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3) The EES: Process and Strategy

In this section, we describe the overall process and outline key features of the actual strategy the EU has adopted to reduce unemployment. We stress the iterative and multi-level nature of the process. We explain that the EES is basically a supply side strategy designed to supplement other macro-economic policies that impact employment.

An iterative multi-level, multi-actor process

The implementation of the European Employment Strategy is outlined in Figure 1 and involves several steps¹⁰ (Biagi, 2000; Bercusson, 2000). It begins with the Commission developing general ideas about the best employment strategy for EU Member States to pursue. The Commission develops these ideas in discussions with the Council of Ministers, Member States, the relevant social actors, such as unions and employer's organizations, and academics. These general ideas are made concrete in the form of annual guidelines proposed by the Commission and modified and approved by the Council of Ministers. Each year Member States draw up National Action Plans outlining how they plan to respond to the guidelines and what progress has been made. At the end of the process, the Commission and Council review Member State actions and plan for a new set of guidelines.

- Figure 1 -

A) Develop Theory - In order to develop a strategy to increase employment, the Commission needs at least a rough theory of what is hindering employment growth. B) Identify Best Performing Member States and Best Practices- In seeking a solution, the Commission has sought to identify successful Member State performance so their best practices can be incorporated into the strategy. C) Propose Specific Guidelines - Specific guidelines are drawn up indicating actions that Member States should take to modify their national employment policies. This is where the EES takes concrete form. An attempt is made to produce a multi-area strategy cutting across a range of domains that affect employment such as taxation policies, unemployment policies, education policies, and gender policies.		D) Consult with Social Partners and Civil Society -In the beginning, there was less consultation but now that the EES is fully implemented, the Commission must formally consult the European Parliament, the Economic and Social Committee, the Committee of the Regions, and the Employment Committee before releasing the final version of the proposed guidelines, and many actors have increased their informal involvement. E) Guidelines Approval - The first proposed guidelines were presented for approval to the European Council at the special Luxembourg Summit on employment in 1997. In following years, the guidelines and the Joint Employment Report are first considered at the December European Council. The guidelines are then passed by qualified majority voting (QMV) at the joint ECOFIN and Labour and Social Affairs Council meeting that occurs after the December European Council. It is at this stage that Member States can revise the Commission's proposals. F) National Level Implementation - After the guidelines are approved, each Member State draws up National Action Plans (NAPs) for taking the guidelines into account in their employment policies.		G) Monitoring and Surveillance - Each year the Commission examines the implementation of the guidelines by the Member States. It uses the National Action Plans, implementation reports, and its own inquiries to assess compliance. Based on its assessment, the Commission can propose to the Council that recommendations be directed at the Member States. Such recommendation can be passed with QMV. H) Joint Employment Report - At the end of the annual cycle, the Commission and the Council write a Joint Employment Report on the employment situation in the Union and on the implementation of the guidelines by the Member States. I) New Cycle - While the Joint Employment Report is being written guidelines for the upcoming year are being developed and the cycle begins again (step c). It is also at this point that the Commission can revise its theory of what is hindering European employment, identify new best practices occurring in Member States, and modify its overall strategic outlook (steps A-B).

There are some noteworthy aspects of this process. Because it is iterative and the guidelines are revised annually, progress can be closely monitored, new ideas introduced, and goals gradually racheted up. The Commission has used these features to make the strategy more comprehensive and ambitious. In its role as the primary administrator of the EES, the Commission has gradually expanded the scope of the guidelines and convinced the Council to set new targets. For example, while the Council initially rejected the idea of setting a target for the overall employment rate, the Commission continued to press for such a figure. In 2000 the Council went along, setting a target of having 70% of the eligible population employed by 2010. A host of other, smaller changes have been made over time that have significantly expanded the strategy.

Another key feature of the process is that it engages many levels of government and involves social actors as well as public officials. Many levels and units of government must cooperate to produce the National Action Plans. This must be done in consultation with regions and social partners. The annual review process involves discussion between Member State and Commission officials, and creates contacts among officials and social partners from different Member States.

A partial strategy and a political compromise¹¹

The EES does not embrace all policies that affect employment. Important areas such as monetary, fiscal, and wage policy that critically affect growth and job-creation in the EU are outside the scope of the process.¹² The EES has developed largely as a supply-side strategy focusing on altering structural impediments to employment. Nonetheless, the strategy does touch on a much larger number of areas than ever has been addressed at the EU level through traditional social policy regulation. While treaty provisions on gender equality and freedom of movement have direct effect, and the EU has enacted a significant body of social legislation, it has focused on a selected number of areas and often passed rules whose real impact was limited.¹³ The EES guidelines concern a wider range of important policy issues. It could be said that the EES trades off the legal force of traditional regulations so that the EU can deal with some core areas of social policy that were hitherto solely reserved to the Member States.

The overall goal of the strategy is to maintain the European Social Model by reforming it. The Commission wrote in the preparatory documents for the extraordinary Luxembourg Employment Summit that "meeting the challenge of insufficient growth and intolerable unemployment requires a profound modernization of Europe's economy and its social system for the 21^st century without giving away the basic principles of solidarity which should remain the trademark of Europe" (European Commission, 1997--emphasis supplied). To do that, the guidelines seek to accomplish the following:

a) Higher Employment Participation -- Because of the aging of its population and the threat to pension systems, Europe needs to have a higher proportion of its working-age population working. This means early retirement should be discouraged. More women will and must work. More part-time employment must be encouraged.

b) More Active Unemployment Systems -- Passive unemployment systems allow skills to deteriorate, fail to encourage workers to actively seek work, and don't supply the skills the workers need to find work.

c) More Skills -- The increase in technological change means that workers need more skills at the outset and need to be able to develop new skills throughout life.

d) More Employment Intensive Growth -- Europe lags behind in the provision of services, which provide employment intensive growth. This is especially true in the "social economy" including services provided by non-profit groups and private companies. Europe must encourage the social economy and decrease direct taxes on labor-intensive services.

e) Fewer Obstacles to Low Skill Work -- Europe must move towards more high skill jobs but low skill workers can't be left behind. Tax systems, especially high, flat-rate social charges discourage low skill workers from working and impede more hiring of low-skill workers. Tax systems need to be adjusted to make work pay. Energy taxes provide one option for replacing lost revenue.

f) Flexibility with Security -- Technological change and changes in the nature of markets requires more flexibility in the way work is organized and workers organize their lives. The model of a male worker working full-time on a normal work week for one company his entire life must be replaced by a model that allows companies more flexibility in terms of working time, envisions greater heterogeneity in the types of workers (men, women, full-time, part-time), and supports workers who will shift companies and careers much more often. This new flexibility must be fostered while providing new mechanisms for providing security to workers.

g) Smaller Companies and Entrepreneurship -- The most dynamic areas of the economy are small and medium-sized enterprises. To get more innovation, Europe needs more entrepreneurial companies. The European Social Model needs to be adjusted to encourage such firms which are often smaller and more dynamic than the traditional firms for which the Model was originally designed.. One partial solution is for tax systems to be reformed to make self-employment and the setting up of small businesses more desirable.

h) Gender Equality -- Women face particular disadvantages in the labor market. These include such things as pay discrimination, higher levels of unemployment, and obstacles to combining work and family life. In order to increase employment participation by women and provide equal opportunity, these disadvantages must be addressed.

While the EES rejects radical deregulatory approaches promoted by some neo-liberals, it bears traces of a compromise between more traditional Social Democratic views and "Blairite" ideas of a "Third Way". The stress on working, flexibility, and the role of entrepreneurship in creating jobs embody the Third Way emphasis on overcoming dependency and shows acceptance of the need to promote risk taking and adapt social protection to the need by business for flexibility (Kenner, 1999). Nonetheless, the guidelines foresee an important role for the state and for the social partners: they presume that the core of the welfare state will remain in force and do not envision major changes in the organization of industrial relations. The strategy is one of reform and recalibration, not major restructuring.

10 Some of the steps we describe are explicitly specified in EU documents. To complement these explicit features we describe other steps that are implicit in the process.

11 Although there is no Commission or EU document that comprehensively outlines the broad strategy that the EES is pursuing, the characteristics of the strategy can be deduced from EU sources such as the guidelines, speeches and papers by EU civil servants, and EU documents on employment policy (European Commission, 1997; Larsson, 1998; Lönnroth, 2000).

12 Monetary policy, fiscal policy, and wage policy when considered at the EU-level are considered outside the EES process and are addressed at the EU-level in the Broad Economic Policy Guidelines, the Cologne Process' Macroeconomic Dialogue, and/or by the European Central Bank (ECB). When the Broad Economic Policy Guidelines are drafted, macroeconomic dialogue occurs, or interest rate policy is made, their impact on employment is, of course, of some concern but other issues such as monetary stability or fiscal balance are often of equal or if not more concern.

13 The EU social policy with the most widespread impact concerns gender wage equality. Other EU social policy a) concerns a specific area (health and safety); b) contains minimum standards that affect only a few Member States (Working Time Directive) or only a limited number of companies (European Works Council Directive); and/or c) deals with limited issues (Parental Leave Directive, Part-Time Workers Directive).

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