Foundation Forum 2009 - Reflections on the recession

All in this together? The role of social dialogue

Social dialogue is an important feature of the European Social Model. Some Members States, notably Ireland, built their modern economies on the basis of national agreements with the social partners. What is their position on social dialogue in recessionary times? Can it deliver the hard decisions? What of Member States where social dialogue is not part of their culture or was considered a luxury they could not previously afford? Will they turn to it now and what are the alternatives? Here are some perspectives.

Companies – flexibility allowed for quick response to crisis in Germany

Wolfgang Goos, Deputy Director of the German Federation of Chemical Employers’ Associations, representing 1,900 companies, stressed that in Germany, good social dialogue and flexibility in the chemical industry enabled a quick response to the crisis. The consequences of the crisis were not extreme. Employees and unions are increasingly well represented and they can react well.

The principle of subsidiarity – solving a problem as close as possible to the grass roots – has helped. Negotiations have looked not only at wages but at job security. Social partner agreements are a way of expressing common agreements which perhaps are not suitable for wage negotiations. European works councils help all to realise that the sooner we can react to new developments the better we can deal with them. If you look at the challenges we’re facing now, basically they are about how to manage change, whether it’s globalisation, demographic change, or ensuring higher qualifications. Our strength in Europe is knowledge. Every euro spent on training is better than investing in poisonous securities. The European social model is the way forward.

Governments – Bulgaria using social dialogue for economic recovery

Krasimir Popov, Deputy Minister of Labour and Social Policy in Bulgaria noted that a new government was voted in Bulgaria three months ago. Its aim is economic recovery.
‘We choose to use social dialogue as a powerful tool to try to change our society and to overcome the crisis. Social dialogue and partnership is our underlying approach. Anti-crisis measures have been discussed by tri-partite parties. Sustainable results have been achieved. Continuous dialogue takes place with the social partners. One of the first steps of the government was to review a new employment grant for 2010.

How do we use social dialogue to solve the crisis? A working group proposes measures to resolve it. Our short-term plan for recovery includes social security and health insurance and the social consequences of restructuring. Vouchers are available for training workers who lose their jobs, covered by the European Social Fund. Huge resources are being made available to stimulate job creation.’

European Union – social dialogue has mitigated consequences throughout EU

Jean Paul Tricart, Head of Unit on European Social Dialogue within the European Commission Directorate-General for Employment, Social Affairs and Equal Opportunities, noted that social dialogue has contributed to resilience in the EU during this crisis, mitigating its consequences. ‘The EU social model is a powerful one. Agreements have been reached about maintaining jobs. Social dialogue has been very important. Where there were weaknesses, they were often due to poor social dialogue.

Debate on the causes of the crisis has to continue. Initially, the EU did not come to an agreement on its causes. It was seen as a financial crisis from the US. There was a link between the crisis and income inequalities. The subprime crisis in the US was associated with workers needing to get into the financial market to find home loans. In the EU, we need fair distribution of incomes. We need to explore inequalities, such as bonuses for traders. And we need to get consensus. We must put more emphasis on skills. We cannot separate the short-term response to the crisis to the long-term one: the short-term response shouldn’t make long-term challenges more difficult. It was necessary to maintain employment. We need to avoid outsiders in the labour crisis. How are we to avoid alienating the unemployed and the young? In addition, the climate change debate is an important one, such as its consequences for employment.’

Trade unions – social dialogue develops growth and trust between partners

Anna Ekström, President of the Swedish Confederation of Professional Associations, noted that in 1976 the Swedish parliament decided on a codetermination act.
‘Companies should always discuss changes with workers. It was opposed by conservatives and communists. The latter feared employees would feel solidarity with their employers. I’m glad to say they were right! It has helped develop growth and trust among the social partners. Today there are marches in Dublin about creating the right conditions for social dialogue. In Sweden, it’s not so much tripartite. It is more a dialogue. Nordic countries have a very high trade union density of about 80%. Social dialogue is about a balance of power amid conflicting interests. So far, social dialogue in the Nordic countries is the best I have seen, even though it is not perfect. With true social dialogue, there is give on both sides. We have quite a few local agreements about lower pay, less time working etc.

Thanks to European Works Councils, we know more about workplaces elsewhere in Europe and ideas travel faster. Changes elsewhere in Europe become quickly known. Everyone gives the word flexicurity his or her own interpretation. But it should be seen neither as security nor flexibility but the combination of both. If you want nice growth, then have social security systems that promote growth. Nine years on and I still love the vision of the Lisbon agenda. There are budget deficits all over Europe. There will be big fights all over Europe. The common areas for debate are taxes, social security and investment in education. We should see social security as an investment; a trigger for change; a trigger for growth – we should see it as a springboard and less as a safety net.

Ten years ago I was part of a group that drafted the Lisbon agenda. Europe needed to increase its productivity and its labour supply – everyone works a little more and smarter and more should work. Make it as simple as that. The key issues are labour supply, productivity and trust.’

Member States – Social dialogue led to economic stabilisation in Ireland

Dermot McCarthy, Secretary General to the Department of the Taoiseach, said social dialogue originated in Ireland due to the economic crisis of the 1980s, with falling employment, emigration and the erosion of the economic base. ‘We needed alignment of fiscal and income policies and a national level of wage bargaining for stability. National level wage bargaining aligned fiscal and income policy. With courage by the social partners, it led to the stabilisation of the economic situation. This resulted in Ireland’s economy performing spectacularly well. We doubled the labour rate, attracted Irish emigrants to return home and non-national immigrants to arrive, leading to the source of our prosperity. Many more people were at work and the institutions of partnership gave rise to strategic reports by social partners, national-level pay agreements and effective problem-solving in managing the unexpected.

We can, with hindsight, see some opportunities missed: we overemphasised national partnership to the neglect of the enterprise level and we failed to apply insights of flexicurity and failed to up-skill the labour force in the face of accelerating change in the workplace. Then came the present crisis. We moved rapidly from fiscal surpluses to fiscal crisis. Through social partnership we sought to understand how it came to be that we were in this situation. We are fortunate to have a framework, a ten-year plan, to 2016. It provides a context. There are agreed principles in places but applying them is difficult. Handling distributional conflict is the essence of social dialogue. Our best interests lie in reaching consensus. With marches around Ireland today, a shared perspective has yet to be found. However, amid continuing controversy and debate there is still commitment to social dialogue. With continued commitment to social dialogue, we shouldn’t be unduly pessimistic.

Positive change can be achieved through this crisis if it is viewed as an opportunity to support and strengthen the European Social Model and not as means to dismantle social partnership, squeeze the public sector and lower working conditions in Europe. The debate is held in the context of massive unemployment particularly among the young, an ageing population and an inadequacy of pension income and future pension provision.

The crisis is a turning point for Europe and will test the limits of the social model. It should be protected through tighter regulation of the financial sector, innovative social partnership and the strengthening of social dialogue. The positive element of this crisis is that it is a window of opportunity but one which may only be available for the next two to four years. It also heightens the focus on what needs to be done by all the players – sooner rather than later.’