Social policy challenges in European Union

Kari Välimäki
Managing Director, Seafarers’ Pension Fund

Online publication Future of Europe
© SOSTE Finnish Federation for Social Affairs and Health, February 2019

When I assessed the possibilities of strengthening the EU’s social dimension in 2014, I was not very hopeful. The wellbeing models are national, and we still lack European will and identity which would be needed to reinforce the social cohesion of the EU. The development of the single market and the reform of European administrative practices have progressed in the past few years, but progress has been slower than before.

The European Union is in a very challenging situation, as it has faced growing nationalism in some of its member states e.g. Poland and Hungary. The Brexit negotiations in Great Britain have also slowed down the development of the EU. In the worst-case scenario, the unstable political situation in Italy may also cause major problems for the Union. In such a case, increasing integration – not to mention reinforcing the social dimension of the EU – is at least as challenging as it was four years ago.

The Commission has long recognised the need to improve the social policy cooperation. The last sign of this is the European Pillar of Social Rights which it introduced. In its contents and goals, the Pillar resembles the objectives already presented in the 1990s and at the start of the millennium.

Additionally, in the Reflection Paper on the Social Dimension of Europe of spring 2017, alternatives have been outlined for the development of the social dimension up until 2025. It is the goal of Juncker’s Commission to improve the acceptability of the EU in the eyes of its citizens by reinforcing the social dimension.

Principle of subsidiarity as a challenge

The principle of subsidiarity still presents a challenge for the reinforcement of the social dimension. It prescribes that decision-making cannot be delegated from the national states to the union level without compelling reasons. This has meant restricting the social policy competence of the Union primarily to the promotion of movement of labour. At EU level, progress has been made in issues concerning gender equality and occupational health and safety. For single market reasons, the EU has also advanced in matters regarding the movement of patients and aspects of healthcare that involve effective markets. There is e.g. EU legislation on medical equipment.

Reinforcing the social dimension at EU level would also support the national social security in the member states: if economic and social issues were coordinated better than before in the Union decision-making, the maintenance and reform of national social security systems would also be endorsed. Social and healthcare policy decisions at EU level would prevent the purely marketized solutions.

Reinforcing the social dimension at EU level would support social security in the member states.

An integrated, in-depth social protection system is needed in Europe, since global market development has not improved the relative position of those in the weakest position. At best, the supranational competition promoted by the EU creates efficiency and effectiveness, which bring more resources to the public economy and the reform of social protection. However, sharing the fruits of economic growth would also require political regulation and steering at EU level. But this terrifies those who see the EU as purely a promoter of a free single market. European companies and some of the member states oppose all EU-level social policy initiatives, because they see them as surpassing the powers of the Union. The Pillar of Social Rights may therefore remain only a declaration which will not lead to tangible results.

If the general principles of an integrated social protection system cannot be agreed upon at EU level, national social policy decision-making ”will remain subordinate” to supranational economic decision-making. This is not a successful model for sustainable economic and social development. The EU should be able to promote social security also for the sake of its own competitiveness and legitimacy.

Recommendations and follow-up of social protection

Through the principles of the Pillar of Social Rights, the Commission seeks to ensure equal rights and access to employment, fair working conditions and social protection and inclusion, while globalisation, digital revolution, new working methods and demographic trends change working life and the entire society. The aims are good, but there are not enough means at EU level to implement them. The EU must resort to recommendations and follow-up of social protection. The possibilities of Directives and even tighter regulation are modest.

To support the Pillar, the Commission proposes a Scoreboard of Social Indicators. In principle, it provides a good chance to examine and compare the success of national measures. However, the challenge is how the EU can use the Scoreboard in its decision-making and how seriously the national governments take the cross-country comparisons.

The Commission is aware that although the member states wish to deepen the social protection in the EU on a general level, they do not wish to lose their decision-making powers to the EU.

Little evidence of impact of the European Semester on social policy

The Commission reviews the social dimension in the context of economic development and employment. In that area, the EU has more powers. The Reflection Paper does not add anything new in this sense either, as the examination of social protection has been linked to the European Semester for years, and it is part of the Europe 2020 strategy. Social policy goals have also been set in it, including the reduction of population living at risk of poverty by 20 million.

The social policy goals of the European Semester include the reduction of population living at risk of poverty by 20 million.

During the Semester, country-specific reports are produced on the economic and social development of the member states as well as future projections. Based on them, the Commission makes its country-specific recommendations. The system works well in itself – producing information and comparisons – but there is no evidence of the use of the information in the decision-making of the countries.

The EU reports such as European Semester 2018: Key EU Figures show that the decrease of poverty and social exclusion has advanced somewhat in recent years, probably because the economic situation has approved. The cyclical improvement has reduced unemployment, but the situation of vulnerable population groups has improved slowly or not at all.

The Commission has said that inequality is a threat to the EU cohesion. The EU itself does not have much chance of combatting inequality, which is why the Commission emphasises the social investments of the member states to improve the unemployment rate, to increase human capital and to combat poverty.

Implementation of Social Pillar up to member states

In practice, the implementation of the goals of the Social Pillar is the responsibility of the member states. This is evident from the opinion of the Social Protection Committee and the Employment Committee (European Pillar of Social Rights Joint SPC­EMCO Opinion. 31 May 2017):

It is important that the Social Pillar fully respects the existing division of competences in the Treaty, remains coherent with the single market and takes due account of subsidiarity and proportionality, and the autonomy of social partners. In this context, the implementing actions will need to be taken at different levels: European, national, regional and/or local. Ownership by Member States and social partners will therefore play a key role and the strengthened role of social dialogue in the proposal is particularly welcome.

With emphases such as these, the EU’s own role in enhancing the social dimension remains secondary. Concerted efforts cannot be carried out, as national positions and interests are different and so are the goals of labour market parties. The unions are too scattered to make European labour market policy. It is in the employers’ interests to prevent European bargaining and allow companies to move their operations from one country to another according to market terms.

The goals of the Social Pillar hence cannot be obtained as a joint European project, because, as the Social Protection Committee and the Employment Committee find in their joint statement:

The Social Pillar will only have a real impact through strong ownership at Member State level.

EU mainly adopts soft law measures

The principles and goals of the Social Pillar are to be encouraged, and taken seriously, they would form European will and identity. The question is whether they really create a basis for decision-making and what it would mean in practice. However, the Commission is unsure about the speed and means through which the goals could be reached. It is ready to update and supplement the EU level legislation, if it is considered necessary. It is also ready to follow the implementation of the Union legislation more closely and promote social dialogue and development of social protection in the context of economic coordination. This means soft law measures with respect to social protection instead of legally binding guidance.

The EU may proceed by focusing on the four basic freedoms, and free movement, when it comes to social protection. Legally, the EU may proceed by presenting proposals on the minimum requirements in working life based on free movement as well as the harmonisation of the basic standards.

Soft law guidance may be carried out by recommendations, spreading best practices and supporting some reforms. It may also be done by promoting dialogue between labour organisations, encouraging the inclusion of the third sector and engaging in wider cooperation with other international organisations. Tough measures such as norm-based and resource-based control are not widely used by the EU in the promotion of social protection. The total budget for the EU social protection is only approx. 0.3 per cent of the total social expenditure of the EU countries, which means it has no real effect on the decision-making on the member states’ social protection. EU is mainly showing its flag by offering material aid to the most vulnerable groups through food aid for example. It has a European aid fund for the most deprived called the FEAD, although this aid originally relates to agricultural rather than social policy.

The total budget for the EU social protection is only approx. 0.3 per cent of the total social expenditure in the EU countries, which means it has no real effect on the decision-making on the member states’ social protection.

Three options forward

Since it is challenging to arrange social protection at EU level, the Commission has sought different pathways in the document exploring the background for the Social Pillar:

  1. Limitation to free movement i.e. social protection mainly relating to employment
  2. Progress in social protection through cooperation of individual member states or
  3. Common progress by all member states.

The first option would mean very small steps forward and employment-related social protection. The national level would be responsible for those outside the workforce, which is the present case.

The other option would be a sign of the disintegration of the Union continuing but at the same time it could create wider cooperation than is presently the case between some of the member states. Brexit and the development in the member states of eastern and central Europe are other signs of the disintegration. The limited cooperation of some member states in social protection would also be reflected in the rest of the cooperation between the EU states.

The third option would continue the present soft measures within social protection.

Will and identity wanted

Reinforcing the social policy dimension of the EU is challenging at best. It is worrying that both social politicians and the supporters of the free market still pursue the extraction of national social policy decision-making from the decision-making on the global economy. It is easier to understand the views of the supporters of the liberal and totally free market economy, because from their viewpoint, the regulation of social policy is undesirable. But social politicians should be able to grasp that building welfare states was only possible because the legal decision-making on different policy areas such as the economy, employment, education and social protection, was on the same level. Social policy reforms cannot be and should not be made independently from economic decision-making.

The EU integration has been done almost purely on market terms. Social policy decisions have diverged and remained at national level. This is not a sustainable road, as the social cohesion of the Union is creaking. The EU will be made the scapegoat of social problems on a general level, even if it does not have power over social policy. This has increased Euroscepticism and the power of various populist movements.

Reinforcing the social dimension of the EU and at the same time the credibility of the entire EU is a demanding exercise intellectually. The biggest problem of social policy at EU level is in the tools of the policy. The many steps in decision-making and its lack of transparency eat away at the citizens’ trust in national and EU-level decision making.

Reinforcing the social dimension of the EU and at the same time the credibility of the entire EU is a demanding exercise intellectually.

It is clear in the member states that the government bears the political responsibility for the preparation and implementation of decisions and the parliament ultimately approves the laws and the budget. Democratic and parliamentary rules are clear and generally known.

There is no such clarity in the EU decision-making. The Commission is an autonomous organ, relatively independent of the member states, and it has the right of initiative in several matters. The Councils and their preparatory bodies represent the member states without an explicit possibility to influence the actions of the Commission. The EU Parliament has little real power irrespective of some matters relating to the codecision procedure. The low turnout at European elections shows that the citizens are very aware of the role of the EU Parliament.

Social protection threatened by partially invisible shift of decision-making power to EU

The biggest threat to the social security systems of the member states is the silent and partially invisible shifting of the decision-making power to the Union through decisions, the indirect or even direct impacts of which cannot always be seen. Of the EU level decisions, e.g. procurement law and regulation of state aid and monopolies such as Alko (the Finnish monopoly distributor of alcohol beverage products) have had a significant impact on the organisation of Finnish social security. The decisions have had major influence on the framework of national social policy, even though the basic principle has been the creation of a free market in the EU.

The framework of national social policy has changed and will change through EU level decisions. This progress continues if the decision-making of the Union will continue to increase in issues of economic policy, and only the subsidiarity principle is emphasised in issues of social policy. This will result in stronger market-based thinking in social policy and the narrowing of social policy.

Enhancing the social dimension of the EU would not only increase the legitimacy of the Union but also secure the prospects of a national social policy. National social security systems cannot be defended by an integrated economic area without uniform social policy principles and decisions concerning the whole region.

The challenges of the EU span the whole continent and even the whole globe. We need wise political decision-makers and innovative experts for the Union to develop as an integrated economic and social entity.


This is an article of the online publication Future of Europe.
© SOSTE Finnish Federation for Social Affairs and Health, February 2019