clearly the way for a transfer of staff
between the old and the new supplier, this is the case of Regulation 1370/07 on
public passenger transport services. In other cases this may remain subject to
the more general provisions of Directive 2001/23/EC on the transfer of
undertakings to the extent that they apply. Public authorities – often at local
and regional level – are directly or indirectly responsible through public
enterprises or the granting of concessions for a sizeable share of employment
in the service sectors. Further to their general responsibility for the
economy, they should ensure the conditions for the smooth transmission of
knowledge and the best use of the existing workforce of the sectors of which they
are in charge. This is particularly important at the moment of the renewal of
concessions or when any divestment is foreseen.

4.9: OBJECTIVES FOR THE FUTURE

The
objective for restructuring within the transport sector could be to develop a
large and competitive and socially inclusive European market, in which a
substantial number of firms are robust enough to finance the IT, energy and
logistic improvements needed to become competitive low-carbon firms and in
which a significant number are large enough to invest in research.

From a social point of view, transport
employees should enjoy the degree of job stability needed to achieve an
acceptable reconciliation of work and private life and to ensure their
commitment to the job, which is crucial, to increase their productivity and
innovative capacities. Their skills and competences will need to be regularly
upgraded to keep up with innovation and facilitate their mobility. Given the
intensive competition expected between firms in the years to come, job stability
in the transport sector should include a ‘flexicurity’ approach, where changes
in job content could be introduced, including in conjunction with other firms,
preferably within the same profession and within the wider transport, logistics
and travel sector.

If the completion of the internal market in
transport is to be achieved, further cases of restructuring look likely in the
future. As announced in the White Paper ‘Transport 2050’ these include
restructurings resulting from the expected opening of domestic passenger
railways and road cabotage, the current gradual obligation to tender out public
service contracts for rail, and the possible development of improved access to
port services. In all of these cases, the essential element is to deliver good-quality
services, in particular for those measures that improve the commercial
attractiveness of rail and navigation as low-carbon transport modes. The right
consideration of the human dimension (e.g. quality of jobs and work) will be
crucial to deliver those high quality services, even more so in a context of
increasing skill shortages.

From a horizontal point of view, the issue
of training should be a priority in terms of meeting the challenges of climate
change, ageing and globalisation. Frequent restructurings and high labour
mobility makes on-the-job training both more necessary and less likely. It makes
it more necessary because adaptability of workers has to be enhanced to cope
with new technologies and organisational changes. However, it makes it less
likely because firms have little incentive to finance the training of workers
who may soon leave them. Therefore, significant efforts have to be made in the
field of training, in collaboration with the social partners and the Member
States, with the objectives of increasing the supply of skilled labour (by
means of lifelong learning and gender balance-oriented training) and by adapting
skills to emerging needs, such as green energies, IT, logistics, ability to
deal with elderly or reduced mobility passengers, and languages.

With a view to the decarbonisation of
transport while enhancing the competitiveness of the sector, the transport
sector seems to have significant opportunities to increase its productivity,
not least to make up for a shrinking labour force. These will stem from an
accelerated dissemination of information and communication technologies and
from a combination of policies allowing better access to markets, better
provision of infrastructure and a more efficient use of it. A sector that is
able to generate healthy growth will also be able to finance the technological
improvement needed for a change towards a low-carbon economy. For these
developments to take place smoothly and effectively, the cooperation of the
social partners is essential, notably in respect of the provision of human
capital and its swift reallocation where it is most needed at the lowest social
cost.

All sectors operate within the framework of
European industrial policy and this is therefore an important area of consideration,
and one that is inextricably linked to employment policy. The next section of
this chapter therefore looks at the future of industrial policy and what this
might mean for EU labour markets, based on a recent European Commission
Communication.

5: THE FUTURE
OF INDUSTRIAL POLICY
5.1: AN INTEGRATED INDUSTRIAL POLICY FOR
THE GLOBALISATION ERA

Ensuring that the EU economy is capable of
facing the challenges that the future is likely to bring is a key concern,
particularly in the light of the economic crisis that is still ongoing in many
EU countries. Strengthening the competitiveness of the EU economy and enabling
it to provide growth and jobs therefore needs to be at the centre of EU
industrial policy, along with the goal of enabling a transition to a low-carbon
and resource-efficient economy.

To this end, the European Commission issued
in October 2010 its Communication entitled An integrated industrial policy
for the globalisation era. Putting competitiveness and sustainability at centre
stage.[198]

In this document, the Commission outlines
its approach to industrial policy, stating that it will put the competitiveness
and sustainability of European industry at centre stage. The overall approach
is characterised by the following strands:

● bringing together a horizontal basis and sectoral application. All
sectors are important and it will continue to apply a tailor-made approach to
all sectors. However, there will also be coordinated European policy responses;

● the whole value and supply chain will be considered, from access to
energy and raw materials to after-sale services and the recycling of materials,
some parts of which will be outside Europe; and

● regular reporting by the Commission on the EU’s and Member States’ competitiveness and industrial policies and performance.

5.2: IMPROVING THE FRAMEWORK CONDITIONS
FOR INDUSTRY

There is still significant scope for better
regulation at the EU and national level, despite the existence of a
well-developed body of EU legislation and regulation. In particular, it is
essential to move towards smart regulation, which comprises the following
elements:

● 
competiveness proofing of policy proposals as
part of the Commission's integrated Impact Assessment process; and

● 
ex-post evaluation of the effects of legislation
on competitiveness.

Further, Member States need to make
increased and more systematic efforts to reduce the administrative burden,
pursue better regulation and e-government policies and to simplify support
schemes in order to help smaller businesses. Although much progress towards
creating a better business environment for SMEs has been made through
initiatives such as the Small Business Act and certain components of the EU’s
Lisbon Strategy, it is necessary to continue to improve the business
environment for SMEs.

Access to finance has been identified by
the majority of EU Member States as a significant barrier to growth,
particularly in the case of SMEs. Credit availability is still not back to
normal following the crisis, and financial markets remain risk averse. The
Commission has established an SME Finance Forum in order to try to find new
solutions to ensure access to finance for businesses, and in particular SMEs.

5.3: INDUSTRIAL INNOVATION

Innovation is a key driver for
productivity, increased energy and material efficiency, the improved
performance of goods and services and the generation of new markets. However, Europe needs to be better at turning its excellence in ideas into marketable goods and
services and therefore industrial innovation policy should encourage faster
development and commercialisation of goods and services and ensure that EU
firms are first into the market. In particular, there is an urgent need for
better coordination of education, research and development and innovation
efforts, more coherence in science, technology and innovation cooperation with
the rest of the world, a global approach to societal challenges, the
establishment of a level playing field for research and development and
innovation, an enhanced access to finance and risk capital, and an appropriate
focus on both competitiveness and societal challenges.

There is also a need to improve skills and
strengthen the share of technology and skill-intensive activities. Further, an
improved use of ICT will be essential for future competitiveness.

In order to encourage industrial
innovation, the Commission intends to put into place a range of activities to
promote the use of technology, to encourage industrial research, development
and innovation, to bring together higher education and businesses in order to
improve the skills of Europe’s workforce, to promote new business concepts, and
to develop greater cross-fertilisation between sectors.

5.4: IMPROVING THE EU’S SKILLS BASE

Modernising the skills base of Europe’s workforce — including making sure that employees have the skills and knowledge to
cope with technological and information technology change — is one of the
Commission’s key policy objectives. This can be achieved in a number of ways:
upskilling of the workforce, improving the employment rates of certain groups
such as young people, older workers, refugees, women and migrants already
legally present in the Member State, increasing retirement age, as well as
improving free movement of EU citizens.

Although there is high unemployment,
European industry is still struggling to find employees who have the necessary
skills to fill their vacancies, and the EU therefore needs to address this
skills mismatch. This is even more urgent, given the fact that modernising
industrial structures will mean that in the future, new skills will be needed
and career shifts will be more frequent. Workers therefore need support in
managing these processes successfully, and there needs to be closer
coordination between national, regional and local governments, with a strong
involvement of the social partners. There also needs to be close coordination
between the public sector and industrial partners in the area of education and
training policies, with a focus in particular on increasing the number and
quality of science, technology, engineering and maths (STEM) graduates.

In order to promote the skills development
of the EU workforce, the Commission intends to encourage the networking of
Member States’ industry, education and employment authorities, with a view to
the sharing of information and best practice on labour markets and skills
strategies. It will also propose guidance principles on framework conditions
for job creation, looking in particular at the development of graduates in
science, technology, engineering and maths.

For a comprehensive discussion of skills
and competences, see chapter 2.

5.5: TACKLING STRUCTURAL EXCESS
CAPACITIES

An important priority of the EU’s new industrial policy must be to help
EU industry to recover swiftly and to make the necessary adjustments after the
economic crisis. In particular, the Commission believes that the emergence of
what it terms structural excess capacities in some industries requires
tailor-made responses at company level, ranging from engaging in new business
models and products to definite market exit.

Companies and
social partners have the primary responsibility for restructuring to ensure
their future competitiveness and viability, since experience has shown that
competitive-driven structural adaptation is quickest and most efficient. Member
States also need to support reallocation of labour, within the framework of a
flexicurity system. In particular, better anticipating and managing
restructuring would help employees and companies to adapt to transitions
imposed by excess capacities as well as by modernisation and structural
adjustment. Existing State aid rules offer Member States ample possibilities to
use state aid to accompany change, eg through training. In addition to this, at
the European level, the Regional and Cohesion Funds can stimulate investment
and innovation to strengthen the resilience of local economies.

Further, an expanded European Globalisation
Adjustment Fund will also help to improve the ability of Member States and regions to manage the consequences of the crisis and help to provide retraining and
other active labour market measures aimed at helping redundant workers to find
alternative employment. See also chapter 3.

5.6: THE ROLE OF MANAGEMENT AND WORKER
REPRESENTATIVES

The role of
management and worker representatives when anticipating and managing
restructuring is particularly important, as is their interaction with each
other. Most specifically, management and workers’ representatives are the key
players to agree on restructuring strategies at the company level. Policy interventions should accompany such restructuring to avoid
social hardship and promote new skills and jobs, thus avoiding mass lay-offs
and the decline of entire regions or the delocalisation of entire industries,
and facilitating economic reconversion and professional transitions.

The ETUC,
Business Europe, CEEP and UEAPME have worked on a draft joint text, entitled Orientations
for reference in managing change and its social consequences in 2003 without
having reached a formal agreement on it (see chapter 7 for more details).
However, the Commission believes that these orientations need to be revisited
to integrate knowledge subsequently accumulated on the best ways to anticipate
and manage restructuring and to take into account the experience of the
economic and financial crisis. Updated orientations on restructuring could be
very useful in reinforcing the capacity of businesses and the workforce to
adapt to a fast-changing economic environment.

Box 6.5: Commission
commitments on the anticipation and management of restructuring

The Commission makes a number of commitments in the
framework of a strategy to develop the anticipation and management of
restructuring. These are to:

● 
review Community support for re-integrating
redundant workers into new jobs including through the review of the European
Globalisation Adjustment Fund (EGAF) regulation (2011);

● 
launch a consultation on restructuring;

● 
review the Rescue and Restructuring Guidelines
for State Aid (2012);

● 
support Member States and regions through
Cohesion Policy in the diversification of existing industries, upgrading
industrial capacity, stimulating investment and innovation to re-develop and
strengthen the resilience of local economies;

● 
present proposals to accelerate the
implementation and improve the focus of European Structural Funds through the
Fifth Cohesion Report (2010) and in the new Cohesion policy regulatory
framework (2011).

5.7: TOWARDS A NEW EU GOVERNANCE FOR
INDUSTRIAL POLICY

Although the crisis has shifted the focus
of industrial competitiveness policies towards short-term rescue and recovery
actions, it is clear that the future attention of policy makers must focus on
long-term structural challenges, largely on maintaining global competitiveness,
climate change, energy, the ageing of the population, skills and knowledge.
Delivering this strategy calls for more effective European governance and in
particular for coordinated European policy responses, focused in particular on:

● a holistic and better-coordinated vision of policy-making at EU
level, including competitiveness proofing of new policy proposals; and

● closer cooperation with Member States and more monitoring of the
success and competitiveness performance of policies at EU and Member State level.

The exchange of best practice will be an
important part of this process. The types of areas that are particularly
suitable for this are the reduction of the administrative burden and assessment
of impacts of competitiveness, ‘fitness checks’ and ‘think small first’ in
national legislation, policies to facilitate access to finance, key strategies
in connection with industrial needs and in the design of national industrial
policies, particularly in the case of individual sectors and the involvement of
stakeholders.

It is hoped that this new approach to
industrial policy will help businesses and investors to engage in profitable,
sustainable and job-creating industrial production in the EU and improve
international competitiveness. This would help Europe’s industry to benefit
from the fast-growing world market provided by globalisation. It is also
important that industrial policy is sustainable and the next section of this
chapter therefore examines the principle of a sustainable industrial policy.

5.8: SUSTAINABLE INDUSTRIAL POLICY

The Commission’s Directorate General for Enterprise and Industry (DG ENTR) is actively engaged in helping to develop and deliver
policies and instruments to facilitate economic and social adaptation, through
its Sustainable Industrial Policy.[199] DG ENTR is concerned with restructuring and adaptation to change
from two perspectives.

First, DG ENTR is working to ensure fair
treatment for Europe’s energy-intensive industries in the context of the
Emissions Trading system (ETS). One of the main priorities is to find an
equitable solution that helps the EU meet both its climate and competitiveness
imperatives. This is compatible with DG EMPL’s ambition to secure smart
restructuring for the future, within the framework of smart growth, which is
one of the focuses of the EU’s 2020 strategy. Second, DG ENTR is also charged
with ensuring optimal framework conditions for Europe’s environmental goods and
services industries. These industries are expanding rapidly and will provide
much of the future employment and economic growth that EU economies and
citizens need. However, these industries face stiff competition from abroad.

The Commission and Member States therefore need to ensure that the right policies are developed and implemented to help
them thrive. Europe needs to ensure that it responds positively to change in
this context by ensuring that EU workers have new skills for new jobs and encouraging greater movement of more of the EU’s economic resources
(notably workers and capital) to these fast-growing sectors.

The Commission recognises that the two most
pressing challenges facing industry and policy makers today are how to grow
Europe’s economies and create jobs while making the transition to a more
resource-efficient economy, as noted in the Commission’s October 2010
Communication on industrial policy (see above). European industry is already
responding to this challenge and shifting to more sustainable ways of
production in many sectors. The challenge for policy makers is to facilitate
the necessary transition with consistent policies. These policies must not
overburden industry while creating the legal certainty required to help
companies deliver innovative products and technological solutions to
environmental challenges.

Main principles guiding Commission
policy in restructuring and industrial change

The guiding principles of the Commission’s
work in relation to restructuring and industrial change should be: Confidence,
Certainty and Coherence:

● 
first, in view of the fragility of the economic
recovery, it is important that Europe develops and articulates a more ‘can do’
attitude. Businesses and consumers thrive on confidence and suffer from doubt
and uncertainty. It is therefore imperative that the EU sets out a positive, proactive
change agenda to secure the recovery, build on its strengths and successfully
marry competitiveness and climate imperatives;

● 
second, industry needs to plan ahead and
requires as much legal certainty and clarity as possible. It needs to have
clear, consistent and well-signalled policies and is entitled to expect fair
treatment from policy makers in this respect and to be given reasonable
timeframes to adjust to new targets or objectives. This is particularly
important in the context of the green economy, where much capital-intensive
investment is required to seize emerging opportunities. In view of the
difficulties companies currently face in accessing appropriate finance and the
speed with which competitors in the US and Asia are moving in markets such as
solar energy, it is crucial that the EU commits to long-term visions (such as
the 20 % renewable energy target by 2020[200]) and delivers realistic roadmaps outlining the steps to be taken to
achieve them. That is why a clear and reasoned restructuring agenda supported
by realistic targets and accompanying actions is important; and

● third, the EU needs joined-up, holistic, coherent policies that
facilitate the transition to a more sustainable economy and avoids setting
contradictory objectives in different policy spheres. This is of course easier
said than done, as has been seen with, for example, the phasing-out of
environmentally harmful subsidies for the coal industry and the difficulty of
explaining to fishermen why they have to sacrifice their livelihoods to protect
a resource. But to be credible and successful, the EU does need to avoid
silo/compartmentalised thinking in different policy spheres and ensure that its
policies complement rather than contradict each other in the restructuring
context as elsewhere.

In terms of specific policy domains that
offer the greatest potential to improve competitiveness, facilitate a more
sustainable economy and proactively anticipate change and restructuring, the EU
needs to focus particularly on developing talent in order to foster innovation.
For example, environmental skills
need to be developed and promoted. Europe needs to equip its labour force with
new skills for new green jobs and deliver structural reforms and a better-integrated
internal labour market in the green economy. Initiatives also need to be taken
at national level, particularly in the field of education. Further, as the
adverse effects of restructuring and globalisation make some skills obsolete,
workers must be retrained to exploit opportunities in the environmental sector. Specific actions aimed at promoting green jobs and providing
society with the necessary green skills could be progressively integrated into
EU employment policies. These could include mapping current training needs and
identifying gaps and possible solutions for dealing with them. Eco-innovation is a
process which encompasses change to business practices, technologies, products
and processes[201] which move
towards cleaner and more energy and resource-efficient products and processes. And it is a key instrument to improve competitiveness in a way that
does not jeopardise living standards in a resource-constrained environment.

However, eco-innovation faces specific
barriers, such as a constantly evolving regulatory framework, inconsistent
incentives and subsidies and a lack of adequate structures, networks, and
sources of funding. This calls for the development of an integrated and
comprehensive EU eco-innovation strategy as an important complement to the
Innovation Union flagship initiative.[202] Box 6.6 below gives an overview of the programmes available in the EU that aim to promote
environmental skills.

Box 6.6: Programmes to promote environmental skills

A study issued in 2010[203] looked at environmental skills programmes in six European countries:
the UK, the Netherlands, Italy, Germany, Bulgaria and Poland. It found considerable variety among Member States in terms of the existence of environmental
skills programmes. Usually, however, firms are at the frontline of developing
green skills — often through in-house training to their staff in response to a
business need.

There is an even mix of courses that cater for
the high-, medium- or low-skilled. The most common method of financing environmental skills programmes is
usually a mix of public and private finance as there is considerable public
funding of skills programmes conducted in partnership with companies.

This report offered the following conclusions:

There is a mix of skills being
targeted by environmental skills programmes

Environmental programmes target the full range
from low-skilled through medium- to high-skilled audiences. These programmes
tend to be driven by employment demand and by the implementation of environmental
legislation that requires sectors to train staff to meet new or stricter
regulation. The actual content of trainings and programmes varies across
industries and is often tailored to specific companies. A common thread is the ‘soft’
skills programmes, aiming to raise environmental awareness, and provide
training which improves environmental skills for every day use.

Green skills provision is relatively
less mature than other skills provision areas

In countries across Europe, skills provisions
programmes have been mainly targeted at traditional jobs and traditional skills
over the past years. Indeed, even green skills programmes often target
such traditional jobs, but placing an emphasis on the extra green elements of a
job that must be learned to be able to contribute to a low-carbon economy.
Given that the emphasis on green skills as a specialisation has been recently
coming to the fore, and is especially focused on the ecological industries such
as waste management, renewable energies etc., the maturity of the specialist
green skills programmes is increasing but remains behind those programmes
targeting traditional skills.

Recognised need for green skills
training across Member States

Based on the case studies presented in this
report, it is clear that the majority of people recognise the need for green
skills training and its importance in facilitating green growth. The importance
that stakeholders attach to green skills development differs between Member
States; however the conclusion that can be drawn is that environmental skills
programmes are found in every country studied in this research with both public
and private sector involvement. Nevertheless, financing of environmental skills
programmes varies between countries.

Firms are large investors in green
skills, supported by national and European funding

Firms are at the frontline of developing green
skills — as they provide in-house training to staff throughout different
sectors of the economy. Large companies in ecological industries in particular
have ongoing learning opportunities for their staff that are linked to
sustainability in a number of different formats.

Some countries are further advanced
than others

The UK is a country where the needs of a green
economy have been analysed more than elsewhere: for example, there has been
much research on what skills gaps exist and how they can be filled. In the
short term it is recognised that some of the gaps will have to be filled in
with migrant workers who have such skills and more investment is needed to
develop technical and other green skills in the long term. Other countries have
less well-established green politics, and therefore also lag in terms of the
supply of environmental skills programmes.

Qualifications from programmes are usually
not universally recognised

Many environmental programmes do not have universal
recognition for the qualifications participants receive. Accreditation and
other similar initiatives may help increase the mobility of green-skilled
workers. Especially at the sectoral level, accreditation is something that
could be approached more consistently, which would take away a barrier to
allowing the labour market to flow to where demand for certain skills exist.

5.9: ENERGY-INTENSIVE INDUSTRIES AND
INTERNATIONAL ASPECTS

The EU must also be ever mindful of the
external competitiveness implications of its actions, as European industries
have to thrive or strive in the global arena. That is why the EU needs an
ambitious, fair and balanced international agreement on climate change and
progress towards a truly global carbon market. Indeed, without global carbon
pricing in some form there will be imbalances in cost-sharing that will distort
competitiveness, leading to political difficulties and a slowdown of progress
towards an eco-efficient economy[204].

The EU has to strike a fine balance between
leading from the front in terms of its climate, energy and industrial policies
and not putting its industries at a competitive disadvantage. There are
benefits to be gained from continuing to move first and quickly, in order to
grow EU environmental industries. Competitive
advantage will belong to those economies that adapt earliest to the challenges
of the changing fundamentals. And it is the relative pace of green growth that
will determine competitiveness, not only the setting of green growth as an
objective.

However, Europe also needs an industrial
and climate policy that promotes environmentally friendly innovation without
leading to industrial outsourcing and the loss of jobs and prosperity. And just
as there is no place in the 21st century for an industrial policy which is
pursued at the expense of the environment, there is also no place in the
competitive global economy for an environmental policy that unnecessarily
drives industry and jobs out of Europe to pollute the environment elsewhere.
That does not make any sense from an economic or environmental perspective.

That is why the revised Emissions Trading
System (ETS) Directive includes a number of implementing provisions that will
reduce the risk of carbon leakage. The
EU ETS Directive (2003/87/EC) was amended in 2009 by Directive 2009/29/EC. The design changes will apply as of the third trading period, which
will begin in 2013 and run until 2020. The amended Directive contains a range
of measures to be adopted by the Commission after agreement by the Member
States. The EU ETS intends to drive investment into low-carbon technologies by
putting a price on each tonne of greenhouse gases emitted and introducing the
principle of auctioning of emission allowances.

In a broader context, European industry is
a major user of energy and raw materials and thus an important part of their
cost structure is related to these inputs. If industry is to be competitive, it
should attain a sustainable use of these resources as they will remain part of
their core business factors. Sustainable growth[205] is not the exclusive domain of certain sectors. It rather
represents a re-orientation of the entire economic landscape. However, for some
industries, sustainable growth will need to be focused on how the use of energy
and raw materials is managed. Scarcity and climate-change objectives will
increase the cost of these inputs for industry in the long run, thus an
industrial policy that wants to address competitiveness cannot forget the
efficient use of these resources. This will lead to a ‘double dividend’
as other policy developments also require a more efficient industry with
regards to input use. For example, minimising the risk of climate change
requires that the European economy be fully decarbonised by 2050. However,
sustainability requires considering the wider picture of efficiency in the use
of all materials. European industry is facing a dramatic challenge under which
its current business model will be turned inside out in the coming decades, and
this new environment calls for an industrial policy that promotes this change
if European industry is to remain competitive. The greening of the economy
should not mean that European industry disappears; rather, it should mean that
European industry develops competitive products and processes for a sustainable
future.

To that effect, EU policies should:

● 
support industrial transition: the EU should provide a regulatory framework that facilitates a
sustainable future by exploiting the benefits of existing technologies and
promoting the development of new technologies;

● 
deepen product policy: industrial policy must incorporate a life cycle analysis
perspective of products. This is carried out in the Community context mainly
via eco-design, energy efficiency labelling and eco-label Directives; and

● 
develop market and financial incentives: the EU should also play a leading role in providing incentives for
sustainable industries. Appropriate pricing systems should be introduced and
perverse incentives removed.

5.10: DEVELOPING A SUSTAINABLE INDUSTRIAL
POLICY

In line with the ever-changing industrial
landscape, both in the European Union and further afield, and more specifically
the growth of environmental concerns and a focus on the green economy, the EU
is trying to develop an industrial policy that is sustainable. The objective of
this sustainable industrial policy is to set the appropriate framework
conditions for industry to achieve the 20-20-20 targets[206]
while reinforcing its competitiveness and seizing the resulting opportunities.

Green growth is economic growth in the
high-growth sectors[207] that meet increasing global demand for improved resource, energy
and carbon efficiency and growth that improves the EU’s production efficiency.
It provides for new employment opportunities since it increases economic
activity in sectors that are relatively job intensive within the EU (such as
waste management). Green growth would reduce the EU’s bill for imports of
energy and other raw materials. The EU currently sends € 350 billion (or € 700
per person) a year out of the EU economy to pay for energy imports.[208] Europe already produces some world-leading green
technologies and has world-leading environmental industries[209] with a combined
turnover of more than € 300 billion, providing nearly 3.5 million jobs.
These eco-industries are growing fast and have large global market shares of
more than 30-40 % for recycling, waste management and renewable energy.
Meanwhile, the global markets for eco-technologies and
services are estimated to more than double to € 3 trillion by 2020.[210] But this first-mover advantage is
being challenged and the Commission is working to ensure optimal framework
conditions for these industries in the context of its Sustainable Industrial
Policy Action Plan.[211]

The core of this action is a new
Sustainable Product Policy that aims to improve the environmental performance
of products, reward eco-friendly behaviour, and foster the demand for better
products, through energy labelling, green public procurement and incentives.
The Eco-design framework Directive[212] is the cornerstone of this initiative. Implementing measures that
have already been adopted are set to deliver total energy savings by 2020
equivalent to more than 12 % of the EU’s electricity consumption in 2007.
And with many more implementing measures currently in the pipeline, this
initiative is making a major contribution to helping Europe reduce its energy
consumption.

5.11: THE FUTURE

To stimulate investments and prepare the ground
for future economic success, the EU, and its national governments must set out
a clear and reasoned roadmap for the future direction of their economies. This
will allow business and entrepreneurs to better target their investments and
ensure that they are made in Europe rather than elsewhere. This vision is set
out in the Commission’s Europe 2020 strategy (ADD and in follow-up roadmaps
such as the Low-Carbon Economy Roadmap (COM(2011)112) and the Energy Roadmap
2050 (COM(2011)885)). Future Communications and actions from the Commission
need to translate this vision into practical actions that free business to
adapt to change and deliver our future prosperity.

Box 6.7: Towards sustainable industrial competitiveness policy

Ideas setting out a general framework for a
sustainable industrial competitiveness policy are contained in a paper to EU
industry ministers in 2010.[213] This paper concludes that, until
recently, by implementing extensive restructuring, the EU’s resource-intensive
industries have been largely able to respond to the various pressures they
faced.They have implemented extensive restructuring measures and positioned
themselves as reliable suppliers of high-quality and specialised products to
the most demanding client sectors. However, the crisis has resulted in a fall
in demand and industry faces increased competition from non-EU countries,
higher energy costs and challenges relating to access to energy and resources.
It sets out three possible transformation strategies:

● transformation strategy 1: Process innovation and reducing
resource-intensity. Investing in technologies and
production methods that reduce resources and energy-intensity are a key
transformation strategy. In the energy-intensive basic material industries such
as chemicals and steel, the potential for increasing energy productivity
typically relates closely to core process technologies;

● transformation strategy 2: Moving to ‘up-market’ segments. EU industries have responded to globalisation pressures by
specialising and differentiating their products, by moving into niche markets
and by moving to ‘up-market’ segments. Increased differentiation and moving to
higher value-added segments can however be difficult for parts of the
resource-intensive industries, if they are unable to differentiate their
products or compete on technological intensity. However, investment and
development in ‘up-market’ segments will reduce the industry’s exposure to
consequences of supply-side sensitivity; and

● transformation strategy 3: Increase presence in growth markets and
relocate to low-cost countries. This strategy
presumes both the capacity of EU firms to undertake such investments and the
absence of foreign investments restrictions. It would also allow these EU
companies to take advantage of the lower cost base in these markets. Despite
clear advantages for industry, this strategy can hardly be called favourable
from a European or global perspective.

Trying to ensure that the EU labour markets
are fully equipped to face up to the challenges outlined in this chapter has
significant implications for skills and competence development. It is vital to
ensure that the EU labour force has the right kinds of skills and competences
that will enable it to work in the types of jobs that will be available in the
future. Chapter 2 looks in detail at the main issues related to skills and
competence development.

CHAPTER 7:
MAIN ECONOMIC AND SOCIAL CHALLENGES: THE RESPONSE OF THE EU

The past two years have seen the most
severe economic and financial downturn probably in living memory. This has had
a substantial effect on the economy of the European Union and has been the
cause of a high level of restructuring activity, as organisations attempt to
adapt to the new climate and keep pace with change in a globalised economy.

Within this context, the EU is facing a
wide range of challenges, both in economic and social terms. The successful
management of transition will therefore be key to ensuring the social and
economic future of the EU. The European Commission has set out its broad vision
for the next 10 years in its 2020 Strategy, which follows on from the Lisbon
Strategy that ran from 2000 to 2010. Alongside this, the Commission has also
been focusing, over the past few decades, on how to manage change within the
context of enterprise restructuring. The involvement of the social partners in
this process is key, and in accordance with this, the Commission issued a first
consultation to the EU-level cross-sector social partners in 2002, asking for
views on the establishment of principles at Community level that aim to help
support businesses undergoing restructuring. This consultation triggered joint
work from the social partners in 2003 on a draft text entitled Orientations
for reference in managing change and its social consequences, which
addresses the anticipation and management of restructuring and the roles of the
main stakeholders. However, the text has never been formally agreed by the
social partners. This first consultation was followed, in 2005, by a second
consultation that focused on mitigating the negative consequences of
restructuring. Although the social partners responded by organising a series of
seminars to debate the issues surrounding restructuring, the 2003 text remains
the main EU-level social partner text dedicated to the anticipation and
management of change.

Over the past two years, due to the
economic crisis, the issue of how to anticipate and manage restructuring has
gained centre stage in EU social policy. The EU has funded a wide range of
projects aimed at finding, highlighting and disseminating good practice in this
field, and stimulating debate on the issues to be taken into account when
anticipating and managing restructuring. In its most recent Communication on
industrial policy and globalisation, the Commission states that ‘updated orientations on restructuring can be very useful in
reinforcing the capacity of businesses and workforce to adapt to a fast-changing economic environment’ .[214] Drawing on the wide range of experience gained from initiatives
already undertaken, the Commission will issue in 2011 a Green Paper on ‘ Restructuring and anticipation of change: what lessons from the
economic crisis?’.

The Commission’s main objective with this
planned Green Paper is to help reinforce and disseminate a practical culture of
anticipation in the implementation of restructuring programmes, with the
emphasis on moving from a purely corrective strategy, based on passive
anticipation, towards preventive action that will stave off conflict and in
some cases prevent the emergence of a crisis situation through the proactive
and negotiated management of restructuring.

1: PRINCIPLES EXPRESSED IN AND RESULTING
FROM THE COMMISSION’S CONSULTATIONS OF EUROPEAN SOCIAL PARTNERS
1.1: THE 2002 CONSULTATION OF THE EUROPEAN
SOCIAL PARTNERS ON ANTICIPATING AND MANAGING CHANGE

The European Commission
issued a first phase of consultation of the Community
cross-industry and sectoral social partners on anticipating and managing change
on 16 January 2002.[215] In the economic and social environment of that time, it was
considered to be important to debate the need to develop throughout the EU good
practices that should be followed by companies undergoing restructuring. The
consultation paper suggested a number of areas relevant in this context and
asked the views of the social partners on:

● 
the usefulness of establishing at Community
level a number of principles for action which would support business good
practice in restructuring situations;

● 
the method of drawing up and developing these
main principles and, in this context, whether they consider that agreements
between the social partners at cross-industry or sectoral level represent the
appropriate way of proceeding; and

● 
any other appropriate initiative that should be
further considered.

The European Commission’s view when
launching this consultation was that enterprise restructuring, which has a
growing transnational dimension, was an important element of change and that
the European Union should focus positively on this issue. This requires the
right balance to be struck between flexibility for businesses — which is more
important than ever in times of ongoing restructuring — and security for
workers, which is necessary to maintain human capital and employability (for a
exploration of flexicurity in the crisis, see chapter 5). Forward-planning of
human resources and enhancement of skills were seen as core issues in this
context and the development of mechanisms favouring them requires an active
partnership between the social partners, including at EU level. The initiative
aimed to stimulate dialogue between the social partners in order to identify
and develop best practices on anticipating and managing restructuring.

The Commission stated at that time that one
of the key factors for the success of restructuring, in terms of strengthening
the competitiveness of business and from the workers’ point of view, is good
practice in terms of involving worker representatives. This entails involvement
on an ongoing basis in the general running of the business, but also effective
and therefore anticipatory involvement in relation to the possible emergence of
changes likely to have an impact on employment.

In addition to this important worker
involvement dimension, the Commission stressed the fact that most Member States
have developed their own responses to the economic and social challenges
associated with restructuring. This has been achieved through sets of rules,
either statutory or agreement-based, with which businesses engaged in restructuring
should comply, as well as good practices that they can follow. These rules and
practices usually address, amongst others, the following issues:

● 
anticipating and assessing the social
consequences of restructuring, including taking into consideration the fact
that delaying limited restructuring may lead to more wide-ranging restructuring
in the future;

● 
the principle whereby job losses and
redundancies should be a last resort (ultima ratio), to be used in the
absence of other, less drastic solutions;

● 
an effective search (by providing the necessary
resources or by achieving certain set targets) for alternative solutions, such
as redeployment, training or retraining of the workers concerned. Planned
measures should be phased in over time, and efforts should be made to
reorganise work, including working time, as a precondition for the use of more
radical measures. Help should be provided in relation to jobseeking,
occupational guidance, supporting the development of self-employment or the
creation of SMEs by the workers affected, and support should be given to
workers taking over certain activities of the business;

● 
examination of the feasibility of finding
individuals to take over the business activities that have been affected by the
restructuring; and

● 
the rehabilitation and
reallocation of abandoned industrial sites, both as an environmental measure
and the absorption of a proportion of the jobs lost as a result of
restructuring.

Within this context, the Commission
believed that a debate on the principles that can help to support business good
practice in restructuring situations could relate, amongst others, to the
following areas:

Employability and adaptability

● 
Managing careers.
Good management of human capital makes for a successful changeover to the knowledge-based
economy and strengthens the competitiveness of businesses. For this reason,
without prejudice to the powers of the public authorities in this field,
companies have an interest in helping to maintain their workers’ capacity to
adapt to developments in the techniques and knowledge required for work. This
could be achieved, for example, through ongoing training and regular and
independent skills assessments or other such measures applied in certain
countries. More generally, it is important that businesses try to anticipate
the competences and skills that will be needed, taking into account as far as
possible the rapid obsolescence of knowledge and skills. This responsibility
also concerns workers who must avail of the training opportunities offered to
them and thus contribute actively to the ongoing adaptation of skills. In this
context, the acquisition of entrepreneurial competences plays an important role
in improving employability.

● 
Support for employability and adaptability. When designing and implementing restructuring, faced with the need
for workforce adjustment, it is good practice to ensure that employees can
continue to work in their chosen occupations. Achieving this involves an active
partnership between companies, the public employment service, training bodies
and other players concerned. Several types of measures applied in many Member
States are relevant in this context: for example, redeployment, help in finding
a new job, vocational guidance, support for the development of self-employment
or the creation of SMEs by the workers affected by restructuring, and support
for workers who take over some of the activities of the business.

● 
Considering all options. The fact that there must be immediate, real and serious economic
grounds to justify job losses, which are only considered after other, less
damaging, options have been examined, is widely acknowledged and observed in
the EU Member States. This concern for the lowest social cost, which
encompasses the idea that any decision leading to job losses should be
proportionate to the objective of ensuring the survival or maintaining the
competitiveness of the company, needs to guide the practical implementation of
restructuring plans. This may result, for example, in the phasing of the
planned measures over time or prior reorganisation of work, including working
time, before any recourse to job cuts. A clear explanation of the serious
nature of the economic grounds underlying the need for job losses is essential.

External responsibility

● 
Territorial responsibility. Aspects to take into consideration at territorial level include
measuring local effects, cooperation with local players, local training, and
the rehabilitation of industrial sites.

● 
Downstream responsibility. Aspects to take into consideration here include the impact of the
proposed restructuring on subcontractors by, for instance, concern for the
security of orders, participation of the subcontractor’s workforce in training
and adopting a global perspective, including subcontractors, when agreeing,
adopting and implementing measures relating to the points set out above.

Implementation of restructuring

● 
Involvement of workers. Social dialogue is essential for the successful management and
acceptance of change. It can reinforce the effectiveness of the process and
minimise its cost. Therefore, all restructuring processes need to involve
effective cooperation with workers’ representatives in order to anticipate and
successfully manage its social and economic consequences. Both parties need to
engage in dialogue on the basis of full and wide-ranging information, while
ensuring compliance with the principle of confidentiality.

● 
Fair compensation.
In accordance with well-established practice in all Member States, the
provision of fair compensation in the form of, for example, payments or notice
periods is an essential element that can smooth the adjustment process where
job losses cannot be avoided.

● 
Prevention and resolution of disputes. There are no measures at Community level for preventing or for
helping to resolve collective industrial disputes that have a transnational
dimension. Such measures exist at national level only, for disputes restricted
to a single country. However, given the usefulness of such national systems for
preventing and resolving collective industrial disputes, their potential for
application at Community level needs to be explored.

● 
SMEs. Particular
attention should be paid to the way in which restructuring practices are
developed by SMEs, taking into account their specific situation and needs and
their more limited capacity to act, on one hand, and the need to preserve
social cohesion and equity amongst the European workforce, on the other.

The result of this consultation was that
the EU-level social partners held a series of meetings and seminars, which
finally resulted in agreement on a joint text on the management of change,
which is discussed below.

1.2: THE 2003 EUROPEAN SOCIAL PARTNERS’ WORK
ON MANAGING CHANGE

In response
to the above first consultation of the social partners, and following a series
of seminars and case studies, European social partners’ representatives worked
on a joint text entitled Orientations for reference in managing change and
its social consequences.[216] However, the text has never been formally agreed by the social
partners.

This text
comprises six sections which broadly follow the list of themes proposed by the
Commission in its consultation. For a broad outline of the content of this
text, see box 7.1 below.

Box 7.1: Overview of the
main provisions of the (never formally agreed) draft EU-level cross-sector
social partners’ text, Orientations for reference in managing change and its
social consequences of 16 October 2003

● 
Introduction. The
main challenges of the current economic and social situation are listed, among
others, as globalisation, new technologies, competition, and modernisation of
work organisation. The text stresses the importance of a positive attitude to
change, and the existence of good-quality social dialogue, and explains the background
to this joint text. It also mentions the European Monitoring Centre on Change
(EMCC, based at the European Foundation for the Improvement of Living and
Working Conditions, Dublin) as an important instrument of support.

● 
Explaining and justifying change. This section stresses the importance of explaining and justifying
the need for changes to employees, their representatives and managers, in good
time, and respecting the obligations of information and consultation throughout
the change process, in order to create a climate of confidence and trust. In
this regard, several possible instruments for ensuring that this is done
effectively are suggested, such as specific annual reports on developments, or
documentation prepared for shareholders.

● 
Developing employability. This section makes an explicit link with the social partners’ Framework
of actions for the lifelong development of competencies and qualifications
of March 2002,[217] which
emphasises the importance of the ongoing competence development of employees.

● 
Territorial dimension. This section emphasises the need for partnership at local and
regional level between employers, trade unions and public authorities in order
to promote the development of new employment-generating activities. It stresses
the important role of the European Structural Funds in this regard (for more
information on European financial support for restructuring, see chapter 3).

● 
The specific situation of SMEs. In this section, the important role of SMEs in the local economic
and social fabric and their vulnerability in the face of restructuring in
regions dominated by one activity are brought to the fore, highlighting the
need for a supportive business environment for SMEs, and the importance of
involving their employees and/or their representatives in the management of
change.

● 
Managing restructuring. This is the most sensitive section of the text, in which the
social partners agree that the management of restructuring must take account
both of the needs of enterprises, and of the needs and choices of employees.
The text stresses the need to explore all possible alternatives to dismissals
(the ‘ultima ratio’ principle, ie that dismissals should be a last resort),
including a list of possible options which could be considered as an alternative
to redundancy in the case of restructuring. Emphasis is placed on the
importance of the time factor in the good management of restructuring.

The main shortcoming of the text, however, lies in the lack of any
appropriate dissemination and of any mechanism for its concrete application.
The Commission therefore felt that it wanted to revisit this issue and
subsequently issued a second consultation of the EU-level social partners, set
out below.

1.3: THE 2005 CONSULTATION OF THE
EUROPEAN SOCIAL PARTNERS ON RESTRUCTURING AND EMPLOYMENT

Following this first stage
of consultation and the conclusion of the social partners’ joint text as set
out above, a second phase of consultation of the European social partners was
launched on 31 March 2005 as part of the Commission’s Communication on
Restructuring and Employment.[218] In addition to the issue
of restructuring, this Communication also focused on European Works Councils
(EWCs), following a first consultation of the social partners on revising the
EWCs Directive in April 2004. This consultation process ultimately led to a
Commission proposal for a revised EWCs Directive in July 2008 and the adoption
of the revised EWCs Directive in 2009 (Directive 2009/38/EC).

In setting the scene for this second
consultation, the Commission stated, in the consultation document, that, in the
context of anticipating and managing restructuring, ‘the
preservation of social cohesion, which is a distinctive characteristic of the
European social model, requires the introduction of accompanying policies
designed to reduce the social costs to a minimum and to promote the search for
alternative sources of jobs and income.’ It noted further that although
restructuring is generally seen as a negative phenomenon, it is essential to
the survival and development of enterprises. The negative impact of
restructuring should therefore be managed as carefully as possible.

The Commission
stated further that a range of factors contribute to restructuring, as follows:

● 
the development of the European single market
and the opening-up of economies to international competition;

● 
technological innovation;

● 
the development of the regulatory framework (the
introduction of new regulations or deregulation); and

● 
major changes in consumer demand, which are
taking place as a result of, among other things, the new needs of an ageing
population, greater sensitivity to environmental issues or changes in the
geography of world demand.

The Commission
noted that the EU social partners have a ‘decisive’ role to play in helping to
mitigate the negative effects of restructuring, in two key areas:

● 
within the European sectoral social dialogue
committees, it is up to the social partners to develop ways of anticipating
structural change, having regard particularly to negotiations at cross-sector
level, and to their sectoral and regional monitoring initiatives;
and

● 
given their special knowledge of the sectors,
they have a role to play in informing and alerting the authorities at all
levels. If the social partners then decide to alert the Commission to a particularly worrying development, the Commission
can decide to set in motion an enhanced process of sectoral monitoring.

The Commission then called on the
social partners to become more involved in anticipating and managing change,
noting in the consultation document that they are ‘key
players in terms of effective action on the restructuring front’. It noted that this second-stage consultation should primarily consist
of inviting the social partners to continue their ongoing work by encouraging
the adoption of their best-practice guidelines on restructuring and European
Works Councils. Acknowledging the work that the social partners have already
undertaken in this area, notably the 2003 draft text, Orientations for
Reference in Managing Change and its Social Consequences, the Commission
felt, however, that there was a need for more European social dialogue input,
and therefore encouraged
the European social partners to intensify ongoing work and to start
negotiations with a view to reaching an agreement on the requisite ways and
means for:

● 
implementing mechanisms for applying and
monitoring existing guidelines on restructuring (agreed by the EU social
partners in 2003), and a discussion on the way forward;

● 
encouraging adoption of the best practices set
out in the existing guidelines on restructuring; and

● 
devising a common approach to the other points
in the Communication which are of concern to them, more especially training,
mobility, the sectoral dimension and the anticipatory aspect.

In the consultation document, the
Commission stated its firm belief that ‘restructuring must not be synonymous
with social decline and a loss of economic substance. On the contrary,
restructuring can underpin economic and social progress — but only if such measures
are correctly anticipated, and provided firms can manage the necessary change
quickly and effectively, and provided public action helps ensure that the
change is carried out in sound conditions’. It highlighted the following four
dimensions as a focus for the response at Community level:

● 
A need for consistency between the various
policies, if growth and the ensuing restructuring are
to avoid destroying human capital.

● 
A need for a long-term perspective encompassing
the various Community policies. If the economic and social players are to act
effectively, they need to be able to see the way ahead.

● 
A need for participation on the part of all the
stakeholders, first and foremost the social partners.

● 
A need to pay heed to the local dimension — it
is, after all, at local level that anticipating change is most effective.
Looked at from this angle, the European Union’s regional and cohesion policy
must act as a catalyst.

The EU-level social partners have not
concluded a second joint text as a result of this consultation exercise. They
have, however, held a series of seminars throughout EU Member States, to
discuss ways in which to anticipate and manage restructuring (for more details
on this, see chapter 5).

2: PRINCIPLES RESULTING FROM ANALYTICAL
WORK AND STAKEHOLDERS’ VIEWS
2.1: SOURCES: STUDIES, REPORTS, RESTRUCTURING FORA

Aside from the above-mentioned
consultations of the EU-level cross-sector social partners, in recent years, a
range of organisations and groups have analysed in depth the issue of restructuring
and the best way to deal with this phenomenon in an anticipatory and proactive
manner, sometimes with Commission funding. These include:

● 
The Gyllenhammar Report.[219]
In 1997, the European Council invited a high-level expert group to analyse the
implications and economic and social effects of industrial change, and to
consider ways of anticipating and managing them. The Group’s report, Managing
change, issued in 1998, presented a set of recommendations addressed to
political decision-makers, company managers and social partners.

● 
A 2002 report entitled Anticipating and
Managing Change. This suggests a dynamic approach to the social aspects of
corporate restructuring.[220]

● 
The Final Report and other materials of the
TRACE Project[221] in 2006, which examines industrial and economic restructuring and
how trade unions can defend the interests of working men and women facing this
challenge.

● 
The Final Report of the MIRE Project (2007).[222] This project
aimed to examine innovative restructuring processes and looked at how they
could be translated into other contexts. More specifically, the aim was to
benefit from exchanges between five EU Member States: Belgium; France; Germany; Sweden; and the UK.

● 
The Final Report of the AgirE Project (2007),[223] entitled Anticipation
of restructuring in the European Union. This project aimed to examine new
approaches integrating the knowledge acquired over 10 years on restructuring.
It involved practitioners and researchers, who brought their experience and
cross-analyses together to help institutional and social players to deal with
the challenges of restructuring.

● 
The 2008 Impact assessment preceding the launch
of the revision of the European Works Councils Directive,[224] as well as its
2007 preparatory study,[225] both of which analysed the way in which EWCs intervened in
restructuring processes and the impact of EU rules in this field.

● 
A number of Restructuring Forums[226] organised by the European Commission from 2005 to the present day,
which have dealt with the issue of anticipation, preparation and good
management of restructuring in a comprehensive way and covering different
dimensions, such as sectoral issues, regional issues, SMEs, the automotive
sector, and the defence sector). For details, see box 7.2.

● 
The 2009 Checklist on Restructuring Processes,[227] which is based on numerous practical examples of good practices in
the context of anticipating and managing change and restructuring within
different national frameworks, industrial relations systems and economic and
social contexts. It is a synthesis of the main actions
identified during a workshop
organised by DG EMP in Brussels in February 2009 involving over 40 experts on
restructuring from around Europe. More than 600 actions to anticipate and manage restructuring were identified at
this workshop.

● 
The ARENAS project (Anticipating Restructuring
in Enterprises: National Seminars),[228] a European Commission-funded project which organised seminars in
all of the EU Member States, in order to debate issues relating to
restructuring. More information on this project, which ran from 2009 to 2010,
can be found in chapter 5.

Box 7.2: Restructuring Forums organised by the European Commission

Date || Focus of the Forum ||

June 2005 || Inaugural Forum || The main conclusions of this Forum included recognition of the need to anticipate and accompany change, with a view to giving workers affected by restructuring the opportunity to swiftly find new jobs, and the importance of planning coherent policies in order to exploit all possible synergies between the actors.

July 2006 || Sectoral actions in industry || This Forum had three main objectives: to showcase the experience and potential of sectoral social dialogue and of sectoral social partners’ organisations in anticipating change and restructuring; to familiarise them and the other Forum participants with the Commission’s Communication of 5 October 2005 on a new integrated industrial policy, which aims at developing tools to predict and anticipate change and at implementing coordinated actions to reinforce certain sectors; and to discuss the European Union’s financial mechanisms which support anticipation and management of change and restructuring.

December 2006 || How dynamic regions face restructuring, the role of the European Social Fund and the other Structural funds || This Forum was dedicated to the regional dimension of restructuring and the role of the ESF. Although much of the Forum’s focus was on what has been done in the recent past, it was also strongly focused on the future, and in particular on the 2007–13 programming period of the Structural Funds.

June 2007 || Anticipation of change || This Forum was devoted to anticipation of restructuring at various levels. It also served as an event at which the actors involved in the anticipation of restructuring could share experience and best practice and learn from each other.

October 2007 || The challenges of the automotive industry. Towards a European partnership for the anticipation of change. || This Forum was dedicated to the restructuring challenges faced by the automotive industry, in a year when change in the automotive industry was at the top of the industry agenda, following a number of high-profile restructuring cases. One of the main objectives of the event, which was entirely fulfilled, was to promote a ‘European Partnership for the anticipation of change in the automotive industry’ describing the roles and responsibilities of each actor (European Union, governments, companies, trade unions and regions).

November 2007 || Adaptation of SMEs to change || This Forum highlighted the specific challenges that restructuring can pose for SMEs and created a platform for the exchange and discussion of best practices on how to adapt to change. The Forum also addressed questions that are rarely raised from the point of view of entrepreneurs as well as that of the employees.

November 2008 || Anticipating change and restructuring in transnational agreements || The aim of this Forum was to analyse the emerging mechanisms for partnership and anticipation of change that are contained in transnational agreements, the approaches adopted by the groups using these instruments, the views of the actors on the added value and the results achieved, the difficulties encountered in the implementation process, and the role that these mechanisms have among all the measures taken at different levels when restructuring processes are planned and assistance is provided to employees.

November 2008 || Innovative actions of Article 6 of the European Social Fund || The objectives of this Forum were to show the innovative dimension of a range of ESF-funded projects and their transferability potential, but also of diffusing the experiences of successes of these projects and of helping the actors involved in the management of the restructuring within the framework of the new programming of the ESF 2007-2013.

December 2008 || Anticipating change in the defence industry || This Forum brought together the European institutions, governments, social partners, academic experts, regional and local authorities, as well as market development experts, in order to discuss the anticipation of change in the defence industry. The Forum was also an opportunity for the launch of a ‘European Partnership for the Anticipation of Change in the Defence Industry’ aimed at maintaining and strengthening the competitive position of EU defence industries, creating high levels of high-quality jobs and reinforcing the employability of the workers of the sector, a pre-condition for sustainable growth and social cohesion.

June 2009 || The impact of climate change on employment || The purpose of this Forum was to spread awareness of the changes that can be expected as a result of climate change, and the new skills that will be required in the medium term to meet the needs of adjusting to a low-carbon economy. It also provided a platform for employers and trade unions to learn from other organisations that have internalised this challenge and taken positive measures to anticipate change, in addition to disseminating information on practices that have been used to embrace change and come up with innovative solutions, notably using new technology.

November 2009 || Restructuring and the crisis — Building Partnerships for anticipating and managing restructuring in a socially responsible way || The main objectives of this Forum were to promote mutual learning on how to manage restructuring in the context of the crisis, on the basis of the experiences developed so far, and to debate what the EU can further do in order to help the actors to cope with the effects of restructuring in a socially responsible way.

December 2009 || Sectors’ New Skills for New Jobs || The objective of this Forum was to present, promote and discuss the 18 sector-based studies published by the European Commission that look at emerging and future skill needs up to 2020. The Forum also launched a discussion on how to reinforce and promote stronger collaboration at European level in the field of skills anticipation, focusing on the sectoral approach. The Forum served as a platform for the exchange and discussion of good practice and instruments for dealing with skills identification at sector level.

July 2010 || The Impact of Financial Investors on Enterprises || The purpose of this Forum was to spread awareness of the challenges that the increasing importance of these unconventional financial actors poses, and to engage a wide audience throughout the European Union (social partners, representatives of public authorities at different levels and experts) to take stock of their prevalent expectations and concerns about unconventional financial actors.

October 2010 || Anticipating and managing restructuring in a socially responsible way — New partnerships to preserve employment || The main objective of this Forum was to debate with the social partners, the Member States and the EU institutions the way in which the EU, Member States, social partners, companies and workers should face the challenge of corporate restructuring in the context of an economy in deep and quick transformation and with a view to ensure that restructuring takes place in a socially responsible way and benefits to employment. It also presented the main findings of each of the 27 national seminars organised by the Commission in 2009-2010, which analysed and debated the measures and instruments used for anticipating and managing restructuring in the 27 EU Member States (for further details, see chapter 5).

November 2010 || Investing in well-being at work — Addressing psychosocial risks in times of change || The purpose of the Forum was to hear and discuss the latest research findings on the health impact of restructuring, on stress at work, and on the reality of risk assessments at Europe’s workplaces. The Forum also presented new information on the implementation of the European social partners’ framework agreement on work-related stress, and heard high-level presentations on the political framework in Member States.

Based on these studies and analyses, policy
makers have a great deal of evidence on which to base any future actions in the
area of anticipating and managing restructuring. The main issues to emerge from
these studies are discussed below.

3: MAIN ISSUES RELATING TO THE
ANTICIPATION AND MANAGEMENT OF CHANGE

Since the late
1990s, in the context of the changing pace and forms of corporate
restructuring, anticipation has become a crucial issue. New practices from
different actors both inside and outside companies have emerged, showing that
restructuring can be managed more easily and with more success when the social
and regional actors are able to anticipate potential negative effects in the
short term (operational anticipation) and, above all, when they manage to
prepare change in the long term (strategic anticipation).

Operational and strategic anticipation of
change and restructuring is not only a necessary requirement for managing those
processes in a socially responsible way and for cushioning their social impact:
it is also an indispensable pre-condition of economic success and company
competitiveness. A focus on the strategic goals of the company and placing
change within long-term management frameworks (as opposed to decision-making
based on short-term profits) can usefully contribute to the sustainability and
competitiveness of companies. This is also the case for economic sectors,
regions and economies as a whole.

In recent years, and as has been seen
above, the European Commission has launched several initiatives in the field of
anticipating and managing change and restructuring. The European Commission has
also financed numerous studies on this topic and supported the Joint European
Social Partners’ Work Programme which includes an integrated project on
restructuring in the EU27 Member States.[229]

3.1: THE IMPORTANCE OF TIMELY ACTION

The more time the actors have to act before
the announcement of a restructuring event (or after the announcement but before
the implementation of the restructuring), the more space for discussion they
will have to anticipate and manage the restructuring in a responsible way. They
will also be more likely to have time to be able to find solutions to the
resulting economic and occupational problems. The period of time given for
restructuring (especially in a context of acceleration of change) has recently
become a major factor conditioning the ability of the actors to monitor the
situation, to identify particular risks (dependent, for example, on the
particular level of qualifications, age, health, and gender of the workers
involved) and to act in a proactive way. This means that the type of
anticipatory action of each actor strongly depends on the period of time they
have at their disposal before, during or after the announcement.

There are
degrees of predictability in the management of change: it depends where the
time cursor is situated. A high degree of predictability is possible when anticipation
is used as a permanent monitoring process for developing workers’ employability
and sustainable activities of the company. Such an ex ante approach aims
at conceiving and implementing in advance strategies, practices and measures
that contribute to enabling companies and workers to adapt to all internal and
external shocks and transformations. National, regional and sectoral
observatories dealing in a prospective way with the evolution of employment,
skills and careers belong to this category. Early warning mechanisms, such as
observatories that track economic and labour market developments in specific
sectors or regions, and which are then able to highlight actual threats or
dangers to employment in particular regions, sectors or companies, intervene
generally a little later but are still within this early stage of anticipation
that gives time to the actors to build a common representation of future
economic and social developments. Finland has a relatively well-developed
system of early warning mechanisms, including the Government
Foresight Network, which is an inter-ministerial forum for cooperation and
exchange of information in issues relating to the anticipation of future
events. This comprises a systematic and inclusive process involving the collection,
assessment and analysis of information. It also includes the drawing up of
projections for the future in the medium and long term.

Anticipation
can also be designed to manage a restructuring process in the best possible
way, to find alternatives and to limit negative social impact, according to a ‘curative’
or an ex post approach. In this context, tools and procedures are
conceived and used at an early stage to prepare workers, organisations, work
processes and the local labour market for the consequences of a restructuring
event that is already underway. The aim here is to mitigate the impact of
restructuring on the employment paths of workers and on the economic situation
of the region concerned.

In the final stage of restructuring, there
are strategies aimed at managing a temporary crisis situation, by implementing
a range of different tools (for example during the present crisis, short-time
work or reinforcing temporary unemployment schemes or part-time work). The main
idea behind this approach is to find ways to maintain the workforce during the
crisis and then to be ready to restart pre-crisis activities. However, it is
also important to take on board the fact that a crisis can stimulate the need
to accelerate structural adaptations.

It is clear
that the current economic crisis significantly reduces the time available for
anticipatory intervention and the capacity of the social and regional actors to
implement anticipatory solutions. However, even in this period of crisis, time
remains an essential factor for overcoming a crisis situation.

3.2: A MULTI-LEVEL, MULTI-ACTOR ISSUE

Anticipation can be used by the actors
concerned at different levels (European, national, regional sectoral and
company). However, issues surround questions such as: in what way can the
actors be involved in preparing for change in a permanent way (especially
before the announcement of restructuring); the capacities of the actors to
build a shared diagnosis of a restructuring situation and to manage the
situation; and whether there are shared diagnoses and a common perception of
the crisis and its causes.

All actors can
play an active role in anticipating and managing change, as new and innovative
practices show. In a context of multi-actor anticipation, the actors concerned
are to be found both inside and outside the company. A multi-actor approach
also requires strong interconnections between actions at different levels (such
as mobilising corporate strategies, local management, trade unions, public
authorities, regional bodies, observatories, universities, and the European
level). The multiplicity of these interactions, which conditions the role of
the different actors, is a factor of complexity. It also means that some
actions and some policies are more difficult to apply to SMEs.

A key element of any successful strategy of
anticipation and prevention of the negative social impact of restructuring
consists of building a culture and practice of permanent adaptation to change.
This can be achieved by creating and pursuing on a permanent basis the
instruments that will facilitate smoother adaptation and will help
organisations to cope better with crisis situations once they occur. This
includes the development of specific knowledge and expertise on change
management, the development of strategies of crisis management and the creation
of early warning systems. This implies that the strategic dimension should be
integrated into corporate management as opposed to short-term profit or asset
value objectives. For this purpose, the creation within companies of change
managers who could liaise with similar entities at other levels (notably at
regional, national and sectoral level) may be particularly useful.

With regard to
companies, social responsibility for anticipating and managing change concerns
the internal as well as the external responsibility of the companies concerned
(at local, national, or European/international level). For example, it concerns
the involvement of the company in the economic revitalisation of the area hit
by the restructuring, which in turn aims to secure the professional transition
of those workers who have been made redundant.

Companies are at the centre of the
restructuring process. Any efficient action of anticipation and socially
responsible restructuring must start and be conducted mainly within individual
companies. Internal action is, however, frequently insufficient, taken on its
own, to prevent or alleviate the social impact of restructuring. It must
therefore be combined with parallel measures and instruments deployed by other
actors (such as social partner organisations, public authorities and individual
employees) at other levels of governance (local, regional, national, sectoral
and European).

It seems also important to stress the role
that the companies can play concerning the employability, or capacity to adapt,
of their workforce. The development of workers’ competences is crucial for the
success of the company and for the capacity of the workers to manage their
working life.

SMEs are frequently
excluded from most training and support provision and therefore experience
particular difficulties in dealing with organisational, as well as wider
economic, changes (see chapter 2 on training in SMEs). This is clearly an
unfavourable scenario, given the importance of SMEs for jobs and growth in the
EU. One way of addressing this problem would be for the sectoral organisations
and the regional authorities to offer tools and methodologies (eg pooling
resources) to take account of the time, cultural and financial specificities of
SMEs (ie the fact that they do not have the resources, access to credit, formal
internal systems or the staffing levels of larger firms). These interventions
not only help to train and support SME employees, but also give strategic
direction to the business, which is a critical step in the positive management
of change.

From the
employee representatives’ perspective, anticipation is very much linked to
their capacity to exercise in good time their social and economic prerogatives
at different levels (such as the level of the site, company, group of
companies, national and European level). This presupposes an effective and
constructive mode of implementing information, consultation and negotiation
practice at the enterprise and group levels.

Employee representatives at company and
group levels are the main management counterparts during restructuring
processes. They should therefore be involved and participate actively in all
anticipatory measures and permanent mechanisms established by the company,
internally and externally (ie those that are part of internal company processes
and procedures, and those that have been developed by or with the help of
external parties). Representing the entire workforce, they are in a unique position
to work with the change manager, if one is present, promote smooth change and
restructuring and ensure that employees’ interests are safeguarded. If there is
no change manager, the company needs to ensure that this role is covered by
managers internally.

From the employers’ and employer
representatives’ point of view, anticipation of restructuring can be part of
good business planning and a need to anticipate demand for goods and services.
Regular meetings with employee representatives can form part of this process,
giving the parties an opportunity to discuss likely future trends.

Employers are the actors that usually
initiate and consequently manage the process of restructuring. They are bound
by national legislation concerning the process, particularly in the area of
informing and consulting employee representatives. In particular, consultation
should be carried out in good time to allow discussion of the options available
to mitigate the impact of any planned redundancies. Where a relationship of trust
has been built up with employee representatives, meaningful consultation will
be able to take place.

From the
individual worker’s viewpoint, anticipation relies on their capacity as an
individual to choose and to use a training programme in order to improve their
employability and to facilitate a transition in their career and working life.
The intensity of the difficulties met by workers who have been made redundant
varies according to their level of qualification, with the risk being higher,
the lower the level of qualification. With regard to employability, it is
evident that the individual employee cannot be regarded as an isolated entity:
other actors, such as the employer, employee representatives, the social
partners and the public authorities have a crucial role to play in supporting,
motivating and encouraging individual employees.

Employees are, together
with companies, the main actor of the restructuring process — and at the same
time, very often, the main victims of restructuring. Without prejudice to the
specific responsibilities of the other actors in creating the whole set of
conditions that will give employees a real opportunity to find their way
through those processes, the success of any effort to minimise the social cost
of restructuring depends, as far as employees are concerned, on:

● 
Their own initiative, dynamism and positive
attitude at all times and not only when restructuring or the loss of the job is
a concrete possibility.

● 
Their capacity to collect the information that
will help them to understand the situation (if possible in advance of
particular restructuring events) and to use adaptation tools such as reskilling
and upskilling and redeployment where possible.

● 
Their proximity to their representatives at all
levels.

● 
Their capacity to be employable and mobile and
to make transitions to alternative employment, possibly in different sectors.

● 
The frameworks and actions that are in place in
order to support employees in strengthening their employability, involving
actions such as career advice, training, recognition of competences and
acquisition of transferable skills.

The opportunities offered to employees in
term of training and support may differ significantly according to how an
employee is categorised — ie whether they are a temporary agency worker, or a
temporary worker within the company — and also the size of the company.

For the social partners, collective
bargaining and other forms of bi- and tripartite bargaining and dialogue are
among the most important tools for anticipating and managing change at
enterprise, sectoral, national and European/international levels. Social
partners also play a crucial role with regard to the social perception of a
given restructuring situation.

Social partners represent employers and
workers at cross-sector and sector level. They play a key role in anticipating
and managing change. Their capacity to intervene at all levels through social
dialogue and collective bargaining mechanisms places them in a privileged
position to coordinate actions aimed at stimulating and developing social tools
for anticipating and managing restructuring. They are important actors in the
creation of social innovation, economic and social progress, solidarity, social
inclusion and good-quality employment practices at all levels. The creation of
guarantee, training and job security funds by collective agreement is a
particularly innovative practice that has been developed in recent years.

National and
regional authorities can also develop specific actions supporting employees and
companies in the field of anticipation of change and restructuring. Regional
authorities have a specific role in coordinating all actors and offering rapid
solutions to the consequences of a restructuring event. For examples of
regional anticipation and management of change, see box 7.3.

Although the main actors involved in
restructuring processes are companies, their employees, and social partners;
public authorities also have an important role to play. They shape the relevant
legal framework, define and pursue employment policy goals, manage important
forecasting tools, possess the institutional capacity to help employees
(through means such as education and training institutions and job centres) and
manage substantial financial resources that can be allocated to meeting the
needs of restructuring companies and their employees.

Other government-led tools are mediation,
forecasting tools and incentive schemes. A major contribution from governments
consists in establishing or supporting the creation of risk mutualisation
mechanisms (guarantee, training and job security funds). This should be seen in
the context of flexicurity policies — for more information on flexicurity and
restructuring, see chapter 5.

Alongside national governments, regional
authorities have a major role to play in the coordination of the work of
stakeholders who intervene in each region through restructuring operations or
are engaged in the processes of anticipation.

Another task that falls under the
responsibility of regional authorities relates to the promotion of regional
development and economic and social reconversion of regions likely to be, or
already affected by, severe restructuring. It seems important in that regard
that regions create a regional task force (a body involving all stakeholders
interested in employment in the region) and train change managers who will
coordinate the economic, social and institutional actors around those two
objectives.

The efficiency
of anticipation processes developed by all of these actors differs according to
the time they have for acting in a strategic and effective way. An early
diagnosis contributes to effective anticipation, while a late (or mistaken)
diagnosis hinders the possibilities of both strategic and operational anticipation.
Time is indeed an essential factor.

Box 7.3:
The regional experience of anticipation and management of change

At a preparatory workshop for the Restructuring
Forum that was held on 23 September 2009, participants presented and discussed
a range of experiences of both the anticipation and the management of
restructuring and change at regional (or more properly territorial, as the
geographical scope is not always that of an administrative region) level. The
experiences were those of:

● Finland’s public Regional Employment and
Economic Development (TE) Centres and regional foresight services, which engage
in ongoing action such as mapping and planning of employment and skills needs,
and are involved in the ‘Finnish action model’ for responding to abrupt structural
change. When a region is classified as undergoing such change, the appropriate
ministries and TE Centres, in partnership with the regional council and local
municipalities, draw up a plan to tackle the crisis.

● The Asturias region of northern Spain, an area traditionally
dominated by heavy industry and mining, which has undergone a major process of
industrial reconversion since the 1980s. Since 2000, this process of moving
from industrial to services employment has increasingly been managed by regional
authorities and other actors, with an important role for higher education
institutions and public funding.

● The northern region of Portugal (Norte), where a multi-actor ‘bottom-up’
regional competitiveness pact was launched in 2007, covering areas such as
innovation, internationalisation, employment, mobility, social inclusion and
support for enterprises. The region is highly reliant on industry, especially
textiles, and the pact focuses on innovating the industrial base and making it
more hi-tech. This includes linking sectors through ‘competitiveness poles’,
retraining and upskilling (eg in ICT skills), and attracting young people into
industry.

● Göteborg in Sweden, where a
public-private collaborative platform, Business Region Göteborg, has since 2000
sought to support growth in the region by providing a good investment climate
and developing networks of growing companies. It has aimed to redirect the
economy from traditional industries to hi-tech sectors, stimulate company
networks and clusters, promote foreign investment and enhance collaboration
between universities, business and local authorities. The region is now
considered one of the most knowledge-intensive in Europe.

● Genk in Flanders, Belgium, which has faced successive waves of industrial change. In the 1980s and 1990s, innovative
local development programmes tackled high youth unemployment, and then the
closure of local coal mines was addressed, with EU support, through an
integrated multi-actor programme of industrial renewal and training/retraining.

● The Arve valley, in the Haute-Savoie département of eastern
France, where a ‘competitiveness pole’ has been established to promote
excellence, competitiveness and innovation among the area’s large number of
small-scale mechanical engineering companies, and anticipate future changes
affecting them. The pole (unusually for such schemes in France) includes a human resources programme, aimed at promoting modern HR management, based on the
forward-looking management of employment and skills, especially among SMEs.

● Grenoble in south-east France, where the
MATRI project (funded by the EU) seeks to bring together stakeholders —
including large companies, business groups, local authorities, universities and
research bodies, and trade unions — to develop ways of anticipating future
needs for individual and collective competences in order to strengthen local
actors’ ability to develop new products and services. This includes foresight
studies, a job observatory, action plans overseen by standing groups, rapid design
of tailored training/tutoring and ‘job roadmaps’, local mobility poles
involving large and small companies, and local change/competence managers.

● Veneto in eastern Italy, where the regional authorities (as in the case across Italy) are responsible for employment
and training. For example, they draw up annual regional employment plans,
operate a regional labour market observatory and information system, and engage
in tripartite dialogue with the social partners. Key themes for the region
include demography and globalisation, and the authorities conduct projects in
areas such as human capital development in SMEs, lifelong learning to
anticipate change, the creation of cluster districts and the operation of a
skills stock exchange. In the current crisis, the region has adapted these
various instruments and reached a framework agreement with the social partners,
involving increased resources and support for companies and workers. A regional
taskforce has been established, along with a public-private technical
assistance structure.

CHAPTER 8: CONCLUSIONS

This report has examined a wide range of
issues related to restructuring, the impact that it has on sectors,
organisations and workers, and the likely impacts of continuing restructuring.
Crucial factors include how to best anticipate restructuring, and the best way
to manage restructuring once a restructuring course has been decided, including
the use of EU funds.

One of the main points of focus of the
report this year has, inevitably, been the restructuring that has taken place
as a result of the economic crisis of the past two years. There is a
significant amount of information concerning the impact that the crisis has had
on the EU labour market and the extent to which it has contributed to higher
levels of restructuring across the EU. The EU institutions have a range of
measures and tools designed to help organisations undergoing restructuring,
largely in the form of funds, and these funds have been made use of by
organisations that have implemented restructuring programmes over the past two
years in the context of the crisis.

Although the recent crisis has thrown the
issue of how to manage restructuring into sharp relief, it should not be
forgotten that restructuring is a part of everyday business life with which
organisations need to engage if they are to remain competitive in an
increasingly globalised market. Anticipating and managing restructuring will
therefore continue to be issues that need to be addressed at EU level, at the
level of EU Member States, at sub-national level and at the level of the
individual organisations undergoing restructuring. Once the recession is over
and the European economy begins to grow once more, however, the shape and focus
of the economy is likely to continue to evolve, due to the future challenges
facing the EU in areas such as continuing industrial restructuring and industry
rebalancing, the emerging green economy and what this will mean for all
sectors, but particularly transport and energy, and demographic challenges such
as the ageing population.

More than ever, there is a need to ensure
that skills and competences are kept up to date with all of these trends, not
just in an environment of restructuring, but throughout the length of
individuals’ careers. There is therefore a significant focus on skills and
competence development in this report, focusing on the issues of lifelong
learning and the types of skills development that will be needed to meet the
future challenges faced by the European economy. Going forward into the next
decade, the European Commission has highlighted skills and competence
development as a key feature for its Europe 2020 strategy.

The European Commission has initiated a
range of actions over the past 15 years that have had the aim of trying to help
organisations and stakeholders to manage restructuring in a way that has the
least possible negative impact on workers, their families and the surrounding
community. These include two consultations to the EU-level social partners on
the issue of managing change. There is now a will at EU level to further and to
try to devise some kind of over-arching framework for restructuring at EU level:
in its Communication on industrial policy, issued in October 2010, the
Commission stated that ‘updated orientations on restructuring can be very
useful in reinforcing the capacity of businesses and workforce to adapt to a
fast-changing economic environment’.[230]

The European Commission has also, over the
past two decades, funded a wide range of research, in the form of studies or
analyses concerning the identification of good practices, measures or actions
to better anticipate the restructuring and manage it in a responsible way.
There is a significant degree of convergence between the good practices and actions
highlighted in these studies, enabling the following key messages to be
identified, as set out below.

1: TEN TENTATIVE LESSONS ON THE ANTICIPATION AND MANAGEMENT OF
RESTRUCTURING

An analysis of the above reports and
studies on the subject of restructuring and labour market transitions gives
rise to a number of key messages relating to the anticipation and management of
restructuring. These tentative conclusions are contained in the table 8.1 below,
which shows each lesson learned and the documentary sources for this lesson,
based on the numbers given to the studies set out below the table.

Table 8.1: Ten key tentative lessons on
the anticipation and management of restructuring

Lesson || Documentary sources

Measures to anticipate and manage restructuring are influenced by factors such as national culture, national industrial relations and employment systems, national welfare and social security systems and national skills and training strategies. Nevertheless, there are distinct and clear possibilities for the translation of initiatives or elements of initiatives across borders, adapting them to different national contexts. || There is a significant variety of country-specific backgrounds and experiences, depending very much on the respective traditions and frameworks of welfare state rationales and industrial relations (1). Many tools and measures have been put into place by Member States in the context of the crisis (2). Career choice and career development are extremely diverse around the EU (4). There are persisting national differences that make translation of good practices from one country to another difficult. Although it is probably not possible to transfer whole tools, there is a case for looking at the functional equivalents of tools in different countries. For example, many mechanisms are composed of basic tools or measures which are often similar across Europe, such as individual profiling, skills assessment, personal action plans, job clubs, training for job search, individual or group coaching during the search process, support for business creation and training offers. It is important to focus on what is done instead of who is doing it and how (7). Member States differ greatly in terms of the types of measures that they adopt to anticipate and manage restructuring. However, there is the potential for the transfer of experiences from Member States with more developed toolboxes for restructuring (8). The exporting of entire systems of system-dependent processes should be discouraged. However, there are micro examples of practice that can be considered for adoption in the context of differing national environments and systems of employee relations (10). The quality and maturity of enterprises’ arrangements to support workers are affected by the variable starting points for different countries (12).

Active social partner involvement is crucial in many of the schemes available to anticipate and manage restructuring. || Many of the schemes in existence would not be able to function without the involvement of the social partners at all levels (1). Collective bargaining and other forms of bi- and tripartite bargaining, negotiation and dialogue are one of the most important tools of anticipating and managing changes at all levels (6). Social dialogue is a key tool in the anticipation and management of restructuring (8). The active engagement of the social partners in the anticipation and management of change at all levels improved performance in the design of change management architecture and in restructuring practice (10). The involvement of social partners in the design and implementation of flexicurity policies through social dialogue and collective bargaining is of crucial importance (12).

A wide range of actors participating in measures is a strengthening factor. Partnerships can provide a wide range of expertise and human resources to support organisations that are trying to manage restructuring. This can also limit the effects of restructuring on the wider region, community and employees’ families. || A multi-actor approach is invaluable, in terms of career guidance and competence development support (4). A range of knowledgeable partners are needed in order to promote healthier restructuring (5). The multi-actor approach with strong interconnections between actions at different levels is extremely important (6). Multi-actor collaboration is of importance through all the stages of restructuring, and partnerships at regional, national and sectoral level are essential ingredients for dealing with the issues and concerns that are related to restructuring (9).

SMEs have specific challenges when engaging with the anticipation and management of restructuring in a socially responsible way. They often lack the resources, both financial and in terms of personnel, to go much beyond statutory compliance. || Although SMEs cannot develop socially responsible practices on their own, they can be supported in this task by publicly funded strategic arrangements and regional partnerships. There may therefore be a case for targeted public support for SMEs in terms of career progression and skills development (4). SMEs do not have the same internal HR resources as larger companies and often lack the necessary knowledge about external support offers that might facilitate and ease the process of organisational restructuring. External collaborations are very useful for organisations, and particularly SMEs (5). There are a range of tools that can be used by SMEs to help them to anticipate and manage restructuring. These include outplacement, a range of training offers, local and regional employment pacts that cover SMEs, and schemes that validate skills and competences (7). There is a gap between large companies and SMEs regarding anticipation, social dialogue practices and the support given to workers when made redundant. Many restructuring models are not appropriate for smaller companies and there is therefore a lack of support for SMEs (8). It is often said that small and micro enterprises are the engines of economic growth and act as shock absorbers at times of change, but it is clear that the role of small and micro enterprises in the economy and the issues they face in restructuring are more complex (10). There should be fair allocation of resources regarding short-time and temporary lay-off schemes, with specific attention paid to the needs of SMEs (10).

Anticipation of restructuring is a powerful tool that can limit the negative effects of restructuring. However, there needs to be a greater emphasis on anticipation and preparation of restructuring. || Anticipation of likely future needs for career guidance is a key issue in supporting socially responsible practice (4). There needs to be more health monitoring and prevention in a coordinated way (5). True anticipation initiatives were only to be found in a limited number of EU Member States, and their effectiveness depends on timeliness and good-quality data (8). Actions that focused on the ‘before’ stage of restructuring have entailed a more proactive approach and have been able to minimise the negative social impacts of restructuring (9). Anticipation of change is crucial if sudden and unexpected workforce shocks are to be avoided and restructuring take place against timescales that facilitate both organisational change objectives and the delivery of acceptable solutions for affected workers (10).

European funds play an important role in some of the newer EU Member States and in southern Europe. || These funds play a vital role in funding transition schemes and are therefore of vital and continuing importance to these countries, some of which are still in the process of shifting the focus of their economies away from over-reliance on traditional heavy industry (1). EU funding is relied on by some of the newer EU Member States in the development of measures to anticipate and manage restructuring (8).

While redundancy should always be a last resort, active measures should take place over passive measures. || One of the key long-term strategies should be ensuring the sustainability of labour supply. This implies, for example, that early retirement not be readily facilitated (3). Severance payments, while attractive to individual workers, are not a long-term measure. When designing a severance package, elements such as retraining and competence development should be included. Similarly, there should not be any over-reliance on early retirement (8).

Training is a crucial and core issue when considering the anticipation and management of restructuring. || A more general access to support for training is desirable, with a focus on skills and competences that will be needed in the future. Such a future skills orientation might require occupational change and substantial retraining (3). Career guidance and continuing training are vital components of socially responsible restructuring (4). Training, skilling and reskilling are seen as key to anticipating or accompanying restructuring in order to avoid unemployment or to facilitate a rapid return to the labour market (8). Training and other human capital measures, such as mentoring, are key tools in the management of restructuring, allowing individuals to develop their skills, and deal with their own personal employment situation (9). The social partners in every participating country highlighted current skills mismatches and/or the future skills needs to support the changing economy as key issues for the social partners and for government. In the longer term, these issues have to be addressed through more, and more effective, investment in education and training at all levels. In the shorter term the issues of lifelong learning and migrant workers need to be tackled (10).

The impact of restructuring on the health of the individuals concerned should be monitored closely, and negative effects, such as psychosocial impacts but also physical impacts, should be mitigated as much as possible. This concerns those who are made redundant, those overseeing the redundancies (line managers) and the ‘survivors’ of restructuring. || Healthier restructuring needs conscious stakeholders and leaders and a proactive health policy, with collaboration from both within and outside the organisation. It is clear that organisational change is always a potential stress factor. If employee stress levels can be monitored, specific preventative health measures can be put into place to try to avoid or mitigate the negative impact of restructuring on employees’ health (5).

Although a range of innovative policies and practices have been highlighted by all these studies, at national, regional, sectoral and organisational level, there is a general lack of coordination and coherence in terms of the implementation of socially responsible restructuring. For example, in terms of anticipation, it is vital that the information collected by early warning or forecasting systems is passed on in a timely fashion to the relevant stakeholders in order to ensure that it is put to full use. In the management of restructuring, all stakeholders, such as employees, employers, employee representatives, local authorities and training providers need to work together to ensure that employees facing job loss are provided with career guidance, appropriate training and competence development and outplacement support. More emphasis therefore needs to be placed on coordination of measures. || Good coordination from all the actors is needed in implementing career guidance and skills development policies (4). The availability of measures to support the transfer of redundant workers to new jobs is limited and uneven across Member States (8).

SOURCES AND FURTHER READING

● (1) Organising transitions in response to restructuring. Study on
instruments and schemes of job and professional transition and re-conversion at
national, sectoral or regional level in the EU. Eckhard Voss. Wilke, Maack
and Partner. In collaboration with Alan Wild, Valeria Pulignano, Ann
Kwiatkiewicz and Nicolas Farvaque.

● 
This study is a review of mechanisms,
programmes, schemes and funds of support for workers affected by restructuring,
which have been set up in parallel or to complement mechanisms provided by
public employment services. The focus of the study is on transitions and
professional transfers from one job or profession to another, rather than on
maintaining employment by means such as short-time working. This study found
that there exists a wide range of mechanisms to support professional transition
and that these systems are constantly changing — only a very few mechanisms
remain constant over time.

● (2) Recovering from the crisis. 27 ways of tackling the
employment challenge. European Commission. 2009.

● 
This is a review of ways in which each of the 27
EU Member States have tried to increase or maintain employment levels, giving
one example from each Member State.

● (3) Restructuring in recession — ERM Report 2009. European
Foundation for the Improvement of Living and Working Conditions.

● 
This report examines the ways in which companies
around the EU have taken initiative to main employment, largely by means of
reducing working hours but also by other means, including wage cuts.

● (4) Socially responsible restructuring. Effective strategies for
supporting redundant workers. Cedefop working paper No 7. 2010.

● 
This report provides evidence of the
contribution of career guidance and continuing training in helping to support
redundant workers.

● (5) Health in Restructuring. Innovative Approaches and Policy
Recommendations (HIRES). European Expert Group on Health in Restructuring.
Thomas Kieselbach. Rainer Hampp Verlag, 2009.

● 
This report focuses on the health dimension of
restructuring, examining the available data for monitoring the forms and
effects of restructuring, looking at the effects of restructuring on individual
health and organisational performance, examining which EU policies might best
guide restructuring to reduce its negative health effects, and looking at how
the different groups of actors can best cooperate to maintain organisational,
employee and community well-being.

● (6) Checklist on Restructuring Processes. European
Commission, February 2009.

● 
This checklist examines the issues that are
relevant for each of the actors involved in restructuring: companies; employee
representatives; individual workers; social partners, including sectoral
organisations; national authorities; and regional authorities. It states that
all actors can play an active role in anticipating and managing change and sets
out the key areas of focus and the challenges for each of these actors.

● (7) European Restructuring Toolbox. European Commission.
Progress project VS/2009/0319. January 2010.

● 
This toolbox consists of a users’ manual, which
contains a methods of how to learn from each other in terms of anticipating and
managing restructuring. It also contains more than 60 tools that have already
been implemented in countries, regions, local labour markets and companies. The
users’ manual describes how to use these tools.

● (8) 27 national Seminars Anticipating and Managing Restructuring.
EU Synthesis Report. September 2010.

● 
This is the final report of a large EU-wide
project based on the organisation of national seminars in each of the 27 EU
Member States, focusing on best practices in terms of anticipating and managing
restructuring.

● (9) Toolkits for restructuring based on the innovative actions of
European Social Fund Article 6 projects. DG Employment, Social Affairs and Inclusion.
GHK. December 2009.

● 
This is a practical toolkit intended to help
actors to deal with restructuring. It presents a range of actions and success
factors for six types of actor in the three main stages of restructuring.

● (10) Improving the anticipation and management of restructuring ...
adding value through social partner engagement. Aritake-Wild. January 2010.

● 
This report was commissioned by the European
social partner organisations and looks specifically and exclusively at the role
of the social partners at the national, sectoral, regional and enterprise
levels in economic restructuring.

● 
(11) Preparatory study for an impact
assessment of a European Code of Conduct on Restructuring. Interim report, GHK, September 2010.

● 
The purpose of this report is to examine current
company practices in restructuring situations, to ascertain the costs and
benefits of introducing European level regulations in this area (either through
a Directive or a Commission Recommendation addressed at Member States), and to
establish the potential impact on non-binding policy options, ie would
companies follow the principles if they are not obliged to do so?

● (12) ERM report 2010. Short-time working and temporary lay-off as
flexicurity instruments. European Foundation for the Improvement of Living
and Working Conditions.

● 
This study looks at the incidence of short-time
working across the EU during the current crisis, in addition to temporary
lay-offs, within the framework of flexicurity.

● (13) Restructuring work and employment in Europe. Managing change
in an era of globalisation. Bernard Gazier and Frédéric Bruggeman (eds).
Edward Elgar publishing, 2008.

● (14) Building anticipation of restructuring in Europe. Marie-Ange Moreau (ed) in collaboration with Serafino Negrelli and
Philippe Pochet. Peter Lang 2009.

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Eurostat: European business — Facts
and figures, 2009 edition.

(http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/portal/page/portal/product_details/publication?p_product_code=KS-BW-09-001/EN/KS-BW-09-00
l-EN.PDF)

GHK (2009), The
Impacts of Climate Change on European Employment and Skills in the Short to
Medium-Term: A Review of the Literature. Company Case Studies (Volume 1)).
(http://ec.europa.eu/social/main.jsp?catId=103&langId=en&eventsId=172&furtherEvents=yes)

KPMG (2008)),
Risk Preparedness Framework: Climate Changes Your Business.
(http://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/Documents/Climate-changes-your-business.pdf)

Notteboom, T. and Rodrigue J.-P., The
corporate geography of global container terminal operators.

(http://people.hofstra.edu/jean-paul_rodrigue/downloads/2010 %20IAME%20-%20Notteboom-Rodrigue-final.pdf)

UNEP/ILO (2009)), Green Jobs: Towards
decent work in a sustainable, low-carbon world.

(http://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/---webdev/documents/publication/wcms_098487.pdf)

Waddell and Burton (2006), Is work good for your health and well-being?
(http://www.dwp.gov.uk/docs/hwwb-is-work-good-for-you.pdf)

Chapter 7

Alpha
Consulting, Anticipating and Managing Change. A dynamic approach to the
social aspects of corporate restructuring. (http://www.social-law.net/article.php3?id_article=417)

Aritake-Wild,
Improving the anticipation and management of restructuring ... adding
value through social partner engagement. January 2010.

European
Commission Communication, An Agendaagenda for New Skillsnew skills and
Jobsjobs. (http://ec.europa.eu/social/main.jsp?langId=en&catId=958)

European Commission Communication on
Restructuring and Employment (, COM(2005) 120). (http://eur‑-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2005:0120:FIN:EN:PDF)

European
Commission first consultation of the Community cross-industry and sectoral
social partners on anticipating and managing change, Anticipating and
managing change: a dynamic approach to the social aspects of corporate
restructuring. (http://ec.europa.eu/social/BlobServlet?docId=101&langId=en)

EU social
partners’ draft text, Orientations for reference in managing change and its
social consequences. (http://ec.europa.eu/social/BlobServlet?docId=2750&langId=en)

EU social
partners, Framework of actions for the lifelong development of competencies
and qualifications. (http://ec.europa.eu/employment_social/dsw/public/actRetrieveText.do?id=10421)

High -level group on economic and
social implications of industrial change –, Final Report.
(http://ec.europa.eu/employment_social/soc-dial/csr/gyllen_en.pdf)

[1] Directive 2005/36/EC
of the European Parliament and of the Council of 7 September 2005 on the
recognition of professional qualifications, OJ L 255/22, 30.09.2005.

[2]    Indeed, ERM is to some degree anticipatory in that it records
announcements of job losses; these announcements are often only one stage in a
multi-step process in which factors such as social dialogue and negotiation
play a role in affecting the ultimate employment outcomes.

[3]    The source for these cases is not the ERM itself. They were
identified in desk research for the ERM annual report 2009 (Eurofound 2009).

[4]    Though note that ERM only began recording announced job creation
cases towards the end of 2003.

[5]    Excluding cross-national EU or World cases (to avoid double
counting).

[6]    ERM records numbers of workers employed in the units affected by
the individual restructuring event. While this bears no necessary relationship
to either firm-level or establishment-level employment, we use it as a proxy of
both here in the absence of other data.

[7]    See also Mandl, Storrie, Bober 2009.

[8]    ACEA 2009.

[9]    Council of the European Union, Joint Employment Report 2008/9 – ‘To
sustain progress, it is essential to avoid using early retirement schemes to
regulate supply as in past downturns’.

[10]   See for example the Polish government’s recent proposed reform of
early retirement provisions for certain strenuous occupations, http://www.eurofound.europa.eu/eiro/2008/11/articles/pl0811019i.htm.

[11]  Though there may be counter examples at firm level; Group
Michelin in June 2009 announced the offer of early retirement benefits aimed
primarily at those within five years of retirement with the aim of creating
vacant positions to be filled by the 500 new hires Michelin expects to make
annually.

[12] Carley, M., Industrial
relations developments in Europe, 2008, available online at
http://www.eurofound.europa.eu/eiro/studies/tn0903029s/tn0903029s.htm.

[13] Dobbins, T., Emergency
budget includes public service pay review and early retirement, available
online at

http://www.eurofound.europa.eu/eiro/2009/04/articles/ie0904019i.htm    .

[14] Mandl,
I./Salvatore, L., Tackling the recession: Employment-related public
initiatives in the EU Member

States and
Norway, Comparative study
of the European Foundation for the Improvement of Living and

Working
Conditions, 2009, available online at

http://www.eurofound.europa.eu/emcc/erm/studies/tn0907020s/tn0907020s.htm.

[15]   Though in the case of Hellenic Petroleum (EL) early retirement
was offered to workers as young as 47-48.

[16]Financial Times, BBVA offers staff five
years’ leave, 3 June 2009, available online at http://ftalphaville.ft.com/blog/2009/06/03/56539/bbva-offers-staff-five-years-leave/.

[17] British Airways, Thousands Of Staff
Opt For Pay Cuts, News Release 25 June 2009b, available online at https://www.britishairways.com/travel/bapress/public/en_gb.

[18] Dettmer, M., German
employees exchange wage cuts for equity. A share of future profits, spiegel
online, 2009, available online at:  http://www.spiegel.de/international/business/0,1518,640304,00.html.

[19]   See the Commission Communications: ‘From Financial crisis to
recovery: A European framework for action’, COM(2008) 706, and ‘A European
Economic Recovery Plan’, COM(2008) 800.

[20]   See: March 2009 Commission Communication for the Spring European
Council ‘Driving European recovery’, COM(2009) 114.

[21]   For an extensive analysis on labour market transitions during the
crisis, see: Arpaia, A. and N. Curci, ‘EU labour market behaviour during the
Great Recession’, European Commission (DG ECFIN), European Economy, Economic
Paper No 405, June 2010.

[22]   Detailed analysis on STW schemes during the crisis can be found
in Arpaia, A., N. Curci, E. Meyermans, J. Peschner and F. Pierini, ‘Short-time
working arrangements as response to cyclical fluctuations’, European Commission
(DG ECFIN), European Economy, Occasional Paper No 64, June 2010. A joint paper,
prepared in collaboration by Directorate-General for Economic and Financial
Affairs and Directorate-General for Employment, Social Affairs and Inclusion. http://ec.europa.eu/economy_finance/publications/occasional_paper/2010/pdf/ocp64_en.pdf.

[23]   ECOFIN Council Conclusions on exit strategies for crisis-related
measures in the labour and product markets, of 16 March 2010.

[24]   Commission Communication ‘Europe 2020 — A strategy for smart,
sustainable and inclusive growth’, COM(2010) 2020.

[25]   Short-time working arrangements as a response to cyclical
fluctuations. Occasional paper 64, June 2010.
http://ec.europa.eu/economy_finance/publications/occasional_paper/2010/pdf/ocp64_en.pdf.

[26]   In Germany, short-time working accounted for only 25 % of
the total reduction in average hours from 2008 to 2009, while reductions in the
volume of paid over-time work and debiting working-time accounts were both
responsible for a 20 % reduction in hours (other leave covered by sick
leave etc.): Bach, H.-U. and Spitznagel, E., 2009, ‘Kurzarbeit:
Betriebe zahlen mit — und haben was davon‘, Institut für Arbeitsmarkt- und
Berufsforschung, IAB Kurzbericht 17/2009:

http://doku.iab.de/kurzber/2009/kb1709.pdf.

[27]   Cassa integrazione guadagni.

[28]   Employment in Europe 2010: http://ec.europa.eu/social/main.jsp?catId=738&langId=en&pubId=593.

[29]   This is published by unit ENTR/B2 — Industrial competitiveness
policy: http://ec.europa.eu/enterprise/policies/industrial‑competitiveness/documents/index_en.htm#monthly_notes.

[30]   ECORYS, Measuring and Benchmarking the Structural Adjustment
Performance of EU industry, May 2009
http://ec.europa.eu/enterprise/newsroom/cf/_getdocument.cfm?doc_id=5328.

[31]   CCMI Opinion on the European aviation relief programme: http://eescopinions.eesc.europa.eu/EESCopinionDocument.aspx?identifier=ces\ccmi\ccmi071\ces1944-2009_ac.doc&language=EN.

[32]   CCMI opinion on the European shipbuilding industry: dealing with
the current crisis: http://eescopinions.eesc.europa.eu/EESCopinionDocument.aspx?identifier=ces\ccmi\ccmi069\ces644-2010_ac.doc&language=EN.

[33]   ‘General Motors announces Europe-wide restructuring plans’, May
2010 http://www.eurofound.europa.eu/eiro/2010/02/articles/eu1002029i.htm.

[34]       Temporary Community framework for State aid
measures to support access to finance in the current           financial and
economic crisis (2009/C16/01):

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2009:016:0001:0009:EN:PDF.

[35]   Factories of the future public/private partnership initiative:
http://ec.europa.eu/research/industrial_technologies/factories-of-the-future_en.html.

[36]   Green Cars Initiative:
http://ec.europa.eu/research/transport/info/green_cars_initiative_en.html.

[37]   A European strategy on clean and energy efficient vehicles, COM(2010)
0186: http://www.ipex.eu/ipex/cms/home/Documents/doc_COM20100186FIN.

[38]  The Cohesion Policy is one of the main
instruments supporting investments in growth and jobs. "The Cohesion
Policy: Responding to the economic crisis", is a review of the
implementation of cohesion policy measures adopted in support of the European
Economic Recovery Plan SEC(2010) 1291 final.

[39]   Recommendation on the establishment of the European Qualifications
Framework for lifelong learning (2008/C 111/01): http://eur‑lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2008:111:0001:0007:EN:PDF.

[40]   European guidelines for validating non-formal and informal
learning. Cedefop, 2009: http://www.cedefop.europa.eu/EN/Files/4054_en.pdf.

[41]   Resolution of the Council and of the representatives of the
Member States meeting within the Council of 28 May 2004 on Strengthening
Policies, Systems and Practices in the field of Guidance throughout life in
Europe.

[42]   Resolution
of the Council and of the Representatives of the Governments of the Member
States, meeting within the Council of 21 November 2008 on better integrating
lifelong guidance into lifelong learning strategies.

[43]   Career Guidance. A Handbook for Policy Makers. The European
Commission. OECD. OECD Publishing, December 2004. ISBN: 9789264015210.

[44]   Commission Communication ‘Europe 2020 — A strategy for smart,
sustainable and inclusive growth’, COM(2010) 2020.

[45]   The European Commission, DG Employment, Social Affairs and
Inclusion financed a study on ‘Transferable skills across economic sectors —
Role and importance for employment at European level’ in order to identify
which skills are transferable across sectors, groups of sectors and
occupations, currently and during the 10 next years, which are the instruments
and methods to be used for a better mobility of the workers through the
development of transferable competences and which is the role of the main
actors in this field. This article is based on the results of this study. http://ec.europa.eu/social/main.jsp?catId=101&langId=en&furtherPubs=yes

[46]   New Skills for New Jobs: anticipating and matching labour market
and skills needs. COM(2008) 868 final:
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2008:0868:FIN:EN:PDF.

[47]   New Skills for New Jobs: Action Now. A report by the Expert Group
on New Skills for New Jobs prepared for the European Commission. February 2010.
http://ec.europa.eu/social/BlobServlet?docId=4508&langId=en.

[48]   Europe 2020 — A European strategy for smart, sustainable and
inclusive growth. COM(2010) 2020.

[49]   Youth on the Move. COM(2010) 477 final:
http://ec.europa.eu/education/yom/com_en.pdf.

[50]   For further details, see
http://ec.europa.eu/social/main.jsp?catId=784&langId=en.

[51]   https://ec.europa.eu/employment_social/anticipedia/document/show.do?id=2945.

[52]   For a detailed description of the ISCO classifications see: http://www.ilo.org/public/english/bureau/stat/isco/isco88/major.htm.

[53]   http://www.walqing.eu (FP7,
2010-2012) — Walqing focuses on work in growing jobs in Europe with problematic
working conditions, precarious employment, and/or lack of social integration.
It specifically addresses the representation of vulnerable groups in these jobs
such as migrant and ethnic minority workers, some groups of women and younger
and older workers.

[54]   Walqing working paper 2010.1, Structural growth of employment
in Europe Balancing Absolute and Relative Trends, by Sem Vandekerckhove,
Bart Capéau and Monique Ramioul of HIVA-K.U.Leuven.

[55]   New Skills for New Jobs COM(2008) 868 final: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2008:0868:FIN:EN:PDF.

[56]   A Shared Commitment for Employment COM(2009) 257 final:
http://register.consilium.europa.eu/pdf/en/09/st10/st10628.en09.pdf.

[57]   Expert Group on New Skills for New Jobs (2010), New Skills for
New Jobs: Action Now, European Commission,
http://ec.europa.eu/social/main.jsp?catId=568&langId=en.

[58]   An agenda for new skills and jobs: A European contribution
towards full employment COM(2010) 682:
ec.europa.eu/social/BlobServlet?docId=6328&langId=en.

[59]   Sector Councils on Employment and Skills at EU level — A study
into their feasibility and impact: https://ec.europa.eu/employment_social/anticipedia/document/show.do?id=2947.

[60]   CCMI opinion on matching skills: sector councils on employment
and skills: http://www.eesc.europa.eu/?i=portal.en.ccmi-opinions.14368.

[61]       The challenges of the automotive industry —
Towards a European partnership for the anticipation of change: http://www.anticipationofchange.eu/fileadmin/anticipation/Logos/EU_partnership_en.pdf.

[62]   For more details, see http://www.anticipationofchange.eu/.

[63]   CLEPA and EMF joint declaration:
http://www.clepa.eu/index.php?id=388.

[64]   European strategy on clean and energy-efficient vehicles
COM(2010) 186 final: http://eur‑lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2010:0186:FIN:EN:PDF.

[65]   European Commission (2010), ‘European SMEs under Pressure, Annual
Report on Small and Medium-sized Enterprises 2009’, Directorate-General for Enterprise and Industry:
http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/performance-review/pdf/dgentr_annual_report2010_100511.pdf.

[66]   For further information, see
http://ec.europa.eu/enterprise/policies/sme/index_en.htm.

[67]   For further information, see
http://ec.europa.eu/enterprise/entrepreneurship/sme_envoy.htm.

[68]   European Commission (2009) Guide for training in SMEs, DG
Employment, Social Affairs and Inclusion 
http://ec.europa.eu/social/main.jsp?langId=en&catId=782&newsId=544&furtherNews=yes.

[69] For more details, see
http://ec.europa.eu/enterprise/policies/sme/index_en.htm.

[70] The LLL2010 project (supported by the EC’s 6th Framework Programme
for Research, 2006-2011 — http://lll2010.tlu.ee/) studied lifelong learning
through a network of fourteen institutions in different countries/regions:
Austria, Belgium, Bulgaria, Czech Republic, England, Estonia, Hungary, Ireland,
Lithuania, Norway, Scotland, Slovenia and Russian Federation. It conducted
research with adults who are participating in formal education (or studies the
reasons for non-participation), within small and medium enterprises (SMEs) and
within schools, universities and other providers of adult education.

A summary of the research on formal LLL practices within SMEs was
published in the Journal of Workplace Learning (Vol. 22 No 1/2, 2010, pp.
79-93): ‘Formal adult learning and working in Europe: a new typology of
participation patterns’ by Günter Hefler and Jörg Markowitsch, Danube
University, Krems, Austria. This paper was the winner of the Best Paper Award
at the 6th International Conference on Researching Work and Learning, Denmark, June 2009.

[71] The first country report, from New Zealand, is available under the
following link: http://www.oecd.org/document/46/0,3343,en_2649_34417_44999662_1_1_1_1,00.html.

[72]   Treaty on the Functioning of the European Union:
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2008:115:0047:0199:EN:PDF.

[73]   The market economy operator principle is a test based on the conduct
of a reasonable private investor or private creditor and consists of
determining whether the undertaking which benefits from any state support
measure could have obtained the same economic advantage this measure brings on
the market.

[74]   Community guidelines on State aid for rescuing and restructuring
firms in difficulty, OJ C 244, 01.10.2004, p. 2.

[75]    An overview of the rescue and restructuring cases can be found
under this link:
http://ec.europa.eu/competition/elojade/isef/index.cfm?clear=1&policy_area_id=3.

[76] The application of State aid rules to
measures taken in relation to financial institutions in the context of

the current global financial crisis: http://ec.europa.eu/competition/state_aid/legislation/banking_crisis_paper.pdf.

[77]   The recapitalisation of financial institutions in the current
financial crisis: limitation of aid to the minimum necessary and safeguards
against undue distortions of competition, 2009/C 10/03: http://eur‑lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2009:010:0002:0010:EN:PDF.

[78]   Communication from the Commission on the treatment of impaired
assets in the Community banking sector: http://ec.europa.eu/competition/state_aid/legislation/impaired_assets.pdf.

[79]   Communication from the Commission on the return to viability and
the assessment of the restructuring measures in the financial sector in the
current crisis under the State aid rules: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2009:195:0009:0020:EN:PDF.

[80]   Communication from the Commission — Temporary Community Framework
for State aid measures to support access to finance in the current financial
and economic crisis.

[81]   Communication from the Commission amending the Temporary
Community Framework for State aid measures to support access to finance in the
current financial and economic crisis:
http://ec.europa.eu/competition/state_aid/legislation/atf_en.pdf.

[82]   Communication of the Commission applying Articles 92 and 93 of the Treaty to
short-term export- credit insurance: http://eur‑lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31997Y0917(01):EN:NOT.

[83]   Case N 80/2009 — State guarantees in favour of Volvo cars
(OJ C 172, 24.07.2009).

[84] Case NN 41/2009 — Rescue Aid to LDV (OJ C 212, 05.09.2009).

[85] State Aid Scoreboard, Autumn 2010 Update, p.11. See http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2010:0701:FIN:EN:PDF.

[86]  The Temporary Framework for the real economy has not been
prolonged after 1st January 2012. From this date, normal State aid rules should
apply.

[87]   http://ec.europa.eu/employment_social/esf/index_en.htm.

[88]    Report on ‘The European Social Fund: adaptability and continuing
training of workers’, Bernard Brunhes International, 2010.

[89]   Regulation (EC) No 1081/2006 of the European Parliament and of
the Council (5 July 2006) on the European Social Fund and repealing Regulation
(EC) No 1784/1999.

[90]   For more details, see:
http://ec.europa.eu/social/main.jsp?catId=326&langId=en.

[91]   Communication from the Commission to the European Council on A
European Economic Recovery Plan, COM(2008) 800.

[92]   Regulation (EC) No 546/2009 amending Regulation (EC) No 1927/2006
on establishing the European Globalisation Adjustment Fund.

[93]   For the purpose of the EGF the economic sector is defined as a
NACE Revision 2 Division, Regulation (EC) No 1893/2006 establishing the
statistical classification of economic activities NACE Revision 2 and amending
Council Regulation (EEC) No 3037/90 as well as certain EC regulations on specific
statistical domains.

[94]   For the purpose of the EGF the region is defined at NUTS II
level, Regulation (EC) No 1059/2003 on the establishment of a common
classification of territorial units for statistics (NUTS).

[95]   This category consists in particular in career guidance, skills
certification, personalised action plans, open information services for
jobseekers, etc.

[96]   Communication from the Commission ‘Europe 2020 — A strategy for
smart, sustainable and inclusive growth’, COM(2010) 2020.

[97]   This contribution is based on Regions 2020: Regional
vulnerability — Globalisation (Update of the Commission Staff Working
Paper: Regions 2020 ‘An Assessment of Future Challenges for EU Regions’, which
was published in November 2008).

[98]   Crips, F. et al. (2009), Regional challenges in the perspective
of 2020. Regional disparities and future challenges. Background paper
Globalisation. Study carried out for the European Commission. Brussels.

[99]   For more details, see:
http://ec.europa.eu/regional_policy/sources/docgener/evaluation/pdf/expost2006/
wp4_exec_summary_en.pdf.

[100]  The contribution of restructuring to labour productivity is
calculated by dividing an adjusted figure for labour productivity in 2007 by
productivity in 2000. The adjusted productivity figure in 2007 is calculated by
combining sectoral productivity of 2000 with the distribution of sectoral
employment in 2007. Productivity is calculated as GDP in constant prices
divided by employment. Sectoral GDP is adjusted to the sectoral share of GVA.
The analysis is based on a six-sector breakdown: Agriculture, Industry,
Construction, Trade, Financial and business services and Public services.

[101]  Regions with a GDP per capita which is below 75 % of the EU
average.

[102]  More information can be found at www.urbact.eu/unic.

[103]  http://ec.europa.eu/regional_policy/cooperation/interregional/ecochange/
regiostars_11_en.cfm?nmenu=4.

[104]  See European Commission (2008) Communication on the review of the
application of Directive 2002/14/EC in the EU, COM(2008) 146,
http://eur-lex.europa.eu/LexUriServ/
LexUriServ.do?uri=CELEX:52008DC0146:EN:HTML, and accompanying Commission staff
working document, SEC(2008) 334,
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:52008SC0334:EN:HTML.

[105]  Proposal for a Directive on the establishment of a European Works
Council or a procedure in Community-scale undertakings and Community-scale
groups of undertakings for the purposes of informing and consulting employees
(Recast) COM(2008) 419:
http://ec.europa.eu/prelex/detail_dossier_real.cfm?CL=en&DosId=197188.

[106]  Available at:
http://ec.europa.eu/social/main.jsp?catId=707&langId=en.

[107]  Judgment of 10 September 2009, Akavan Erityisalojen Keskusliitto
AEK ry and Others v Fujitsu Siemens Computers Oy.

[108]  Judgment of 16 July 2009, Mono Car Styling SA, in liquidation v
Dervis Odemis and Others.

[109]  Judgment of 10 December 2009, Ovido Rodríguez Mayor and Others v
Herencia yacente de Rafael de las Heras Dávila and Others.

[110]  Judgment of 11 February 2010, Ingeniørforeningen i Danmark v Dansk
Arbejdsgiverforening.

[111]  Judgment of 16 October 2008, Kirtruna SL and Elisa Vigano v Red
Elite de Electrodomésticos SA and Others.

[112]  Judgment of 27 November 2008, Mirja Juuri v Fazer Amica Oy.

[113]  Judgment of 12 February 2009, Dietmar Klarenberg v Ferrotron
Technologies GmbH.

[114]  Judgment of 11 June 2009, Commission of the European Communities v
  Italian Republic.

[115]  Judgment of 16 October 2008, Svenska staten v Anders Holmqvist.

[116]  Judgment of 16 July 2009, Raffaello Visciano v Istituto nazionale
della previdenza sociale (INPS).

[117]  European Commission (2009) ‘Restructuring in Europe 2008. A review
of EU action to anticipate and manage employment change’ pp. 106-113.
http://ec.europa.eu/social/main.jsp?langId=en&catId=103&newsId=434&furtherNews=yes.

[118]  For details, see European Commission (2009) ‘Restructuring in
Europe 2008. A review of EU action to anticipate and manage employment change’
p. 109.

[119]  The text is available here:
http://ec.europa.eu/employment_social/dsw/public/actRetrieveText.do?id=8735.

[120]  The study is available here: http://ec.europa.eu/employment_social/dsw/public/actRetrieveText.do?id=8711.

[121]  The concept of employability in the railway sector.
Recommendations.
http://ec.europa.eu/employment_social/dsw/public/actRetrieveText.do?id=8555.

[122] Joint
declaration on training and qualification in the ground-handling sector:
http://ec.europa.eu/employment_social/dsw/public/actRetrieveText.do?id=8773.

[123]  Restructuring in the Electricity Industry: A Toolkit for Socially
Responsible Restructuring with a Best Practice Guide: http://ec.europa.eu/employment_social/dsw/public/actRetrieveText.do?id=8751.

[124]  See
http://ec.europa.eu/social/main.jsp?catId=707&langId=en&intPageId=214.

[125]  See http://ec.europa.eu/social/main.jsp?catId=707&langId=en&intPageId=214.

[126]  Commission staff working document — The
role of transnational company agreements in the context of increasing
international integration COM(2008) 419 final. http://ec.europa.eu/social/main.jsp?catId=707&langId=en&intPageId=214.

[127]  http://ec.europa.eu/social/main.jsp?catId=157&langId=en&furtherCalls=yes&callType=2.

[128]  Council Regulation (EC) No 2157/2001 of 8 October 2001 on the
Statute for a European company (SE).

[129]  Council Directive 2001/86/EC of 8 October 2001 supplementing the
Statute for a European company with regard to the involvement of employees.

[130]  Involvement of employees means any mechanism, including
information, consultation and participation, through which employees’
representatives may exercise an influence on decisions taken within the
company.

[131]  Study on the operation and the impacts of the Statute for a
European Company (SE) — 2008/S 144-192482. Ernst & Young. December 2010.
http://ec.europa.eu/internal_market/consultations/docs/2010/se/study_SE_9122009_en.pdf.

[132]  Report on the application of the SE Statute (COM(2010) 676 final:
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:52010DC0676:EN:NOT.

[133]  http://ec.europa.eu/internal_market/company/docs/se/report112010/sec2010_1391_en.pdf.

[134]  Information from the ETUI’s worker participation website:
http://www.worker-participation.eu/.

[135]  All of the national background papers can be found on the
following website: http://arenas.itcilo.org/.

[136]  ‘Organising transitions in response to restructuring. Study on
instruments and schemes of job and professional transition and re-conversion at
national, sectoral or regional level in the EU.’ Eckhard Voss, Wilke, Maack and
Partner.

[137]  See ‘The role of Public Employment Services related to
‘Flexicurity’ in the European Labour Markets’, Report for DG Employment, Social
Affairs and Inclusion, March 2009.

[138]  For more information on flexicurity, see:
http://ec.europa.eu/employment_social/employment_strategy/flex_meaning_en.htm.

[139]  Towards Common Principles of Flexicurity: More and better jobs
through flexibility and security (COM(2007) 359 final), http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2007:0359:FIN:EN:PDF.

[140]  Flexicurity Pathways. Turning hurdles into stepping stones. Report
by the European Expert Group on Flexicurity, June 2007.
http://ec.europa.eu/social/BlobServlet?docId=1519&langId=en.

[141]  Extending flexicurity: the importance of short-time working
schemes. ERM report 2010.
http://www.eurofound.europa.eu/publications/htmlfiles/ef1071.htm.

[142] ‘Employment insecurity of European individuals during the
financial crisis. A multi-level approach’ (Heejung Chung — Wim van
Oorschot, Tilburg Univeristy, The Netherlands), undertaken in the framework of www.RecWoWe.eu research project (FP6
project 2006-2011) on the basis of the 4th wave of the European Social Survey
for 22 countries for the year 2008/2009 [ESS question D47: ‘How likely is it
that during the next 12 months you will be unemployed and looking for work for
at least four consecutive weeks?’].– see also European Data Centre on Work
and Welfare www.EdacWoWe.eu.

[143]  Council Directive 89/391/EC on the introduction of measures to
encourage improvements in the safety and health of workers at work: http://eur‑lex.europa.eu/smartapi/cgi/sga_doc?smartapi!celexapi!prod!CELEXnumdoc&lg=EN&numdoc=31989L0391&model=guichett.

[144]  Community Strategy 2007-2012 on health and safety at work:
http://eur‑lex.europa.eu/smartapi/cgi/sga_doc?smartapi!celexplus!prod!DocNumber&lg=en&type_doc=COMfinal&an_doc=2007&nu_doc=62.

[145]  Council Directive 98/59/EC on the approximation of the laws of the
Member States relating to collective redundancies:
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31998L0059:EN:HTML.

[146]  Council Directive 2001/23/EC on the approximation of the laws of
the Member States relating to the safeguarding of employees’ rights in the
event of transfers of undertakings, businesses or parts of undertakings or
businesses: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32001L0023:EN:HTML.

[147]  Directive 2005/56/EC of the European Parliament and of the Council
on cross-border mergers of limited liability companies:
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2005:310:0001:01:EN:HTML.

[148]  Directive 2009/38/EC of the European Parliament and of the Council
of 6 May 2009 on the establishment of a European Works Council or a procedure
in Community-scale undertakings and Community-scale groups of undertakings for
the purposes of informing and consulting employees.

[149]  Directive 2002/14/EC of the European Parliament and of the Council
of 11 March 2002 establishing a general framework for informing and consulting
employees in the European Community — Joint declaration of the
European Parliament, the Council and the Commission on employee representation.

[150]  Framework agreement on work-related stress:
http://ec.europa.eu/employment_social/dsw/public/actRetrieveText.do?id=10402.

[151]  Framework agreement on harassment and violence at work:
http://ec.europa.eu/employment_social/dsw/public/actRetrieveText.do?id=8446.

[152]  Promoting the Mental Health of the Population. Towards a
strategy for mental health for the EU. European Commission Green Paper
issued in 2005:
http://ec.europa.eu/health/ph_determinants/life_style/mental/green_paper/mental_gp_en.pdf.

[153]  Charter of Fundamental Rights of the European Union:
http://www.europarl.europa.eu/charter/pdf/text_en.pdf.

[154]  Information is publicly available on the website of the Bilbao
Agency: http://osha.europa.eu/fr/topics/stress.

[155]  European Commission Guidance on work-related stress — Spice of
life or kiss of death?, Office for Official Publications of the European
Communities, Luxembourg, 2002. Available at:
http://www.isma.org.uk/pdf/publications/ke4502361_en.pdf.

[156]  See, for example: ‘Is work good for your health and wellbeing?’
Waddell and Burton, 2006:
http://www.dwp.gov.uk/docs/hwwb-is-work-good-for-you.pdf.

[157]  Health in Restructuring (HIRES), funded by DG Employment.
http://hesa.etui-rehs.org/uk/newsevents/files/restructuring.pdf.

[158]  For more information: http://ec.europa.eu/social/main.jsp?catId=88&langId=en&eventsId=290&furtherEvents=yes.

[159]  The European Pact for Mental Health and Well-Being:
http://ec.europa.eu/health/ph_determinants/life_style/mental/docs/pact_en.pdf.

[160]  Tzampazi report on mental health — 2008/2209 (INI):
http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+REPORT+A6-2009-0034+0+DOC+XML+V0//EN.

[161]  European Parliament Resolution on mental health:
http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+TA+P6-TA-2009-0063+0+DOC+XML+V0//EN.

[162]  More information is available under the following link: http://ec.europa.eu/health/mental_health/policy/conferences/index_en.htm.

[163]  Employment in Europe 2009: http://ec.europa.eu/social/BlobServlet?docId=4196&langId=en.

[164]  GHK (2009), ‘The Impacts of Climate Change on European Employment
and Skills in the Short to Medium-Term: A Review of the Literature. Final
Report (Volume 2):
http://ec.europa.eu/social/main.jsp?catId=103&langId=en&eventsId=172&furtherEvents=yes.

[165]  Adapting to climate change: Towards a
European framework for action COM(2009) 147 final:
http://eur‑lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2009:0147:FIN:EN:PDF.

[166]  Commission Restructuring Forum: Impact of climate change on
employment. For more information, see:
http://ec.europa.eu/social/main.jsp?catId=88&langId=en&eventsId=172.

[167]  UNEP/ILO (2009) Green Jobs: Towards decent work in a sustainable,
low-carbon world: http://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/---webdev/documents/publication/wcms_098487.pdf.

[168]  KPMG (2008) ‘Risk Preparedness Framework: Climate Changes Your
Business’:
http://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/Documents/Climate-changes-your-business.pdf.

[169]  GHK (2009), ‘The Impacts of Climate Change on European Employment
and Skills in the Short to Medium-Term: A Review of the Literature. Company
Case Studies (Volume 1):
http://ec.europa.eu/social/main.jsp?catId=103&langId=en&eventsId=172&furtherEvents=yes.

[170]  European Commission (2005) ‘Commission Staff Working Document on
the links between employment policies and environment policies’:
http://ec.europa.eu/environment/integration/pdf/sec_2005_1530_en.pdf.

[171] An energy policy for Europe. COM/2007/0001
final: http://www.ipex.eu/LexUriServipex/webdav/site/myjahiasite/groups/CentralSupport/public/2007/COM_2007_0001/COM_COM(2007) 0001_EN.pdf.

[172] Communication from the Commission to the European Council and the
European Parliament — Renewable Energy Road Map Renewable energies in the 21st
century: building a more sustainable future, COM(2006) 848 final:
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2006:0848:FIN:EN:PDF.

[173]  Directive 2009/28/EC on the promotion of the use of energy from
renewable sources and amending and subsequently repealing Directives 2001/77/EC
and 2003/30/EC:
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:140:0016:0062:en:PDF.

[174]  Towards a comprehensive climate change agreement in Copenhagen, COM(2009) 39: http://eur‑lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2009:0039:FIN:EN:PDF.

[175]  The impact of renewable energy policy on economic growth and
employment in the European Union. 2009:
http://ec.europa.eu/energy/renewables/studies/doc/renewables/2009_employ_res_report.pdf.

The study is based on an analysis of the historic situation,
based on an input-output model (MULTIREG) that was used to assess the effect of
developments in the RES sector on other economic sectors. With regard to future
developments, the analysis employs a RES-sector bottom-up model (GREEN-X) that
was designed to simulate the effect of RES support policies to 2030. In order
to calculate future economic effects, two well-established, independent
macroeconomic models (NEMESIS and ASTRA) were used in parallel and their
results were compared for maximum reliability. Both the approach and the
results have been peer-reviewed.

[176] The Transport White Paper ‘Roadmap to a Single European Transport
Area- Towards a competitive and resource efficient transport system’ sets as an
objective to reduce the GHG emissions of transport by 60 % in 2050.

[177]  Out of the 1 064 696 enterprises which existed in the transport
sector in 2008, a large majority belonged to the atomised road transport sector
(600 000 to road freight transport and 325 728 to road passenger transport).

[178] Source: Eurostat - National Accounts (table 6.1). This figure does
not include own account transport which corresponds to the transport services
that firms in all sectors provide for themselves (16 % of total activity in
tkm). The construction and to a large extent maintenance of transport
infrastructure and of transport means (i.e. road vehicles, ships, trains) is
not included either.

[179]  European Commission (2010), EU energy trends to 2030 — Update
2009: http://ec.europa.eu/energy/observatory/trends_2030/doc/trends_to_2030_update_2009.pdf.

[180]  The transport sector is a dynamic sector from an economic point of
view, which has managed to attain rapid productivity growth. Annual labour
productivity in the transport services sector has grown more than in the rest
of the economy. The COMPETE study shows that the sectors that have recorded the
highest levels of productivity growth are maritime and air transport. COMPETE. ‘Analysis
of the contribution of transport policies to the competitiveness of the EU
economy and comparison with the USA’:
http://ec.europa.eu/transport/wcm/infrastructure/studies/2006_10_compete.zip.

[181]  Such as the introduction of the European Railway Traffic
Management System (ERTMS) in railways or the Single European Sky Air Traffic
Management Research (SESAR) programme in aviation, which replace more labour
intensive means of traffic control and management. Modern communication tools
may reduce the need or the desire for travelling as well.

[182]  European strategy on clean and energy efficient vehicles
(COM(2010) 186): http://eur‑lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2010:0186:FIN:EN:PDF.

[183]  ‘The 2006 turnover for DB Schenker totalled 17 billion euro, 3.8
of which stemmed from rail freight and combined transport. The 2006 turnover
from the freight and logistics branch of SNCF group totalled 6.6 billion euro,
roughly 2 billion of which stemmed from rail freight and combined transport.’ Freight
Business Restructuring and its Impact on Employment. Joint European Group
CER-ETF with the support of DG EMPL.

[184]  Public transport firms may also participate in the deployment of
electric vehicle pick and drive cars such as those of the Paris ‘Autolib’
system expected to be available from 2011. Le Monde 12.6.2010, page 2.

[185]  A recent agreement between Lufthansa and British-Airways/Iberia
foresees the transfer of British Midland to the latter.

[186] Or more exactly by the impossibility so far of reaching an
agreement over the restrictive US national ownership clauses.

[187]  See ‘The corporate geography of global container terminal
operators’. Theo Notteboom and Jean-Paul Rodrigue.

[188]  For example ‘The ETF wants as a first step a moratorium on the
liberalisation of transport modes since it only replaces public monopolies by
private monopolies or leads to fragmentation and destructive competition to the
detriment of workers’. Selected resolutions adopted at the ETF (European
Transport Workers Federation) 2009 Congress — Ponta Delgada, 27-29 May 2009.

[189]  In aviation, loss of competition will be fought typically through
the compulsory transfer of slots free of charge, to be distributed among new
entrants or existing competitors.

[190]  The opportunities that the internet provides to identify and
consolidate demand for public transport and to provide tailored solutions, such
as taxis, microbuses and coaches, are just starting to be explored.

[191]  IRU press release:
http://www.iru.org/index/en_media_press_pr/code.973/lang.en.

[192]  IATA financial forecast December 2011 www.iata.orga/economics

[193]  ERM Quarterly, issue 1, Spring 2010.

[194]  See the report of the Joint European Group CER—ETF ‘Freight
business restructuring and its impact on employment’ of February 2009, funded
with the support of DG EMPL/F/1, Page 65.

[195]  About 50 % of foreign seafarers on EU-flagged ships come from
the Philippines; other important labour supplier countries are the Ukraine and Russia (EMSA).

[196]  A 2007 study, ‘Rail training 2020. Training needs and offers in
the European railway area. The next 10 - 15 years’, on the evolution of skills
and training in the railway field provides insights that can also be relevant
for training in other modes of transport.
http://ec.europa.eu/transport/rail/studies/doc/2007_rail_training_2020.pdf.

[197]  Council Directive 2009/13/EC as shown in:

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32009L0013:EN:NOT

following the agreement between ETF and
ECSA.

[198]  An integrated industrial policy for the globalisation era. Putting
competitiveness and sustainability at centre stage. COM(2010) 614:

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2010:0614:FIN:EN:PDF.

[199]      Commission Communication on Sustainable
Consumption and Production and Sustainable Industrial Policy Action Plan, COM(2008) 397/3:
http://ec.europa.eu/environment/eussd/pdf/com_2008_397.pdf.

[200]  The EU climate and energy package:
http://ec.europa.eu/environment/climat/climate_action.htm.

[201]  One official definition is available in the Community Guidelines on State Aid for Environmental Protection,
(2008/C 82/01). .

[202]  Part of the Europe 2020 strategy, the Innovation Union will
attempt to improve framework conditions and access to finance for research and
innovation so as to strengthen the innovation chain and boost levels of
investment throughout the Union.

[203]  Programmes to promote environmental skills. Final report. Ecorys
Research and Consulting. For the European Commission, DG Environment. June
2010.

[204] COM(2011) 21 A resource-efficient Europe –  Flagship initiative
under the Europe 2020 Strategy

[205]  See Europe 2020: A
European strategy for smart, sustainable and inclusive growth, Communication
for the Commission COM(2010) 2020.

[206]  A reduction in EU greenhouse gas emissions of at least 20 %
below 1990 levels; 20 % of EU energy consumption to come from renewable
resources; and a 20 % reduction in primary energy use compared with
projected levels, to be achieved by improving energy efficiency.

[207]  Such as clean-tech, recycling, renewable energy, building energy
systems, energy efficiency.

[208]      Second strategic energy review. An EU
energy security and solidarity action plan. COM(2008) 781 final:

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2008:0781:FIN:EN:PDF.

[209]  DG ENTR study on eco-industries:
http://ec.europa.eu/enterprise/policies/sustainable-business/eco-industries/index_en.htm.

[210]  Roland Berger Strategy Consultants, 2009; The same source states
that more people could be employed in this sector in Germany by 2020 than in
the automobile and mechanical engineering sectors. Global investment in
renewable energies rose by 85 % in 2007, year on year (IEA).

[211]  Sustainable Industrial Policy Action Plan:

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:52008DC0397:EN:NOT.

[212]  Eco-design framework Directive 2005/32/EC:
http://www.energy.eu/directives/l_19120050722en00290058.pdf.

[213]  Towards Sustainable Industrial Competitiveness Policy.
Issues paper to EU Ministers of Industry. Part II B. Transformation and
Resource-intensive Industries. ECORYS Brussels NV in partnership with IDEA
Consult NV. June 2010.

[214] The same view is expressed by the Commission in the Single Market
Act of November 2010 — see Proposal No 32 under point 2.2 (http://ec.europa.eu/internal_market/smact/index_en.htm)
and the Commission Communication on An Agenda for New Skills and Jobs — see
point 1.2. (http://ec.europa.eu/social/main.jsp?langId=en&catId=958).

[215]  ‘Anticipating and managing change: a dynamic approach to the
social aspects of corporate restructuring’: http://ec.europa.eu/social/BlobServlet?docId=101&langId=en.

[216]  Orientations for reference in managing change and its social
consequences http://ec.europa.eu/social/BlobServlet?docId=2750&langId=en.

[217]  http://ec.europa.eu/employment_social/dsw/public/actRetrieveText.do?id=10421.

[218]  Commission
Communication on Restructuring and Employment (COM(2005) 120): http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2005:0120:FIN:EN:PDF.

[219]  High-level group on economic and social implications of industrial
change — Final Report: http://ec.europa.eu/employment_social/soc-dial/csr/gyllen_en.pdf.

[220]  Anticipating and Managing Change. A dynamic approach to the social
aspects of corporate restructuring. Alpha Consulting: http://www.social-law.net/article.php3?id_article=417.

[221]  Project financed by the Commission under Article 6 of the FSE
Regulation: http://www.traceproject.org/.

[222]  Project financed by the Commission under Article 6 of the FSE
Regulation: http://www.mire-restructuration.eu/.

[223]  Project financed by the Commission under Article 6 of the ESF
Regulation: http://www.fse-agire.com/.

[224]  European Works Councils Directive (94/45/EC):
http://ec.europa.eu/social/main.jsp?catId=707&langId=en&intPageId=211.

[225]  For details, see: http://ec.europa.eu/social/main.jsp?catId=707&langId=en&intPageId=211.

[226]  See background documents, minutes and Final reports on:
http://ec.europa.eu/social/main.jsp?catId=783&langId=en.

[227]  For details, see:
http://:ec.europa.eu/social/BlobServlet?docId=28002741&langId=en.

[228]  The project website is at: http://arenas.itcilo.org/.

[229]  Since 2004 the European Social Partners have been carrying out
comprehensive national studies on restructuring in the EU Member States. In
addition to a series of national dossiers and national seminars with social
partners, two comparative reports on restructuring in the new Member States and ten ‘old’ Member States were carried out. A final evaluation report and a
major conference completed the project in January 2010: Improving the anticipation and management of restructuring ...
adding value through social partner engagement. Aritake-Wild.
January 2010.
http://www.spcr.cz/files/cz/eu/esd/IP2_-_Joint_Study_on_Restructuring_in_the_EU_-_Final_EN.pdf.