Renaissance of Pay Clauses in German Public Procurement and the Future of the ILO Convention 94 in Europe

Thorsten Schulten

Public procurement is of high economic importance. In many countries it covers up to one fifth of the annual national GDP. Public authorities have always used their market power as a contracting entity to promote certain social and labour standards. The ILO had even adopted a separate Convention on Labour Clauses in Public Contracts (Convention 94 from 1949). In order to promote fair competition and to avoid downward pressure on wage and working conditions in the tendering process, the ILO Convention 94 wants to ensure that workers hired in contracting companies do not receive less favourable conditions than those laid down in the appropriate collective agreements.

A Tide of Inequality: What can Taxes and Transfers achieve?

Malte Luebker [1]

Inequality is a top issue in the public agenda, partly as a result of the financial crisis that helped draw attention to this topic. As banks relied on the support of taxpayers and millions of workers had lost their jobs, people began to see the compensation of bank CEOs – with an average 2010 pay package of $9.7 million in Europe and the US[2] – as obscene.

Those at the top of society have long captured the gains from economic growth. From 1970 to 2008, the annual incomes of the top 1% of US taxpayers rose threefold in real terms from $380,000 to $1,140,000. By contrast, the incomes of the bottom 90% remained where they were in 1970 – at $31,500 per year (in real 2008 dollars).[3]

Minimum Wages in Europe: a Strategy against Wage-Dumping Policies?

Lars Vande Keybus

In numerous countries such as Ireland, Greece, Portugal, Hungary, and others, the European Commission (EC) - in cooperation with the International Monetary Fund (IMF) and European Central Bank (ECB) - has imposed a dramatic policy mix that consists of blind austerity, privatisation and wage cuts. Following the adoption of the notorious ‘six-pack’ in December 2011, it is clear that such policies will become a general rule all over Europe. The ‘six-pack’ sets up a structure in which the EC is granted a role as budgetary supervisor and punisher. The commission has the opportunity to almost automatically punish European Union (EU) members who do not follow recommendations to correct

The G20 and Jobs: Time for Plan B

John Evans

When the economic crisis broke following the collapse of Lehman Brothers in September 2008 and the global banking system seized up, workers began to be laid off, families saw their houses repossessed and banks teetered on the brink of collapse. Financial panic knew no frontiers. It was clear that a coordinated global response by governments and institutions was required to counter what the IMF termed the “Great Recession”. The major economies used the G20 as the forum to coordinate their responses, scaling it up from a low-key Finance Ministers’ Forum into a Heads of Government Summit process – effectively replacing the G8.

The international trade union movement responded rapidly[1], matching the “heat” of the street with the “light” of policy messages coming out of the G20 Summits. Trade union demands centred on stabilising employment, putting in place social protection for workers hit by the crisis, and effective and coordinated government intervention to support the global economy so as to prevent the “Great Recession” becoming a 1930s-style “Great Depression”.

Global Wage Trends: The great Convergence?

Patrick Belser

Average wages

The financial and economic crisis has cut global wage growth by roughly half in 2008 and 2009. Based on a sample that covers a large chunk of the world’s 1.4 billion wage-earners, the Global Wage Report 2010/11(i) finds that the global growth in real monthly wages slowed from 2.7 and 2.8 per cent in the two years before the crisis (2006 and 2007) to 1.5 and 1.6 per cent in 2008 and 2009. If China – where data coverage is limited to fast growing “urban units” – is excluded from the sample, the average wage growth drops from 2.1 and 2.2 per cent before the crisis to 0.8 and 0.7 per cent in 2008 and 2009. In 2010, preliminary results suggest that wages have started to recover, but not as fast as profits and not yet to pre-crisis levels. Generally, wages have taken a bigger hit in developed than in developing countries.

This short-term cost of the crisis to workers must be understood in the context of a longer-term trend towards wage convergence across regions. Table 1, taken from the Global Wage Report 2010/11, shows that while average wages more than doubled in Asia since 1999 and more than tripled in Eastern Europe and Central Asia (which partly reflects the depth of the wage decline in the 1990s), wages stagnated in advanced countries, increasing by just about 5.2 per cent in real terms over the full decade. This is less than the rate at which Chinese wages grow in one year. The base from which Chinese wages are growing remains, of course, much lower. The average American worker still earns in about one month what a Chinese worker in the private sector earns in one year. The point, however, is that the gap is closing and that the economic and financial crisis – as well as the slow recovery of wages in the West – has accelerated this convergence.

Table 1 Cumulative wage growth, by region since 1999 (1999 = 100)

* Provisional estimate / ** Tentative estimate / … No estimate available
Source: ILO Global Wage Database.

One factor that contributes to the convergence is the faster growth in labour productivity in developing regions. Another factor is the apparent decoupling between productivity and wage growth in advanced countries. According to one calculation, while average wages in advanced countries grew by 5.2 per cent over the last decade, labour productivity increased by 10.3 per cent (see Figure 1). In other words, wages grew only half as fast as labour productivity. One simulation indicates that if wages had grown as rapidly as productivity, average wages in advanced countries could have gone up from roughly US$ 2,864 per month in 1999 to $3,158 in 2009 instead of only $3,012 (figures are expressed in 2009 PPP dollars). Distributed over all paid employees, this decoupling may thus have cost workers in advanced countries hundreds of billion dollars in forgone wages over the full decade. These resources have not exactly been lost to everyone – since they went into profits and investment. But this redistribution has certainly limited non-credit based household consumption, and at least partially explains the low interest rates that were needed in some countries before the crisis to keep consumption going.

Figure 1

Note: Since the indices refer to a weighted average, developments in the three largest advanced economies (United States, Japan and Germany) have a particular impact on this outcome.

The low pay crisis

The long-term losses to labour have not been equally distributed between all workers. Those who have suffered most from the decoupling are the workers at the middle and the bottom of the wage distribution. Those at the top have fared better, as indicated by the increasing gap between mean and median wages in many countries and epitomized by the ongoing bonus-bonanza among the world’s CEOs. While the highly educated elite has transformed into global “superstars”, workers with average skills have become the victims of the global compression in labour costs.

It is at the bottom of the wage distribution that things have deteriorated the most. This is revealed by the steady increase in the share of workers on “low pay”, defined as the proportion of workers whose hourly wages are less than two thirds of the median wage across all jobs. The latest figures show that since the second half of the 1990s, relative low pay has increased in about two thirds of countries (25 out of 37 countries). In advanced countries, low pay now afflicts about one in every five workers, or about 80 million people. At the country level, the incidence of low-wage employment still shows considerable variation. When full-time workers are considered, the incidence of low-wage employment varies from less than 10 per cent in Sweden and Finland to about 25 per cent in the United States and the Republic of Korea.

But low pay is not just a problem in developed economies. Case studies show that in recent years low-paid wage work has also increased in a number of developing countries, for example China, Indonesia or the Philippines. What differs, of course, is the context, which is much more dynamic in emerging economies. While low pay in advanced countries is often the outcome of stagnating or decreasing incomes at the bottom, low pay in rapidly growing developing countries has more to do with the rapid progress of the middle class. This, however, does not mean that low pay is not a policy issue in emerging economies. The labour unrest in Chinese factories in 2010 showed that low paid workers expect their conditions to improve in line with overall social and economic progress.

Policy options

Wage trends seem to point towards the complex process of global integration, where average wages converge towards the (stagnating) levels of advanced countries and where inequality between top and median, and median and bottom wage-earners increase almost everywhere. There are exceptions, of course. This trend nonetheless points towards the importance of international coordination on wage-related matters. The collective action problem is particularly acute in the Eurozone, where any country’s attempt to link wages more closely to productivity growth immediately leads to a decline in external competitiveness relative to Germany – the star-performer where average wages actually declined by 4.5 per cent over the last 10 years despite a (modest) increase in labour productivity. Outside of the Eurozone, wage compression in China similarly limits the room for wage increases in other emerging economies.

At the national level, countries should be encouraged to support low-paid workers through a combination of minimum wages and income transfers. Minimum wages have the potential to make a major contribution to social justice. In the United Kingdom, for example, the minimum wage was identified in 2010 as the most successful government policy of the past 30 years in a survey of British political experts. In this survey(ii) , a successful policy is defined as one which is successfully implemented, has a positive social and economic impact, and can be sustained over time. Perhaps most importantly, the much-feared negative impact on UK jobs failed to materialize. The positive effect of the minimum wage has been compounded by the working tax credit, a system of so-called “in-work benefits” that reduces taxes for the low-paid who work for a minimum of 16 hours per week. Both minimum wages and “in-work benefits” are complementary, for without the former, companies may feel that they may quite simply shift some labour costs onto tax credits.

The minimum wage can have a positive impact in developing countries too. In Brazil, a country with a large informal economy, the two policies that are most frequently credited for the sharp reduction in poverty and inequality over the last decade are the Bolsa familia – a programme of cash transfers conditional upon children attending schools – and the national minimum wage that has been revived since 1995. Even The Economist now recognizes that “by boosting domestic demand, these policies have also contributed to economic growth”.(iii) In countries such as India, minimum wages are being implemented along with employment guarantee schemes that set the floor for wages. One simulation shows that if the coverage of minimum wages were extended to all wage-earners in India instead of a select group, it could lift the incomes of 76 million low-paid salaried and casual workers.(iv)

(i) International Labour Office (ILO). 2010. Global Wage Report 2010/11. Available at:
http://www.ilo.org/travail/areasofwork/lang--en/WCMS_DOC_TRA_ARE_WAGE_EN/index.htm
(ii) See http://www.instituteforgovernment.org.uk/pdfs/PSA_survey_results.pdf
(iii) “Lula’s legacy”, 30 September 2010.
(iv) Belser, P.; Rani, U. 2010. Extending the coverage of minimum wages in India: Simulations
from household data, ILO Conditions of Work and Employment Series No. 26, 2010 (Geneva, ILO).

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Patrick Belser is the principal editor of the ILO Global Wage Report. Before working on wages, he spent 5 years with the ILO programme on fundamental principles and rights at work and co-edited a book called Forced Labor: Coercion and Exploitation in the Private Economy, published in 2009 by Lynne Rienner.

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Change or lose Europe

Friederike Spiecker

Frank Hoffer

When asked what he thought of Western civilisation, Mahatma Gandhi replied: “I think it would be a good idea.”

After an agonising depression and another devastating war, Europe finally followed Gandhi’s advice and moved from centuries of antagonism, war and “beggar thy neighbour” policies to a world of cooperation and integration. Reintegrating post-nazi Germany, bringing the former Portuguese, Spanish and Greek dictatorships into a democratic Europe and opening up to Eastern Europe are milestones in this complex integration process based on political will, cooperation and regulated markets. But it was only after the ideological shift in the 1980s and 90s that mainstream thinking changed and concluded that the best form of cooperation was fierce competition and radical market liberalisation. However, deregulation, the common market and single currency did not create the promised land of prosperity, but resulted in declining wage shares and greater inequality.

The benefit of a single currency in a large market across several countries lies in a common employment and growth-oriented monetary policy for all member countries, rather than a monetary policy narrowly focussing on the needs and priorities of the anchor currency as in the former European exchange rate mechanism. However, in a world dominated by deeply rooted neoclassical and monetarist beliefs, this benefit had no chance of materialising.

Relinquishing internal exchange rate flexibility deprives governments of an adjustment mechanism to respond to unequal economic performance. This increases the need for 1) coordinated wage, fiscal and especially tax policies to avoid a race to the bottom which would inevitably have a negative impact on overall growth; and 2) joint infrastructure and industrial policies to improve productivity and reduce regional development differences.

With the euro, balanced trade requires that wages in all member states grow in line with national productivity plus targeted inflation rate of the ECB. Otherwise countries with relative higher growth in unit labour costs will systematically lose market share and build up trade deficits. The case for a coordinated wage policy to avoid imbalances, beggar thy neighbour policies and a waste of potential growth is overwhelming; it is alarming that it has been ignored for so long. Those who let unit labour costs rise too fast are equally responsible for the explosion of imbalances after the abolition of the exchange rate mechanism as those who gained market shares through wage restraint. This lack of policy coordination resulted in rapidly growing trade imbalances after 1998 (Table 1).

Table 1

Prior to the euro, Germany’s above-average productivity growth and export surpluses were frequently adjusted through currency appreciation. Trade imbalances stayed within 2% of GDP and – contrary to today – German workers benefited from German competitiveness as the ‘Deutschmark’ (DM) appreciation made imported goods and sunny holiday destinations abroad cheaper.

Under the new currency regime, however, it was almost exclusively businesses that benefited. This mercantilist strategy was costly to Germans. Wage dumping translated to export growth, depressed domestic demand, and the lowest growth rate in the Eurozone. Given these German wage developments, even France, who achieved wage growth in line with productivity (Table 2), suffers from a growing trade deficit with Germany (Table 1).

Table 2

Regardless of government actions, rebalancing is bound to occur. The question is how and with what consequences for growth, distribution and ultimately political stability. Realignment can be achieved through either wage cuts in deficit countries, a rise in wages in surplus countries, or constant transfers from the former to the latter. However, it makes a world of difference whether the realignment occurs by “deflationary” means, forcing everybody to follow the German example, or within an overall growth regime that avoids the pitfalls of wage deflation.

Three scenarios are possible:

1. Deflationary cost cutting.
This is what European institutions and surplus countries currently impose on deficit countries. The result will be a deflationary depression in deficit countries with high unemployment, negative growth, and public debts accelerating as share of GDP. Internal devaluation will require a massacre of public services and nominal wage cuts of 20 – 30% for countries like Spain, Greece, Italy or Ireland. Their economies will shrink and so will the inner-European export market for surplus countries. Ultimately, after having sold and privatised what is left of public assets in a depressed market, countries will default. Ironically, this “no bailout policy” will cause involuntary transfers, as creditors will have to write off part of the credits. These banks – mainly from surplus Germany – will again claim their systemic relevance and German taxpayers will be asked to save them. This “solution” might be as costly for taxpayers as direct transfers to Greece or Ireland. The outcome of such an austerity policy is unfortunately a negative sum game within Europe, and its only rationale is the unlikely prospect that the shrinking internal market will be overcompensated by export surpluses outside the Eurozone.
If popular resistance does not force European governments and the EU to change policies, it is difficult to see how the Euro and ultimately European integration can hold.

2. Constant public transfers.
This is the reality within the German currency union since 1990. The constant “trade deficit” between West and East Germany is closed through a stream of public transfers. Such a transfer system on a European scale currently looks politically impossible, even if some form of European unemployment insurance would be desirable further in the integration process.

3. Wage-led growth.
A wage-led growth oriented policy coordinated by Eurozone member states is the only realistic way to avoid repercussions deriving from deflation. Such a policy must be based on 1) rapid extension of domestic demand in surplus countries through wage, income and fiscal policies; 2) giving all Eurozone governments access to low interest euro bonds; and 3) productivity-enhancing investment in pan-European infrastructure. Only if surplus countries drive economic growth and increase aggregate demand can deficit countries regain market shares and avoid a long and painful depression. However, even under the favourable conditions of economic growth, rebalancing will only be possible if deficit countries accept below average unit labour cost growth over a longer period of time, and if surplus countries change their aggressive export strategy and strengthen internal wage growth so that unit labour costs rise above average. During this period, nominal wage growth in deficit countries must stay positive. Wage policy must act as a barrier against downward pressures on wages that risk pushing countries into deflation, as seen in Japan. Realignment within an overall regime of nominal wage growth would allow the reduction and eventual reversal of permanent German trade surpluses.

The necessary policy changes cannot be understood within a narrow enterprise logic, viewing wages merely as costs and not as income and demand (an irreplaceable condition for sustainable, productivity-enhancing and equitable growth). Democratic governments need to focus on the common good of full employment and provide a framework to achieve collective bargaining wage settlements that ensure wages growing in line with productivity. This should include:

• a legal minimum wage at 50% of the average wage;


• government support for co-ordinated or centralised collective bargaining and universal application through legal extension mechanisms;


• labour market regulations minimising all forms of precarious atypical employment and limiting the excessive power of employers in the labour market;


• that governments, as the largest employer, investor and procurer ensure public sector wages grow in line with the defined wage norm and provide contracts only to companies that adhere to collective bargaining agreements;


• productivity enhancing public investment;


• a progressive European tax on trade surpluses overshooting 2% of GDP in two consecutive years to give surplus countries the choice either to stimulate their own economy or to provide transfers to neighbouring countries that pursued a balanced functional wage policy, but lost market shares because of the mercantilist strategies of surplus countries;


• a tax on enterprises that try to gain a competitive advantage through wage depression instead of innovation. Unlike the Polish government who introduced the Popiwek tax against wage inflation in the 1990s, enterprises would have to pay a 50% tax on the gap between the actual increase of the hourly wage and a wage increase fully reflecting productivity growth and targeted inflation rates to avoid wage deflation. This would encourage employers to share productivity gains with their employees and would ensure wage growth in line with macroeconomic requirements for sustainable growth.

To support such an inclusive rebalancing strategy, the European Central Bank should 1) raise its inflation target to 3-4% to provide more space to adjust without making deflationary nominal wage cuts; and 2) aim at co-ordinated exchange rate policies between the major trading blocks to ensure that internal balancing does not result in external imbalances.

For Europe, adopting a coordinated wage policy oriented towards lower inequality, balanced trade and economic growth is not only necessary and possible: it would in fact be a good idea.

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Frank Hoffer is senior researcher at the Bureau for Workers' Activities of the ILO.

Friederike Spiecker is a macroeconomist and independent consultant. She has published widely together with Heiner Flassbeck, chief economist at UNCTAD, on German, European and international economic policy.

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Domestic Workers in Switzerland protected by the Country’s first Sectoral Employment Contract

Mauro Moretto

Vania Alleva

In Switzerland as elsewhere, the State has been retreating on social policy in recent years. This is leading to a decline in social service provision and, consequently, to an increase in demand for domestically based services. Nobody knows exactly how many waged employees are currently at work in Swiss private households (as many are unreported), but statistical estimates suggest that their numbers are continually increasing. At the end of 2007, the Unia trade union, on the basis of various studies(1), put the number of full-time jobs in the sector at about 125,000 (approx. 4 per cent of the total workforce). More than 90 per cent of these employees are women. Many are migrants, often without any legal residency status. They come from a whole range of countries where they had often previously gained academic qualifications and worked in other occupations. Recently, increasing numbers of women from the new EU member states have been finding jobs in Swiss private households.

Fighting low wages and poor working conditions

Despite the legal risks, and other incentives to stay hidden, more and more private household workers are venturing out to see Unia. They report appalling working conditions: extremely low wages, combined with hefty deductions for board and lodging, often no social security or pension coverage, massive daily workloads, pay stoppages if they fall ill or if the employer goes on vacation, uncompensated work on public holidays, obviously no overtime arrangements, and so on. No wonder that all the available studies pinpoint this sector as the one with the highest proportion of precarious employment relationships and working poor.

For more than ten years now Unia has, together with other unions in the Swiss Federation of Trade Unions (SGB/USS), been fighting against the social scandal of the working poor and for substantial pay rises in low-wage sectors. At the turn of the 21st century, it chalked up some important successes in sectors such as hospitality and retailing. However, as Switzerland still does not have a general legal minimum wage, this struggle runs up against certain limits – especially where there is no organized negotiating partner on the employer side with whom to agree on binding minimum wages. As that applies particularly to domestic workers, Unia and the SGB/USS called on the Swiss government, at the end of 2007, to make use of the legal possibilities that were created as part of the accompanying measures for the free movement of persons between Switzerland and the European Union, and to decree for this category of workers the first-ever Switzerland-wide “standard work contract” (Normalarbeitsvertrag or NAV) with binding minimum wages and working conditions. An NAV is not a collective agreement, but a sector-specific legal minimum wage for sectors in which there are no collectively agreed provisions.

At the same time, Unia drew public attention to the highly precarious working conditions experienced by domestic employees. The government finally took up the union concerns and asked an experts group to work out the parameters for an NAV with binding minimum wages. Taking part in that group were representatives of the cantonal and national authorities, employer organizations, and organizations in related sectors (cleaning and hospitality), as well as the authors of the present article, who were representing the unions. The experts group reported back in mid-2009 with a proposed NAV that took account of multiple elements and requirements. The main focus was on the setting of minimum wages that would reflect the wide-ranging and physically demanding tasks involved in private domestic work. Concretely, the experts’ group defined three wage categories on the basis of experience and training: 1. untrained employees, 2. experienced employees and 3. employees with vocational training or long experience. For the domestic employees’ protection and security, other elements going beyond the legal requirements are vital. Among them are working time arrangements (including overtime), holidays and leave, and the continued payment of wages in case of illness. Although the Unia representatives pressed for these elements to be included in the proposed NAV, they were left out – both because they are covered by existing cantonal NAVs and because the legislation underpinning national NAVs does not provide for them.

A first step in the right direction

On its way through the political and administrative procedures, the draft NAV had to overcome some resistance and many hurdles. Some cuts also had to be accepted, notably to the effective minimum wage levels, before the national government decreed the first NAV for domestic employees, with binding minimum wages and the force of law, in October 2010 (see here the full text of the law in German, French and Italian) . To date, this is the only national-level NAV, so its significance goes beyond the sector for which it was adopted.

The NAV came into force on 1 January 2011, and it is an important step in the right direction. The compulsory minimum wages are:

• CHF 18.20 per hour for untrained workers


• CHF 20.00 per hour for untrained workers with 4 years of professional experience or for workers with two years’ training


• CHF 22.00 per hour for workers with three years’ training.

That is less than the experts group proposed, but it is nonetheless a significant improvement on the current situation and it sends out an important signal to domestic workers employed in Switzerland. The minimum wage for untrained domestic employees corresponds to about 55 per cent of the average gross wage. The mandate given to the group had specified that the minimum wages set for domestic employees were under no circumstances to exceed the minimum wages negotiated by the social partners for the related cleaning and hospitality sectors. But by pointing to the many different tasks performed by domestic workers, who for example often help to care for children and elderly people, the experts were able to justify a partial waiver of this requirement. For these minimum hourly wages to apply, a domestic employee must work on average at least 5 hours a week for the same employer. The main reason for this is that home helps who clean several households on a purely hourly basis in fact earn considerably more (as a rule, CHF 25.00 or more) and are therefore scarcely affected by wage dumping.

The Swiss delegation will now be in a good position, at the International Labour Conference in June 2011, to push hard for the adoption of the new Convention that will enshrine fair employment conditions for domestic workers worldwide.

Implementation: an uphill task

Now for the difficult, challenging part - implementation. Ever since 1 July 2004, the canton of Geneva has had its own domestic workers’ NAV with minimum wages – a precursor to the national NAV. So far, experiences with it have been very positive. Admittedly, it is difficult to monitor whether the NAV is being correctly applied, as we often do not know in which households domestic employees are working. But word has increasingly got around among these workers that the NAV gives them certain rights. And when necessary, they do go to the labour courts to get those rights upheld. The highest-profile case was won by Unia Geneva, which secured back payments of CHF 70,000 for a married couple who were both working as domestic employees. The NAV does provide protection, and it enables employees to defend their rights more effectively. The experience in Geneva shows that employers want to avoid the courts and will often, in case of dispute, pay up the minimum wage without further ado. Employers are also better informed about their duties.

In the case of the national NAV on domestic work, verification is seriously hampered by the opaque and fragmented nature of this part of the labour market. Monitoring of compliance with the NAV is first and foremost the task of the tripartite commissions in the cantons. Thanks to the binding minimum wage rates embodied in the NAV, these commissions have been provided with the instrument they need in order to ensure and enforce, at the very least, effective protection against wage dumping. To get the new NAV applied, the tripartite monitoring bodies will need to be supported with various instruments, including broad information campaigns aimed at both employers and employees.

Still to be tackled is the question of the residency status of domestic employees from non-EU countries. Although the degree of exploitation certainly does not depend on residency status alone, the demand for the regularization of undocumented immigrants remains crucial. Only through such legal security can lasting improvements be achieved in the living and working conditions of these employees and their families. Beyond regularization, it is absolutely crucial to de-couple access to courts from the residency status of migrants; this will go a long way in reducing their precariousness.

Information and targeted union organizing

There are also challenges for Unia and other organizations engaged in this field. As domestic employees cannot be informed and organized at their workplaces, alternative locations have to be sought or created. Essential to this is the closer networking of trade unions, migrants’ associations with strong representation of women, and organizations working in the migration field. Here, Unia in particular can build on its long years of cooperation with the many associations through which migrants maintain links with their countries of origin. The union’s experience as an intercultural mediator must be adapted to the domestic workers’ situation. Conscious efforts must be made to recruit and train contact persons and reps who know the specific living and working circumstances of domestic employees and speak their language. Equally, social and political alliances are needed in order to offset the limited scope for self-organization. This entails organising targeted information meetings, language courses, or integration courses, which promote empowerment, exchanges of experience and collective processes.

(1) Including Alleva, V. and Niklaus, P-A (2004) Leben und Arbeiten im Schatten. Studie der Anlaufstelle für Sans-Papiers und GBI, Basel: ECOPLAN.

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Vania Alleva is a member of the executive committee and leader of the service sector branch of Unia, the Swiss inter-professional trade union.
Mauro Moretto is a member of the leadership of Unia's service sector branch.

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European Economic Governance: The next big Hold Up on Wages

Ronald Janssen

One of the main purposes of the current drive for European economic governance is to transform wages into the main or even single instrument of adjustment under monetary union. Strangely, this idea appears to enjoy a high degree of consensus among both conservative and progressive economists. For the former, extreme wage flexibility including wage cuts and sub-regional deflation is necessary if the rest of the Euro area is to catch up rapidly in competitiveness with Germany. For the latter, the rebalancing of competitive positions is to proceed by setting up some kind of ‘wage planification’ process at the European level in which German wages are to go up while wages outside Germany are going down and stay down for many years to come.

Both views are based on the idea that there exists a direct and straightforward link between wages and competitiveness, as if one unit change in wage costs equals one unit change in competitiveness, or even jobs. However, a closer look at the German experience reveals that this assumption is totally flawed: competitive prices are not at the basis of Germany’s massive exports boom. What really drives German exports is the growth of its exports markets: if those economies into which Germany is exporting enjoy an economic boom, then German exports closely follow. Here, a recent analysis from the European Commission (2010) finds that the dynamism of Germany’s export markets explains almost the whole of the 7.3% annual average increase in its export volumes over the 1999-2008 period, whereas the contribution of more competitive pricing on German export performance is barely noticeable (0.3%).

How to explain the fact that a decade of real wage stagnation has barely had any impact on Germany’s spectacular export boom? The reason has to do with the specialization pattern of its industry, focusing on products which the more dynamic (emerging) economies are most eager to buy (machinery, telecom equipment, transport infrastructures, etc.). This type of specialization pattern has the effect of making demand for German exports price inelastic: it is technical knowhow (‘how to produce efficient machinery’) and quality that count. In this equation, prices are a subordinated matter. Indeed, econometric studies (Artus, 2010) find that a 10% reduction in German export prices increases export volumes by 4% only. In the case of France, a similar price reduction would boost export volumes by as much as 12%.

The fact that the demand for exports is relatively irresponsive to prices also explains why German business opted not to pass on falling unit labour costs in manufacturing into lower export prices. Doing so would only have made a small difference in export demand and overall production, implying a limited increase in total profits. The alternative of boosting profit margins by maintaining output prices while squeezing wages was substantially more attractive. In other words, business mostly used the sacrifices that were forced upon German workers during an entire decade to increase its own profit margins and dividend pay outs instead of creating jobs by becoming more competitive. In the end, it is not surprising to observe that the share of profits in Germany’s non financial sector has skyrocketed from 36.3% of gross added value in 2000 to 41.4% in 2008 (Eurostat, 2009).

All of this implies that the ongoing discussion on European economic governance should be turned completely upside down. Pushing for competitive wage deflation in the Southern part of the Euro area is a dead end road. Given the deeply ingrained structural features of German industry, wage cuts in Spain or Portugal will barely alter these countries’ relative competitive positions with Germany. As argued above, the world is buying German exports not because they are cheap but because of their quality and of their type. By cutting wages, Southern Europe will mainly be competing for export demand with economies such as France, Eastern and Central Europe – or with themselves. However, the French economy, with high unemployment, is not exactly in the best position to digest the export shock that a wave of Southern wage deflation would bring about. Competing with Central and Eastern Europe on the basis of wages is also a lost cause: wages there are still much lower while most of these countries are outside the euro and may/will respond to a competitive wage devaluation by a competitive currency devaluation. This leaves workers in the South of Europe to compete…with each other. The ‘winner’ will be the country that cuts wages the most in comparison with the rest of the South. However, the taste of this ‘export’ victory will be bitter since the gain will come at the expense of a deep depression of domestic demand in the entire South of the Euro area.

Unfortunately, the bad news does not end here. The mechanics of monetary union should not be forgotten either. With the economic weight of the South of Europe in the entire Euro area being limited to 15%, whereas the weight of Germany is as high as 25%, the response of monetary policy will necessarily be ambiguous. The European Central Bank is forced to set interest rates according to the average situation in the Euro area, not according to the situation in those parts of it that are in most trouble. This actually means that wage cuts in the South will be met with higher, not lower, interest rates as set by common Euro area monetary policy. With deflation taking hold while nominal interest rates are rising, the policy trap which these distressed economies find themselves in will be complete.

In a cynical way, history is extracting its own revenge. When the single currency project was being set up back in the 1990s, rumours inside the Delors Commission claimed that monetary union would in the end cause so many problems that politicians would have no other choice than to take Europe forward. At that time, this referred to policies such as a substantially higher European budget, European investment policy and European taxes. Europe indeed now finds itself into such a situation calling for emergency action. However, blinded by the old obsession with cost competitiveness, it is cracking down on workers. This will prove to be a fatal mistake: extreme wage flexibility, even if it is presented as a type of ‘central wage planification’ in co-management with trade unions, in the end boils down to a big hold up on wages.

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Ronald Janssen works as an economic adviser in Brussels.

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References

• Artus, P. (2010), Flash 2010, Paris 


• Eurostat (2009), ‘Business profit share and investment are higher in the EU than in the USA’, Statistics in focus 28, Luxemburg.


• European Commission (2010), ‘The impact of the global crisis on competitiveness and current account divergences in the euro area’, Quarterly report on the Euro Area, Vol. 9, No 1, Brussels

What does wage-led growth mean in developing countries with large informal employment?

Jayati Ghosh

The past decade has been one in which export-led economic strategies have come to be seen as the most successful, driven by the apparent success of two countries in particular - China and Germany. In fact, the export-driven model of growth has much wider prevalence as it was adopted by almost all developing countries.

This was associated with suppressing wage costs and domestic consumption in order to remain internationally competitive and to achieve growing shares of world markets as far as possible. Managing exchange rates to remain competitive, despite either current account surpluses or capital inflows, became one of the major elements of this strategy. This was associated with the peculiar situation of rising savings rates and falling investment rates in many developing countries, and to the holding of international reserves that were then sought to be placed in safe assets abroad.

This is related to a classic dilemma of mercantilist strategy, which is evident in exaggerated form for the aggressively export-oriented economies of today: they are forced to finance the deficits of those countries that would buy their products, through capital flows that sustain the demand for their own exports, even when these countries have significantly higher per capita income than their own. The flows of capital from China and other countries of developing Asia is an egregious example of this.

The strategy also generated fewer jobs than a more labour-intensive pattern based on expanding domestic demand would have done, which meant that employment increased relatively little, despite often dramatic rises in aggregate output. This is why, globally, the previous boom was associated with the South subsidising the North: through cheaper exports of goods and services, through net capital flows from developing countries to the US in particular, through flows of cheap labour in the form of short-term migration.

The recent collapse in export markets halted that process for a while. Although there has been a recovery, it is very evident that such a strategy is unsustainable beyond a point. This is particularly true when a number of relatively large economies seek to use it at the same time. So, not only was this a strategy that bred and increased global inequality, it also sowed the seeds of its own destruction by generating downward pressures on price because of increasing competition as well as protectionist responses in the North.

So there are both external and internal reasons why it is hard to sustain such a strategy beyond a point. Externally, deficit countries will either choose or be forced to reduce their deficits through various means, and protectionist responses. Internally, the potential for suppression of wage incomes and domestic consumption will meet with political resistance. In either case, the pressures to find more sustainable sources of economic growth, particularly through domestic demand and wage-led alternatives, are likely to increase.

The process of global economic rebalancing was initiated by the financial crisis and is now likely to get accentuated through the current fragile recovery and potential instability of the near future. One important result is developing countries (and the surplus countries like China in particular) can no longer depend on exports to US as their primary engine of growth. The US trade deficit is set to shrink, and at a fundamental level it really does not matter whether this occurs through exchange rate changes, changes in domestic savings and investment behavior or increased trade protectionism.

So countries must diversify their sources of growth, looking for other export markets as well as for internal engines of growth. This is what makes arguments for a shift in strategy towards domestic wage-led growth so compelling.

In developed countries with relatively strong institutions that can affect the labour market, including collective wage bargaining, effective minimum wage legislation and the like, it is probably easier to think of wage-led growth and strategies to allow wages to keep pace or at least grow to some extent) along with labour productivity growth. But what about most developing countries, where such institutions are relatively poorly developed and where many if not most workers are in informal activities, often self-employed? How are wage increases and better working conditions to be ensured in such cases? And what does a macroeconomic policy of wage-led growth entail in such a context?

In fact, it is still both possible and desirable to get wage-led growth in such contexts. There are five important elements of such a strategy in developing countries with large informal sectors:

• Make the economic growth process more inclusive and employment intensive: direct resources to the sectors in which the poor work (such as agriculture and informal activities), areas in which they live (relatively backward regions), factors of production which they possess (unskilled labour) and outputs which they consume (such as food).


• Ensure the greater viability of informal production, through better access to institutional credit to farmers and other small producers, greater integration into supply chains and marketing that improves their returns, and technology improvements that increase labour productivity in such activities.


• Provide increases in public employment that set the floor for wages (for example, in schemes such as that enabled by the National Rural Employment Guarantee Act in India) and improve the bargaining power of workers.


• Provide much better social protection, with more funding, wider coverage and consolidation, more health spending and more robust and extensive social insurance programmes, including pensions and unemployment insurance.


• Increase and focus on the public delivery of wage goods (housing, other infrastructure, health, education, even nutrition) financed by taxing surpluses.

The last point is often not recognised as a crucial element of a possible wage-led strategy, but it can be extremely significant. Furthermore, such a strategy can be used effectively even in otherwise capitalist export-oriented economies, as long as surpluses from industrialisation and exports can be mobilised to provide wage goods publicly. Indeed, this has been an important and unrecognised feature of successful Asian industrialisation from Japan to the East Asian NICs to (most recently) China. The public provision of affordable and reasonably good quality housing, transport facilities, basic food, school education and basic healthcare all operated to improve the conditions of life of workers and (indirectly) therefore to reduce the money wages that individual employers need to pay workers. This not only reduced overall labour costs for private employers, but also provided greater flexibility for producers competing in external markets, since a significant part of fixed costs was effectively reduced.

What are the macroeconomic advantages of such a strategy? Quite apart from the obvious benefits in terms of reducing poverty, improving income distribution and the conditions of informal workers, there are positive implications for the growth process. It allows for more stable economic expansion based on increasing the home market, and need not conflict with more exports either. It encourages more emphasis on productivity growth, thereby generating a “high road” to industrialisation.

Clearly, if countries in which the majority of the world’s population are concentrated are actually to achieve their development project in a sustainable way, new and more creative economic strategies have to be pursued. Wage-led growth, including through measures such as those outlined here, is likely to be an essential element of such strategies.

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Jayati Ghosh is Professor of Economics at Jawaharlal Nehru University, New Delhi, and Executive Secretary of International Development Economics Associates (http://www.networkideas.org/). She has consulted with many international organisations and governments, and works actively with progressive organisations in India and elsewhere.

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More pay and more jobs: how Brazil got both

Paulo Eduardo de Andrade Baltar

So far, the 21st century has been good to many Brazilians. Formal employment and the minimum wage have risen, the purchasing power of those earning average pay has recovered, open unemployment has fallen, and undocumented subcontracting has been curbed. Average household incomes have risen and poverty has declined. Positive macroeconomic developments, a range of progressive government policies and improved collective bargaining outcomes have all played a part in this.[1]

Purchasing power regained

Under the two successive presidencies of Luiz Inácio Lula da Silva (“Lula”), income inequality in Brazil has shown just a small decrease, from a Gini index of 0.58 in 2002 to 0.55 in 2008. Much more significant is the marked change in the labour market configuration, which has had a very positive impact on poverty levels. From 61.4 million people in 2003, the number living in poverty dropped to 41.5 million in 2008 (a cut from 34.3% to 21.9% of the total population). Those in absolute poverty fell from 26.1 million in 2003 to 13.9 million in 2008 (from 14.6% to 7.3%).

The recovery in the purchasing power of the minimum wage has been crucial here. It really gained momentum from 2005 on, when the federal government made an explicit commitment to promoting it. Between 2003 and 2008, the minimum wage rose faster than inflation, providing workers at the base of the income pyramid with significant real gains (38.3%). The government established a policy of annual adjustment that takes account of past inflation and adds up the average GDP growth of the two previous years. There has also been an important, though smaller, increase in the real median wage. Its purchasing power rose by 23.5%.

Formalising jobs

The increase in the average growth rate of GDP over the period 2004-2008 had significant positive impacts. The labour market absorption of working age people increased and unemployment went down. At the same time, the relative weight of informal employment, self-employment and unpaid work declined. The proportion of formal employment in the whole economically active population (including the unemployed) aged 15 and above increased from 36.1% in 2004 to 40.9% in 2008. There was an especially significant increase in the formalisation of youth jobs. This is important, as formalisation brings workers within the effective scope of labour law and social security provisions. More than 95% of the formal jobs created are on open-ended contracts. However, this does not imply job security. Brazilian employers have great flexibility in hiring and firing. For example, in 2009, in the midst of the crisis, just under a million formal jobs were created within a total of 33 million employees registered in Brazil. But that was the net job creation figure. There were 15.2 million dismissals as well as 16.2 million new hires.

Recent Brazilian experience contradicts the frequent assumption that a minimum wage will lead to net job losses and inflationary pressures. Rather, it points to the importance of public regulation of the national labour market. In Brazil, employees who are formally hired cannot be paid less than the established legal minimum. But the minimum wage is also a reference point for most informal workers and many of the self-employed. And its revaluation has had a positive influence on wage negotiations, especially on setting wage floors for some occupational categories.

Income transfers

Social security provisions have been a further important means of income distribution. A non-contributory scheme brought in for rural workers has helped to put them on an equal footing with urban workers, and a Continuous Money Benefit has ensured an income for some particularly disadvantaged groups. In both cases, the benefit cannot be below the value of the minimum wage (in line with the general social security guidelines for retirement or survival benefits). But the explicit policy of revaluing the minimum wage has not worsened social security deficits, as the good performance of the economy and the expansion of formal jobs have boosted the system’s revenues. On the other hand, the increased purchasing power of the rural pensioners and other poor beneficiaries has resulted in increased disposable income within the country’s smaller communities, especially those in the long-impoverished North-East. More effective social security coverage has also indirectly helped to improve the labour market, as a guaranteed income for senior citizens enables them to stop seeking work. And it allows some dependent minors to avoid premature entry into the labour market, thus reducing the incidence of child labour.

The various conditional income transfer schemes have been grouped into one single Family Grant programme which now covers more than 11 million families. It transfers a monetary supplement to families with an insufficient income per capita to avoid situations of extreme deprivation. In return, they agree to maintain their children’s and teenagers’ school attendance, seek medical care for expectant mothers and newborn babies and withdraw their children from child labour. This programme is intended as temporary support, allowing family members some time to seek better labour market insertion. However, even during the period of economic growth and employment expansion in 2004-2008, the vast majority of the families were unable to meet the conditions for leaving the programme.

Unemployment insurance is another important safety net. Despite the employment expansion in 2004-2008, the number of people drawing unemployment benefits actually rose. This was because the greater formalisation of jobs, which increased the number of those covered by unemployment insurance, was not accompanied by a reduction in employee turnover. The increased expenditure on unemployment pay-outs also stemmed from the real increase in the minimum wage, as the minimum benefit is equal to the statutory minimum wage.

Unemployment benefits helped to maintain households’ spending power during the worst period of the economic crisis, between the end of 2008 and the beginning of 2009. The benefits have also been contributing to the promotion of decent work in Brazil, as they are payable to workers who are rescued from slave-like employment relationships, during the time it takes to reinsert them into the labour market.

The role of trade unions

Although it has seven recognised trade union centres and more than 1,600 unions, the Brazilian labour movement has been demonstrating greater unity in action in recent years. Even during the crisis of 2008-2009, a large proportion of the occupational categories managed to bargain up the purchasing power of their wages. The negotiating climate has changed significantly since 2003. Rights are no longer being bargained away in exchange for the maintenance of employment. The relaunch of Brazil’s development agenda has increasingly shifted the union focus to winning back lost rights and making broader demands – notably for a 40-hour week.

The unions’ relationship with government has also moved forward, facilitated by President Lula’s social origins and the 1988 constitutional provisions for greater policy participation by the social actors.

A real development agenda

The Brazilian labour market still faces considerable structural problems, but opportunities do exist for sustained development in the coming years. It should be characterised by a policy of economic growth, an active industrial policy, coordination of efforts to solve the infrastructural problems, respect for the environment, expansion of the public services, the linking up of production chains, investment in science and technology, and restructuring of the State. Provided employment can be generated, there is also the possibility of extending public labour regulation and social protection. Public institutions should be strengthened as a way of fighting labour market fraud. ILO Convention 158 on termination of employment should be applied in order to counter unjustified exemption mechanisms. Although Brazil ratified this Convention in 1995, it pulled out of it again in 1996. A trade union reform should be brought in, so as to increase the representativeness of the unions and secure their organising rights in the workplace. Also crucial is continuity in the policy of revaluing wages, particularly the legal minimum wage.

Brazil can and should create a development model that distributes income and dignifies citizens.

1 Baltar et al, Moving towards Decent Work. Labour in the Lula government: reflections on recent Brazilian experience, Berlin 2010.

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Paulo Eduardo de Andrade Baltar is a researcher at the Centre for Labour Economics and Trade Unionism - CESIT – in the Institute of Economics of the State University of Campinas – UNICAMP – Campinas, São Paulo, Brazil

Additonal readings

GLU Working Paper No.9: Moving towards Decent Work. Labour in the Lula government: reflections on recent Brazilian experience; May 2010; by Paulo Eduardo de Andrade Baltar, Anselmo Luís dos Santos et al

or in Portuguese

GLU Working Paper No.9: Trabalho no governo Lula: uma reflexão sobre a recente experiência brasileira; May 2010; by Paulo Eduardo de Andrade Baltar, Anselmo Luís dos Santos et al

Making its voice heard: a role for the labour movement in policies for recovery

Andrew Watt

Let us be optimistic and assume for the sake of argument that the economic crisis is behind us and the world’s economies will return slowly to ‘trend’ growth. What are the main challenges facing policymakers and, especially, the labour movement? There are the urgent issues of rethinking our financial system (key to averting a relapse into crisis down the line) and the medium-run need to manage the transition to an ecologically sustainable growth model. In the middle are a set of intertwined challenges on which I want to focus here: getting unemployment down; getting fiscal deficits down; and reducing inequalities. All these are vital if we are to move towards a sustainable economic and social growth model that serves the interests of the many, not the few.

The good news is that these aims are not mutually exclusive. On the contrary, there is a set of policies – a policy mix – that can achieve them all simultaneously. The bad news is that in many cases such policies do not seem to be high on the to-do lists of policymakers. Getting the balance between monetary, fiscal and wage policy right, over time and across countries, is not quite everything, but it is key to addressing the grave challenges that face us and avoiding a backlash in favour of reactionary policies.

What would that policy mix look like?

Key to getting both unemployment and fiscal deficits down is returning to faster economic growth. Merely getting back to ‘trend’ growth rates – in the advanced countries 2-3% a year – will not be enough. For the foreseeable future this requires the maintenance of aggressive stimulus measures in most countries (I’ll come back to the ‘most’ caveat).

It is vital that the world’s leading central banks uniformly commit to keeping interest rates at or near zero for the foreseeable future and fiscal expansion is initially maintained as far as possible.

But what about the risk of inflation and the problems of overburdened government budgets? Actually, both factors are arguments for sustained expansionary monetary policy. Government budgets are indeed in a parlous state in most countries, ‘inviting’ welfare state cutbacks. Low interest rates are absolutely vital to bringing them back close to balance. Lower policy rates help to keep the interest paid by governments down, thus limiting debt-servicing costs. They stimulate real economic growth and, not least, bring about a desirable rise in the rate of price increases. Why desirable? Because inflation is substantially below target, and faster inflation raises the nominal rate of economic growth, which is decisive for fiscal consolidation. (Ch. 2 of this shows just how important this effect is.) Specifically in the euro area, a faster average rate of inflation would also dramatically ease the solution of the adjustment problems for those countries (like Greece and Spain) that have to reduce their relative wages and prices. And if you are worried about bubbles, regulate the markets – don’t kill the economy with high interest rates.

Given an extended period of low interest rates, what should fiscal policymakers do?

Deficits will be reduced only when the economy picks up sufficiently for unemployment to fall. In the short-run this means most counties still need an expansionary fiscal policy. With monetary policy still up against a zero bound and with the banking system still sluggish, fiscal policy has a vital role to play in sustaining demand and also channelling spending towards socially desirable outcomes, such as lower inequality or the transition to a low-carbon economy. At the same time, credible consolidation plans should be announced now and foreseen with an appropriate ‘trigger’. It makes no sense to use an arbitrary date (‘the start of 2011’) as a starting-point. Instead a sensible real-economic trigger (a certain output or employment target), tailored to national conditions, should be used.

A key challenge for the labour movement is to ensure that, in qualitative terms, these consolidation measures are favourable to working people. This implies a focus on strengthening revenue capacity, and deflecting the tax burden away from labour and on to capital, high incomes and material resources. Specifically, progressive political forces should unite behind calls for a financial transactions tax (at international or European level) and for the introduction of an EU carbon tax with a levy at the external border.

Should all countries run the same expansionary fiscal policies?

No. Those countries with relatively low deficits/debts and with current account surpluses should do more for longer to stimulate their economies. In the euro area this means Germany, Austria and the Netherlands. Faster demand growth in these countries would be good for employment and would dramatically ease the adjustment issues facing the euro area. Similar considerations apply at the global level to Japan and China; (in the latter case, best via a return to a policy of steady exchange-rate appreciation). Fiscally constrained countries must attempt as far as possible to sustain demand while coping with their adjustment problems; clamping down on tax avoidance would raise revenue without depressing demand so much. Demand and price deflation is almost always the most costly strategy. There’s a better way.

And what about wage policy, unions’ ‘core business’?

It is both simple and hard at the same time. In ‘equilibrium’, real wages should rise at the same rate as labour productivity, nominal wages at that rate plus an allowance for ’desirable’ inflation. In most advanced capitalist countries real wages did not keep pace with labour productivity during much of the neoliberal period: rising profits, siphoned off by the financial sector and CEOs and channelled into speculation, were a major cause of the crisis. In a nutshell, this happened because the institutional structures that underpinned the balanced growth, and especially the productivity-wage nexus, of the Fordist era were destroyed by neoliberalism. Modern equivalents need to be found. No general blueprint for this can be given, but progressive governments and union movements have to start designing and developing such mechanisms. Some useful points of departure include establishing or strengthening minimum wages and governmental support for collective bargaining institutions (e.g. extending the coverage of representative collective agreements or reducing free-riding by charging non-member firms and workers a bargaining levy). An important role can be played by measures to reduce price pass through by companies: there is a strong progressive case to be made for ‘smart deregulation’ of product and services markets to reduce firms’ pricing power and thus raise real wages.

The right path for nominal wages is key. In the short run, the concern is to avoid deflationary wage developments (concession bargaining) which will hamper, not aid, recovery as generalised price deflation may take hold. In the medium run, as the recovery hopefully strengthens, nominal wage increases in line with the above rule will help underpin continued expansionary monetary policies.

Within a monetary union, the issues are rather different. As recent events have shown, persistent divergences from the nominal wage norm (in both directions) can build up in the member countries over a longer period. Then suddenly they require correction - one-sidedly by deficit countries - in the worst possible context, a deep economic and fiscal crisis (a crisis to which the imbalances were an important contributing factor). The key step here is for the surplus countries to engineer faster wage growth. Once again, the policy goals are not in conflict: a good way to achieve this in the short term is to run more expansionary fiscal policy. At the same time, deficit countries need to reduce their relative price levels. As I said there is a better way than fiscal contraction and a deep recession to induce deflation: some form of social pact to freeze wages and prices (ideally against the background of faster area-wide inflation).

What can labour hope for?

There is a path out of the crisis, one leading to stable and balanced economic growth and a steady return to lower unemployment, sound public finances and rising real wage incomes. There are no insuperable goal conflicts or fundamental problems in moving on to this trajectory, and labour’s key interest must be to get onto it. However, for this to occur, the key areas of monetary, fiscal and wages policy need to be well coordinated with one another, both across time and space. The coordination mechanisms that do exist at the supranational (European, global) level are weak (the EU Macroeconomic Dialogue), flawed (the Stability and Growth Pact) and/or nascent (the G20). Meanwhile, the forces of globalisation undermine those coordination mechanisms that were, or still are, effective at the national level. Charting out the required policy mix is relatively easy and positive steps are possible even with the limited coordination structures currently in place. What will be harder is moving towards newer, more effective, coordination structures that permit economically efficient, socially just and ecologically sustainable outcomes over an extended time horizon.

Neoliberalism has been decisively weakened by the crisis, but its proponents are regrouping. There is still an opportunity for labour to make its voice heard in a progressive restructuring of global, European and national structures. It has a vital interest in doing so. It has good arguments. It must also shout, and the others must be persuaded - or forced - to listen.

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Andrew Watt is a Senior Researcher at the European Trade Union Institute (ETUI). He edits the ETUI Policy Brief on European Economic and Employment Policy and is co-editor of a recent book "After the crisis – towards a sustainable growth model". He writes a monthly column for the "Social Europe Journal".

Further links

• http://www.etui.org/research/Publications/Regular-publications/ETUI-Policy-Briefs
• http://www.etui.org/research/activities/Employment-and-social-policies/Books/After-the-crisis-towards-a-sustainable-growth-model
• http://www.social-europe.eu/author/andrew-watt/