European Hustle

European Elections: Frans Timmermans’ social system – would it work?

The political European election campaigns are in full swing and each Spitzenkandidat is trying their best to generate as much media attention as possible in a national-dominated media landscape that pays little to no heed to anything they say. As a result, their statements and claims become increasingly boastful and extreme, in the hopes of getting any kind of reaction at all.

So let us have a look at the different policies of the different political representatives on the European level and see just how effective their policy ideas really would be (whether or not they are actually implementable is another story).

In this issue, we will have a look at Frans Timmermans, lead candidate of the S&D faction (Socialists & Democrats for Europe) and his ideas for the future of Europe.

Naturally, an S&D candidate has to propose social policies and policies that aim at reducing wealth and wage gaps. But do the proposed policies really tackle the issues at hand?

To understand whether or not Timmermans’ policies would be effective, we first have to look at the underlying causes for the problems they are trying to solve.

“Social rights for every European worker” means that the S&D would like the Pillar of Social Rights in the European Union to become binding, giving all EU citizens the right to take their grievances with their national system to the European level and ensuring that national governments all apply the same standards for workers across the EU.

This is an ambitious, but entirely expected (and not a new) call for the S&D. It is definitely one of the simpler slogans and policies to communicate and something many people in Europe would appreciate. However, it does bare a danger in it if not implemented right.

For example, if the Pillar of Social Rights becomes binding, without adjustments being made to the national social systems, this could lead to a cascade of individual (and trade union-led) legal cases from all over the EU overwhelming the European courts. This would have to be accounted for in its implementation. At the same time, this could finally legitimise the European Union for regular citizens, as they would suddenly have a stronger more direct link to the union.

“Better wages in Eastern Europe” sounds great; for Ukraine and Belarus. What about Central Europe? Poland, Hungary, Czechia, Slovakia, Slovenia… you know, countries that are actually in the EU? Nothing angers a Czech more than hearing that they are Eastern European, while Austria is in Western Europe, when in reality Prague is geographically further west than Vienna.

Dismissing the vastness and complexity of the entire Eastern bloc by grouping their issues together does not reflect the sensitivity to European issues that you would perhaps expect from the First Vice-President of the European Commission.

Terminology aside, I am actually very curious as to what the S&D’s plans are for this. The PES 2019 election manifesto does not mention any of these countries, nor Eastern or Central Europe. So if this is a priority for Frans Timmermans, why is there no further explanation as to how this will be achieved?

Terminology aside, I am actually very curious as to what the S&D’s plans are for this. The PES 2019 election manifesto does not mention any of these countries, nor Eastern or Central Europe. So if this is a priority for Frans Timmermans, why is there no further explanation as to how this will be achieved?

Let us continue with “a fair contract for young people in the gig economy”. First of all, the gig economy encompasses more than just a Deliveroo driver. It also applies to consultants, ad and design agencies, software developers, artists and more. We have to differentiate between knowledge-based gigs and service-based gigs. Throwing them all together is a big mistake, as some of these worker groups fall into very different wage classes and in some cases are actually quite happy to stay freelancers and refuse classic employment contracts, because they can negotiate much better working conditions for themselves and earn a lot more money that way, while maintaining the freedom to reject any given project for whatever reason.

Speaking of negotiating better working conditions, stronger trade unions don’t necessarily guarantee better pay or working conditions for workers and in countries with strong corporatist systems, like Austria, it can lead to other unwanted side-effects.

While some worker groups, like people employed in metallurgy for example, find strong unions indispensable, unions can also be very effective at blocking new types of business. It was the taxi union that managed to ban Uber from multiple countries, limiting the scope of the emerging gig economy and depriving consumers of a cheaper and faster alternative to overpriced taxis.

Worker unions also do not recognise gig workers as their clientele and neither do industrial unions. One-person businesses generally tend to fall under the radar of the big unions and only get any attention when the unions feel that they are interfering with the activities of one of their core members. In other words, unions don’t represent or help gig workers in the best case, but in the worst case, they make their lives a living hell.

But let’s talk about young people, who are working as delivery drivers, or are helping out short-term in a shop or handing out flyers and coupons on a windy street corner. Why do these people work in these jobs?

There are two reasons, why young people decide to take on a ‘gig’ like that.

Most often they are students and want or have to earn some extra cash to afford a decent living during their studies. This is caused in most cases by high living costs in the metropolises, in which universities usually are located. If a student comes from a different town, maybe a small village even, they don’t have the luxury of staying with their parents throughout their studies.

And if they are working-class? Chances are their parents, friends and neighbours won’t be very supportive of their choice to study, rather than getting ‘a real job’, meaning these kids then have to support themselves, while being shunned by their natural environment, in order to get through their studies. Solutions to these problems would be to decentralise universities and to grant loans or living wage scholarships to students, something that Denmark, for example, has long since been doing.

But why are young people not getting better jobs, even if only part-time if they have problems sustaining themselves? This is reason two to take on a gig. There simply aren’t any better jobs available for them.

The financial crisis of 2007-2009 has left half a generation (Y) no other choice but to find non-traditional ways of earning money, acquiring skills and experience, in order to continue growing, keep themselves employable and ultimately just survive the harsh times they were thrown into.

Today, employers have the choice to employ a fully-educated and thoroughly experienced 30+ year old candidate, or a technologically-aware 20-something year old high flyer from generation Z. Why would they settle for a 28-year old postgraduate, who has spent five or more years working on and off in freelance jobs, volunteered and has acquired little to no formal job experience? Either you take the more experienced candidate and pay them a higher salary for their improved output, or you take the young graduate, pay them less and give them on-the-job training.

These young people need both more jobs and better conditions for start-ups and young entrepreneurs, so that those that felt the pain of the last financial crisis have a chance to either find a job, or create jobs for others and in any case, gain the necessary experience they need to build a life-long career, rather than being forced to jump from one short-term opportunity to the next.

This leads me to “a decent minimum wage in every member state”. Denmark, Sweden, Finland, Austria, Italy and Cyprus do not have a minimum wage. Ironically, this selection represents some of the most socially progressive countries in Europe. There is a simple reason for this. A minimum wage creates more problems than it solves.

A minimum wage forces employers with limited budgets to cut jobs in exchange for higher salaries for their remaining employees. Since the work of every employee is vital, particularly for SMEs, this can also mean a decline in business, growth and also the growth of jobs. At the same time, those workers that lost their jobs end up in the social system, having to now fully be supported by the state, lest they fall under the poverty line. This puts a much stronger strain on the state’s social systems than say, an additional boost to an existing wage that is not sufficiently high. In Belgium, this system exists and even trainees are paid by the state for six months, while they are being trained for full-time employment by hiring companies.

A minimum wage also does not eliminate social dumping (particularly fueled by workers moving from the 2004 EU enlargement), as new regulation will simply force those that wish to (or are forced to) offer their services at a lower rate into the black economy, in turn costing the state valuable tax revenue.

Differing minimum-wages adjusted to each country’s living costs could potentially also reinforce economic migration from East to West and South to North in Europe, as workers from less-wealthy countries will see an opportunity to earn more money in richer countries.

Timmermans was also very specific about the amount of money this should entail. It should be 60% of the median salary in each country. The median tends to be quite low, however, as only a few people earn particularly high wages, while the great majority of the population have relatively low incomes. For example, the German Insitut der Deutschen Wirtschaft notes in a study from 2018 that in Germany, 3,4% of people earn more than 250% of the median wage, most of which are located on the very high end of that spectrum. Meanwhile, almost 30% earn less than the median wage.

Using the median wage in a country as the basis for the calculation of a minimum wage is dangerous math. In Germany 60% of the median wage would make up for around 1000€ per month, placing recipients of the minimum wage in the poor earner category. 60% of the median wage would also mean a reduction in the current minimum wage in countries with high minimum wages, like France. In most countries with a strong middle class, this policy could actually lower wages, which might be better for companies, but definitely will hit those employees currently earning a minimum wage.

At the same time, in certain Central and South-Eastern European countries, a minimum wage could actually benefit the population, as there are few to no extremely rich people and the middle class is often also trapped in the low wage spectrum, causing the median to be very low. A minimum wage equivalent to 60% of the median wage, would then be considered a relatively high wage in that country. Of course, the issue that arises is whether any local company in Slovakia will be able to afford those wages. A big multinational company that moved into the country certainly would, but local businesses and particularly SMEs, might very well be doomed by such a policy.

In any case, a one-size-fits-all approach is never a good idea in Europe (think austerity). A better way to increase productivity in Central and South-Eastern Europe might be to attract outside investment with incentives for those companies (e.g. building up the right infrastructure) while maintaining a strong local entrepreneurial environment that can compete with foreign companies that settle there.

As always, it is best to take a closer look at the policies our representatives propose, to see whether they don’t just sound good, but could actually work as solutions to the issues we face. In the case of the S&D, their proposals would not tackle issues, but rather reinforce their own position as the principle proponents of greater state expenditure and strong social nets.

The S&D’s policies would work well if big multinationals did not have the luxury of moving countries at any time and if they were the backbone of the economy. However, they are not. SMEs account for two thirds of all jobs in the private sector in the European Union and they are also responsible for 85% of job growth. As such, any policy to help low-wage earners should be a policy that also supports existing SMEs and spurs the creation of new SMEs across the European Union.

Dominik Kirchdorfer
Dominik is a European writer and entrepreneur of Austrian and Polish descent. His passion is storytelling and he wants to do everything in his power to give the story of Europe a happy ending. He is currently the President of the EFF - European Future Forum, Editor In-Chief of Euro Babble and Managing Editor of Italics Magazine. Dominik recently published his first SciFi novel, The Intrepid Explorer: First Flight under the nome de plume Nik Kirkham. Twitter: @NikKirkham
http://www.nikkirkham.eu

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