From the TUC

How stronger labour law could reduce inequality and solve the Eurocrisis

11 Feb 2012, by in International

We held a seminar with the Foreign Policy Centre and the European Commission, assisted by Thompsons Solicitors on Friday, to launch a pamphlet called Single Market, Equal Rights? We’re holding further seminars on the same subject in Birmingham on 20 April and Cardiff on 11 May – contact the Foreign Policy Centre if you want to attend. Here are some thoughts about how inequality and labour law are key elements of the eurozone crisis.

Because that crisis is essentially a crisis of inequality between deficit countries and surplus countries. Not so much about public sector deficits, as trade deficits.  If you look at the countries in deepest trouble now, they weren’t the countries with the greatest debt or budget deficits in the past decade. But they were the countries with the greatest current account deficits. Basically, they were importing themselves into crisis, fuelled by low interest rates. But what’s worse is a deeper inequality: inequality of incomes.

For too long, working people across Europe have been getting by on tick. Instead of low wages and easy credit, we need sustainable levels of demand, higher than they are now. Working people must be able to pay for goods and services, their housing and so on, out of their pay packets and their savings.

And if inequality is bad for Europe’s economy, it is worse for Europe as a whole.

As the economy worsens, social tensions are rising. At the moment, the cameras are focusing on Greek trade unionists and Spanish youth, protesting against what their governments are doing. But things will get worse still.

As the economy stutters, the European right will find their voice, and worse. Immigrants, travellers, gay men, trade unionists…. maybe even Jews again.

Governments and bond traders who advocate austerity need to be careful what they wish for. The policies of the 1930s were not good for Europe’s economies, but that wasn’t the worst of it.

It doesn’t have to be that way. To heal Europe’s divisions we need to rebuild strong European institutions. Labour law is one of those institutions, as is collective bargaining.

Common European labour laws should be part of a race to the top, not the bottom. Social climbing, not social dumping!

They could re-start the process that previous EU expansions have delivered, before the global banking crisis kicked off in the developed world’s most unequal society across the pond.

Common labour law is part of the process of providing greater equality of incomes and working conditions, higher skill levels and longer holidays, better quality public services and more choice in the shops.

It could provide more harmonious societies, with less social tension and less poverty of ambition.

2 Responses to How stronger labour law could reduce inequality and solve the Eurocrisis

  1. Gareth
    Feb 13th 2012, 1:44 pm

    Interesting piece.

    The logic here is perverse. Rather than taking the most competitive economies and forcing everybody else more like that, you want to take the least competitive economies and force everybody else to be like that?

    When you go to the Bundestag and ask Germany to be more like Spain, what will the reaction be? (Less rioting and more riotous laughter, I’d suspect)

    The political economy of Europe is beyond me, but I suspect this is no more likely to be workable than the ECB/IMF taking over governance of the peripheries.

  2. Owen Tudor

    Owen Tudor
    Feb 13th 2012, 5:07 pm

    Gareth, I think you must be operating under the misapprehension that the strongest labour laws exist in the least competitive countries of Europe. In fact, as the OECD have acknowledged, the richest and most competitive countries in Europe are the ones with the strongest labour laws – think the Scandinavian countries and, indeed, Germany and Austria. “Most competitive” does not necessarily mean “cheapest”.

    So yes, I’d take Swedish or Finnish labour laws any day! In practice, as with most EU social and employment law, we’re not actually asking for as much as that – the common levels set down by the EU are usually floors that are below what the most competitive economies have got, but even they would be better than what the least competitive countries currently have, let alone what is being proposed for them!