Friday, November 22nd, 2019

Speech by ESBA President David Caro on the occasion of the 30th anniversary of UPEE on “Challenges to the development of EU Industrial Relations”

ESBA President David Caro with UPEE’s Violina Nakova and LOW’s Sally LOW at UPEEE’s 30th anniversary event in Sofia, Bulgaria.

On Thursday the 20th of November 2019, ESBA President David Caro gave a speech on the occasion of the 30th anniversary of ESBA Member Union for Private Economic Enterprises (UPEE) in Sofia, Bulgaria.


The full speech is available below.

Dear Friends and Colleagues,
Dober Den!

It is a pleasure and a privilege to join you here for the 30th Anniversary of the Union for Private Economic Enterprise.

As President of the European Small Business Alliance, representing nearly a million small businesses in countries across and beyond our European Union, I bring you fraternal greetings from your friends and colleagues across Europe.

It has been most interesting to hear more of the history of your Union and the part it has played in promoting the role which private enterprise and entrepreneurs can play in the transition to a social market economy. We must not take for granted what has been achieved over these last thirty years; the successes achieved here and in other former Comecon states bear testimony to the courage, determination and enterprise of the peoples of Europe, working together in creating a stronger Union.

Especially, I want to say that we who run small businesses, and I am one, having my own manufacturing company, part of the automotive supply chain, employing 15 people based in Birmingham UK, should never underestimate the crucial part we play in economic development. Governments can help or hinder, and large multinationals appear to occupy the commanding heights of an economy, but it is from those who start up and sustain small and growing businesses that the jobs are created, the innovation comes, and the dynamism of new businesses is fashioned.

We at ESBA, with the support of our Members, are social partners within the fabric of the European Institutions. It is vital that we continue to do so. The Single Market in Europe can make the biggest difference to ambitious smaller businesses, as it creates access to finance, to a more diverse labour force and to bigger markets. Barriers and regulations always tend to favour larger companies. As we reduce the barriers to trade, so we should give proportionately greater opportunities to SMEs across Europe. I was very pleased, therefore, to see the emphasis which the new Commissioner-designate, Thierry Breton, gave to SMEs regarding our access to finance and reducing regulatory barriers to growth.

Building the European Single Market is a challenging process, given the scale of changes in all our markets. Nor is the Single Market simply about harmonising regulations and removing national barriers. It must create a digital single market, which adapts to national and EU fiscal rules, and which continues to be the social market which is so distinctively European.

By this, we look for a European economy which is fully competitive internationally, but with a structure of social protection and welfare which means we can maximise the wellbeing of whole populations, rather than see the effects of market concentration leading to deepening inequalities.

In 2002, the Commission’s High-Level Group on Industrial Relations identified 6 challenges for industrial relations in Europe: globalisation, the emergence of the Eurozone, EU enlargement, technological change and the knowledge economy, demographic trends (especially ageing), and changes in the labour market. Today, there are other challenges that affect industrial relations in Europe, including fall in competitiveness, changing jobs and skills, regional imbalances, climate change and the ensuing need to green the economy, socio-political changes, and EU specific events (e.g: Brexit, next budget).

The notion of producer and consumer is blurred and e-commerce is shifting functions from retail to logistics and adding some new skills requirements with regard to online marketing and communication. The challenge for unions is to reach collective agreements, access to secure employment and good work within the emerging logistics and delivery functions, which are increasingly flexible and attuned to customer demand. The implications for industrial relations arising from the growth of e-commerce and online sales are not clear-cut. On the one hand, given the low incidence of unionisation in SMEs, the emergence of larger semi-monopolistic players in the e-commerce sector may provide new opportunities for trade union intervention and unionisation. However, this trend may also be associated with challenges. The growth of online sales and e-commerce could over time lead to a decline in face-to-face retail employment, thus raising issues associated with downsizing of the retail workforce. It may also increase the importance on services associated with online sales, such as logistics and just-in-time delivery, leading to increasing trends of outsourcing and automation, which could pose challenges for unionisation and collective bargaining in the sector.

Today, more than 40 per cent of working people in Europe are in self-employment or non-standard employment. Atypical employment contracts (fixed-term work, on-call contracts, casual work etc.) are gaining prevalence. While creating new opportunities for jobs, these flexible arrangements lead to uncertainty, especially when it comes to job security and social security coverage. With the rise of a platform economy, millions of people declare platform work as their main source of income. This raises questions about “uberisation of the workforce” and decent work conditions, as platforms rely on atypical employment arrangements and reduce costs of service provision by getting users, or crowd workers, to use their own assets (bike, cars, apartments and tools) to provide services. Self-employed and platform workers have certainly entered the agenda of unions, despite posing challenges compared to traditional firm-based members. The most recent challenge is the type of false self-employment we see in the platform economy, whereby so-called self-employed persons work exclusively for one large platform, often on a zero-hour contract.

Alongside employment challenges, other trends include the erosion of nationally based employment protection, due to increasing economic internationalisation of companies and global value chains, and their diminishing interest in national institutions of employment regulation and unwillingness to provide the tax revenues necessary to sustain welfare states. Moreover, with the emergence of multinational companies, the nature of collective bargaining is also changing towards ‘transnational’ collective bargaining.

The growth of company-specific employment regimes, which shift bargaining power from unions to employers, increases decentralisation of companies and their subcontracting of activities, which escape the web of collective regulation, as well as the rise of the informal economy, appear among other trends that have an impact on European industrial relations.

Furthermore, trade union membership is in decline. Challenges of unionisation in the service sector include, difficulties in establishing trade union density due to fragmentation and spatial distribution of employment, and uneven patterns of industrial relations between new and more established service sectors, among SMEs especially, there is a low incidence of unionisation.

Our industrial relations system was designed in the industrial age, during the 20th century. Institutionalised industrial relations were founded on a normal employment relationship, collective organisation and bargaining, union recruitment, full time employment etc. and collective withdrawal of labour could have a persuasive impact. This system no longer serves its purpose in the 21st century era of atypical employment which utilises a diversified workforce in terms of gender, ethnicity and employment status, and decreased job security through fixed term contracts, agency work, subcontracting, dependent self-employment and unpaid internship. Our industrial relations system should be adapted to Industry 4.0, through the digital transformation of trade unions, inter alia. This does not mean that we should do away with our core values, such as social dialogue embracing workers and owners, which is taking stronger shape, not least because of the convergence of interests between management and workers, but needs wider inclusivity, particularly relating to the small business sector. We all see digitisation reshaping markets, AI radically changing some jobs, ageing societies putting a premium on labour and demanding greater skills. For owners and managers, these all mean we need more skilled, more adaptable workers; and for the workers themselves, this spells opportunity, which is the basis of the European industrial relations system, permitting us to reach compromises among employers, workers and public institutions. We cannot expect people to work flexible hours, to have many different jobs and to learn for the rest of their life without guaranteeing their social rights.

From its onset, the EU supports sectors that are traditionally seen as strategic, such as steel and automotive, dating back to its first incarnation in 1957. The EU’s unique social model has played an important role in building the internal market. The EU Charter of Fundamental Rights specifically promotes an EU system of industrial relations by virtue of it including rights of association, collective bargaining and collective action.
There are around 70 EU social directives, protecting workers and giving them rights in areas such as health and safety, non-discrimination at work, working conditions, as well as information and consultation about collective redundancies, transfers of companies and other workplace issues. The financial and economic crisis in 2008 and the political responses have made European industrial relations fractured, disrupting mechanisms of bargaining coordination and creating a certain divide between countries with more resilient industrial relations and lower inequality levels, and other countries in which industrial relations weakened and income inequality increased.

In this context, the European Commission, in 2015, launched a ‘new start’ for European social dialogue reinforcing social rights and enhancing sustainable and inclusive growth, laying the foundation for the pursuit of industrial democracy, growth and equity. In a joint statement in June 2016, the Commission, Council of the European Union and social partners underlined its fundamental role as a significant component of EU employment and social policymaking.

In 2017, the European Commission launched the European Pillar of Social Rights, a new flagship initiative aimed at achieving better convergence in industrial relations in which the ‘social dialogue’ plays a central role.

The Pillar calls for “building a more inclusive and fair European Union where all member states converge on a set of 20 principles and rights’, which can be structured around three categories: Equal opportunities and access to the labour market: Fair working conditions, and Social protection and inclusion.

A key role in the implementation of its principles is played by the European Social Fund, Youth Employment Initiative, Erasmus+, European Globalisation Adjustment Fund and the Fund for European Aid to the most deprived.

To complement the Communication introducing the Pillar, a number of legislative and non-legislative initiatives are planned to be adopted in the field of work-life balance, information for workers, access to social protection and working time.
The EU Member States committed to implementing the Recommendation on Access to Social Protection to harmonise social security systems, pension systems and health coverage. Moreover, this coverage is meant to be transferred between jobs, and jobs status.

The Commission also put forward the New Skills Agenda in 2016 aimed at employability and prosperity, while linking attention to skills, human capital and working conditions to industrial policy in the EU. Moreover, the future European Social Fund Plus, at 101 billion euros, is expected to help people to adjust to change.

Since the 1990s, European trade unions attempted to coordinate their wage bargaining policies at EU level in order to prevent ‘a race to the bottom’ in terms of wages and working conditions within the Eurozone, this proved rather unsuccessful. However, collective bargaining helped to create alternatives to layoffs and assisted many countries in maintaining their level of labour and social indicators. Some collective agreements succeeded in reducing inequalities with regard to access to jobs, social protection and pensions, and to better protect workers trapped in atypical contracts. Some other arrangements have permitted employees to achieve a better balance between work and family life. Also, higher levels of trade unionization and collective coverage of women seem to have had a positive effect on narrowing the gender pay gap. Ultimately and finally, our lawmakers must understand that there are good and bad in both employers and employees. A disruptive worker in a small business can be so damaging, and legislation that only recognises employee rights, without paying attention to their responsibilities to those who employ them, is flawed legislation. The old maxim that a good law is a balanced law still holds true today.
This is, and should be, the context for our work on developing Industrial Relations in the EU. The Junker Commission has placed an admirable emphasis on the Social Pillar. EU legislation has been directed to putting a minimum structure of social protection in place, to avoid social dumping and to ensure that our economy is one of which we can be proud
At one time, the contest between labour and capital was conducted as if it was a zero-sum game; a fixed return had to be divided between them. It was rarely true and even less so today. We know, in SMEs, that the quality of one’s workers and the relationships which we create, with staff, customers and suppliers, are integral to success; and a well-motivated and well-rewarded workforce deliver value to owners too.
This is not an agenda for mandating collective bargaining across enterprises. Businesses should manage their own reward structures. But it is a framework for unions, employers and governments to work to ensure that workers can secure support as skills and jobs change, as the shape of employment itself is disrupted.

And it should mean that as markets adapt rapidly to digitisation, AI and climate change, we should not see workforces and business sectors left behind. We will need sectoral support for those changes. The European Commission, as we can see from the structure of the new Commission Programme, are alive to these needs.

Across Europe, it is equally true that economic development is not straight forward. We won’t make poorer regions richer by making the economic powerhouses of Europe poorer. Through our Single Market and a cohesive market for skills and jobs, we can encourage European businesses to continue to create many hubs for industrial success.
The reduction of barriers, and smart investment in new technologies, can mobilise business to serve wider markets from the less-developed regions. That will be a positive gain for Europe as a whole. It will alleviate stresses in the Eurozone. And it will mean that the less prosperous regions of Europe will grow and develop.

This is fundamental to our concept of a Social Market; competitive, efficient, equitable, fair, most of all, enterprising.

As you consider how much you have achieved over 30 years, we can also consider how many and how profound will be the changes in the next 30 years.

A carbon-free economy, labour shortages, rapid adoption of AI, digital markets, all will become the norm, but will global trade be freer or more protectionist? For example, will the US let cars with Chinese semi-conductors and operating systems for autonomous vehicles into cars on American roads?

Europe sets standards. We can lead. We can create industry leaders in the future, as we have in the past, if we have a strong European market. But the wellspring of that future economic success will be in private enterprise, in entrepreneurs, in your members.

I wish the UPEE continued success for the decades ahead.