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Centre for Employment Studies
LRR Second Conference The European Union, achieved its monetary union and with unemployment still near 10%, faces three realities as it is still in the process of closing the technology gap with the United States: (i) an ageing population; (ii) the continuation of immigrant waves from the South and the East; (iii) the trend towards the end of jobs for life. As a consequence, there is increasing risk of labour market segmentation in Europe, touching upon the weak fringes of the work force, and particularly the immigrants, the unskilled young and the elderly. The consensus view emerged since the Eighties was that employment growth could be achieved in the EU, only to the extent that labour market flexibility would increase in parallel. The role of aggregate demand was played down inspite of the vast underutilization of human resources. Monetary policy was strongly restrictive (and pro-cyclical) since the mid Eighties, with interest rates at their highest in 1992 when growth was approaching zero and turning negative a year later. The fiscal story confirms the restrictiveness of EU demand policy. This view is now, at last, the object of serious reconsideration. The thrust toward deregulation and liberalization of the labour market has been and still is strong. Rapid convergence towards an ideal USA model is, occasionally, advocated. There appears to be some evidence that higher LM flexibility may be conducive to higher employment generation. At the same time employment protection is becoming progressively thinner with the weakening of the welfare state. The crucial policy issue is whether it is possible to achieve sound employment growth in Europe without the economic and social costs that too often appear to go together with labour market flexibility: social exclusion of the least priviledged, segmentation between groups of population who have access to higher education and perspectives of upwards mobility for themselves and their offsprings, and others who are denied this access, between locals and immigrants. Not dealing with these problems might pave the way to political instability, social unrest, outright racism. Since the Nineties, in most EU countries, a vast share of new hirings takes the form of fixed time or temporary contracts, part-time positions, atypical contracts of various sorts. Work-leasing, disguised forms of self-employment, all aim at reducing labour costs and turning work into a flexible commodity. The experience with short-term contracts in Spain has become renowned, but Italy and France (and others too) have followed similar tracks. Likewise, the case of Holland – with one third of employment holding part-time positions – is setting another important example. At the opposite extreme, the UK and Ireland stand out for having achieved almost complete deregulation of their labour markets. On the other hand, in some EU - countries, especially of Southern Europe, the black economy is vast and possibly increasing. It develops also, although not only, as a reaction to tight regulation and high taxation. There, flexibility of earnings and of working hours is total, employment protection nil, labour market segmentation at its highest, with most statistical indicators failing to trace any of these phenomena. The costs of such developments may be serious: increasing and persisting income inequality, polarisation between good jobs and bad jobs, high risk of being trapped in the low tail of the earnings distribution, eventually leading to social exclusion. In addition to vast market failures leading to waste of human resources and disincentives to invest in human capital. These perspectives pose a great challenge to European
policy-makers. This Conference aims at improving the understanding of
some of the main issues, and at providing a sounder orientation for
future applied research.
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