THE EUROPEAN EMPLOYMENT STRATEGY: LABOUR MARKET REGULATION AND NEW GOVERNANCE

Vol. 16 No. 7 (July, 2006) pp.555-557

THE EUROPEAN EMPLOYMENT STRATEGY: LABOUR MARKET REGULATION AND NEW GOVERNANCE, by Diamond Ashiagbor. Oxford, UK: Oxford University Press, 2005. 384pp. Hardback. $110.00/£60.00. ISBN: 0199279640.

Reviewed by Lawrence E. Rothstein, Department of Political Science, University of Rhode Island. Email: LER [at] URI.EDU

Although this volume is chocked full of information and takes a position I agree with, I found it confusing and ultimately unconvincing. Diamond Ashiagbor analyzes a mass of EU and OECD documents to trace the European Employment Strategy and to suggest that the strategy relies heavily on an open method of coordination, or “soft coordination,” allowing national variation rather than reliance on mandatory law and centralized EU regulation. The employment strategy relies on guidelines, best practice examples and reporting requirements rather than directives dictating EU-wide outcomes. Overall, however, Ashiagbor concludes that this strategy has still privileged the deregulatory, social welfare reducing, employment creation policies embodied by supply-side oriented OECD pronouncements. EU employment policy has emphasized employment numbers to the detriment of employment quality and social justice.

The language of the many EU documents relied upon for evidence is largely precatory, and there is little analysis of the details of national policies and politics in response to these documents. Furthermore, Ashiagbor is also at pains to show that the documents leave open the path to a social justice oriented European employment policy and to suggest that some countries are following such a path more closely without necessarily producing less favorable employment numbers. Thus, my confusion and failure to find the central argument supported clearly by the evidence, despite the argument’s intuitive attraction. Of course, reality is often not tidy. Both lawyers and economists have been known to prefer documentary analysis or deductive reasoning from pure assumptions to immersion in the empirical data.

Chapters One, Two and Three take on neoclassical economic theories of the role of law and regulation in labor markets and economic policy. Ashiagbor debunks the neoclassical assumption that beyond basic property and contract law, legal regulation of markets is an interference with efficiency. She suggests that legal regulation is necessary to construct and maintain markets and that markets without adequate legal regulation to support mutual trust are unable to create cooperative long-term action which is the central purpose of the employment relation. She notes as well that there is no evidence that more rigorous employee protection regulation reduces employment or creates unemployment. There is also some evidence indicating that certain kinds of employee protection regulation, for example working hour reductions, increases employment. [*556]

Ashiagbor takes issue with the notion that there is a “U.S. employment miracle” spurred by deregulatory policies and lionized in OECD documents that should be emulated by the EU. She points out problems of data comparability and interpretation such as what to do with the comparatively massive U.S. prison population. She notes that the recently lower U.S. unemployment rates and higher EU rates do not correlate historically with differences in regulation. Looking at individual European countries, particularly the Netherlands and Scandinavian countries, she shows that recent major increases in employment and decreases in unemployment have coexisted with strong employee protection and generous social welfare programs. As 2004 OECD data indicate, Sweden, Norway, the Netherlands, Luxembourg, Iceland, Denmark and Austria all had lower unemployment rates in 2003 than the U.S., and several of these countries also generated as great or greater percentage increases in their civilian employment than did the U.S. in the 1993-2003 period. Ashiagbor notes that OECD data do not back the OECD’s own deregulatory/flexibility policy prescriptions. Finally, she takes up the social justice perspective arguing that the EU should not focus solely on improving employment generation when such a perspective leads to lessening employment quality and security, income inequality, increasing poverty and less effective participation in the decisions that greatly influence the quality of individual and family life.

Chapter Four contains a detailed, heavily footnoted analysis of the evolution of EU employment policy in major documents, from 1997 and the Treaty of Amsterdam, through the Lisbon Council of 2000, to refinement of the “Lisbon strategy,” up to early 2005. This process began with the rejection of expansionary fiscal and monetary policies to achieve “full employment” and with the tying of EU employment policy to voluntary guidelines subject only to the mandatory fiscal and monetary requirements establishing the European Monetary Union. Thus the subordination of social and labor policy to fiscal and monetary policy was affirmed, if still contested by a few Member States and the European Parliament. The language of “full employment” was changed to “high levels of employment” to be achieved by increasing labor market and managerial flexibility. But the power of the EU under the employment policy articles of the Treaty of Amsterdam was considered only “supplementary” to that of the Member States and thus to be achieved by studies, guidelines and reporting requirements rather than mandatory goals or targets. This is what Ashiagbor refers to as “soft law.”

By the time of the Lisbon Council in March 2000, however, many of the Member States’ electorates proved intransigent regarding major changes in employment protection and social welfare policy. Furthermore, the data noted above, indicating that deregulation was not clearly correlated with improved employment, had grown. The Lisbon Strategy coming out of this Council attempted the reintegration of social and employment policy, arguing that high levels of employee protection and a strong social welfare system could help [*557] foster high quality employment. This encouraged development of Third Way policies, promoting entry into and transition between jobs through improved training, family leave and support, prevention of discrimination and exclusion and active labor market policies. Procedurally, as Chapter Five indicates, great weight was placed on requiring Member States to submit for comment to the European Commission and then carry out individual National Action Plans (NAPs) for employment that promoted the goals of improving employability, entrepreneurial activity, adaptability and equal opportunity. By 2005 it was clear that the Commission’s comments on and efforts to urge performance of the NAPs, struck a balance strongly in favor of measures to increase national economic competitiveness.

Chapter Six and the short concluding chapter test effectiveness of the “soft law” method for harmonizing EU employment policy in light of continuing Member State opposition to granting the Commission plenary power to set employment policy by directive. Ashiagbor concludes that this open method of coordination has been reasonably effective. Using the examples of the UK and the Netherlands, Ashiagbor demonstrates how similar labor market reforms have been pursued in two countries with very different perspectives on social policy. Both countries have moved to flexibilize employment through investment in human capital and the emphasis on continued access to quality employment, including increased part-time work, rather than a stable job. Yet the Netherlands maintains significantly more committed than the UK to employment protection regulation and a very strong social welfare policy. These differences, however, are limited as well by the mandatory adherence to the fiscal and monetary policies promulgated by the Commission to maintain the European Monetary Union.

In the end Ashiagbor still warns of the dangers of eschewing social justice criteria for economic ones. This warning would have been bolstered by more attention to the national political forces supporting and opposing deregulation and the dismantling of worker protection and social safety nets, and how these constituencies bring power to bear inside the EU. There are many, and I suspect that Ashiagbor is one, who would argue that the main goals of the founders and major supporters of the EU are improving the opportunities for, the mobility of, and the security of transnational capital investment – hence, a strong interest in decreasing the influence of workers and social welfare constituencies.

REFERENCE:

Organization for Economic Cooperation and Development. 2004. OECD IN FIGURES: STATISTICS ON MEMBER COUNTRIES (2004 Edition). Paris: OECD.

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