Beyond Bolkestein New Threats to Labour Standards in a Liberalized Europe
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‘Beyond Bolkestein – new threats to labour standards in a liberalized Europe’
Charles Woolfson*
Paper to Conference
SOS – Selling our Services: The draft Services Directive versus Social Europe
Institute of Employment Rights London 12 July 2006
*Marie Curie Chair, University of Latvia, Professor of Labour Studies, Department of Law, University of Glasgow, Glasgow G12 8QQ, UK. Email: [email protected]
1 If we were to give any advice to Latvia…..it would be to invest in people, and that will pay benefits in the long term’ (Irish Foreign Minister at seminar ‘Does Latvia follow Ireland's path? - migration of workforce’, Seminar, Riga, 20 January 2006).
‘ … comments from employers suggested migrant workers were better thought of because they were more likely to be happy with the minimum wage (as it was higher pay than in their home countries’ (UK Home Office Report, Employers’ Use of Migrant Labour, March 2006).
Introduction On 1st May 2004 eight former communist countries completed the long road to full European Union membership. Having left the embrace of the former Soviet Union, they entered the new European Union with high expectations of the benefits that would accompany enlargement in terms of access to a single European market. Key among these expectations was the free and unrestricted exercise of the freedom to compete in the provision of services, the right to travel, to seek residence and to work within the Union’s twenty-five Member States. Although, formally at least, each of the new entrants has met the conditions of the acquis communautaire, transposing European law into domestic frameworks, the difference in history and perspectives between the new and the old Member States cannot be overemphasised. While nearly one in three people in the EU-25 earn less than 75 per cent of its average income per head, two-thirds of these live in the new Member States. So far as questions of labour relations, labour rights and labour standards are concerned, the impacts of enlargement have still to be fully assessed. The enlargement of the European Union has simultaneously provided something of a magnet for workers from the East, and presented trade unions in Western Europe with a challenge that is now seen by some potentially to threaten existing labour standards. Most often, this threat is described in terms of ‘wage dumping’, as workers from the new Member States are substituted for existing labour at a half, or even one third of the rate, paid to their Western counterparts. The debate on the proposed Services Directive has brought these issues into sharp focus.
Linkages between questions of labour migration and labour standards in the new Europe have been given new focus as workers from Eastern European new Member States facing problems in securing decent labour conditions in their home countries, are embarking upon an ‘exit’ strategy involving significant numbers of the labour force. Using Latvia as case study, this paper first explores the deteriorating labour conditions which the domestic labour forces of post-communism are currently experiencing, in order to better understand neglected aspects of the dynamics of labour migration in the new Europe. It is suggested that labour standards in the old EU Member States will be subject to increasing pressure occasioned, in particular, by the arrival of ‘deteriorated’ and often informalised labour from Eastern Europe (Castells and Portes, 1989; Heintz and Pollin, 2003). In exploring the proposition of a ‘race to the bottom’ in labour standards in the new Europe, it is useful to ask just how ‘low’ standards can potentially fall (Woolfson and Sommers, 2006). Latvia provides a pertinent example.
Latvia: labour in a neo-liberal new market economy
2 A central feature of the low labour standards in post-communist countries has been the reconfiguration of the employment relationship which has accompanied the growth of the market economy. Previously secure life-time employment, particularly with in large state-owned industrial enterprises, albeit at low wage levels, is now a matter of history. In its place there is, at best, limited job security and increasingly the growth of informalised and largely contingent employment in many sectors. This growing divergence of labour standards tests the strength of the hypothesis that it will be possible to implant a sustainable variant of a European ‘Social Model’ in the context of a European Union which is enlarging eastwards (Vaughan-Whitehead, 2003; Sapir, 2005). In more neo-liberal post-communist new market economies such as the Baltic States where organised labour has been largely disempowered, the deterioration of labour standards is undergoing accelerated development, under combined pressures on domestic and incoming foreign capital seeking competitive advantage in both European and global arenas.
Latvia is a small ex-Soviet republic of some 2.3 million. It is also the poorest of the new entrants in the most recent EU enlargement, as measured by a variety of economic and social indicators (Dennis and Guio, 2003). Like its Baltic neighbours of Estonia and Lithuania, in Latvia the paradigm of neo-liberal reconstruction has been actively implemented in the last decade and a half. A World Bank report providing a global ranking of 155 nations on key business regulation reforms noted Eastern Europe in general for having achieved the highest rate of reform of any region in the world (World Bank, 2006). Overall, Latvia is ranked at 26th in the world, with the three Baltic States in particular commended by the World Bank for their ‘remarkable achievement’ in achieving a top thirty ranking since the relatively recent introduction of market reforms (World Bank, 2005). Market reform has been a success, at least for the domestic elites who have benefited not simply from the economic gains of privatisation, but also from the more recent record rates of GDP growth, albeit from a position of significant absolute decline during the early post-independence period. There have, of course, also been collusive benefits for West European business interests which have been given new investment opportunities, taking advantage of the cheaper labour in Eastern Europe (Bohle and Greskovits, 2004).
In the three Baltic States, the average GDP growth has been between 6.5 percent and 8 percent per annum in most recent years, and in the case of Latvia in 2005, by nearly 10 percent (Ministry of Foreign Affairs, 2006). Such successes have however been achieved at a price. In really existing post-communist society significant numbers of the labour force have fallen, or more accurately have been pushed below any threshold of regulatory or collective forms of protection (Rajevska, 2005). These workers are submerged in the variously described ‘shadow’ ‘grey’ or ‘black’ economy of casual, contingent, fixed-term or temporary forms of employment of both a legal and/or semi-legal nature. This economy of ‘precaricity’ is a major factor in nearly all post-communist Eastern Europe countries where it is linked to the increasing gap between the ‘haves’ and ‘have-nots’ (Barkley Rosser, Rosser and Ahmed, 2000). Here ‘market forces’ are no mere economic abstraction but a daily ‘lived experience’. Correlatively, in terms of trade union density, collective bargaining agreements and so forth, the situation in the Baltic region is the least developed among the new EU Member States. Recent estimates suggest that in Latvia perhaps 15 -16 percent of the workforce are trade union members, slightly better than in Estonia at 11 percent and Lithuania at 14 percent, while optimistically, at best, 20
3 percent of the workforce are covered by collective bargaining agreements (EIROnline, 2006a; EIROnline, 2005a; EIROnline, 2005b). As elsewhere in Eastern Europe, the majority of trade union membership is concentrated in the public sector or in the few remaining unprivatized enterprises, while union representation in the new private sector companies is negligible and fiercely resisted by most employers. Up to four- fifths of the current trade union members are inherited from Soviet times and all evidence suggests continuing trade union decline (Antila and Ylöstalo, 1999; 2003).
Viewed in historical perspective labour conditions in the Baltic States are radically deteriorating. This view is given some credence by an ILO labour inspectors’ report on the region which notes: …workers’ protection has become more and more difficult due to the privatization process and due to learning the rules of market economies. In consequence, this has led to a drastic degradation of the working environment and a renewed exploitation of the labour force in the Baltics (von Richthofen, 2002: 15 emphasis added). ‘ Deteriorated’ employment conditions or ‘down-graded labour’, and an accompanying tendency towards informalisation are interlinked impacts of the arrival of market forces in ‘transitional’ Eastern Europe (Castells and Portes, 1989; Portes, Castells and Benton, 1989). In neo-liberal economies such as Latvia, there has been the rapid erosion of stable employment relations within newly intensified work regimes, in which the discipline of mass unemployment has been an important factor in undermining labour confidence. The result has been to create desired-for labour flexibility and workforce compliance, with a consequential down-grading of employment standards. Deteriorated labour standards take many forms, for example, through the imposition of bogus ‘full-time’ contracts, along with secondary or hidden supplementary contracts stipulating the surrender of employment rights, increasing resort to various forms of probationary, fixed-term or part-time contracts, failure to provide written contracts of employment, utilisation of ‘self-employed’ status to avoid employer obligations regarding social insurance contributions, and ubiquitously, avoidance of social insurance and tax liabilities through payment of minimum wages to employees supplemented by so-called ‘envelope wages’. Deteriorated labour standards are also manifest in dangerous and unhealthy working conditions to which employees are exposed and which they are unable to refuse without fear of job termination. Typically, deteriorated labour standards are experienced coercively as a clustering of labour abuses, such as delays in or non-payment of wages, the requirement to work unpaid overtime, extended working hours, poor health and safety conditions, authoritarian working environments, hire and fire regimes, and the denial of collective representational rights.
The Latvian State Labour Inspectorate estimates, for example, the percentage of workers receiving ‘envelope wages’ in the form of supplements to the official minimum wage at 28 percent (LETA, 2004). In 2004, each fifth Latvian enterprise inspected had violated the labour legislation. Of nearly two thousand enterprises inspected by the State Labour Inspectorate about one fifth were found to have employees who did not have any employment contract. Estimates of employees without contracts are as follows; for the wood industry (24 percent), construction (23 percent), retail trading (14 percent), agriculture and medicine (each 8 percent) (State Labour Inspectorate, 2004). The tendency to labour ‘informalisation’ is revealed in this so-called ‘undeclared work’, prevalent in many sectors of the economy including
4 public sector healthcare institutions, construction, agriculture and forestry, hotels and restaurants, commercial services and retail. The Free Trade Union Confederation of Latvia (LBAS) has made its own calculations suggesting 25 percent of total employment is undeclared work, involving 137,100 employees (four fifths in the private sector and one fifth in the state and local government sector) (EIROnline, 2004a). Other estimates of under-the-table wages payments range between 15 percent and 45 percent of total employment for Latvia (EIROnline, 2004a).
An OECD report noted an increasing discrepancy (on average about 10 percent) between the wages employers report to social insurance authorities for tax purposes and the wages they report to statistical agencies (OECD, 2003: 61). OECD suggests concealment of wages from the statistical agencies by many private-sector employers, such that ‘official wage statistics are therefore unreliable for the private sector’ (2003: 61). OECD noted official statistics as recording no less than 32 percent of the private employees earning about one third of the average wage. This result is not very plausible, considering …that the public-sector wage distribution did indeed show the expected bell-shaped normal distribution around the average. Labour force surveys (LFS) indicate about the same wage distribution in private sectors (although LFS-based wage data are less reliable in other respects) (2003: 61). By comparing public and private-sector wages according to both LFS and employer surveys, OECD estimated that around 20 percent of all private-sector employees in Latvia earned more than their employers report for statistical purposes (2003: 61). The extent of concealment is also indicated by the relatively low level of declared pay in the private sector compared with the public sector; private sector pay is 21.4 percent lower on average, while in sectors where undeclared work is traditionally found, such as the construction industry, the disparity is even greater (32.5 percent) (EIROnline, 2004a). In construction, the figure for the proportion of employees in Latvia receiving envelope wages reportedly reaches 40 percent (Sedlenieks, 2005) while, more generally, ‘local economists …believe that the shadow economy in Latvia is 40 percent of GDP or more’ (European Employment Observatory Review, 2005: 115). It is this mass of ‘down-graded’ legal and semi-legal employment which provides one of the key ‘drivers’ for deteriorated labour standards.
Routine abuse of employees Evidence from contemporary social surveys and case studies of Latvia suggests excessively long working hours, low basic salaries, high levels of conflict in the workplace, gendered wage discrimination, poor working conditions and above- average proportions of employees in various contingent, temporary or atypical forms of work (Antila and Ylöstalo, 2003; EIROnline, 2004a; Hazans, 2005). Various forms of labour abuse flow naturally from ongoing subordination. The manipulation of envelope wages is used by employers as a ‘soft’ form of ‘employee differentiation’, with a view to eliminating staff no longer required, without incurring any social costs to the employer in terms of redundancy pay (Hazans, 2005; 192). Where one form of employment abuse exists, it often subsists with a whole bundle of other labour abuses. Antila and Ylöstalo (2003) suggest up to two-thirds of employment contracts are negotiated with employers on an individual basis, and the percentages of employees whose wages payments are subject to delay is increasing over time, while employer demand for unpaid overtime affects up to on in five of the workforce. Significant numbers of employees (also up to one in five in the public sector) are forced to hold a
5 second job to make ends meet (Antila and Ylöstalo, 2003: 78, 81, 129,139, 125). Again, OECD notes ‘liberal wage setting laws’ ensure that legal minimum wages are low by international standards at only 37 percent of the average wage (OECD, 2003: 59). In a remarkably candid appraisal, OECD observes for the Baltic States: In sum, the predominant forms of wage-setting in the three countries appear quite flexible….While such flexibility is advantageous for business, there can be a danger of abuse by less-scrupulous employers if the institutional framework is too weak. Some groups of low-skilled workers, notably in small private firms, are probably in a vulnerable position if their employers are tempted to reduce wage costs more than is legally allowed (2003: 60).
In terms of other measures of ‘labour flexibility’, Latvia is estimated as having the highest overall proportion of employees on fixed-term employment contracts among the new Member States, comprising up to 23 percent of the workforce compared to an average of 11 percent for EU accession states (European Foundation 2002). OECD notes that the newly introduced employment laws replacing Soviet era labour codes are ‘liberal in the sense that employers are free to dismiss workers if there is not enough work and – with a few exceptions – they have the right to select the workers they want to dismiss according to economic criteria’ (OECD, 2003: 58) The report also observes the impact of reforms with regard to the period during which temporary contracts may be applied, length of required dismissal periods and severance pay: In Latvia, this limit (on temporary contracts) was reduced in 2002 to two years, which is similar to the situation in many OECD countries. The minimum notice period for economically motivated dismissals can be up to 4 months in Estonia and Lithuania, but only 1 month in Latvia. The legally required severance benefit is up to 4 months' pay in Estonia and Latvia and up to 6 months in Lithuania… Although the costs involved are not out of line with the situation in many OECD countries, concerns about these costs have been expressed from the employer side on various occasions (OECD, 2003: 58). While expressly prohibited in the new labour code, illegal successive short-term contracts are in fact a rapidly developing feature of the restructuring of the labour market along more informal lines, particularly through the rapid growth of agency- type working arrangements. Typically, where collective agreements exist, they are rather weak when it comes to issues such as securing additional severance pay in the event of dismissals. More likely, union members are not re-employed. Employees, afraid of losing their jobs, will characteristically collude to hide any contract abuses. The varieties of abuse are testament to the capacity for exploitation in a vacuum of regulated standards of control and officially tolerated violations. As official governmental documentation describes it, in Latvia today, there is a ‘low level of legal culture in employment relationships’: …employers still do not pay sufficient attention to compliance with normative acts regulating employment legal relationships, not concluding labour contracts with employees or processing them incompletely and inaccurately, as well as violating work payment principles. Violations in work payment issues also occur often – overtime work is unpaid, payment rules for a rest period in the working week are violated, wages are not paid on time (National Lisbon Programme for Latvia 2005-2008, 2005:36).
6 Symptomatically, Latvia represents a labour market in which ‘employees lack information about their responsibilities and rights in terms of industrial relations’ (EIROnline, 2004c). A recent survey of Latvian employees revealed that 15 percent were willing to work overtime hours without pay, 22 percent or employees reported that the collective agreement was only formality. A further 31 percent of respondents admitted that they would be ready to work without contract, 37 percent would work even if social guaranties were not paid and 38 percent would be ready work without annual holidays (SKDS, 2005, 35). On the other hand, opinion polls consistently show that dissatisfaction over human rights violations in labour relations at the top of the list since 1996 (in 1996-38 percent, in 1998-45 percent, in 2000-47 percent) (Rajevska and Vanags, 2005: 65). However, the pervasive ‘low-trust’ social environment of post-communism, in which individualistic solutions to life problems are sought, including those of abuse in the workplace, remains a barrier to collective assertion of labour rights (UNDP, 2003; Rose, 2005).
The consequences for safety and health at work are particularly significant. Under Latvian legislation, the laws regulating industrial relations relate specifically to employees with employment contracts. Thus, if an employee is injured in an accident at work, social guarantees may only be received if the employee has a contract. Construction is one of the industries in which employment contracts are most often not concluded with the employees and in which working hour limits are not observed. The result is fatigue and predictably, accidents in the construction sector are disproportionately represented (EIROnline, 2006b). Moreover, so-called ‘self- employed’ in construction are excluded from labour protection while the injuries for this group are not registered in the official data bases, thus reinforcing the already significant underreporting of workplace accidents. A recent upsurge in speculative building activity following EU accession, particularly in the capital city Riga, has led to a sharp increase in industrial fatalities, already more than half as much again in excess of EU15 averages for the last few years. For three out of a five year period, between the years 1999-2003, Latvia has ranked either the worst or second worst performer in terms of workplace fatalities in Europe and current rates are spiralling (Woolfson, 2006).
Meanwhile, the level of penalties which are imposed on employers for violations of labour law is very low (EIROnline, 2004b). The penalty for employing a worker without a contract is a fine of up to 720 Euros, although the average fine is nearer 100 Euros. The newly increased (2005) maximum fine for an administrative violation of labour laws is 1,420 Euros, but only for repeat offenders. Until recently, only corporate fines rather than personal fines could be imposed, although proposed changes in the Criminal Law will now make owners and managers of enterprises criminally liable if they provide fraudulent information to the State authorities with the aim of hiding illegal activities (European Employment Observatory, 2005: 118-9). Even so-called ‘legitimate’ businesses will often keep a second set of accounting books, or conduct ‘off-book’ or ‘direct’ payment transactions with their employees, sub-contractors and customers to avoid taxation, thus oscillating between criminal and non-criminal behaviour on a regular basis, and increasingly blurring regulatory avoidance with outright criminality (Feige and Ott, 1999).
There is an argument that employers will eventually come to understand that exploitation and informalisation are counter-productive as a labour-utilisation
7 strategy, since poor human resource development inhibits the supply of motivated productive labour. This presupposes that employers as a class are sufficiently unified and capable of taking the longer term view, and more importantly, have the means to pursue other than individual short-term expedient objectives. Given the prevailing penchant for resort to semi-legal, illegal and abusive employment practices, this seems unlikely. Thus, while there may be individual employers for which resort to deteriorated forms of labour relations is a less preferred route this does not seem to apply to the majority of small and medium sized, or even larger enterprises. In the new market economies, the struggle for profits and economic survival dominates in a context where employers are only too ready to seek advantage at the expense of labour. Precisely where the norm for employment standards will ultimately rest is very much in the balance at this time.
The ‘exit strategy From the standpoint of Latvian society, the practices of employee abuse may benefit individual employers but it is not a ‘costless’ strategy. Accession to the European Union has at least partially opened doors which were once closed. The recent period has seen a significant outflow of labour seeking higher wages and better working conditions in old Member States. Latvian analysts estimate that perhaps 50,000 to 100,000 people have emigrated in the 18 months since EU accession, as many as 25,000 to 50,000 of them to Ireland (EUbusiness, 2006). These figures, amounting to a staggering total of between 4 percent and 10 percent of the workforce, are of increasing governmental concern (EIROnline, 2006c). How much of the migration is ‘legal’ is not known. If worker outflow continues at the current rate, the Latvian economy could be faced with serious labour shortages. Such shortages of labour are already becoming significant, not only in construction and the ‘informalised’ sectors, but in medical and allied professions, and in other high qualification sectors, with resultant ‘de-skilling’ of the labour force as a whole. A report from the Dublin European Foundation notes that better-educated men and women in the ages 25-34 from Latvia are ‘four times more likely to migrate to another EU Member State than equally well-educated men and women in the same age group from the Czech Republic, Hungary, Slovakia and Slovenia’ although similar figures are reported for neighbouring Poland, Estonia and Lithuania (European Foundation for the Improvement of Living and Working Conditions, 2006). The research suggests different reasons in the new Member States as to why individuals would wish to migrate with ‘work-related factors’ such as higher household income (59 percent) and better working conditions (57percent) featuring high on the list of priorities. One Latvian employer, AS RSEZ “Rebir” a power-driven hand tool manufacturer reported some eighteen months after accession that 650 people had left the company, half of whom to look for better job opportunities in older EU Member States. In the words of the Riga office of the International Organisation for Migration, ‘workforce emigration has taken from Latvia almost the same number of people as deportations under Soviet occupation’, (quoted in EUbusiness, 2006).
The exit of labour is creating a ‘secondary’ reinforcing migration in the region as workers from other parts of the former Soviet countries are recruited who are willing to work for even lower wages and under poorer conditions than their Baltic counterparts. Renooy et. al., describe what they call a ‘chain migration of labour from the East to the West’, involving migrants from the less-developed neighbouring states of the former Soviet Union (2004:145). VP Market, a Baltic supermarket chain, has
8 announced its intention to hire staff from neighbouring Belarus (Economist, 2005). Employers in Latvia can now be heard complaining. The managing director of an association of Latvian construction contractors, Marcis Nikolajevs, has also said that companies are being forced to import building workers, not just from other parts of the former Soviet Union, but that the contractors association also is considering flying in temporary construction workers from as far away as Ghana. ‘We used to be a proud people,’ Nikolajevs bemoaned, ‘this migration is a national tragedy’ (Bilefsky, 2005). Such secondary migration flows may produce further tensions, not least over sensitive ‘ethnic balance’ questions in countries like post-Soviet Latvia, where an uneasy relationship with the significant Russian minority already exists and ‘tolerance’ for those of a different skin colour is rather low.
The social consequences of the labour exodus for the social fabric of Latvian society have been eloquently recorded in investigative articles and at least one on the rupturing of family ties and rural depopulation (Bilefsky, 2005; Sweeney, 2006; Muktupavela, 2003). Laima Muktupavela’s experiences as an itinerant mushroom picker in Ireland record that life for the emigrant is not necessarily free from the kind of gross exploitation suffered back home, especially for those in poorly regulated areas of the economy, like horticulture. This picture is confirmed by a recent study of abuses of migrant labour from the Irish authorities (Irish Labour Relations Commission, 2005). Yet, the adoption of an ‘exit strategy’ by tens of thousands of workers from the new Member States such as Latvia is both an understandable and an inevitable consequence of the desire to find a better working life, and to escape the adverse nature of the working environment. The Latvian state employment agency has commented on the low levels of pay and the ‘not uncommon practice for companies to employ workers illegally, or officially pay them the minimum salary thus decreasing their level of social protection’. In a rare instance of public candour, a representative of the agency has conceded that ‘employers in Latvia are not ready to motivate their employees and give them good working conditions. This is the main reason why our citizens are looking for jobs in other European countries’ (Akule, 2006). A hurriedly-appointed government survey of Latvian citizens now employed in Ireland was carried out by the national Strategic Analysis Commission in response to growing concerns. A couple of brief quotes from Latvian migrant workers in Ireland go to the heart of the matter: ‘I am not afraid to talk with my supervisor which was the case in Latvia. Here (in Ireland) there is trust, and confidence in the employee. And so the work is better done in such an atmosphere’. Another respondent reported, ‘In Ireland we live a life which is “human worthy” - we can afford not always to be thinking of prices and about unpaid wages’ (Strategic Analysis Commission, 2005 unofficial translation).
Whether this official soul searching can alter what seems to be the current exploitative approach towards their employees adopted by the new business class of Latvia, or elsewhere in Eastern Europe remains to be seen. For their part, trade unions in Latvia have developed little countervailing capacity to confront the manifold labour abuses of employees. Paradoxically, it is the weakness of organised labour, and its overall inability to provide serious resistance to capital’s downwards drive on labour standards that may lead to improvements for a narrow elite of the workforce, as employers struggle to retain their increasingly disaffected employees. ‘Management by fear’ may be increasingly replaced by other more ‘subtle’ human resource concerns. One real prospect is the further segmentation of the workforce between
9 those workers with access to more favourable and secure working conditions and those who do not.
Conclusion This paper has taken a preliminary look at deteriorated labour in post-communist society, focussing on a worst case example, Latvia. Viewed in the wider European context of enlargement, the process of accelerated decline in labour standards is now playing out not only within Eastern Europe but also in the older EU Member States, as migrant labour offers to work at wages and under conditions that potentially erode superior collectively bargained standards. While Latvia has been the focus of this analysis, neighbouring states have also contributed significantly to post-accession labour migrations and will do so even more in the future. Paradoxically, the issues raised have come into focus in the current European Year for Workers’ Mobility, the objective of which is to promote the free movement of labour in the Union and in the context of the heated debate on the proposed Services Directive (Europa, 2006).
As the future of ‘transitional arrangements’ limiting labour inflows in the single market are reviewed, a European-wide level policy makers are faced with a challenge, if labour mobility is not to leave open the door to dangerous xenophobia. In Ireland, an opinion poll for the Irish Times suggested that 78 percent of voters wanted to reintroduce work permits for workers from new EU Member States, while 41 percent thought there are enough foreign workers in Ireland and no more should be (Irish Times, 23 January 2006). The potential erosion of labour standards in the enlarged Europe is unlikely to diminish. It is rather more likely that new EU Member States will be permanently consigned to providing a low-wage high-hazard labour reservoir within the enlarged Union. This state of affairs will inevitably exercise a continuing gravitational pull on existing labour standards throughout Europe, particularly as further European enlargement proceeds eastwards. Lastly, returning to the question of securing of a common floor of labour standards in line with EU Charters and norms, the case of neo-liberal Latvia offers little ground for optimism. The troubling possibility exists that there will be no ‘ratcheting’ of deteriorated labour standards in the more neo-liberal new market economies, either by the effective enforcement of protective labour regulation (an area where European institutions have proved rather weak), or by the independent collective resistance of organised labour, either at domestic or European levels (Sabel, et al., 2000). For European capital this is perhaps good news, but for workers in both the new and the old Member States, rather less so.
As a statement of fact there is no doubt that labour mobility is a key tool of increased competition in the new Europe, in which Latvia is seeking to exploit its advantage in low cost labour, relying on the ‘low road’ of low wages and low added-value in terms of labour productivity. Policy makers can begin to address a new direction, a ‘high road’ based on the upskilling and valuation of human resources, above all in fair and equitable employment relationships with rewards based on decent standards of work. It seems clear that only if the latter road is chosen is it likely that the current haemorrhage of labour will cease. If Latvia continues down its current path however, it is its own working people and their families who will loose. For the further development of labour standards in a European context, that price is already too high.
10 References
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