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May 13, 2019

New European Parliament and Commission for a more ambitious framework for social and employment policies

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After the next European elections on May 26, a new EU Parliament and Commission will take over the responsibility of developing a “Social Europe,” one of the main legacies of the past presidency. 

EU institutions implement social policies by financing programs with special funds (most notably the European Social Fund) that are designed and implemented by the national governments. Coordination of employment policies under the EU economic governance framework is aimed at monitoring, preventing, and correcting problematic trends. 

Results under this framework are far from satisfactory. Most noticeably, during the last crisis European institutions lost credibility in terms of their ability to coordinate economic and social policies, stabilize the economies of member countries, and promote efficient structural reforms. Their policies have often been considered both as impositions on the member countries during a crisis and a support for the status quo under normal conditions. Few innovations in social and employment policies and institutional improvements are rooted in them (see Boeri and Jimeno, 2016).

There are two recent advances in this state of affairs. One is the constitution of an EU “Pillar of Social Rights” to ensure equal opportunities and access to the labor market, fair working conditions, and better social protection and inclusion. Another is the creation of the European Labor Authority (ELA) that will achieve full operational capacity in 2023 to (i) facilitate access for individuals and employers to information on their rights and obligations as well as to relevant services, (ii) support cooperation between EU countries in the cross-border enforcement of relevant Union law, including facilitating joint inspections, and (iii) mediate and facilitate a solution in cases of cross-border labor market disruptions or disputes between national authorities. However, the EU Social Pillar still refers the fulfillment of its objectives to the European institutions, the national governments, the social partners, and other interested parties, under the current (narrow) interpretation of the distribution of competences defined by the Treaties of the European Union. 

Two necessary conditions for the constitution of a true European Social Pillar are a further decrease in unemployment rates and a higher and sustained growth of productivity. This will not happen while dysfunctional labor markets still prevail in many countries and reform fatigue retards progress in structural reforms. Moreover, population aging and technological developments will radically change the “battlefield” of social and employment policies.

Meeting these challenges with isolated programs built on piecemeal approaches, as done in the past, is doomed to failure. An alternative framework for EU supranational social and employment policies, built upon a more decisive intervention of the EU Parliament and Commission, is needed. For this, supranational policies must transfer resources to individuals, not to governments, by providing benefits in the form of endowments that are completely portable between national jurisdictions, so as to reduce barriers to labor mobility. Individual accounts as deposits of endowments transferred to EU citizens are fundamental to improve transparency, efficiency, and portability of rights across member countries. Notional-account pension systems and the so-called Austrian Fund are good instruments to develop this strategy. Access to EU transfers from social and employment policies should be conditional on national governments accepting the necessary institutional changes required to enhance the effectiveness of these policies.

EU institutions must find a way to develop a true European citizenship. Providing guaranteed quality education, job opportunities, professional promotion, and social protection is a good way to start. Transferring resources to EU citizens better serves these goals than either grandiose non-credible statements about Social Pillars or maintaining supranational policies subordinated to inefficient social and employment programs of national governments.

© Juan F. Jimeno

Boeri, T., and J. F. Jimeno. “Learning from the Great Divergence in unemployment in Europe during the crisis.” Labor Economics 41 (2016): 32–46.

Read Juan F. Jimeno’s IZA World of Labor article “Unemployment and the role of supranational policies.

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