For a Labor Day Against the Threat of Social Competitiveness
Why Europe should resist weakening workers’ rights in the name of economic renewal. A commentary by Pietro Galeone
As many nations prepare to celebrate Labor Day, a spectre is haunting Europe: the spectre of deregulation.
After the European Union recently passed the Omnibus package, which has been criticized by some as a veil to mask deregulation as simplification, growing voices have been pushing for what would amount to a social Omnibus, i.e. shifting gears in reverse also in the realm of social rights.
Less than two months ago, the European Social Forum provided an interesting example.
The Forum is the annual event organized by the European Commission to focus on labor and social issues in the EU.
While initiatives like the Quality Jobs Act or the Anti-Poverty Strategy were at the forefront of discussion, highlighting the efforts of the Commission to improve working conditions and inclusion in the EU, a new buzz word came up in almost every discussion: “competitiveness.”
Competitiveness per se is a neutral concept, and it has become the EU’s “Spirit of the Age” lately since Draghi’s report came out. Yet many questions at the Forum asked to reconcile social rights with competitiveness.
This is where the true meaning behind this use of the term comes out: competitiveness is seen as something in opposition to workers’ rights, something that must be reconciled with quality jobs.
This meaning reveals that workers’ rights are seen as a burden to companies, a cost that is to be borne because of exogenous regulation. And that is where deregulation comes about. If competitiveness becomes the ultimate goal, then depicting social rights as a hurdle in the way of innovation and cost minimization justifies their sacrifice.
But is this the right approach? Can competitiveness truly be founded only upon low labor costs?
I would argue that this view misses some crucial points and can hence become very dangerous for the EU, for five main reasons.
First of all, because there is no reliable evidence of how hampering labor rights truly are for innovation.
There are several less socially costly policies that the EU could implement instead to foster innovation (e.g. strengthening capital markets, simplifying bureaucratic procedures), before cutting workers’ rights.
Second, because the end goal of this approach remains opaque. As the benchmark for innovation is always the United States, are we aiming to cut our employment protections down to the level of the US?
Yet even in the US, tech jobs have been recently moving abroad to countries like India, citing lower labor costs. So will we then have to lower our standards to compete with the Indian benchmark? It seems like this approach would open the door to a global race to the bottom on working conditions and labor precariousness.
Third, because we must reject the idea that competitiveness can only be achieved via lower costs. A low-price growth model in which firms stay afloat by underpaying employees or bypassing regulations hurts not only workers but also high-quality firms.
The EU has already proven that it can leverage its reputation and attach conditionalities to its market access; it can do the same to promote a model of competitiveness based on high-value innovation without compromising on workers’ rights and other key standards.
Fourth, because cutting social rights would reduce workers’ bargaining power, in turn slowing down wage growth.
This would depress internal demand, after decades in which it has been already sacrificed in the name of export competition.
In the words of Mario Draghi: “Paul Krugman called focusing on competitiveness a dangerous obsession… The approach we took to competitiveness in Europe after the sovereign debt crisis seemed to prove his point. We pursued a deliberate strategy of trying to lower wage costs… The net effect was only to weaken our own domestic demand and undermine our social model.”
Fifth, because it is a very short-sighted policy measure. In an era of unprecedented and growing inequalities, we must seek ways to ensure that technological progress can raise living standards and bridge existing gaps.
A low-protection approach to competitiveness, instead, leaves adjustment costs to be borne by the public and by a large group of workers in the bottom part of the wealth distribution, in order to benefit the profitability of high-tech companies owned by a very wealthy few.
Beyond all these practical reasons, dismantling our social model it would betray who we are as Europeans. This Union was founded upon the ruins left by fascisms, to ensure that the horrors that those regimes brought about would never reoccur. Yet fascism was voted into power by social resentment, fueled by economic insecurity of the lower classes and their belief that the ruling class was prioritizing a few international elites to the needs of working people.
With this in mind, the Social Fund became a pillar of the first European Economic Community already in the Rome Treaty of 1957, placing social inclusion and cohesion at the core of the European identity ever since.
It isn’t a coincidence that Euroscepticism has grown mainly in eras characterized by cuts in welfare and social spending: the first wave in the 90s during the rigid disinflation of the EMS and the introduction of the Maastricht debt and deficit parameters; then with the austerity years in the early 2010s.
Thus, promoting a European agenda based on an antiquated view of competitiveness and social cuts not only betrays our values, but it would risk undermining popular support for the EU at a time in which we need more European unity than ever.
IEP@BU does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the authors.
