A model solution for European workers

The UK is about to start its latest six-month presidency of the European Union, and it is a difficult time. The proposed EU constitution is in cold storage, much of the euro currency area suffers mass unemployment, and the original Lisbon strategy for structural reform has had to be kick-started.

The debate over the causes of Europe’s economic malaise revolves around the ‘European Social Model’, which is unfavourably compared with the UK’s version of the lighter regulated ‘Anglo-Saxon model’. But while it is generally accepted that Anglo-Saxon economics convey many advantages, there is a common assumption that the European model smooths the rough edges of free market capitalism and is better for the workers. However, the evidence does not support this view. Large-scale official surveys find that around one in three EU workers are very satisfied with their working conditions, which is no higher than the Chartered Institute of Personnel and Development (CIPD) job satisfaction measures for the UK. But why might this be the case?

Take pay. The latest Eurostat figures (for 2002) place the UK third in the EU average pay league behind Luxembourg and Germany but well ahead of France, Italy and the Scandinavian countries. Admittedly the UK does have a wide pay distribution and a relatively high proportion of low-paid workers, but this is because we prefer to price low-skilled people into jobs rather than support them on benefits. And doing so by offering in-work tax credits means that the UK has a relatively low proportion of working poor by EU standards.

Meanwhile, constant talk of the UK’s long-hours culture is misleading. The same flexibility that encourages a high rate of workaholism in this country promotes an equally high incidence of part-time working. The UK could, therefore, just as well be characterised as having a short-hours culture. Likewise, the evidence that Europe’s Social Model makes workers more secure in their jobs is far from clear cut. While tougher European restrictions on employers’ ability to fire staff improves the job security of workers on permanent contracts, it also encourages hiring of temporary staff who often feel far from secure. The proportion of employees on temporary contracts averages 14% across the EU – double the UK rate – a fact that should be set against the superior job security of EU workers on permanent contracts.

Continental Europeans are understandably wary of the harsher aspects of the Anglo-Saxon model – especially in its starker US guise. But the UK experience over the past decade shows that it is possible to operate a version of Anglo-Saxon economics that serves the common social good as well as the economy. The people of Europe would appear to have little to lose and much to gain from moving in our direction.

John Philpott is chief economist, Chartered Institute of Personnel and Development

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