(Press Communication – 24 November 2014) The European Commission is due to publish the Annual Growth Survey 2015 and the Juncker Investment plan this week. The investment plan will be crucial to a sustained recovery but this risks being undermined by the now familiar call for more and deeper structural reform. As this briefing from EPSU makes very clear the kinds of reforms envisaged by the Commission will not only have a negative impact on workers but will contribute nothing to getting Europe out of recession.
EPSU General Secretary Jan Willem Goudriaan commented: "Our findings give the lie to those who claim wages are too high and employment protection laws too strict and the cause of Europe’s problems. They are not and like austerity they are part of the problem fuelling the risk of deflation. Flexible labour markets, low wages and precarious jobs undermine any attempts to establish a sustainable and job-rich recovery. What we need are solid wages, secure jobs and public investment as the powerful locomotives of growth.”
Wage moderation, pay freezes and pay cuts have been on the austerity agenda for several years now but they have done nothing to get the EU out of the crisis. This briefing explains how lower wages are linked to falling demand and consequently lower employment and that rather than wage moderation, fair pay increases are needed to bring wage developments in line with productivity.
There is a real risk that a downward wage spiral is being created. With the bulk of trade being carried out within Europe, wage cuts in one country will create pressure for competitive cuts in other EU Member States. This is not just a counterproductive move but simply adds to the pressures that are leading to deflation and the risk of further and longer term recession.
Two other targets of the structural reformers are minimum wages and employment protection. In both cases, the briefing is clear that it is a grave error to push for lower standards. Higher minimum wages and secure employment can both be linked to increased productivity and quality as employers are more likely to invest in training and skills.
The other reforms favoured by the European Commission, echoed in comments from the employers, concern corporate taxation and non-wage labour costs. Both are apparently too high. The briefing provides the data to contradict this, showing clearly that taxes on corporate profits in Europe are below the levels of Japan and the US. Meanwhile, a proper analysis of social contributions, taking account of the high levels of private social insurance that workers face in the US and Japan, reveals that the situation in Europe is not as the Commission and employers would like to portray it.
Goudriaan continues: "Commission and government leaders should stop asking for more and deeper sacrifices from public service and other workers. The money to pay decent wages, provide quality services and invest in our economies is there. It is now time to deal with tax fraud and evasion by corporations and the wealthy, sanction those like PricewaterhouseCoopers that advise on tax avoidance and bring those governments back in line that operate tax havens."
Note: Briefings on austerity
This is the fourth in a series of briefings that challenge the claims about austerity. Briefing one exposed the fact that austerity measures have not only failed to deliver growth but also to improve the health of public finances in some countries. The second explained the mixed-up thinking behind “growth-friendly fiscal consolidation” and the myth that confidence in the economy would be created by cutting public expenditure.
The third briefing explores more of the claims about structural reforms. It argues that rather than being fixated on wages and labour costs, policy makers need to look at the role of rising capital costs. The briefing also highlights the fact that profits have been rising while investment has been falling and that boosting competitiveness depends more on innovation than cutting labour costs.
The briefings are available here: www.epsu.org/a/10808
For more information:
EPSU : Pablo Sanchez, [email protected] +32 (0) 474 62 66 33
EPSU is the European Federation of Public Service Unions. It is the largest federation of the ETUC and comprises 8 million public service workers from over 265 trade unions; EPSU organises workers in the energy, water and waste sectors, health and social services and local, regional and central government, in all European countries including the EU’s Eastern Neighborhood. EPSU is the recognized regional organization of Public Services International (PSI).
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