WRITTEN QUESTION E-1466/03

by Herman Schmid (GUE/NGL) to the Commission

(29 April 2003)

Subject: Downsizing

Between 1993 and 1995, nearly two million jobs disappeared in the USA as a result of downsizing. The cutbacks affected companies which were performing well (Thurow, The Future of Capitalism, London 1996). The aim of downsizing is to reduce staff and boost efficiency. Several studies show, however, that there has been no improvement in the efficiency of the companies concerned and that, more often than not, the measures have resulted in economic inefficiency (Pfeffer, Flexibility on the labour market: Do companies really know best? Stockholm 2000, Swedish Council for Working Life and Social Research). In addition, there has been an increase in ill-health among the staff remaining after the cutbacks. Downsizing tends to produce stress since the chances of promotion can be expected to decrease as the company levels down and the work can be expected to intensify if fewer staff are to carry out the same amount of work as previously (Jackson, Downsizing and lean organisations in Barklof (ed.) The pain threshold? An anthology concerning the effects on health in lean organisations, Stockholm 2000, Swedish Council for Working Life and Social Research).

Does the Commission consider downsizing to be a sustainable strategy for growth and new jobs?

Is downsizing consistent with the European employment strategy's objectives of full employment, social inclusion and quality work?

What alternative ways of attaining the objective of full employment can the Commission envisage?

Answer given by Mrs Diamantopoulou on behalf of the Commission

(23 June 2003)

The European Employment Strategy contributes to the Lisbon agenda for Europe to become the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion.

The EC Treaty provides that Member States remain responsible for their employment policies. Consequently they are expected to design their employment policy mix in such a way as to implement the Employment Guidelines and help to achieve the Union-level objectives, according to national circumstances and in line with the overall recommendations set out in the Broad Economic Policy Guidelines. The latter aim at economic stability and sustainable growth and take due account of the recent changes in the economic climate and their implications for each individual Member State.

In the global economy, the achievement of more jobs is dependent on a competitive and dynamic business community to new economic structures and on high adaptable productivity in the economy at large. In this context, it is the role of the Employment Guidelines to help Member States to design favourable framework conditions for job creation which are compatible with sustainable economic growth, whereas the individual enterprise has to decide how to operate and to adapt to a changing economic environment. The Commission does not consider that downsizing per se in general is inconsistent with the European Employment Strategy. Downsizing and cost reduction is often needed for the company to survive and preserve the sustainability of the remaining workplaces. However, the Employment Guidelines promote measures and flexible solutions which can act as alternatives to downsizing or soften the negative effects of restructuring for the individual worker, including the development of human capital to strengthen the adaptability of the company and the individual employee. Moreover, the references mentioned by the Honourable Member just confirm the importance for the European Employment Strategy to give increased consideration to the issues of job quality and Corporate Social Responsibility.

In its reply to the oral question H-0281/03 of Mr Schmid given during question time of Parliament's May 2003 plenary session(1), the Commission already illustrated how several of the Employment Guidelines contribute to the dynamism of businesses to create and maintain jobs, and to meet needs of restructuring in a positive way conducive to employment. It should also be added that the Employment Guidelines call for the involvement of the social partners to contribute to the implementation of the Guidelines, in particular concerning the management of change and adaptability.

The Commission would like to refer the Honourable Member to its reply to his Written Question E-1459/03(2), in which it detailed a number of Community instruments and on-going policies aiming at addressing the social impact of corporate restructuring.

In addition to that, the Commission would like to underline the fact that one of the main objectives of those instruments and initiatives, and in particular- the on-going social partners' consultation on corporate restructuring, consists precisely in promoting an anticipative and long-term approach to the development of employment within companies, rather than basing decisions affecting jobs on a short-term analysis of the needs of companies.

(1) Written answer of 13.6.2003.

(2) OJ C 280 E, 21.11.2003, p. 148.