Opinion of the Economic and Social Committee on 'Social policy and economic performance` (97/C 287/17)

On 26 and 27 February 1997, the Economic and Social Committee, acting under Rule 23(3) of its Rules of Procedure, decided to draw up an opinion on 'Social policy and economic performance`.

The Section for Economic, Financial and Monetary Questions and the Section for Social, Family, Educational and Cultural Affairs, which were jointly responsible for preparing the Committee's work on the subject, adopted their opinion on 14 May 1997. The rapporteur was Mrs Konitzer.

At its 346th plenary session (meeting of 29 May 1997), the Committee adopted the following opinion by 83 votes in favour, with 30 against and 11 abstentions.

1. Introduction

1.1. Until now, social policy (in its widest sense) has not been adequately integrated with macro and structural policies in a coherent policy mix. The reason for this is, in the eyes of the Economic and Social Committee, that, in the past, too little consideration was given to the ways in which social policy - and the social security schemes that spring from it - can help underpin economic performance. This opinion, on the other hand, assumes a fruitful interaction between social policy and economic performance. The white paper itself states that 'the educational system, labour laws, works contracts, contractual negotiation systems and the social security system form the pillars of the various "national employment environments"` ().

1.2. This opinion is based on the results of the conference on social policy and economic performance held under the Dutch presidency in Amsterdam from 23 to 25 January 1997. The conference undertook an in-depth analysis of the extent to which there can be a positive interplay between social policy and economic performance. The Economic and Social Committee feels the time has come to use this analysis as the basis for an agenda of specific reforms. This is the aim of the present opinion. The opinion seeks neither to pre-empt the findings of forthcoming discussions nor to prejudge policy reforms, but rather to form a base for structured dialogue.

1.3. The following section begins with a general assessment of the premise that social policy and economic performance can be mutually beneficial; this obviously has political and institutional repercussions, not least for employment.

2. The interdependence of social policy and economic performance: policy implications

2.1. Social policy and economic performance

2.1.1. Investments in the future, occupational mobility and technical innovation are crucial elements of a successful, dynamic economy.

However, structural change also has adverse consequences. Many individuals will feel that economic change puts them at risk and this creates either a fear of or the reality of, greater insecurity. This is where social security comes in; founded on solidarity, it spreads risks, making life less hazardous for the individual. Sound social security schemes are thus a sine qua non of dynamic economic development. They can pave the way for smooth structural change, and provide trade and industry with an enhanced basis for innovation. Vocational training, qualifications and adequate protection against the impact of technical change, and against the hazards to the individual which are inherent in any forward-looking economic policy, are factors which have a positive impact on growth. Investment in human resources must go hand in hand with investment in the production process.

2.1.2. Social security also engenders a higher level of social cohesion, equal opportunities and tolerance. This too has an impact on growth, since policies framed for the longer term tend to be easier to put through, even if they are unpopular at the moment of initial impact. Together with a good, well differentiated social infrastructure, social security forms the basis for the peaceful resolution of conflicts of interest, providing a stable framework for long-term corporate policy. On the other hand, absence of social security has a direct cost in the form of exclusion and poverty, which, although difficult to quantify, undoubtedly undermine prosperity.

2.1.3. Thus, social cohesion has a positive external effect on labour productivity. This external effect is becoming increasingly relevant, as the human resources factor becomes ever more important in a knowledge-driven economy. In macroeconomic terms, increased labour productivity, at a given wage level, makes replacement of labour by capital less attractive. This boosts employment.

2.1.4. A modern system of social security can also be the basis for a favourable innovation climate. Innovations - i.e. technical progress - particularly in how work is organized, are directly affected not only by 'hard` macroeconomic fundamentals but also by 'soft` factors such as social cohesion and social infrastructure ().

2.2. Economic performance and social security

2.2.1. A high level of economic performance releases adequate financial resources for proper social security and gives the bodies which administer it a secure future on which to build. The improvement of economic performance not only secures the financial basis for social policy, but also means that fewer people will find themselves in need of social assistance in the first place.

2.2.2. High growth rates based on sustainable development and sound competitiveness have a direct and positive impact on employment and help alleviate the burden of taxes and charges on the labour factor. People then become less reluctant to pay taxes or social security contributions and social cohesion is maintained.

2.2.3. A high level of economic performance, coupled with high labour productivity, together with other factors, is also a fundamental element in ensuring, that as far as possible, the possible negative impact of social security on incentive is kept low. A proper level of unemployment benefit which promotes employability is one way of boosting incentive to seek work.

2.3. Combining social and economic progress and implementing essential institutional reforms

2.3.1. In the light of these general considerations, the Economic and Social Committee stresses that it is possible to establish a positive link between social policy and economic performance. Policies must therefore be pursued which allow both economic and social elements to thrive. The Economic and Social Committee backs the idea of making social policy an integral part of a coherent, macroeconomic policy mix at both national and European level.

2.3.2. As the Economic and Social Committee recognizes, shortcomings remain in terms of both policy content and institutional organization.

2.3.3. As far as content is concerned, too little recognition has been given to the macroeconomic role of social policy, and the idea that social security in the widest sense of the term is merely a cost factor which the Member States and Europe can only 'afford` when the economy is booming, continues to hold sway. The Economic and Social Committee feels that the adoption of an integrated approach holds out more hope of success. The Committee therefore expressly welcomes the conference on social policy and economic performance organized under the Dutch presidency of the Council and endorses the basic analysis of the general situation outlined on that occasion.

2.3.4. The Economic and Social Committee believes that the time has now come to use this analysis as the basis for an agenda for discussing specific reform projects. The social partners should be closely involved in this discussion, and in the decision-making procedures concerning the reforms. Given the radical changes now taking place in the way people live together in society, and against the backdrop of steadily rising unemployment, the Committee recognizes the urgent need to modernize and give fresh impetus to the ongoing development of the European social model. A whole range of economic and social factors from both inside and outside Europe is reason enough for political action. It is just as inappropriate to respond to changing circumstances by lowering the overall level of social protection as it is to cling blindly to outmoded structures. What is needed is the dynamic further development of the European social model. This could include the best practices from Member States which have provided the climate for increased employment and economic growth.

2.3.5. That said, however, the Economic and Social Committee recognizes that, as things stand, economic and social policies are implemented at different 'levels`; 'duties` lie with the economic system, 'remedies` one level down with the social system. This state of affairs is also reflected in institutional structures. These too must be subject to review. With the crisis on the jobs front showing no sign of abating, essential institutional changes should focus on the promotion of employment as a priority objective, with job creation incorporated consistently into all policy areas. There should be more interinstitutional coordination and cooperation, especially in respect of macroeconomic and social policies. This should work on a horizontal basis - i.e. in terms of relations among the different European institutions - and vertically in terms of relations between the European institutions and the Member States. The Economic and Social Committee therefore welcomes the offer of cooperation made by Mr Borstlap, chairman of the newly established Committee on Employment and the Labour Market, at the ESC plenary session on 19 March 1997.

2.3.6. The Economic and Social Committee sees its role as a forum in which strategies for policy development and institutional reform can be drawn up, coordinated and appraised. The Economic and Social Committee brings together at European level representatives from economic and social circles in the Member States. It is thus the one European body which, since the signing of the Treaties of Rome, has had experience in conducting and organizing economic and social dialogue at European level.

2.3.7. In the following section the Economic and Social Committee makes specific proposals for future institutional cooperation.

3. Institutional cooperation

3.1. A dynamic, social and competitive European economy cannot be achieved without interdependent social policy and economic performance, dialogue and participation; these are the motor for change. Flexibility is also needed to meet the challenge of new risks, and social consensus is a sine qua non of sustainable growth - with employment levels to match. These factors also highlight the need for enhanced, more intense cooperation among the bodies and players involved.

3.2. The Economic and Social Committee recognizes that implementation remains incomplete. There is no shortage of credible studies on the current situation, but the local, national and European levels have been slow taking practical action on any of them. The Economic and Social Committee would also call on the European Council to ensure that all Member States live up to their European responsibilities and both back and speedily implement Commission President Jacques Santer's proposal for a confidence pact on employment ().

3.3. Against the backdrop of the analysis outlined in this opinion, the Economic and Social Committee calls for concerted action on employment on the part of the Social Council and the Council for Economic, Financial and Monetary Questions. To prepare the ground for these policies, the directors-general involved should initiate dialogue both among themselves and with the advisory committees of these councils, on the basis of the results of the Amsterdam conference held from 23 to 25 January 1997 and the agenda for development projects outlined in this opinion.

3.4. The Economic and Social Committee would take the opportunity of endorsing the newly established Committee for Employment and the Labour Market, set up to back the Social Council, and the Committee for Economic Issues set up as part of the Council for Economic, Financial and Monetary Questions. The Economic and Social Committee, the EU's socio-economic forum, is looking forward to effective co-operation. The Economic and Social Committee feels that players at European level can profit from the Committee's experience, its closeness to the citizen and its pursuit of a Europe which can perform well on both a social and economic front.

3.5. The Economic and Social Committee intends to set up an internal study group made up of members of various sections in order to adapt to the new dimension assumed by the dialogue mentioned in point 2.3.6. This study group will actively seek to cooperate with the institutions concerned and should in particular consider the following questions: globalization and effects on low-productivity work; funding of social policy; competitiveness and social policy and balance between flexibility and social protection.

Brussels, 29 May 1997.

The President of the Economic and Social Committee

Tom JENKINS

() European Commission, 'Growth, competitiveness and employment`, p. 16.

() The Commission Green Paper on Innovation differentiates between innovation in processes, products or services, and innovation in labour organization. The third part of Chapter II of the Green Paper speaks of a 'climate of innovation`.

() Cf. Opinion on Action for employment in Europe - a confidence pact, rapporteur: Mr Chevalier, co-rapporteurs: Mr Walker and Mr Schmitz (OJ C 56, 24. 2. 1997).

APPENDIX to the opinion of the Economic and Social Committee

The following amendment attracted more than 25 % of the votes cast but was rejected during the course of the deliberations.

Point 2.3.4

In the second sentence after the word 'unemployment` add the words 'in some countries`.

Reason

Unemployment is not actually rising in the EU as a whole. It is rising in some countries but falling in others and, overall, is static.

Result of the vote

For : 48, against : 57, abstentions: 3.