EU Labor Market Policy

Ideas, Thought Communities and Policy Change

A. Schellinger

• Publisher: Palgrave Macmillan
• Year: 2016
• ISBN:
  9781137508720
• Topic: Politics & International Relations
• Subtopic: European Politics
• Index: Politics & International Relations

The EU's 'social dimension' today is a product of the ideology of the 1990s. Its employment field is directed to increase the employability of workers and the adaptability of labor market regimes. The book argues that this social-liberal approach is best explained with a set of ideas strategically advanced by 'thought communities' in the policy process. It traces the success of this new approach in the debates among academic experts and policy-makers in the mid-1990s, the decisions leading to the adoption of the Treaty of Amsterdam, and the establishment of the approach in the policy field between 1997-2007. The author explores the processes through which ideas came to matter in the policy process. At every stage, the claim that ideas played a predominant role is strengthened by addressing the most viable alternative explanations such as institutional constraints set by Economic and Monetary Union and the preferences of political leaders.

1

Introduction

1.1. The puzzle: EU labor market policy

In the first half of the 1990s, the European Union (EU) found itself in a difficult situation. After some success in the fight against unemployment in the 1980s, most Member States experienced record numbers of people out of work. By 1994, the overall unemployment rate in the EU stood at 11.1 percent – a high level similar to that of the economic and financial crisis starting in 2007 (European Commission, 2000c). Then, as now, the process of European integration was in turmoil. In 1992, the Danish people rejected the Maastricht Treaty and the French people gave their approval only by a narrow margin. The focus on measures to enhance the single market as introduced by the Single European Act of 1986 was seen to have caused a crisis of legitimacy (Tidow, 1998, pp. 17–18). In this context, the ‘social dimension’ of the EU – and particularly the employment field – moved onto the agenda of EU policy-makers.

The white paper of 1993 outlined the main proposals of the European Commission under the Presidency of Jacques Delors. It saw low investment in human capital, misguiding incentives resulting from tax and benefit systems, and overly rigid regulatory frameworks as some of the most important problems afflicting Europe’s labor markets (European Commission, 1993c, pp. 117–144). This supply-side-oriented approach was complemented by proposals for a large-scale investment program to improve Europe’s infrastructure. The so-called Essen strategy adopted by the Member States in 1994 coincided with this general policy orientation, stressing the need for social partnership, flexible work organization, reduction of non-wage labor costs, and the transition from passive to active labor market measures (European Council, 1994). However, the European Council, then dominated by conservative governments, rejected proposals for additional financial resources to stimulate employment growth, for a stronger regulatory approach, and for more EU-level competences in the employment field.

In 1997, the left won the elections in France and in the United Kingdom. Following the German elections in the fall of 1998, one observer noted that “for the first time in the history of the European Union social democratic-led governments were in power simultaneously in Bonn, London and Paris” (Dyson, 1999, p. 195). One should add that Italy as well was ruled by a center-left coalition. What is more, however, these governments could assume that this constellation would remain stable for the coming years. By 1999, only Ireland, Luxembourg, and Spain were governed by the right (Manow, Schäfer, & Zorn, 2004, p. 12). However, the left in Europe did not speak with one voice and on some issues, such as competence allocation, it did not take a uniformly different position from the right. Different political strategies became apparent.

The EU employment field moved center-stage for the newly elected governments in France, Germany, and the United Kingdom. German Chancellor Schröder demanded an ‘employment pact’ while his French and British counterparts, Jospin and Blair, had already agreed to focus on employment at a conference of left-wing party leaders in Sweden weeks before the Amsterdam European Council in 1997 (Dyson, 1999, p. 205; Pollack, 2000b, p. 284). However, the French and British prime ministers “collided” over differences in their approaches: Jospin, on the one hand, stressed the need for an “interventionist, regulatory Europe,” including proposals for European wage coordination and minimum standards; Blair, on the other, “emphasized labor market flexibility” and rejected more regulation and additional funds (Pollack, 2000b, pp. 269, 284). The “ ‘welfare-to-work’ approach [of the British government] contrasted” with those of the left governments in Germany, France, and Italy in the second half of the 1990s (Dyson, 1999, p. 197). In 1997, the Member States agreed to the Employment Chapter in the Treaty of Amsterdam and adopted the first set of annual ‘European Employment Guidelines.’

For the first time in the history of the EU, a constitutional treaty, the Treaty of Amsterdam, included a separate chapter on ‘employment.’ The “constitutionalization” of “employment policy” is particularly noteworthy in light of previous treaties that were predominately driven by economic issues (Barnard, 1997, p. 281). The Employment Chapter in the Treaty of Amsterdam aimed to ensure a “skilled, trained and adaptable workforce and labor markets responsive to economic change,” as well as a “high level of employment” (Treaty of Amsterdam, 1997, Art. 125, 127). The Treaty of Amsterdam included provisions for a “coordinated strategy” among Member States based on annual “employment guidelines” for national policy-making that changed only marginally in the following years (Treaty of Amsterdam, 1997, Art. 125, 128 (2)). The Member States’ principle policy objectives became apparent in these guidelines, which were organized in four sections: employability, entrepreneurship, adaptability, and equal opportunities. They aimed to adapt “benefit and training systems [in order to] provide real incentives for the unemployed [. . .] to take up work,” to change the taxation system to encourage self-employment and the employment of “unskilled and low-paid labor,” to change the regulatory framework to include “adaptable types of contract,” and to “reconcil[e] work and family” through parental leave and the provision of child care (European Council, 1997b).

The main thrust of the EU employment field had become supply-side oriented. According to Scharpf, the first set of policy objectives of the ‘coordinated strategy’ corresponded with the “type of supply-side policies which are favored by neo-liberal economists” (Scharpf, 2002, p. 654). The main problem analysis was adopted with the European Employment Guidelines’ focus on “labor market rigidities, [. . .] wage structures, and ‘benefit disincentives’ ” (Kenner, 2003, p. 473). Given the differences within the European left, it is perhaps less surprising that the EU employment field did not adopt a fully fledged interventionist approach than that the political left seemed to follow exactly the prescriptions of neo-liberal economists. Active labor market policies and education and training programs were part of the policy repertoire of the left well before 1997. The approach taken in the EU employment field, however, eclipsed any market-correcting dimension with binding law. In this respect, it can also be seen as a break with the main currents of the approach taken by the European Commission until 1997. Therefore, this book asks the question: How can we explain the policy paradigm observed in EU labor market policy?

1.2. State of the art: Three explanations

There are three main explanations of the policy orientation of the EU employment field that are briefly summarized in this section and elaborated in the following chapters. In the first view, it is the result of bargaining among Member States based on national preferences. The second explanation stresses institutional factors as constraints in the policy context of Economic and Monetary Union (EMU) or as the result of functional spillover. Finally, the policy orientation can be seen as the result of the role of ideas in the policy process.

The first explanation is based on the theoretical framework of ‘liberal intergovernmentalism’ (Moravcsik, 1999). This theory includes two stages: In the first stage, national preferences are derived from the economic structures found within the Member States. For labor market policy, the preferences of Member States are explained by the country’s level of income and the political party in power. Moravcsik and Nicolaidis argue that “poorer countries and conservative governments tend to oppose” EU labor market policy as they expect it to lead to increases in national expenditure, while “richer countries and leftist governments tend to support” it (Moravcsik & Nicolaidis, 1999, p. 63). In this view, the interests of Member States are the product of a cost-benefit analysis based on economic conditions at the national level. National preferences are efficiently aggregated through a bottom-up process mediated by domestic political institutions.

In the second stage of intergovernmental bargaining, national governments were “seek[ing] agreements that most efficiently realize[d]” their preferences (Moravcsik & Nicolaidis, 1999, p. 61), and outcomes were “decisively shaped by the relative power of national governments” (Moravcsik, 1999, p. 52). The adoption of the Employment Chapter in the Treaty of Amsterdam is explained particularly with regard to the preferences of the large Member States France, Germany, and the UK. In a similar vein, Pollack argues that the Employment Chapter in the Treaty of Amsterdam is foremost the result of political contestation along the left-right spectrum and bargaining between national governments (Pollack, 2000b). According to Pollack, the “content of the Employment Chapter was fundamentally contested [. . .] between left-wing and right-wing governments” (Pollack, 2000b, p. 283; emphasis in the original). Pollack explains the differences between national positions in terms of the different socioeconomic interests of their core constituents. It is argued that coalition-building between national governments gave the EU employment field its policy orientation (Pollack, 2000b, p. 284). In summary, EU labor market policy is explained by national positions grounded in party politics and intergovernmental bargaining.

A different explanation is provided in institutional accounts. One version of historical institutionalism stresses the constraints resulting from existing institutions that develop over time. At the EU level, these constraints are particularly forceful as institutional reform often requires agreement among all Member States (Pierson, 1996, p. 143). The outcome in the EU employment field is therefore explained as principally the result of previously existing institutional constraints. Schäfer argues that EU labor market policy is best explained by the institutional constraints created with EMU by the primary law of the Treaty of Maastricht in 1992 (Schäfer, 2004). According to Scharpf, the policy options for the EU employment field were severely limited by the European monetary regime, which forestalls the adjustment of interest rates, and by the Stability and Growth Pact (SGP), which limits national spending capacity (Scharpf, 2002, p. 655). In this view, the policy orientation of the EU employment field is seen as the corollary of institutions established ex ante.

Another strand of institutional analysis highlights the independent contribution of supranational institutions and thus directly challenges intergovernmental explanations. In particular, accounts in the tradition of neo-functionalism conceptualize the Commission as important for the “upgrading of common interests” among the Member States and as the “main actor cultivating” functional spillover (Niemann & Schmitter, 2009, p. 50). With regard to the EU employment field, several analysts stress the independent contribution made by the Commission through coalition-building in the context of changing Member State preferences (Riel & Meer, 2002). The Commission, together with other EU actors, such as the Party of European Socialists (PES), is argued to have played a key role in transnational exchange leading to common positions among policy-makers (Aust, 2004; Johansson, 1999). According to this approach, the outcomes in the EU employment field are best explained through the entrepreneurship of supranational organizations.

The third explanation stresses how action may be explained through an interpretation of structural and institutional factors. Ideas provide the basis for interpretative frameworks through which external conditions assume meaning. Comparative scholarship in ‘political economy’ and constructivist debates in ‘international relations’ have long advanced this view (Hall, 1989b; Wendt, 1992). Ideational approaches have also gained in traction in the study of EU policy-making more widely – examples include accounts of EU monetary policy as well as the nature of European integration in general (McNamara, 1998; Parsons, 2003). This research project belongs to this growing ideational scholarship. The principal building blocks of the argument and its position vis-à-vis the other explanations are presented in the following section.

1.3. The argument: The European idea of work

In a nutshell, I argue that only an examination of the role of ideas can explain the development of the EU employment field. Ideational elements were crucial for the interpretation of labor market issues. New leadership within the European Commission “shift[ed] the locus of authority over policy” by involving new personnel and expertise (Hall, 1993, p. 280). By 1997, pressing issues in European labor markets put employment on the agenda of the Member States. In the same year, the change in government in the UK dissolved a long-standing stalemate in the EU employment field. Supranational policy entrepreneurs succeeded in establishing a particular vision of work in the EU policy arena. The approach remained significant over time. The argument is developed in three stages: First, the development of ideas is examined; second, the emergence of ideas in the policy arena is traced; and finally their longevity is explained.

In the first stage, I argue that different interpretations of labor market issues and policy solutions in the second half of the 1990s were developed in communities of experts: ‘thought communities.’ My research shows that there were at least two fundamentally different approaches to labor market issues at the time; I call them ‘social-liberal approaches’ (SLAs) and ‘institutional approaches’ (IAs). I argue that different assumptions, for example about the role of the service sector, led researchers to diverging problem understandings, and that from these approaches widely different policy implications were derived. These two sets of approaches were ‘incommensurable’ – in the sense that socioeconomic data was interpreted differently. Scientific as well as sociological mechanisms were central to the development of both approaches. It is shown that the new problem understanding of the SLA emerged in research on labor market policy, welfare states, and labor law. The development of this problem understanding was congenial to the ‘Third Way’ movement that took place in several Member States. With regard to the EU policy arena, I identify several leading research institutions such as the Wissenschaftszentrum Berlin für Sozialforschung (WZB) and the European University Institute (EUI) in Florence that served as ‘hot spots’ for the new problem understanding. My research also shows that the European Commission provided substantial support for the development of this new approach.

In the second stage of the argument, the emergence of ideas in the policy arena is examined. Based on Kingdon’s multiple stream model, it is argued that in 1997 a rare window of opportunity for policy entrepreneurs opened (Kingdon, 2003 [1984]). This opportunity depended on pressing problems that put labor market policy on the agenda of political decision-makers and changes in government in key Member States such as the United Kingdom and France. I argue that these conditions allowed policy entrepreneurs in the European Commission to shift authority over problem definition. It is shown that the responsible Directorate of the European Commission was restructured in terms of its organization and personnel. This new policy orientation within the European Commission was both critically validated and sustained by the involvement of the SLA thought community. The resulting Treaty of Amsterdam as well as subsequent Employment Guidelines became milestones for the new policy paradigm in the EU employment field.

Finally, this book investigates the longevity of the SLA in the policy process. Based on a detailed examination of one of the most important policy outputs of the EU employment field – the employment guidelines – I show that the policy paradigm prevailed from 1997 to 2007. This continuity is observed against the backdrop of changing economic conditions and political majorities in the Member States. I argue that this continuity is explained by the acceptance of the problem understanding by key policy actors and their formal role in the policy process. The significance of the social-liberal problem understanding can be observed with regard to the continuous involvement of the SLA thought community. This involvement depended on the institutional accessibility of the political system. Within the ‘Open Method of Coordination’ (OMC) – a non-binding way for Member States to coordinate their labor market policy – the European Commission and EU Presidencies played an important role as agenda-setters. These actors systematically gave privileged access to the same thought community over time.

The argument advanced in this book is substantively different from major alternative explanations. I claim that neither structural nor specific institutional accounts can explain the policy orientation of the EU employment field. My argument challenges two central aspects of structural accounts. While I concede that socioeconomic change was crucial as it put labor market policy on the agenda of political leaders in the 1990s, I argue that the structural conditions of European labor markets left the scope for different policy options open. The policy orientation of the EU employment field depended on the interpretative framework that defined “not only the goals of policy and the [instruments], but also the very nature of the problems they are meant to be addressing” (Hall, 1993, p. 279). I substantiate my claim by reconstructing the debate at the time. My findings show that there is a consistent and recognized set of alternative interpretations of the nature of labor market issues. I also show that the negotiations that led to the adoption of the Employment Chapter in the Treaty of Amsterdam and the first set of Employment Guidelines did not predominately follow the logic of intergovernmental bargaining. I claim that the European Commission played an important role as agenda-setter in the employment field by tracing the development of policy proposals well before the changes in government in the UK and France in 1997 could be anticipated.

In a similar vein, I position my argument vis-à-vis those explanations that emphasize institutional constraints based on prior integration. I agree with claims that institutionalized agreements related to EMU constrained the options of policy-makers at the time, but I show that this explanation overly relies on the dichotomous conception of Keynesian and neo-classical policy alternatives for the employment field. While it is certainly the case that demand-oriented labor market policy did not fit with the emerging monetary regime at the time and was therefore an unlikely candidate in the employment policy sphere, a range of viable options for labor market policy did remain available to policy-makers. The alternative problem analysis implied different policy goals and instruments that were compatible with the existing institutional framework. Institutional constraints therefore left the policy field ‘underdetermined.’

This research project aims to complement accounts that stress the role of supranational institutions. These analyses tend to lack an explanation for actor motivation. This is particularly relevant in this area, because the new direction of the EU employment field and the introduction of the OMC did not lead to more policy competences for the Commission, and may even have weakened its previous position. The motivation of the Commission therefore requires further explanation. Similarly, the role of EU-level party organizations, such as the PES, is difficult to explain based on the interests of its constituents, as it was a newly founded organization whose operations were largely detached from national debate...

Table of contents

• Cover
• Title Page
• Copyright
• Contents
• List of Figures and Tables
• Acknowledgements
• List of Abbreviations
• 1. Introduction
• 2. The Theoretical Framework
• 3. The EU Policy Paradigm
• 4. Thought Communities and ‘Work’
• 5. The Emergence of the Policy Paradigm
• 6. The Policy Paradigm from 1997 to 2007
• 7. Paradigms in Crisis
• 8. Conclusion
• Appendix
• Notes
• Bibliography
• Index