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Kristina Maslauskaite

Kristina Maslauskaite

Kristina travaille sur les problématiques liées au Marché intérieur européen. Elle ...
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Kristina Maslauskaite sur Public Service Europe "The myths and realities of 'social dumping' in the EU"

le 03 Juin 2013 à 15:18
Article par Kristina Maslauskaite
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Kristina Maslauskaite signe un article sur Public Service Europe, le 3 juin 2013, intitulé  "The myths and realities of 'social dumping' in the EU" dans le cadre de la publication de son étude sur la concurrence sociale.

The myths and realities of 'social dumping' in the EU

by Kristina Maslauskaite
03 June 2013

Public opinion and politicians are worried that intense compe¬tition in the cost of labour between member states might result in the 'race to the bottom' in terms of social standards – says think-tank

The debate on social competition, or social dumping, is as old as the European Union itself. Yet it the discussion been getting louder in the recent years, marked by economic turmoil and high levels of unemployment in many of the member states. Public opinion and politicians are worried that intense compe¬tition in the cost of labour between member states might result in the 'race to the bottom' in terms of social standards.

A clear definition of social dumping in relation to the existing European labour standards is crucial in this discussion. After all, the answer to whether it exists is very much dependent on what is meant by the question. Even though no universal definition of social dumping exists, the most relevant criteria for differentiating between welfare-enhancing competition and harmful dumping seem to be 'artificially lower' labour costs. In other words - not explained by objective factors such as productivity levels, economic development and national preferences; which could confer an 'unfair advantage' to the exporting firm.

Once social dumping is defined as a strategy to artificially curtail national labour standards, we find that generally speaking there is little space for regime competition between the European 'core' and the 'new' member states. There are four main rea¬sons why the gap in terms of cost competitiveness between the old member states and the 10 Central and Eastern European countries – or CEECs - has virtually been closed.

First of all, the CEECs have lost their cost-competitiveness over the last decade. Obviously, in nominal terms, salary differentials between the member states remain enormous with the minimum wage in Bulgaria 14 times lower than that in Luxembourg. However, labour productivity in Bulgaria is 12.8 times lower than in Luxembourg whereas, purchasing power adjusted minimum wage in Bulgaria is in fact only six times lower than that of Luxembourg.

In terms of productivity-adjusted total labour cost, some of the new member states have not only lost their status of the cheap labour destination. But they have also become more expensive than the European core. This is a result of a very fast wage convergence in the period from 2000 to 2011, which was not matched by a similarly high productiv¬ity growth. As a result, in 2010, the unit labour costs in Slovenia and Estonia were higher than in France or Germany - suggesting that the productivity gap between CEECs and the European Union 15 has become even larger than the wage gap.

Secondly, current International Labour Organization and European labour law has set mini¬mal standards in all of the EU member states. Even though social policy is still considered a national competence significant prog¬ress has been made in harmonising basic health and safety requirements, non-discrimination and other standards.


Thirdly, labour standards such as working hours, employment protec¬tion and occupational health in the new member states as a group seem to be comparable to the European core. Even though quantita¬tive analysis is not easy to perform in most of these cases, no evidence of consistently poor labour standards in the CEECs can be found. Moreover, if some of the countries score low on some of the indices, these differences can often be explained by the socio-economic context rather than governmental policy of labour cost reduction.

Fourthly, the new member states do have higher shares of 'shadow' economy, which could artificially lower the cost of labour when the workers are employed outside official contracts. Yet, it is not obvious that unofficial activities can confer a real economic advan¬tage. Weak institutions, which often go hand-in-hand with shadow economy, might imply additional costs for a producing firm.

If anything, there are three member states - namely the United Kingdom, Ireland and to some extent Luxembourg - that seem to consistently outperform all the other countries in terms of real labour cost. That combined with low tax rates, flex¬ible labour laws and relatively weak employee participation make the British Isles the most realistic suspects of social dumping. It does not automatically follow that these countries do engage in social dumping though; it only implies that their economic model is the most efficient in terms of labour cost. As previously discussed, disloyal and genuine welfare-enhancing competition might be sometimes difficult to disentangle.

These are, of course, just some general observations on national levels. Some sectors - especially construction, agriculture and transport - might be experiencing dif¬ferent dynamics in terms of disloyal competition. Further research, especially in these sectors of economic activity, would be welcome to shed more light on the complex issue of social dumping.

Kristina Maslauskaite is a research fellow at the Notre Europe-Jacques Delors Instituteand author of the forthcoming study Social dumping: myths and realities

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