SPEECH/97/198

Address by Mr Jacques Santer

President of the "Concrete action is crucial in the fight against unemployment "

very t Deli t foi ns fai gai cé on ort e w Check A

le texte pron gesprochen Seul t das gil Es

Plenary session of the Brussels, 1 October 1997 Mr President, Honourable Members of Parliament,

This morning the Commission adopted its reports on employment and its proposals concerning the guidelines for Member States' employment policies. These are our contributions to the special scheduled for 21 November devoted entirely to employment. Given the importance of that meeting and the absolute priority accorded to fighting unemployment, a priority which the European Parliament has also stressed on numerous occasions, I would like to take this opportunity to give you the "first taste" of our proposals.

The proposals for the guidelines constitute a first - and an important one at that, representing a qualitative leap in the way we tackle employment issues at level. To a certain degree I see them as the culmination of the process I set in train on 31 January last year when, in this very place, I presented the Confidence Pact for Employment to you.

Integrated action on macro-economic policy, on the internal market, labour market policies, the structural funds and mobilisation of all the players in the quest for convergence in the fight against unemployment and for jobs - these are the elements I urged in the Confidence Pact because: - the post-industrial revolution and economic globalisation require a new integrated approach, and - put very simply, it would be incomprehensible not to view jobs as a matter of common concern, and unacceptable for the Union not to bring all its positive assets to bear on the fight against unemployment.

This approach has been taken increasingly on board. The social partners have picked up the gauntlet with the result that they are now negotiating at European level, and successfully so! At national level, the endeavours to conclude agreements are now multiplying. The European Council’s conclusions have repeatedly backed the idea of the Confidence Pact. And what is more, employment is expressly mentioned in the Amsterdam Treaty; employment is now a matter of common concern. It is no longer simply the object of pious wishes, but has been underpinned with monitoring and convergence procedures which will foster coordinated policies within a common framework.

From now on it will not just be a matter of submitting reports on employment. The Amsterdam Treaty provides for the establishment of guidelines for Member States' employment policies and even, where appropriate, recommendations to Member States as regards the employment policies they should be pursuing.

The significance of this step forward should not be underestimated. I know the sceptics will be throwing their hands up and exclaiming "not another load of procedures!" But you do not have to think back very far to recall how the idea of a common approach on employment was being roundly condemned. And now we realise just how effective the surveillance and convergence procedures in the context of economic and monetary union have been. They made each of our Member States shift up a gear in order to achieve the jointly specified objectives.

2 We should draw inspiration from this in our fight against unemployment. We all agree that this is the priority of priorities. The heads of state and government emphasised this when they said that we should not wait until the new treaty had been ratified before setting about applying the provisions in the chapter on employment. They also highlighted this fact by deciding to focus all their attention on employment at November's special European Council. They have thus indicated their resolve in this field, and I applaud them for it.

But we must beware of arousing false hopes! No passage in the treaty, no European Council conclusion, no statement of intent will create jobs - this can be achieved only through effective, efficient and tenacious action on a broad front. This will take time. But just because there is no magic wand to wave does not mean that we should give up. On the contrary, it is all the more of an incentive to take action, to implement specific measures as of now. The 18 million jobless within the European Union are crying out for this. And we owe it to them.

Furthermore, the economic conditions and prospects for growth are improving. Let us grasp the opportunity! But we must beware of complacency. Things will not automatically improve as the economy picks up. We know that structurral changes are required. And we know what we have to do. All the analyses pick up the same theme. Successive European Councils have laid down the priorities. The time for talking is over. It is now time to act.

It is in this spirit that we are today revealing our proposals for the guidelines. They contain:

− specific aims, ambitious but realistic ones because they are based on the best practices identified in Member States, and quantifiable wherever possible, and

− we propose that the said objectives be pursued in as specific a manner as possible based on Member States' own action plans drawn up within a common framework of objectives and guidelines, which should be updated and monitored every year.

The European Union's long-term aim must be to move progressively to an employment rate of over 70%, similar to that of our main trading partners. This calls for a serious and determined effort on the part of Member States to apply the policy mix we are proposing. If this is done, and with the economic situation picking up, in five years we could increase the current 60% employment rate to 65% and cut the current 11% unemployment rate to 7%, thus creating 12 million new jobs.

Is this ambitious? Of course. But realistic: − if all our Member States seriously apply the rules of the game, pulling together and motivating one another through peer review and peer pressure, and − if at Member State and Union level we tackle the problem from the following four angles: − creating a new culture of enterprise; − creating a new culture of occupational integration or employability; − promoting and encouraging adaptability; − fostering equal opportunity policies.

3 First field of action: the spirit of enterprise. Jobs are created by companies. We therefore need a climate conducive to stimulating enterpreneurship, especially in respect of small and medium-sized firms, which are the real sources of new jobs. More specifically we propose:

− Cutting down the red tape and reducing general overheads because they discourage firms from hiring new workers. The burden is enormous, with red tape costing our companies an estimated ECU 200 billion a year.

− Reducing the obstacles which prevent people from leaving paid employment and setting up as self-employed: all too often people balk at the thought of losing their acquired rights to social protection.

− Making it easier for SMEs to obtain capital, in particular through creating, by the year 2000, a pan-European secondary capital market modelled along the lines of America's impressive NASDAQ stock exchange, which covers 5 500 companies employing some 10 million people. It has helped to create hundreds of thousands of new jobs and its turnover exceeds that of the New York exchange.

− Putting into practice something the European Council has long been contemplating - reducing the fiscal burden on jobs. Up till now the trend has been going in the totally opposite direction. The tax burden on jobs has been increasing, while that on capital has been decreasing. The current rate of 42% is a job killer. We are asking every Member State to set itself the target of substantially reducing this by 2000. By way of example, a reduction of one percentage point of GDP would be equal to some ECU 70 billion. Some say this will be hard to achieve. I would remind them that every year our Member States spend almost ECU 100 billion on state subsidies, most of which goes on sectors with a shaky future and not very promising in job creation terms!

− Simultaneously re-balancing taxes on capital. This would help maintain budget neutrality, limit harmful fiscal competition and the concomitant distortions of the internal market. Today the Commission finalised a package of measures to be discussed at the Ecofin Council on 13 October. And I would also recall in this connection our proposals on taxing energy.

− Finally, much has been said about the challenges posed by new technologies, which also offer an opportunity for our companies. We need strategies which can enable firms to harness the full potential of such irreversible developments, notably by making it easier for them to plug into the information society. A lot has been said about the scale of our research and development drive. But what is the real situation? Quite simply, we are being left behind by our competitors. So let us reverse the trend by increasing the money we spend in these fields so as to match the levels achieved in the USA and Japan, i.e. 2.5% of GNP.

4 Mr President, Honourable Members,

The second field of action we are proposing aims to achieve better occupational integration, improved employability. We have 18 million jobless. But at the same time companies complain that they have hundreds of thousands of vacancies which they cannot fill. This comes as something of a surprise, of course. But it is not that surprising when one considers that half of those unemployed have no training and that less than 10% of the jobless receive training.

This applies in particular to young people under 25. And is this any wonder given that 10% of our young people drop out of the school system? And that 45% of those who enter secondary education do not see it through to the end?

Almost 50% of those without jobs are long-term unemployed. Lack of training is much to blame for this. So what is going on with our Member States' employment policies which absorb ECU 200 billion every year? Two thirds of these policies are purely passive in nature and provide no incentive for people to get back onto the job market.

Unemployment is harmful for the individual, bad for the cohesion of our societies and a terrible waste of potential in terms of growth and prosperity. The brief analysis I have just presented shows that insufficient skills are a main cause of this scourge. Our proposal is that Member States tackle it by setting themselves precise objectives, viz.:

− offering every unemployed adult a fresh start - in the form of a job, training or any other measure - before they have been unemployed for 12 months, and a fresh start to every young person before they have been jobless for six months;

− similarly, Member States should set themselves the aim of halving within five years from now the number of young people who drop out of the school system, and of ensuring that many more young people complete their secondary education and have access to company apprenticeship/traineeship schemes;

− we should also give priority to active employment policies; Member States should set targets for the number of people to be brought into the new system, and reintegrated into the labour market;

− and within five years from now they should have raised to at least 25% the number of jobless people offered training.

And it is also in the social partners' interests for the necessary changes to succeed. Their European-level negotiations on parental leave and part-time working clearly demonstrate the essential role they can play. The same holds true for their exemplary contribution to ensuring pay restraint over the past few years. We ask them to step up their efforts because the challenges are considerable. More specifically, they should speedily conclude a framework agreement with a view to opening up jobs across Europe and enable more people to find work.

5 Nor should we forget the contribution already being made by the Structural Funds to raise skill levels and to render labour market policies more active. Member States must, as far as possible, lend a hand in this.

Mr President,

Greater adaptability is the aim in our third field of action. New technologies, new market conditions - the changes to which our companies have to adapt are gathering pace. The ability to adapt is becoming more and more crucial for company viability.

This is an irreversible trend which must be accepted as part and parcel of work organisation. Here, too, there is an important role for the social partners to play, notably as regards negotiating agreements on work organisation and flexible working arrangements.

But Member States must also contribute, especially by creating the framework for more adaptable types of contract and improving the conditions attaching to atypical jobs in social security and career development terms.

Member States must also find ways of better supporting companies' ability to adapt. They must, for example, improve tax arrangements pertaining to investment in human resources and development of on-the-job training. They ought to promote measures which encourage workers to go in for further training. Instead of spending vast amounts on state subsidies for sectors with a shaky future, Member States should opt more for measures promoting further vocational training, creation of lasting jobs and efficient operation of labour markets.

Mr President,

I shall now turn to the fourth field of action proposed in our guidelines, i.e. equal opportunities. I have talked to you about unemployment in general and of young people in particular. But there is no denying that women are harder hit by unemployment than men and that they have a lower participation rate in the world of work. What I said just now about the potential for growth and prosperity embodied in our human resources applies equally well, of course, to women workers. This is all the more true if one considers the demographic outlook. In the long run, given a decreasing population, the contribution made by women will be crucial in maintaining our standard of living and upholding the European social model.

It is with this in mind that we are proposing a three-pronged approach:

− first, Member States must translate their commitment to equal opportunities into action; they must make a real effort to reduce the gap between the unemployment rates for women and men by actively promoting more jobs for women;

− secondly, more must be done to reconcile work and family responsibilities; let us add to what has been achieved in terms of career breaks, parental leave and part-time working, on a speedier basis where necessary; let us improve access to child-care services and to care for dependent persons;

6 − and thirdly, we must make it easier for women to return to work, through training provision, for example.

Mr President, Honourable Members,

I have endeavoured to give you a more or less exhaustive overview of the proposals we adopted today as our contribution to the special European Council on Employment. It is our intention to submit - later this month - a further contribution, which will be in two parts. First, we will present our comments on the follow-up to the other action decided on by the Amsterdam European Council concerning employment, for instance, action to be taken by the European Investment Bank, under the internal market action programme, and concerned with SMEs and underpinning our competitiveness. Furthermore, we will flesh out our thinking on how all our common policies can be better geared to promoting employment.

As I near the end of my address, I would like to reiterate that our proposals as presented to you today are our guidelines for the Member States' employment policies. I repeat - for the employment policies of the Member States. Because the decision on what individual measures to take is primarily up to Member States. Each of them is in a different situation. While staying within the framework of the guidelines, it is their job to adapt the general approach to their needs and to define the precise aims.

Therefore, as has been the case up till now, it is the Member States who will define and implement their own policies. Nevertheless, the situation has changed radically. The new procedure, whose importance I emphasised at the beginning of my address, signals a new intent to coordinate matters and achieve success in areas where go-it-alone moves have failed.

Our proposals, as put before you today, take Member States at their word. We are not asking them to perform miracles at the special European Council. We should at all costs avoid raising false hopes which, by their very nature, can only end in bitter disappointment. But we do urge the European Council to come up with concrete guidelines for future action in keeping with the convergent analyses and principles which it has itself adopted. We also ask it to show that recognising employment as the priority of priorities is not simply an empty phrase. That is what the Union's citizens expect, and it is, above all, what the 18 million unemployed expect.

Thank you very much for your attention.

7