Unemployment in Europe - causes and remedies[1]
Doc. 7620
16 September 1996
REPORT
Rapporteur: Mr BLOETZER, Switzerland, Group of the European People's Party
Summary
The report sets out to identify the main reasons behind the high unemployment rate in some European countries, and to suggest remedies. Increasing globalisation of national economies but also rigidities in national policies are seen as important causes behind the present situation.
The report calls for changes in educational systems and for policies to stimulate entrepreneurship. While reforms are necessary for future prosperity and social cohesion, they must not question the fundamental solidarity in society built up over decades.
I. Draft resolution
1. Unemployment in many Council of Europe member states has reached intolerable levels, and is causing great suffering to millions of jobless people and their families. The Assembly considers that this situation calls for a full examination of its causes as well as effective policies to combat it. Unless this is done, Europe's political stability and social cohesion are at risk.
2. Over the last twenty years there has been no net creation of employment in the western European market economies. At every downturn in the economy unemployment has soared; at every upturn it has come down only slightly or not at all. This points to there being more deep-seated reasons behind current high unemployment, reflecting policies and structures that are inadequate to meet changing realities in the world and domestically.
3. Since the public finances of the large majority of European countries are too strained to combat unemployment through increased government spending, the bulk of policy action will have to be directed at structural reform, that is, changes in the basic economic and social functioning of our societies, at fiscal consolidation, and at price stability.
4. Europe, and especially western Europe with its mature welfare systems, has to rethink its policies as regards the creation and preservation of jobs, incentives to work, as well as its position vis-�-vis the rapid, and welcome, rise of new economies in the rest of the world, including countries in transition in central and eastern Europe.
5. It is essential, however, that the foundations of a caring society built up over decades should not be upended, so that especially vulnerable groups such as the elderly, the handicapped and the young continue to be given adequate protection and opportunity.
6. Since Europe cannot turn its back on a world community committed to more and more open trade under the Uruguay Round and the new World Trade Organisation, it will have to assume policies which render it more competitive and which allow it to grow at a pace such, that more employment is created than is lost due to "corporate down-sizing", commonly held to be between 3% and 4% growth per year.
7. In view of the large differences in unemployment among different Council of Europe member countries - ranging from about 3% to over 20% - it is essential that countries learn from each others' successes and failures.
8. The emerging new world economy is being built on exchanges - of goods, but increasingly also of services and particularly information. European countries will have to adapt and upgrade their educational and vocational training systems to meet this challenge, as regards general knowledge and culture, languages, communications skills, specialised knowledge and skills and the link between education and work. Policies must also facilitate the diffusion and exchange of information, in particular through the modernisation and liberalisation of the infrastructure in telecommunications.
9. The new world economy favours smaller, more flexible enterprises. Council of Europe member countries should therefore particularly favour the creation and development of new enterprises.
10. Policies should aim to make it more attractive to work, to employ and to create new enterprises.
11. The Assembly considers that the following general measures should be considered:
i. more flexible conditions surrounding employment;
ii. a reduction in often superfluous or counterproductive regulations in all sectors of economic life;
iii. social security systems which encourage rather than discourage the seeking of employment.
12. In addition, the following measures specially directed at helping the unemployed should be considered:
i. a shift from passive to active labour market policies, encouraging the jobless to seek new employment, including job counselling, and job-search assistance schemes, and the improvement of skills;
ii. special attention given to the reintegration of long-term unemployed, including women and young people, in order to preserve their feeling of worth, reduce their psychological distress and prevent alienation.
13. Unemployment in a number of European countries in transition is also a matter of concern. It is essential for overall European prosperity and growing-together that these countries can benefit from a climate of open trade with western European countries. In some countries in transition, especially in eastern Europe, higher rates of unemployment are coupled with high inflation, a hesitation to carry out economic reform and political uncertainty. Here it is essential that western European countries continue to assist the reform process in all ways possible.
14. Council of Europe member states should bear in mind the recommendations of the OECD's 1994 "Jobs Study" and implement them where appropriate to their particular circumstances.
15. Steps must be taken to ensure that the European Monetary Union can provide new employment through greater macro-economic and trade stability, both among participating countries and with others, whether belonging to the European Union or not. European trade and co-operation must not be allowed to suffer as a result.
II. Explanatory Memorandum
by Mr BLOETZER
I. Introduction
II. Market and Employment: An Overview
III. The Cost of Unemployment to the Individual and to Society
IV. The OECD Jobs Study
V. Central and Eastern European Labour Markets
VI. Social Support and Unemployment. From Passive to Active Labour Market Policies. The Need for Structural Reform
VII. If jobs are lost, where may new ones be created?
VIII. Searching for Answers: The G-7 JOBS Summit in Lille
April 1996
IX. Other factors
i. Worker flows
ii. The European Monetary Union and its possible effects on employment
iii. Minimum-wage laws
X. The Role of the State and of Enterprises
i. Government training programmes
ii. Flexible working time
iii. Small and medium-sized enterprises and job creation
XI. The Committee's hearing with representatives of the OECD and the European Trade Union Confederation, March 1996
XII. Concluding Remarks
I. INTRODUCTION
1. In a motion for a Resolution presented by the Rapporteur and several of his colleagues in July 1995, it was pointed out that unemployment in the majority of Council of Europe member states, especially in western Europe, has over the last few years become less and less a function of the ups and downs of the economic cycle, and more and more a structural phenomenon. For every successive upturn in the economy, unemployment remains at a higher level, so that it at present affects 10.5 percent of the active population in European OECD member countries.
2. This situation can no longer be accepted. The social cohesion of our countries is under threat, and important changes in the way we run things will be required if we are successfully to tackle this problem. At a time when the finances of Council of Europe member states are overall too weak to allow the problem to be tackled effectively through increased public spending, the only answer lies in structural reform in all sectors of the economy.
3. The authors of the motion called on the governments of Council of Europe member states to devote urgent attention to the underlying causes of unemployment, and to lasting remedies, notably by:
- following macroeconomic policies which both encourage economic growth and make it sustainable;
- removing disincentives to work and hire, through better designed social security and tax systems, and other measures designed to improve labour market flexibility;
- increasing the individual's employment chances through better education, transition to work and on-the-job training.
4. In addition to the above, the Rapporteur wishes to stress the importance of furthering small and medium-sized enterprises. They are the "life blood" of a modern economy. They provide new ideas, find and open up new niches of activity and are on the whole much more dynamic than big corporations. As major companies "down-size" their workforce, the role of small companies becomes vital in combatting unemployment. Their establishment and development must be furthered, at least by facilitating their finding necessary venture capital.
5. The present report also takes into account a Motion for a Recommendation on the employment of young people in Europe, presented in May 1996 by Mr Hunault and others (Doc. 7556). The motion's legitimate contention that "young people are far harder hit by unemployment than their seniors" and that "unemployment among young people has become a stumbling block to economic progress" is something with which this Rapporteur fully agrees and which permeates the present report.
6. A first version of the present report was submitted to the Committee on Economic Affairs and Development in November 1995. A second version served as a basis for an exchange of views with experts from the OECD and the European Trade Union Confederation in March 1996 (see Section XI), prior to its provisional adoption in June 1996, and its final adoption in Sofia, Bulgaria, in September 1996.
II. MARKET AND EMPLOYMENT: AN OVERVIEW
7. The economic record of Europe in the post-war era can be divided into two main periods. The first, lasting until 1974, was characterised by fast, balanced growth with high employment. The second, which is still with us, has seen slower growth and rising unemployment. Several factors lie behind the change from the first to the second period, such as insufficient demand for labour in the economy, wage levels, skills of the workforce, the pace and scale of international integration and, a major factor, technological developments affecting blue and white collar workers alike. The contrast between western Europe and the United States is striking: the former failed to create a single net additional job between 1973 and 1994, while the latter generated some 38 million over the same period. Surely then, something is wrong with the way we deal with our economies.
8. For one thing, in the 1970s the world's labour force lived mainly in countries that were largely insulated from international markets. At present, however, China, the countries of the former Soviet Union area and South Asia - representing nearly half the world's labour force - are entering the global market. According to World Bank statistics, by the year 2000 more than 90 percent of workers may be living in countries already integrated in world markets. Future challenges to the 'traditional' industrialised countries will thus likely come from what are today emerging, developing or transition countries.
9. Economic globalisation has entered a critical phase, characterised by swift movements of capital across borders, acceleration of technological changes, and a rapid evolution of management and market requirements which put the social fabric of our democracies under pressure. What is striking is our inability to come up with coherent and sustainable approaches - not only help people cope with these structural adjustments but convince them that change, if properly approached, can lead to new prosperity.
10. The globalisation process takes the form of a dramatic redistribution of economic power at the world level, which sooner or later will translate into that of political power. By the end of this decade, strategic economic parity will essentially have been reached among the United States, East Asia and Europe. Any change of this magnitude in the global balance of power is bound to have a profound destabilizing effect, although not necessarily for worse.
11. This process also challenges some assumptions so far deemed flawless. For instance, it was conventional wisdom that technological change and increases in productivity would translate into more jobs and higher wages. But in the last few years technological changes have eliminated more jobs than they have created.
12. The 'mega-competition' that is part and parcel of globalisation may lead to a zero-sum game situation where the winners take all. The gap between those able to keep abreast with the pace of globalisation - because they are knowledge and communication-oriented - and those left behind is getting wider at the national, corporate and individual level.
13. This dramatic effect of the global economy is complicated by at least three factors. It is becoming harder to ask the public to go through the pains and uncertainties of structural adjustments for the sake of benefits yet to come. Public opinion is on the defensive, increasingly anxious about the future. The social impact of these pressures is being felt in particular when economic activity has slowed sharply in most industrial democracies.
14. Secondly, globalisation tends to de-link the fate of the corporation from the fate of its employees. In the past, higher profits meant more job security and higher wages. The way transnational corporations have to operate in the global economy means that it is now routine to have corporations announce new profit increases along with every new wave of lay-offs.
15. In the past there was also a certain logic between events at the micro, ie company, level and the macro, ie national, level: for lay-offs at the company level permitted those concerned to seek other, often better paid jobs in other sectors of the economy. In today's harsher climate that logic is broken: companies lay off ever more workers, blue-collar and increasingly white-collar, who are increasingly unable to find new employment. Society, which has to pay unemployment benefits to them, may have to increase the taxation of companies, thereby causing them to wish to shed further workers - or of individuals, thereby reducing their purchasing power and overall demand in society.
16. The third phenomenon concerns temporary workers. The number of temporary employees in the manufacturing workforce has almost doubled in the past five years. This switch has been more marked in manufacturing than in other sectors, where flexible working methods cannot be easily used due to rigid labour regulations. The advantages are clear. Temporary workers are often paid less than full-time staff and the employer usually does not contribute to pensions. This type of worker earns only when at work, which greatly reduces company overheads. A further reason for companies taking on temporary staff is economic uncertainty which can make even full-time workers redundant.
17. All this confronts political and economic leaders with the challenge of demonstrating how the new global capitalism can function to the benefit of the majority and not only for corporate managers and investors. Hence, the key issue is how to define the social responsibilities of corporations and the national priorities of governments.
18. As regards corporations, it is worth noting that there can be no sustainable growth without the public seeing itself as the major stakeholder in the successful functioning of the economy, even though technological innovations have increased the knowledge of potentially profitable international exchanges and of economic opportunities abroad. In the absence of a stronger and more active participation by the public, and of a governmental structure capable of distributing equally productivity gains, changes in technology and innovative production strategies will not lead to a situation where investment returns are socially beneficial.
19. With respect to national priorities, the traditional notion of economic policy no longer meets public opinion's expectations. Focusing on training and education, on the constant overhauling of telecommunication and transportation infrastructures, on entrepreneur-incentive fiscal policies and on adjusting social policies has to be a central part of a national policy. This should be able to spur a new spirit of individual entrepreneurship coupled with moral responsibility. No individual, corporation, or country will be in a position to seize the new opportunities that the globalised economy offers within a social vacuum.
20. The world is changing as profoundly as with the advent of the Industrial Revolution. The social, political, cultural, moral and economic consequences are as enormous and irresistible as them. The tide called "the global economy" cannot be halted by command or stopped by protecting the domestic industry. It can only be understood and accommodated to.
III. THE COST OF UNEMPLOYMENT TO THE INDIVIDUAL AND TO SOCIETY.
21. Unemployment in the OECD area at present stands at some 34 million people, about 7.7% of the labour force In addition, it looks set to remain high over the rest of the decade. OECD medium-term projections suggest it may fall no lower than to 7% by the year 2000. Differences between Council of member states are, however, considerable, from about 4.2% in the Rapporteur's own country Switzerland and 3% in Luxembourg, to 8.2% in the United Kingdom, over 22% in Spain and 17.2% in Finland (1995 figures; Source: OECD). While unemployment in certain countries in central and eastern Europe is as high as in western Europe, in countries like the Czech Republic (3%) and Poland it is considerably lower. These differences would indicate that there are answers, that a 12% unemployment rate, for example, is not a predicament somehow decided by a higher power, but rather to a large extent a result of national policies.
22. Seen over time unemployment rates have risen ever since the 1960s. In Japan, the rise has so far been modest 3.1% in 1995, while in the United States unemployment has fluctuated cyclically around a slightly rising trend (5.6% in 1995). However, the unemployment rate in western Europe, which rose above 10% already in the early 1980s, is now again increasing. Are we doomed to witness ever higher unemployment over the years in this way, and to accept the devastating notion "once unemployed, always unemployed"? Surely we must not allow this to be the case.
23. The present situation pits those who continue to believe in traditional economic theory against those who see the present situation as entirely new. The novelty, according to the latter school of thought, lies not only in the speed of structural change (should it, can it be slowed down?), but also in the advanced state of "globalisation" of the economy (causing industry to move out) and the high pace of technological development (which takes away jobs, at least in the short-term).
24. The pessimists are quick to point out that the private sector in Europe member countries has not witnessed any net employment growth for the last twenty years. Apparently, the previous link between economic growth and increasing employment seems to have been weakened. Pessimists will also point to the "maturing" of certain service sectors that have hitherto contributed to growth in employment � as a result of technological development and market integration. These include banking, financial services, insurance and transport. Finally, they will point to the trend of companies to locate services and manufacturing to lower-wage, developing countries.
25. Others will point to an alleged loss of employment from Europe, especially western Europe, to low-wage, low-social security countries in East Asia or elsewhere (or indeed, within the European Union itself, as recent company moves have illustrated). The Rapporteur is very much aware of the risks to economic, political and social stability posed by the massive closing of plants. Yet he remains hopeful that, as these countries develop, so will their wage levels and hence their demand for imports. In East Asia itself, formerly low-wage Japan has become "high-wage" compared to East Asian neighbours such as the Republic of Korea and Singapore, with a subsequent loss of manufacturing to them. The Republic of Korea and Singapore in their turn are now losing manufacturing to others in the region who themselves move up the wage ladder. There are many indications that the world as a whole is in the same "dynamic restructuring" process.
26. The optimists even see the emergence of future "growth centres" in Asia, Latin America and central and eastern Europe, arguing that these will provide vast markets as they expand. Furthermore, they say, let us not underestimate the vitality of European economies themselves, not only in their ability to adjust, but also in their capacity to generate new products, services and hence employment. Small-and medium-sized enterprises are supposed to play a vital role in this economic renewal. The optimists also see the successful conclusion of the Uruguay Round � and the consolidation of the European Single Market - as providing a long-term boost to economic consolidation.
27. Whichever camp is more correct, it is generally agreed that annual growth rates in our economies need to be between 2 and 3% if we are to ward off any further deterioration in unemployment and between 3 and 4% over several years if unemployment is to be significantly reduced. Although unemployment seems to be a global problem, the picture is particularly bleak in Europe. Furthermore, the contrast with in particular the United States is stark. Not only has total employment grown much more rapidly in the United States of America than in Europe since 1970. In addition, the proportion of the population of working age that have a job has risen by over 10% in the United States, while it has fallen by more than 5% in the European Union countries.
28. In the wake of the oil crises of 1973 and 1979 it was common to blame rises in unemployment on higher energy costs. By now, however, oil hardly costs more in real terms than before the first oil price shock in 1973. It also used to be true that real wages in Europe grew faster during the 1970s than was warranted by the growth in productivity. This, it was believed, created a squeeze on company profits and increased unemployment. However, since the early 1970s real wage growth has declined, and the share of total economic resources going to wages has fallen back to the level it had around 1970.
IV. THE OECD JOBS STUDY
29. If we cannot hold either energy prices or "excessive" real wage growth responsible any longer for high unemployment then, we have to look deeper. Could it be that unemployment has become its own driving force? Has it reproduced and fed on itself, in the process becoming more a structural than a cyclical problem?
30. This, at least, is one of the conclusions drawn in the "Employment/Unemployment Study Policy Report", or the OECD Jobs Study, published by that Organisation in 1994. It forms a comprehensive research effort on the reasons for and remedies to the disappointing progress in reducing unemployment. The Rapporteur will deal with it at some length not only because he got to know it as the Assembly's Rapporteur in 1994 on OECD activities, but above all because he believes it is the perhaps most penetrating analysis of the issue of unemployment ever undertaken at international level.
31. Another message from the study is that member countries have to become more innovative than in the past � in particular since the traditional, Keynesian method of combating unemployment through budgetary expansion can hardly be used any longer due to countries' debt situation. The ratio of government debt to GDP increased enormously during the 1970s and 1980s. Many OECD countries have budget deficits close to record levels. Thus, the scope for expansionary action is severely limited. Indeed, the current high budget deficits also tell a story about their lack of effectiveness, for if they were the answer then we would long ago have eliminated unemployment.
32. The media these days talk a lot about a "super information highway" that will affect every aspect of our private and professional lives. Experts predicts a swift merging of fibre optics, micro-processors, digital switches and video. Together, these will form a seamless web � the "information super highway".
33. The OECD's Jobs Study concludes that new information technologies will require, even more than in the past, far-reaching changes in our social environment, our attitudes, and the way we work. Only if these conditions are met will potential productivity gains be realised. Furthermore, it believes that if we use them effectively they should be able to foster long-term employment, rather than threatening it. It is clear that new technology eliminates certain types of activities. The question is: can it produce new, different types of work?
34. Changes in technology and trade flows appear to have affected the types of employment in demand. Evidence abounds of a decline in the demand for unskilled male labour in OECD countries. OECD observes that unskilled workers have formed a larger and larger part of the total number of jobless during the 1980s and up until the present time. Furthermore, the situation of unskilled workers has worsened most in those countries where differences in wages between unskilled and skilled workers have remained limited and rigid.
35. If one central message of OECD's Jobs Study is that unemployment, in particular in Europe, is more structural than recessional, another conclusion is that the only way to tackle it successfully over time is to adjust to, rather than resist, change. The study goes on to make specific recommendations across a whole range of micro-economic policy areas, including education and training. Some of them are no longer controversial: nurturing an entrepreneurial climate, improving the diffusion of technological know-how, or improving the skills of the labour force. Others touch a more sensitive nerve, namely the reform of social security and unemployment benefits and employment protection measures.
36. The OECD study draws attention to the role of the level of wages. Wage levels are of vital importance to the individual, for they directly affect his standard of living. Even though, theoretically speaking, wages should fall if an industry's labour costs are too high, a host of institutional arrangements often prevent this from happening. "Employment protection" refers to regulations which make it difficult or expensive for employers to dismiss workers they no longer want to keep. The study suggests that employment protection may encourage a preference for "prime-age workers", whose abilities and experience are proven. The reverse side of the medal is that this could work against job chances for young people and older workers. Similarly, insufficient wage adjustment may preserve good incomes for a few, but may inhibit companies from hiring new workers, or encourage them to move production to lower-wage countries.
37. Low, indeed declining, geographical mobility of the work force is particularly noticeable in Europe, partly caused by a shortage of housing. Again, the contrast with the United States is stark. There, geographic mobility between states is an important adjustment mechanism for reducing high unemployment. Over the decades this Rapporteur can remember, there have been massive shifts in the United States work force from the east coast to the west and to the north, from the northern "rust belt" to the "sun belt" of the south, and so on. In Europe, such mobility is rendered much more difficult by national boundaries, as well as by linguistic and cultural differences.
38. Structural adjustment policies may also entail making wage settlements less uniform across the regions of a given country. Some observers believe that rigid, centralised wage agreements which do not recognise wealth and cost-of-living differences among regions in fact accentuate the exodus of companies and people from disadvantaged areas as entrepreneurs are no longer attracted by the lower cost of labour. In the United States low wages have permitted many people entry into the labour market, followed by the possibility of moving toward more skilled occupations later. (However, in the United States an increasing number of people also form part of the new underclass of so-called "working poor" � often families where both parents work but which still fall below the "poverty line".) Others maintain, on the other hand, that central wage agreements can be valuable, both in increasing overall consumer demand and in contributing to more dynamic structural adjustment, notably by forcing less competitive industries to modernise (or leave the market).
39. In Europe the span between wages is less pronounced, and the "working poor" are probably fewer. However, comparatively generous unemployment benefits � in themselves of course welcome � have contributed to a growing group of long‑term unemployed people, who lose confidence in their own capacity, find their skills becoming outmoded, and grow used to a life of non-work. As has been pointed out, it must be a primary concern to society, and to these people themselves, again to have the possibility of letting work give more meaning to their lives.
40. The Parliamentary Assembly of the Council of Europe has recently participated, through members of our Committee, in Council of Europe workshops on unemployment and structural reform in Europe. The workshops tried to identify certain of the causes behind the present employment situation in Europe, such as technological developments and the globalisation of the economy. In addition to unemployment, they drew attention to increasing "precarious employment", as well as to increasing inequalities and poverty and social exclusion. Among the action recommended were the elimination of labour market rigidities and an industrial policy supporting the creation of small and medium-sized enterprises.
41. It is difficult to draw any far-reaching conclusions as to the advantages and disadvantages associated with different types of labour organisation in different countries. Nobody, for instance, can deny that Japan has been very successful in keeping unemployment low. Yet it has done so with relatively high industrial wages and small differences in wages among regions. The country also has high direct taxes, a considerable degree of labour market regulations, and limited labour mobility among firms.
42. The OECD Jobs Study examines many other things, such as the beneficial effect that could be expected from a lessening of the tax burden on the use of labour, in particular low-skilled labour. It also recognises the responsibility of governments to make sure that those who are negatively affected by structural change are given assistance. The winners must continue to compensate the losers in the economic gamble, and labour market reforms should not be allowed to undermine social cohesion. The study also recognises that many of the structural reforms suggested will be politically difficult to implement.
43. However, resistance to change and the defense of the status quo do not provide a suitable answer, and could indeed be a recipe for even greater social injustice in the future. We only have to think of the long-term unemployed who illustrate the marginalisation of entire categories of citizens and especially the young. Not only do those who go without a job for a long time lose their skills. What is worse, they will also lose their confidence. Getting into the habit of not having anything meaningful to do may be the hardest thing of all.
44. Meanwhile, the "insiders", those in secure, stable and well-paid jobs, risk gradually forgetting about the others. So far the term "two-thirds society" has been used, meaning that two-thirds have jobs and are well-off. Could it be that in the future, unless we take resolute action, we will have to talk about a "one-third society" instead, ie one in which only one-third are paid well and live in job security, whereas the rest drift further and further away from the mainstream of work and community life? What will happen to our social cohesion, to our political systems if this occurs?
V. CENTRAL AND EASTERN EUROPEAN LABOUR MARKETS
45. The task facing an economy in transition as regards the labour market is not easy. Ultimately, employment can only be saved by reform - restructuring the economy in the direction of greater efficiency and hence profitability - and reviving the general level of demand for labour. The nature of the challenge at hand depends partly on the pattern of production inherited from the communist era and the extent to which the onset of the transition has been accompanied by a recession and a resulting fall in overall demand for labour. Transition economies vary widely in the extent to which they were distorted by the previous planning regime. In addition, some, as we have seen, are developing very rapidly and have low unemployment.
46. A crucial decision has to be taken by certain less advanced countries in transition: whether to hide or bring into the open the extent of labour under-utilisation. There are several ways of hiding a labour surplus. Maintaining it in state enterprises has been the strategy followed in some countries. Here, a distinction must be made between cases where retention of labour has been a substitute for reform, and cases where it has been a conscious part of the reform process. In some transition economies subsidies have kept inefficient enterprises alive, and the process of restructuring has hardly started. In others the relatively low rate of decrease in state sector employment has not apparently involved subsidies, but has been due, rather, to delays in privatisation and to wage restraint. The latter may be seen as a deliberately gradualist approach to reform rather than an avoidance of it.
47. In Central and Eastern European labour markets, private sector employers fill most vacancies by hiring employees directly from state jobs rather than from the pool of the unemployed. The prevalence of a private-sector wage premiums in most transition economies is consistent with the strategy of selecting out of the state sector workers who are generally younger and more motivated to acquire rewards from work effort rather than social benefits. The impression is one of a selective labour market process in which private firms use wages to attract relatively qualified workers from the state sector and interpret unemployment as a signal of lower qualifications. This mechanism of state-private sector competition has already produced changes in the pay structure within state companies.
48. While working for restructuring and revival of labour demand, the government of a transition economy has a number of immediate options. At one extreme it could, without recurring to massive subsidies, take an easy approach to lay-offs and bankruptcies, and keep more employees than would otherwise be the case. At the other extreme is the option to press on as fast as possible with lay-offs from, and bankruptcies among, loss-making enterprises. Displaced workers would then either become registered as unemployed or work in the unofficial economy (or both). This approach could also be supplemented by training programmes.
49. Understandably, in view of their aspirations to join the European Union, most central and eastern European countries are committed more to the second, so-called "European", model. The only major advantage of the first model may be political. It diminishes both the pain of the transition and the likelihood of social and political unrest. This explains why the electorates in some central and eastern European countries have ousted governments that have presided over high open unemployment rates. The danger of the first model is that it may become a substitute for reform rather than a part of the reform process.
VI. SOCIAL SUPPORT AND UNEMPLOYMENT. FROM PASSIVE TO ACTIVE LABOUR MARKET POLICIES. THE NEED FOR STRUCTURAL REFORM.
50. Experts on the labour market impact of the tax benefit systems in force in many Council of Europe member states draw attention to several "traps", that is, benefits which could actually over time worsen unemployment rather than reduce it. The "unemployment trap", for instance, results when unemployment and related benefits are in excess of or near the after-tax wage/salary of the person concerned, had he or she been employed. He or she therefore has no incentive to seek renewed employment, and over time becomes less and less adapted to changing professional requirements.
51. The "poverty trap" is related to the "unemployment trap". It applies when the combined effect of the withdrawal of social welfare benefits and the payment of income taxes and social security contributions on additional earnings means that a low-wage worker has no incentive to work harder or invest in training.
52. A third is the "fiscal wedge" which denotes the difference between the cost of one hour of work for the employer and the purchasing power that this hour of work gives to an employee after his taxes and social security contributions have been deducted. The "fiscal wedge" is especially relevant in the case of low-skilled workers whose take-home pay is considerably reduced. The question becomes one of distributing the overall tax burden on the population and of finding solutions which do not hinder the development of jobs for less skilled workers.
53. What, then, is the possible role of the level of unemployment benefits on unemployment? Evidence suggests that high unemployment benefits do not necessarily increase unemployment. Rather, benefits tend to do so only when they are not efficiently administered. When new benefits are introduced controls are normally tight. However, these are often difficult to keep up in the face of structural changes in the labour market and an increase in the number of beneficiaries. For instance, whereas in the early stages the unemployed will only receive benefits if they are available for new employment, this criterion tends to become less and less adhered to both by the authorities and by some of the unemployed.
54. The social protection systems in many of our member states may be in need of fundamental reform. In the current world economic environment a number of these programmes may impede our economies' capacity to adjust to profound and rapid changes in technology and world competitive pressures. Many of our social policies have their origin in the beginning of this century, with the welfare state being constructed essentially after the second world war. Now, however, we have a new and rapidly changing world economy with profound and rapid technological development. What is more, the globalisation of the world economy pits one country's system of social protection against that of every other.
55. Indeed, the very meaning of social assistance has changed. If some 30 years ago it was considered a last recourse intended for a small number of the truly needy, today it has become the main means of existence for a large number of long-term unemployed people, who are increasingly excluded from the mainstream of economic activity. Furthermore, social assistance as such is getting a bad name among the general public, which is upset at cases of abuse.
56. However, the solution surely cannot lie in a society lacking in solidarity or social cohesion. Such a society would be fundamentally inefficient because of the social tension and the insecurity that would follow. We need to keep an equitable and advanced social protection system.
57. The Rapporteur believes that effective so-called "active labour market policies", are generally to be preferred to "passive" ones. In other words, it is better to help an unemployed person find a role in the work place, rather than just ensuring him a guaranteed revenue. Among active labour market policies that do seem to work well one can mention job counselling, motivation and job search assistance schemes. The public employment service can also play a key role in enhancing the effectiveness of active labour market policies. Active labour market policies also imply finding ways to integrate labour, education and social policies, and going from income support measures to policies stimulating employment and activity. Developing the skills of the labour force, and especially women � in brief, education and training � becomes a priority.
58. An "active society" is clearly better prepared to tackle "structural reform". OECD sees structural reform as essential to expand the potential of our economies for non-inflationary growth, to provide new, genuinely competitive job opportunities, and to improve the efficiency of the public sector. More generally, structural reform enhances the effectiveness of macro-economic policies and make product, labour and capital markets more responsive to a changing political, economic and technological environment.
59. Structural reform is thus an extremely important tool for long-term economic growth. It applies to the whole range of areas where structural adjustment is needed, such as manpower and social policies, education, industrial and regional policies, and science and technology. Permanent structural reform is needed in most economic sectors. It is normally associated with both positive and negative effects, and it is the task of all those responsible for the decision‑making process in society to minimise the latter. Basically, the aim of any structural adjustment policy should be to prepare a society in time for the changes it faces, so as to avoid bottlenecks in any form they could take.
VII. IF JOBS ARE LOST, WHERE MAY NEW ONES BE CREATED?
60. Where may new jobs be created? Here there are certain rather clear trends. For example, the share of occupations associated with farming, fishing, textiles, clothing and leather, and simple routine office operations, both in the private and the public sector, seems doomed to further decline. Meanwhile, jobs related to information and communications technology, medical and personal services, media, entertainment, tourism and environmental protection are expected to expand, some of them very substantially, even though many of them will be dependent on the general level of economic activity in society.
61. The borderlines between occupational categories will become increasingly blurred. For instance, the distinction between manufacturing and servicing jobs is daily becoming less meaningful. Up to 80% of the jobs in manufacturing are in fact today non-production, service-type activities, such as engineering, design, sales and marketing. Furthermore, while manufacturing may continue to shrink, the sector will continue to generate considerable indirect employment.
62. The emergence of new industries, products and services in such fields as biotechnology, multi-media information and "virtual reality" will create jobs for which currently there is no classification. Nor do service jobs any longer fall easily into the low-paid, low-skill category. In fact, earnings in many service activities have out-stripped those in manufacturing over recent years, while certain relatively low-grade occupations are becoming increasingly skilled in nature.
63. The jobs of the future, if less definable, can be expected to be more "horizontal" and mobile. They will require computer literacy, language skills, the ability to communicate and deal with people. There may be less emphasis on stable, salaried employment as such, as increasing numbers move from one activity to another.
64. The many uncertainties as to future labour requirements clearly place an immense burden on the education and training system. The latter will have to respond to a multitude of demands from many age groups and social categories. Conversely, the "capacity for learning" will be even more crucial for tomorrow's citizens.
65. The challenge of overcoming unemployment is absolutely vital to future social peace and the maintenance of democracy. It must be among the absolute priorities of our societies to ensure employment to the maximum number of their citizens. There are so many tasks around us: taking care of the handicapped, the very young and the elderly who now are often abandoned; and the restoration of our environment, cultural heritage and inner cities.
VIII. SEARCHING FOR ANSWERS: THE G-7 JOBS SUMMIT IN LILLE, April 1996
66. A Jobs Summit was convened by French President Jacques Chirac in the Northern French city of Lille in April 1996. In his opening speech, Mr Chirac asked: "Are we condemned to chose between unemployment and poverty?". He went on to "define the contours of a third path" between the economies of North America, especially the United States, with what he saw as little social protection and a downwards development of pay but with strong creation of new jobs; and the economies of Europe, notably Western Europe, with the opposite characteristics. The French President inter alia called for a lowering of the cost of less skilled work, in particular by shifting extra-salary costs of employers toward other areas. He also suggested a "better utilisation of unemployment insurance" in order to "stimulate employment rather than inactivity". Furthermore, he encouraged his G-7 partners to engage in a reflection on the management of their fiscal and social systems in order to avoid the so-called "assistance trap". Finally, he reiterated France's attachment to the "European social model" which, he said, was based on a "social protection in conformity with the dignity of man, a tradition of social dialogue and negotiation, and a role on the part of government as a guarantor of social cohesion". Finally, he asked for minimum social standards around the world and warned against a development where the global economy would be subjected to the law of the jungle by a general downward spin in social protection.
67. These and other French proposals did not, however, meet with agreement from the majority of the other G-7 representatives, mainly coming from finance ministries. Other European G-7 participants were less than enthusiastic about the idea of having the European Union become more active or even dominant in creating a general social policy framework. The Americans contrasted the US unemployment figure of about 5.6% of the active population with that in the European Union of 11.2% (1995 figure: Source: OECD). The European Union, they argued, has not seen any net gain in employment over the last three years, while the US economy created 140,000 new jobs alone in the month of March 1996. (212,000 jobs in the services sector, 22,000 in the distribution area, while manufacturing employment shrank by 62,000.)
68. If the French position was to a certain degree supported by the ILO's Secretary General Michel Hansenne, who warned against "threats against social peace", the OECD's then Secretary General, Mr Jean-Claude Paye, suggested that if indeed there was such a thing as a "third way" as suggested by France, then it would have to be "somewhere between the two models, and nearer the Anglo-saxon one than the European one". The OECD Secretary General went on to say: "There is no alternative. The world is engaged in globilisation, which for the first time gives hope for all the countries in the world to participate in the world economy ... Any slowing down or effort to protect oneself will only lead to the construction of a Jurassic Park, in an economy which would fall increasingly behind the rest of the world".
69. The Lille Summit, whatever its long-term results may be, nevertheless served the purpose of bringing the debate about the future orientation of the world economy and our approach to unemployment into the open. While the European participants were unanimous in rejecting any wholesale adoption of the US model, this still begs the question how Western Europe is to counter the undeniable and menacing trend in the direction of destruction of employment without any significant creation of any new.
IX. OTHER FACTORS
i. Worker flows
70. The exchange of labour among countries through migration can be of considerable relevance, although labour is less mobile than either goods or capital. A distinction should be made between advantages for the sending country and those for the receiving country. Emigration countries may experience three major advantages. Firstly, unemployment and, with it the social costs of paying for it, may be reduced. Secondly, remittances from workers abroad to their families and accounts at home may increase. Third, returning workers with new skills acquired abroad may provide new stimulus for the domestic economy.
71. Immigration countries can expect to gain economically by adding foreign workers with skills that may be scarce among their own work force. Immigration may also reduce wage inflation by increasing the supply of labour.
72. The net effects of international migration may be distributed unevenly among countries. In the political arena the voices pleading for restrictions on immigration are often louder than those pleading the opposite. In the EU there is, at least at treaty level, free movement of labour among the member states, coupled with restrictions on immigration from outside the Union.
ii. The European Monetary Union and its possible effects on employment
73. On the one hand, a single currency will help trade, and may therefore help employment, by eliminating trade-inhibiting currency fluctuations and currency transaction costs. It may also better attract foreign direct investment by offering a larger single-currency area of cooperation for companies.
74. However, membership in an economic union also entails for each participating country a weakening of autonomy in the design and exercise of national economic policies. It influences each member country's macroeconomic policy by restricting its power to follow independent national economic policies, and by making each economy more sensitive to developments in the partner countries.
75. This economic interdependence may cause policy conflicts among member states, especially when economic integration is not accompanied by political integration. Within a customs union, for instance, the feedback of 'externalities' on the economies of partner countries can be positive or negative. Obviously, positive externalities (such as increased trade) provide benefits and are welcome, while negative externalities (such as higher import prices for certain goods coming from outside the Union, resulting in higher prices for consumers) are unwanted. Countries in this situation may seek to overcome the problems by greater harmonisation of policies.
76. In an economic and monetary union the pursuance of independent national fiscal policies is rendered more difficult by the rising economic interdependence among participating countries. If fiscal policies waged by one country influence demand or interest rates within the single-currency area in ways that do not suit its partners - or if they negatively affect the exchange rate of the common currency vis-�-vis other currencies - then this will raise calls for stricter budgetary management. These may in turn, at least in the short term, have adverse effects on employment programmes and social benefits, not to speak of the employment situation as a whole.
77. On the other hand, if a country allows its fiscal debt to rise by borrowing extensively in the Union's capital markets, it can drive the Union's interest rate upwards. This increase in the union's interest rate, besides negatively affecting the debt situation of its partners, may have negative consequences for investment and growth.
78. It is unfortunate that the EMU in the minds of many people has come to be so closely associated with harsh fiscal policies and unemployment, especially since the more strict policies introduced in most EU countries in the 1990s would have been necessary under any circumstances, given the rise of budget deficits and public debt. Indeed, they may well have to be even more drastic in the event the EMU does not materialise and financial instability were to intensify as a result. It may well, on the other hand, be that the introduction of the EMU may be somewhat delayed - as a project or for certain EU countries - until economic conditions are again more favourable.
79. In sum, monetary integration holds out the prospect of more efficient resource allocation among countries and regions, Other advantages include lower transactions costs, savings through lower holdings of international reserves, and the elimination of exchange rate risks, thus reinforcing the role of the price mechanism and stimulating trade, investment and growth.
80. Capital will flow increasingly to the most profitable parts of the EMU area, necessitating compensatory support by richer regions to poorer if higher unemployment there is to be avoided. (Such transfers presuppose a political acceptance to do so among the richer regions or countries in the EMU area.) Alternatively, the labour force can move to where the capital is concentrated, as has happened for over a century in the United States, but then linguistic difficulties and cultural attachment to one's own region or country is probably much greater in Europe, rendering such flows more problematic.
iii. Minimum-wage laws
81. Governments may cause wage rigidity when they prevent wages from adjusting to different levels, for instance by imposing minimum wage laws. However welcome minimum wages may be from a social point of view, for some workers, and especially the unskilled and inexperienced, they can be a barrier to finding employment as they reduce the quantity of labour that firms will demand. In previous decades minimum wages were rightly seen as encouraging companies to substitute machines for labour, thereby raising productivity and letting surplus labour go to other sectors in an expanding economy. However, this avenue is no longer open as practically all parts of our economies are 'downsizing'.
82. The minimum wage is often thought to have its greatest impact on teenage unemployment. The wage level of teenagers tend to be low for two reasons. First, because teenagers are among the least skilled and least experienced members of the labour force, they tend to be less productive. Second, teenagers often take some of their "compensation" in the form of on-the-job training rather than direct pay. Minimum wages can therefore
be particularly punishing for teenagers. Some studies suggest that a 10% increase in the minimum wage may reduce teenage employment by 1 to 3%.
83. To mitigate the effects on teenage unemployment, some policy-makers have long advocated exempting young workers from the regular minimum wage. A lower wage for teenagers would allow more of them to be hired and enable them to get training and job experience. Opponents argue that it gives firms an incentive to substitute teenagers for unskilled adults, thus raising unemployment in the latter group.
X. THE ROLE OF THE STATE AND ENTERPRISES
i. Government training programmes
84. Education and training, in addition to their fundamental task of promoting the development of the individual, have a crucial role in stimulating growth, restoring competitiveness and creating a socially acceptable level of employment. However, it is essential to grasp the nature and limits of this role.
85. It is only in combination with measures in other areas, such as overall economic policy that education and training can have their full impact, said a 1994 White Paper on "Growth, Competitiveness, Employment" published by the European Commission. European systems of education and training will be able to produce positive results only if they are adapted to the new fabric of society and economic life.
86. The study identifies three major areas where education and training may successfully combat unemployment: by training young people and retraining staff made unemployed by rises in productivity as a result of technological progress; by strengthening the competitiveness of businesses; and by developing a form of growth which produces more employment by improved matching of general and specific skills to changes in labour markets. Thus, training is seen as an instrument of active labour market policies which are necessary to increase competitiveness, and to assimilate and spread new technologies.
87. One priority must be to combat unemployment among young people with limited skills through an educational system which provides basic skills and which establishes the links between school and working life. Apprenticeships and in-service training in businesses, which allow people to gain the type of skills needed in the world of work, should be encouraged in countries where they are not already in existence.
ii. Flexible Working Time
88. Around the world, but especially in Europe, a discussion goes on about whether a reduction in working time could reduce unemployment through so-called "work sharing". Our Committee has recently, in an Opinion (Doc. 7381 of 13 September 1995; Rapporteur: Mr Schwimmer), taken up this subject. This raises a number of questions in the Rapporteur's mind. For instance, should "work reduction" lead to "pay reduction" in order to be economically feasible? But would employees agree? Furthermore, "work sharing" supposes that there is somebody willing and able to carry out the job that is being freed. Can such a "professional match" be guaranteed? There are many who do not believe in the virtues of "work sharing". They argue that the end result will in fact be fewer rather than more jobs overall.
89. Suffice it to say in this context that the matter is complicated. If indeed there is less work to go around, then our societies may well have to adapt by reducing working time. However, any increase in employment due to a reduction in working time risks being offset by two opposing forces. Firstly, an increase in productivity of the workers that have been retained, making it less necessary to hire new ones. Secondly, an increase in employers' costs per unit of output which reduces competitiveness and thus employment.
90. When examining changes in working hours, it is important to draw a distinction between the volume of work and the number of people in employment. Certain governments have succeeded better than others in translating a given volume of work into jobs, normally by increasing the number of part-time jobs.
91. Available data suggest that in northern countries, except for the United Kingdom, reductions in working time have had an effect on the labour market. Between 1983 and 1991, the volume of work undertaken, in terms of the total number of hours worked, went up by only around 2% in Denmark and Belgium but, because of the reduction in average hours worked, the number of people in employment increased by 8%. Over the same period, in Germany, the volume of work rose by 7% and the number of people employed by 12%.
92. The time may therefore have come to remove obstacles to, and preferences of employees and employers for, patterns and hours of working, since this could increase the number of jobs for given levels of output. It is doubtful, however, whether a mandatory shorter working week would have the same effect.
93. It could rather be sought by ensuring that those who are willing to work shorter hours do not suffer undue loss of social protection and poorer conditions of services; or by providing incentives to companies to fill the new employment opportunities through the registered unemployed (eg along the lines of the job rotation schemes which have been initiated in Denmark).
iii. Small and medium-sized enterprises and job creation
94. In order to maximize the job-creation potential of small and medium-sized enterprises (SMEs), governments should consider removing existing barriers, such as excessive fiscal pressure and red tape, and implement measures aimed at strengthening the competitiveness of SMEs and favouring their growth.
95. There is a need to identify those financial, fiscal, administrative and legal constraints which fall disproportionately on SMEs and thus impede employment. Small businesses are crucial as creators of new jobs, and yet they have the least capacity to pass on costs given their limited staff and market power. Another important aspect is the development of work opportunities for women, and ensuring their equality with men. Numerous SMEs are started by women, and this trend could be further accentuated with the right policies.
96. In addition, the development of new employment opportunities may be promoted through the use of public-private partnerships in potential growth areas, such as the environment, energy, transport, leisure, arts, sport and the care sector. Public agencies can be decentralised in favour of local social and economic entities.
97. Progress on all of these fronts will hinge on the willingness of the social partners to develop new types of workplace relationships, in the direction of greater flexibility, more active public-private cooperation and new apprenticeship schemes encouraging the development of the entrepreneurial skills among young people, as well as their capacity to master new technologies.
XI. THE COMMITTEE'S HEARING WITH REPRESENTATIVES OF THE OECD AND THE EUROPEAN TRADE UNION CONFEDERATION, March 1996.
98. Considerable attention was devoted at the Committee's Hearing with OECD and the European Trade Union Confederation (ETUC) in March 1996 to the 'trade-off' between social equity and labour market efficiency. Different countries observe different such trade-offs. Some, such as the Nordic countries, place great value on small wage differences, relatively high minimum wages, generous unemployment benefits etc. Others observe larger wage differences in the hope of thereby awarding work and over time reducing unemployment. Countries favouring equity also emphasise continuous education and training of the work force and more active labour market policies.
99. Another issue has to deal with ways of upgrading the skills of the work force. Some countries emphasise "life-long learning". The OECD has concluded from its research that it is very important that all those who leave secondary education at the age of 15 to 18 should have acquired basic skills and qualifications needed in working life. The OECD has also found that general, untargeted training programmes are more expensive and yield relatively poor results. It also emphasises the need to assist young people during the transition from school to work. Another issue is how to motivate young people with low educational levels. Companies unwittingly add to the problem by tending to invest mainly in employees who are already more skilled, leaving the less skilled behind.
100. In studying the results of active labour market policies among several member countries, the OECD found that the largest share of resources go to retraining programmes for the long-term unemployed. As previously indicated, broad, untargeted programmes have been shown to do little to assist young people. Indeed, the latter tend to be stigmatised by potential employers for having followed such courses, so much so that some now refuse to engage in them. By way of contrast, the OECD has found that determined assistance to the unemployed in the search for new jobs seems to work relatively well. It is on the whole relatively inexpensive, and cost-effective.
101. Moreover, wage subsidies have been found to have both a 'displacement effect', signifying that companies hired subsidised workers at the expense of others who would otherwise have been employed; and a 'substitution effect', that is, employees have been fired so as to give their jobs to subsidised new employees. Overall, the net gains in unemployment have been shown to be rather meagre, or in the vicinity of 20 new jobs per 100 jobs subsidised.
102. Subsidised employment has, however, been found to have some benefits as well, for instance in restoring the confidence of the people benefiting, and maintaining their contact with active life. Subsidies for people who start new businesses have also been found to be beneficial in some countries. However, the percentage of people likely to use effectively such an opportunity is relatively small. In conclusion, then, job creation subsidies are not considered a very efficient use of public money.
103. The OECD emphasises the need to gain a clear profile of new claimants for unemployment benefits right from the start. Such an early identification would identify those most at risk of falling into long-term unemployment. Indeed, the majority of those who lose a job will find work relatively soon, and many will not need assistance, which is why it is all the more important to pinpoint those who do. People also have to be encouraged to search for new jobs, the OECD has found. While the organisation recommends that unemployment benefits be made conditional on participation in various training programmes, it also warns against a "carousel effect" of gaining rights to renewed benefits following enrolment in a programme, then enroling in a new programme as benefits dry up and so on.
104. The OECD also emphasise the need to reform tax benefits systems. A key word here is to "make work pay". Indeed, the Organisation maintains that one has to take into account the whole plethora of benefits as well as tax rates to make sure that work pays.
105. A central question is how to enhance demand for low-skilled workers. It is important that these not be overtaxed, while at the same time sparing the many in the dense middle income levels who with heavy taxation might be discouraged from working, or from spending. Other OECD recommendations include: broadening the tax base to more things than work income; widening income distribution to a certain extent; and monitoring active job search by the unemployed more intensely. Social benefits, it believes, should also be made more transparent, for there are in the majority of our countries a myriad of them, and they are understood by very few.
106. It could be useful to encourage part-time work, but then it must be made sure that full-time employment does not suffer as employers seek to substitute part-time employment for full-time employment, or as employees conceal from authorities work done in addition to part-time employment.
107. The representative of the European Trade Union Confederation maintained that European governments had changed their priorities after the first and second oil crises in 1973 and 1979, respectively. In following more strict monetary policies and in giving priority to the struggle against inflation, governments had, the ETUC representative argued, become less interested in fighting unemployment.
108. ETUC sees the remedies against the current high unemployment in Europe as lying in the three parallel pursuits of growth, competitiveness and employment. Social progress should not be seen as secondary to economic progress, but as a necessary concomitant to it.
109. The ETUC representative believed that a watershed in government policy had been reached in 1995. Up until then, he said, it had been thought that new employment would eventually be created if the fight against inflation and in favour of macro-economic stability was determined and of sufficient duration. When, in 1995, economic recovery did not lead to a rise in employment, everybody seemed to lose heart. In other words, a "normal" recovery rate of between 2 and 3% was no longer considered enough to create new employment. Instead, the new figure advanced was between 3 and 4% over several years in order to make a significant dent in joblessness figures.
110. The ETUC representative believed that investment spending in Europe had to rise from the present around 20% to up towards 24%. This had to be coupled with wage increases, though moderate. Furthermore, he thought that central banks in Europe were concentrating excessively on controlling inflation and were not sufficiently concerned with economic growth. ETUC believes there is considerable room for monetary relaxation.
111. Furthermore, ETUC believes that something has to be done to restore confidence among consumers and investors alike. Others, among them the OECD representative, said that this was easier said than done. Exactly how does one restore confidence except through confidence-inspiring policies? How much can governments do?
112. The Committee's discussion at its March 1996 hearing inevitably touched on the European Monetary Union and its possible impact on the employment situation. The ETUC representative was in favour of a relaxation of the EMU criteria, in particular as regards public deficits and debt. He argued that the Maastricht criteria in these and other regards had been established before the 1993 recession, and that the Treaty on European Union in fact could be read more flexibly than the orthodox school was ready to admit.
113. Certain members feared that the European Monetary Union could lead to increased rigidity in all respects relating to the employment situation, and hence greater joblessness. Others held that labour costs were crucial to international competitiveness and therefore had to be reconsidered.
114. The ETUC representative also strongly called for major government, or EU, investment projects in order to raise the level of economic activity, in particular through the trans-European transport network project. The ETUC representative also placed great hope in various initiatives at EU level such as the 1996 Intergovernmental Conference starting in Turin in March 1996; work toward a European employment pact; and a tripartite conference in Italy in June 1996 involving governments, employees and employers.
XII. CONCLUDING REMARKS
115. Combatting unemployment successfully requires resolute action both at "micro" and "macro" level. The latter includes such things as structural reform, fiscal consolidation and price stability. We need to effectively integrate macro-economic and micro-economic analyses and policy recommendations, and monitor their implementation.
116. The Rapporteur does not believe protectionism would help in the longer term. It would only preserve artificially yesterday's jobs, instead of preparing for those of tomorrow, including new well-paid jobs in emerging sectors. Furthermore, he believes that recent technical advances and the expansion of trade and investment create vast new opportunities for Council of Europe member countries to expand employment, provided that they show themselves permanently innovative and able to adjust, constantly improving their economic efficiency.
117. No single solution is likely to be valid for all countries; for that they are too different. Fundamentally, however, all our member states stand to gain from a situation where those without employment are not only encouraged financially to look for jobs, but also one where societies are able, through economic growth and entrepreneurship, to supply them.
Reporting committee: Committee on Economic Affairs and Development
Budget implications for the Assembly: none
Reference to committee: Doc 7365 and Reference No. 2029 of 25 September 1995.
Draft resolution adopted by the committee on 10 September 1996 by 26 votes with 1 abstention.
Members of the committee: MM. Davis (Chairman), Pavlidis, Mrs Degn (Vice-Chairmen), MM. Alo_lu (Alternate: Kiratlio_lu), Andreoli, B�rsony, Behrendt, Belyaev, Benetatos, Bilinski, Billing, Mrs Blattmann, MM. Bloetzer, Bog�r, Mrs Burbien�, M. Buzatu, Mrs Calner, MM. Cerqueda Gispert, Coviello, Dokle, Mrs Durrieu, MM. Elo, Eyskens, Fenech, Dame Peggy Fenner (Alternate: Sir John Cope), MM. Figel (Alternate: Prokes), Frey, Galv�o Lucas, Gonzalez Laxe, Goop, Grimsson, Gusenbauer, Kamhi (Alternate: Demiralp), Kirilov, Kir�teins, Kol�_, La Loggia (Alternate: Caputo), Latronico, Le Grand, Leers (Alternate: Blaauw), Liapis, Malinowski, Masliukov, Mautner-Markhof, Merkushov (Alternate: Gamanyuk), Minkov, Muravschi, Nov�k, Pahor, Pereira Coelho, Poppe, Puche, Radulescu Botica, Rippinger, Siebert, Telgmaa, Townend, Tripunovski, Tumanov, Valleix (Alternate: Mignon), Van der Maelen, Mrs Verspaget, MM. Wallace (Alternate: Deasy), Yaroshynsky (Alternate: Kapustyan).
N.B. The names of those members who took part in the meeting are printed in italics.
Secretaries to the committee: MM. Torbi�rn and Bertozzi.
[1]. by the Committee on Economic Affairs and Development