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**Opinion of the European Economic and Social Committee on the Results of the Employment Summit **

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Official Journal C 306 , 16/12/2009 P. 0070 - 0075 *

Opinion of the European Economic and Social Committee on the Results of the Employment Summit

2009/C 306/16

On 13 March 2009 the president of the European Commission asked the European Economic and Social Committee, under Article 262 of the Treaty establishing the European Community, to draw up an opinion on the

"Results of the Employment Summit".

The Section for Employment, Social Affairs and Citizenship, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 26 May 2009. The rapporteur working alone was Mr GREIF.

At its 454th plenary session, held on 10 and 11 June 2009 (meeting of 11 June 2009), the European Economic and Social Committee adopted the following opinion by 140 votes to 27, with 24 abstentions.

1. Recommendations

1.1 The EU Member States have been hard hit by the current financial and economic crisis. Unemployment is growing at a worrying rate; top priority must therefore be given throughout the EU to preventing mass lay-offs and further rises in unemployment. The EESC realises that this will require particular efforts by all stakeholders at national and European level. "Business as usual" is not an adequate response to this exceptional situation, and it is not an option for current employment policy.

1.2 This opinion sets out the following EESC recommendations to overcome the current labour market crisis. They are intended as groundwork for the relevant decisions by the European Council on 18/ 19 June 2009:

- restoring consumer and investor confidence by ensuring and encouraging private and public-sector demand;

- using publicly subsidised active employment policy instruments to enable employees to stay at work while training;

- avoiding income cuts as far as possible and promoting equality of opportunity, paying attention to inequalities and ensuring greater security on labour markets;

- ensuring public investment through a provisional, flexible approach to the Stability Pact and expanding the tax revenue base in Member States;

- increasing the supply of European funding, facilitating access to European Structural Funds, acting swiftly to improve the Globalisation Fund.

- progressing with socially acceptable structural reforms, upgrading skills, matching labour market needs more effectively, improving mobility and promoting entrepreneurship.

1.3 Social partners and other representatives of organised civil society have a key role to play in tackling the crisis. Decision-makers from business, social and political spheres are responsible for ensuring that a similar crisis does not happen again.

2. Introduction: given the huge rise in EU employment, "business as usual" is not an option for employment policy

2.1 The EU Member States have been hard hit by the current financial and economic crisis. The number of companies affected by the economic slowdown has risen drastically since September 2008. Unemployment is growing at a worrying rate:

- recent forecasts suggest that unemployment in the euro area will increase from 7,5 % in 2008 to 10 % in 2009; in 2010 it could even reach 12 % [1];

- compared to previous downturns, unemployment is growing at a much faster rate – whereas in the early 1990s unemployment rose about 1 % every 4-5 quarters, it will grow by 3 % in the euro area in 2009 alone [2];

- in many sectors – both services (especially banking) and manufacturing (especially the automotive industry and its suppliers, chemicals and the construction sector) – numerous workers have been laid off;).

- we need to prepare for further painful rises: according to current European Commission and OECD forecasts, another 8 million will become jobless.

2.2 In view of these worrying labour market trends, top priority must be given throughout the EU to preventing mass lay-offs and further rises in unemployment. The EESC realises that this will require particular efforts by all stakeholders at national and European level. "Business as usual" is not an adequate response to this exceptional situation, and it is not an option for current employment policy. In view of this, the EESC welcomes the holding of an employment summit as a good opportunity for launching a debate on the necessary steps to ensure that a crisis with such dramatic implications for employment does not happen again. This is why the Committee has responded to the call for active collaboration with the social partners and civil society interests.

2.3 In its Programme for Europe [3] and previous opinions (e.g. on the European economic recovery plan) the EESC has already highlighted some key steps which are of particular importance as short-term crisis management measures.

2.4 To complement these, this EESC opinion sets out some other recommendations for curbing further growth in unemployment, as a contribution to preparations for the relevant decisions by the European Council on 18/ 19 June 2009:

3. EESC recommendations to overcome the current labour market crisis

3.1 Restoring consumer and investor confidence by ensuring and encouraging private and public-sector demand.

3.1.1 Employment policy per se does not create jobs. It can support the job creation process; however, it cannot take the place of the dynamism which is needed to generate new jobs. A stable economy is the basis of an efficient labour market policy. Without economic regeneration no positive employment development will occur. Thus, especially in the difficult conditions prevailing on labour markets, employment policy measures can only succeed if macroeconomic conditions are more favourable. In view of this, when the European recovery plan was adopted in December 2008 it received EESC backing. The Committee feels that the plan is the right response to the challenges faced by the European economy, but urges the Commission and all national stakeholders to implement the programme without further delay [4].

3.1.2 However, if mass lay-offs are to be avoided and mass unemployment contained, much more intensive efforts are now needed at national and European levels. The EESC therefore reiterates its previous concern that the recovery plans launched so far are too limited in scope. [5] Should it become clear by the autumn that the measures so far taken lack the power to prevent mass lay-offs, the EESC advocates the adoption of a second European economic recovery plan, which would have a wide-ranging impact on labour markets, with funding in the order of 2 % of GDP. Alongside additional national investments to boost the employment impact, which should be implemented in a more coordinated fashion than has hitherto been the case, major European investment projects must also be identified.

3.1.3 Labour market policy measures to accompany economic revival are key. The planned expenditure, therefore, of 1 % of GDP should be allocated to specific employment policy measures, varying according to the situation on a given national labour market (e.g. strengthening unemployment benefits, promoting flexicurity arrangements, supporting short-term employment while providing appropriate income support, investing in education and training, further introduction of employment incentives, preventative and business-friendly measures, creating jobs in the third sector, etc.), and an additional 1 % of GDP to investment projects with a significant employment impact. Such investments can yield a double dividend in terms both of solving environmental and social problems and of promoting innovation, provided that they do not merely provide a short-term economic stimulus but also boost competitiveness and future growth potential, in line with the Lisbon strategy.

3.2 Using publicly subsidised active employment policy instruments to enable employees to stay at work while training

3.2.1 The EESC is pleased that more and more EU countries have – in view of the dramatic employment situation and the difficulties faced by many companies – implemented publicly subsidised active employment policy instruments, enabling employees to be kept on and engage in further training instead of being laid off (short-term employment is the watchword here). The EESC feels that arrangements enabling companies to keep employees on during the crisis, combined with solid income support for employees whose hours are cut, are a much smarter way of getting to grips with the crisis than simply laying off skilled employees as soon as orders fall off, as it ensures that sufficiently skilled workers are available once the economy recovers. The EESC feels that such arrangements should also be extended to EU countries where they are currently lacking and to employees on non-standard employment contracts.

3.2.2 Although such measures could temporarily take off the pressure on companies and sectors which are in a particularly difficult situation, we need to consider what can be done if the economy continues to slow down and such company-specific measures are not enough to prevent lay-offs. In this case, additional instruments to provide comprehensive employment protection and retraining must be developed with the involvement of the social partners and the requisite funding put in place in order to mitigate the full force of the crisis on labour markets (e.g. sector-specific safety nets, demand-orientated qualifications in sectors important for the future such as the environment, energy and health, for example).

3.2.3 In addition, adequate, effective and sustainable social security networks are needed, taking particular account of employment assistance for the most vulnerable, i.e. socially disadvantaged groups. Generally, it is those in the weakest position, those with insecure employment conditions, such as temporary and contract workers, as well as disadvantaged groups on labour markets, who experience unemployment first. Young people are also disproportionately affected. Bringing young people into the labour market should therefore be given top priority during the recession. The social economy also has a key role to play in overcoming the crisis, particularly in terms of creating worthwhile jobs which are of social value. Care must, however, thereby be taken, that this does not lead to any distortion of competition.

3.3 Avoiding income cuts as far as possible and promoting equality of opportunity, paying attention to inequalities and ensuring greater security on labour markets

3.3.1 The sharp rise in unemployment and the use of short-term work arrangements shows that in most countries there is sufficient flexibility on labour markets to enable companies to respond quickly when orders dry up. In view of this, we can hardly claim that European labour markets are rigid. In the current crisis, calls for the watering down of existing labour protection rules are completely unfounded. Given that more and more employees are facing increasing risks due to the deteriorating employment situation, what we actually need is more effective security on labour markets. The EESC feels that one way of doing this is to facilitate access to social benefits to the jobless in particular, and to make them more generous to prevent even greater inequalities. With this in mind, the EESC urges the Commission to re-table its proposal to extend the eligibility period for unemployment benefit [6].

3.3.2 Care should be taken to ensure that the measures taken in response to the crisis do not counteract the objective of stimulating demand and employment and of cushioning social impacts. They must be designed to be socially acceptable and conducive to growth and employment. In view of this, appropriate fiscal and income policies should be developed in cooperation with the social partners to stimulate private consumption.

3.3.3 The EESC has already pointed out that wages policies appropriate to the double economic role played by wages have a key role to play in dealing with the crisis. As companies will only invest and create jobs if they expect strong demand, a medium-term strategy of keeping wage rises in step with productivity growth in the national economy as a whole will, from a macro-economic viewpoint, make sure a proper balance is struck between sufficient growth in demand and price competitiveness. The social partners must therefore work to avoid wage restraints along the lines of a beggar-thy-neighbour policy [7]. In view of this, the EESC emphasises – especially against the backdrop of a severe economic slowdown – the need to gear wage policy towards productivity trends throughout the entire economy.

3.4 Ensuring public investment through a provisional, flexible approach to the Stability Pact and expanding the tax revenue base in Member States

3.4.1 Measures to revive the economy and stabilise labour markets will be expensive. Most EU countries will exceed the 3 % budget deficit threshold. The EESC has already pointed that in the framework of the more flexible, reformed Stability and Growth Pact this can under certain circumstances be considered sensible, necessary, and therefore as something to be tolerated without penalty. The conditions of the Pact should certainly not be an obstacle to forward-looking public-sector investment in research, development and education in order to develop potential for future growth [8], because this growth will provide the basis for putting public finances back onto a sustainable course rapidly once the crisis has been overcome. We need to start thinking now about how we can return to a long-term sustainable path after the crisis.

3.4.2 Government money cannot be used for everything – bailing out banks, making benefits more generous, investing in innovation and supporting business. It will be essential for government to tap new sources of revenue. The EESC believes that Member States' tax base will have to be broadened, not least by closing tax havens, ending tax competition and taking measures to tackle tax evasion. In addition, a general re-think of tax systems is needed, with due regard for questions of contributions from different kinds of income and assets [9].

3.4.3 Strengthening the European dimension also requires that consideration be given to joint European projects, for instance in energy supply infrastructure. Greater flexibility between the various EU budget headings would make it possible for such projects to be part-funded from unused resources. Thought should also be given to the idea of a European bond from a European sovereign wealth fund.

3.5 Increasing the supply of European funding, facilitating access to European Structural Funds, swift action to improve the Globalisation Fund

3.5.1 When allocating resources from various European funds there should, in addition to efficiency, be emphasis on a flexible, pragmatic approach with a view to accelerating the impact of spending. In view of this, there is a need to simplify the administrative aspects of using funding, and also to provide for additional funding through transfers of unused funds from other Community policy areas.

3.5.2 With regard to the European Globalisation Fund, the EESC recently issued a separate opinion on this subject [10], which wholeheartedly endorsed the Commission's proposal to temporarily extend the scope of the fund to employees who have lost their jobs as a result of the current economic crisis.

3.5.3 The EESC also recommended increasing the fund to EUR 1 billion, doubling the contribution period to 24 months, halving the minimum eligible number of redundancies from 1000 to 500, and raising the co-financing rate. The EESC also urges that social partners at all levels be involved in processing applications. If the economic crisis continues, consideration should be given to further beefing up of funding, and to reducing the minimum eligible number of redundancies for an application from 500.

3.6 Upgrading skills, matching labour market needs and promoting mobility

3.6.1 Upgrading skills is critically important for Europe's future growth and productivity, for its capacity to adapt to change, and for equity and social cohesion. It is the best way to exploit new opportunities for sustainable job creation.

3.6.2 When the economy starts to recover all labour resources will be needed, not least because of demographic change, with a shrinking labour force of working age.

3.6.3 Worker mobility is a key instrument for an efficiently functioning Single Market and is essential for enabling more people to find better employment, a key objective of the Lisbon strategy. Workers need to be more mobile both between jobs and between regions and Member States, provided that such mobility is consistent with the applicable wage agreements and national labour law. Mobility also boosts economic growth and EU competitiveness in global economic competition.

4. Comments on the priorities identified at the employment summit

4.1 Based on the above key points, the EESC supports the priorities identified at the employment summit, which could help to stabilise the situation on labour markets.

4.1.1 Staying in work: In this context, the EESC feels that it is particularly important to focus on the issue of the quality of work ("more and better jobs") and to making transition from one job to another pay. The concept of flexicurity must ensure "security in change", with equal priority in practice for labour market security, stable employment and maintaining employability, social security and labour market flexibility. In leaving behind the crisis and finding our way back to growth, we therefore need to give employees greater security, with less flexibility and less precarious employment conditions.

4.1.2 Promoting mobility: Changing economic conditions require a high degree of innovative adaptability, not least on labour markets. We need to be able to respond intelligently to rapidly changing structural conditions. In line with the flexicurity approach, we need to ensure that employees are equipped for the new challenges in the world of work, so as to enable mobility between high-quality jobs. In the context of the current crisis, special attention must be paid to maintaining employability. It is important to create and safeguard jobs instead of just supporting unemployment. We also need to do everything we can to ensure that employment policy measures do actually ensure mobility from lost jobs to newly created ones rather than mobility from work to unemployment or the trap of low-quality jobs.

4.1.3 Providing training in line with labour market needs: The EESC feels that access to training, funding for such training and the use of working time for lifelong learning are of key importance. However, all this needs to go hand-in-hand with the creation of productive, highly skilled and well-paid jobs so that employees are not forced to accept low-skilled jobs, as happens all too often. Highly skilled employees and the availability of productive employment are essential in order to bring young people onto the labour market and promote competitiveness and prosperity.

4.1.4 Improving labour market access: This is an especially important priority in view of the current crisis, which has deepened inequalities and created existential problems for more and more people. It is especially important to create jobs particularly for those who are excluded from the labour market and to take effective steps to remove discrimination as far as access to and remaining in the labour market are concerned. The EESC has already adopted a separate opinion on promoting labour market access for priority groups, in which it pointed out that (re)entry into employment must always go hand-in-hand with efforts to ensure that employees from such groups have a good chance of remaining and progressing on the labour market [11]. In view of this, the EU must – with the involvement of the social partners, whose autonomy must be respected – ensure that appropriate rules on non-standard employment are in place, while making it clear that permanent employment contracts should remain the norm in future.

4.1.5 Encouraging entrepreneurship and job creation: The EESC recognises that short-term measures have to be accompanied by long-term measures and forward-looking strategy. Business need to be helped to overcome the credit crunch and revitalise their day-to-day mission to produce, to provide services and to create jobs. An entrepreneurial mindset has to be promoted. The unemployed, particularly young people, who are willing to start their own businesses must be encouraged through economic instruments, support for productive investments and specific training.

4.1.6 Progress on structural reforms, as provided for in the EU Strategy for Growth and Jobs, must continue. These reforms must be carried out in a socially responsible manner without counteracting the objective of stimulating demand and employment and of cushioning social impacts.

4.2 Social partners and other representatives of organised civil society have a key role to play in tackling the crisis. A strengthened social dialogue – and in particular strengthened wage agreements – is needed, to draw up and implement a policy to put an end to the crisis as soon as possible, while mitigating as far as possible the economic and social fallout of the crisis on ordinary citizens. Decision-makers from business, social and political spheres are responsible for ensuring that a similar crisis does not happen again.

Brussels, 11 June 2009

The President

of the European Economic and Social Committee

Mario Sepi

[1] OECD Interim Forecast, March 2009. Compared to these forecasts for the EU-16 Group, in 1999 unemployment in the EU-15 was 9,9 % and 10,9 % in the EU-11 (URL: https://www.oecd.org/dataoecd/7/20/2666439.pdf)

[2] ibid.

[3] See "A programme for Europe: proposals of civil society" – www.eesc.europa.eu.

[4] EESC opinion of 24 March 2009 on the "European Economic Recovery Plan", rapporteur: Mr Delapina (OJ C 228, 22.9.2009).

[5] ibid.

[6] Commission Communication on "Driving European Recovery", 4 March 2009 – COM(2009) 114 final.

[7] See footnote 4.

[8] ibid.

[9] ibid.

[10] EESC opinion of 24 March 2009 on the "European Globalisation Adjustment Fund", rapporteur: Mr Pariza Castaños (OJ C 228, 22.9.2009).

[11] EESC opinion of 12 July 2007 on the "Employment of priority categories (Lisbon Strategy)", rapporteur: Mr Greif (OJ C 256, 27.10.2007).

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Appendix

to the Opinion of the European Economic and Social Committee

The following amendments, which received at least a quarter of the votes cast, were rejected in the course of the debate (Rule 54(3) of the Rules of Procedure):

Point 3.3

Amend as follows:

"Avoiding income cuts as far as possible and promoting equality of opportunity, paying attention to inequalities and ensuring greater security on labour market; flexicurity is the right approach, to modernise and foster adaptability of labour markets."

Voting

For: 84 Against: 90 Abstentions: 11

Point 3.3.1

Amend text as follows.

"The sharp rise in unemployment and the use of short-term work arrangements shows that in most countries there is sufficient flexibility on labour markets contributes considerably to companies' ability to respond quickly when orders dry up.to enable companies to respond quickly when orders dry up. In view of this, we can hardly claim that European labour markets are rigid. In the current crisis, calls for the watering down of existing labour protection rules are completely unfounded. Given that more and more employees are facing increasing risks due to the deteriorating economic and employment situation, what we actually need is an adequate balance between security and flexibility. In order to promote equal opportunities for all and to avoid an increase of inequality, relevant measures should be introduced, especially for the most disadvantaged. The EESC believes that such measures should include a reduction in wage-related costs and appropriate income support while at the same time maintaining re-employment incentives.more security on labour markets. The EESC feels that one way of doing this is to facilitate access to social benefits to the jobless in particular, and to make them more generous to prevent even greater inequalities. With this in mind, the EESC urges the Commission to re-table its proposal to extend the eligibility period for unemployment benefit."

Voting

For: 78 Against: 96 Abstentions: 9

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