Eurocapitales – Lisboa, 13-10-06

Free movement of labour – breaking the barriers by Richard Wassell – Vice-chairman, Central London Europe Group

Congratulations on taking on this serious and misunderstood subject. As always with Eurocapitales, I hope at the conclusion of this afternoon we shall not just let the issue go – but go on working with it and use it to build the reputation of our network. As I am no economist, this session will be less statistical than some – but it may be more impressionistic… 2006, you will have seen from your folder, is the European Year of Workers’ Mobility. I have read the leaflet in Portuguese just now (yes I can!) – there must be an equivalent in English but I have not seen such. Two initial thoughts relative to this or indeed any EU programme: •

programmes are structured in such a way that only a small number or nominal crosssection of people can be involved or benefit. No wonder Europe is not seen as “close to the citizen”. We need to re-think and re-structure all these programmes if we are to maximise outreach to the population, to the media, to the way that we do things so there is lasting benefit. Same goes by the way for the Leonardo programme – which has immense potential but, because of the way it is structured, limited outreach;

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access to the European Year in common with other EU programmes is no doubt through participation in competitive calls for proposals. This system, almost universal now in dealing with the public sector even at national level: •

represents a poor use of applicants’ time given the odds against their being successful;

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represents a poor way of implementing policy because projects have to be so diluted in order to meet the parameters of the call;

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creates a psychological barrier instead of partnership between EU and other institutions and the applicant organisations which are supposed to be the engine-room of change.

Let’s go back to the drawing-board and develop something better… I have concluded in considering this subject that we cannot take in isolation the issue of free movement of labour. We must set it in context – how free movement impacts on employment markets in the host and sending countries alike, the economic backcloth against which these developments are taking place, the long-term consequences. In looking at these I make no apologies for having been drawn into wider speculation about the future organisation of work. Ultimately the constraints to the development of labour in the best interests of our people, whether at national or European level, are the barriers that matter.

Some of the following will be drawn from a UK perspective and I start from an unfashionable position, certainly within UK. With apologies to my friend and colleague Áine, I am not a believer in the unfettered power of the market. Markets cannot deliver consistently enough in the best interests of all the people – and people’s lives are too important to leave to the vagaries of the market place. As an example of the British way, I was asked at a conference the other week for the English equivalent of “l’économie solidaire” but had to admit the concept would be meaningless sin UK, as would the term “social partners”. Government in my view is elected to govern – i.e. set the parameters in economic as well as social matters and ensure those parameters deliver for all the people prosperity or at least a decent living standard commensurate with effort. With continuing globalisation, for instance - government should just not be sitting back and letting it control us. I do not imply by all this the imposition of a heavy bureaucracy. Clear strategic leadership is what we need and what we lack. So that’s the first barrier that needs to be broken – so that people again have faith in the system and do not feel their fate is left to chance (as markets do by definition). Ladies and gentlemen, which economic model do you believe in? In the UK we are given to striking comparisons between the European (or, I should say, Continental) model – with higher security and higher taxation but lower job generation and productivity – and the wonderful UK system which apparently creates prosperity through “flexible employment”. If you visit workaday parts of UK and compare them with your own countries, you may not see these reflected in the social environment – with growing and ever-more disturbing pockets of deprivation, alienation and state dependency. This has led since the 1980s to the growth of a semi-educated underclass which we did not have in my youth – and I am not speaking here of immigrants but of native white British people. Our UK economy seems to me base don 35m or 40m population active against a population of 60m – even before taking into the unprecedented scale of immigration. That cannot be sustainable – so I am very concerned as to the social cohesion of our society in the future. Something not unique to UK, as I can see from the current thesis of material emanating from the EU, is a belief in ethnic diversity both for its own sake and a somehow a source of economic dynamism. In some cases the latter may be true – but more significant is that along with other factors such as fragmentation of media and in many countries of family life, the obsession with diversity contributed to a breakdown of the sense of nationhood and identity. This is worrying people in UK and perhaps the tide will yet turn. We need to be focusing on what unites us, not what divides us – one nation, one community. Some of this applies at European level also. The alternative is escalating division in our societies, leading to unrest which I do fear in the long run. But this is relevant in talking of job mobility because the more we break society down into component parts, the less mobility there can be. Reverting now to the issue of flexible employment, we have in UK managed to combine some of the less attractive features of the US socio-economic model with some of our own. By all means it is easier to hire and fire then elsewhere in Europe – and I do agree rightly so. However, as I have seen from various projects I have visited in Sweden, the Netherlands, even Italy we provide a very poor level of resettlement support for the unemployed back into work as compared to many of our peer countries. Poor both in practical an d resource terms – and because it is based ion the supposition that jobs are always out there to be had. They are just not. We boast of our record in job creation – but much of this is founded on low-paid and/or part-time jobs in the services sector, where of course we depend on immigrant labour on conditions UK people past first youth would not be considered for.

So flexible employment is an illusion, entirely in keeping with a government led by a conjurer. But we should be mindful of another feature of the UK system – the personal infrastructure which people have to support in their individual lives and in particular the high proportion of personal financial resources ploughed into purchase and maintenance of property. This is another national obsession – but of the populace rather than of government – and it is another constraint to job flexibility because it greatly personal disposable income and therefore the volume of liquidity in circulation other than in the form of debt. Moreover, buying and selling property in Britain is a complex and time-consuming business – whence your job can only be as flexible as is your mortgage. Now, I’m relieved to tell you an issue not unique to Britain. Recently and not before time, EU legislation came into force to counter age discrimination in employment. It’s fifteen years too late for some of us! But somehow I don’t think there’ll be compensation for loss of earnings in the interim. But the legislation, though welcome, cannot go far enough. No legislation can control implicit as opposed to explicit age discrimination in selection – which is inevitable when the applicant is older than the interviewer. Only a systemic change, which I am coming to, can change that. Bringing together the personal infrastructure issue as discussed a moment ago and the age discrimination factor, consider the impact on the way people conduct their working lives. So as to sustain one’s career dynamic and sustain marketability over a working life in order to cope with infrastructural responsibilities, the most important skills seem to be i) securing a job and ii) retaining it at all costs, especially through adeptness in internal company politics. \One’s adeptness in actually carrying out the job itself seems to be very secondary. So there’s another – cultural – barrier which need to overcome to productivity and therefore job mobility. In Britain at least, the large influx of workers from the accession countries has had a mixed press. Government prepared the public very poorly by scandalously estimating that no more than 15k such would come. Of course, the reality has been many times that – because Britain and Ireland elected no to erect transitional barriers. It does appear that of necessity we shall be doing so for Romania and Bulgaria, notwithstanding suggestions from those countries that their workers will prefer more southern climes anyway). But for the most part at least the British have been surprised by the hard work ethic of the Central/East Europeans in our midst – as compared to many of our own workers, whether of UK or other ethnic origin. I am concerned, though, at the demographic implications of these wholesale population shifts. Unlike in W Europe, for instance, the population of S E Europe is actually projected to fall over the next 25 years. In Estonia, meanwhile, where they already have a small population a sizeable minority of whom are non-Estonian, there is very real concern at the prospect of a both relative and absolute decline in the population of ethnic Estonians. Even in the UK the drift of population towards the London region where most jobs in the service sector or at least are though to be is exacerbated by this region also attracting for similar reasons the majority of new accession immigrants. This all of course creates strain on housing and infrastructure in S E England – apparently leading to panic building to uncertain standards in order to house everybody – whilst other regions stagnate. This is in restraint of a balanced economy and therefore of balanced employment opportunities – for the established population and the new, in the over- and under-nourished regions both. Ladies and gentlemen, all our thinking, all our projections seem to be grounded in the assumption that the norm is for a person to have a job. Even in UK, self-employment is of necessity very common but is understood neither by government - nor by financial institutions whose employees assume that everyone is like them, with a fixed salary. Let’s break this down – of course there is and always will be work and enough needing doing. The systemic fault lies with the accessibility to and especially the distribution of said work.

Why do we suppose though that the number of jobs available will broadly match the number of jobs required? As we have seen, in UK we are a long way from that. Jobs can only be created when the investment is available to sustain them; we don’t always seem to understand this simple truth. The distorted and debt-ridden economy we have today is not the most propitious environment against which to venture such investment. No investment means no employers means no jobs. So – a radical suggestion. The job was invented generations ago, to meet the conditions of that time. But it is too inflexible a mechanism to deliver economic involvement to sufficient of the people sufficient of the time. Thus it is no longer workable as the only fully recognised model. We must overcome this by breaking down the differentials between the way employed, self-employed an unemployed are identified and treated so that all are included, all have an opportunity and all have a future. I don’t propose a detailed solution – yet, but I do propose a new way forward which will unravel some of our structural blockages or market failures. As it stands, if you think about it and ironically so, the job is itself a barrier to economic and social mobility. I am afraid we must moreover: •

take language training much more seriously across the EU. Of course UK is one of the worst offenders – and modern languages are in decline in our schools. We must develop new vehicles for training young people especially – perhaps via a module between leaving school and entering work (or non-work) which would be semi-compulsory, would enable students to concentrate on language and naught else for a while, and would qualify for training credits;

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member states must have greater fixed autonomy in order to provide incentives/disincentives to offset free movement of labour where such creates the imbalances I have spoken of. This may be out of keeping with the free market; but we can see the consequences otherwise. Sorry to say it, as one of the few remaining British Europhiles – but no, one size does not fit all.

RCW