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PREVIOUS SPEAKERS:
Stephen Hughes MEP

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ILS ANNUAL CONFERENCE

14-16 September 2001

Title:
Basic Rights or Red Tape? Is there too much labour law or is more needed.

Modern, adaptable, flexible workplaces - balancing flexibility for enterprises with security for workers.

People like me get used to the accusation that we simply love to regulate and thus inhibit the flexibility firms of all shapes and sizes need to survive and prosper. In actual fact I think we should be looking to regulate only where it is strictly necessary (especially at EU level), that the regulation we do produce should be as simple to understand and apply as possible and that we should do all we can to ensure flexibility. What I also firmly believe, however, is that flexibility for enterprises must be balanced with security for workers working in and moving between those enterprises.

It is my firm belief that without that balance we will impede rather than promote the sensible management of change.

The reason we need flexibility is, indeed, about the management of change

  • Demographic changes, which will turn age structures on their head;
  • Changes brought about by the pace of development of information and communication technologies;
  • Changes brought about because of globalisation and, closer to home, the effect of Europe becoming a single economic entity - mergers, take-overs and transfers of businesses - an increasing rate of restructuring generally;
  • Changes to be brought about by the planned enlargement of the EU to take in a number of Central and Eastern European countries.

These changes are, in turn, driving a necessary shift from traditional forms of work organisation to what is sometimes called "the flexible firm":

For almost a century the organisation of work was usually founded on the same basic principle: a hierarchical top-down organisation with a high degree of specialisation and simple, often repetitive, jobs. During the 20th century, this type of work organisation spread all over the industrialised world. The rebuilding of European industry during the post-war period was based on the concept of the mass production system. This production system contributed for several decades to an unprecedented growth in productivity and prosperity.

However, during the last 20-30 years, the limitations of this way of organising work have become evident. One major problem has been that under the traditional system the work is split up into narrow functions with short, repetitive work cycles. The way work is done is prescribed in detail. The system does not give sufficient room for a process of upgrading and innovation. For continuous improvement to be possible, it is important to involve the workers themselves and in order to be involved they must have the possibility of exercising judgement, developing social contacts and learning. These are the points where the traditional mass production system becomes too much of a hindrance. The workplace has to be opened up: to flows of ideas, to suggestions, to learning, to improvement. Initially, this was done through the introduction of a parallel development organisation, such as quality circles. The idea was to make step-by-step improvements, day by day, to get visible results over time, instead of waiting for a crisis to occur.

Both the traditional form of work organisation and that based on step-by-step improvements still exist and will continue to do so for many years. But in parallel, a more fundamental change in the organisation of work is emerging, a shift from fixed systems of production to a flexible, open-ended process of organisational development, a process that offers new opportunities for learning, innovation, improvement and thereby increased productivity.

This new concept of a process of continuous change is sometimes described as "the flexible firm" and the workplaces as high trust and high skill workplaces. There is no one model, but an infinite variety of models, which are constantly being adapted to the circumstances of the individual firm and its workers. The transformation can be explained by three factors, representing change: human resources, markets and technology.

- Human Resources: In traditional economic thinking, labour is a factor of production similar to land and capital - a cost to be reduced. In a knowledge based economy, however, people represent a key resource. Organisations are valued not only on the basis of their products or machines but primarily on the knowledge-creating capacity of the workforce, the people who work for them, how they work, what work means to them. The rate of innovation and change in products and technologies is so rapid that the competitive advantages of companies and countries will be the capacity of the workforce to create knowledge. The European workforce of the 1990s, especially the younger age group, is much better educated and trained than any earlier generation. About 70 per cent of this young European workforce have an upper secondary level education and about 20 per cent have a university degree. (But the UK performs relatively badly in this respect).

- Markets: Consumers are more demanding than ever before and they do not accept simple standardised products. They look for innovation, for variety and novelty, for high quality, both in goods and services. Competition in the market place forces firms to organise production in such a way that changing consumer preferences can be met. That creates demand for close links between market and production, capacity for continuous innovation and improvement, and a high degree of flexibility in production. Competitiveness and success will more and more be based on the innovative capacity and adaptability of firms, less and less on the traditional concept of producing more of the same at low prices. The most innovative and flexible firms are more likely to survive and expand.

- Technology: During the last 20-30 years a new technological revolution has begun, based on the introduction of information and communication technologies, (ICTs). One of the main effects of the new ICTs has been a dramatic reduction in the cost and time of storing, processing and transmitting information. Such changes have a fundamental effect on the way we organise the production and distribution of goods and services, and thereby, on work itself. At the beginning of this technological revolution, the economic result of the introduction of new information systems was rather poor in terms of productivity growth. But, more recently there are a growing number of examples where the introduction of ICTs has met the highest expectations. The main message from these examples is the need for an integrated approach, linking the introduction of Its with the education and training of the workforce and with organisational renewal.

So flexibility is crucial; I know and accept that.

But it is my contention - implicit in the title of my talk - that to manage change and promote the shift toward the flexible firm, we need to bring about a proper balance between flexibility and security. We need to recognise the mutual benefits of effective, open and flexible structures and methods for ensuring that the workforce is a partner in the process of restructuring. And we need to recognise the corollary: that it is the absence or failure of such provisions which causes suspicion; which hinders change and adaptability; which militates against the conditions needed for capital and human investment and for changes in work patterns to reflect new demands; and which make structural change less of a process, more of a battleground.

Incidentally, before we move on, something else might be thought to be implicit in the fact that I'm standing here before you speaking about this subject at all - the assumption that the EU is the great source of labour market regulation. In fact, I did a count - I might have missed one or two but I count 57 directives in the social and employment field and almost 60% of those concern health and safety at the workplace. Even at the height of de-regulation fervour a decade ago, very loaded Govt. questionnaires could not get more than 10% of sme respondents to say that health and safety regulation was unnecessary and burdensome. Over 20% cited VAT returns as the biggest bugbear. When you take account of the fact that this list of 57 also includes the key gender equality directives, the law on transfers, collective redundancies and insolvency and perfectly sensible directives such as that on posted workers, it begins to become apparent that this idea of the EU as the engine room of unnecessary, meddling, burdensome legislation is something of a myth.

And just to squeeze in another incidentally, it is also worth bearing in mind in this debate that work by the OECD on this issue (labour market regulation and employment) is clear - there is no link between levels of employment protection and rates of long term job creation. Nor do they damage productivity. Today's world workplace productivity leaders are the social partnership economies of Northern and Western Europe. In contrast, the OECD finds high levels of social protection and collective bargaining mean wages and incomes are more equal. The EU countries with the most highly developed social, welfare and educational provision – Denmark Sweden and Finland – also have among the highest levels of taxation. No surprise there. You get what you pay for. But rather than such levels of provision and taxation acting as a "drag anchor" on the productive potential of those nations, recent OECD analysis shows that those economies are among the most productive in the world. Clearly it is possible for a "virtuous circle" to be established.

Coming back to the point, I contend that we need to pursue a proper balance between flexibility and security. But how do we achieve that balance? Well, it doesn't necessarily have to by means of legislation.

The 1997 Amsterdam Treaty gave us a number of tools which allow us to take a soft legislative route - through what has come to be termed "open coordination" - or through the negotiation of binding framework agreements by the social partners at EU level.

The first of those tools was a new Employment Chapter.

The chapter guarantees that EU countries will regard unemployment as a common concern. And, of course it is. Our economies are very closely locked together -over 90% of the goods and services we buy in a given year in the EU are sourced from within the EU. So "beggar thy neighbour" policies - monetary or fiscal or social dumping - by one country can no longer work; they hurt the whole. The chapter therefore lays down a framework for the coordination of employment and economic policies throughout the EU. And it commits our nations to following Employment Guidelines agreed at EU level each year and to producing National Action Plans to show how they are meeting the guidelines.

This year's Guidelines include 18 action heads to tackle 4 main priorities: -

Employability- making sure everyone has the abilities and skills - regularly updated - they need to be employable;

  • tackling youth unemployment and preventing long term unemployment

  • a more employment friendly approach: benefits, taxes and training systems

  • developing a policy for active ageing

  • developing skills for the new labour market in the context of lifelong learning

  • active policies to develop job matching and to prevent and combat emerging bottlenecks

  • combating discrimination and promoting social inclusion by access to employment

Entrepreneurship - encouraging the setting up and nurturing of small and medium sized companies;

  • making it easier to start up and run businesses

  • new opportunities for employment in the knowledge based society and in services

  • regional and local action for employment

  • tax reforms for employment and training

Adaptability - making sure people at work and firms have the flexibility balanced with security that they need to compete effectively;

  • modernising work organisation

  • supporting adaptability in enterprises as a component of lifelong learning

and equal opportunities - making sure all possible steps are taken to reduce the gender gap in the world of work.

  • gender mainstreaming approach

  • tackling gender gaps

  • reconciling work and family life

Most important of all in my view is that these guidelines have been "operationalised" by agreement to some very specific goals and targets. At the outset, for example, it was agreed that in no member state of the Union would any under 25 year old or older worker be allowed to drift longer than 6 months or 12 months respectively into unemployment without some positive intervention. And in all member states within 5 years the proportion of the unemployed in training at any one time would be as high as the level the in the best 3 performing countries at the outset (meaning, for the union as a whole, a rise from 10% up to 20%).

The other big new tool in the Amsterdam Treaty is the social chapter which, of course, now applies to all member states following the period of Britain's opt out. In that social chapter, Article 138 gives the opportunity to the social partners at EU level to negotiate agreements which can then be given the force of law. That option has been used successfully on several occasions and I will return to that in a short while.

And alongside these new tools there is still, of course, the option to legislate.

So given these new tools, how have things panned out in recent years? Have we seen the end of the need for regulation? Well, first I would like to look at the Employment Strategy to see how things have been working out there.

At one level there is no doubt it has been successful - it has focussed the minds of all MS Governments on the need to shift expenditure and emphasis away from passive and into active labour market measures. The employability pillar is generally regarded as having had a positive effect. (The true potential and strength of the strategy will be tested during the current economic downturn which will doubtless be exacerbated by Tuesday's events in NY and Washington DC). But in the light of our discussion today it is interesting to focus in on some of the areas where the strategy does not seem to be making as much progress.

Taking a look at the Commission's recommendations to MS's following it's annual assessment of National Action Plans we can see that something of a pattern emerges. The last set were fairly typical in this respect and they highlighted (among other things) the following points for action:

The need to pursue policies to promote gender mainstreaming, reducing the gender pay gap and/ or policies to reconcile working and family life in 13 out of the 15 member states (Belgium, Denmark, Germany, Greece, Spain, Ireland, Italy, Luxembourg, Austria, Portugal, Finland, Sweden and the UK).

The need to promote policies to involve or to retain older workers in the labour market in the case of 9 out of the 15 member states (Belgium, Denmark, Germany, France, Italy, Luxembourg, Netherlands, Austria, Finland).

And in a third of member states (persistent offenders) the need to promote social partnership to promote, in turn, adaptability (Greece, Spain, Luxembourg, Portugal and the UK).

The quote from the Commission in the case of Greece in this respect is particularly telling in the light of the theme I have adopted for my contribution today: -

."… [Greece needs to] encourage a partnership approach and promote concrete commitments by the social partners at all appropriate levels on the modernisation of work organisation, with the aim of making undertakings more productive and competitive while achieving the required balance between flexibility and security".

In the case of the UK, the Commission says: -

"The United Kingdom should therefore: improve the balance of policy implementation of the Guidelines, so as to strengthen and make more visible efforts to modernise work organisation, in particular by fostering social partnership at all appropriate levels."

Now it's on these points - the involvement of social partners; adaptability & atypical work; reconciling work and family life/ tackling the gender gap; and the involvement of older workers in the world of work - that I would like to focus the rest of my presentation. In each of these areas I leave the same rhetorical questions in the air - were we right to proceed in the way we did? were we right in certain instances to come down in favour of further regulation?

First, worker involvement and social dialogue.

It is firmly the view of the European Parliament that we need to review and strengthen current law on collective redundancies and EWC's and that we need a general framework on information and consultation in national undertakings. There are those in the business community - and the view has been held in certain parts of the Commission at certain times - that all we really need is a voluntary code of corporate responsibility. Why do we take the view we do? Well two main reasons:

  • First, over the last two years and more a whole procession of delegations of workers representatives have come to us in the EP and particularly members of the Employment Committee, to complain that they have been denied rights under existing directives or that, quite often, the directives have been completely ignored by their companies. Sometimes it has been a failure in transposition, sometimes the gains outweigh potential penalties for companies and sometimes the directives themselves contain loopholes and weaknesses. These delegations have included workers form ABB-Alstom, Goodyear, Michelin, Ford, Royal Sun Alliance, Vauxhall, Corus and Marks and Spencer to name just very few.
  • The second is that as the Commission's recommendations show, the adaptability pillar of the employment strategy is making only slow progress. And let's bear in mind that the successful pursuit of that pillar is essential in delivering flexibility balanced with security.

In all of the debates held on these instances of transfer, merger and restructuring, most members have made the same point – we are not in the business of stopping restructuring; we recognise that it will continue – it is a wholly to be expected consequence of the completion of the EU’s internal market and globalisation. But what we do insist upon is that restructuring should be conducted in a socially responsible way. An important ingredient is that it should be handled through partnership - workers should be informed and consulted and systematic flows of information and consultation, good communication, should become a daily reality in firms of all shapes and sizes. That is already a reality in a great many firms, but as the continuing delegations of workers show, it is far from being the reality in far too many. And I don’t think it is any accident that a great many of the delegations we have received have involved British workers or British companies.

We, in the EP, are therefore pleased that the Commission will produce a proposal for the revision of the EWC at the turn of the year, that it has promised a review of the directive on collective redundancies within the next year or so and, most particularly, that we are now dealing with the second reading on a general framework on information and consultation with every hope that it will be adopted before the end of the year under the Belgian Presidency of the EU.

Incidentally, it is interesting to read the section of the UK’s National Employment Action Plan for this year at the point at which it responds to the Commission’s criticisms in relation to social partnership. It launches a staunch defence of the "UK model of social partnership based on diverse and informal arrangements at various levels" but ends by pointing out that new legislation was introduced last year to enable trade unions to gain recognition where a majority of the relevant workforce wants that to happen. Even in paradise it seems that some additional regulatory underpinning is sometimes needed!

Now turning to the other areas, atypical work; reconciling work and family life/ tackling the gender gap; and the involvement of older workers in the world of work, at the risk of seeming to deviate, let me look back to the subject of demographic change. In the EU we have left a period of strong growth in the working age population. We have entered a period of much slower growth. In ten years time, the working age population will start to diminish. Italy has already reached that point. Germany and Spain will soon follow. The trend is common to the whole EU. At the same time, the over-60 age group, mainly retired people, will rise by 37 million, that is 50%, over the next 25 years. They - we - will expect higher pensions, on average, than the present generation of pensioners. This is a huge common challenge: the decreasing size of the EU’s working age population and the increase in the older dependent population puts increasing emphasis upon the need to prevent any form of discrimination keeping people out of the labour market.

It is going to be a question of "all hands on deck." And it is imperative that we begin now, not when the changes have begun to happen, to put in place policies and provisions which will make sure that people are not kept out of the labour market because of gender, skin colour, age, disability or any other reason. We need to begin to change deeply ingrained habits. We need family friendly policies, improved child care, flexible forms of working – part time, fixed term contract and temporary work – that are not second rate or exploitative. We need to be pursuing active ageing policies, preventing ageism and promoting improved access to the world of work for people with disabilities.

I therefore think we have been correct at EU level in again taking a regulatory route in three respects: -

First, the social partner framework agreements on part time working and fixed term contract working which were converted into directives – the UK Part time worker regulations came into effect last year and the fixed term regulations are out for consultation with an implementation date next year. Sadly, attempted negotiations on an agreement on workers placed by temporary employment agencies broke down earlier this year (on the subject of the comparator) but we in Parliament are pressing the Commission to take the legislative route and we have assurances from Commissioner Diamantopolou that the proposed legislation will appear within a matter of weeks

In a sense, we are causing action to be taken throughout the EU to put these important elements of flexibility in place in a non exploitative form often despite rather than with the help of MS’s. If that sounds like a strange thing to say, look no further than attempts by our own government to limit the impact of the pt and ft directives through over narrow transposition.

The part time worker regulations in their draft form would have benefited only 45,000 part time employees out of the 6.8 million part time workers in the UK – just 0.66%! Only after much pressure and to-ing and fro-ing were the regulations widened to cover workers rather than employees only. Now the draft regulations on ft are attempting to leave pensions and pay out of account and the argument is underway once again over whether they should cover only employees or workers.

The second theme for recent regulation has been attempts to help reconcile family and working life. The legislation on atypical work is of assistance in this respect as well of course. But I think the agreement/ directive on parental leave was an important symbolic step forward (it was a pity we had a bit of a wrangle on the transposition of that one too) which started a major debate in our own country over parental and paternal leave. Indeed it is leading to extended provision in terms of both maternity and paternity leave.

The third recent theme of legislation/ regulation is in relation to the combating of discrimination. Two directives were agreed last year under Article 13 of the Treaty. The first will put in place EU wide laws to combat racial discrimination similar to our own Race Relations Act – similar but further reaching; it includes useful provisions on indirect discrimination and reversal of the burden of proof. The second will combat other forms of discrimination, including on grounds of sexual orientation, religion, age or disability. Most member states will need to introduce new law on one or more of these aspects. We will certainly need to introduce new laws to combat ageism and maybe here and elsewhere we will see the idea of active ageing being taken seriously.

So what for the future - is there a raft of further regulation waiting to be released upstream? Well no, there really isn't. We, in the Parliament, are looking for further regulation in the area of health and safety at work (optical radiation, fields and waves, noise, ergonomics and repetitive strain injuries). But beyond that the new social action programme is looking for little or nothing in legislative terms beyond and instrument on the social security aspects of atypical work and one on individual dismissals.

We are happy to see the further development of open coordination systems such as those which are getting underway in relation to social protection and immigration. We also hope to see further negotiated framework agreements between the social partners at EU level (for example, on telework) which would then be converted to directives. But where other means fail to promote the idea of the need to balance flexibility and security I am of the view that if a legal base exists for action at EU level, we should use it.

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