Opinion of the Committee of the Regions on the Communication from the Commission on Restructuring and employment Anticipating and accompanying restructuring in order to develop employment: the role of the European Union
Date: 2005-11-16
Institutions: European Committee of the Regions
Subjects: EU employment policy, EU industrial policy, European Employment Strategy, competition policy, industrial restructuring

16.5.2006

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Official Journal of the European Union

C 115/27

Opinion of the Committee of the Regions on the Communication from the Commission on
Restructuring and employment Anticipating and accompanying restructuring in order to develop
employment: the role of the European Union

(2006/C 115/06)

THE COMMITTEE OF THE REGIONS,

Having regard to the Communication from the Commission on Restructuring and employment -Antici-
pating and accompanying restructuring in order to develop employment: the role of the European Union,
COM(2005) 120 final,

Having regard to the decision of the European Commission of 31 March 2005 to consult it on the
subject, under the first paragraph of Article 265 of the Treaty establishing the European Community,

Having regard to the decision of its Bureau of 12 April 2005 to instruct its Commission for Economic
and Social Policy to draw up an opinion on this subject,

Having regard to its Opinion on the Integrated Guidelines for Growth and Jobs 2005 -2006 (CdR 147/2005
fin),

Having regard to its Opinion on the Revision of the Guidelines for Regional State Aids (CdR 77/2005 fin),

Having regard to its Opinion on the Communication from the Commission on the Social Agenda (CdR 80/
2005 fin),

Having regard to its Opinion on the Communication from the Commission on the Social Dimension of
Globalisation — the EU's policy contribution on extending the benefits to all (CdR 328/2004 fin),

Having regard to its Draft Opinion CdR 148/2005 rev. 2 adopted on 23 September 2005 by its Commis-
sion for Economic and Social Policy (Rapporteur: Mrs Irene Oldfather, Member of the Scottish Parlia-
ment) (UK/PES),

unanimously adopted the following opinion at its 62nd plenary session, held on 16/17 November
2005 (meeting of 16 November).

1. The Committee of the Regions' views

The Committee of the Regions

ment and that it must form part of a long-term vision of the
development of the European economy in order to ensure that
the changes really are a way of strengthening its competitive-
ness;

1.1 welcomes the Communication as a useful contribution
to the key debate of the restructuring of enterprises and the
effects on employment. Restructuring has become a response
to market changes, the creation of the internal market and
globalisation. It is seen by many companies as an important
element in maintaining competitiveness, when viewed as an
opportunity to create new activities with higher-added value
and more sustainable jobs within the concerned territory;

1.2
is pleased that economic restructuring is discussed
within the context of the Lisbon Strategy for growth and the
European Social Model. The CoR wishes to emphasise the
importance of the European Social Model
in alleviating the
detrimental effects of restructuring for both individuals and
local communities, and recognizes the need to take preventa-
tive action in relation to this where possible;

1.4
notes that the Communication only examines the EU
level. Given the important role played by local and regional
government and Member States, the Committee of the Regions
the Communication was not wider in
is disappointed that
scope and looked at
the interaction between the different
spheres of government and the roles of these different spheres
of government. However, the EU has competencies in areas
such as the development of the Single Market, trade and devel-
opment policy and the Lisbon Agenda. It is important that the
European Commission considers the effects of these policies on
economic restructuring and vice versa;

1.3
agrees that it is necessary to ensure that restructuring is
well-managed to meet a two-fold economic and social require-

1.5
agrees with the Communication that the cost of restruc-
turing can be high not only for the workers concerned but also
for its detrimental effects on the local and regional economy;

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1.6
emphasises the important role of the European Moni-
toring Centre on Change for highlighting best practice, with a
view to building a firmer foundation for the public debate on
restructuring and relocation;

1.12
notes that the example of the United States 2002
Trade Adjustment Assistance Reform Act is cited as a positive
example of opening the economy up to trade and providing
the CoR
assistance to companies and workers. However,
believes that there are many examples in the EU of public agen-
cies successfully responding to restructuring that can be used as
a model;

THE CURRENT CHALLENGES

The Committee of the Regions

agrees that the following reasons can result in restruc-

1.7
turing at the enterprise level:

— European single market and the opening-up of economies

to international competition

— Technological innovation

— The development of the regulatory framework

— Major changes in consumer demand

argues that the Communication should have looked in
1.8
greater detail at globalisation and the relocation of a large
number of jobs outside the European Union;

1.9
suggests that the changes in the sectoral patterns of
employment and the quality of jobs are important considera-
tions in the framing of employment, training,
industrial and
agricultural policy at EU level. The Communication states that
between 1977 and 2002 around 30 million jobs were created
in the EU. 44 million jobs were created in the service sector
while 7 million jobs were lost in industry and 7.5 million jobs
lost in agriculture. Employment rates have increased 25.1 % for
high-skilled workers, 14.2 % for workers with intermediate
skills and only 2.2 % for unskilled workers;

1.10
supports the Communication about the benefits for
growth and employment in terms of the deepening of the
internal market and the opening up of the economy to trade.
The CoR also welcomes the recognition in the Communication
on the regional
impacts of these policies and the need for
social justice in these policy areas;

1.11
supports the Communication's view that the effects of
restructuring can be influenced by policies to improve the func-
tioning of the labour market, strengthening active employment
policies, anticipating change, and providing mechanisms to
facilitate the transition to other employment. The CoR would
also like to stress the importance of effective local and regional
economic development strategies which assist in the growth of
the economy and the diversification of the economic base.
Restructuring of enterprises in these sorts of economies is far
easier to manage;

RESPONSES AT THE EUROPEAN COMMUNITY LEVEL

i. G e n e r a l a p p r o a c h

The Committee of the Regions

1.13
supports the need for greater coordination of Com-
in particular,
munity policies which affect restructuring and,
welcomes the creation of a task force involving the Commis-
sion departments which have an effect on restructuring;

1.14
agrees with the examination of Community policies
that affect restructuring so that the appropriate policy changes
can be made.

ii. R e for m of

t h e Eu r op e a n E mp l oy me n t Str a te g y

(E E S)

The Committee of the Regions

1.15
calls upon Member States to ensure that measures
agreed under the European Employment Strategy are imple-
mented effectively and promptly;

1.16 welcomes the important links that the Communica-
tion makes between the Lisbon Strategy, the European Employ-
ment Strategy and the EU Structural Funds. The CoR empha-
sises the importance of measures to support adaptation and
restructuring which are proposed by the European Commission
in the European Social Fund (ESF). The CoR also emphasises
the need for high quality management training, geared to local
needs and based on a broad partnership, so that employers and
employees have the skills to manage change effectively and,
thus, welcomes the proposals for training ‘change managers’;

1.17 wholeheartedly agrees with the conclusion of the
Communication which states that that ‘it is, after all, at local
level that anticipating change is most effective’ and that ‘the
European Union's regional and cohesion policy must act as a
catalyst’ (1);

(1) COM(2005) 120 final page 12, footnote.

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calls upon Member States

1.18
to adequately finance
regional and cohesion policy so that it can act as a catalyst for
change.

1.26
stresses the importance of CAP reform and rural
development policy in reducing the detrimental effects of
restructuring on agricultural employees and rural communities
and particularly underlines the usefulness of endogenous devel-
opment policies;

recalls that there are still regions,

1.19
in countries that
were already Members of the Union before the recent enlarge-
ment, which, in order to be able to converge with the other
regions of the Community, are dependent on a continuation of
regional development policies,
through the Structural and
Cohesion Funds, at least during a transitional period;

iii. R e for m of Commu ni t y fi n a nci a l

i nstr u me nt s for
be tt e r anti ci pa ti on and manag e me nt of r e str u c-
tu r i ng

The Committee of the Regions

agrees with the Communication that, as well as the
1.20
European Employment Strategy and EU structural funds, that
the Seventh Framework Programme and EU education and
training programmes can assist in the development of a compe-
titive knowledge-based economy, that encourages mobility;

1.21
proposes an increase in the assistance provided for
research, development and innovation (R+D+I), based on the
significant benefits this type of activity brings to the restruc-
turing of companies and to alleviating the negative impact that
this can have on some local and regional economies;

notes that no consideration has been given to the
1.22
different
impact of restructuring on men and women; this
hinders the adoption of measures specifically adapted to each
issue;

1.23
expresses concern about the low levels of finance
allocated in EU Member States negotiations to the Competition
Objective. Restructuring will still continue in these areas and
many areas need support to fully modernise regional econo-
mies and create a knowledge economy;

1.24
reiterates its support for the Commission's proposals
for a Growth Adjustment Fund in the EU Structural Fund nego-
tiations for the period 2007 — 2013;

1.25 welcomes the new impetus given by the proposal of
establishing a Globalisation Adjustment Fund, which would
aim at addressing significant economic and social shocks on
local and regional
level resulting from globalisation-related
restructuring, which local and regional authorities could not
have anticipated;

iv. Industr i a l a nd e nte r p r i se poli c y

The Committee of the Regions

1.27
supports the approach adopted by the EU in April
2004 when industrial and enterprise policy was revised. In this
companies was
revision,
improved,
innovation was
supported and co-ordinated action established at sectoral level;

framework for
and

competitiveness

regulatory

greater

the

1.28
supports the suggestion in the Communication that
the European Commission identifies sectors subject to rapid
and far-reaching change and through high-level groups invol-
the Commission will concentrate on
ving all stakeholders,
analysing the development of competitiveness, environmental
threats and opportunities, consequences at the regional
level
and measures that could be taken at the Community level to
anticipate and manage change.

v. Comp e t i ti o n p oli c y

The Committee of the Regions

notes that

1.29
the current guidelines for rescuing and
restructuring firms in difficulty were introduced in October
2004 without consulting with the Committee of the Regions or
the European Parliament;

notes that the Commission has published the State
1.30
Aid Action Plan (2) (SAAP) in June 2005 and this will be the
subject of a separate CoR Opinion. The CoR further notes that
the SAAP announces an assessment and modification of the
rescue and restructuring aid guidelines in 2007/2008 and
emphasises the need to consult with the Committee if the
Regions before new guidelines are introduced in 2009;

1.31
emphasises the importance of draft Regulation laying
down general provisions for the European Regional Develop-
ment Fund, European Social Fund and Cohesion Fund
(COM(2004) 492) that if companies benefiting from the funds
cease a productive activity and a possible loss of jobs within
seven years of the financing decision, they must repay the sums
received (Article 56).

(2) COM (2005) 107 final – CdR 225/2005.

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vi. E x te r na l p oli cy

The Committee of the Regions

1.32 welcomes the statement in the Communication that
the Social Agenda applies to external measures and makes
provision for the promotion of employment, social policy and
decent working conditions for everyone. The Communication
goes on to state that
the social agenda
includes the promotion of fundamental social rights, develop-
ment of the social dialogue, corporate social responsibility, and
the proactive management of change at a global level. These
objectives will guide the EU its dealings with international orga-
nisations such as the ILO, OECD, UN, IMF, World Bank and
WTO.

the objectives of

vii. S tr e n g th e ni ng th e p a r t ne r sh i p for c h a ng e

The Committee of the Regions

1.33
supports comments in the Communication that the
Commission will pursue change partnerships through strength-
ening the social dialogue, a Communication on Corporate
Social Responsibility and the creation of a ‘Restructuring
Forum’;

1.34
believes that the first Restructuring Forum held in
June 2005 was a great success and looks forward to the estab-
lishment of the Forum as a regular event. In particular, the CoR
welcomes
the intention to concentrate on the local and
regional level at a future Forum;

1.35
agrees that the proposed Communication on Corpo-
rate Social Responsibility should focus on the best practices
used by firms and stakeholders to address restructuring. The
Communication states that evidence shows that companies
which are better able to handle restructuring in a socially
responsible manner are often those with better track records in
terms of market competitiveness and resilience. The CoR
welcomes these conclusions;

1.36 welcomes the proposal
in the Communication that
the European Monitoring Centre on Change will be asked to
monitor restructuring and provide a quantitative and qualitative
analysis if restructuring that will assist the public debate.

Paper on Labour Law which will look at new models of work
organisation and the role of labour law in coping with restruc-
turing. This would provide an opportunity to look at
the
‘reflexive restructuring’. These measures
encouragement of
include training breaks, sabbaticals,
job-sharing, remote and
part-time working and are less disruptive than the compulsory
redundancies associated with more aggressive restructuring.

ix. T h e se cond p h a se of c onsultati on of

th e Eu r o-
pe a n soci al par tne r s on compa ny r e str uc tur i ng
a nd E u r op e a n w or ks c ou nc i ls

agrees with the Communication that the social part-
1.38
ners need to be more involved in anticipating and managing
change and restructuring;

1.39 welcomes the approach of the Commission in respect
to the revision of the Works Council Directive began in April
2004. The Commission has outlined four areas for agreement
to Works Councils' role in anticipating and managing change
and restructuring. These areas of agreement include the adop-
tion of best practice and common approaches to restructuring.

2. The Committee of the Regions' recommendations

The Committee of the Regions

2.1
feels that economic restructuring at enterprise level is
an inevitable part of the modernisation process in the creation
of a forward looking knowledge based economy but empha-
sises the need to strengthen the European Social Model to alle-
viate the problems that restructuring can cause for individuals
and local communities;

2.2
agrees with the European Commission that the ‘Restruc-
turing Forum’ has a valuable role to play and that a future
Forum should examine the role played in restructuring at the
local and regional level;

calls for more research on the responses of government
2.3
to the restructuring of enterprises, particularly the roles and
interaction of the EU, national, regional and local spheres of
government and also for more research on the causes of
restructuring, particularly globalisation;

viii. Ada p ti ng

t h e

fr a me w or k of

r e g u la ti on a nd

a g r e e m e nt

1.37 welcomes proposals in this section for regulatory,
modernisation, and simplification measures provided for under
the Lisbon Action Programme and the proposal for a Green

calls for EU, national and local policies to be built
2.4
round employment security rather
than job security. This
would move away from the concept of a job for life (job
security) and move to a situation where employees learned the
skills
to move more easily from job-to-job (employment
security);

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2.5
emphasises the role of the European Monitoring Centre
on Change and its role in providing up-to-date information on
economic restructuring which will inform the debate on antici-
pating and managing changes;

2.6
stresses the need for the greater co-ordination of EU
policies to adapt to and manage change, and in line with the
Commission recommendations suggests the need to include
educational and training policy in the list of policies to be
further coordinated;

2.7 wishes to see a well-functioning European Employment
Strategy which plays a key role in the adaptation and manage-
ment of change and the creation of employment in growth
sectors;

2.8
emphasises the fact that restructuring at enterprise level
is easier to manage where local and regional agencies have
devised economic development strategies that promote growth
and diversify the economy This makes it easier for former
employees to find alternative employment;

2.9
acknowledges the key role that the EU Structural Funds
and European Social Fund play in restructuring and the
management of change. The CoR calls upon Member States to
agree an EU budget that allows local and regional authorities to
modernise their economies and, thus, reduce the detrimental
effects of restructuring at the level of the individual enterprise,
considering that this is a horizontal problem that affects all
kinds of regions;

2.10
recommends the re-consideration by EU Member
States of a growth or globalisation adjustment fund through
the EU structural funds which would allow the EU to intervene
if a crisis hit a local or regional economy due to restructuring;
the CoR considers that this fund could only intervene if a
regional threshold is reached, defined in terms of the propor-
tion of workers hit by the restructuring shock which could not
be anticipated, the regional unemployment rate and the impact
on regional GNI. It agrees that the Fund should cover measures

Brussels, 16 November 2005.

for absorbing the shock in terms of human capital, i.e. through
training and relocation of workers and recommends that this
fund should be established within the EU budget as a perma-
nent independent fund with its own fixed annual budget. The
CoR supports an allocation to that fund of EUR 1 billion per
year.

that

recommends

2.11
the European Union looks at
actions to diversify rural economies and improve their competi-
tiveness so that the severe effects of agricultural restructuring
can be reduced; it particularly emphasises the important role
that endogenous development policies can play in this;

while welcoming the proposals on industrial and
2.12
enterprise policy, the CoR recommends that the European
Commission works closely with local and regional authorities
to identify sectors experiencing rapid change;

2.13 wishes to be consulted when the rescue and restruc-
turing guidelines are reviewed in 2007/2008;

2.14
recommends that Social Agenda considerations play a
key role in negotiations with international organisations and in
the Doha Development Round;

stresses the need for the responsible management of
2.15
change and restructuring at
the level of enterprises and
different spheres of government and the need to ensure that
employers are aware of their obligations. The CoR recommends
that this can be achieved in a number of ways at the EU Level
through the strengthening of the Social Dialogue, the Commu-
nication on Corporate Social Responsibility and negotiations
surrounding the Works Council Directive;

recommends that enterprises look first at the encour-
2.16
agement of
‘reflexive restructuring’. These measures include
training breaks, sabbaticals, job-sharing, remote and part-time
working and are less disruptive than the compulsory redundan-
cies associated with more aggressive restructuring through
branch closures.

The President

of the Committee of the Regions

Peter STRAUB