The last 50 years have seen an increasingly unified world market for capital. This change has not been mirrored in the labour market. As capital has become freer, at the borders of Europe we have seen increasing restrictions on movement put into place.
This is starting to change. At least within Europe.
With open hands...
Last month, Finland, Spain and Portugal all announced they would open up their labour markets to workers from the new member states from May 2006. While several countries, notably Germany and Austria, are retaining transition periods for the moment, it is now inevitable that they will have to open their borders to workers from the new member states; even protectionist France is preparing for the change.
A recent OECD report indicates that opening labour markets will not create massive immigration flows, and in those countries which have already opened their borders (Sweden, UK and Ireland), the new labour force has benefited their economies.
...But closed pockets?
The question of transition periods is thus a minor question. More pressing is the broader question of how, within a unified labour market, workers rights will be upheld. Such a unified labour market poses great challenges for those normally invested with the obligation to ensure workers rights, the trade unions. The European Trade Union Confederation (ETUC) offers one response to this question.
The ETUC is a European organisation that brings together unions from all over Europe. We recently interviewed Tom Jenkins, senior advisor on international issues at the ETUC. He welcomed the announcement that more countries will open up their labour markets: “we would rather see no transition periods at all” he said. “The temporary restrictions have actually had a negative effect; they have caused a growth in undeclared work, exploitation and discrimination.” The labour shortages in Western Europe will not go away, and the opening up of the market is a better way to resolve this problem than using illegal labour.
However, the ETUC gives only conditional support for an open labour market. It demands that people who work in the same territory are paid the same wage: “opening labour markets should not be an excuse to increase competition” Tom Jenkins said. This principle of equal treatment has become one of the most important issues for the ETUC.
This principle was seemingly enshrined in what has become known as the Posting Directive, which placed workers rights and labour law at the heart of the common market. This was challenged in 2004 by the Directive on Services in the Internal Market, or what become known as the Bolkestein Directive. This directive argued for extensive liberalisation of services in Europe. The key point of dispute was the ‘country of origin principle’, which held that companies “are subject only to the national provisions of their Member State of origin.” This, the ETUC feared, would encourage a downward spiral as every company relocated to the country with the lowest wages and fewest environmental regulations.
The response to the proposal was a massive protest led by the ETUC. In February the European Parliament voted 391 to 213 in favour of fundamental changes to the Services Directive, safeguarding all the elements covered by the Posting Directive: the new version would oblige businesses to observe wages and working conditions in the country where a service is delivered. This new version has been presented to Parliament and will be voted on later this year.
In this reformed legislation there are also great limits placed on what services can be liberalised. SGI’s, services of general interest, the ETUC argues, should be placed in a separate framework to commercial services. Some critics allege this version of the directive is watered down, and allows countries like France to continue protectionist policies that unfairly limit competition with the companies of the new member states.
Shortly after the February vote, Piotr Wozniak, the Polish economy minister, expressed doubt as to whether the bill was even worth supporting in its current form. Yet, while a unified internal services market is clearly beneficial for the countries who have just joined the EU, the ability of the new member states to compete on the basis of their poverty is not a sustainable strategy for Europe.
In an age when lines between left and right are increasingly unclear, the debate is a refreshing one. Those who favour a Bolkenstein style directive argue in favour of driving down costs, those against argue in classical left-wing fashion that certain public services should be protected from the market.
The confusion in the debate reflects the broader confusion in the European project. Is Europe content to rest as a common economic area, or is there a social and intellectual project underneath these reforms?
How this issue is resolved is at the heart of a struggle for the unified labour market. It is the difference between Polish workers in Finland being paid Polish wages; or being paid at Finnish wage levels. The latter is more in tune with a European project that wants to raise the quality of life throughout Europe.