Europe: Social and just, thanks to strong workers‘ rights

Ausgabe 07/2021

The EU must become more social. Only in that way will it be possible to restore trust. Experts from the Hans-Böckler-Stiftung explain what reforms are necessary to achieve this.

The EU can do more to improve its citizens’ living and working conditions. Social policy alone is not enough for this; the economic policy and legislative conditions for a Social Europe must also be improved. Social rights must not, as so often in the past, be subordinated to economic freedoms. This is the conclusion reached by a team of social scientists, economists and jurists at the Hans-Böckler-Stiftung. They provide an answer ‘to the multiple crises of the past few years, not least the EU’s legitimation crisis’. 

The experts start out from two central assumptions: first, a growth- and employment-friendly economic policy is indispensable for a Social Europe. And second, stronger workers’ rights would not only bring about more fairness, but also make the EU more successful and sustainable economically. Action is needed, among other things, on provisions for the solo self-employed and protecting seasonal workers and foreign contract workers. The authors also call for the introduction of a European minimum wage, strengthening collective labour law and codetermination, as well as fundamental reform of European fiscal rules for the Monetary Union. 

Security in the digital platform economy

Around one in six workers in the EU are self-employed. Two-thirds of them are solo self-employed, who are completely on their own and enjoy few safeguards. One bout of illness can pose an existential threat. Although the EU member states have announced, within the framework of the European Pillar of Social Rights, that all workers – both employees and the self-employed – are entitled to fair working conditions and access to social security systems, this declaration is not yet legally binding. The EU should lay down binding minimum standards, which the member states could then improve on. On top of that, the prohibition of regression should ensure that national standards cannot be lowered by means of European regulations. The goal should be to include the self-employed in their countries’ statutory social security systems. 

Labour and social law also have to be adapted to the requirements of an increasingly digitalised world of work. If work takes place online – and no longer in a concrete workplace – the borders between self-employment and dependent work become blurred. Crowdworkers who are allotted tasks via an internet platform may be formally self-employed, but in fact they are often dependent on what their clients offer them and how they are evaluated. The problem is that there is a lack of legal certainty concerning the circumstances in which also the self-employed can join together to negotiate collective agreements or company agreements. This distinguishes them in German labour law from employees.

According to a ruling by the European Court of Justice (ECJ) self-employed are entitled to negotiate collective agreements under certain circumstances. Whether the ECJ in fact means ‘only’ the bogus self-employed, who are in reality employees, or whether it considers that employee-like self-employed persons may also enter into collective agreements is not clear from the ruling. According to the HBS experts, ‘EU competition law should be interpreted in accordance with fundamental rights and the right to collective bargaining, and the right to negotiate collective agreements should be granted to all workers, including platform workers and the self-employed’. The social benefits that such agreements bring about in terms of fairness, a level playing field and social progress should take precedence. It would make sense to expressly set out in European law a derogation from the prohibition on cartels for the collective agreements of the self-employed. 

More rights for cross-border employees 

Employees in the EU who are posted abroad temporarily often work under poor conditions. This has been seen once again in the mass outbreaks of infection among seasonal workers and foreign contract workers during the Covid-19 crisis. Posted workers are not entitled to payments for short-time working, sick pay is often not paid, employment protection is not adhered to and their unemployment benefit entitlements are inadequate. But even before the pandemic, temporary employees were exposed to considerable risks from flexible work assignments. The HBS experts recommend improvements in foreign workers’ legal situation in order to eliminate unequal treatment, abuses and exploitation. 

In 2019, just under 10 million European workers were employed and lived in another member state. A further 1.5 million were cross-border commuters or seasonal workers for up to eight months a year in another EU country. In addition, an estimated 3 million workers were posted to another member state. Germany serves as a hub in this respect: around a quarter of all European postings were from Poland to Germany, and a further quarter of all postings were from Germany to its immediate neighbours. 

There are repeated instances of worker exploitation, in particular when temporary agency firms in other EU countries are involved, which recruit and post workers from third states. Another source of problems are agencies that specialise in the posting of solo self-employed workers, which is, for example, widespread among those employed in private households. For people posted from third countries, residence status is often linked to the work contract, which renders them strongly dependent on their employer and open to coercion. 

Although the legal situation has been formally improved by the revision of the EU Posting of Workers Directive, in practice there are still many ways of circumventing the regulations. According to the analysis, equality in the sense of equal pay for equal work in the same location does not exist. Part of the reason for this is that the EU has long left it to the member states to supervise the protection of mobile foreign workers. However, the member states often have no interest in doing so and their supervisory authorities tend to be understaffed. Employers oppose trade union demands for stricter controls at European and national level, calling for cuts in red tape and voluntary self-regulation instead of state supervision. 

Decent minimum wages and nationwide rates 

In autumn 2020 the European Commission published its proposal for a Directive on adequate minimum wages in the European Union. According to the draft, not only should minimum wages in the EU be raised substantially, but collective agreements should be strengthened. According to the HBS experts, ‘the proposal thus represents a paradigm change in European labour policy’. Not that long ago the Commission took a dim view of minimum wages and collective agreements, regarding them as obstructions to the free market. Now it has come to the conclusion that in most member states ‘minimum wages are too low to ensure people a decent standard of living’. 

The point of the European Commission’s minimum wage initiative is not to prescribe a uniform wage floor for Europe as a whole, but rather to establish transparent criteria for adequate minimum wages, the details of which would be left to the member states. The states would then take their bearings from ‘internationally accepted’ benchmarks. What that means in practice would not be laid down in the law itself, but be made clear in the recitals that are key to legal interpretation. There it is stated explicitly that a minimum wage shall be regarded as adequate if it corresponds to ‘around 60 per cent of the gross median wage and 50 per cent of the gross average wage’. In future, national minimum wages must be measured on that basis. Implementation in all EU countries with statutory wage floors would result in a wage rise for more than 25 million workers, almost seven million of them in Germany alone. Currently the German minimum wage stands at 9.5 euros per hour or 48 per cent of the median wage. In an EU comparison Germany ranks fourteenth out of 21. Only Bulgaria, France and Portugal manage at least 60 per cent of the median wage. 

An adequate wage level also requires a comprehensive collective bargaining system. The European Commission has come around to the same opinion. It proposes that all member states in which less than 70 per cent of employees work in firms covered by collective bargaining should, among other things, develop action plans to promote such bargaining. The option of allocating public contracts only to companies that pay wages in line with collective agreements is also expressly emphasised. Action is also needed in Germany, where only around half of employees benefit from a collective agreement. 

The draft directive has encountered some resistance in the political debate, so that its adoption is by no means certain, as things stand. While the European Trade Union Confederation, despite various criticisms on detail, predominantly supports the draft, the European employers’ associations reject the initiative out of hand. Governments have exhibited a wide range of responses: Austria, Hungary, the Netherlands and Poland, as well as Denmark and Sweden, have been very sceptical, but France, Portugal and Spain back the initiative. The German government is a supporter of the minimum wage initiative, even though it has not been particularly active in this respect. The current situation in the European Parliament is noteworthy: the relevant rapporteurs – the Dutch Social Democrat Agnes Jongerius and the CDU MEP Dennis Radtke – agree that the stabilisation of collective bargaining should be further strengthened. 

Social rights before economic freedoms 

The EU Charter of Fundamental Rights expressly protects workers’ collective rights. On the other hand, European case law is constantly restricting free collective bargaining and the right to strike. In the conflict between freedom to provide services and freedom of establishment, on one hand, and social rights on the other the ECJ has given precedence to economic freedoms in several of its rulings. According to the HBS experts, ‘these judgments have given rise to considerable resentment not least among trade unions. They have weakened support for European integration even among its greatest supporters.’ 

The austerity policies imposed during the Euro crisis have caused further harm. Euro countries that needed financial assistance had to commit themselves to comprehensive deregulation. Besides cuts in public spending, this included obligations that inevitably weaken national collective bargaining systems. The aim was first to curtail trade union and employee rights, and subsequently to force down wages. The idea was that this would improve price competitiveness in the relevant economies. Among other things, minimum wages were frozen, public sector wages cut and collective agreements eroded. As a consequence, not only were trade unions weakened, but real wages fell, sometimes dramatically, in the affected countries. However this strategy of wage cuts and demand deflation led the economy in many euro countries to slump even further. But this not only deepened Europe’s economic crisis. According to the HBS analysis, ‘stagnating or falling incomes, growing social problems and the erosion of social rights boosted euroscepticism and awakened the impression that Europe is an unsocial project’. The EU will be able to regain trust if it manages to correct the mistakes of the past and improve people’s working and living conditions. A first step in that direction would be to shape European law in such a way that social rights cease to be deemed of secondary importance. 

In the experts’ view, the most far-reaching measure would be to give Europe its own, ‘real’ constitution. It should include only provisions on competences, bodies and procedures, as well as on fundamental political and social rights. The rest of the EU acquis, including legislation on the single market, could then be amended by a simple majority in the Council and in the European Parliament. The fundamental freedoms would lose their superordinate status. This would re-establish the primacy of politics over the single market. 

Furthermore, collective labour law could be exempted from European competition law through derogations. Less fundamental, but equally necessary are measures such as the establishment of specialised chambers for labour law at the ECJ to supplement the expertise on labour law or labour issues, which hitherto has sometimes been rather meagre. Also, the Social Dialogue should be strengthened, and the European Commission should be expressly obliged to introduce social partner agreements at EU level into the legislative process. Finally, the European Charter of Fundamental Rights should be reinforced to better protect free collective bargaining.