Sonja Bekker
The Commission’s recent Communication on the EMU’s social dimension includes the proposal to develop a scoreboard of social indicators. These indicators should make the social implications of economic governance more visible and indentify European divergence in social trends. In order to evaluate the Commission’s proposal two questions are of relevance. First, via which coordination mechanism should these indicators be measured? Second, which types of indicators monitor best the social state of Europe?
Which coordination cycle for evaluating social Europe?
Regarding the first question, it is noteworthy that the Commission actually proposes two sets of indicators. The first involves a few social and employment indicators that should be added to the already existing scoreboard of indicators of the Macroeconomic Imbalances Procedure (MIP). The MIP aims at detecting and correcting macroeconomic imbalances and starts out with a scoreboard assessment in its preventative arm. It has also a corrective arm that is accompanied with fines for Eurozone countries that perpetually fail to meet the EU’s requirements. The MIP’s scoreboard is mainly filled with economic and financial indicators, however, it includes also two indicators that address employment issues: the change in unemployment rates and the nominal unit labour costs. The Commission proposes to add more social and employment indicators to the list, which essentially means including more social components to an eventually binding policy cycle. The second set of proposed indicators is a new scoreboard to be included in the European Employment Strategy (EES). It is an extra instrument to analyse the social state of countries in the Joint Employment Report. This new scoreboard is thus added to a soft law policy cycle which does not have a legally binding effect.
Viewing these two scoreboard proposals, a first remark is why the existing MIP is not exploited better to evaluate the social state of Europe. This would integrate the social dimension into the heart of an economic coordination cycle and open up ways to come to a balanced evaluation of economic and social policies. This would suit better the socioeconomic reality, as it is often impossible to make a sharp distinction between social policies and economic policies. Usually social policies have economic aspects while economic policies have social dimensions. For instance, solid pension schemes may prevent old-age poverty, yet, they often also determine the level of public expenditure. Joint consideration combined with the aim to have a balanced outcome thus may counter the weaknesses of scrutinizing separately what can hardly be separated. Moreover, joint social and economic evaluation reflects better the meaning of the ‘horizontal clause’ in the Treaty (Article 9) that obliges the EU to take into account a range of social goals when defining and implementing policies and activities.
A counter argument against making more use of the MIP is that member states and social partners have a great deal of autonomy in most social and employment policy fields. This is a valid argument, however, viewing the current state of affairs, one has to conclude that the MIP is already used to assess employment trends. And more importantly, the MIP is one of the legal bases for country-specific recommendations in employment and social policy areas. For instance in 2013 Hungary received a MIP-related recommendation to address youth unemployment. France received the MIP-based recommendation to ensure a reduction of labour costs and to ensure that its minimum wage is supportive of competitiveness and job creation. It seems that the EU has already been stretching its competences in the preventative arm of the MIP. It could therefore certainly be an option to add more employment and social indicators to the MIP scoreboard, very much so if this would ensure a more balanced evaluation of social and economic trends.
Which indicators to include?
The second question, concerning the type of indicators, leads to the observation that a number of the proposed indicators are measured at least twice, within different coordination cycles. For instance, the MIP and the EES both want to measure unemployment, youth unemployment, youth inactivity (NEET), and at-risk-poverty rates. Moreover, the Commission proposes to add the participation rate and the at-risk-poverty rate as indicators to the MIP, yet these are already two of the headline targets of Europe 2020. It seems quite ineffective to measure the same indicator in more than one coordination cycle. By measuring each indicator only once, space is created to add additional indicators to the scoreboards.
What should be included are indicators that allow for more of an investment and preventative approach, reflecting the robustness of societies and the resilience of people to deal with economic shocks. The indicators that are currently proposed will show adverse trends only at a late stage. This is because events usually occur in a specific order. First there is economic decline resulting only later on in rising unemployment and at the end of the time line leading to growing poverty rates. Thus, when witnessing growing poverty, a country usually has been in economic misery for quite some time. Reacting at that stage is mostly reacting (too) late. It would make more sense to start giving policy recommendations at a preventative stage. Suggestions for indicators reflecting resilience are the education level of a population and access to training and lifelong learning. Another indicator could be income replacement rates when unemployment occurs in order to see how much income security people have, also in volatile labour markets. Also involuntary fixed-term and part-time employment could predict whether people are able to build a life and progress in their careers, or rather are likely to become unemployed when an economy contracts.
Some of such indicators are already part of the Commission’s proposal, yet they are opted for as supplementary indicators. Why not make these supplementary indicators into prime indicators? Perhaps this would help to turn social Europe into a primary goal as well, which is measured on an equal footing with economic policies.