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Contribution to the OECD Expert Workshop on Inclusive Growth, April 3, 2013

By Michel Mercadié, member of the Social Platform Management Committee

With 26 million people in the EU having no job unemployment has reached a historically high level. Poverty has drastically increased to almost 120 million people and is deepening in many member states.

Next to this, inequality is growing. Income inequality in OECD countries is at its highest level for the past half century. The average income of the richest 10% of the population is about nine times that of the poorest 10%. Furthermore, the reduction of numbers of public school teachers and higher tuition fees to access schools and universities – for example a 50% increase in the UK – make it more difficult to access quality education for children and young people coming from low-income families.

Social and health services across Europe have been severely hit over the last years by austerity measures. Increasing cuts in public health budgets are fostering health inequalities as the costs are shifted to households. Access to and financing of childcare services and care services for the elderly and other dependents has been reduced. Some countries have limited access to public day-care for children to families where both parents are employed, leading to an increased care-work load on the unemployed and limiting their possibility to look for a job. In Ireland public beds in nursing homes have been reduced. In the Netherlands programmes to facilitate disabled persons have been cut.

What actions have to be taken?

To respond to the deteriorating and preoccupying social situation in Europe, the EU and its member states need to act now by supporting inclusive growth through increased social investment and better governance.

Social budgets must be protected when developing actions to tackle macro-economic imbalances, in order for growth to be inclusive. In this context, it is necessary to ensure that member states commit to keep a high level of funding for the EU cohesion policy, and that 25% of the cohesion funds is allocated to the European Social Fund. Having a strong EU budget is good for the implementation of EU common objectives at European and national level.

The EU and its member states must invest in services of general interest and strengthen social protection. Empirical evidence shows that investing in and maintaining sufficient level of public spending in social and health services and, social protection can not only help improve the social situation but also would support growth and save costs in the long-term. Cutting social and health services will lower their quality, not meet the current demographic challenges and threaten the economic recovery prospects for Europe.

Furthermore, the EU and its member states must invest in the creation of, access to and progression in quality and sustainable employment. This includes developing the social economy and the job potential of the social and health care services sector, the creation of jobs accessible for people with lower skills, and bringing the labour market closer to all people, including through the implementation of a Youth Guarantee. Ensuring quality and sustainable jobs – including by setting decent minimum wages in all member states – will counter the increase of in-work poverty, precariousness, indecent working conditions and labour market segmentation.

There is an urgent need to develop a true and integrated anti-poverty and social inclusion strategy at EU and national level, supported by an appropriate budget. It should include the integrated implementation of the 2008 Active Inclusion Strategy, combining the equally important strands of adequate minimum income schemes, inclusive labour markets and access to high-quality social services.

Alternative sources of financing social policies need to be developed. A bigger EU budget fuelled by the revenues of financial transaction taxes or other schemes not based on national contributions, is fundamental for greater social cohesion. National authorities should commit to fairer re-distribution through tax justice, by supporting increased revenue through a higher focus on progressive income tax, and on taxes on capital and environmental risks. Raising revenue that negatively affect low income groups disproportionately, e.g. increases in VAT on basic goods and services, have to be avoided.

Social targets should be mainstreamed in all other policies, financial and economic policies in particular. The social impact of main policy actions across the EU has to be assessed and solutions have to be provided to redress negative social consequences of financial and economic policies. An example for this is promoting use of social and environmental considerations in public procurement in addition to promoting sound management of public finances.

Barriers to employment and social inclusion can be removed further by investing in equality, in particular through the adoption of the Article 19 Equal Treatment Directive. Discrimination plays a crucial role in preventing people from being lifted out of poverty and from accessing education and the labour market.

At the moment, a wide inclusive and democratic process to decide upon economic and social priorities is clearly missing. Further integration and plans for growth could only make the EU more social and closer to citizens’ aspirations if decisions are discussed by a wide range of stakeholders, including NGOs and social partners. Also, the European and national Parliaments have to be given real power in the EU economic governance processes.

Social and economic policies on equal footing

In the context of the Europe 2020 strategy for smart, sustainable and inclusive growth, member states committed to a reduction of poverty and an increase of employment. However, the current discussions and policies agreed to create growth, are clearly overlooking these social objectives, being driven by mere economic and budget concerns.

The EU and its member states urgently have to put social considerations on an equal footing with fiscal and economic priorities in all components of EU governance. This is not a minor evolution but it is needed to prevent people from living in a segregated world and from fearing unemployment and extreme poverty. This is the only road for Europe to efficiently and effectively achieve smart, sustainable and inclusive growth.

 This article was originally publiched in the OECD Workshop on Inclusive Growth – Opinion notes, April 3, 2013.