18 July 1995

Doc. 7360

1403-12/7/95-4-E

REPORT

on working time

(Rapporteur: Mr GUSENBAUER,

Austria, Socialist Group)

Summary:

      Must the retirement age be increased to take extended lifespan into account and compensate for the lack of contributions from the unemployed or must it, on the contrary, be lowered?

      The rapporteur does not choose between these options but seeks to demonstrate that greater flexibility and the reduction of time spent at work spread over a person's lifespan would make it possible to both cut unemployment and improve the quality of life. He considers several ways of achieving this, ranging from flexible working hours and choice of time worked to the gradual reduction of time spent at work throughout one's working life.

I. Draft recommendation

1.       Europe numbers several tens of millions of unemployed, whether registered or unregistered; some countries have unemployment rates exceeding 20% of the potential labour force and half of these countries reach 10%. Of the unemployed, half are long-term and the majority are no longer in receipt of unemployment benefit.

2.       For the first time, unemployment is increasing simultaneously with employment, so that job creation no longer suffices to reduce unemployment.

3.       This situation is not only intolerable for its victims but also threatens to cause social unrest and ultimately calls into question the solidarity pact between the generations.

4.       As retirement is occurring earlier and earlier while life expectancy increases in most countries, it can be calculated that in order to keep pensions at their present level the next generation will need to work ten to twelve years longer and pay 2,5 times higher pension contributions together with heavier taxes and social security contributions than at present, otherwise pensions will be cut by 60%.

5.       Working time reduction, though widely considered desirable by labour and management, does not always create jobs and sometimes even has the opposite effect; in particular, it may impair competitiveness.

6.       Competitiveness in fact suffers from a situation where expensive plant and premises are in operation for only part of the time, thus incurring losses or forfeiting profits, whereas they need to be occupied full-time in order to be paid off.

7.       Hitherto, flexible working has usually been tantamount to precarious employment, held predominantly by women in a ratio of one to three within the European Union.

8.       Measures to combat unemployment and reduce working time therefore require innovation and efforts to ensure that flexibility benefits the worker and helps reconcile working and family life.

9.       A reduction in working hours, which have remained stable since 1970, is both a goal to be attained and one of the possible ways of combating unemployment.

10.       Different instruments, such as education and training, the financial markets, the market economy, but also working time, could and should be used to reduce unemployment.

11.       The Assembly recommends accordingly that the Committee of Ministers invite the governments of member states:

i.       to adopt, in consultation with social partners, framework legislation on working time guided by the following principles:

      a.       flexibilisation and reduction of working time with the aim of curbing unemployment and improving quality of life;

      b.       flexibilisation and reduction of working time should be negotiated and form the subject of a contract between the social partners which takes into account their respective interests. They should offer a range of possibilities such as:

      i.       flexible working hours;

      ii.       free choice of working time;

      iii.       working time savings accounts;

      iv.       sabbatical leave;

      v.       longer parental leave for either parent;

      vi.       alternating work-rates;

      vii.       gradual reduction of working time throughout working life;

      c.       reduction in working hours could be accompanied by salary negotiations, but wages below the equivalent of the average income should not be reduced;

      d.       maintenance of competitiveness by full-time use of plant and premises;

ii.       to establish fiscal neutrality between, on the one hand, investment in new recruitment, and the training of those new recruits and, on the other hand, investment in new machinery;

iii.       to encourage the promotion of job creation through investment rather than the        payment of unemployment benefits.

II. Explanatory memorandum

by Mr GUSENBAUER

Introduction

      During the preparation of this report the rapporteur benefited from attending various hearings held by the Sub-Committee on Labour and Employment which comprised a representative from OECD, representatives from the social partners European Trade Union Confederation (ETUC) and the Union of Industrial and Employer's Confederations of Europe (UNICE) as well as Professor Marin from the University of Vienna (Austria).

      The Social, Health and Family Affairs Committee also held an exchange of views on the draft report with the Committee on Social Affairs and Employment of the European Parliament, attended by Mr Michel Rocard, Rapporteur on the reduction of working time for the European Parliament.

A. The problematic: reshaping the lifetime distribution of gainful work

1.       Whether we like it or not, and whether we realise it or not, both reductions and many forms of flexibilisation of working time are already taking place on a large scale. If this is the case, the remaining but crucial question is not how to either prevent it from happening or how to promote processes going on anyway, but how to shape them in accordance with some overall policy objectives, such as promoting international economic competitiveness, and that is the production of wealth; high standards of living and an improved quality of life, including a better compatibility of working and private/family life; additional job creation and the reduction of unemployment, non-employment and underemployment and of corresponding social deprivation and disintegration. The basic query, in short, is not any longer whether working time will or should be further shortened and flexibilised, but only how and how fast, when, by whom, and with what social consequences.

2.       In the highly industrialised and post-industrial world, radical reductions in working time took and take place in a diversity of forms. Since 1960, the weekly working time has been reduced by around one-quarter, whereas annual vacation time has increased by about the same measure. In many countries, paid and unpaid leave of absence have been extended considerably. Overall actual working time of those in work and activity rates within the active parts of adult populations have fallen significantly in all countries, though in widely diverging degrees and patterns.

3.       In contrast to the preceding post-war period, working time since 1975 has been mainly reduced in a wild-cat manner, primarily on a firm or branch level as dictated by operational needs of the single enterprise or economic sector. It took the form of a multiplication of unemployment and long-term unemployment, of part-time jobs, of deregulated short-time work, of so-called "minor" or "non-employment" — and that of a wave of pre-retirement measures (including above all "pre-retirement invalidity pensions"). Labour slack rates have been consistently higher than official unemployment measures of all sorts: according to an OECD estimate, there is a "silent reserve army" of about 13 million people willing to work but not registered as unemployed or involuntarily working part-time only — this is in addition to several dozens of millions of registered unemployed in Europe and North America.

B. Unemployment

4.       Unemployment rates in Europe have become double digit. For the first time in post-war Europe, more people are without a job than during the Great Depression in 1933. While unemployment rates are still considerably lower than during the inter-war period, absolute numbers have widely surpassed the unemployment figures of the 1930s — with nearly 40 million in Europe and North America. However, to paraphrase George Orwell in "Animal Farm", "some peoples are more unemployed than others"; unemployment rates within Europe have widely diverged to differences in national averages of up to 1:10, and up to several times the disparities on a regional level. But, most important, the political will and consensus to reduce or even eliminate mass unemployment has fallen apart.

5.       The structure and meaning of unemployment in the 1990s has become very different from the situation as it was up to around 1975. While mass-unemployment has become visible since the 1980s, long-term unemployment is less evident but even more dramatic. Long-term unemployment is historically new and has multiplied since the 1970s: within the European Union, now more than every second unemployed does not find a new job within one year. The risk of remaining unemployed in the core of Europe is eight times higher than in Canada, the United States or Sweden, and still many times the rates in countries such as Switzerland, Austria or even countries of central and eastern Europe. Though unemployment has become a huge burden to public finances, for the first time in the post-war period the majority of the unemployed in Europe (not in North America) do not receive unemployment benefits any longer — because of their long-term unemployment status, they are on social assistance only. This is a direct way to highly segregated societies and wide poverty.

6.       Historically new also is the household structure of unemployment: about one-third of the unemployed are being supported by parents, spouses, partners or children, thus maintaining a family income quite above that of single breadwinners in a family or of unemployed with dependent family members only or without affiliated persons, but many are exposed to painful deprivation and poverty or become heavily indebted. There are three million homeless in the European Union, many of them children, families and mentally disabled persons.

7.       Historically new is, above all, a simultaneous increase of both employment and unemployment: in a number of countries, figures of people in paid work and out of work have reached historical highs at the same time. By implication, and in contrast to previous periods, any increase in employment does not any longer automatically reduce unemployment; job creation or enhancing productive employment is, henceforth, a necessary, but not any longer a sufficient condition for decreasing unemployment.

8.       As the European Union whitebook 1993 has clarified, there is no such thing as "growth without jobs": the employment intensity of growth has been rather unchanged and actually slightly higher than in the 1960s: and even in recent years the volume of work has been expanding and millions of new jobs have been created — just not sufficiently in order to compensate for an increased labour force and an increased demand for new jobs by new entrants in the labour market. This is all the more remarkable in view of the fact that current activity rates of below 60%, as well as the increase in activity rates in western Europe, are still among the lowest in the industrialised world when compared to the United States and Canada, to Japan, Scandinavia or the post-communist countries of central and eastern Europe.

9.       In sum, thus, there is not so much a shortage of work, not even of gainful work, but rather there is a shortage of full-time jobs and full employment for an increasing working population at current wage and working-time levels. As long as the development of new, marketable products and the conquest of new markets is outpaced by the rationalisation of existing production with enormous rises in productivity, mainly in industry (up to the year 2000, between 20 and 25 million jobs less will be needed to produce today's volume of products and services within the European Union), and as long as the demand for paid work outpaces the proliferation of new jobs, the hard choice in the end comes down to either accepting mass unemployment or reducing labour demand or reducing wages and salary levels — or to work-sharing, including income-sharing among all those seeking paid work.

10.       Since the 1980s, employment and unemployment are for the first time rising at the same time. Consequently, creating jobs no longer means automatically reducing unemployment as well. If we are neither to exclude women, migrant workers, young people, elderly workers, persons with disabilities or others from the labour market, nor to significantly reduce wages and salaries, the option left to cope with insufficient job-creation is the sharing of gainful work — and of income. Productivity gains will have to be distributed by the reduction of working time and a better quality of life rather than by additional money-income.

11.       As many critics have correctly noted, not every reduction of working time creates new work; sometimes it brings about even the opposite. Working time which is to create new work requires some general framework of rules and a broad social acceptance. It needs to be without impact on unit labour costs (that is without full wage compensation) and without negative impact on effective demand, it needs to be massive and sudden, but reversible, and as voluntary as possible. Therefore, instead of suggesting a general 35-hour working week, the introduction of extended leave, time-saving accounts, time-off compensation rather than overtime payment for extra-hours, burdening of night and shift work, working time at choice or very flexible part-time work, flexible or part-time pensions — or the four-day/30-32 hour working week, as already practised in many multinational enterprises in manufacturing — may be more promising strategies than the conventional ones which have not worked so far. We can certainly learn from some countries' failures and other countries' success.

12.       Regular and secure full-time jobs over the whole life cycle in working age — the standard employment-relationship until the 1970s — have become the exception in the 1990s. In the meantime, the average weekly working time of adult populations has fallen below thirty hours and the average share of lifetime work has fallen significantly below half the lifetime (down to around 40%) — with an ever-increasing proportion of the labour force being unemployed, working short-time or part-time only, being in retraining, on parental, care or other leave, and an ever increasing proportion of the population in working age out of the labour force, in invalidity pension, early retirement, etc. Today, only a minority of adult Europeans have permanent full-time jobs over most of their working life period.

C. Old-age pensions

13.       Even more drastic is the reduction and compression of gainful working time in life. Since 1970, people in several European countries live about four years longer but work about eight years less than before and receive retirement pension for about nine years more than before. In some countries of western Europe, only 20% of workers retire according to schedule; up to 90% in the 60 to 65 age group are retired, an age cohort in which, a generation ago, with much less longevity and health in all age groups, the same proportion of the labour force was still active. Today, almost every second person retires disabled; pensions for the disabled have greatly increased, and even doubled in some countries with the highest health, safety and social welfare standards, since 1980. While many invalidity pensions may be regarded as a "soft way-out" of the labour market instead of open unemployment, not all of this may be regarded as a social achievement.

14.       Such rapid reductions in the period in life spent in gainful work will — in combination with stagnant birth rates and further increasing longevity and societal ageing — dissolve the generational contract within our lifetime. Drastic early retirement rates threaten to undermine public old-age pension schemes within one or two generations, mainly at the expense of those who are now in the first half of their lives. In many western countries, a maintenance of the generational contract of old-age pensions and social security by 2030 would require a currently unthinkable ten to twelve years more work, 2,5 times higher pension contributions, taxes and social security contributions of up to 60% or 70%, or a 60% cut in pensions. As with mass unemployment, an erosion of the generational contract through ever earlier retirement and, for example, a radical one-dimensional reduction of working time, is threatening our social equilibrium and a sustainable development of wealth and welfare — and, with that, public safety, social peace and democracy.

15.       State socialism has failed just as the old paternalistic welfare state has. Governments in most countries either do not want to or prove unable to reduce unemployment. In several countries with well-established social security systems, the pre- and post-war generations may carry to their graves the generational contract at the cost of their children and grandchildren. Job creation today has nothing to do with "full-employment" policy because work-sharing is not even experimented with. Old-age pension schemes in one or two generations time will have nothing in common with today's old-age "pensions" if we do not basically redefine the generational contract for the third millennium. And the longer we wait, the more costly and painful the necessary changes will have to be. Innovative reductions in working time and a reform of the pension scheme are the core of an innovative politics of time and new models of flexible working time over the life cycle.

D. Flexibilisation

16.       Flexibilisation of working time is also taking place continuously, with ever greater speed since the 1980s. This is not surprising in a service economy, on the contrary: only missing or unilateral, one-sided forms of flexibilisation call for an explanation.

17.       In general, "flexibilisation" implies the complete disconnection of working time on the one hand and operating or opening hours on the other. This, of course, becomes ever more urgent the shorter the weekly working time is. In service economies and leisure societies, leisure time is always somebody else's working time — not only with fire brigades, police and hospitals, but with any services related to information, culture, education, entertainment, gastronomy and tourism. It is not impossible but extremely and increasingly costly for a modern service society to be operating on an emergency-call level for only a third of the year, to close its shops and other service facilities for most of the time, or to have extremely expensive machines, equipment, premises and other hardware facilities unused for the greater part of the year, without undermining quality of life and competitive capacity as well as productivity.

18.       Therefore, radical liberalisation and flexibilisation are as indispensable as is the reduction of working time. Europe needs a far-reaching liberalisation of operating and opening hours, also on weekends and holidays; an abandonment of fixed and narrow closing times as a remnant of the past (perfectly compatible with the highest standards of welfare and social security, as the Swedish case in point, where this has been achieved decades ago, amply demonstrates); and a considerable extension of machine hours and operating hours in order to ensure competitive capacity vis-à-vis countries catching up technologically and in skill-levels, but with significantly lower wages. In this respect, we could learn from countries or enterprises where machines work the longest hours and employees the shortest.

19.       Flexibilisation and reduction of working time belong together, and, for this reason, have to be negotiated jointly by the social partners. To try to enforce one without the other would be a naive recourse to class-struggle strategies by employers or trade unions; without realistic hope of success for labour organisations and at high social costs for the business community as well. One would get much closer to the liberal dream of business and of many consumers of a paradise of completely free opening hours and of free working time if this was connected with more freedom of and within work for the employees, and socially well-protected. Workers representatives will have a lot to do to co-operate actively in designing these disquieting and unavoidable trends from a social point of view instead of remaining simply defensive, but condemned to lose — or to win — at a self-destructive price only.

20.       So far, flexibilisation has been rather one-sided in favour of and at the initiative of business and employers. Millions of precarious temporary or part-time jobs have been created: up to half of all new job offers in western Europe since the 1980s have been "atypical" or temporary. Every third woman, but every thirtieth man within the European Union, works part-time. Flexible and precarious work — rental jobbing, outwork, telework, casual work and day labour are flourishing, and so is illicit work, unpaid, autonomous activities or "underpaid" voluntary work. While this has been the rule rather than the exception in market capitalism throughout time and space, it is historically new for the welfare societies of post-war Europe; and there is no "iron law" of one-sided flexibilisation to continue uncontested.

21.       What is needed is a well-balanced, decentrally regulated flexibilisation, not a wildwest or wildeast development. We need a compromise between the two extremes of individual sovereignty of time — to work as much, when and how one wants to — and a kind of modern slavery work on permanent call duty. Therefore, the controversy pro and contra flexibilisation is completely misplaced — and very unimaginative. Everything depends on who is defining what kind of flexibility — and how.

22.       Up to now, increased flexibility and corresponding productivity gains were matters of management initiative and the logic of reorientation and optimal use of productive facilities only — or of the shadow economy. But human beings as appendices only to machines, as a bumper for peak times and seasonal business fluctuations, is too one-sided a management or business perspective only. More worker and family-friendly flexibility will have to be developed, orientated towards more personal liberty of time or "time sovereignty", allowing employees to be the "masters of their time". This is what it takes to make family or private life compatible with professional working life; and to re-balance gender relations in favour of women who work more and even more unpaid throughout the life cycle, regardless not only of age, but of profession, position, class or any other factor of distinction.

23.       Such a new kind of flexibilisation includes, among others, flexible working hours, free choice of working time (temps choisi) and working-time saving accounts, change between full-time and part-time and the right to part-time work for parents of (small) children, generous parental leave, long-term sabbaticals resulting from time-saving accounts for education, for burdening work and unconsumed vacation, "rolling" three or four-day work weeks with rhythms alternating, job-sharing and job-switching, time-autonomous working-groups, annualised block-units — nine months working and three months (partly) unpaid holiday — as well as staggered models with increasing working time after job-entry and decreasing working time before job-exit in the form of part-time and flexitime pensions. And of lifelong learning, several regular hours weekly and in weeks of educational leave and up to one-year sabbaticals, neither financed solely by the single employee, nor exclusively by the enterprise or the state.

24.       Therefore, opening hours, operating hours, and working-time arrangements in general, should be changed if that change enhances and improves the quality of life for almost everyone (consumers, families, public traffic or transport users, etc.) and increases social wealth or guarantees economic competitiveness. Flexibilisation is always in a crucial tension between a constraining production process and personal freedom. It is the task of the social partners to find compromises which allow for socially protected individualisation of working-time schedules within enterprises and branches. The social partners are merely to exchange operational flexibility for flexibility tuned to the employee's and their family's needs as well as for any regulated reduction of working time — either weekly, or annually or over the life cycle.

25.       Long due is a great political new deal, a new social contract, a historical compromise between the social partners: exchanging a significant reduction of working time for a significant flexibilisation of working time, because a little here and a little there will not help. New pension schemes and new payment schemes cannot be avoided either. Why not jointly open up new paths and find compromises which could be multiplied by comprehensive package deals? Concentrated expert knowledge would need clear political guidelines and a consensus on overall strategic aims.

26.       This may be very difficult to achieve, but it is inevitable. The reduction and flexibilisation of working time over life is taking place anyhow: either unruly, in a wild-cat, chaotic manner and at the cost of the weakest in society, including our children and grandchildren; or in a manner that is fairly easy to survey, regulated, civilised, and a financially and socially sustainable one in the world of tomorrow.

      Reporting committee: Social, Health and Family Affairs Committee.

      Budgetary implications for the Assembly: none.

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

      Draft recommendation adopted by the committee on 28 June 1995.

      Members of the committee: MM. Gusenbauer (Chairman), Marques (Vice-Chairman), Rathbone (Vice-Chairman), Mrs Albrink, Mrs Andnor, Mr Banks, Mrs Belohorská, Mrs Birzniece, Sir Andrew Bowden (Alternate: Earl of Dundee), Mr Bugli, Mrs Burbiené, MM. Buzatu, Christodoulides, Curto, Dees, Deguara, Dionisi, Djerov, Mrs Fleetwood, Mrs Gatterer, MM. Geoffroy, Gouteyron, Gross, Haack, Hegyi, Mrs Høegh, MM. Horn, Jacquat, Jónsson, Kelam, Keller, Kollwelter, Kotsonis, Koucký, Mrs Luhtanen, MM. Van der Maelen, Maginas, Małachowski, Mazzone, Mozetič, Mrs Van Nieuwenhoven, Miss Özver, MM. Palacios, Paunescu, Mrs Poptodorova, Mr Raška, Mrs Robert, MM. Robles Orozco, Scaglioso, Wallace (Alternate: Maloney), Weyts, Wielowieyski, Yürür.

      N.B.       The names of the members present at the meeting are printed in italics.

      Secretaries to the committee: Ms Coin et Ms Meunier.