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5th Meeting, Prague, 5 May 2009

Flexicurity in the European Union

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Rapporteur: Mr Michael Parnis, EESC (Employees group)

Introduction

Much has been said and written about the concept of flexicurity. The European Commission (EC), the European Parliament, employers, trade unions,civil society organisations (CSOs), governments of Member States, economists, sociologists, think tanks, and many others have expressed their views on what it is or/and how should it be approached and implemented.

This report intends to deliver a broad range of opinions put forward by various stakeholders. It then analyses the current political agenda of the EU regarding flexicurity issue.

Although a wide range of CSOs and political leaders, either from Member States or from the EU, have put forward the flexicurity concept when dealing with economic and social reform during recent years, it must be underlined that this is not about any miracle solution. No one-size-fits-all approach would be relevant when reforming labour and social laws in different countries. However, this report will finally focus on some prerequisites needed for such reforms.

1Definitionsand first historical examples of the flexicurity concept

At the core of EU initiative as far as flexicurity is concerned is the EC Communication "Towards Common Principles of Flexicurity:More and better jobs through flexibility and security"[1].

The Communication starts with asking “Why flexicurity?"and gives the following answer: “Flexicurity is a combination of flexibility and security in working arrangements. The concept is a response to the needs European labour markets are facing. Technological developments are becoming ever more rapid. Products and services are developed at an ever quicker pace. If Europe wants to strengthen its economy and create jobs, it has to be in the forefront of these developments. Enterprises have to move towards innovative products and services development. They have to master new skills and production techniques. This is a continuous process, affecting employers and workers alike. Jobs change more quickly than before. The ability to adapt and readiness for change are becoming more and more important”.

1.1What is flexicurity?

As a start, the online encyclopaedia Wikipedia definesflexicurity as follows: "a blend of flexibility and security and a welfare state model with a pro-active labour market policy. The model is a combination of easy hiring and firing (flexibility for employers) and high benefits for the unemployed (security for the employees)".This stands as a clear and commonly admitted definition, very useful to keep in mind when exploring the concept in more details.

In the above mentioned Communication the answer on "What is flexicurity?" is also worth mentioning: “Flexicurity is a new way of looking at flexibility and security on the labour market. It sets out from the awareness that globalisation and technological progress are rapidly changing the needs of workers and enterprises. Companies are under increasing pressure to adapt and develop their products and services more quickly. If they want to stay in the market, they have to continuously adapt their production methods and their workforce. This is placing greater demands on business to help their workers acquire new skills. It is also placing greater demands on workers with regards to their ability and readiness for change”.

To define separately what is at stake when speaking about flexibility and security, let stick to some clear distinctions underlined in a research paper from the European Trade Union Institute for Research, Education and Health and Safety (ETUI-REHS).

1.1.1What is behind flexibility?

  • External numerical flexibility:Adjustment of employment volume by way of an exchange with the external labour market; involving lay-offs, temporary work, fixed term contracts.
  • Internal numerical flexibility:The temporal adjustment of the amount of work within the firm, involving practices as atypical working hours and time account schemes.
  • Functional flexibility:Organising flexibility within the firm by means of training, multi-tasking and job-rotation, based on the ability of employees to perform various tasks and activities.
  • Financial flexibility: The variation in base and additional pay according to the individual or firm performance.

1.1.2Different kinds of security

  • Job security: Security deriving from employment protection legislation, etc., limiting the employer’s possibility to dismiss at will.
  • Employment security: Adequate employment opportunities through high levels of employability ensured by e.g. training and education.
  • Income security: The protection of adequate and stable levels of income.
  • Combination security: The security of a worker of being able to combine his or her job with other responsibilities or commitments than paid work.

Now that we have a clearer picture of what involves flexibility at a business-level, we can already perceive that flexibility is not about any unique recipe. The concept is flexible in itself and can be used and promoted by opinion leaders in many different ways, depending of national constraints and political will. On this respect, Dutch and Danish examples are worth examining.

1.2National examples

1.2.1The Dutch pioneers

The flexicurity concept itself was first employed in speeches and interviews by Dutch sociologist Hans Adriaansens in the mid-1990s in the Netherlands, in the context of the preparation of the Dutch Flexibility and Security Act and the Act concerning the Allocation of Workers via Intermediaries (Wilthagen and Tros 2004; van Oorschot 2004). These two acts aimed to inject additional flexibility into the labour market by relaxing dismissal laws and the rules to start a temporary work agency on the one hand, while generating a higher level of security for employees in flexible jobs on the other (Wilthagen et al. forthcoming).

The main aim was to reconcile the interests of employers and workers, strengthening both competitiveness and protection. As a result, the Dutch flexicurity model was born. Dutch flexicurity promotes the use of atypical, flexible types of employment; at the same time it provides such flexible types of employment with similar rights concerning working condition and social security as standard employment.

This concept was rapidly picked up by a group of labour market researchers, first in the Netherlands (e.g.Wilthagen 1998, 2002; Muffels et al. 2002), but then also in Germany (Keller and Seifert 2000; Klammer and Tillmann 2001), Denmark (Madsen 2002, 2003) and Belgium (Sels and van Hootegem 2001; Sels et al. 2001). In subsequent years, researchers, in a growing number of European countries became involved in research dealing with flexicurity and, by 2006, flexicurity seems to have put down firm roots in the European academic community. One result of this is that Denmark has been discovered as an alternative to the Dutch flexicurity model.

1.2.2The Danish model

Today, Denmark is considered as having the highest level of flexicurity legislation into place in Europe. The Danish flexicurity model is built on three pillars:

  • flexible standard employment, resulting from low employment protection;
  • extensive unemployment benefits providing incomesecurity to the unemployed;
  • active labour market policies aimed at skill upgrading and activation of the unemployed.

What the models (Dutch and Danish) share is that, in both cases, the importance of social dialogue as a means to devise and legitimize flexicurity policies is underlined. These two national cases have roused the interest in flexicurity of both the academic community, as well as that of politicians and policymakers.

This interest stems to a large extent from the fact that both countries have managed to improve their labour market situation remarkably since the mid-1990s, reducing unemployment rates to the lowest and employment rates to the highest levels in Europe. Increasingly, the flexicurity models of the two countries have been put forward as the explanation for these successful labour market developments.

The Dutch and Danish models also illustrate that a variety of versions of flexicurity are possible. Indeed, in much of the academic literature, flexicurity is, in theory at least, presented as a set of alternative combinations between different categories of labour market flexibility and security, often illustrated by a matrix indicating possible combinations and trade-offs.

Flexicurity is about achieving new and positive combinations between one or more types of flexibility and one or more types of security. Such positive combinations should lead to win-win situations in which:

  • Employers benefit from high levels of flexibility, which is expected to be good for economic dynamism and employment creation;
  • Flexibility is made acceptable to workers because it is accompanied by high levels of security.

LO (Landsorganisationen i Danmark - Danish Confederation of Trade Unions), in its report called “The flexible labour market needs strong social partners: The European discussion on the Danish Labour Market: FLEXICURITY”says the following: “Today, the Danish labour market is characterized by a high employment rate and a relatively low unemployment rate. The Danish labour market is also characterized by a high level of flexibility. The regulation of the Danish labour market is relatively limited as most rules are agreed by the social partners. Compared to other European countries, it is relatively easy to hire and fire. However, the employees receive a relatively high rate of compensation upon unemployment. The employers have a flexible workforce to draw on. They are able to adjust the workforce to changes in production without incurring great costs. The employees have the opportunity to quit their jobs with a relatively short notice. A large group of skilled and un-skilled Danish employees have eight days’ notice when they’ve found themselves a better job”.

2EU-level stances on flexicurity

2.1European Commission takes the lead

In line with the Lisbon agenda, adopted in 2000, which goal was to make of the EU economy the most prosperous and competitive zone by 2010, the flexicurity theme emerged at an EU level as an employment policy tool which made directly sense in the perspective of national structural reforms intending to dynamise national labour markets.

By 2006, the EChad used a wide range of forums and means to promote the new approach. Indeed, MrBarroso, Mr Špidla and other Commission officials have spoken out in favour of flexicurity on numerous occasions[2]. What is more, the Commission took the initiative to organize a tripartite social summit on flexicurity in October 2006, to mark the launching, in cooperation with the social partners, of a process to establish common flexicurity principles that can guide national employment policies.

In line with this, the Commission’s 2006 Employment in Europe report devotes an important part of its analysis to the issue and proposes a range of pathways towards flexicurity. In addition, flexicurity was at the heart of the Commission’s green paper on labour law, its proposal for labour law reform in Europe.

Hence, the Commission followed an extremely comprehensive and multifaceted strategy to advocate flexicurity.

2.2Common positions to emerge within other EU institutions on flexicurity

Under the European Commission lead, the other EU Institutions engaged into the debate and promotion of flexicurity. From the EU Council part, flexicurity was high on the agendaof two informal meetings of the European ministers of employment and socialaffairs, organised by the Austrian EU presidency (January 2006) and the Finnish EUpresidency (and policy documents July 2006). The Employment Committee and Social Protection Committee of the Council of the European Union both set up working groups on the issue, producing background documents.

The issue has also beendiscussed by the European Parliament (EP) and the EP President stated inearly 2006 that:

"There is growing agreement on the benefits of the 'flexicurity' model."(Josep Borrell, President, European Parliament)

2.3European Social partners' contrasted position on the Commission Communication

The Commission initiatives on flexicurity have been received with interest by the mainEuropean workers’ and employers’ organisations.

2.3.1The European Trade Union Confederation (ETUC)'s position

ETUC initially welcomed the European initiatives in this area, even though it was cautious about the shape such initiatives should take (ETUC 2006).

Then the ETUC Executive Committee adopted a common position on 17-18 October 2007.The position adopted states that “The Commission communication from 27 June 2007 on flexicurity has the merit of opening up the possibility of an in-depth discussion on the way the European labour market is adapting itself to change. This discussion will lead to the adoption of common principles on ‘flexicurity’ by the European Council at the end of this year”.

“The ETUC identifies this as an important opportunity to promote a concept of ‘flexicurity’ that is labour friendly, balanced and based on the realities of workers on the European labour market”.

The ETUC outlines key principles on flexible and secure labour markets, these include:

  • Ensure good and robust job protection systems.
  • Undertake ‘smart’ reforms by enlarging and complementing job protection with employment security.
  • Put job quality, including the principle that stable and secure open-end contracts, should remain the general form of employment, at the centre of flexicurity.
  • Promote negotiated flexicurity by strong, autonomous and representative social partners.
  • Improve social welfare systems by ensuring generous social benefits covering all forms of contracts and work.
  • Invest in active labour market policies.
  • Promote lifelong learning.
  • Putting better gender equality into practice.
  • Complement flexicurity with a growth and job friendly macro economic policy.
  • Make available the budgetary resources that are necessary to finance flexicurity.

The ETUC concludes that the Communication of the EC needs major rebalancing.

It further states that “whereas the ETUC is calling to modulate the design of job protection systems so that employment security measures are added to the security of stable jobs, the communication’s focus is simply on reducing the level of job protection. […] The ETUC is promoting secure contractual arrangements as the general form of employment in Europe, the Commission wants ‘flexible and reliable’ contracts. […] The ETUC wants to see generous social benefits as a basis for ‘learn fare’ agenda and upwards mobility, the Commission is promoting a ‘workfare’ agenda. […] The ETUC is of the opinion that the Commission communication is presenting a view on flexicurity that is seriously imbalanced in favour of the interests of business. With the flexicurity agenda as defined by the Commission, business will get the ‘flexibility’ to fire workers at a low cost, while also obtaining the ‘security’ of having at its disposal a workforce that is disciplined by ‘workfare’ policies to accept any kind of job, even if this is a precarious one. […] This type of flexicurity agenda is not desirable. It will result in an insecure work force unable to engage in the agenda of training and developing high productive workplaces, in rising inequality because the elite of strong ‘insiders’ (CEO’s, managers, supervisors) will capture the wage moderation efforts obtained from regular workers whose bargaining position has deteriorated and, finally, in an economic slowdown because of increased precautionary savings of workers”.

Finally the ETUC concludes by calling on theEuropean Council, European Parliament and Commission to rebalance flexicurity by making it more labour friendly and to respect the joint European social partners' opinion.

2.3.2European Employers’ position

The biggestEuropean employers’ organization, BusinessEurope (former UNICE), has also called forflexicurity (UNICE 2006), while the European Employers’ organisation for smallenterprises UEAPME recently claimed that flexicurity was the key to modernise labourmarkets (UEAPME 2006).

In their reaction to the Commission communication “towards common principles of flexicurity” Business Europe stated on 6 November 2007 the following:

“Europe is faced with an urgent need to improve the adaptability of companies and workers in order to successfully address the challenges of globalisation, rapid technological developments and population ageing. The ability to manage change requires modern and dynamic labour markets which are flexible while at the same time providing new forms of security for workers. BusinessEurope therefore supports EU actions to promote flexicurity in order to correct structural weaknesses on Europe’s labour markets”.

“Flexicurity is about facilitating the creation of new jobs as opposed to trying to preserve existing ones, and supporting companies and workers’ efforts to adapt to market changes. Rather than imposing restrictions on possibilities to terminate individual employment contracts, or introducing restrictions on the use of flexible forms of work, flexicurity implies removing the obstacles to creating new jobs while equipping workers to grasp new employment opportunities and maximise their chances on the labour”.

Business Europe continues by stating that flexicurity should consist of the following policy components:

  • Flexible and reliable contractual arrangements;
  • Accessible and high-quality lifelong learning;
  • Effective active labour market policies;
  • Employment-friendly social security systems.

“In order to yield maximum results, these four policy components must be implemented in an integrated way. However, depending on the national context and traditions, the detailed ingredients of the flexicurity policy mix will vary from country to country. There is no one-size-fits-all model of flexicurity to be replicated across the EU”.

“A status-quo on European labour markets is no option. Firm and forward-looking action is necessary to correct structural weaknesses. Governments must take the necessary measures to better combine the requirements of flexibility and security in order to overcome the trade-off between more inclusive labour markets and strong productivity growth in which many Member States are currently trapped. The Commission can help by facilitating discussions and policy developments at the EU and national level. BusinessEurope believes that the Commission Communication on flexicurity constitutes an important step in the right direction by promoting reform through a set of common principles while respecting the policy competence of Member States”.

3National Pathways for flexicurity

In the above mentioned Communication,the ECpromotescommon principles and suggests pathways to Members States:“Each Member State has a specific labour market situation and culture. The European Commission is therefore not aiming for a one-size- fits-all "flexicurity recipe" for all Member States, but rather to establish "pathways" to be developed towards achieving more flexicurity. Pathways are sets of measures that can, if introduced in conjunction with each other, improve a country's performance in terms of flexicurity”.