Balancing flexibility and security in Europe's labour markets

EU member states have for some time been facing a dilemma regarding their labour markets. On the one hand there is a strong demand for further flexibility of labour markets, employment and the work organisation, while at the same time an equally strong demand exists for providing security to employees, especially vulnerable groups and outsiders in the labour market.

Hence finding a balance between flexibility and security represents a key challenge to both European and national policy-makers for the labour market.

The concept of flexicurity rests on the assumption that flexibility and security are not contradictory, but complementary and even mutually supportive. It brings together a low level of protection of workers against dismissals with high unemployment benefits and a labour market policy, based on an obligation and a right of the unemployed to training.

While flexicurity sounds like the right answer to the challenges of today's accelerated economy, doubts arise as to the transferability of the concept to economies other than the Scandinavian ones where it was born.

The flexicurity model is understood by many as a re-interpretation of the European social model. Even Vladimír Spidla, the European Commissioner for Employment, Social Affairs and Equal Opportunities, has stressed on various occasions that each country's economy has its own particular aspects and that solutions which may work for one country are not always transferable to another.

However, almost all stakeholders agree that there is the need to update and adapt labour law to today's world. Europe needs to improve its capacity to anticipate, elicit and absorb economic and social change. This requires employment-friendly labour policies, modern forms of work organisation and well-functioning labour markets.

The European Commission has been actively promoting such change. For example, in the 2001 Employment Guidelines, (Council decision 2002/177/EC) under the Adaptability pillar, Guideline number 13, states that: "To negotiate and implement at all appropriate levels, agreements to modernise the organisation of work, including flexible working arrangements, with the aim of making undertakings productive and competitive, achieving the required balance between flexibility and security, and increasing the quality of jobs."

The statement is further restated in the Integrated European Employment Guidelines 2005-2008 (Council Decision 2005/600/EC) whereby Guideline No 21 maintains that there is a need to "promote flexibility combined with employment security and reduce labour market segmentation, having due regard to the role of the social partners".

The latest Commission's effort regarding the flexicurity approach has been in the form of the Green Paper entitled "Modernising labour law to meet the challenges of the 21st century" (COM 2006 708 final). In the Green Paper the need of balancing flexibility and security in European labour markets is again reiterated.

It states that the drive for flexibility in the labour market has given rise to increasingly diverse contractual forms of employment, which can differ significantly from the standard contractual model. This has created a situation whereby labour law needs to evolve in order to support the Lisbon Strategy's objective of achieving sustainable growth with more and better jobs.

What needs to be done now is to start a process whereby Member States start to actively push for a right balance between flexibility and security which will help support the competitiveness of firms, increase quality and productivity at work and facilitate the adaptation of companies and workers to economic change.

A European Commission communication on flexicurity is already planned for June. The aim of the communication will be to develop the arguments in favour of the "flexicuirty" concept and outline a set of common principles by the end of this year to manoeuvre the ongoing reform efforts.

A well-attended seminar on the Green Paper was organised by Forum Malta fl-Ewropa last month. Various local stakeholders participated in the panel discussion and the concept of flexicurity was discussed, with all participants agreeing to an extent that there needs to be a new balance between flexibility and security for the sake of both employees and employers.

The next step to be carried out domestically is to now use the Green Paper as a basis for assessing Malta's domestic situation and start coming up with tangible proposals to modernise Malta's labour law.

The social partners have an important role to play here and they must ensure that the 'flexibilisation' of the labour market must not lead to the erosion of workers' rights. There is a limit of how much workers and employers can be flexible and the concept of flexicurity needs to work in tandem with other policies, such as lifelong learning, the increase in participation of women in the labour force, mobility of workers, and more flexible social security rules.

All this will help to ensure that Malta has the necessary tools to be competitive in today's world.

Mr Cuschieri is research executive at Impetus Europe Consulting Group Ltd.

marvin.cuschieri@impetuseurope.com