Opinion of the Economic and Social Committee on "Employment, Economic Reform and Social Cohesion - Towards a Europe of Innovation and Knowledge"

(2000/C 117/13)

On 23 September 1999 the Economic and Social Committee decided, in accordance with Rules 11(4), 19(1) and 23(3) of its Rules of Procedure, to draw up an Opinion on "Employment, Economic Reform and Social Cohesion - Towards a Europe of Innovation and Knowledge".

The Subcommittee "Employment, Economic Reform and Social Cohesion", which was responsible for the preparatory work, adopted its opinion on 9 February 2000. The rapporteur was Mr Morgan, the co-rapporteur Ms Engelen-Kefer.

At its 370th plenary session on 1 and 2 March 2000 (meeting of 2 March), the Economic and Social Committee adopted the following opinion by 114 votes in favour with 5 abstentions.

1. Introduction

1.1. On 16 October 1999 the Finnish and Portuguese presidencies invited contributions to the discussion at the extraordinary European Council to be held in Lisbon on 23 and 24 March 2000 on the subject "Employment, economic reform and social cohesion - Towards a Europe of innovation and knowledge". The ESC is delighted to have been asked to contribute to this Summit and, in particular, to have been invited together with the Parliament, the Commission, the European Central Bank and the social partners to the follow-up High Level Forum to be held in Portugal at the beginning of June.

1.2. On 17 January 2000 the Portuguese Prime Minister wrote to the members of the European Council restating the issues. The following is an extract from his letter:

A new period is beginning in European construction.

Despite the economic recovery, serious social problems continue to exist, such as unemployment, social exclusion and the risks of a future imbalance of the social security systems - which are also the reflection of deeper-seated structural difficulties calling for courageous reform. These difficulties are heightened by the unavoidable challenges posed by globalisation, technological change and an ageing population. The European social model can only be sustained by building new competitive factors and the renewal of the social model itself.

The Portuguese presidency takes place in the year 2000. It is an appropriate moment for long term thought and decisions. This is the aim of the Special European Council we will hold in Lisbon on 23 and 24 March. We want to update the European strategy for growth, competitiveness and employment in the light of the new conditions, as well to enhance the content of the European Employment Pact.

There is a central issue which I would like to raise as a starting point. A new paradigm is emerging: that of the economy of innovation and knowledge, which is becoming the main source of the wealth of nations, regions, enterprises and people. Europe is lagging behind significantly and should define its own path for a new competitive platform, while also fighting the new risks of social exclusion. It is necessary to combine innovation with social inclusion.

I believe that we have the conditions to define a new strategic goal for the next ten years: to make the European Union the world's most dynamic and competitive economic area, based on innovation and knowledge, able to boost economic growth levels, with more and better jobs and with greater social cohesion.

An economic and social strategy to renew the basis of growth in Europe must combine macro-economic policies, and the modernisation of social protection.

1.3. The Portuguese presidency has subsequently presented its document dated 12 January 2000 entitled "Employment, Economic Reform and Social Cohesion - Towards a Europe of Innovation and Knowledge".

1.4. The Committee welcomes the document and the general direction of its proposals.

1.5. The Committee endorses the idea of an "affirmative strategy". This Opinion is also affirmative. We endorse the call for a growth rate of at least 3 % for the whole of the EU. It may need to be higher to eliminate unemployment and social exclusion. We agree that it is now essential to foster a culture of dynamism and entrepreneurship and a culture of strengthened social cohesion. We too believe that an economic and social strategy to renovate the basis for growth in Europe must combine macroeconomic policies, economic reform, and structural policies, active employment policies and the modernisation of social protection.

1.6. The ESC response is based on the proposition that the people of the European Union possess a capacity for innovation and enterprise sufficient to create all the new and sustainable jobs we need.

1.7. What is the impediment to job creation in Europe? An insufficient number of firms and other organisations are successfully innovating and exploiting knowledge resources. Creativity is a powerful human talent. Why is it not fully used in Europe? What is the new paradigm?

2. The New Paradigm

2.1. In conventional use, the term "new paradigm" means growth without inflation, and is used in the context of US monetary management. In practice, this also means higher levels of employment without inflation, as can be demonstrated by the lower US levels of unemployment. For social reasons the US is not seen as a model for Europe. In a European context we could reinterpret this paradigm as follows:

- maximising economic development while minimising social exclusion and conflict;

- providing a competitive economy while sustaining a competitive social model;

- optimising the utilisation of new technologies in a strategy which is sustainable for the social and natural environment and resources;

- securing sustainability with the development of a participatory culture and an appropriate corporate culture based upon a creative approach to lifelong learning and solidarity.

2.2. In the present EU context such a new paradigm - economic growth, embracing also social cohesion, leading to employment growth but not to inflation - is the most desirable of outcomes.

2.2.1. A buoyant and optimistic economic climate is beneficial to structural change. Doing away with jobs that are no longer competitive is easier the more new, sustainable jobs are created elsewhere and the more a change of jobs entails the prospect of better working conditions.

2.2.2. What will therefore be beneficial is an economic policy which also seeks to achieve a steady expansion in overall demand over and above gains in productivity. The current problems cannot be overcome by renouncing economic growth. We need to achieve at least the 3 % growth target stated in the Presidency document.

2.2.3. If the new paradigm is an "outcome", what are the factors that have brought it about, and what factors might create an equivalent outcome in the EU? There is no definitive answer to this question, but a number of causes can be identified. They range from the economic and the industrial to the cultural, the social and the ecological, and the demand for sustainability.

2.3. What factors are driving the new paradigm and what are its characteristics? What drives inflationless growth? Some of the obvious elements are:

- global competition, which exerts a downwards pressure on the price of goods and services in certain sectors,

- productivity, which seems at last to be entering a new dimension as a result of long-term investments in IT and telecommunications,

- skills, where changes in demand have put a minority of jobs at a premium and a majority of semi-skilled and unskilled jobs at a discount in the labour market,

- re-structuring, driven by IT, which has led to de-layering and outsourcing, both of which can be deflationary,

- development of the service sector and a transfer of employment to the service sector,

- extension of flexible "lifestyle" employment, in terms of both location and working hours.

2.4. If the above factors explain why inflationary pressures have been reduced, what factors might account for growth?

- the dynamic industrial sector of information technology (IT), or more correctly the information society technologies (IST) sector - including hardware, software and services,

- the rapid growth of information-based industries such as media and finance on the back of IST developments,

- the progressive transformation by IST of traditional asset-based industries,

- the growth of the venture capital industry and the proliferation of new enterprises, many of them exploiting new technologies,

- the emerging impact of sustainable development policies causing both the adaptation of old industries and the development of new ones.

2.5. The factors described in paras. 2.3 and 2.4 have only been able to have positive impact on the new paradigm because of favourable fiscal and monetary policies. In turn, these have stimulated and allowed extensive investments in information technologies.

2.6. A major factor in the achievement of the new paradigm in the USA has been the role of capital markets. The huge growth in the market value of the technology sector has been achieved by a major redirection of investment. The vast growth of venture capital funds is another example of this new focus. An EU capital market does not yet exist in this way. The introduction of the euro is a vital precursor, but equity and venture capital markets remain underdeveloped. Recent cross-border transactions in Europe point to the way ahead but governments, banks, companies and regulators will need ambition and vision on a Community-wide scale to underpin the new paradigm in the EU. However, if cross-border financial transactions are to be facilitated in Europe, it must be recognised that cross-border social movement is not possible in the same way as social movement between states in the USA. Therefore the social dimension will need a European solution.

2.7. These growth and productivity factors are in turn affecting the social, cultural and organisational dimensions of business.

2.8. Table 1 reflects the impact of Japanese manufacturing practices as explained in the book "The Machine that Changed the World"(1). It is recognised that customers create jobs, that people are the key asset, and that to be fully effective employees have to be empowered.

Table 1: The Old and the New Soul of the Enterprise

>TABLE>

2.9. Table 2 describes the new organisational ethic based on employable skills, rapid change and extensive collaboration and reward systems.

Table 2: Management Choices

>TABLE>

2.10. Table 3 emphasises particularly the impact of information systems on organisational culture. This is the new paradigm in an organisational sense.

Table 3: Transition from Industrial to Information

>TABLE>

2.10.1. The existence of creative potential is increasingly the key to competitive success. Traditionally, it has mainly been the preserve of a select few to develop new solutions. But to keep up with the increasing pace of development, this creative potential needs to be multiplied. In doing so it is essential that it is not just basic knowledge and the latest technology which is promoted; it is just as important to increase specialist know-how in all areas of activity. It is therefore vital to promote employability and to continually adapt and upgrade manpower skills if the capacity of Europe's economy for innovation is to be enhanced.

2.10.2. Innovation is a profoundly social process involving people first and foremost, with their knowledge, skills and creativity. These skills need to be given room to develop in cooperative and participatory work environments unhindered by traditional hierarchies. What matters is not just following the regulations, but organising the production process in the best possible way. To achieve this, employees must be given a say. New forms of work organisation, such as group and team work, make it possible to utilise the knowledge and skills of the workforce to the full and to broaden their scope for action and decision-making, thereby creating an opportunity to combine increased productivity and competitiveness with improved working conditions for employees. Involving the whole of the workforce also entails developing information, consultation and participation processes within businesses and services.

2.10.3. Innovation, when seen not only as a technical process, but also as a social one, requires a radical change in work structures and a corresponding rethink of working hours. New answers need to be found which reconcile the objectives of business, the needs of workers and the interests of the consumers. Businesses benefit from the increased productivity thereby generated, while workers enjoy the security of competitive jobs and are better able to combine career and family. The goal must be to reconcile all interests fairly and to find a new balance between the needs of business in terms of flexibility, on the one hand, and the need felt by workers to have greater control over their time and to benefit from social protection on the other. As structural change continues, so the norm for employment conditions will change with it. Redefining "normal working hours" requires collective agreements (and in some cases legal provisions) to guarantee the social protection rights of workers, but these in turn should not become barriers to employment and competitiveness.

2.11. The changes outlined in the three tables are radical. They are not easy to achieve in large enterprises with a history. They are much easier to achieve in new enterprises with no social and organisational legacy. This explains, in part, the rapid growth and success of some new enterprises. The challenge is to achieve these changes in all enterprises.

2.12. The rapid pace of structural change brings risks as well as opportunities.

- Labour intensive activities employing a relatively unskilled workforce will give way to more capital-intensive industries with a more skilled workforce and person-to-person and company-to company services.

- A higher level of skilling will be required both for those joining the workforce and for those already employed. At the same time, the "durability" of knowledge acquired will be shorter, making it necessary to respond and adapt increasingly quickly. This in turn will require a radical revision of the arrangements for training trainers.

- New forms of work organisation must involve placing greater responsibility on workers, giving them more scope to realise their potential. Greater problem-solving abilities and social skills will be required, even at the lowest levels of the organisational structure.

- Changing jobs, either within an organisation or from one organisation to another, will be more common. For many this goes hand in hand with dwindling job security. At the same time, new forms of employment, in most cases less protected, are becoming widespread, such as temporary contracts, casual labour, self-employment with semi-employee status etc., making it necessary to develop and apply adequate strategies and investments to provide adjustment for workers and provide adequate social protection. One of the most important preconditions for structural change to work well is that it should be accompanied by social security.

- The opportunities for less-skilled workers on the labour market look set to diminish further. This will bring higher unemployment, lower relative incomes and increasing wage disparity. The situation is compounded by the high incidence of long-term unemployment. Therefore adequate policies for education, training, retraining and integration of long term unemployed are needed. There will be more barriers to employment as some employees will find it difficult or even impossible to adapt.

- Poverty and social exclusion may increase and new forms of marginalisation will accompany the rapid pace of structural change. There are also dangerously increasing costs, both direct and indirect, related to social exclusion. Both private and public bodies, including enterprises, must dedicate themselves to combating this trend through adequate measures in order to make a social inclusion policy a priority in all fields.

2.13. Any sustainable improvement in the employment situation in Europe will therefore also depend on how successfully economic restructuring, particularly with regard to information technology, can be promoted and organised in a socially acceptable way, and how the ability of companies to innovate can be enhanced.

2.14. Clearly it is the intention of the Portuguese Presidency to use the Lisbon Special Summit to accelerate and accentuate the work on innovation and knowledge under way via the Cologne, Cardiff and Luxembourg processes.

2.15. The key requirement for the Lisbon Council is to take a strategic view of the condition of Europe in the context of the new paradigm. The current cyclical economic recovery could provide an excuse for not taking the fundamental action which is needed if the cyclical recovery is to be translated into a structural renaissance leading to sustained growth in employment.

2.16. It is our conviction that in Europe we do have the necessary innovation, creativity, knowledge and enterprise to excel in the new paradigm. But we must release these capabilities. Obstacles must be replaced by opportunities. Penalties must be replaced by incentives. The last decade saw the liberalisation of European industries. Now we have to liberate the energies of European men and women.

3. Towards the New Paradigm - a Society of Innovation and Knowledge

3.1. The task of the Lisbon Summit is to accelerate the advent of the new paradigm. To some extent the "processes" already in place lead in that direction. The Europe of knowledge has many dimensions and a number of Community policies are designed to promote its development. Generated primarily by scientific and technological research, knowledge must be structured appropriately so that it can be spread and more readily drawn upon by ordinary people. Information technologies - themselves the product of the knowledge boom - are a powerful tool for disseminating knowledge: mastering these technologies is thus an essential step in the development of a Europe of knowledge What we need at Lisbon is commitment to a limited number of highly visible actions which will create the climate for the new paradigm, as well as accelerate progress towards it. Action will be proposed to boost innovation. As for the knowledge-based society, the proposal is to focus on knowledge acquisition through the use of information technologies.

3.2. The ESC proposes the following agenda for the Lisbon Summit

3.2.1. Adapt the social model(s) to the new paradigm

While retaining social protection, the social model in its different manifestations needs adapting to remove barriers to employment, avoid social exclusion in all age groups and reinforce equal opportunities, especially for women.

3.2.2. Achieve mass training in Information Society Technologies

To ensure employability and avoid social exclusion, specific consideration needs to be given to each generation of men and women.

3.2.3. Popularise and facilitate the growth of the enterprise culture

Issues include skills and employability for all, incentives for entrepreneurs and employees and recognition of the social and economic value of enterprise. By entrepreneurs we mean the founders and managers of SMEs, including social economy firms, exploiting new technologies and addressing new markets.

3.2.4. Help established companies to convert to the new paradigm

The tables and commentary in section 2 have demonstrated the scale of change required.

3.2.5. Adapt education and training to the new paradigm

While education and training is central to the whole concept of the new paradigm in general, and employability in particular, it is remarkable that the new paradigm in the USA is emerging from a base of generally low educational achievement. Given the support of governments and companies, the EU has an opportunity to create new employment of quality as well as quantity as a result of higher educational achievement. Investment in human capital is the basis for a society of innovation and knowledge.

3.2.6. Harness sustainable development for innovation and growth

Fully adapting the economy and culture of the EU to the principles and precepts of sustainable development involves radical change, fundamental discontinuity and both technological and behavioural innovation. Such developments are consistent with the new paradigm.

3.3. The Committee takes it for granted that the EU institutions and the Member States will fully involve the social partners and other socio-professional organisations when implementing the decisions of the Lisbon Summit. Such involvement is essential for success.

4. Adapting the Social Models

4.1. Our concern relates to that part of the social and cultural model which involves getting employed, employment protection, unemployment and post-employment retirement. A recent analysis suggests that in the EU it is necessary to recognise Rhenish, Nordic, Mediterranean and Anglo-Saxon models. These differ in their scope, the mechanics of their operation and their financing. For the purposes of this opinion it is important to recognise that these differences do actually produce different outcomes on many different scales, e.g.

- Percentage of men employed in various age ranges.

- Percentage of women employed in various age ranges.

- Percentage of young people not yet in work.

- Proportion of older people of working age permanently excluded from work.

- Etc.

4.2. Without focusing specifically on any one model we can ask some general questions about the working of all the models.

- Why are so many young people excluded from the work force in certain countries? What are the barriers to their employment?

- Why do certain models postpone the entry of young people into the work force for almost a decade - arguably the decade in which people possess most energy and inspiration?

- Why do some models lead to more single women in employment than single men, while in others this is far from the case?

- How far do different provisions for childbirth and childcare, as well as the organisation of work and family life, help and hinder the employment of parents?

- Why does cyclical unemployment convert into structural unemployment in some models more easily than others? What are the barriers to re-employment?

- What is the link between pension funding and early retirement in certain Member States? Can this linkage be broken so that the retired can be re-employed without damaging their pension expectations?

- What are the main factors that create poverty and social exclusion and what are the most efficient policies to promote the inclusion of the most vulnerable groups?

In order to find solutions and answers to these questions the EU Summit should review the process of benchmarking and exchange of good practice.

4.3. Given a framework of favourable fiscal and monetary policy, employment can be further increased when the arrangements for employment protection and social changes are well balanced.

4.3.1. The introduction of flexible working hours and other collectively agreed working time arrangements should not only be determined by companies' profit-based time management criteria, but should also give employees of both sexes more say in the way their individual working hours are structured. Making working hours more flexible broadens businesses' scope for action, but should also give employees more scope to improve coordination of their professional and private commitments. Increasing the options for employees as regards working hours also opens up new avenues in the field of employment policy.

4.3.2. As far as the cost of employment is concerned, the main problem arises in those models where social costs are recovered by a tax on employment. There is need for careful reform of these financing structures in the European context.

4.4. Pensions are a particular issue in many Member States' social models. The ratio of employment-age men and women to retirement-age men and women is deteriorating continually. Yet the retirement age is falling, the young are unemployed, and unfunded pension liabilities are a growing embarrassment and a potential cause of higher social charges. All three issues need resolving:

in the short term

- use early retirement to facilitate downsizing and to create employment for young people;

in the longer term

- bring the young into the workforce;

- reverse the trend towards early retirement;

- restructure the organisation and financing of pension systems.

4.5. Caring for future generations is essential for a future social model. With regard to children, policies to combat child exploitation should take into consideration the holistic, preventive, proactive approach provided by the ESC Opinion on this matter (CES 976/98). In this context the Committee praises and expresses its strongest support for the goal set by the Portuguese Presidency to eliminate child poverty by 2010.

4.6. As comparative studies of employment policy in the various Member States show, an integrated approach involving economic, fiscal, structural and labour market policy is required to achieve sustainable successes in the fight against unemployment. This policy mix also entails securing the future of businesses and jobs through social, organisational and structural innovations in the private and public sectors. Economic and social innovations are needed in businesses instead of unimaginative job-cutting or relocation to low-wage areas.

4.7. It is clear that the new paradigm must embrace the social model. The EU must hold onto its "acquis". At the same time the mechanics of the various models must be addressed. Underpinning all our thinking should be the belief that if, in the new paradigm, we really can build a society of innovation and knowledge, then our ability to create new sustainable jobs will considerable. The social model should be mainly focussed on giving an adequate framework and protection to enable all workers to best develop and apply their skills. In the new paradigm the social model should not be defensive; it should be infused with optimism and a conviction that we can rely on the enterprise of our people. Without that, no model can help us.

4.8. While considering how the existing EU social models need to be adapted to the new paradigm, it will be necessary, as an extension of this work, to consider how the accession states from Eastern Europe and elsewhere can be fast-tracked towards the paradigm. Clearly this involves reformed business structures as well as an adequate and stimulating social framework.

4.9. We endorse Section 4 of the Document of the Presidency where it says that "to make use of [our]... employment potential also requires stock to be taken of the European social model, which is one of the strong suits of the European project. But there are two prerequisites for its continuation in the context of globalisation: the renovation of its economic base, building new competitive factors, and the modernisation of its very structure. This will make it possible to find a new synthesis with more jobs and greater social cohesion."

5. Mass training in Information Society Technologies

5.1. The personal mastery and application of IST skills goes beyond both education and work. Like the ability to drive a car in the 20th century, they are basic life skills for the 21st century.

5.2. In the 20th century the slow evolution of mass motoring meant that driving skills could be acquired when needed by each generation. The full development of the internet-based information society will take less than a generation. Therefore familiarisation must be accelerated. This requires both government and company initiatives.

5.3. Mass familiarisation with the Internet and e-mail offers considerable social benefits. It offers a new world of opportunity to the elderly, the disabled and the sick. Trends also suggest that the individual consumer will be better served in the foreseeable future by e-commerce than by conventional distribution channels. This means that individuals unfamiliar with the internet are likely to be disadvantaged, which may mean that the already disadvantaged could become more so.

5.4. Civil society generally needs to develop an appreciation of the risks and opportunities involved in IST so that IST can be developed in accordance with social needs. Therefore there must be both teaching and learning about the opportunities and limitations of ISTs. A virtual society is no substitute for a real society.

5.5. How should mass familiarisation be achieved?

5.5.1. Familiarising the general public with IST is not simply a question of training and acquiring the relevant skills. It is primarily a question of changing the way people think.

- Changing the way people think about accessing knowledge and information (wealth of information - speed of access);

- Changing the way people think about processing information and drawing conclusions;

- Changing the way people think about the objective value of each piece of information and knowledge, particularly with regard to the present need constantly to filter information and continually to gauge the reliability of knowledge.

With this in mind, training alone is not enough to familiarise the general public with IST. What is needed is education, and this on an ongoing basis.

5.5.2. The generation under twenty should learn IST skills in the formal education system. Where teacher understanding, teacher training and school equipment are not yet up to standard, crash programmes of improvement should be introduced. In this context, the considerable skills of many students should be recognised and harnessed.

5.5.3. The rest of the population will have to undergo a process of reeducation and training. Responsibility for this, as well as its implementation, will inevitably be down to the schools and institutions of lifelong education and training. It is clear that immediate measures and adjustments are required to achieve this.

5.5.4. A large proportion of employees are learning in the work place. Special programmes are in place in a number of Member States. This is reinforced by the influence of school age children. Schools have the potential to teach any of their parents not using IST at work.

5.5.5. However, a large proportion of the working generation just under sixty may be less exposed to and receptive to IST at work. Early retirement may mean that some of this generation will have bypassed IST completely. There is the particular issue here of re-engaging this generation into work.

5.5.6. The generation over sixty will have been largely by-passed. Yet without IST access it will be socially vulnerable.

5.6. The recommended actions for government are:

5.6.1. Ensure quality of IST education in schools with targets set to ensure that the skills are universally acquired; this will require a resource injection for the training of teachers, amongst other things.

5.6.2. For those at work, encourage schemes for IST education and training, if necessary in advance of the actual need. All employees should have the opportunity to acquire these skills and governments and companies will need to be tough minded to ensure to do so.

5.6.3. Provide employment-oriented IST education and training for the unemployed, including those who have retired from the workforce but can be re-engaged. In this context, it is also necessary to provide alternatives to IST skills for that minority that is not capable of acquiring these skills.

5.6.4. Provide community-oriented IST education and training for individuals excluded from the workplace and for the elderly, the disabled and the sick.

5.6.5. Mass penetration may also require provision of hardware at low or no cost. Unions and companies can use their purchasing power to buy cheaply on behalf of the employees. The community (5.6.4 above) may have to rely on the government and third parties. The new trend to develop sub PC devices should help the economics of internet usage.

5.6.6. The Lisbon Summit could commit Member States to these actions.

6. The enterprise culture

6.1. The Summit Conclusions should recognise the social and economic role of enterprise and entrepreneurs. These provide an important channel for the exploitation of technology, innovation and knowledge.

6.2. Lisbon should set out to remove the obstacles to enterprise, while at the same time gaining approval for its social and economic role.

Actions to promote enterprise:

6.2.1. Every school at every level should launch enterprise initiatives. Careers advisers should be trained to communicate the challenge and excitement of business careers. Young people leaving education should have the capability to become entrepreneurs in their 20s, when they are at their most creative.

6.2.2. Fiscal changes to provide incentives for entrepreneurs and their employees are necessary. A fiscal environment really attractive to venture capital needs to be created. All of this should be aimed at SMEs and the creation of new enterprises.

6.2.3. A regulatory revolution to remove the obstacles to company formation and development should be launched. By the end of 2000, reduce the number of documents needed to form a company to the absolute minimum needed in any Member State.

6.2.4. Enterprises have a finite capacity to deal with regulation. They cannot continue to absorb new regulations year after year. Even larger companies have difficulties to cope with the inflation of administrative formalities, although the cost is proportionally less than for SMEs. The regulatory trend for companies, and for small companies in particular, must be reversed and the burden reduced.

6.2.5. Politicians will need to act dramatically to stem and reverse the tide of regulation sweeping over business and society. Because government departments are compartmentalised, they cannot assess the total regulatory burden imposed on business by all departments. The European Commission and most Member States have studied the issue for years, but to very little effect. It will take draconian political action to have any effect. Member States should recommit themselves to this effort at Lisbon with an efficient monitoring process and timetable. A Small Firms Charter as recently advocated by several sources would be a highly visible and effective way of addressing these issues and bringing most of the strands together.

6.2.6. It is particularly important not to strangle e-commerce at birth. The explosive growth of dot.com companies is a major source of innovation. They need encouragement. The determination of the Commission to drive forward its e-commerce legislation is very welcome in dot.eu. The Committee welcomes the eEurope initiative(2) and the Communication on Strategies for Jobs in the Informations Society(3) which the Commission has recently presented in view of the Lisbon Summit.

7. Established Companies and the New Paradigm

7.1. Change is a constant for business. Every company has within it the potential for failure. Market forces continually change the rules. Companies must innovate to survive.

7.2. Innovation can apply to all areas of business operation: research and development, products and production, markets and marketing and service provision. Where this involves the organisation of work, innovation will be particularly needed in the technical, structural and social spheres.

7.3. Innovation means change. In the new paradigm change is a constant. Business society and government must accept it readily. Enterprises must be more flexible and adaptable, less rigid and hierarchical.

7.4. Action points include:

7.4.1. The remaining distinctions between blue and white collar workers need to be reconsidered, since the flexible company aims at one class of employee.

According to Article 13 of the Amsterdam Treaty, discrimination based on sex, racial or ethnic origin, religion or belief, disability, age or sexual orientation, should be abolished.

7.4.2. Enterprises must achieve optimum competitive advantage from information society technologies. As a result management may be de-layered, employees empowered, new jobs created, old jobs replaced. Such changes will have to be made sensitively. Accordingly, in order to mitigate the negative consequences and increase the acceptance of change, workers will need help from government, unions and management for re-training and re-employment.

7.4.3. A skilled and adaptable workforce will be essential for the new innovative work environment. Currently only a minority of workers have the skills to embrace the new technologies and they are able to attract higher rewards. The majority are in unskilled and semi-skilled jobs and they are less well rewarded. There will be fewer unskilled and semi-skilled jobs in the future and it will be necessary for all workers to develop their full potential through training and retraining.

7.4.4. The Committee reiterates its request that all companies and public sector bodies employing over 1000 employees within the EU prepare a "managing change report" on a voluntary basis(4) to provide information on structural changes foreseen and a pro-active outline of proposed change management. Employees and their representatives should be involved in drafting and implementing the report.

7.4.5. In helping to anticipate and plan for sectoral and regional economic development the Committee also invites the Commission to make a feasibility study on the creation of a European Observatory on Industrial Change(5).

8. Adapting Education and Training to the New Paradigm

8.1. Education and training should achieve the following objectives:

(a) at the individual level:

- fulfil personal potential

- ensure employability

(b) at the national level:

- fulfil population's potential

- develop the skills necessary for the new paradigm economy and society.

8.2. The basic preconditions for fulfilling personal potential is that the school system equips individuals to shape their own lives successfully, assert themselves in society and at work and develop social skills and the readiness to accept responsibility. In order to exploit the potential of new technologies to the full, it is vital, above all, to have a good to very good basic knowledge and mastery of basic skills such as speaking, reading, writing and numeracy. Lack of these skills is the major reason for social marginalisation. The challenges of the modern world of work do not allow human skills to remain untapped. A comprehensive action plan for literacy and numeracy at all ages for all people must have the utmost priority in the knowledge society. Special attention needs to be paid to immigrants and ethnic minorities.

8.3. More thorough preparation for the world of work by the education system would help focus young people on their personal employability while also highlighting self-employment and entrepreneurial opportunities. At the same time they would learn about the economic and social contribution of business and the obligations of business to society.

8.4. To promote equal opportunities in the learning society, it is essential that women have greater access to new technologies. It is just this kind of technology to which women in some Member States still have little or no access when growing up at home or in school. This must be rectified in future to provide equal opportunities for men and women and to prevent women being pushed out of the labour market. Whereas women have benefited in the past from the expansion of the service sector, it must be assumed that the proportion of men working in such areas will grow in future. One reason for this is that, in many cases, ongoing rationalisation in typically female service occupations is creating more jobs for men in new service sectors closely linked to production. This being the case, it is important for women to acquire skills so that they can hold their own in these rapidly growing market sectors in the future.

8.5. It would be a mistake to allow our concern for employability and work place skills to downgrade the status of academic education. Individuals with important academic intellects should ideally complete academic education to the highest level before switching to a profession. Many of the best brains in business achieved first class academic results before entering business. Well trained academic minds can contribute to all spheres of national life and are needed to play a leading role in the knowledge society.

8.6. An economy seeking to exploit innovation and knowledge must be underpinned by science and technology. An adequate supply of advanced scientific, technical and managerial skills is needed and needs to be widely diffused in the workforce. Science and technology courses are not sufficiently attractive. A new approach to science and technology teaching and learning at all levels in the education and training system must be a high priority and a closer link between the theoretical study of science and its application in industry should be ensured.

8.7. The ESC is currently producing an opinion on "The European Dimension of Education: its nature, content and prospects" in which it will develop its proposals. At Lisbon the EU should commit itself to upgrading the skills of its existing workforce via Member State and company initiatives while at the same time promoting increased understanding and support for the enterprise culture.

9. Sustainable Development

9.1 It would be difficult to conceive of a new paradigm which did not encompass sustainable development. It must be a "sustainable" paradigm and to be so it must be based on innovation and knowledge. Amongst the major concerns are:

9.1.1. The control and reduction of waste and pollution on land, in water and in the atmosphere.

9.1.2. The sustainable use of land and water, involving agriculture, forestry, horticulture, urbanisation, industrialisation, transport, tourism and sport.

9.1.3. The development of sustainable fuel resources and the use of organic fuel and other limited natural resources.

9.1.4. That food production on land and at sea be better balanced to demand and sustainability, with increased attention to the quality of the food chain.

9.1.5. A better balance between public and private transport, supported by a more rational approach to spatial planning and land use.

9.2. Development of the relevant knowledge base provides the means for improved management of sustainability. There are opportunities for public and private research but public initiatives are imperative.

9.3. There is a vast potential for job creation arising from the exploitation of technologies for environmental protection and sustainable development.

9.4. Technical, industrial, behavioural and cultural innovations will all be needed if the concerns detailed in 9.1 above are to be achieved. Successful innovation should lead to the revival of existing companies and the formation of new and successful SMEs. Member states will need to establish appropriate incentives (both carrots and sticks) to stimulate such innovation.

9.5. The prospects for a durable economic, ecological and socially stable future will improve if a broad basis of technological and organisational expertise can be built up and developed further. One of the requirements for this is a functional and effective system of innovation in which the interplay between research and education, between training, production and organisation, and between technology transfer and state policy on innovation takes on a variety of forms.

9.5.1. It is also necessary for this purpose to give more support in Europe, in terms of breadth and depth, to research and development as the seedbed and basis for future innovations(6). At the same time the associated careers must be made so attractive that the most gifted candidates can be attracted and remain in Europe. Already in schools there must be more qualified teachers of mathematics and science subjects (and also, if need be, of technical subjects).

9.6. The Lisbon Summit should charge the Commission with the responsibility for examining the issues raised in section 9.1 in the context of existing EU programmes and commitments so that the Council can consider further actions to ensure that the new paradigm is sustainable.

9.7. The sustainable dimension will be a particular challenge for the accession of new Member States.

10. Government and the New Paradigm

10.1. Considering the issues highlighted in this opinion, and the plethora of Member State initiatives identified, the key issue which emerges is whether we do not also need a new paradigm for government itself.

10.2. The classical view that the state is sovereign as a service provider must be superseded by a cooperative relationship between the state and society. The public expects from the state not only that rules and regulations are observed but also that services are provided properly and efficiently.

10.3. A modernising policy by the state must

- be focused more on decentralised cooperation networks,

- give greater prominence to economic efficiency and efficacy.

This includes greater efficiency in administrative implementation and weighing the economic case for alternative methods of application.

10.4. The restructuring of the state and public administration is an altogether complicated and lengthy task. Proposals on way ahead could be set out in a separate ESC opinion.

Brussels, 2 March 2000.

The President

of the Economic and Social Committee

Beatrice Rangoni Machiavelli

(1) Womack, James P., et al. The Machine that Changed the World, 1990.

(2) eEurope - An information society for all, COM(1999) 687 final.

(3) COM(2000) 48 final.

(4) See ESC Opinion on "Managing Change - Final report of the High Level Group on economic and social implication of industrial Change", OJ C 258, 10.9.1999.

(5) Ibid.

(6) See also Commission Communication "Towards a European research area" (COM(2000) 6 final).