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Example research essay topic: Maastricht Treaty Labour Markets - 2,747 words

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How Important In Building European Unity Was How Important In Building European Unity Was The Maastricht Treaty? The first foundations of a common social policy within the European Community were set down in the treaty of Rome, first signed by the six original member states of the Community in 1957 and subsequently by each new member state upon joining, with the UK signing in 1973. One of the major social provisions of this treaty was freedom of labour movement between EC nations, seen as a prerequisite for a properly functioning internal market, and viewed by some as having led inexorably to pressures to standardise labour laws within the Community (Currie 1993). Such pressures prompted the Social Charter of 1989, the main aspects of which would have been enforced by the Social Chapter of the 1992 Maastricht Treaty had John Majors Conservative Government not ensured the sections removal; in the final draft of the treaty the chapter was replaced with a Protocol and Agreement concerning social policy which applies only to the other eleven states of the Community (see Duffy and de Cara 1992). As this discussion is about the strength of unity of the Social Chapter, social issues, which are also part and parcel of the wider debate over the chapter, will only be discussed where they have direct bearing on this. The major economic arguments for and against the Social Chapter can only be understood after the most significant facets of the chapter have been discussed and the ideological standpoint of the then British Government outlined.

The Social Chapter of the Maastricht treaty was designed to allow for the formation of a common European social policy with a commitment to " the promotion of employment, improved living and working conditions, proper social protection, dialogue between management and labour and the development of human resources with a view to lasting high employment" (Duffy and de Cara 1992, 335 - 336). This would have been facilitated partly by way of a widening of qualified majority voting to proposals on the improvement of the working environment, working conditions, the information and consultation of workers, sexual equality and the integration of those excluded from the labour market. Each individual nations right of veto over such areas would therefore have been removed and Britain could have been forced to adopt measures designed to harmonize European labour regulations. Such measures would have inevitably imposed increased regulation on British industry, possible examples being maximum limits on working hours and increased standards for the health and safety of workers. Had the government signed up to the Social Chapter it would also have been stating an official commitment to the co-determination of workers in the running of companies and to the protection of workers whose contracts are terminated, although retaining the right of veto over such matters. The explicit reasons for the governments objection to common European standards on these kind of measures are located within a general ideology of labour market deregulation (Szyszczak 1994).

Essentially this is a view that " labour markets work most efficiently with the minimum of Government intervention" (COM 1992 [quoted by Szyszczak 1994, 313 ]), and while the government concedes that " legislation is sometimes necessary to ensure effective operation of the market, to protect particularly vulnerable groups or to achieve a fundamental principle of policy, (it) should be confined to the minimum necessary consistent with establishing a balance between the needs of employers and employees" (ibid). The British governments contention, therefore, is that regulatory policies which the " Social Chapter" was designed to form the basis of would have led directly to significantly detrimental economic effects, both for Britain and for the EC Union as a whole, namely unemployment and lack of competitiveness due to reduced flexibility. The argument for a direct link between regulation and such effects, however, is hotly disputed by those who claim that it is based solely on orthodox views of the labour market, some of the presuppositions of which they claim are inaccurate and misleading. Most significantly those supporting regulation would claim that complex individual decisions are not best coordinated by price mechanisms, and that treating labour as a commodity is inappropriate as such a view ignores the humanity of labour and therefore the complexity of individual motivations. While it must be stressed that belief in the potential economic benefits of regulation per se and belief in the economic benefits of the Social Chapter are far from one and the same, a discussion of the perceived merits of regulation and deregulation is vital background to this debate.

The discussion will begin with a brief look at the perceived effects on unemployment. The government claims that unemployment would be increased by greater regulation of the labour market both in the short term, due to unskilled labour being priced out of jobs and lack of employer confidence in their ability to hire and fire at will, and in the long term, by the general unhealthy state of the economy. While some degree of likely short term unemployment were the Social Chapter adhered to is difficult to deny, the fact that those likely to become unemployed in the short term are likely to be low skill, low wage workers not working in the internationally traded sector, whose overall effect on economic growth is therefore fairly small (Marsden 1994), means that it is the long term employment prospects which are more significant. The potential effects of a shared European social policy on competitiveness are therefore more directly dependent on flexibility. Flexibility is widely agreed to be essential for competitive businesses (Marsden 1994) and can be seen as comprising three dimensions (Atkinson 1984).

Functional flexibility is sought so that employees can be easily redeployed between activities in response to changes in products or production methods, numerical flexibility is desirable in order to allow optimum workforce size at any given point in time, and financial flexibility is sought both to allow wages to adapt to the condition of the external labour market and to allow " a shift to new pay and remuneration systems that facilitate either numerical or functional flexibility, such as assessment-based pay systems in place of rate-for-the-job systems. " (Atkinson 1984, 28). Proponents of deregulation see numerical inflexibility as a consequence of regulations increasing worker security, and comparisons of job tenures with short term sensitivity of employment levels to output in UK, USA, Germany and Japan (Marsden 1994) would seem to vindicate this view. Marsden, however, refutes the suggestion that functional flexibility should also necessarily suffer in regulated systems due to external regulations pushing up trainee wages, thereby providing disincentives for employers to provide training. He uses the example of Germany to illustrate how strong co-determination al and industrially standardised infrastructures provide " the basis for a strong, high quality training system. " (p. 4). Marsden further argues that regulation may in fact increase functional flexibility by providing job security for individual workers, thus necessitating no jealous hoarding of skills and allowing skill transfer within firms. The argument of those favouring deregulation as regards financial flexibility is that regulatory policies prevent this by, pushing up wages and therefore costs to unnecessarily high levels, as well as reducing incentives for workers to progress or to perform well in higher paid jobs.

Marsden, however, suggests that, though this may well be true in deregulated systems, in regulated systems where cooperation is facilitated by co-determination, large pay differentials might actually be harmful as they would lead to a concentration of rewards on a few key individuals rather than facilitating a diffusion of responsibility. Marsden's arguments, typical of the supporters of regulation, seem highly plausible. The fact, however, that they draw heavily on the examples of Japan and Germany, countries with economic, social, historical, cultural and geographical features often widely divergent from those of Britain or other countries in the EC, means that they are difficult to prove or disprove. As Addison and Siebert (1993) noted, the survival of regulatory systems is " an indicator of their internal appropriateness, not of their generalisability. " (in Szyszczak 1994, 314). Marsden indeed admits that in this area of theory " good evidence is hard to come by, and controversial. " (Marsden 1994, 2). This must cast some doubt on the operational validity of his arguments for Britain and the rest of Europe.

As was noted earlier, however, this debate cannot be characterised simply as deregulation versus the Social Chapter. Before the debate can be widened further, the real and perceived relationship between the two must therefore be discussed. Regulation and deregulation are political categories; in the real world of industry there can be only types and degrees of regulation. The significance of this statement lies in the fact that domestic politics has polarised the regulation debate in Britain. The Labour partys commitment to such policies as a minimum wage, ensuring job security for employees and co-determination as well as the Social Chapter has allowed the government to collectively reject such policies as regulatory, forming in the minds of the public a strong association between the chapter and other industrial regulations. For instance John Major, speaking in 1994, stated, " the Social Chapter would create jobs, but in Japan, not here.

A maximum working week would create jobs, but in the Pacific basin, not here? . (Leathley 1994 a). An example of the confusion such statements have created can be seen in a letter to the Times from Mr P Hayward (1993) in which he professes worry over possible job security measures he believes will result from the Social Chapter. The fact is that, had Britain signed, the government would have retained their veto over measures relating to worker dismissal as well as co-determination, and, furthermore, the chapter contained no provision whatsoever concerning minimum wages. Accusations such as that from Dr Jack Cunningham who claimed the government were " peddling a lie that the Social Chapter would affect trade union legislation" (Leathley 1994 b) would, then, seem to be reasonably well founded if somewhat overzealous. In the light of all this, the fact that in June 1994 over three-quarters of 300 top businessmen interviewed in a Gallup poll believed that signing the Social Chapter would be detrimental to British companies may be seen as largely an endorsement of deregulation in Britain rather than a significant statement on Europe. The Social Chapter, therefore, is not quite the " farrago of bureaucratic restrictions on competition" the editor of the Times (1993) branded it.

Indeed Szemery (1993), while describing himself as a Conservative, stated his belief that political disagreement should not be over what he saw as the fairly innocuous provisions of the Social Chapter itself but over " the detailed legislation that is or will be based on the chapter. " Notwithstanding, the fact is that the chapter would in itself have imposed some degree of increased regulation on British industry, any amount of which, it seems, is anathema to the Conservative party. While their arguments for British deregulation, supported by British businessmen, are difficult to refute in the light of available evidence, this issue is not one of Britain in isolation but of Britain within the European Union. While John Major believed in deregulation, he was also pro-Europe. This begs the question, can the effective economic integration seen as necessary for the competitiveness of British and European companies in the global economy be achieved without the harmonization of social policy throughout the EC, inherent in which must be at least some industrial regulation? A major economic argument for a social dimension to the European Community has been that, in the past, " the lack of integration and coordination of the Community labour markets has created a social deficit leading to economic imbalances which in turn may lead to chaotic and inflationary wage- setting. " (Szyszczak 1994, 314).

In the absence of some kind of common European social policy, individual European nations may also seek to capitalise on low wages, facilitated for instance by relatively low health and safety standards, in order to provide favourable climates for investment and cheap exports. Since the signing of the Maastricht treaty, this has in fact occurred. In February 1993 a dispute arose when the American vacuum cleaner manufacturer Hoover decided to move production from France to Scotland due to lower wage levels. The British government was promptly accused of attracting investment from other EC countries by maintaining low pay and conditions, described by many as social dumping. John Major, however, was unrepentant stating, " they can have the Social Chapter. Well have the jobs. " (ibid).

Pierre Beregovoy the French prime Minister, however, stated that this was " not the way of reviving Britains or Europe's economy. " (ibid). The MEP for Greater Manchester East, Glyn Ford (1993) strongly agreed with this statement, claiming, " our partners do not want us serving as a Trojan horse to bring social dumping inside the walls of the Community, and neither should we, because in seeking to under-cut the wages, health and safety provisions and working standards in the rest of Europe the government would succeed only in impoverishing our own economy further. " While John Major might see the attraction of jobs to Britain as a vindication of deregulatory policies, attempting to under-cut other EC countries, while it may bring some limited short term prosperity, it cannot possibly aid either British or European long term competitiveness. A look at general debates on the theme of regulation and flexibility would seem to suggest that different systems may be economically appropriate to different countries depending on diverse social, historical, cultural and geographical factors. While this is not to suggest that each country will automatically possess a naturally appropriate labour regulation system, this non-generalisabilty of labour market theory, coupled with the acquiescence of British businessmen to deregulation, would seem to make the British governments argument that regulation in the UK reduces flexibility difficult to refute, at least in general terms. The discussion, however, is very much one Britain within Europe. In an era of supra-national trading blocks, the fact that Britain cannot hope to compete effectively as an individual power outside of the EC is accepted by all three major political parties in this country.

The real issue here, therefore, is one of the general flexibility and therefore competitiveness of the European Community as a whole. A high level of such flexibility cannot exist where there were social deficits and social dumping, but is best ensured by healthy debate between all of the member countries of the Union. The Social Chapter was not the rigid and all encompassing document it is widely perceived to have been and the Conservative government would have had much scope to prevent over-regulation of European labour markets had they signed. The validity of the British governments argument that adherence to the Social Chapter of the Maastricht Treaty would seriously damage both British and European competitiveness was always contingent on the existence a fragmented Europe which, due to social deficits and the possibility of social dumping would have become even more fragmented and therefore lacked the cohesion necessary to be effective on the world market. Its contention was therefore never particularly robust and is, in any case, likely to become irrelevant as the other nations of the Community grow increasingly impatient with Britains refusal to compromise in the spirit of European integration. Simply, if Britain is part of the European Union, let us participate fully.

BIBLIOGRAPHY Coffey, P (1995) The Future Of Europe Currie, E (1993) Taking the social chapter seriously, the Times, 7 May Dinan, D (1994) Ever closer union? 394 - 401, Basingstoke, Macmillan Duffy, P. , de Cara, J. Y (1992) European Union: the lawyers guide, Guildford, Longman Marsden, D (1994) Regulation versus deregulation: which route for Britains labour market? , Employment Policy Institute Economic Report v 8 (8), 1 - 4 Szemery, J (1993) The effect on Britain of accepting the Social Chapter, the Times, 12 February Szyszczak, E (1994) Social policy: a happy ending or a reworking of the fairy tale? in Legal issues of the Maastricht Treaty 313 - 327, Chichester, Chancery the Times editor (1993) A good dumping, the Times, 8 February the Times foreign staff (1993) Beregovoy rebukes Major for luring EC jobs away, the Times, 1 March Windows, P (1993) Co-determination in the European Community, Economy and Society v 22 (2), 135 - 158 Department Of Politics And Modern History Europe In The Global System Ian Bates 97 / 333269


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