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The European Union 2: Poverty and Employment - Activity

The EU flag

Image: As the EU gets larger the problems may also get bigger - does the EU have the strength to address these problems or will it make the situation worse by getting involved in policy making - government failure at a European level? Copyright: Alberto Villén, stock.xchng

The EU is now 25 countries. The expansion of the Union in 2004 from 15 to 25 members necessitated a reassessment of the whole issue of the single market and the implications of reaching that number of members. There is also the fact that other countries are likely to be bidding to join in the next five years.

Out of these discussions came a new constitution for the EU. The discussions were complex and difficult but a draft was eventually hammered out and is now in front of the electorate around Europe for their decision. On 29th May 2005, France went to the polls to vote on the Constitution in a referendum. The decision was a no vote. Three days later, the people of the Netherlands also voted to reject the new constitution.

The Constitution covers a range of aspects over how Europe should be run, from voting rights of members to the extent to which the EU can get involved with decision-making in member states.

Some of these issues are essentially political in nature, but there is also an economic one that runs through it all. Essentially, the differences between those that want to see the EU provide an economic model of social and economic welfare and security and those that want to the EU to be a vehicle through which the single market can operate more effectively.

The new EU Commission have now taken up their posts and begun work on establishing the policies that will move the EU forward in the coming years. One of the key elements of these policies is a new social policy aimed at dealing with two major problems: unemployment and poverty. The new Social Agenda is meant to run until 2010. The following gives an outline of the aims of the policy:

Under employment, the Agenda will focus on:

  • Creating a European labour market, through enabling workers to take pension and social security entitlements with them when they work in a different Member States and by establishing an optional framework for collective bargaining across frontiers; the Commission will also examine transition periods for workers from new Member States
  • Getting more people into better jobs, particularly through the European Youth Initiative and supporting women in (re-)entering the labour market
  • Updating labour law to address needs created by new forms of work, i.e. particular short term contracts; a new health and safety strategy
  • Managing the process of restructuring through the social dialogue

Under poverty and equal opportunities, the Agenda will focus on:

  • Analysing the impact of ageing populations and the future of relations between the different generations, by launching a Green Paper on demography
  • Supporting the Member States in reforming pensions and health care and tackling poverty
  • Tackling discrimination and inequality; the Commission will examine minimum income schemes in the Member States and set out a policy approach for tackling discrimination, particularly against ethnic minorities such as the Roma
  • Fostering equal opportunities between women and men, for example by setting up a gender institute
  • Clarifying the role and characteristics of social services of general interest

Source: The new Social Agenda: an essential pillar of the new growth and jobs strategy, Europa press release, 09/02/05 (http://europa.eu.int/rapid/pressReleasesAction.do?reference=IP/05/152&format=HTML&aged=0&language=EN&guiLanguage=en)


An unemployment queue

Image: In the EU as a whole, there are over 16 million people unemployed representing 11% of the population of working age. How does the EU tackle this sort of problem? Copyright: European Community 2005, European Commission Audiovisual Library

Task

  1. With reference to each bullet point, explain what you understand the economic benefits to be to member states and the citizens of member states of the aims under the new social agenda.
  2. Using your knowledge of fiscal, monetary and supply side policies, explain ONE measure that the EU could put in place to bring about the policy aim that has been specified in as many of the areas identified in the bulleted list above as you can.
  3. Evaluate the likely consequences of these policies in seeking to achieve their objectives.

A student at university

Image: Is investment in training and education a route to overcoming unemployment? If it is, do the effects come quickly enough to satisfy citizens of all 25 countries in dealing with unemployment? Copyright: European Community 2005, European Commission Audiovisual Library

To help you on your way, we have produced a short commentary on one of the points in the Agenda - social services in general.

Social Services

Social services exist to help those least able to help themselves get some support. These social services include such things as invalidity benefits, housing benefits, maternity allowances, free school meals, help for the aged, assistance in coping with unemployment and so on.

Few would argue with the importance of providing these services but the issue is how far the state or, in this case, the EU should go in providing such support to its citizens. Some would argue that services should be minimal to ensure that people do not come to rely on them - like a crutch and that the existence of incentives is an important driver in reducing reliance on the welfare state. Others might point out that a universal provision of such services is inappropriate - state pensions, for example, may be something that is essential for some elderly residents of the EU but there are equally plenty of people who have assets and savings who could manage quite comfortably on their thrift and who do not need these benefits.

Should such services therefore be means-tested; in other words, some form of test applied to ration out the provision of such services? Those that are deemed to be able to afford private social care and support should be prepared to pay for that because it releases funds to those who really do need it.

Any social services agenda requires funding. The funding comes from the EU taxpayer. The sheer size of the EU now means that the number of people needing such general social services is huge and the funds have to come from member states. How are the contributions from member states to be decided and who should get what from the EU and on what basis?

The issues therefore are complex. Your task is to think about how key economic policies might be used by the EU to try to achieve certain objectives and what the implications of such policies are likely to be. Remember to try to ensure you keep your discussion focussed on the EU as opposed to the UK or any one particular country.