In the Beginning, There Was Social Policy:
Developments in Social Policy in the
European Union from 1972 through 2008†
John T. Addison
Queen’s University Belfast (U.K) and IZA Bonn
This paper argues that the evolution of social policy – vulgo labor market mandates –
in the European Union seems to follow a set path. Intervals of activism have been followed by challenges and checks to its development, but Treaty innovations (inter al.) have provided the impetus for further activism. The classic and first case in point was the Single European Act (1976), which presaged a new bout of legislation by widening the reach of qualified majority voting. The next was Maastricht, or the Treaty on European Union (1991) and the Agreement on Social Policy, which for the first time established a firm basis for social policy. An intermediate but instructive step was passage of the Treaty of Amsterdam (1997) which formally incorporated the latter into the main body of the treaty rather than leaving it as a Protocol appended to the treaty, The most recent instance is the Treaty Establishing a Constitution for Europe, which was to morph into the Reform (or Lisbon) Treaty of December 2007. This agreement portends more fundamental reforms for two reasons. First, it implies new legislation in the area of labor relations (issues such as pay determination, the rights to strike/lockout, and the right of association) previously expressly excluded from social policy. Second, it will test some member states applying European law, which means that theoretical opt outs may be just that. And, if history is any guide, there will be subsequent consolidation to bring the labor standards set under legislation into line with European Court of Justice decisions and a further ratcheting-up of standards.
th†A first draft of this paper was first presented at the 77 Annual Meeting of the
Southern Economic Association, New Orleans, November 19-21, 2007 to anchor the session European Social Policy and Other Mandates. The author thanks without
implicating session participants for their comments.
We are now in the fifth phase of social policy in the European Union. The most recent phase associated with the abortive Treaty Establishing a Constitution for Europe
cannot be understood in isolation of the preceding phases. Indeed, in seeing distinct connections between the various phases, we shall argue that it is déjà vu all over gain or, in more measured fashion, that history casts a long shadow in matters concerning the erection of a plinth of worker rights at European level. Since neither the institutions nor the phases of labor market regulation are well known to U.S. observers, our discussion is primarily descriptive. (For a formal analysis of the economics of mandates, see Addison, Barrett and Siebert, 2006; Addison and Hirsch, 1997.)
Our presentation proceeds as follows. We first outline the various phases of policy, concluding with an interpretation of the most recent phase. In a summary, we draw together the threads of our discussion and assess the likely evolution of policy. Our evaluation is altogether more pessimistic than that of American commentators such as Krueger (2000), who offers a blanket market failure argument by way of justification for all sorts of labor mandates, or European observers such as Adnett and Hardy (2005) who see policy as becoming more pragmatic and steadily modernizing (via the substitution of soft law for hard law) to allow accommodation to local needs.
II. The Phases of Social Policy
Phase 1. The 1974 Social Action Plan
The first phase can be traced back to October 1972 when a summit meeting of the heads of state of the member nations of the European Community (the European Council) gave support to a “vigorous” social policy having the same importance as the
achievement of economic union. In response, the European Commission – the body
responsible for proposing Community legislation – put forward an ambitious social
action plan that proposed mandates in the areas of health and safety at work, minimum wages, working hours, employee participation, and the hiring of contract labor (Commission, 1974). The European Council of Ministers, the agency responsible for discussing and approving Community legislation (but see below) issued a Resolution that endorsed the action plan while cautioning that a standard solution to all social problems should not be attempted and that the “subsidiarity”
principle be respected. The Resolution amounted to a declaration of general principles but it provided a foundation for Community social policy, taken in conjunction with
1Articles 117 and 100 of the Treaty of Rome.
What was the result? The Commission, strictly DG-V, achieved some early success. Thus, each of its proposals to strengthen job rights in the event of collective redundancies, transfers of undertakings, and firm insolvencies were adopted in Council/enacted into law between 1975 and 1980. Somewhat more substantive equal opportunities legislation was also passed that extended the definition of equal pay contained in Article 119 of the Rome Treaty. Similarly, substantial progress was made in the area of health and safety despite the absence of any treaty basis for such intervention: between 1978 and 1987, some 11 such directives were adopted in
2Council. (We should note here that Article 118(1) of the Single European Act marks the introduction of a firm treaty basis for health and safety measures, while Article 118A(2) provides for qualified majority voting in Council in respect of such measures.)
That said, prior to the Single European Act (SEA), which delineates the second phase of Community social policy, the Commission‟s successes were
overshadowed by its failures. No progress was made on its proposals dealing with employee rights to information, consultation and participation (in ascending order of intervention, the Vredeling initiative, 1980/83; the European Company Statute, 1970/1975; and the draft Fifth Directive on Company Law, 1983). Similarly, impasse was reached on its proposals seeking equal treatment of part-timers with full-timers as regards working conditions, dismissal protection, and occupational security schemes in 1982/83, on its attempt to place curbs on the operation of temporary employment agencies in 1982, and its initiative seeking 3 months parental leave in 1983/84.
In all these cases, if not health and safety per se, the Commission‟s proposals
strayed too far from national practice, and not just that of the United Kingdom.
Phase 2. The Social Charter
In an attempt to facilitate completion of the internal market (i.e. economic integration) the United Kingdom conceded ground in the issue of qualified majority voting (QMV) in Council. The unintended consequence was that it would now be easier to pass social legislation by undercutting the British veto. Strictly speaking, the SEA only
provided for QMV on matters of health and safety under Article 118A. Also the thrust
3of the SEA like that of the Treaty of Rome remained distinctly economic.
Just two years after the implementation of the SEA, the Commission was to issue in December 1989 a solemn proclamation of fundamental social rights: the so-called social charter. The social charter was not binding on its signatories (and in fact the United Kingdom refused to endorse it), but it was accompanied by a detailed social action program which contained no less than 47 separate initiatives, some 23 of which were to be the subject of binding legislation (see Addison and Siebert, 1991, 1994).
Draft legislation swiftly followed, the hallmark of which was the
Commission‟s creative use of the health and safety criterion under article 118A.
Examples included directives on the 48-hour maximum working week, pregnant workers, and child labor. These measures had no well determined link with health and safety and insofar as they dealt with “the rights and interests of employed persons”
seemed to be directly undercut by another provision of the SEA (viz. Article 100A) requiring unanimity.
A list of the principal social charter initiatives in ascending order of controversy is as follows:
1. Two council decisions on measures to assist the elderly (adopted); 2. Modifications to existing Community vocational training programs for young people and employment information systems (adopted);
3. A slew of 11 health and safety initiatives, mostly rooted in the pre-social charter health and safety framework directive 83/391/EEC that noted inter al. that improvements in safety, hygiene, and health at work were not to be subordinated to
purely economic considerations (all adopted with one exception relating to chemical
agents at work that was only adopted in April 1998);
4. An atypical workers (health and safety) directive requiring agency workers and those on fixed-tern contracts to be informed of job risks and trained appropriately (adopted);
5. Modifications of the earlier directive on collective redundancies (adopted); 6. Employers duty to inform employees of the conditions applicable to the contract or employment relation (adopted);
7. Protection of young people at work, basically seeking to ban child labor (adopted, with transitional relief to the United Kingdom);
8. Posted workers directive guaranteeing host country conditions to posted workers (adopted);
9. Pregnant workers directive providing maternity leave, dismissal protection, and preservation of employment rights, and provision of risk assessments (adopted); 10. Working Time Directive establishing the 48-hour week, rest periods, annual paid leave, and regulating night work (adopted, although the United Kingdom abstained
from the vote in Council and unsuccessfully challenged the treaty basis of the directive);
11. Two further atypical worker draft directives extending to part-timers and fixed-term contract workers comparable working conditions to those enjoyed by full timers and providing such employees (and agency workers) with the same protection under statutory and social security provisions as full timers (deadlocked); 12. European Works Councils (withdrawn and processed under the Agreement on Social Policy).
On balance, the Commission had secured most of its objectives, even if it had to compromise on items 5, 9 and 10 in particular. But it continued to be frustrated by British opposition and sought a way out.
Phase 3. The Agreement on Social Policy and Two-Track Social Europe During the 1991 intergovernmental negotiations leading up to the revision of the treaties establishing the common market, the Commission sought to extend the reach of social policy and to widen the treaty basis permitting qualified majority voting beyond the tenuous hold of Article 118A. To this end it proposed a special social chapter to the new treaty – the Treaty on European Union, or Maastricht Treaty as it is more popularly known.
The opposition of the United Kingdom meant that a political compromise was necessary to save the wider treaty. The formula was to relegate the terms of what would have been the social chapter to a Protocol on Social Policy appended to the
Treaty on European Union of 1991. Annexed to the Protocol was an Agreement on
Social Policy. The Protocol was signed by all (the then) 12 member states and noted the intention of eleven of their number to use the machinery of the Community to implement an Agreement on Social Policy that specifically excluded the United Kingdom.
The two key innovations of the Agreement on Social Policy pertain to treaty
4basis and the social dialogue process. Crucially, the Agreement confirms and clarifies
the legal competence of the Community in matters of social policy while extending the basis of QMV. Thus, Article 2 of the Agreement on Social Policy sets down five areas where QMV would apply, and another five areas requiring unanimity. Specifically, QVM is permitted for measures dealing with (a) improvement in the working environment to protect workers health and safety, (2) working conditions, (3) the information and consultation rights of workers, (4) gender equality, and (5) the integration of workers excluded from the labor market. Unanimity would still be
required for measures concerning social security, dismissals protection, freedom of association, conditions of employment for third-country nationals resident in the
5Community, and financial contributions for the promotion of manpower instruments.
The upshot was that were now to be two sets of rules governing social policy in the new EU: the standard treaty route under which Commission proposals would be processed before all member states (15 with the accession of Austria, Finland, and Sweden in January 1995) and the Agreement on Social Policy route before the reduced Council of 11 (14) member states.
The second key component of the Agreement on Social Policy was the role reserved for the two sides of industry at European level/social partners: at that time the Union of Industrial and Employers‟ Confederations of Europe (UNICE), the
European Centre of Enterprises with Public Participation (CEEP) and the European
6Trade Union Confederation (ETUC). Under Article 3 of the Agreement, prior to
submitting proposals in the social policy field, the Commission had to consult the social partners on the possible direction of Community action. Following such consultation, if the Commission decided to pursue legislation, it had again to consult them on the proposed details. At any stage in these second-stage negotiations the social partners could inform the Commission that they would like to negotiate on the issue. At their joint request, any resulting framework agreements could be implemented (i.e. given the force of law) by a Council decision following on a proposal from the Commission.
While not eschewing the standard treaty route, it soon became clear that the Agreement on Social Policy was to be used by the Commission to attend to unfinished business. In the summer of 1994, just prior to the first application of the Agreement, of the 26 binding measures stemming from the social charter no less than 18 had been
enacted into law, another 4 were close to passage, and just three – the two proposals
on atypical work and the draft directive on transnational works councils in European-scale organizations – remained deadlocked in Council. There were also a number of other draft directives left over from the earlier social action plan (most obviously, those dealing with systems of worker participation).
The first use of the Agreement was the controversial draft legislation on European Works Councils. This was also the first occasion on which the social partners tried to negotiate their own accord. When the latter proved abortive, the Commission stepped in and issued its own proposals which were adopted by the
reduced Council in September 1994 (OJ L254 of 30.9.94). But the social partners were able to reach their own framework agreement on parental leave in December 1995 (OJ L145 of 19.6.96) and on part-time work in May 1997 (OJ L14 of 20.1.98).
7That said, no framework agreement could be reached on a number of other issues and
it looked as if the process of social dialogue might be fatally compromised in March 1998 when UNICE pulled out of discussions on the subject of worker information and consultation at national level. Nevertheless, a framework agreement on fixed-term (but not agency) contracts was jointly reached in February 1999 (OJ L175 of
Finally, during this third phase of policy, the Commission was to process a number of social charter and other proposals through the standard treaty route. Adopted legislation – in addition to the long-delayed posted workers‟ directive noted
earlier – included a measure providing equal treatment for men and women in occupational social security schemes (OJ L46 of 17.2.97), and amending earlier legislation; an initiative safeguarding worker rights in the event of business transfers (OJ L201 of 17.7.98), replacing earlier legislation in the light of evolving case law; a consolidating collective redundancies directive (OJ L225 of 12.8.98); and a measure safeguarding the supplementary pension rights of employed and self-employed persons moving within the Community (OJ L209 of 25.7.98). Further, the Commission proposed legislation on worker involvement attendant upon the
formation of the European Company (OJ C138 of 25.9.91), a measure that dated back to 1970, as well as two directives seeking to extend the 1993 working time directive to hitherto excluded sectors and to the road haulage industry (see OJC249 of 1.9.99 and OCJ43 of 7.2.99, respectively).
In sum, this phase of social policy contains few truly new binding initiatives and patently lacks the detail of the social charter‟s action program. Instead, policy was
to be guided by a “rolling action plan,” designed to be added to as circumstances changed and in the light of perceived needs (see Commission, 1995). The lack of detail reflects European preoccupations with unemployment and reduced competitiveness on the one hand and the certain revision of Community competence in matters of social policy attendant upon the deliberations of the intergovernmental conference on changes to the treaties establishing the Community.
As a postscript, the appearance of two-track social Europe was to prove short lived. Within a month of the election of New Labour in May 1997, the United
Kingdom was to opt in to the Agreement on Social Policy, which was to become part and parcel of the new treaty.
Phase 4. The Long March: The Treaty of Amsterdam, the Social Chapter, the Open Method of Coordination and Modernization
The Treaty of Amsterdam, 1997, incorporated the provisions of the Agreement on
9Social Policy directly into the main body of the Treaty. It had therefore become a
Social Chapter after all. But the new treaty did not become effective until May 1999. In the interstices, to extend directives to the United Kingdom, the Commission readopted the Agreement on Social Policy legislation on a whole Community basis (under Article 100). In this way, the EWC directive, the social partners‟ framework
agreement on parental leave and on part-time work, as well as the burden of proof in sex discrimination cases were all extended to the United Kingdom in advance of treaty ratification. (Most of the other legislative adoptions in the second half of 1998 have already been discussed under Phase 3.)
Immediately after treaty ratification, the most important proposal being processed through the social chapter route concerned draft legislation on a general framework for informing and consulting employees. Although at this time there were already a number of pieces of legislation in place covering worker information and consultation – namely, directives on collective redundancies, transfers of business, European Works Councils, and the provisions for worker participation implicit in the plethora of Community health and safety measures) the Commission had enjoyed little success in its flagship employee involvement proposals. Thus, it will be recalled that the deliberations on the European Company Statute (ECS) and the Fifth Company Law Directive proceeded along the social charter initiatives but were not part of that legislative agenda. They foundered partly because of British opposition (the voluntaristic tradition) and material diversity among member states in their procedures for informing and consulting workers.
In its medium-term action program, the Commission (1995a) had suggested that Vredeling would be withdrawn in the wake of the European Works Council (EWC) Directive, while a subsequent Commission (1995b) communication indicated that it favored a single new instrument on ways of consulting workers at national level to complement the transnational provisions of the EWC directive. As we shall see, the path was to be tortuous.
The Commission had launched consultations with the social partners in June 1997 on the subject of possible Community action on worker involvement and consultation. The timing as is usual with controversial Commission initiatives is no
accident. It followed on the Vilvoorde incident, publication of the Davignon (1997) report into worker participation, and the election of New Labour in Britain. Davignon focused solely on the ECS. It recommended that companies setting up as a European Company voluntarily negotiate a form of participation with their unions. A default would apply in the form of standardized procedures The Davignon Report was incorporated as a (revised) ECS text on worker information and consultation and discussed in Council in October and again in December 1997. But both board representation and the default proved controversial, and despite progress attendant upon the insertion of a zero participation option and the removal of the guarantee of board representation the measure remained stuck in Council until the end of the social action program 1998-2000.
Besides, because of its voluntary nature – companies had first to elect to
become a European Company – the ECS was of limited help to the goal of
harmonizing national systems of informing and consulting workers. The Commission sought to pursue harmonization because of the alleged weaknesses of national mechanisms of informing and consulting workers, the need to avoid distortions of competition, while supposedly increasing the competitiveness of firms, as well as the need to render existing systems more transparent and consistent. Following UNICE‟s decision not to proceed with a European-level agreement, the Commission issued its own proposals in November 1998 but the measure was not to be discussed in Council for almost two years.
But our narrative is running ahead of some other key developments. An important social policy innovation in the Treaty of Amsterdam was a new chapter (Title VIII) dealing with employment. It set a high level of employment as a central objective of the Community and committed member states to developing a coordinated strategy for employment and particularly for promoting a skilled, trained and adaptable workforce and labor markets responsive to economic change. The goal was to be facilitated by Community measures to supplement the actions of member states. The European Council was to review the employment situation annually and reach conclusions on the basis of a joint annual report issued by the Council and the Commission. Acting on a qualified majority on a proposal from the Commission, the
Council was to formulate guidelines that were to be taken into account by member states in drawing up their own employment policies. They had to furnish the Council with annual reports on the implementation of their national employment policies in the light of the Council‟s guidelines. And the Council could in turn make nonbinding Recommendations to the member states on their performance, again by QMV on a recommendation from the Commission. It could also adopt incentive measures to facilitate cooperation among member states (such as comparative analyses and pilot projects). Initially, four Commission guidelines (rather than targets) were accepted by Council: the promotion of a culture of entrepreneurship (e.g. more self employment and new business start-ups); the creation of a culture of employability (ensuring inter al. that each unemployed adult (young) worker was offered a job, training, retraining, work experience, or other employment assistance within the first 12 (6) months of becoming unemployed; the promotion of adaptability (i.e. accommodating to flexible work arrangements with no loss of employment security; and the strengthening of equal opportunities by raising female participation rates via career breaks, parental leave, and the like.
Note that unlike the other terms of the Treaty of Amsterdam, which would not be activated until ratification (May 1999), action pursuant to this employment chapter was immediate. Employment policy had moved the top of the European agenda. (Given the hiatus over employee involvement, the only other major ongoing initiative at this time was the extension of the 1993 working time directive, consultations on
10which had – as noted earlier – begun in 1997 before the treaty was signed.).
The employment chapter was followed up by the Luxembourg jobs summit to discuss the employment situation in November 1997. This led to a revised set of guidelines on employment policy in the following year and to a new social action program for 1998-2000 (Commission, 1998). Like its immediate predecessor, the social action program is pretty thin on detail. Three principal lines of action are outlined. The first covers jobs, skills and mobility, where the employment chapter is
seen by the Commission as very much the central plank of social policy. It refers to the introduction of a new generation of education and training programs, inter al. The more substantive themes covered under the second heading of the changing world of
work concern the organization of work and the “anticipation of industrial change.”
Under the first heading the broad aim is to secure proper training, the development of new forms of contractual relationships, and career paths that are consistent with job