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Home Opinion Stopping Europe’s race to the bottom: Free movement, precarious jobs and the populist signal
Immigration • Living Standards • Europe

Stopping Europe’s race to the bottom: Free movement, precarious jobs and the populist signal

Lodewijk Asscher - 31 October 2013

Today the people of Europe face tough choices at the crossroads of our common European project. These choices require us to think about good morals

A few weeks ago a German court fined a Pizza delivery company for violating ‘good morals’ because it paid its delivery staff an hourly rate (below the minimum wage) of €1.59 (£1.34).  Germany does not have a legal minimum wage, so strictly speaking it is not against the law to pay wages this low. However, the verdict that such wages violate good morals is meaningful. It should make progressives wonder why we appear to have become accustomed to practices that are totally unacceptable and to things that are morally wrong.

It should make us wonder why we seem to accept that we no longer see the cleaners that tidy up our classrooms and offices, because they are hidden away at the end of the day.

Take for example the UK, where there are 20,000 employees of the retailer Sports Direct who work on zero-hour terms. This means they never know how many hours they will work in a coming week or if they will be able to pay their bills; and, because they are on zero hour contracts, they have no sick or holiday pay, pension plan or education and training budget. In this situation, it is very difficult for them to get a tenancy agreement or loan.

Or take the example of the Italian town of Prato, a hub of Italy’s clothing industry. Here, the entire industry is in Chinese hands. Under Chinese working conditions, Chinese production is done, by thousands of imported Chinese workers. Rules and regulations don’t seem to apply to these ‘made in Italy’ garments, with the Italian government choosing to look the other way.

When we stumble upon such abuses we react with shock. To paraphrase UK deputy prime minister Nick Clegg: they make us fear that the clock is winding back to the bad old days of people standing at the factory gates, waiting to be picked for a day’s work.

Yet why are we so passive in the face of such gross injustice?  As progressive political parties, we need to question more the underlying premises. We need to question the current economic structure which we seem to accept as a given. We need to question the fact that we seem to have accepted the commodification of human beings. We seem to have accepted a society in which we see labour only in terms of cost. We seem to have accepted the unacceptable.

This situation leaves us at a vital crossroads where we have to make a fundamental choice between disposable and decent work. Or in UK Labour leader Ed Milibands’ words, the choice between a ‘race to the bottom’ or a ‘race to the top’. The Euro crisis and other European developments are putting pressure on the arrangements we agreed upon long ago.

This is due to the fact that many European countries tend to rely on a tried-and-tested recipe to cure an economic crisis; a recipe that is widely believed to create the greatest economic growth and the most jobs. Namely: cut the minimum wage. Or even abolish it. Reduce protection against dismissal to give companies the ability to fire their employees at will, and give benefits to the poor so they won’t die from hunger, while keeping them hungry enough so they will accept any job.

Of course, the statistical models indicate this recipe will lead to more jobs in the future, but people will have to take 3 or 4 jobs to make ends meet, and while the models suggest it may lead to a higher GDP, it will not lead to a fair and socially just society.

The choice between decent and disposable work

It is overly romantic and naïve to suggest that we can go back to the way things once were. Labour market reforms are necessary. The world we live in has changed dramatically and we need to change with it. In order to preserve our way of life, we have to change. In order to adapt to the demands of our new economic world order and the crises that accompany fundamental changes, choices must be made, but we have to decide on the direction of those reforms. If we fail to do so, we will simply stand by as reform is defined as a euphemistic term for a race to the bottom.

In the UK, a clear choice was made during the economic crisis of the 1980’s. Under Margaret Thatcher, the market was deregulated and the power of the unions broken. With that, the idea that we are all individuals and therefore don’t need collective protection began to dominate ,as did the idea that the economy and labour market only stand to benefit from deregulation and market forces (this thinking was not limited to conservative parties).

Tony Blairs’ Third Way was the shining example for former German Social Democratic Chancellor Gerhard Schröder when he imposed his ‘shock therapy’ on Germany by drastically reforming the German welfare state and labour market in 2003. The results were impressive. The former “sick man of Europe” with 5 million unemployed men and women, is now considered the “champion of Europe”, and Governments throughout the region look with great admiration to the so-called “German Miracle”.

Yet the German court ruling I mentioned earlier illustrates that there is a shadow side to the German miracle.

All over Europe employers have abused the opportunities afforded to them by these type of reforms. Their employees find themselves stuck between a rock and a hard place, trapped in the perpetual insecurity of disposable jobs. More and more people are being laid off and replaced by flexible workers, or they are hired back in the same job but without dismissal protection.

Nevertheless, while we look with envy at the German miracle, Germany looks with envy at the far-reaching labour market flexibility introduced in countries like the Netherlands and the UK; flexibility that gave way to zero-hour terms and an army of self-employed scrambling to earn a living wage.

A familiar pattern is occurring everywhere. Decent jobs are being replaced by disposable jobs.

Access to the European labour market

In the UK, about 20 per cent of all low-skilled workers are born outside the country and people from poorer EU countries are vastly overrepresented in low-wage sectors such as hospitality and food manufacturing. In the Netherlands, workers from central and Eastern Europe make up 12 per cent of all employees in agriculture and horticulture.

Throughout Europe we see a growing division between those with a permanent contract and those without.  We see a growing number of people who are forced to work several jobs to earn a living wage. We see more and more people working in zero-hours contracts and facing the insecurity of not knowing what the next day will bring. Not knowing if or how they can pay their rent. We see a growing number of people who lack training, because no one invests in disposable workers. We see this situation undermining our competitive strength, and at the same time, we see a growing number of employers using smart but unfair arrangements to dodge the rules and regulations we do have.

This trend is further exacerbated by the growing availability of people willing to work under even lesser conditions, and for lower wages. Europe has opened its borders. This means that a growing number of EU newcomers have access to the European labour market. Due to this growing labour mobility there is an increasing risk that a vast stream of new people will flood our local labour markets. Labour migrants are willing to work at lower standards and in many cases are unfamiliar with the regulations and the language. They don’t know their rights and are prone to exploitation. Some are hired as wage labourers. Many others are supposedly self-employed, but are actually working under false arrangements for a single employer or (sub) contractor. Especially in sectors such as agriculture, cleaning, construction and transport, Western Europe has seen a huge influx of labour migrants from low wage countries. In these sectors, competition and pressure on prices is fierce.

These new labour migrants compete with low-educated citizens, thus causing tension. The situation has also created housing and integration problems in certain neighbourhoods.

Their vulnerable positions tempt many employers not to play by the rules and thus gain an illegal competitive advantage over those who play fair. Sometimes this means they just bend the rules a bit, but increasingly such practices resemble modern-day slavery. The sheer number of these newcomers to our labour market aggravates the disruptive effect on our labour standards.

Preventing the unraveling of the European project

What kind of Europe will we be living in if this trend becomes the norm? It is not a Europe social democrats should contribute to but rather one we should prevent from becoming a reality.

The article David Goodhart and I wrote addressing this problem around the freedom of movement of labour in Europe created a stir all across the continent. People accused me of everything from xenophobia to downright racism. I was called a left-wing populist who was trying to win back the favour of those who have converted to right-wing populism. But we cannot hold back for fear of being misunderstood or misinterpreted. I hold the European project too dear.

Don’t get me wrong: generally, countries benefit greatly from the free movement of workers. It is one of the central pillars of European integration and it should remain so. However, we must prevent this pillar from being damaged due to evaporating popular support and irresponsible social effects.  

Take the truck drivers who work for Albert Keijzer, a cargo company based near Amsterdam. Every single day, they see foreign trucks driving the Dutch highways. Competing companies are dodging Dutch labour laws to cut down on labour costs. They invent smart but unfair arrangements and seem to be getting away with it. And by doing so, they are putting companies that do want to play by the rules out of business, leaving truckers unemployed.

They blame the Polish or Romanian truck drivers who ‘steal’ their jobs. They blame the competing companies, which are dodging regulations. They blame the government, which is failing to act. They blame Europe, which has opened up its internal borders without protecting their livelihood.  

And while we can debate whether these truckers have the right to blame their Polish peers who also simply want to give their children a better future, we cannot ignore these sentiments. We cannot afford to take their complaints and worries lightly.  

All this puts the European project under vehement pressure. In order to protect the benefits of integration, we must also pay attention to the negative consequences. We need to reshape the European project so it will no longer pose a threat to the rights that the labour movement has fought so hard for over the last century.

We need a new settlement that is fair to the people of both the sending and the receiving countries, and we need to stamp out abuses so that Europe will become and remain a vehicle to improve the lives of its citizens. If we fail to do so we will face a growing decline in support for the European Project, which could well mean the beginning of disintegration.

A new social deal for Europe

The road to prosperity should not be paved with disposable work, for, disposable work creates disposable people, and people should never be disposable. Social democrats cannot sit back and accept the status quo. It is imperative that we must fight against the conviction that in order to win the global race people have to lose. We cannot and should not try to win a race against the sweatshops of the world for the fewest employment rights because the more we try the worse things will get.

The race to the top of global competitiveness should rather be based on: investment in education and innovation; fighting unfair competition and stimulating corporate social responsibility and good business; steering labour migration in the right direction; and restoring the balance between labour market flexibility and security.

In the Netherlands, together with the Prime Minister Mark Rutte, the Labour party (PvdA) are embarking on such a mission to revitalise the so-called Poldermodel through social dialogue with employees and trade unions on labour market reforms. Together we’ve reached a new social deal which signals that we still consider it necessary to protect and compensate workers given their unequal position vis-à-vis employers.  But at the same time we are demanding that today’s workers adapt to new labour market realities.

In addition to this new deal, the Dutch government has implemented measures to combat fraud and exploitation of EU labour migrants, with new bilateral agreements signed with Romanian and Bulgarian colleagues. I have appealed to Brussels to address the shadow side of the free moment of workers. And now finally, Brussels is listening. We’ve agreed to jam on the brakes and put a stop to this race to the bottom.

But there is more to be done. Can we find a new balance between flexibility and security? Can we invest in people? Can we renew and revitalise our society, which was built on social dialogue and solidarity, high social standards and quality of work?  Can we protect freedom of movement and hone our European project?

I am one of the optimists: I believe we can.

Lodewijk Asscher is deputy prime minister and minister of social affairs and employment of the Netherlands

This is a contribution to Policy Network's work on The Future of the EU.

Tags: Lodewijk Asscher , Opinion , Immigration , xenophobia , racism , populism , extremism , mainstream , social welfare , healthcare , welfare , citizenship , Europe , EU , European Union , Free movement , Freedom of Movement , Free movement of labour , Jobs , Grwoth , Wages , Precariat , Mark Rutte , Diederik Samsom , Lodewijk Asscher , Netherlands , Dutch , Dutch Labour Party , Partij van de Arbeid , PvdA , Eurozone ,

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The Policy Network Observatory promotes critical debate and reflection on progressive politics. It is centre-left orientated but determinedly challenges social democracy. It is pro-European but restlessly questions EU institutions and practices.

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