How to fix our European Job Market

BY VALERIA PULIGNANO. The EU’s plan to fix the European job market by encouraging flexibility has not helped much in the revitalization of the labour market. Countries are now demanding a new strategy and focusing on the security of their employees first.

Written by sociologist Valeria Pulignano. Valeria is researching labour markets and employment relations at the comparative level in Europe at CESO.

valeria-klHave you experienced problems finding a job? Right now, there are five million more unemployed people than in 2008 and youth unemployment is through the roof! Making ends meet is getting increasingly harder, particularly for the poorest among us, and that breeds rising feelings of social exclusion among people in Europe.

Pay, working time and the duration of labour contracts have been changing rapidly over time in order to catch up with the needs of competitiveness by companies. Meanwhile, the use of temporary contracts has been increasing in order to provide firms with more flexible capacity. This is important to help companies adjusting the workforce when dealing with reductions in production and demand. Moreover, if firms distribute and continuously adapt working hours in accordance to their needs they are better able to cope successfully with changes in customers’ orders on the market. Consequently, lowering of pay has been introduced as a result of working for short periods and for reduced hours.

Flexible companies and secure jobs

Everything described above is what the scientific and policy community call flexibility. Let me explain briefly what flexibility is. Flexibility refers to the capacity that firms have to adapt quickly to market demand. What I said above illustrates that working conditions on the job market in Europe have been used as flexible instruments because they helped companies, and particularly big firms operating across national borders, to remain competitive in the global market.

On the other hand, security refers to the protection offered to people on the job market. What we observe is that social security measures such as unemployment benefits – and job protection more generally – have been progressively reduced in scope in the European job market. It happened most during the recent economic crisis, under the pressure of EU austerity measures.

As a result countries, for example Germany, Spain, and the Scandinavian countries such as Denmark adapted their labour legislation in such a way to increase flexibility on the one hand, without paying so much attention to guaranteeing security on the other. This stimulated increasing insecurity in the job market, with youth unemployment increasing all over Europe, and especially in Southern and Eastern Europe where it has reached dramatic levels.

Is flexibility enough to fix job markets?

The situation we face today in Europe clearly illustrates something different from what the European Commission presented in the mid-2000s. It stated that flexibility should have been the magic formula to create secure and protected jobs in the labour market. In other words, flexibility alone is not the best receipt to fix the job market. The crisis in particular has demonstrated essentially the inverse. Although we believed for many years that flexibility could be the starting tool for guaranteeing security on the job market – the slogan was “Be flexible and you will find a secure job!”- I have to admit that this proved to be misleading.

The slogan “Be flexible and you will find a secure job!” proved to be misleading.

Nowadays security is the first step in creating flexible job markets. To be ready to guarantee flexibility to firms, employees first need to be guaranteed security through unemployment social benefits coverage, health and safety, pension and other social security rights as well as the possibility of making transitions to good quality jobs.

Some examples in Europe

I would like to give to you an illustration of this by referring to two examples in Europe coming out of the recent crisis: Denmark and Germany. Denmark was the country touted as the perfect illustration of how a flexible labour market with low restrictions on employers in firing workers could still offer high security of employment. Under the pressure of reforming labour markets and the welfare system, Denmark is gradually promoting more security today in order to be able to guarantee flexibility.

Similarly, although perhaps from a relatively worse situation, moving from being one of the most secure (during the 1980s) national economies in Europe, Germany suffered the consequences of becoming one of the most flexible economies during 2000s. Too much flexibility without security in the current changing German context contributed to creating precarious work, particularly in the youth, and increasing social disadvantages for elderly people. Today, the slogan used in Germany is “good quality jobs” rather than “flexible jobs”!

The conclusion of this story is that security in the job market should be pushed to the forefront in guiding the European Union towards recovery. Guaranteeing security is the challenge for policymakers in Europe for the future. Wherever the answer lies, as Europe strives to move out of this recession, it is clear that it should explore all possible avenues towards “more secure and good quality jobs”!