Europe -Labor: Macron Wins a First Round.

by S.G. Kazolias:  President Emmanuel Macron campaigned to put an end to what he called “Social Dumping” —- the practice of temporarily hiring workers from poorer EU countries at the minimum wage and paying their much lower social security in their home country.  On March 1, EU delegates in Brussels agreed to revise the 1996 accord allowing this. But getting all EU countries to agree may be harder.

When the then 12 EU members approved the 1996 ‘Posted Workers’ directive, labor costs between the different countries was one to three. As the EU enlarged to 28 with the former Soviet Block countries, that differential became one to ten and employers took advantage of it. Skilled labor was brought in from countries like Bulgaria, Romania and Poland at a fraction of the cost.

The idea was that, somehow, the free movement of people would further European integration.  The result seems to have been just the opposite.

Fighting populism, defending Europe

Today there are as many as 400 thousand posted workers in France. Macron complains low paid foreign workers are taking jobs the French would do if wages were higher. Unemployment in France is around 10% and much more than double that for those under 25. This, according to Macron, is one reason French voters are tempted by populist, anti-immigrant parties.

Anti-Europe and anti-immigrant themes played high in Italy’s election campaign too. Italy, like France is suffering from stubbornly high unemployment, especially youth unemployment which is at 33%. Europe is being blamed. There are not only calls to leave the Euro, but to quit the EU as well.

Bavaria’s conservative CSU lost its absolute majority for the first time in September’s legislative elections over the immigrant question. They hold state elections in October. Austria also voted strongly for the anti-immigrant and Europe-sceptic far right forcing the conservatives to form a coalition with them.

Posted Workers were a big factor in getting the British to vote to leave the European Union in a June 2016 referendum. It remains a thorny point in on-going negotiations between London and Brussels on the terms of the separation.  British Euro-sceptics denounce “unelected technocrats in Brussels completely divorced from reality” imposing rules on the UK which hurt British workers.

‘We hear you’

Although it is probably too late to do anything about the UK, negotiators were quick to point out that growing anti-EU sentiment is a major preoccupation. “This must show our fellow citizens one thing: Europe is not distant from their concerns, the first of which is employment.” said the Euro Deputy, Elizabeth Morin-Chartier.

Germany, with its booming export economy and very low unemployment, says it needs a positive migration of 500 thousand skilled workers a year. It was an argument used by the “Refugees Welcome” movement even though there were few skilled workers among the million who arrived in 2015.  And German industrialists are hesitant to reform a system which works well for them.

Germans opposed to massive immigration call the argument “hogwash.” They point out that economists have warned that digitalization will eliminate up to 40% of the jobs in countries like Germany over the next ten years. The digitalization debate was a major theme in last year’s elections and in talks to form a new coalition government.

For East European member states, the posted worker scheme brings in much needed money and reduces social tension due to high unemployment. They too may drag their feet, especially as many of these countries opposed Germany’s liberal approach to massive illegal immigration. They also fear the new directive will make their companies less competitive.

What’s in the new deal?

At the heart of our proposal was the principle of equal pay for equal work in the same place, and we now confirm this in legislation,” said EU Social Affairs Commissioner, Marianne Thyssen.

  • Posted Workers contracts will be limited to 12 months and can be renewed once for six months. A compromise to Macron as the European Parliament pushed for a 24-month period.
  • European truck drivers will not be included in the rules. This was a demand from Spain and the eastern countries. Their rules will be discussed at a later date.
  • Posted workers are to benefit from the same collective bargaining deals for workers in the host country; this includes salaries and bonuses.
  • The new directive is to go into effect in 2020 if voted on this year. Another victory for Macron against the European Council who wanted to see it take effect in 2022.

Labor is also happy with the deal, for now. “For the some two million posted workers in Europe, this means a salary increase which has been too long in coming,” said Luca Visenti, President of the European Confederation of Unions. But the new directive could backfire for them if companies use fewer posted workers as a result of increased labor costs.

The 28 member states will examine the new directive in March. If it gets by the hurdle of the eastern EU countries, the European Parliament should vote in June.