More and better jobs by putting social Europe at the heart of the Lisbon strategy

Brussels, 01 December 2004

The Lisbon strategy is about reaching ambitious objectives in the economic, the social and the sustainability field through a strategy of innovation and by investing in a knowledge society. Lisbon is not about wage cuts or competition on the basis of bad working conditions; instead it is about economic, social and ecological policies that are mutually strengthening each other. This is why the ETUC has welcomed the Lisbon strategy from the beginning.

The Lisbon mid term review presents an opportunity to restore this basic approach. This opportunity should not be missed. The ETUC urges the Commission and the upcoming Spring Council to take the following ETUC key demands into account when reviewing the Lisbon strategy:

1. Learn the lessons from past experience. Stop the mantra of unbalanced structural reform. Stop the mantra of stability and nothing but stability. Lisbon is about high growth, more and better jobs, social cohesion and sustainable development. In practice however, exactly the opposite is happening. The European economy is barely growing, unemployment is edging up, labour productivity trends are falling and workers feel more than ever insecure. Lisbon is not delivering because the kind of reform that is being pursued is not the right one. Too much focus is put on deregulation and flexibility instead of assisting workers to tope with change. Lisbon is also not delivering because aggregate demand policies are being distrusted and have been abandoned. Even when hit by economic shocks and downturns in demand and overall confidence, government intervention in order to stabilise the economy is being distrusted and only implemented in a slow and inadequate way.

2. Get the structural policy agenda right. Put Social Europe at the heart of the Lisbon strategy. It is too simple to cry out for ‘reform, more reform and even more reform' and then blame governments for non-implementation. The reality is that structural reform has become a code for deregulation and unlimited flexibility, for weakening workers' rights and wages and for the dismantlement of the social welfare state. It should come as no surprise that workers and the public at large are refusing an agenda that is in fact leading to the destruction of the European Social Model.

If acceptance and ‘ownership' of structural reform policies is to be enhanced, then a radical overhaul of the current policy approach is urgently necessary. For the ETUC, the mid-term review has to acknowledge that social Europe is a powerful force for productivity and growth and that, for the Lisbon goals to be delivered, a massive investment is required in positive labour market institutions such as:

• active labour market policies with well functioning employment services that provide guidance, training and counseling

• increased access to lifelong learning for all workers

• improved social benefits regimes, supporting unemployed in their search for new jobs

• policies to reconcile working and family life

• policies to fight discrimination and gender gaps

• initiatives to promote participation of workers in developing high performance work places.

• developing new forms of security for workers while maintaining the principles of existing forms of workers' security.

By helping workers to accept and to be able to cope with the process of structural change, social Europe is not just a financial or a regulatory burden. Instead, social Europe is at the core of Europe's competitive advantage and the process of growth and job creation. This is in particular true for investments in learning capacities in general. Investing in learning capacities are essential for innovation and should become a priority in innovation policies. Also, by investing in learning for all workers, social cohesion can be promoted and inequality can be avoided. This corresponds with the original Lisbon idea: wages and productivity should be brought in line with one another, not by bringing down wages but by increasing skills and productivity of all workers.

The ETUC urges European policy makers to draw up a European investment plan in social infrastructure. In this European Social Investment Action Plan, the focus should be on social policies that help workers to address the challenges of ‘delocalisations', globalisation and restructuring. Also, special attention has to go to the urgent needs of the new member states in building labour market structures that underpin employment, productivity and social cohesion.

3. Break the taboo on active aggregate demand management. Deliver the Lisbon goals by reforming Europe's macro policy regime. Macro-economic demand policies are an indispensable part of an agenda for growth and jobs. For growth and jobs to materialise there needs to be supply side and demand side policies. Structural policies that improve the quantity and quality of labour supply have to go hand in hand with active demand policies that support growth and create jobs. We can train as many workers as we wish, but this will not create one single extra job when firms do not offer jobs because of lack of demand.

The economic slowdown which has set in since 2001 and from which Europe in 2004/2005 still has enormous difficulty from recovering vividly illustrates the need for Europe to reform its existing regime of macro policy making. Europe can no longer continue to focus its macro economic policies exclusively on stability and leave the responsibility for growth and demand to policy makers in the rest of the world. As the second biggest economy in the world, and with a single currency at its disposal, Europe needs to act and behave as the ‘master of its own economic destiny' by pursuing aggregate demand policies that support growth and make the European economy resilient against negative economic shocks.

The European Central Bank should stop looking for inflation around every corner and under every stone. When growth is endangered and inflation is nowhere in sight, the ECB should abandon its ‘wait and see attitude' and support growth by reducing interest rates in a timely and substantial way. From its side, the Stability and Growth Pact should take into account the need for fiscal policy to stimulate the economy in times of economic slowdown, whereas an ambitious fall in the deficit should be reserved for economic upturns.

The ‘Growth Initiative', decided upon by the 2003 December Council, should be taken up again and be strengthened. With the aim of securing the recovery, member states should be invited to present ‘national plans for economic recovery ‘ that increase public investments in education, research, social housing, revitalisation of inner city areas, clean technologies, and renewable energy sources by 1% of GDP.

4. Sustainable development is a pillar for growth, competitiveness and social cohesion. Like Social Europe, the environment is a source of competitive advantage for Europe. Sustainable development policies force the European economy to invest in those sectors for which future world demand will grow most (‘first mover' effect). Sustainable development policies also improve present European competitiveness by economising on expensive energy and materials input.

The ETUC calls upon the European Spring Council to fully integrate the Strategy for Sustainable Development with the Lisbon process. For the ETUC, this implies:

• Building a consensus between social partners on the transition towards sustainable development in order to manage potential tensions between environmental and social goals.

• Progressively include external costs in prices and removing harmful subsidies.

• Making the environment an integral part of European industrial policy programmes.

• Steer investments in European Research and Development towards innovation in the areas of energy efficiency, clean technologies and renewable energies.

• Making sure that the single European energy market recognises that energy supply has to remain a service of general interest with all consumers being entitled to access.

• Globalising sustainable development: the external dimension of sustainable development including the (non-) respect of core labour standards is an issue for Europe's competitiveness and must be addressed by the EU in its external policies.

5. Put the money where the Lisbon mouth is. Nice policy intentions are not enough. Yes, Europe needs to invest in more research and development, in more and better education, in labour market structures that help workers to engage in change. But these policies need to be financed. If European policy makers really attach the highest importance to the Lisbon agenda, they need to create the necessary budgetary room, notably indirectly through structural funds, by:

‘Lisbonising' the Stability and Growth Pact'. With the Stability and Growth Pact as it exists at present, Europe is not able to engage in an agenda of innovation. Europe does not have the luxury to wait another five years or so for deficits to be eliminated before investing massively in innovation, research and development. This dead-lock needs to be broken by reforming the Stability Pact so that investments which are at the heart of the Lisbon priorities are no longer counted in the public deficit, at least for the first next years.

Putting a halt to tax competition between member states on mobile incomes. European governments just cannot afford to continue on the road of competitive tax dumping. ‘Beggar-thy-neighbour strategies' that try to shift the tax base of mobile incomes between countries are only to the benefit of international capital and reduce substantially the margin for European governments to invest in the Lisbon priorities. The savings directive needs to be implemented and in the field of company taxation, the discussion on a common tax basis has to be supplemented by a minimum tax rate on profits.

Urging the European Investment Bank to make full use of its finance possibilities. With an increased ceiling on loans from 2003 onwards, the EIB can engage in additional lending. It must be assured that this additional lending room is used to a maximum extent and that the investments link up with the Lisbon agenda of innovation, research and development.

6. Do not narrow down the Lisbon agenda to a focus on competitiveness. Revise the concept of competitiveness. The ETUC urges policy makers to resist the temptation of going for a ‘quick economic fix'. Achieving competitiveness and jobs on the basis of social dumping is in flagrant contradiction with the Lisbon model and will weaken the productive base and the innovative capacity of the European economy in the medium and long run. The Lisbon ‘learning society' will not be reached on the basis of poverty, insecurity and sharp inequality.

No long working hours. Pressing workers to work long hours is a too easy solution. In the medium run however, it will lead to a burned out working force, to reduced job opportunities, hinder women in entering and progressing in the labour market and increase (work place) accidents. Experience from those member states that have long working hours testifies to this. Strikingly, these member states are also characterised by relative low productivity scores. The current revision of the European working time directive should lead to more, not less control on those employers that force workers to work excessive long hours.

No general cuts in wages. Competing low wage economies on the basis of wage cuts is a dead-end street. There will always be countries where wages are still lower. Moreover, general wage cuts undermine domestic demand and reduce the incentive for firms to invest in innovation and productivity.

No to a services directive that will lead to social dumping. The present draft directive on an internal market for services (Bolkestein directive) is a recipe for social dumping and will push companies to compete with each other on the basis of poverty wages, poor social protection and unhealthy working conditions. The ETUC urges a radical overhaul of this draft directive.


Revise the concept of competitiveness. Competitiveness should be about policies that enable the European economy to secure its place in the international division of labour by moving up the ladder of technology, innovation and productivity. This implies investing in research and development, investing in productive and secure labour markets and social dialogue that address workers' fears of structural change and investing in the development of those sectors where the jobs of the future are to be expected (sustainable development, social and personal services care sectors).

Keep and strengthen the benchmarking process on social inclusion. ‘Trickle down' strategies do not work. Economic success does not automatically equal high social cohesion. Several member states benefit from high employment rates while at the same time suffer from very high poverty rates, with as much as one third of children living in poverty. Vice versa, several member states with high social cohesion already outscore the US on areas such as job creation and innovation. It needs to be kept in mind that, as the Kok reports argues, social inclusion policies are not only important to combat poverty but also to contribute to increasing labour supply and generating a productive workforce'. Therefore, the domain of social cohesion should be added to the five policy issues the Kok report proposes to focus on.

7. Ensure that the right set of Lisbon indicators will be used. In order for policy makers to focus on the right set of policies, statistical indicators to monitor whether progress is being made are important. Here, the ETUC stresses that the set of indicators as presented in the Kok report may provide dubious or incomplete information. For example, using an indicator such as ‘productivity per person' in fact heralds those member states that nurture a culture of long working hours while the dismal performance of these same countries in the area of productivity per hour is being concealed. Moreover, in the set of indicators selected by the Kok report, essential indicators concerning social Europe as a productive force are simply missing. This concerns statistics on lifelong learning for workers, on the number of children in households living in poverty and on the extent to which unemployed workers are being assisted in their search for jobs. The ETUC urges the Commission and the European Council to correct and broaden this set of Lisbon indicators to the social dimension. If not, there is indeed a danger of Social Europe being swept under the Lisbon carpet.

8. Implement Lisbon by involving social partners. Lisbon will not be implemented if policies are decided over the heads of workers. Implementation implies ‘ownership' and ‘ownership' can only be achieved on the basis of social dialogue. Here, the ETUC welcomes the fact that the Kok group is insisting on the importance of involving the social partners, both at the national as well as at the European. In particular, the ETUC welcomes the High Level Group's recommendation to make the Lisbon programme a part of the common work programme of European Social partners. At the same time, the ETUC expects a ‘partnerships for change' to represent real change and not ‘the business of deregulation as usual'. The ETUC cannot accept an approach where the trade union's presence or signature is used as an alibi for continuing efforts to weaken or destroy the social dimension of Europe. Also, the ETUC wants it to be clear that all other actors also have to take up their responsibility. Governments and central banks cannot leave the economy to its own device and then expect trade unions and workers to pick up the pieces.

If there is a real willingness to strengthen the European social dimension as part of the Lisbon process and to reform Europe's macro economic policy framework, the ETUC is prepared to explore the possibility of a ‘European framework agreement for innovation, social change and more and better jobs', within the common work programme of European social partners The aim is to foster a consensus between European social partners with regards to how the system of industrial relations, collective bargaining and social dialogue can alleviate workers' fears concerning ongoing ‘delocalisations', and job retrenchment, by helping workers to adjust to change and to engage in the agenda of knowledge, and innovation, instead of giving up their rights and protection. This European framework, based on ‘good practice examples' should then be the basis for further discussions and negotiations at the national level. Here, synergies between national innovation bargaining and the European Social Fund need to be explored.