The preservation and expansion of the social wage is crucial given

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The preservation and expansion of the social wage is crucial given


    Flexploitation and the Internationalisation of the Service Economy;

    Some Reflections on the Bolkestein Proposal and the Future of Social Protection 1in Europe

Anne Gray


This paper will document ‘flexploitation’ and privatisation as employer strategies and

    the policy responses of the EU and its member states. It will analyse contradictions between policy objectives of increased labour supply, increased ‘flexibility’ of labour and job quality. Despite the recent emphasis on social ‘inclusion’ and job quality in the ‘open coordination’ of EU employment policy, the EU has enjoined member states to ‘go with the flow’ of employers’ strategies for casualisation and intensification of work. Both actual employment trends in EU member states and their employment policies are becoming less worker-friendly, with expansion of employment largely at the low-wage margin and increasing insecurity, coupled with recent and planned erosions of the ‘social wage’ in terms of unemployment benefits, pensions and collective services.

    The abandonment of attempts to agree a directive for the regulation of temporary agency work, the ‘Bolkestein’ proposal to open services to unfettered international competition, including possibly those which are currently public services, and the emphasis on raising the labour supply by extending the retirement age, all fly in the face of job quality objectives and threaten the welfare state. Flexibilisation of labour through sub-contracting and the widespread use of employment agencies undermines trade union strength and so undermines the potential for ‘social dialogue’ which has been at the heart of the European model of capitalism.

    There are lessons from the Scandinavian tradition of having a large public sector which generates jobs for women (and some men) in the provision of services for families, in particular childcare and day care for the elderly. However, there may be natural limits to the supply of market labour; do current EU policy objectives attempt to push it beyond these limits?

    Both childcare for working parents, and care of the elderly, at present depend heavily on informal, largely unpaid family care. For example, about a quarter of the childcare ‘places’ provided for British working mothers are with the children’s grandparents.

    Raising the retirement age and the employment rate of women threatens a vital supply of unpaid caring labour, raising the question of whether it is possible or even desirable to commodify family-based care services. Moreover, these aspects of the social wage will need extra resources as international migration within the EU expands, since migrant workers are geographically separated from elders who could help them with childcare and who will later in life need help from their adult children and grandchildren.

     1th This paper was presented at the Global Studies Research Group seminar, 24 November 2005,

    University of East London.


    Any successful re-assertion of the ‘European social model’ will depend on the EU’s capacity to sustain adequate quality in the ‘social wage’ sectors and a trade-union-

    friendly regime for temporary work. The paper will analyse the proposed Bolkestein directive and argue that in its current form it is hostile to both these objectives.

‘Flexploitation’ and European employment policy

The EU approach to the jobs problem

The ‘European social model’ of employment policy driven by dialogue and

    compromise between capital and trade unions as ‘social partners’ has been the legitimating narrative of policies developed since the late 1990s under the ‘open coordination’ method. Despite the recent emphasis on social ‘inclusion’ and job quality, the overall impact of EU policy developments since the mid 1990s has shifted sharply in favour of capital. The social agenda has been undermined by economic policies whose effect is to favour ‘capital oriented flexibility’ as a regulation model. This is more a deliberate choice than an inevitable response to globalisation.

Flexibility and flexploitation

    Flexibilisation of labour markets is at the heart of the EU policy agenda and that of member states under the open coordination process. It has been an important goal in all of the employment guidelines since 1998. Initially, the 1998 Employment Guidelines, under the ‘adaptability’ pillar, enjoined member states to ‘seek to introduce more adaptable types of contracts, whilst providing adequate levels of security’. By 2003, the Broad Economic Policy Guidelines clearly called for lower wages at the bottom of the income distribution, to price the unemployed into work, and criticised ‘inflexible labour market regulations, protecting established employees but making it more difficult for firms to take on new staff.’

    Even restrictions on working hours are now under attack. The Working Time Directive is being revised to give employers more flexibility. The 2005-8 Integrated Guidelines for Growth and Jobs (EC, 2005, p. 4) refer to the ‘low number of working

    hours’ as something which needs to rise – challenging widespread trade union

    objectives of cutting standard hours.

    Since the Lisbon summit established ‘job quality’ as a policy goal, indicators have been established for monitoring it and an objective ‘to promote flexibility combined with employment security and reduce labour market segmentation’ put into the 2004-

    2008 Employment Guidelines. Those who hoped that this would offer a platform for the development of new workers’ rights will so far have been disappointed. First of all, the important directive on temporary agency work has been shelved for the foreseeable future because of divisions between member states. Secondly, the wages and conditions of service sector workers have been seriously threatened by the proposed Bolkestein directive, which will be discussed later.

    The EU member states are divided in their approach to labour issues over the last five years or so. They exhibit what Koch (2004) calls different modes of labour regulation. At one extreme is Sweden, determined to maintain trade-union-friendly policies, but with a few cracks. With the Netherlands it’s what Koch (2004) describes as

    ‘negotiated flexibility’. At the other is the UK, equally determined to minimise both


    regulation and trade union influence an example of ‘capital oriented flexibility’.

    France, Germany and Belgium have chosen to pressurise the unemployed to accept low paid and insecure jobs whilst on the whole preserving conditions for ‘insiders’, pensions excepted. In southern Europe the unemployed have been mainly left alone

     and flexibilisation measures never having had such extensive benefit rights anyway

    have focussed on improving employers’ right to sack. Denmark and the Netherlands

    have each pursued unique approaches, both aimed at making it acceptable for workers to change jobs frequently.

    The objective, of course, is to move to a different position on the trade-off between job quality and job quantity.

     Figure 1

Job Wage share of B quality national income A

    Regulatory floor





    share of





    But this is achieved at the cost of serious losses of job quality for people in the lower tiers of the labour force. Temporary and part-time jobs are less unionised and lower paid. Research done for the European Commission shows the development of a two-


    tier labour market, with the less fortunate facing a shrunken stock of quality jobs for lower skilled people, and likely to be trapped in a cycle of alternating short-term work and unemployment. The ‘flexibilisation’ of labour markets impacts most on those with least bargaining power as individuals the low paid, less well-educated and less

    experienced workers. Flexibilisation, for them, means an intensification of exploitation; in other words, flexploitation.

    Some deterioration in job quality for the unskilled is obviously attributable not to policy but to long-term trends the decline in European manufacturing, increased

    international competition. Some is also linked to privatisation, which has transferred many posts into an arena of keen, sometimes internationalised, competition between contractors eager to minimise and casualise their labour force.

    The policies of European governments have been largely to ‘go with the flow’ of employers’ pressure to change the nature of jobs, drawing their labour laws closer to the American model of near-complete employer freedom to hire and fire. In the 1980s and 1990s, most European states have encouraged ‘flexibilisation’ of labour contract forms in the hope of promoting more jobs. Other examples are removing regulatory barriers to temporary and part-time hirings; ‘flexibilisation’ of working time patterns

    (removing barriers to shift-working, night work, variable or annualised working hours); flexibilisation of wage setting arrangements, like making exceptions to normal wage rates for newly hired unemployed (as in Germany).

    The picture of a flexibilising Europe appears at odds with that of a regulating Europe, as in the part-time work directive, fixed term work directive, working hours directive and so on. The European Union labour directives are intended to control and limit the outcomes of flexibilisation and globalisation, by providing for certain absolute protections and for cross-national workers’ representation in multi-national companies.

    This is partly a question of political legitimacy, but it’s also to prevent deregulation from being used to gain a cost advantage for particular national economies within the single European market. Some directives secure gains in absolute rights, like

    maternity and parental leave and the protection of pregnant women from dismissal, and the limit on working time. But others just seek parity between different groups of workers within one country, rather than between countries (Threlfall, 2003, p. 127). This second group fall short of aiming for upward harmonisation of minimum wage levels or trade union rights, whilst the very real gains in gender equality from the first group of directives illustrate a principle of upward harmonisation which could be extended if the political will was there.

    Whilst flexploitation is in part a direct result of globalisation, privatisation and the shift of European economies from manufacturing to services, it also results from deliberate deregulation of labour markets and from the decline of union power. Casualisation is made easier where unions are weak, and makes them weaker still. In pressing for greater flexibility of labour markets, the European Commission argues that flexibility can and should be balanced with security; Denmark, where workers change jobs frequently but do not appear to feel insecure, is upheld as a model. It is


    rarely recognised that a high degree of unionisation, and a strong trade union presence

    in all aspects of labour market governance, is at the heart not only of the Danish

    model but of the concept of ‘social dialogue’ on which EU-level regulation of labour markets has been built. Consequently a downward spiral of casualisation and reduced

    union power threaten the basis of the ‘social dialogue’ model.

Figure 2

    Flexibilisation and the degradation of labour standards

    Globalisation and advances in labour-

     saving technology

     Shedding of jobs from

     manufacturing Fiscal pressure and

    privatisation leading

    to shrinkage of state sector Rise in % Fall in % employed in

     employed in manufacturing

    services and small


    Cost-cutting in surviving manufacturing

     Break-up of large industry

    workplaces and Service employment traditional TU

     more likely to be part-cultures

    time or temporary

     Deregulation of Rise in % of low skilled

     jobs which are low labour market


    General rise in part-time and

    temporary jobs

    Reduction in bargaining power, fall

    in trade union density

    and strength

    Slow growth of wages for

    lower skilled/lower paid

    people; increasing inequality


    The evidence on the benefits of flexibilisation for employment growth is in any case contested. One view is that some erosion of rights for workers - in terms of lower job security, and greater employer-driven flexibility of working hours, is inevitable as a way of enabling national economies to compete in global markets. Another is that the constraints are exaggerated and that in practice, neither deregulation of labour contracts nor lower wages for the unskilled have much positive impact on employment growth. In support of this view, the Danish and Swedish economies evidence both high wage levels and high employment by comparison with most OECD countries. The OECD’s 1993-4 research on effects of employment protection

    rules found that a high level of employment protection tends to increase the length of unemployment spells but not the overall unemployment rate (OECD, 1994, 1999). Their fresh analysis of the effects of employment protection in 1999 improved ways of measuring the employment protection index, and reduced the list of negative effects found earlier. The OECD found little evidence of a positive link between low pay and low unemployment in a study of 19 countries across the 1980s and early 1990s (OECD 1999). In another cross-national study Esping-Anderson (2002) finds that high minimum wages do not affect overall unemployment, though they may adversely affect youth. But issues about the distribution of jobs between different groups can be addressed by other means.

What happened to the unemployed and benefits

    My book (Gray 2004a) gives extensive detail on the increased conditionality of unemployed benefits which has become widespread across Europe in the last decade or so. It’s illustrated with the fieldwork of direct interviews with unemployed people about the effects of this and about how they see active labour market programmes like the New Deal.

    For both unemployed and other social assistance recipients (mainly lone parents and disabled) there have been substantial changes in benefit eligibility rules in most EU 15 states since the mid-1990s.


    Table 1: Main changes in benefit rules for unemployed since 1990; overview of

    seven countries

Belgium 1996 Level of insurance benefit reduced and waiting period lengthened.

     Widespread extension of reintegration contract obligations for

    2003-5 unemployed

    Denmark 1994-9 Duration of ‘passive’ unemployment insurance rights (that is,

     before claimants are obliged to join an active labour market

     programme) reduced gradually from 7 years to one year.

     Minimum contribution record increased from 26 weeks to 52.

    2002 Cut in social assistance rates.

    France 2001 ‘Degressivity’ feature ended, so that benefit no longer falls as

     claim lengthens.

    2002 Longer waiting period for those with redundancy pay; increased

     contribution requirement for unemployed over 55.

     Duration of ASS (Allocation Specifique de Solidarité), the benefit

    2003 claimed by those whose insurance rights have run out, restricted

     to two years.

     ‘Raffarin’ reforms; tougher requirements about job search and

    2003-4 taking whatever jobs available

    Germany 1994 Small reduction in unemployment insurance rates and

     unemployment assistance rates (by 1% of former earnings for

     those with children, otherwise by 3% of former earnings).

     Redundancy pay to be taken from benefit entitlement. Lower

     benefits for asylum seekers. Sickness benefit also reduced.

     Hartz reforms; further benefit cuts; ‘personal service agencies’ set

    2003-4 up to provide temp work placements for unemployed with

    obligation to accept whatever they offer

    Spain 1992 Benefit rates cut from 80% of former earnings to 70% for first six

     months of unemployment, and from 70% to 60% after that.

     Minimum contribution record raised from six months to twelve.

     Nationwide minimum income scheme introduced for older

    2000 unemployed with dependents, but with obligation to join

     reintegration programmes.

     Some special forms of social assistance for rural workers

    2003 abolished. Tighter availability for work tests proposed;

    government modified proposals after general strike.

    Sweden 1993 Minimum contribution record raised (and again in late 1990s).

     Benefit rates cut from 90% of former earnings to 80%

     Benefit rates cut from 80% of former earnings to 75%, then

    1995-7 restored to former level.

     Cash ceiling on maximum unemployment benefit raised, allowing

    1999 more people to claim the maximum 80% rate.

    UK 1995 Tougher medical tests for access to disability-related benefits

     (giving exemption from the duty to seek work).

    1996 Duration of insurance benefit reduced from 12 months to 6

     months (Jobseeker’s Allowance package). Benefit conditions

     toughened in terms of job search and range of jobs which must be

     accepted. Benefit rates reduced for under 25s. Housing Benefit

     maxima restricted.

    1998 One Parent Benefit abolished, meaning lower income for certain

     lone parents.

    1999-Introduction of New Deal, including an element of ‘workfare’ for

    2000 some long-term unemployed

    2003-4 Jobcentre Plus; compulsory work-related interviews for lone

     parents and most people on incapacity benefits.

    Sources; European Commission; Social Protection in Europe, 1997;; various publications of the Centre for Social Inclusion


    Shorter insurance entitlements, moving more people onto means-tested allowances, and stricter work tests act to drive people into low paid jobs or temporary work. They are coupled with an increased use of active labour market programmes, sometimes used to deter continued benefit claims. ‘Workfarism’ or ‘work first’ is the name given by Peck and Theodore (2000) to the ensemble of benefit rules and employment service practices which are designed to lower jobseekers’ aspirations and wage

    expectations. They argue that workfarist regimes of this kind for the unwaged are a policy tool to facilitate flexibilisation of the labour force, greater acceptance of low-paid and ‘contingent’ work and control of wage growth. ‘Capital oriented flexibility’ (Koch 2004) as exemplified by the UK case has particularly strict availability for work tests, and compulsory labour market programmes for long term unemployed sometimes involving work for benefits. UK authorities are now also applying a stricter regime to people on incapacity benefit by obliging them to undergo frequent assessments and interviews to see if they can work.

    There is clearly some convergence of policies towards the unemployed, in a ‘workfarist’ direction, encouraged to some degree by the coordination of employment and social policies at EU level. ‘Active’ labour market policies are indiscriminately encouraged by the European Commission as part of a neo-liberal approach to the management of the labour market, as a complement to greater flexibility of working conditions and of ‘hire and fire’ rules and apparently without regard for the way in which some of them may undermine job quality and social rights. Without denying that some member states already did use ‘workfarist’ programmes and benefits

    policies prior to the late 1990s for example the UK, which developed them in the

    1980s and others might have moved in that direction independently of EU-level policies, there is no doubt that the Employment Policy Guidelines of 1998 onwards leant some international legitimation and encouragement to these developments. Moreover, if the choice of policy approaches to unemployment is between pushing jobseekers to reduce their wage expectations on the one hand, and expensive schemes to create additional jobs at established wage rates on the other, the predilection towards low government spending motivated by the Stability and Growth Pact leads governments to choose the former.

    There are forms of active labour market policy which are unemployed-friendly and trade-union-friendly; Sweden and Denmark have a long history of them for insured workers. However, there is some controversy over whether elements of their current active labour market policies should be regarded as workfare or workfarist. Elsewhere (Gray 2004a) I have argued in line with Kildal (2000) and with Cousins and Michel (2000) that the increased use of social assistance and of active labour market programmes for its beneficiaries have recently shifted these countries’ systems away

    from client-oriented ‘activation’ and towards ‘workfare’. This is why I say there are

    ‘cracks’ in Swedish ‘negotiated flexibility’.

    Curtailing benefit rights was seen to be good for job creation; the poor must suffer before they can be ‘included’. It’s a policy which puts the burden of labour market adjustment on the poor. It does ‘work’ by inducing them to accept bad jobs. The Commission’s latest Employment in Europe review finds that active labour market measures have helped to improve flexibility. But there is an inherent contradiction


    with job quality. Moreover, a downward spiral of casualisation and reduced union power threaten the basis of the ‘social dialogue’ model.

    Returning to the first diagram, what this does is blocks off the possibility of shifting the trade-off outwards by achieving a negotiated shift in the curve. Workfarism also induces a series of vicious circles whereby the problem of the poverty trap tends to get worse, and then you need even tougher benefit regimes to push people into work, as well as more and more taxpayers’ money to address poverty.

Figure 3



    Strict benefit conditionality WORKFARE EFFECT

    Creation of low-paid jobs through

    labour market programmes

Driving unemployed

    towards low paid jobs

    Demonstration/ Substitution


Easier for employers

    to fill low paid jobs

    Share of low paid/insecure

    work rises

    Problems of avoiding

    poverty, and of reduced

    incentives to work

    Need for in-work benefits

    Tax credit or `disregardsÕ

    Fiscal burden rises


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