Brussels, 21/09/2012 (Agence Europe) - In order to fight the consequences of continuing economic stagnation and social crisis within the EU, the European Commission is currently arguing in favour of single open-ended contracts which, it believes, enable the segmentation of employment markets to be limited. Yet for more than ten years, it is exactly the opposite trend which has characterised the development of these markets. The number of part-time workers or workers on fixed-term contracts has continued to grow. The Commission's proposal only concerns a limited number of states, however, but it illustrates that the current problem of unemployment and employment affects both the quantity of work and its quality.
On Monday 17 September at a conference in Ljubljana on employment market reforms, Commissioner for Social Affairs and Employment Laszlo Andor argued at length in favour of a single employment contract. This type of contract “presents advantages both for the workers and for the firms”. It offers better job security, while encouraging employers and employees “to improve productivity through job-specific investments - such as training”. Finally, “single open-ended contracts offer firms and workers a greater incentive to invest in productivity-enhancing firm-specific skills and human capital”. As for the argument that these contracts increase the cost of labour, Andor rejected this reasoning. With these contracts “the firing and job destruction rate would be lower than in a segmented labour market”, he said.
The share of the active population that works part-time or that is on a fixed-term contract increased from 16.2% in 2000 to 19.2% in 2010 in the EU. Between 2010 and 2011, the number of people working part-time increased from 41.3 million to 42 million. Women are over-represented, with nearly 32% of them working part-time. It is the same situation for young people at the start of their career, according to the latest data from Eurostat, the European statistical office. Since 2008 these two categories of people have been most affected by the economic and financial crisis.
A similar observation was particularly made in a study in February 2012 by the Institute for Research of the German Federal Employment Agency, which examined the link between job security and the rate of employment in ten EU member states. In their conclusions, the authors note that the negative consequences of a strong market segmentation - as is the case in Italy and Spain with very strong protection for open-ended contracts and a high rate of fixed-term contracts, or in France with a low rate of transition between fixed-term contracts/temporary work and open-ended contracts - have been the most apparent in the crisis. “More than 70% of the job losses in Spain were at the expense of temporary employees, with young people and young adults overproportionally affected”, the study says.
The proposal to establish a single open-ended contract is far from reaching unanimity and the Commission has only suggested it in certain cases. Its April employment package (see EUROPE 10597) does not refer to such a measure. Only the observation is made that there is “a need for measured and balanced reforms in employment protection legislation in order to remedy segmentation or to halt the excessive use of non-standard contracts and the abuse of bogus self-employment”. In Ljubljana moreover, Andor referred not to general measures but to the Commission's macroeconomic recommendations by country which praise the positive aspects of the single contract.
Yet is this position justified from an economic point of view? Spanish researchers asked the question in a study published in March 2012 entitled “The effects of introducing a single open-ended contract in the Spanish labour market”, which concludes that the current crisis has largely proved the ineffectiveness of the dual employment market to absorb the shocks of the economic crisis. “We have shown that the single open-ended contract reduces structural unemployment and job destruction”, they note. In their opinion, if this was the only type of contract in force in Spain today, unemployment could eventually decrease to 21%. Businesses would also do well out of this with a reduction in their redundancy costs of around 9%.
However, there is another side of the coin to this measure. The Commission's promotion of open-ended contracts at the same time demands improved flexibility. This is translated into a weakening of employee protection, establishing the possibility of partial unemployment in case of recession, as is happening in Germany. It is one of the ways currently studied by the French government, even if the idea of the single open-ended contract seems rejected. The French minister for employment, Michel Sapin, recently said that an important reform to the Civil Code of employment was being studied to counter the “abusive” recourse to fixed term contracts - which today represent 75% of new contracts, and to favour open-ended contracts, transferring to the first a part of the unemployment contributions.
In the conclusion of the German study, the authors predict that the political choices over the coming years will not be able to be reduced to the increase of a single rate of employment, “understood as the policy of 'work first'”. “The qualitative improvement of employment” will also have to be put on the agenda. The key question for the EU in the future will be to know how to favour the creation of “better quality and more stable jobs while supporting the development of the new recruits' competences”. (JK/transl.fl)