13 September 1995

Doc. 7381

OPINION

on

working time

(Rapporteur: Mr SCHWIMMER,

Austria, Group of the European People's Party)

1.       In January 1994, the Rapporteur tabled a motion for a resolution (Doc. 6987), co-signed by several of his Parliamentary Assembly colleagues, on the need for a concerted European policy on working time. The motion held that "Europe-wide initiatives of working time conditions are needed against the background of persistent and often stubbornly rising unemployment affecting a large part of the active population, and also in order to bridge the differing priorities of employers and employees".

2.       The Bureau of the Assembly subsequently entrusted the Social, Health and Family Affairs Committee with the task of preparing a report on this subject, and the Committee on Economic Affairs and Development with the preparation of an opinion.

3.       The Social, Health and Family Affairs Committee has now prepared a report on the subject, to be presented to the Assembly at its autumn 1995 part-session (Doc 7360; Rapporteur: Mr Gusenbauer, Austria, SOC).

4.       In essence, the report believes that a further shortening of working time is inevitable due to continued productivity gains in the economy. It advocates a maximum of "flexibilisation" as regards individual working hours, necessitating a greatly liberalised system as regards opening hours in commerce or around-the-clock operations in manufacturing. However, the report argues, this must not jeopardise social standards, but should come about following dialogue among the social partners, and including governments. Your Rapporteur can subscribe to many of the arguments in this report. However, he also believes that it leaves out a number of important considerations, which will be outlined in the following.

5.       About 12% of the active work force in Council of Europe member states are without a job. An ILO report presented at the March 1994 International Jobs Summit in Detroit entitled "The World's Employment Situation, Trends and Prospects", stated that 820 million people, or about a third of the world's labour force, live in poverty because they lack adequate jobs. Out of that total at least 120 million people are unemployed, and 700 million are underemployed in jobs that do not pay enough to afford a minimal standard of living. The ILO Director General, Mr Michel Hansenne, said at the time: "These data demonstrate why we call the employment situation a global crisis, far more serious than the economic problems of the 1980s. For the first time since the Great Depression, the industrialised nations, as well as the developing nations, are facing long-term, persistent unemployment."

6.       The ILO attributes the global trend toward high rates of long-term unemployment to three main factors:

-       accelerated technological change, which has "drastically transformed" the way work is performed. While new technologies make some jobs obsolete they do, however, improve competitiveness and create new jobs elsewhere;

-       an intensification and widening of economic competition, as signified by the mobility of manufacturing capacity, capital and labour input, and the growing number of multinational corporations engaged in world trade. One result has been extreme pressure to increase productivity (output per hour) by adopting new techniques, down-sizing work forces and cutting costs; and

-       normal movements in the economic cycle that affect global macro-economic policies and interest rates.

7.       A specific example of rapid technological change can be seen in the manufacture of cars, where increased use of robotics and computer-assisted design and production have sharply reduced the number of auto-workers worldwide.

8.       If unemployment thus rises in a stagnating economy, the question becomes by how much we need to grow in order to make it go down. The OECD estimates that a growth rate of 2.5% per year is necessary in our economies just to keep unemployment at its existing level. In other words, a zero-growth economy would annually reduce the absolute need for labour by 2.5%, or by 10% in four years!

9.       However, an economy growing by more than 2.5% annually, and thus reducing unemployment, is not so difficult to imagine. Indeed, it is already upon us, as the OECD predicts real growth in the OECD area to stand at 3% in 1995, and at 2.9% in 1996. In the 1950s and 1960s, annual growth rates in Europe were normally at about 5% or more. Today, some countries in South-East Asia and Latin America experience even higher growth rates.

10.       Thus, if Council of Europe member states manage to increase annual growth rates to between 3 and 4% per year, unemployment would indeed be declining. The Rapporteur would have wished the report prepared by the Social, Health and Family Affairs Committee to have been slightly more optimistic by holding out this very real possibility, instead of seeing Europe forever doomed to more or less anaemic growth.

11.       Growth rates of an order sufficient to achieve a lasting reduction in unemployment cannot come about, however, without structural reform in our economies. By structural reform, which is strongly recommended by the OECD for the large majority of its member states, is meant an overhaul of all the aspects in the economic life of society which render it less flexible and less able to cope with and adapt to change.

12.       The Rapporteur does not wish to enter into any detailed discussion about this subject, especially since has been covered amply by several various reports on OECD activities presented by the Committee on Economic Affairs and Development1. This year's Rapporteur, Mrs Durrieu in her provisional report on the activities of OECD in 1994 (Doc. 7348 prov.) also draws attention to the "OECD Jobs Study". This major analysis of the extent of and reasons for current high unemployment indeed concludes that joblessness is mainly a result of various rigidities in our societies, and that it can be solved to a large extent by proper policies. If we do not do this, however, we may well go from a "two-thirds society", in which two-thirds are relatively well-off and employed, to a "one-third society" in which only a third can be counted among the fortunate, with the remaining two-thirds under- or unemployed and increasingly poor.

13.       Governments are naturally becoming alarmed, both because of the suffering of individuals who risk becoming gradually more marginalised and unable to be productive and lead dignified lives, and because of the financial burden which unemployment places on government finances.

14.       Meanwhile, who among us is not daily witnessing how companies, in order to stay competitive, cut down their work force to lower and lower levels? Professor Detlev Karsten, speaking at the Assembly's Conference in Helsinki in June 1993 on "The Progress of Economic Reform in Central and Eastern Europe: Lessons and Prospects", pointed to the paradox between the "micro-utility" on the part of companies as they do this, and the "macro-disutility" caused to society (and indirectly to the companies themselves through higher company taxes) as the latter has to ensure the protection of those who lose their jobs.

15.       Volkswagen in Germany has introduced a four-day work week along with reduced pay to workers, in exchange for the company's agreeing not to engage in further lay-offs. Many people see Volkswagen's action as a model for a "new social contract", which if generalised could lead to a happier, more productive society. "Work less, and we shall all have work" could be said to sum up this belief. Proponents of a shorter work-week point out that the eight-hour work day was introduced at the beginning of this century when labour productivity was infinitely lower, and that it has hardly changed since. They recall the discussion of a shorter work week already in the 1930s, and see the Second World War with the subsequent need for massive reconstruction only as a temporary break in a trend which is now again showing its full force, especially with the advent of robotics and information technology.

16.       Other observers, however, are more sceptical. They maintain that it is only Europe which engages in this discussion, while in regions like East Asia or North America it is hardly a topic at all. Shortening the work week will only, they argue, delay the moment when Europe will have to undertake serious structural adjustment in order to rid itself of labour market rigidities that only add to the problem.

17.       Furthermore, they say, since the reduction in pay in the companies where it has been tried is normally less than the reduction in working time, this results in higher unit costs of production for companies and hence a reduction in their international competitiveness, thus causing them to move to lower-wage countries. They point out that Europeans already work fewer hours than the Americans and the Japanese, while they have the highest unemployment. The report by the Social, Health and Family Affairs Committee recognises this problem, and recommends that shorter working hours be accompanied by reduced remuneration.

18.       While presenting the two sides of the argument to the committee, the Rapporteur believes it of importance to ask the question: What will workers do with their free time? Will they read a book or watch a video, the production of which is relatively labour-extensive? In that case their activity is not likely to give rise to much new employment. Or will they go to the restaurant, or make a trip? The restaurant business and tourism are comparatively personnel-intensive, and in this case new employment would be created. However, if pay is reduced, will people be able to go to a restaurant, or for that matter travel?

19.       As regards the future emphases in employment, clear trends are visible. For example, manufacturing and routine office jobs, both in the private and public sectors, seem set to continue to decline. On the other hand, jobs related to information and communications, medical and personal services, media, entertainment, tourism and environment protection are expected to expand, some very substantially. Some of these occupations are by their very nature personnel intensive.

20.       The above is intimately linked with the question of open versus less open trade. Protectionism might, at least temporarily, save some jobs. However, the prices of the goods or services protected will then be higher, leading to less disposable income for other things, and therefore to less of a stimulus for the economy. Open trade, on the other hand, may cause jobs to be lost, but goods and services can be obtained at lower prices, leading to more disposable income for other purposes and hence a greater stimulus to the economy. The report by the Social, Health and Family Affairs Committee would have been even more complete if it had linked unemployment and working time with the question of international trade. Furthermore, various members of the Committee on Economic Affairs and Development have raised the issue of child labour in certain developing countries, and the need to stop the abuse of millions of underaged.

21.       The report by the Social, Health and Family Affairs Committee does, on the other hand, discuss the rather worrying long-term demographic trends. Birth rates are low in Europe, and populations in most Council of Europe member states will diminish in the decades to come. The report describes in detail the difficulties we can expect in the decades ahead in financing old-age pensions and social security.

22.       It does not, however, draw the conclusions just given as regards the potential positive effects on employment. That is, that unemployment may go down simply because there are fewer people in active ages. In addition, the growing number of elderly will require more care, in what is a very personnel-intensive sector.

23.       Another aspect not perhaps sufficiently covered in the report of the Social, Health and Family Affairs Committee concerns the need for an adaptable and qualified workforce. New employment is increasingly opened up in areas requiring high skills and advanced education, but less and less in low-skill professions. We shall have to see to it that our educational and professional training system is able to meet this demand, and then ensure that taxation levels are sufficiently low to encourage people with demanding jobs to offer tasks of eg a domestic nature to others. The latter is now being tried in certain countries, such as France, with considerable success.

24.       There is also the question of more flexible working time. The previously mentioned motion for a resolution recommends that flexible working time "should be used to spread out work of varying intensity better over time". It could also make more efficient use of machines by increasing the time during which they are not idle, as rightly pointed out by the report of the Social, Health and Family Affairs Committee.

CONCLUDING REMARKS

25.       In conclusion, the report by the Social, Health and Family Affairs Committee is to be commended for taking a fresh approach to the issue of working time in Europe. In particular, its call for greater flexibility and more innovative thinking on all sides should be heeded, as should the request for dialogue between the social partners. It also rightly highlights the future crippling cost of pensions and social security unless we reform the system.

26.       However, the Rapporteur wishes to strike a more optimistic chord than does the Social, Health and Family Affairs Committee as regards the potential of our countries to reach economic growth levels sufficient to reduce unemployment. Success in this regard will depend strongly on our ability to undertake structural reforms in our societies, to open up more sectors to national and international competition, to reward work and discourage abuses of the welfare state while protecting those in genuine need, and to improve the quality and adaptability of the workforce through education. Finally, the report by the Social, Health and Family Affairs Committee could have related the working time issue to that of international trade.

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27.       After having examined and approved this Opinion on 7 September 1995, the committee proposed that the following amendments be made to the draft Recommendation contained in Document 7360:

      - insert, under existing paragraph 10, a new paragraph to read:

"Furthermore, sufficient economic growth is necessary in order to generate added wealth, which in turn will create greater demand for products and services, thereby reducing unemployment";

      - add the following two new sub-paragraphs under existing sub-paragraph

      11 ii:

      "to try to reach higher economic growth through the pursuit of structural        reform of the economy, in particular by increasing efficiency in all sectors, and by raising the qualifications of the workforce through education and training".;

      "more specifically, to try to speed up the structural reform in the field of social        security, taking into account the consequences of new employment policies.".

Reporting committee: Social, Health and Family Affairs Committee (Doc. 7360).

Committee for opinion: Committee on Economic Affairs and Development.

Reference to committee: Doc. 6987 and Reference No. 1917 of 24 January 1994.

Opinion approved by the committee on 7 September 1995.

1 ¹Cf. Doc. 6900; Resolution 1014 (1993) and Doc. 7123; Resolution 1046 (1994).