21 The European Union's Social Dimension Gerda Falkner Thanks to Ronan Sow and Veronika PoUak for research assistance. Chapter Contents • Introduction 31 I • The early years of EU social policy 3 I i • Treaty reform: minor turns major 3 12 • From Maastricht to the Lisbon Treaty 3 13 • The development and scope of EU policy 314 • EU funds: fighting social and regional disparities 316 • The open method of coordination 317 • Social partnership at European level 3 i 8 • Conclusion 320 Reader's Guide This chapter looks at how European social policy has evolved since the iate 1950s. It begins by reflecting on the intergovernmental character of the policy in the early days, and on how the gradual introduction of qualified majority voting (QMV) and the widening scope of the policy allowed the European institutions and interest groups a greater say in the EU's social dimension. The chapter also looks at the fight against regional disparities and (youth) unemployment in EU cohesion policy, including the European Social Fund (ESF). Focusing on newer developments, later sections chart the arrival of the open method of coordination (OMC), a non-regulatory approach to European policy making in this field, and the social partnership—that is, the involvement of interest groups representing employers and labour in making European-level social policy. The chapter concludes by arguing that social regulation has become more difficult since the accession of a large number of Central and East European (CEE) states, and because of the effects of the financial and economic crisis. Introduction ■vV'hat Marsl [0 is social policy? In a famous definition, T. H. hall (1975) talked of the use of political power supersede, supplement, or modify operations of economic system in order to achieve results that it uld not achieve on its own. Such a wide definition ould include, for example, redistributive European Union (EU) actions, which provide funding through , £ lion's Structural Funds—that is, the social, ag-'cultural, cohesion, and regional funds. This would far beyond what is usually understood as European social policy and would introduce too vast an array of topics to be covered in this brief chapter. It seems, therefore, more useful to apply a pragmatic understanding of social policy. This involves actions that fall under the so-called 'social dimension of European integral10" (that is, any acts carried out under the social policy chapter of the Treaty), policies targeted at facilitating the freedom of movement of workers in the social realm, and, last but not least, action to harmonize the quite diverse social or labour law standards of the member states, whatever the treaty base. This chapter will first outline the division of social policy competences between the EU and its member states, the interpretation of these treaty provisions in the day-to-day policy process over time, and the latest formal reforms at Amsterdam, Nice, and in the Lisbon Treaty. It will then analyse the incremental development of European Community or later Union social regulation and activities, including the European Social Fund (ESF) and the so-called open method of coordination (OMC). Since patterns of decision-making are quite distinctive in the social, as opposed to other, fields of EU politics, this chapter will also outline how EU-lcvel interest groups participate therein (see also Chapter 14). The conclusion not only summarizes the results of the chapter, but also discusses the performance of European integration within its 'social dimension'. The early years of EU social policy According to the Treaty of Rome (1957), social policy competences were to remain a largely national affair. The Treaty did not provide for the Europeanization of social policies, because too many delegations had °Pposed this during the negotiations. Some governments (especially Germany) pleaded for a neolibcral, The European Union's Social Dimension 3 I I free marker approach to social affairs, even in the realm of labour and social security; others opted for a limited process of harmonization. The French delegation, notably, argued that France's comparatively high social charges, and its constitutional principle of equal pay for men and women, might constitute a competitive disadvantage within the newly formed European market, while Italy feared that the opening up of Community borders might prove costly for the southern part of the country, which was already economically disadvantaged. In the end, a compromise was found, but this did not include explicit European Economic Community (EEC) competences for active social policy harmonization at the European level. The dominant philosophy of the 1957 Treaty was that improvements in welfare would be provided by the economic growth that arose as a consequence of the liberalization of the European market, and not by the regulatory and distributive form of public policy (see Leibfried and Pierson, 1995). The Treaty contained a small number of concessions for the more interventionist delegations. These included the provisions on equal pay for both sexes (Article 119 EEC, now Article 157 TFEU) and the establishment of a European Social Fund (Articles 123-8 EEC, now Articles 162-4 TFEU). Equal pay and the ESF increased in their importance as the European integration process progressed. While other provisions of the Treaty's Title III on social policy included some solemn social policy declarations, they failed to empower the EEC to act. Paradoxically, the sole explicit Community competence for social policy regulation under the original EEC Treaty was not in the part of the Treaty that dealt explicitly with social policy; rather it belonged to Part II, on the foundations of the Community, which contained provisions on the free movement of goods, labour, services, and capital. Articles 48-51 EEC (now Articles 45-8 TFEU) thus provided for the establishment of the freedom of movement for workers as part of the Treaty's market-making activities. This implied the abolition of all discrimination based on the nationality of workers in the member states in the areas of employment, remuneration, and other conditions of work and employment (Article 48 EEC, now Article 45 TFEU). In order to 'adopt such measures in the field of social security as are necessary to provide freedom of movement for workers' (Article 51 EEC, now Article 48 TFEU), the Council was mandated to estab lish Community-wide rights to benefits, and a way of 3 I 2 Gerda Falkner calculating the amount of those benefits for migrant workers and their dependants. Yet although there were almost no explicit social policy competences in the Treaty of Rome, an extensive interpretation of the Treaty basis provided, in practice, some room for manoeuvre. This was possible because, where necessary or useful for market integration, intervention in the social policy field was implicitly allowed through the so-called subsidiary competence' provisions. In other words, laws in the member states that 'directly affect the establishment or functioning of the common market' could be approximated by unanimous Council decision on the basis of a Commission proposal (Article 100 EEC, now Article 26 TFEU). Moreover, if action by the Community should prove necessary to attain (in the course of the operation of the common market) one of the objectives of the Community and if the Treaty-had not provided the necessary powers, the Council was mandated to take the appropriate measures, acting unanimously on a proposal from the Commission and after consulting the European Parliament (Article 235 EEC, now Article 352 TFEU). From the 1970s onwards, these provisions provided a loophole for social policy harmonization. However, the unanimous Council vote necessary for this to happen constituted a high threshold for joint action. Each government could veto social measures and, as a result, the EC found itself in what Scharpf (1988) has called a 'joint-decision trap' (see Chapter 5). KEY POINTS • Trie 195V EEC Treat/ meant thai social policy remained largely a national affair • However the coordination of social security systems for migrant workers was an exception lo '.his rule • Some concessions to the more interventionist delegations provided stepping stones for EU social policy integration in :he longer run Treaty reform: minor turns major In 1987, the Single European Act (SEA) came into force as the first major Community treaty revision (see Chapter 2). As in the 1950s, an economic enterprise was at the heart of this fresh impetus in favour of European integration. But parallel to the member states' commitment to a Single Market pr0g the Europeanization of social policy remained' troversial. In various policy areas touched by m ^ liberalization, notably environmental and , a^*t policy, Community competence was formal! tended (see Chapter 25), but not for social policy * However, one important exception was made \f tide 118a EEC (this article has now been repealed" on minimum harmonization concerning health safety of workers provided an escape route out of th unanimity requirement. For the first time in Eu pean social policy, it allowed directives to be agreed on the basis of a qualified majority of the Council members (see Chapter 1 ft). The standards adoptedfo] lowing this Article were minimum regulations only Nevertheless, under this provision, reluctant mem ber states could be forced to align their social legislation with the (large) majority of memhet states, even against their will. It should be stressed that agreement on this Article was possible only because occupational health and safety issues were closely connected to the Single Market. Governments did not expect this 'technical' matter to facilitate social policy integration in the significant way that it would in the decade to follow. An extensive use of this provision was possible mainly because the wording and the definition of key terms in Article 118a were somewhat vague: 'Member States shall pay particular attention to i encouraging improvements, especially in the working environment, as regards the health and safety of workers, and shall set as their objective the harmonization of conditions in this area, while maintainingthe improvements made, in order to help achieve the objective laid down in the first paragraph, the Council, acting by a qualified majority on a proposal from the Commission . . . shall adopt, by means of directives, minimum requirements for gradual implementation .. .' This formulation made it easy to play the 'treaty base game' (Rhodes: 1995). It allowed governments to adopt not only measures improving the working environment (for example, a directive on the maximum concentration of airborne pollutants), but also measures that ensured the health and safety of workers by improving working conditions in a more general sense (for example, limiting working time). It was clear that the reason why this treaty basis was frequently chosen was the fact that only this Article allowed for majority voting at the time. kEy POINTS I Single- Eur-cean Act i-i:-oduced qualified majority I noting to * ll,r'len :i anspu't o- /ia posted > workers) consider as undue downward p-p«sure (social dumping') Moreover, populist right-wing pat lies have been gaming weight and at times even offices >r recent /ears, with J their approach usually being nationalist and anti-EU—which J does not bode well for EU social poltc * development Debates such as those on social benefits for mobile Fl J «vor kers and their families demonstrate profound divisions between governments be regarded as an opportunity to strengthen the EU's social dimension since it takes one reluctant government out of the relevant equation, this will hardly he a game changer (sec Box 21.2). At the same time, Brexit can be seen as a symptom of the often-limited consensus on social policies amongst EU member states. KEY POINTS • The development of social legislation has increased since the late :950s. with the 1990s Deingthe most active decade ■ In addition to the issue of free movement of workers and equal treatment in national social security systems, the main areas of regulative European social policy are working conditions, anti-discnmination policy, and occupational health and safety • The introduction of soft modes nf governance has not immediately slopped the adoption of binding rules in this policy area but recently, ambrt-ous legislative projects have typicallv ended in political controversies among the governments and blockage in the EU Council. • Despite Brexit, a significant strengthening of the EU's social dimension would come as a surprise due to deep divisions m that area also among remaining members. EU funds: fighting social and regional disparities EU policy is largely regulatory, and this is particularly the case in the social field. However, as this and the following section will outline, the relative importance of regulation has declined in recent years, and both funding opportunities and 'soft' forms of governance have increased. In the case of funding the Treaty of Rome provided for a 'European Social Fund' (ESF). Its goal was to simplify the employ, ment of workers, to increase their geographical and occupational mobility wiLhin the Community, and to facilitate their adaptation to change, particularly through vocational training and retraining. After a number of reforms, the ESF now co-finances projects for young people seeking employment, for the long-term unemployed, for disadvantaged groups, and for promoting gender equality in the labour market. The aim is to improve people's 'cmployability' through strategic long-term programmes (particularly in regions lagging behind), to upgrade and modernize workforce skills, and to foster entrepreneurial initiative. Over the period 2014-20, the ESF will provide £80 bn in funding. In addition to the ESF, other EU funds also seek to combat regional and social disparities, including: the European Globalization Adjustment Fund (EGF) (see case study in Box 21.3); the European Regional Development Fund (ERDF); the European Agricultural Guidance and Guarantee Fund (EAGGF, Guidance Section); and the Financial Instrument for Fisheries Guidance (F1FG). Additionally, the Cohesion Fund finances environmental projects and trans-European infrastructure networks in member states with a gross domestic product (GDP) that is less than 90% of the EU average. In sum, these instruments form the EU's 'cohesion policy' and dispose of approximately one-third of the overall EU budget (Dudek, 2018: 83). This policy has been designed to counter negative effects of EU membership in the economically less competitive regions and, more recently, also the harsh economic and social consequences of Europe's multiple crises. According BOX 21.3 THE EUROPEAN GLOBALIZATION ADJUSTMENT FUND (EGF) -The FU'= most recent innovation on the level of funds is the ruropean Globalisation Ad|ustment Fund (EGF) It aims to help workers made redundant as a result of changing global trade parents tc find another pb as quickly as possible. The Fund became operational in 2007, with €500 m a year at its disposal However, there were significantly fewer funds distributee than O' igmally expected, despite the fact that almost all proiects ever submitted actually received financial support. In 201 3, the overall ceiling was cut to slightly above the highest annual amount ever used: € I 50 m. The co-funding rate was lifted to 60%. and assistance can also be temporarily provided to young people who are out of work or in training (in areas eligible under the youth employment initiative) to the 'partnership principle', sub-national governments have increasingly been involved over time in multilevel politics within the EU. Therefore, the EU's social dimension at large is probably somewhat less regulatory than is often assumed. The steering effect of the EU's labour mar-Itet and social policies—including the EGF—is much stronger than any of the figures indicate, because thev display only the EU's share of the overall project budgets. But the impact of the EU's criteria for project selection is greater than this, since national authorities also apply them with the prospect of European co-funding in mind. Moreover, the relative importance of EU funding has increased at a time of national spending cuts. I KEY POINTS I* The Treaty of Rome established a European Social Fund (ESF) Its a ms are narrower than its name suggests. [ concerning only labour market policy anö mostly targeting [ specific regions ■ The ESF co- funds pi oieus and programmes in the [ member states It has had. since 1971, its own priorities for funding, with a certain steering effect on national f pol'oes. because national governments want a share of I the EU Budget to flow back into their countries I • The FGF co-funds national support programmes for workers who have suffered redundancy as a result of globalization The open method of coordination The legislative or regulatory track of EU social policy has comparatively less importance by now, due to (among other reasons) a new (often called 'softer') style of intervention known as the open method of coordination (OMC) (see also Chapters 7 and 16). Using this approach, the European Union has a novel role as a motor and, at the same time, as a constraint on national, social, and structural reform. The main features of the OMC were developed (initially without treaty basis) in the field of employment policy, as a follow-up to the Essen European Council of 1994. The Amsterdam Treaty's employment chapter later formalized it. Every year since, the EU has adopted employment policy guidelines. Their specification and implementation are left, however, to the national level, so that the domestic situation and party-political preferences can be taken into consideration. All the same, member states must present regular reports on how they have dealt with the guidelines and why they have chosen particular strategies in their 'national action plans' (NAPs). They also have to defend their deci sions at the European level in regular debates on the national employment policy, now in the European Semester Process. Thus, peer pressure comes into play and has, at least potentially, a harmonizing effect on employment and social policies in Europe. As Box 21.4 shows, employment policy coordination at the EU level has been affecLed by the crisis in the eurozone and its impact on employment prospects in some member states. The OMC has been extended to many fields, including pension reform, social inclusion, and education, and it has lately been integrated in a complex, single annual cycle of economic and social governance coordination and control—the 'European Semester' (Laffan, 2014). The member states, particularly those under a bailout programme or with excessive macrocconomic imbalances or deficits, are no longer fully autonomous in their spending policies, including for social and health issues, and the 3 I 8 Gerda Falkner BOX 21.4 YOUTH EMPLOYMENT POLICY IN TIMES OF CRISIS The member states need to take the EU's guidelines for employment policies into account when setting their national targets and policies. Together with the broad guidelines for economic policies, the employment policy guidelines form part of the Europe 2020 strategy and the European Semester Process. To reach the EU's ambitious target of increasing the employment rate for women and men aged 20 64 to 75% by 2020, member states agreed to: • establish forward-looking measures to integrate young people and vulnerable groups into the labour market; • make employment more attractive, particularly for the low-skilled, while ensuring that labour costs are consistent with price stability and productivity trends; and • p'omote self-employment and cntrepreneurship. However, the policy went in a very different direction. As a result of the financial crisis, unemployment rates have ratcheted up from an EU average of 7.1 % (before the last quarter of 2008) to I I 2% in January 20! 5 (Eurostat. 201 5) For tr]0se under 25. the situation was even worse and in Spam, youth I unemployment even reached 5 I A% m 2011 Consequently a 1 Youth Employment Initiative was set up by the European Council with a budget of €6 bn for the pei iod 2C 14-20 (half that via the European Social Fund with national r_o-fundmg) Unfortunately, this will not be enough to ensure that all young I people under 24 receive a good-quality, concrete job offeror traineeship within only four- months of them leaving formal education or becoming unemployed. Tne EU Council debated that the 2020 social goals seem unattainable but 'must not be J changed' {Agence Europe. I I OrtoDpr 2014) B> early 2013 the EP has called for improvements at least af tei 2020 to ensure that EU means are not used as substitute* for national funding 1 (Agence Europe, I9january 201 8) Sources' Eurostat Unemployment statistics, data up to lanuary 20I5.^H (available nnli'ie n hr|i"w -v'.]|>,u'i„'nir'r>; ,r hi isl^i-exptoined/mdei php/UnemployTnent_stat'sticsj. Agence Europe. I I Ouober 2014. «1 The European Union's Social Dimension 3 19 Commission can ultimately even impose fines on non-compliant countries (see Chapter 26). The de facto subordination of social objectives to goals of financial governance has been criticized as much as the relevant process (see overview in Zeitlin and Vanher-cke, 2018) and 'EU-driven austerity policies blamed for their consequences on economies and people's lives1 (Vanhercke, Sabato, and Bouget, 2017). Faced with contracting economies and in the context of a European sovereign debt and worldwide economic crisis, many countries have cut social welfare policies in the frame of their austerity programmes. The International Labour Organization (ILO) has warned that such fiscal consolidation measures have contributed 'to increases in poverty and social exclusion in several high-income countries, adding to the effects of persistent-unemployment, lower wages and higher taxes ... In the EU 28, cuts in welfare protection have increased poverty levels to 24% of the population, many of them children, women, the disabled and the elderly' (Agence Europe, 4 June 2014). It seems that, at least during the crisis years, economic and monetary policies have impacted more on social policy within the EU than explicit EU social policy. Consequently, recent debates focus on how to bring about a more stable and socially viable EMU (Crespy and Schmidt, 2017; Vandenbroucke, Barnard, and De Baere (eds), 2017). KEY POINTS • The open method of coordination is a new EU-level approach that has been developed as an alternative to I regulation in several policies including employment and social issues. ■ ft is based on European guidelines and national action plans (national reports using common indicators), and uses EU-ievel evaluations that feed into new policy guidelines • The financial crisis has affected EU at Lion in the Held of employment, • The European Semester process places a tight corset of^ EU supervision and control over member states' spending policies. I Social partnership at European level EU social policy-making has for a while been character-izedby a style that some have called 'Euro-corporatism (Gorges, 1996). Corporatism is a way of making policy that includes not only public actors, but also interest groups as decisive co-actors (Streeck and Schrmrter, 1991; see also Chapter 14). EU social policy-making, in particular after the Maastricht Treaty, has been characterized by the entanglement of governmental negotiations in the EU Council and collective bargaining i i EU-level social partner agreements (cross-sectoral) Agreements implemented by Council decision; monitored by the Commission Autonomous agreements; implemented by the procedures and practices specific to management and labour and the member states; implementation and monitoring by the social partners Revision: parental leave Fixed-term work Part-time work Parental leave Framework of action: youth employment Inclusive labour markets Harassment and violence at work Work-related stress elework between the major economic interest group federations. As a consequence, the rather particular, closed, and stable policy network in EU social policy represents a 'corporatist policy community' where a few privileged groups co-decide public policies with or under the control of public actors (Falkner, 1998). Under the legislative procedure in EU social policy, the Commission consults on any planned social policy measure. The social partners, representing the interests of workers and European employers are able to nego-tiate collective agreements and play a key role in the European Social Dialogue (sec Chapter 14). They represent their members during consultations with the Commission and the negotiation of collective agreements. Thus European-level employe! and labour groups may inform the Commission of their wish to initiate negotiations on the matter under discussion in order to reach a collective agreement. This process brings decision-making to a standstill for up to nine months. If a collective agreement is signed, it can, at the joint request of the signatories, be incorporated in a Council decision on the basis of a prior Commission proposal. Yet it is important to underline the point that the social partner negotiations on social policy issues arc by no means entirely independent of the intergovernmental arena. There is intense contact and a large degree of interdependence among all relevant actors in social Policy at the EU level—that is, among the EU Council, the social partners, the Commission, and, to a lesser extent, the European Parliament. To date, three legally oinding, cross-sectotal collective agreements on labour «w issues have been signed (see Table 21.1) and were 'Biplemented in directives on parental leave (December 1995, revised in 2010 and 2013); on part-time work (June 1997); and on fixed-term work (March 1999). A number of other negotiations failed to reach agreement—for example, on the issue of temporary agency work—or were not initiated, such as on fighting sexual harassment, and on the informing and consultation of employees in national enterprises. Further agreements were concluded (on, e.g., telework, stress, and harassment at work) that the social partners (above all, industry) designed to be non-binding and/or implemented in accordance with the procedures and practices specific to individual countries, rather than by a directive. Unfortunately, the effect was no implementation in any way in some countries (Degryse, 2017: 118). This can be interpreted as a move away from social partner agreements on effective minimum standards that are applicable throughout the EU. At the sectoral level, at least, there are a couple of recent agreements with subsequent binding directives; for example, on working time in various industries (see Degryse, 2017). In any case, by 2015 even the Commission was arguing that the Social Dialogue could do with a new start (European Commission, 2015a). By 2017, the situation at the cross-industry level deteriorated so much that the ETUC warned a negotiating period for the social partners as provided for in the Treaty would be used by the employers just to 'delay any decision-making' (Agence Europe, 8 November 2017) regarding the Directive reforming the written statement of working conditions. The EU can therefore hardly outsource to the 'social partners' the design on their own effective responses to the social aspects of the current crisis or a globalized, digital future. 320 Gerda Falkner KEY POINTS After Maastricht, EU social policy has involved a 'corporatist policy community'. The organized interests of labour and industry are free to agree social standards collectively, which are later made bmrj Council directives "gin • On the cross-sectoral level, they have done so in three cases, but have failed or have settled for less binding recomrnendati others, 1 Conclusion This chapter has indicated that European social policy has considerably grown and diversified. Treaty bases have been revised several times to extend the range of competences. The European Social Fund has increased its resources and has had a practical impact on national employment promotion. The number of social directives has also increased over time, with the 1990s being the most active decade so far. The CJEU has been influential on a number of social policy issues and, at times, has significantly increased the practical impact of EU social law. The equal treatment of women in the workplace and the protection of worker interests when enterprises change hands are two important examples (Leibfried and Pierson, 2000). In recent years, however, controversial cases such as Case C-438/05 International Transport Workers' Federation v. Viking Line ABP T2008] IRLR 143 and Case C-341/05 Laval [2007] ECR 1-11767, have touched the borderlines between the market freedoms and basic social rights, such as union action (see Chapter 13). When judging social policy developments at the EU level, at least four different evaluation criteria are worth considering. First, the closing of a number of gaps in labour law, introduced or widened by the Single Market programme, was a major task for EU social policy Surprisingly, the EU performed better than most experts expected during the early 1990s and the major gaps were closed. However, the details remain controversial. For example, it is unclear when a national minimum wage should apply to workers from abroad, a controversial issue in road transport services (e-g-> Agence Europe, 19 February 2015). Second, a somewhat more far-reaching criterion for judging EU social law is the differential between Commission proposals (which can be seen to be knowledge-based and common-goods-oriented approaches to the relevant problems) and Council legislation (sometimes seen as the lowest common denominator of self-interested country representatives). There w a huge gap during the late 1980s and early 1990s, which was later almost completely filled. Even some of the most controversial projects, on sexual harassment in the workplace and on employee consultation in the European Company Statute, have been adopted However, more recently, several further reforms were unsuccessful even after years of protracted negotiations as in the cases of the non-discrimination in goods and services provision and quotas for women on company boards. It also needs mentioning here that social Directives by no means always get properly implemented in the member states (Falkner et al., 2005, 2008). A third indicator of the scope of the EU's social dimension is action taken to prevent reductions in national social standards, potentially induced by the increased competitive pressures of the Single Market and economic and monetary union (sometimes called 'social dumping'). One possibility to prevent this from happening would have been to agree on fluctuation margins, which would have stopped any individual country from gaining competitive advantages through lowering social standards. However, such proposals were thought realistic in only a small number of member states, notably Belgium, France, and Germany (Busch, 1988; Dispersyn et al., 1990) but at the level of the Social Affairs Council, there was litde support. The crisis years since 2008 have, furthermore put social standards under strain with fiscal consolidation and bailout programmes getting prioritized. Finally, a fourth evaluation criterion might be the rather small extent to which the EU has forged a truly supranational social order. This becomes ever more obvious in times of crisis as national systems crumble. So far, calls even by former Commissioner for Social Affairs Laszlo Andor for an EU-level unemployment insurance system to counterbalance the differential 0f the economic crisis, have proven unsuccess-I Nevertheless, leading social policy experts hold J niore solidarit)' will be indispensable to counter- steer future shocks in the EMU (Vandenbroucke, Bar- aId,ar.dDe Baere