Opinion of the Economic and Social Committee on the "Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions: Acting Locally for Employment - A Local Dimension for the European Employment Strategy"

(2001/C 14/13)

On 7 April 2000 the Commission decided to consult the Economic and Social Committee, under Article 262 of the Treaty establishing the European Community, on the above-mentioned communication.

The Section for Employment, Social Affairs and Citizenship, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 3 October 2000. The rapporteur was Mr Vinay.

At its 376th plenary session (meeting of 19 October 2000), the Economic and Social Committee adopted the following opinion by 103 votes in favour, with 2 abstentions.

1. Introduction

1.1. The aim of the Commission referral is to spark debate and gather comments, proposals and suggestions to help define, as part of the European Employment Strategy, the options and possible format for an employment development scheme, organised and supported at local level, by analysing the situation which has emerged over recent years both at Community level and within individual countries.

1.2. For some time now most Member States have realised the opportunities that exist at local level for developing employment. In areas where procedures had not previously been decentralised, action is particularly effective if it goes hand in hand with decentralisation.

1.2.1. Whilst the European Union's employment strategy has essentially focused on national efforts, support has also been given to experimental initiatives at local level (Local Development and Employment Initiatives (LDEIs), Territorial Employment Pacts, the "Third System" and the Local Social Capital pilot actions).

1.2.2. Even closer Community attention to the local level can be seen in the new Structural Funds Regulation of June 1999. Not only does the ERDF specifically aim to create jobs by means of endogenous growth and by promoting territorial employment pacts and new employment sources, but the ESF also specifically refers to "initiatives to support local employment and territorial employment pacts". Moreover, the Commission Proposal on Guidelines for Member States' employment policies for the year 2001 stresses the need to involve all regional and local players in identifying all possible opportunities for creating new jobs. The Joint Employment Report for the year 2000 also highlights the need to take decisive steps towards decentralisation in order to boost local employment strategies.

2. The Commission Communication

2.1. Whilst the Commission stresses the positive effect of improved coordination of EU and national policies in the employment strategy, it considers it essential to provide each institutional or sectoral level with the scope and instruments it needs to best achieve the fundamental objective of fighting unemployment. This objective is recognised by the Treaty of Amsterdam as a key issue for the entire EU and it must be taken on board in all Community policies and actions.

2.2. The communication goes on to examine all the objective and prospective problems in involving the local level in the European Employment Strategy.

2.2.1. The communication reiterates the fact that, even in comparison with macro-economic and technological changes, the potential for action at local level has turned out to be considerable. The local level is more closely linked with the development of endogenous resources and is more able to deal with new economic and demographic demands, regardless of the fact that, owing to the nature of their powers and remit, local authorities are already major employers, chiefly in their own local areas.

2.3. It should also be remembered that local authorities now tend to be run on more managerial lines, although this is not consistently the case across the Member States or even within individual countries. The local electorate thus tends to judge the local authorities partly in terms of their success in tackling the unemployment problem. Consequently, training initiatives and back-up measures for small businesses, etc. have sprung up alongside national policies. There is thus a need to identify better coordinated structures and more consistent and advanced instruments to allow local authorities to include the employment question in their work.

2.4. In addition to the local authorities, a key role in job creation is played by firms, especially small firms and micro-enterprises, which have a positive impact on employment. They must be provided with support and back-up measures, as well as preferential services and cuts in red-tape.

2.5. A particularly interesting sector at local level is the "third system", or social economy. This developed as an instinctive response to collective needs which were not being met by public services, or as back-up and regeneration initiatives in the unfortunately numerous social problem areas. Although this sector's growth rates differ across the Member States, due partly to the discrepancies in the basic situation, it now accounts for almost 7 % of all employment. This is without taking volunteer work into account. If the latter were converted into full-time salaried equivalents, the third system would account for 10 % of the workforce.

2.5.1. There is thus all the more need to identify potential areas for the sector to expand, and the organisational and financial weaknesses which stunt its growth.

2.6. The communication addresses the role, potential and possible development of the public employment services; the current and potential role played by the social partners; and the possible support measures which the regional and national authorities could provide for local initiatives.

2.7. The communication points out that, since the European Council in Vienna decided to make the ESF the main instrument for supporting the implementation of the NAPs (National Action Plans for Employment), the new Regulation can now support local partnerships, and more specifically local development and employment initiatives. The Commission specifies that it is not aiming to consult just the institutions of the European Union on the options for further action to boost the local dimension of the European Employment Strategy - which is of course the object of the communication. It also invites contributions from all individuals or representative associations interested in the development of employment and in the issues discussed in the document. Moreover, the Commission will support a series of transnational Seminars, and the consultation period will end in October 2000. Conclusions will be drawn in December, at a Conference organised in Strasbourg by the French Presidency, where the results of the consultation and future prospects will be discussed.

2.8. A budget heading (B5-503) has been made available for all related initiatives, and will also be used to: highlight the potential of the local action plan strategy as part of the European guidelines; raise awareness of the potential for job creation at local level; develop transnational cooperation; promote the identification and exchange of good practice. At a later stage, these actions could be extended to include promotion of the third system under the terms of Article 6 of the ESF.

3. General comments

3.1. The Committee particularly welcomes the Commission communication in terms of its subject matter, the in-depth approach to the issues, and its willingness to engage in wide-ranging consultation to gather further proposals.

3.1.1. Employment policies - hitherto based at Community and national and regional level - would undoubtedly be sharpened up by the introduction of local action plans which the many interested or potentially interested players could identify with and play their part in, according to their particular areas of responsibility and competence and the different regional and national circumstances. This would also boost local involvement in the European employment strategy, by giving local players a greater role in analysing and establishing the NAPs. Such a process would obviously have to respect the subsidiarity principle, and ensure that local action is compatible and consistent with national guidelines and priorities. As a result, policies should be better geared to achieving the desired results. The process should also spawn interesting new proposals that are more in tune with local situations and with the potential and needs of local residents.

3.1.2. Numerous Committee opinions, some of which were adopted some time ago(1), have stressed the need to harness local development - and consequently employment - potential. And the importance of the local level in employment policies under the European Employment Strategy has been underscored even more strongly since the Amsterdam Treaty(2). The Committee thus firmly supports the Commission's initiatives, to which it intends to add some further comments.

3.2. The drive to coordinate Community, national and local employment policies does not just raise the profile of the obvious players, i.e. the local authorities and economic partners such as SMEs, micro-enterprises and the social economy. It also makes it possible to make best use of the indispensable contribution of the social partners, and management and labour organisations, which have a particularly important role to play at local level, as can be seen for example from the experience of the Territorial Employment Pacts. The pacts also benefited from input from grass roots organisations, whose involvement is important from a social and political point of view.

3.2.1. It is this team approach which will make it possible to accomplish all four pillars of the employment guidelines: increasing people's employability; developing entrepreneurship; enhancing flexibility for firms and workers; boosting equal opportunities policies for women and men.

4. The local players

Local authorities

4.1. The Commission document constantly refers explicitly to local authorities as the tier of government which is closest to people's needs, yet which are not allowed to decide their own employment policies even though they have - directly or indirectly - a significant impact on local employment. Moreover, it has emerged from a consultation launched by the Commission that a sizeable number of the 80000 European local authorities suffer from serious information deficiencies, as regards both the European Employment Strategy and initiatives which can be harnessed locally to create employment opportunities. Clearly, this does not apply to major local authorities, nor to the regional level, but to the many smaller authorities.

4.1.1. An enhanced profile for local action as part of the European Employment Strategy should aim to develop proposals and an action capability which fleshes out the current "top-down" action with the type of "bottom-up" approach which has already been used to good effect when preparing the Community Support Frameworks for structural policies in the period 2000-2006.

4.1.2. In order to exploit that ability to take the initiative which could make the local dimension a key factor in improving the European employment picture, and even from the point of view of subsidiarity, there is perhaps a case for making the regional level a kind of go-between. The aim would not be to centralise definition and choice of possible initiatives, but to support, build on and coordinate initiatives which would still continue to be managed at local level.

4.1.3. It is worth remembering that many of the territorial pacts which have received funding are the fruit of a joint initiative involving several local authorities and a variety of partners. One should also not overlook the role of groupings of local authorities or other associations based on particular geographical or socio-economic conditions (e.g. upland authority associations). The regional level could also play a role in providing training and information - particularly for administrators in rural authorities - on the national and Community instruments which can be harnessed in various situations. Local authorities which have already taken steps to improve their knowledge of local government back-up instruments and to disseminate best practice, tend to be members of networks of cities, which play an important role in spreading information.

Enterprises

4.2. The growth in private sector non-agricultural SME- and micro-entrepreneurship over recent years, which has shown a significant ability to create jobs, is inevitably linked to the local context and as such is evidence of local potential. It is thus vitally important to identify back-up instruments for this widespread type of entrepreneurial activity, particularly in the start-up phase, and introduce procedural and tax concessions and easier access to credit.

4.2.1. While local and regional authorities can clearly help local business development by reducing red tape, it is equally and perhaps vitally important to create general conditions that facilitate access to cheaper credit, for example by means of public-private partnerships. However, mobilising local and national resources is not enough; it is essential that people should also be more widely aware of the funding opportunities offered under Community policies.

4.2.2. Training initiatives - as opposed to information-based initiatives to foster a "spirit of enterprise" in young people - are particularly necessary for promoting growth of small local businesses. "Territorial training initiatives and agreements" must be launched and encouraged. These, by coordinating the input of local authorities, social partners, public employment services, social economy bodies, and research centres with the schools network, should aim to enhance cultural awareness, disseminate know-how, introduce the technologies of the information society, encourage innovation in manufacturing and services, and promote professionalism and employability, with a view to launching new businesses and to hiring or redeploying workers in firms which are already in business. Such schemes are entirely consistent with the Lisbon European Council decisions on training.

4.2.3. Action is particularly effective on the local economy level, both for creating a new class of entrepreneurs and workers who are fully conversant with the way that particular economy is developing, and for restoring two qualities to the socially excluded: functioning and capability, i.e. the chance to perform a productive role in society, and the skills they need to seize the particular opportunities which arise. Training must not just provide the skills needed today and tomorrow; it must sow and nurture a culture of adaptability, which will enable the individual to cope with changing working patterns.

4.2.4. This applies equally to micro-enterprises, which are also increasing in number and employing more people, but which often risk being seen as a quick-fix reaction to job losses rather than a reflection of a real spirit of enterprise. It is clear, however, that the Commission's figures on the growth of small- and micro-enterprises would be easier to interpret if they included information about their short, medium and long-term market presence.

The social economy

4.3. The role which the third system or social economy or third sector can play in local employment development is in some ways very simple and in others very complicated. While it is generally accepted that these terms apply to autonomous, locally managed activities which are neither public- nor private-sector oriented and aim to respond old or new local needs that have been left unmet, there remains a pressing need to agree on a common definition.

4.3.1. The most common definition is based more or less on the statute of the organisations operating in the sector or system: cooperatives, associations, mutuals and foundations. However, it is not able to cover all the different situations which exist in the Member States and even within individual countries.

4.3.2. The best way to reach an agreed definition of what the third sector actually involves is to look at the type of work carried out, rather than attempting a "statute"-based definition. In most cases, these organisations are socially oriented, often benefiting from local authority funding, and are active in social and welfare services, training, the environment and leisure, and in getting people from specific disadvantaged backgrounds back to work. As such, they have a strong local dimension. The Committee suggested in a recent opinion that the main criterion for defining social economy organisations should be their not-for-profit focus on people-centred objectives and activities(3). It could also be added that they contribute significantly to social cohesion, since these organisations are particularly successful with groups who suffer discrimination in the labour market, such as the disabled, immigrants and the socially excluded.

4.3.3. In addition to tax incentives and funding arrangements, at least in the initial stages, training is one of the measures which operators in this sector will need if the social economy is to create plenty of more solid job opportunities. This will enable them to complement their initial enthusiasm and hands-on experience with managerial skills - an area in which these organisations have proved to be weaker. The already proven ability to identify new needs and to find new ways of satisfying the needs arising from changing demographic trends, should also be encouraged. However, a strong culture of continuously assessing the efficiency of social action must also be promoted, and this is the role of the local authorities.

Public employment services

4.4. In most Member States, the on-going modernisation of the public employment services has led to greater decentralisation. Local employment offices are thus better able to adapt their resources to the local labour market.

4.4.1. As the public monopoly on the supply of employment services has steadily been lifted, competition from new private players has also given a further spur to renew and bolster the role of public employment offices. These offices must now provide a force for rationalisation and linkage between all private and public bodies working to develop employment and entrepreneurship in their area of operation. The public employment services' initiative must address both the supply and the demand side.

4.4.2. In order to improve the overall quality of public employment services, generalised steps are needed to upgrade their staff and introduce and disseminate new technologies. In particular, local links should be established with schools, universities, research bodies and the social partners. Labour market data should be constantly collated and processed for monitoring, and the quality of service should be systematically assessed.

4.4.3. Public employment services obviously play a key role as regards employability. They can also play an important local role in equal opportunities, as well as carrying out specific schemes to promote the other two pillars of entrepreneurship and adaptability.

The social partners

4.5. While all the above comments confirm the importance of the role of the social partners in applying local employment development strategies, it needs to be specifically stressed. Indeed, the European Council in Feira stated only recently with reference to framing the NAPs, that "the social partners are invited to play a more prominent role in defining, implementing and evaluating the employment guidelines which depend on them, focusing particularly on modernising work organisation, lifelong learning and increasing the employment rate, particularly for women."

4.5.1. So while this local action is a strategic element of the European Employment Strategy and of the individual NAPs, it must be built on by defining a joint approach and common objectives for the social partners, to enable them to develop a sort of "process within the process" within the reference frameworks and objectives established by the local authorities. A special role should be accorded to any bilateral sectoral associations, as they can offer valuable local assistance with training schemes, employment growth, support in crisis situations, flexibility management, and organisational back-up for small businesses. The social partners can also identify the added value of their specific input, make regular assessments and disseminate the benchmark results of their joint action, with particular reference to the adaptability pillar.

5. Specific comments

5.1. In general terms, if some areas achieve greater economic success than others, this is largely because individuals or social groupings have taken consistent systematic action, backed up by product diversity and the cohesive role played by the public institutions. A local development model that fits in with general employment policies should therefore take this as its starting point, and should aim first and foremost to pinpoint and assess local resources and situations.

5.1.1. However, some serious problems need to be explicitly highlighted as they often colour the local employment picture. These are undeclared work, insecure work and social exclusion.

5.1.2. Undeclared work is fairly common in sectors that are labour intensive and involve local economic networks(4). It is also widespread in sectors with a high proportion of small businesses, and in the social economy (not to be confused with the voluntary sector). The main cause of undeclared work, as the Commission has emphasised in several Communications(5), is the burden of tax and social security contributions, and this problem needs to be addressed, although it obviously cannot be solved at local level. Pending the introduction of national provisions to regularise such work, employment policy measures should include steps at local level to ensure compliance with the rules, backed by rigorous checks.

5.1.3. Article 1 of the new ERDF Regulation states that the Fund contributes to "... the creation of sustainable jobs". Local employment policy should adopt a similar approach. Measures should be taken to provide real new job opportunities, making sure that the people entering or returning to employment do not merely fuel the numbers of the "working poor".

5.1.4. Social exclusion is not caused simply by economic factors such as poverty, long term unemployment and bad housing. Cultural, generational, technological, environmental and health-related factors also come into play. This is a challenge which local employment policy must definitely address, irrespective of any Community or national schemes, because experience has shown the importance of an integrated approach and the effectiveness of partnerships that actively involve the socially excluded alongside local authorities, social partners, NGOs and voluntary associations.

5.2. One possible brake on development potential is red tape. The widespread trend towards decentralisation may help here, but other measures are also needed. Procedures for new businesses should be simplified and qualified advisory/training services should be set up to provide administrative and marketing support for small business start-ups in the crafts and local service sectors.

5.2.1. The service sector (personal and, to a lesser extent, community services) currently offers the greatest potential for new jobs. However, one should not overlook more traditional sectors, or the upgrading of craft traditions. Environmental sustainability policies also provide scope for new jobs. Moreover, one should not underestimate the potential of local employment initiatives and micro-enterprises to galvanise entrepreneurial activity, for instance in fields associated with information technology. The rapid development of information and communication technologies and the ability to use them can determine the success of a possible initiative or the loss of more jobs in a particular area. The new regional programmes of innovative measures, recently unveiled by the Commission(6), form a vital framework for local employment strategy.

5.2.2. The communication focuses almost exclusively on the potential role of small and micro-enterprises. However, medium and medium-large companies should not be excluded from the picture(7). The possibility of regular contact between the local authorities and the social partners should not be ruled out, as it is not unusual to see a local economy suddenly facing a crisis caused by decisions taken far away and without warning. Moreover, some local economies can become attractive thanks partly to the presence of businesses which are large employers, catching the eye of medium-sized and medium/large-sized firms.

5.3. The need for financial support from the local authorities is clear, but problems arise because arrangements for the allocation of budgetary resources by central government vary from country to country, as do the tax-raising powers of local authorities. There must be some guarantee that funding will be available, as otherwise no strategic measures are possible. At Community level, in addition to the specific references in the abovementioned articles of the ERDF and ESF Regulations, all the possibilities offered by the Structural Funds and Community Initiatives should be tapped, especially ESF programmes. Support for local employment initiatives is a horizontal priority of the ESF, and it must be provided in practice. It would also be worth exploring the scope for using new funding mechanisms for the small grants referred to in Article 4(2) of the ESF Regulation, earmarked specifically for NGOs and local partnerships.

5.4. It is vital that an effective network be established for disseminating good practices at local level. It is also worth publicising experiences that did not achieve the desired results, as lessons can be drawn from the mistakes. At all events, there should be a periodic appraisal of the results achieved, not only in terms of jobs created but also of their quality, and an analysis of the progress, growth or "mortality" of small and micro-enterprises.

Brussels, 19 October 2000.

The President

of the Economic and Social Committee

Göke Frerichs

(1) ESC opinion on Europe 2000+, Cooperation for European territorial development, OJ C 301, 13.11.1995; opinion on the role of the European Union in urban matters, OJ C 30, 30.1.1997.

(2) Opinion on the Commission Communication: Towards an urban agenda in the European Union, OJ C 95, 30.3.1998; own-initiative opinion on Territorial employment pacts, OJ C 407, 28.12.1998; opinion on the Proposal for guidelines for Member States' employment policies 2000, OJ C 368, 20.12.1999; opinion on the Urban Community initiative, OJ C 51, 23.2.2000; own-initiative opinion on the social economy and the single market, OJ C 117, 26.4.2000.

(3) OJ C 117, 26.4.2000 own-initiative opinion on the social economy and the single market.

(4) Opinion on the Commission communication on undeclared work, OJ C 101, 12.4.1999.

(5) Notably COM(1998) 219 final.

(6) Draft communication of 11 July 2000 from the Commission to the Member States on the regions in the new economy: Guidelines for innovative measures under the ERDF in the period 2000-2006.

(7) Opinion on Managing change - Final report of the high level group on economic and social implications of industrial change, OJ C 258, 10.9.1999, p. 1.