A European employment guideline—a new recipe for dealing with the crisis

Full employment could become a new target for an insecure Europe. A European employment guideline would provide the means to hit it.

Since the investment bank Lehman Brothers went bankrupt a decade ago, unemployment in many EU countries has risen to an unacceptably high level, falling only slightly in recent years. In parallel, right-wing parties and populists are gaining ground at a frightening pace. Today, economists, bankers and investors, including the economics professor Nouriel Roubini and the boss of Bridgewater, Ray Dalio, are warning that, in one to two years’ time, a new financial crisis is likely to emerge which will eclipse 2008. Europe’s heavily indebted countries will then have little scope for fiscal counter-measures.

A new political concept, the ‘European employment guideline’ (EEG), can counteract this. With it, jobs can be created for everybody in Europe within just a few years.

Binding upper limit

The EEG would work this way. The EU’s treaty objective of achieving full employment and social justice would be taken seriously by setting a binding upper limit of 2 per cent unemployment. The current job shortfall in Europe is around 15 per cent, taking into account undeclared unemployment and job-seekers who are no longer registered.

To achieve the 2 per cent target, the European Commission would have the competence to give all companies with more than 250 employees a target by which percentage they would have to increase the number of jobs and personnel expenses. The process would be repeated annually until the number of job-seekers had fallen below 2 per cent and thus the fullest possible employment (given inevitable frictional unemployment) had been achieved.

One third of all employees in the EU are employed by big corporations. If the latter had to increase their workforce by 20 per cent over four years, over 7.3 million jobs would be created in the EU (excluding the UK) and unemployment could be reduced by a third. To do so, large companies could:

• reduce working hours and distribute employment among more workers and/or invest in expansion;
• reintegrate already outsourced, in some cases precarious, jobs and parts of the company into the group, and
• invest in training and further education.

The relevant European works councils, trade unions and other interest groups, such as local authorities, environmental-protection associations and citizens’ initiatives, could negotiate with managements over how the EU target would be concretely implemented in the group—what kind of investments would be made or how working hours were to be reduced. The number of jobs to be created by companies, as well as the increase in labour costs, would be calculated on the basis of the figures for the last three or five years before the introduction of the EEG. Large companies could continue to make profits but only if they made their contribution to full employment.

The guideline could not be introduced in individual countries, but only throughout Europe, as otherwise there would be a threat of relocation. But large companies could by no means do without the huge EU market as a whole.

Incentivised

The EEG would indeed benefit companies by guaranteeing effective demand, because all large firms would be incentivised to invest and thus buy and sell products and services. Small and medium-sized enterprises, while excluded from its requirements, would have more orders.

Moreover, the tax revenues of the member states would increase. The economic and political situation would stabilise after a few years, as jobs would also be created in peripheral EU regions and migratory pressures within the EU would continue to decrease. Right-wing nationalist parties and movements would receive less support. Trust in the institutions and bodies of the EU would grow again.

With increasing job offers, the fear of being dismissed would decrease and wage-earners would be able to fight for better wages and good working conditions. The wage share, which has fallen sharply in recent years, would rise again; in return, exorbitant profits and capital income would be reined in. For European workers and their associations, the EEG would be an important instrument to strengthen their bargaining power after decades of a systematic weakening of trade unions by politicians and corporations.

Even before it was introduced, the guideline would enhance discussion of issues of social justice and full employment. It is crucial that European trade unions, the European Trade Union Confederation and European trade union federations take up this idea and work hard to disseminate and implement the concept.

Strong campaigns

The European works councils would also gain new tasks and fresh vigour with a commitment to the EEG. If trade unions, political parties and NGOs explain the EEG in an understandable and plausible way, and carry it into the population with strong campaigns, it would attract broad social support.

Full employment is a trade-union vision against right-wing isolationist tendencies. And the EEG can be brought into play as an alternative proposal to an unconditional basic income, which is not suited to combating unemployment.

Trade unions have tried over the last three decades to reduce working hours and thus spread work among more people. This was only successful on a few occasions. The entrepreneurial and capital side on the other hand has always preached economic growth as the only solution. The EEG essays an alternative way: how work is redistributed or in which areas and in which regions new investments are made is decided during the implementation of the employment target in individual corporations and must be negotiated there with management by the European works councils and other interest groups. The EEG can be combined with other tax and ecological measures.

Especially in times of economic and political crisis, unconventional concepts have a good chance of turning into reality. Good jobs and income for all should clearly take precedence over profit-seeking for the already rich. Will real full employment, similar to the eight-hour working day or retirement provision, soon become a European achievement?

Documentation on the EEG concept can be ordered (currently in German, English, French and Italian) at [email protected].