A job guarantee could end long spells of joblessness for millions in the EU and send a pre-election signal that a ‘social Europe’ is possible.
The European Union’s policy responses to this century’s major economic shocks—the aftermath of the 2008-09 global financial crisis and the combined impacts of the pandemic and the Russian invasion of Ukraine—present a study in contrasts.
After a short-lived counter-cyclical response to the financial crisis, which helped many countries (including Germany) to cushion the decline of growth and employment, EU authorities reverted to strict adherence to the Maastricht-treaty fiscal rules. By 2010 austerity, tax increases and ‘internal devaluation’ (wage cuts) were variably enforced on member states. Those most vulnerable, already highly indebted or with unstable financial sectors, were pushed into years of unprecedented loss of economic activity, driving many more millions of citizens into the ranks of the unemployed and thousands of businesses into bankruptcy.
Confronted with the pandemic, however, policy-makers showed greater willingness to deploy public finance in support of the population. In addition to the European Commission activating the ‘general escape clause’ of the Stability and Growth Pact, which enabled member states to depart from the Maastricht rules, they were supported by the €98.4 billion SURE programme to help avoid layoffs during the lockdowns through job-retention schemes and wage subsidies. Furthermore, the European Council reached agreement on a €750 billion recovery package, providing access to grants and loans to all member states, mitigating the adverse socio-economic impacts of Covid-19. As a result, Europe managed to avoid the worst.
These diametrically opposed policy orientations, and their divergent outcomes, provide valuable lessons. To address effectively the multiple crises Europe faces—including vis-á-vis the cost of living and the environment—‘business as usual’ rules and policies will not do. Building a resilient and sustainable EU requires a hard look and an open mind, supporting policies that deliver results for citizens while transforming those that do not. In this context, a job guarantee deserves serious consideration.
One of the areas of EU policy failure is long-term unemployment. Over the past decade, the share of the unemployed who have been out of work for more than 12 months has been in the region of 40-55 per cent. The misguided policies pursued during the eurozone crisis led 14 million EU28 citizens into long-term unemployment. Despite the recovery, the extensive efforts and the effective policy interventions now in place, still millions suffer this fate. The private sector is simply unable to generate a sufficient number of jobs for all individuals seeking them: there is no known mechanism in ‘free market’ societies for the demand for labour to match its supply. Policies to support the unemployed—traditionally delivered in Europe through unemployment benefits, active labour-market policies to facilitate re-entry and job-retention schemes or temporary wage subsidies—have failed to compensate for that inadequacy.
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A job guarantee is a policy intervention that can more effectively end long spells of joblessness, by directly offering a job and a wage to the long-term unemployed unable to find remunerative work. Associated work projects, which are publicly funded, are selected with a view to yielding a public benefit to communities while fulfilling unmet needs to the greatest extent possible. The job guarantee is an emblem of our collective responsibility to ensure that, when the private sector cannot deliver, those who want to work have an option, instead of being forced to remain inactive and socially excluded.
The net cost of such an intervention would not be a significant burden on the public finances. Amid the severe depression in Greece in 2013-14, with a 25 per cent drop in gross domestic product and unemployment hitting 27 per cent, Levy Institute colleagues and myself, in collaboration with the General Confederation of Trade Unions of Greece, estimated the impacts on the country of a modest direct job-creation programme, along the lines of a job guarantee. We found significant multiplier effects in output and employment: for every 250 jobs directly created, an additional 100 (mainly skilled) would be created by the private sector elsewhere. As a result, our simulations showed that 59 per cent of the public expenditure required would be recouped through higher tax revenues (income taxes, social-security contributions and value-added tax). Depending on the size of the programme and the level of the job-guarantee wage offered, the net cost would range from roughly 0.6 per cent of GDP to a maximum of 2.2 per cent.
Based on this study, a ‘back to work now’ job-guarantee programme, which combined four days of work per week with one day of upskilling (through lifelong-learning seminars), was designed and rolled out in Greece in 2016 and continues to date. Ample prospects for meaningful job-guarantee opportunities exist and can be offered to the unemployed, in environmental interventions, small-scale physical improvements, filling care-economy gaps and supporting the digital transition.
Time for action
The SURE instrument, NextGenerationEU and its centrepiece Recovery and Resilience Facility have shown that change is possible. This policy reorientation delivered solutions benefiting working people, businesses and the overall economy all at once. It is more urgent than ever to act in solidarity, for the common purpose of reducing insecurity and inequality in Europe.
This was written as part of the ‘Reconstruction beyond the pandemic’ project at the European Trade Union Institute, with an edited volume entitled Transformative Ideas—Ensuring a Just Share of Progress for All
Rania Antonopoulos is a senior scholar of the Levy Institute. During 2015-18, as alternate minister of labour for combating unemployment in Greece, she oversaw the design and implementation of a job-guarantee programme which eventually reached close to 200,000 people.