26 September 1994

Doc. 7158

1403-23/9/94-1-E

CONTRIBUTION

by the Social, Health and Family Affairs Committee

to the enlarged debate of the Assembly

on the activities of OECD in 1993

by Mr GUSENBAUER,

Austria, Socialist

1.       As was the case last year, the Social, Health and Family Affairs Committee, like the Committee on Economic Affairs and Development, which has devoted an important part of its report to the subject, has focused its attention on the unemployment problem.

2.       The Social, Health and Family Affairs Committee has therefore examined the OECD Jobs Study: Facts, Analysis and Strategies.

The situation

3.       The report states that unemployment in all OECD countries could reach the unacceptable figure of 35 million in 1994. The committee's opinion on OECD's activities in 1992 already referred to nearly 36 million. However, even the experts acknowledge that the statistics are not totally reliable.

4.       Thus, United States officials claim that the good results ascribed to that country are based on "statistical aberrations" (Le Monde Diplomatique, article by Marie-France Toinet, June 1994) while Professor John Wells of Cambridge says that the statistics provided by the United Kingdom leave out one to two million unemployed.

5.       According to "The Amex Bank Review", 24 January 1994, the unemployment rates should be 12,3% in the United Kingdom and 9,3% in the United States (and not the 6,3% or 7% reported by OECD and in the White Paper of the Commission of the European Communities respectively).

6.       More surprising is the absence of any figures on the level of poverty in OECD countries and the fact that the subject is not even alluded to in the case of the two aforementioned countries, despite the fact that poverty is reaching alarming proportions, particularly in the United States. This was stressed by the Secretary General of the Trade Union Advisory Committee to OECD, who told a hearing of the Sub-Committee on Labour and Employment that his organisation's two main concerns were unemployment in Europe and poverty in the United States.

7.       OECD ought at least mention that total demand is currently at an unsatisfactory level and should therefore be reinforced by the adoption of expansionist measures for which either national or international funds would have to be found.

8.       Instead of advocating efforts to bring the effects of destabilising speculation into check, OECD is calling for all remaining restrictions on the international money and capital markets to be lifted.

9.       The report notes that the isolated cyclical measures which have been introduced to deal with unemployment have not had positive results and concludes that unemployment is a structural phenomenon. Since the unemployment problem is not a cyclical one, that is linked to the recession, it becomes necessary to adapt to changes rather than resisting them. The question is how?

10.       It first needs to be asked what proportion of unemployment stems from the recession and how much is due to resistance to change. Then, if it is acknowledged that changes are necessary, we need to know whether they will have the anticipated effect, bearing in mind their radical nature and their likely impact on the individuals concerned.

11.       The validity of OECD's claim that new jobs will be created exclusively in the private sector is dubious, at least from the point of view of demand. The future will, in all probability, bring a greater demand for such services offered primarily by the state or semi-governmental institutions such as education, health, quality of life,or infrastructure for instance.

The remedies proposed

12.       Since the unemployment problem is structural, OECD recommends structural solutions, the keyword being: flexibility.

13.       The recommendations give a vision of a deregulated labour market providing a large number of low wage jobs without any security. There is of course a need for reviewing regulations. Reducing labour costs is an important feature of a policy to reduce unemployment.But there are other issues equally important and all policies suggested have to be assessed against a more complex and forward looking concept than a more flexible labour market. The report acknowledges that a set of recommendations has to reflect the value system of our societies including the principle of solidarity. One can ask whether this has been taken into consideration during the elaboration of the policy recommendations.

14.       For it has to be said that the recommendations pose a serious threat to many of the social advances for which a high price has been paid in the past.

15.       As such, they run counter to rights safeguarded in the Social Charter.

16.       It is therefore open to discussion whether the Council of Europe is justified in continuing with the revision of the Charter, which starts by asking member states to accept as one of their primary aims and responsibilities the achievement and maintenance of as high and stable a level of employment as possible, with a view to the attainment of full employment. The parties also undertake to establish or maintain a system of social security and to endeavour to raise progressively the system of social security to a higher level.

17.       More generally, it needs to be asked what place the economists who draft such recommendations reserve for the individual.

18.       The one element which appears to be singularly absent from this report is the human element. Thus, it includes the statement: ".... the human and economic costs which could be involved [in the recommended efforts] ... have not been analysed in detail at this stage" One can only ask why and deplore the fact. The OECD report contains a section headed "people", a title whose paternalist connotations are somewhat surprising.

19.       Furthermore, OECD treats work as a mere "disutility" for the sake of earning money without taking into consideration the other important facets of work, namely its social and psychological significance for the individual and for society. Nevertheless, unemployment, in addition to the greater or lesser loss of income, creates a feeling of being ostracised from society.

20.       Will the recommended measures have the anticipated effect? Taking the example of reducing wages, this is open to question. Thus, wage costs are much higher in Germany than in many other countries, yet Germany runs a large surplus on its balance of trade, particularly in comparison with the United Kingdom, a champion of deregulation.

21.       Why is the model of Japan not proposed? Even the lowest wages, at least within industry, are comparatively high and yet unemployment is low. The Japanese model also demonstrates that flexibility can be achieved equally without the need to change jobs frequently or to suffer frequent unemployment.

22.       As many of the proposals made by employers, the proposal of a negative income tax would have the consequence that profits would benefit the private sector whilst losses would be attributed to the public sector. This would provide companies with an additional incentive to reduce wages even further.

23.       In previous documents OECD gave the impression that benefit levels do not explain differences in unemployment and that seemed to confirm our own experiences; the important policy issue is rather to provide institutional incentives for job search. The report, however, uses strong wording about the need to cut unemployment benefits.

24.       The report also proposes to reduce minimum benefits and to leave people on their own. Such views question the basic principles on which our societies are built; lets not replace poverty traps by open poverty.

25.       In the "Jobs study" OECD says nothing about possible changes in overall taxation to reduce the burden on labour and investment through increased charges on energy and resource consumption.

26.       The "interim report" stated that the questions of collective bargaining, the role of the social partners and tax policies would be addressed in more detail at a later date. However, these subjects were merely touched upon in the most recent draft without any concrete recommendations being specified.

27.       The industrial policies also mentioned in the "interim report" have also disappeared without a word.

28.       Generalisation can prove dangerous as what may be appropriate for one country may be inappropriate for others. One should accordingly avoid recommending for all countries in one region the same type of reforms.

29.       While increased flexibility of working time is proposed there is no reference to reducing working hours.

30.       While this cannot be the only answer it is an option worth exploring, which is what the Sub-Committee on Labour and Employment proposes to do. It has already devoted several hearings to the question of a concerted European policy on working hours and these will form the basis of a report which will probably appear before the end of the year.

31.       While no one would dispute the need to raise educational standards, it has to be asked whether making education relevant to labour market needs is an appropriate objective when these needs are so clearly changing. In short, must individuals adjust to the economy, which would thus become an end in itself, or is the economy there to serve the individual?

32.       We believe that this issue should be thoroughly debated before the Assembly notes the recommendations contained in the OECD study, as the preliminary draft resolution suggests.

33.       In conclusion, I would like to mention a sentence from Anatole Kaletsky, The Times of 9 June 1994:

      "Thus, an OECD report concluding that unemployment was caused by inflexible labour markets and high minimum wages is about as newsworthy as a sermon by Pope John Paul II against contraception and free love. What would have been newsworthy would be for the OECD to endorse tougher laws on unemployment protection, propose new taxes for training or calls for more involvement by trade unions in corporate governance."

34.       The committee therefore proposes the following amendment to the preliminary draft resolution:

      —in       paragraph 7.i, delete the remainder of the sentence after "... fighting unemployment";—

      —ad       d a new paragraph 7.ii: "to consider seriously the possibility to reduce working time."*

* * *

      Reporting committee: Committee on Economic Affairs and Development (Doc. 7123).

      This contribution was approved by the Social, Health and Family Affairs Committee on 20 September 1994.

      Secretaries to the committee: Ms Coin and Ms Meunier.