Some Highlights from the European Commission White Paper on Employment

...it is only by a decentralized approach, i.e. at company level, that adjustments to working hours can lead to improved competitiveness, and thereby encourage job retention and job creation.

The European Commission White Paper on Employment noted that discussion of growth, competitiveness and employment is often beset by conflict between views of various national governments, those of employers' and of trade union organizations. As the Commission pointed out, "if there were a miracle cure for unemployment, it would not have gone unnoticed."

The Commission specifically rejected claims that either protectionism, "opening the taps" on fiscal spending, a generalized reduction in working hours and job-sharing at national levels, or a drastic cut in wages and pruning of social protection are viable options for ensuring stable economic growth and reducing unemployment.

To explain the steady rise in unemployment ion Europe since the 1970s, the Commission first distinguished between three types of unemployment:

Cyclical unemployment occurs whenever economic growth slackens;
Structural unemployment occurs because of rigidities in the labour market, such as excessively high labour costs and inadequate linkage between training and work needs; and
Technological unemployment occurs because changes in production processes and work organization destroys jobs, sometimes faster than new needs can be identified and employment created to fill those needs.

This is not to say that any particular job is lost because of cyclical factors, while another job loss results from technological change. Similarly, it would be extremely difficult to produce statistical estimates of what proportion of total unemployment may be attributed to each of the different types. However, this distinction between types of unemployment is particularly useful in helping to dispel illusions about a one dimensional "miracle cure" that targets a particular type of unemployment, perhaps at the risk of increasing other types of unemployment.

The European Commission White Paper outlined a broad strategy for job creation, naming the following priorities for action:

lifelong education and training;
greater flexibility, both internally and externally;
greater expectations from decentralization and initiative;
reduction in the relative cost of low-qualified work;
thorough overhaul of employment policies;
efforts to meet new needs.

Although listed fourth in the list, one of the White Paper's most interesting and policy specific suggestions came under the heading of reducing the relative cost of low-qualified work. As the paper noted, 40% of the cost of labour in Europe are non-wage costs for statutory social security items, such as unemployment insurance, pensions, and medical insurance. The non-wage costs of low-wage earners is proportionately higher than average.

The White Paper cited studies that suggested that, in some countries, a 30-40%reduction in social security costs for low-wage earners could reduce the unemployment rate by 2%. Rather than either slashing social benefits to match the reduction in revenues or increasing government deficits to finance them, the White Paper suggested that the foregone revenue could be made up by imposing a CO2 tax, that is, a tax on the consumption of fossil fuels.

The beauty of such a tax is that besides helping to create jobs, it would reduce the production of greenhouse gases. That is to say it would be "worth doing anyway" to protect the environment. Although the White Paper does not emphasize this point, it is worth noting that a reduction in the non-wage costs of labour could also be a key element in encouraging more flexible work time arrangements in those circumstances where such changes would lead to greater productivity and competitiveness.

[Return to TimeWork home page] [Overview of the research process]

Some Highlights from the European Commission White Paper on Employment

Copyright 1995 by KnoW Ware Communications