European Pillar of Social Rights: delivering a European Social Union

Thank you very much for the invitation, to be here today, which is also an occasion to celebrate the fifth anniversary of the Proclamation of the European Pillar of Social Rights. This is a forum. As you know, the Latin word Forum refers to the public square in any Roman municipium, primarily reserved for the market but also a gathering place of great social significance, such as to organize political discussion and deliberation. When I read the program of this two-day conference I was positively surprised by the richness of topics and the number and quality of speakers involved in this forum.

It so happens that in 2019, my Italian friend Maurizio Ferrera and I launched a Forum debate on The European Pillar of Social Rights and the Roadmap for a fully-fledged Social Union. We wanted to reflect ahead of the European Elections of 2019 on the initiatives to be included in the next Commission agenda with a view to create a true Social Union, and in particular on the role the Pillar might play in that. With hindsight, I can only be very positive in my assessment of the Pillar’s role, if I see how many of the proposals we discussed in that Forum are now not only part of the EU agenda but have materialized in very concrete policy proposals, such as: the directive on work-life balance, the directive on Transparent and predictable working conditions, the creation of the European Labour Authority, the Council Recommendation on access to social protection, the European Child Guarantee and the more recent directives on minimum wages and pay transparency, as well as the still under debate directive on Platform workers. We also see some principles of the Pillar emerge in the European Semester, which is the surveillance framework for  fiscal and budgetary policies, first via the Social Scoreboard and now potentially via the Social Imbalances Procedure. More recently, the link between the ESPR and the new Recovery and Resilience Facility confirms the idea that resilient, inclusive, activating welfare states are a pre-condition for well-functioning of the EMU as well as the Single Market.

But back to 2019, we also wanted to understand the Pillar as a vehicle on the way to a true European Social Union. We coined this expression – a ESU – because we felt the need to clarify our thinking on the EU’s social role. The EU is a Union of welfare states, with different historical legacies and institutions. National welfare states remain responsible for organizing interpersonal redistribution among their citizens. At the same time, they should organize tangible solidarity among themselves as a collective. We thought two principles are at play here: insurance and convergence. In a Social Union of welfare stats, the EU would support national welfare states on a systemic level in some of their key functions (which is where the idea of mutual insurance , organized solidarity, among member states, pops up) and the EU should guide the substantive development of national welfare states via general social standards and objectives, leaving ways and means of social policy to the Member States (which obviously points to convergence). So, mutual insurance, solidarity and convergence are the key elements of a Social Union.

As some of you may know, we have often argued that a Social Union, so conceived, is not only desirable but also necessary. The necessity argument was very much linked to the debate we had on the Monetary Union. The idea was that for a monetary union to function well, you need a kind of stabilization capacity at the level of the EU. At that time the focus was very much on unemployment benefits. At that time we argued that existing monetary unions either opt for a downright centralization of unemployment insurance, or they demand some convergence in the organization of unemployment insurance and provide a degree of reinsurance and centralization when the need is really high. And so, a minimum convergence on national unemployment benefits would be a corollary of any conceivable Eurozone solidarity risk-sharing scheme that is triggered by unemployment shocks. Meanwhile, we have SURE, a temporary scheme to support short-time work arrangements, not yet a generic and durable risk-sharing scheme. But even without a risk-sharing device, the implementation of common ‘stability-enhancing’ principles would benefit the Eurozone as a whole – this was our argument.

This said, let me also say that a merely functionalist understanding of the need for a Social Union has many limitations. Fundamentally shared aspirations drive the European project at large, over and beyond functional necessities. And here, when we talk about shared aspirations, the Pillar is highly relevant. Formally proclaimed in 2017 as a list of 20 social principles and rights, the Social Pillar is the manifesto of the shared social aspirations of the Union. According to such aspirations, European welfare states should rely on investment in human capital based on equal opportunities, the prevention of and protection against social risks, the existence of effective safety nets and incentives to access the labor market, so as to enable people to live a decent life, change personal and professional statuses over the lifetime and make the most of their talent. In yet other words, here we have a mission statement for the European social model.

And let me say, since Juncker is here, that I am very grateful for the initiative taken and the first concrete initiatives that accompanied it.

From a legal perspective, we know that the EPSR is a not-legally binding instrument, meaning that the twenty principles therein are not enforceable against neither the European Institutions nor against the Member States. However, many of these principles, or parts of them, are binding either through other EU measures. In this vein, the EPSR reaffirms already existing rights, and it complements these ‘to take account of new realities’. And the idea that we have this list of principles, framed as individual rights, I think it is very important.

Now, one year and a half ahead of the next European elections, in the midst of a new economic and military crisis, the question is where we are on the road to a European Social Union. Obviously, notwithstanding the achievements of the past few years, we are far from being done. In the remaining of my intervention I will focus on one specific principle of the Social Pillar: principle n. 12. It reads as follows: Regardless of the type and duration of their employment relationship, workers, and, under comparable conditions, the self-employed, have the right to adequate social protection. In other words, everyone who is at work in the EU, wherever, in whichever sector, whatever the kind of status, must have access to adequate social protection.

I think this is an absolute priority. And we said it already back in 2019, in that forum with Maurizio Ferrera, this is a key principle for at least three reasons. First, if we think about stabilization and the need to stabilize our societies when they are hit by a shock, the argument that we used at the beginning was largely applied to unemployment benefits. But I think that with the covid pandemic we learned an important lesson about stabilization. It is very difficult to fight a pandemic, both in terms of its social consequences but also merely from the point of view of the prevention of infection to spread even further. If you do not have access to universal sickness benefits and incapacity benefit, how can you say to people, ‘when you feel ill, you might be infected, you should not infect your colleagues, stay home!’. How can you say that if you do not have universal access to sickness benefits and to insurance for incapacity. So in terms of stabilization of society in the face of very sudden and deep shock, you need universal access for everybody to social protection, not only to unemployment insurance, but also sickness benefits. So this is the first argument why I think principle number 12 is so important.

Secondly, in the domain of social protection, we are confronted with spill-overs effects. If some member states try to economize, try to be cheap, by not providing adequate universal social protection, you have a kind of unfair competition, which might lead to the proliferation of new forms of work that are not integrated in social security schemes in some Member States. Third, I argued that the political legitimacy of the EU would be bolstered if EU citizenship could be linked to the right to adequate social protection, regardless of the type and duration of their employment relationship, workers, and the self-employed.  This is a very strong principle and indeed a shared aspiration.

Now, what is the problem at stake? Social security systems in many EU Member States still largely rely on their traditional schemes, designed for workers with a fulltime contract of indefinite duration. Even though significant changes occurred, I think that our national social security systems are ill-equipped to deal with the situation of non-standard work and the higher risk of in-work poverty for non-standard workers. Among the most vulnerable workers:

1. Low- or unskilled employees with standard employment contracts in poor sectors,
2. Self-employed persons (notably bogus self-employed and solo-economically dependent self-employed),
3. Flexible employed persons (fixed-term employee, temporary agency employee nd involuntary part-time)
4. Casual and platform workers.

While individual and household factors (e.g. gender, skill level or the size and work intensity of the household) play an important role in explaining in-work poverty (Penas-Casas et al 2019), institutional factors, and especially social security legislation, play an important role as well (Eurofound 2017). The upsurge of new forms of labor has extensively segmented the labor market, leaving an increasing number of atypical workers without access to a vast number of social transfers such as unemployment, sickness, healthcare, maternity, paternity, parental benefits, pensions, occupational sickness or accidents. Vulnerable groups are often confronted with a lack of formal, effective and adequate access to social protection.

Now, maintaining social protection systems that no longer accommodate a big part of the workforce has bad consequences, for individuals, but also for the functioning of labor markets and the stabilization capacity of welfare systems.  Against this background, the emphasis of the Social Pillar (principle 12) on an individual right to adequate social protection against old and new social risks for different groups of workers is therefore of great importance.

Principle 12 was translated into a Recommendation in 2019, which calls on Member States to ensure formal and effective coverage, adequacy and transparency of social protection systems. The aim is to increase income security, reduce precariousness and unfair competition, fight poverty and foster more resilient economic structures. The main target beneficiaries are non-standard forms of employment and the self-employed given that these groups are often not sufficiently covered by social security schemes.

Let me immediately say that this initiative was a very positive step forward. Let me mention some key positive aspect. First the Recommendation initiated an important discussion on the adequacy, suitability and accessibility of our social protection systems and the inability of the current social protection nets to respond adequately to increasingly segmented, dynamic and mobile trends in the labor market. It was further good that the focus was on most vulnerable groups and particularly the self-employed. Third, I think it was good that the angle from which the Recommendation addresses the challenge of access to social protection is securing a life of dignity and not only the issue of financing social protection systems. Finally, I appreciate the inclusion of a monitoring system to discuss and develop agreed quantitative and qualitative indicators.

For all its ambition, however, the recommendation also falls short in several aspects. Let me list such shortfalls. The elephant in the room obviously is its legal basis: a recommendation instead of a directive as initially proposed by the Commission. I will not elaborate on this now, whether we need a more legally binding directive or we are satisfied with a soft recommendation. Clearly it is a crucial debate. Yet, let me say that there are also other aspects of the approach to principle 12 of the Pillar where more ambition is needed and on which I want to draw your attention.

The first concerns the language of the Recommendation that leaves member states a lot of discretion on how to prepare their plan and – notably – on whether to extend the mandatory social security to self-employed (Schoukens 2022). Second, the Recommendation omits the definition of the concept of worker, which allows Member States to resort their national definitions and to exclude important vulnerable groups (Aranguiz 2022b). Yet if you are not clear on what a workers is, the principle 12 is more fragile because it leaves to Member states the possibility to exclude some workers that do not fall under the recommendation. Third, while the proposal originally referred to the social security branches with an explicit mention to Regulation 883/2004, the final text avoids such a connection (Aranguiz 2022b). Fourth, the idea was that Member States had to organize transparency, first of all in their reporting vis-à-vis the EU, but also transparency vis-à-vis individual citizens. We have indeed a persistent problem in take up of social benefits, which is in part a question of organization and architecture but also it is about information and transparency. No tangible provision was incorporated to tackle this particularly problematic area of social protection, where individuals, for a number of reasons explained above, fail to claim their entitlements. Fifth, and maybe most important point, the Recommendation has a sunset clause in 2022 when the European Commission will publish its final report, which will certainly give an up-to-date picture of the situation regarding access to social protection in the Member States and a summary of their positions. After that report, however, no further action is foreseen.

So what to do? I personally think that the Recommendation is a good work and so the EU should not close the window of opportunity. Quite to the contrary, we should come up with a stronger version of what has been achieved so far. First, we have to reconsider the possibility to work towards a Framework directive. As I said, this is a bit an elephant in the room but maybe we should reconsider it.

Secondly, next to the legal debate, a number of substantive issues have to be addressed. In preparation of the Belgian Presidency 2024 we will launch a debate on where we are with the Pillar but we also launch a working group that will prepare different possible venues that can be explored after the sunset of the Recommendation. And I think that the group will not only look at the legal form of the instrument but also at how to strengthen the content. In my view the reflection should focus on the following issues:

• Universal (publicly funded) vs complementary (occupational) schemes: If you say that everyone has the right to access to adequate social protection, does it not mean that you need publicly financed social protection schemes rather than a mixture of basic protection and occupational schemes on top? This is a debate that I think we should have.
• Coverage (mandatory vs voluntary schemes): Can we say that protection is universal if it is not mandatory? Currently it is left to the discretion of member states whether to apply mandatory or voluntary schemes to self-employed which create legal uncertainty and social protection gaps (opt-out clauses are also discussed). Again also here a debate is needed.
• Definition of worker: Providing an EU level definition of worker is key to avoid the possibility that some Member States exclude certain categories of workers from social protection, at the same time guaranteeing that new job realities are accounted for in the legislative instrument. Currently the recommendation does not provide a definition of worker.
• Connection between social benefits and transferability: the link and mutual relationship between social security schemes and social assistance has to be clarified. Similarly, how exactly member states ensure that both workers and self-employed preserve their rights when they switch employment contract/statuses is very important and should be discussed in view of a future recommendation or a future framework directive.
• Adequacy: The current Recommendation refers to preventing poverty and maintain decent standards of living . Yet no threshold is set on replacement income (vis-à-vis precedent income and national median income). I think that it worth to have a debate on how to define adequacy in a more operational sense.
• Transparency: Even though access to information and simplification figure in the Recommendation, this is not a mandatory requirement and Member States follow different strategies. A discussion should be pushed on how to improve transparency and simplicity of social security systems towards individual citizens, in particular the most vulnerable citizens.
• Monitoring: a critical assessment of the current indicators used during the monitoring of the Recommendations should be done. In any European cooperation on social protection should produce impacts. So you need very well organized monitoring system and this is a topic to further discuss.

To conclude, let me again thank you for this invitation. This is the fifth anniversary of the Social Pillar. When the EPSR was launched someone doubted about its added value: it is nice talk again, it will be nothing, it is only diplomatic waffle. This has proven untrue. Under the umbrella of the Pillar many concrete proposals have been approved, which directly affect citizens’ social entitlements. I am not saying it is paradise but a number of concrete proposals. We should pursue the goal and come up with for instance a version 2.0 of the recommendation or a framework directive on access to social protection. It is such an important, fundamental and foundational principle of all welfare states in the EU and a fortiori a key pillar for a Union of welfare states. 

A recording of my speech can be found on YouTube via https://youtu.be/-vuWSyv2dRE?t=5929.